##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO

SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934



FOR THE QUARTERLY PERIOD

ENDED
SEPTEMBER 30, 2005



COMMISSION FILE NUMBER: 001-15941



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UTEK CORPORATION

(Exact Name of
Registrant as Specified in its Charter)



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DELAWARE

(State or Jurisdiction of Incorporation or Organization)



59-3603677

(IRS Employer Identification No.)



202 S. Wheeler Street

Plant City, FL 33563

(Address of Principal Executive Offices)



REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE:
(813) 754-4330



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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 12 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods as the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).    YES ̈NO  x



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).    YES ̈NO  x



On November 4, 2005, there were 7,900,255 shares outstanding of the Registrants
common stock, $0.01 par value.



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##### Table of Contents

UTEK CORPORATION



FORM 10-Q INDEX



|                               |  |                                                                                                                           |  |   
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I - FINANCIAL INFORMATION |  |                                                                                                                          
|                               |  | Item 1.
Financial Statements                                                                                              |  |   
|                               |  | Consolidated Statements of Net Assets as of September 30, 2005 (unaudited) and December 31, 2004                          |  | 3 
|                               |  | Consolidated Statements of Operations for the Three and Nine Month Periods Ended September 30, 2005 and 2004 (unaudited)  |  | 4 
|                               |  | Consolidated Statements of Cash Flows for the Nine Month Periods Ended September 30, 2005 and 2004 (unaudited)            |  | 5 
|                               |  | Consolidated Statements of Changes in Net Assets for the Nine Month Periods Ended September 30, 2005 and 2004 (unaudited) |  | 6 
|                               |  | Financial Highlights for the Nine Month Periods Ended September 30, 2005 and 2004 (unaudited)                             |  | 7 
|                               |  | Schedule of Investments as of September 30, 2005 (unaudited) and December 31, 2004                                        |  | 8 
|                               |  | Notes to Consolidated Financial Statements (unaudited)                                                                    |  | 13
|                               |  | Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                             |  | 20
|                               |  | Item 3.
Quantitative and Qualitative Disclosures about Market Risk                                                        |  | 32
|                               |  | Item 4.
Controls and Procedures                                                                                           |  | 32
|                               | 
|PART II - OTHER INFORMATION    |  |                                                                                                                          
|                               |  | Item 1. 
Legal Proceedings                                                                                                |  | 33
|                               |  | Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds                                                       |  | 33
|                               |  | Item 3.
Defaults Upon Senior Securities                                                                                   |  | 33
|                               |  | Item 4.
Submission of Matters to a Vote of Security Holders                                                               |  | 33
|                               |  | Item 5.
Other Information                                                                                                 |  | 33
|                               |  | Item 6.
Exhibits                                                                                                          |  | 33
|                               |  | Signatures                                                                                                                |  | 34
|                               |  | Exhibits                                                                                                                  |  | 35



Page 2 of 38



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##### Table of Contents

PART I - FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



UTEK Corporation

Consolidated Statement of Net Assets



|                                                                                                                                                                               |  |                    |            |   |                  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                                                                               |  | September 30, 2005 |            |   | December 31,2004 |  
|                                                                                                                                                                               |  | (Unaudited)        |            |   |                  |  
|ASSETS                                                                                                                                                                         |  |                    |            |   |                  |   |            |  
|Investments in non-controlled affiliates (cost $24,438,591 and $18,464,518 at September 30, 2005 and December 31, 2004,
respectively)                                          |  | $                  | 23,244,853 |   |                  | $ | 13,965,941 |  
|Cash and cash equivalents                                                                                                                                                      |  |                    | 3,994,598  |   |                  |   | 3,785,873  |  
|Short-term investments                                                                                                                                                         |  |                    | 15,282,538 |   |                  |   | 5,534,235  |  
|Accounts and notes receivable, net of allowance for bad debt                                                                                                                   |  |                    | 2,141,255  |   |                  |   | 189,888    |  
|Prepaid expenses and other assets                                                                                                                                              |  |                    | 368,476    |   |                  |   | 263,203    |  
|Fixed assets, net                                                                                                                                                              |  |                    | 299,113    |   |                  |   | 410,440    |  
|Goodwill                                                                                                                                                                       |  |                    | 3,154,059  |   |                  |   | 1,517,922  |  
|Intangible assets                                                                                                                                                              |  |                    | 369,137    |   |                  |   | 212,142    |  
|                                                                                                                                                                               |  |                    |            |   |                  |   |            |  
|TOTAL ASSETS                                                                                                                                                                   |  |                    | 48,854,029 |   |                  |   | 25,879,644 |  
|                                                                                                                                                                               |  |                    |            |   |                  |   |            |  
|LIABILITIES                                                                                                                                                                    |  |                    |            |   |                  |   |            |  
|Accrued expenses                                                                                                                                                               |  |                    | 794,509    |   |                  |   | 683,272    |  
|Deferred revenue                                                                                                                                                               |  |                    | 1,646,832  |   |                  |   | 788,888    |  
|Deferred income taxes                                                                                                                                                          |  |                    | 2,497,117  |   |                  |   | 1,314,541  |  
|                                                                                                                                                                               |  |                    |            |   |                  |   |            |  
|TOTAL LIABILITIES                                                                                                                                                              |  |                    | 4,938,458  |   |                  |   | 2,786,701  |  
|                                                                                                                                                                               |  |                    |            |   |                  |   |            |  
|NET ASSETS                                                                                                                                                                     |  | $                  | 43,915,571 |   |                  | $ | 23,092,943 |  
|                                                                                                                                                                               |  |                    |            |   |                  |   |            |  
|Commitments and Contingencies                                                                                                                                                  |  |                    |            |   |                  |   |            |  
|                                                                                                                                                                               |  |                   
|Composition of net assets:                                                                                                                                                     |  |                    |            |   |                  |   |            |  
|Common stock, $.01 par value, 19,000,000 shares authorized; 7,888,673 and 6,003,163 shares issued and outstanding at September 30, 2005
and at December 31, 2004, respectively |  | $                  | 78,887     |   |                  | $ | 60,032     |  
|Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued and outstanding                                                                                      |  |                    |           |   |                  |   |           |  
|Additional paid-in capital                                                                                                                                                     |  |                    | 39,924,642 |   |                  |   | 20,959,242 |  
|Accumulated income:                                                                                                                                                            |  |                    |            |   |                  |   |            |  
|Accumulated net operating income                                                                                                                                               |  |                    | 8,182,502  |   |                  |   | 4,246,227  |  
|Net realized gain (loss) on investments, net of income taxes                                                                                                                   |  |                    | (3,546,874 | ) |                  |   | 490,580    |  
|Net unrealized appreciation (depreciation) of investments, net of deferred income taxes                                                                                        |  |                    | (744,534   | ) |                  |   | (2,805,763 | )
|Foreign currency translation adjustment                                                                                                                                        |  |                    | 20,948     |   |                  |   | 142,625    |  
|                                                                                                                                                                               |  |                    |            |   |                  |   |            |  
|Net assets                                                                                                                                                                     |  | $                  | 43,915,571 |   |                  | $ | 23,092,943 |  
|                                                                                                                                                                               |  |                    |            |   |                  |   |            |  
|Net asset value per share                                                                                                                                                      |  | $                  | 5.57       |   |                  | $ | 3.85       |  
|                                                                                                                                                                               |  |                    |            |   |                  |   |            |  



See accompanying notes



Page 3 of 38



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Operations

(Unaudited)



|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ----------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                                                                                                                                                                                                                                                        |  | Three Months EndedSeptember 30 |            |   | Nine Months EndedSeptember 30 |  
|                                                                                                                                                                                                                                                                                                                                        |  | 2005                           |            |   | 2004                          |   |            | 2005 |  |   | 2004       |  
|Income from operations:                                                                                                                                                                                                                                                                                                                 |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Sale of technology rights                                                                                                                                                                                                                                                                                                               |  | $                              | 9,286,961  |   |                               | $ | 1,525,949  |      |  | $ | 12,466,301 |   |  | $ | 2,932,249  |  
|Consulting and other services                                                                                                                                                                                                                                                                                                           |  |                                | 1,010,452  |   |                               |   | 488,387    |      |  |   | 2,745,145  |   |  |   | 1,395,046  |  
|Investment income, net                                                                                                                                                                                                                                                                                                                  |  |                                | 150,970    |   |                               |   | 26,150     |      |  |   | 318,263    |   |  |   | 48,877     |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                | 10,448,383 |   |                               |   | 2,040,486  |      |  |   | 15,529,709 |   |  |   | 4,376,172  |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Expenses:                                                                                                                                                                                                                                                                                                                               |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Salaries and wages                                                                                                                                                                                                                                                                                                                      |  |                                | 812,751    |   |                               |   | 228,550    |      |  |   | 1,831,906  |   |  |   | 739,694    |  
|Professional fees                                                                                                                                                                                                                                                                                                                       |  |                                | 204,133    |   |                               |   | 122,234    |      |  |   | 547,906    |   |  |   | 367,428    |  
|Acquisition of technology rights                                                                                                                                                                                                                                                                                                        |  |                                | 2,144,467  |   |                               |   | 370,000    |      |  |   | 3,371,262  |   |  |   | 620,000    |  
|Sales and marketing                                                                                                                                                                                                                                                                                                                     |  |                                | 538,012    |   |                               |   | 323,834    |      |  |   | 1,667,597  |   |  |   | 752,295    |  
|General and administrative                                                                                                                                                                                                                                                                                                              |  |                                | 763,307    |   |                               |   | 271,811    |      |  |   | 1,799,871  |   |  |   | 1,062,938  |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                | 4,462,670  |   |                               |   | 1,316,429  |      |  |   | 9,218,542  |   |  |   | 3,542,355  |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Income before income taxes                                                                                                                                                                                                                                                                                                              |  |                                | 5,985,713  |   |                               |   | 724,057    |      |  |   | 6,311,167  |   |  |   | 833,817    |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |  
|Provision for income taxes                                                                                                                                                                                                                                                                                                              |  |                                | 2,252,424  |   |                               |   | 251,871    |      |  |   | 2,374,892  |   |  |   | 297,117    |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net income from operations                                                                                                                                                                                                                                                                                                              |  |                                | 3,733,289  |   |                               |   | 472,186    |      |  |   | 3,936,275  |   |  |   | 536,700    |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |  
|Net realized and unrealized gains (losses):                                                                                                                                                                                                                                                                                             |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net realized gain (loss) on investments, net of income tax expense (benefit) of ($2,766,652) and ($2,435,937) for the three and nine months
ended September 30, 2005, respectively, and $67,843 and $832,094 for the three and nine months ended September 30, 2004, respectively                                                       |  |                                | (4,178,503 | ) |                               |   | 112,446    |      |  |   | (4,037,454 | ) |  |   | 1,379,157  |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |  
|Change in unrealized appreciation (depreciation) of non-controlled affiliate investments, net of deferred tax expense (benefit) of $2,765,722
and $1,243,611 for the three and nine months ended September 30, 2005, respectively, and ($4,698,376) and ($884,311) for the three and nine months ended September 30, 2004, respectively |  |                                | 6,108,475  |   |                               |   | (7,787,343 | )    |  |   | 2,061,229  |   |  |   | (1,465,700 | )
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net increase (decrease) in net assets from operations                                                                                                                                                                                                                                                                                   |  | $                              | 5,663,261  |   |                               | $ | (7,202,711 | )    |  | $ | 1,960,050  |   |  | $ | 450,157    |  
|                                                                                                                                                                                                                                                                                                                                        |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net increase (decrease) in net assets from operations per share:                                                                                                                                                                                                                                                                        |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                                                                                                                                                                                                                                                                                                   |  | $                              | 0.75       |   |                               | $ | (1.28      | )    |  | $ | 0.28       |   |  | $ | 0.08       |  
|Diluted                                                                                                                                                                                                                                                                                                                                 |  | $                              | 0.74       |   |                               | $ | (1.28      | )    |  | $ | 0.28       |   |  | $ | 0.08       |  
|Weighted average shares:                                                                                                                                                                                                                                                                                                                |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                                                                                                                                                                                                                                                                                                   |  |                                | 7,563,853  |   |                               |   | 5,616,324  |      |  |   | 6,957,300  |   |  |   | 5,417,886  |  
|Diluted                                                                                                                                                                                                                                                                                                                                 |  |                                | 7,685,283  |   |                               |   | 5,616,324  |      |  |   | 7,104,371  |   |  |   | 5,727,547  |  



See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                                                                                                                                                |  | For the nine months ended September 30 |            
|                                                                                                                                                                                                |  | 2005                                   |             |   | 2004 |  
|Operating Activities:                                                                                                                                                                           |  |                                        |             |   |      |   |            |  
|Net increase in net assets from operations                                                                                                                                                      |  | $                                      | 1,960,050   |   |      | $ | 450,157    |  
|Adjustments to reconcile net increase (decrease) in net assets from operations to net cash used by operations:                                                                                  |  |                                        |             |   |      |   |            |  
|Change in net unrealized depreciation (appreciation) of investments                                                                                                                             |  |                                        | (3,304,838  | ) |      |   | 2,350,011  |  
|Depreciation and amortization                                                                                                                                                                   |  |                                        | 100,177     |   |      |   | 38,180     |  
|(Gain) loss on sale of investments                                                                                                                                                              |  |                                        | 6,473,482   |   |      |   | (2,211,251 | )
|Deferred income taxes                                                                                                                                                                           |  |                                        | 1,182,576   |   |      |   | 244,907    |  
|Investment securities received in connection with the technology transfer transactions                                                                                                          |  |                                        | (12,368,870 | ) |      |   | (2,932,249 | )
|Consulting and other services rendered in exchange for investment securities                                                                                                                    |  |                                        | (1,207,201  | ) |      |   | (689,195   | )
|Changes in operating assets and liabilities:                                                                                                                                                    |  |                                        |             |   |      |   |            |  
|Accounts receivable                                                                                                                                                                             |  |                                        | 93,433      |   |      |   | 107,690    |  
|Prepaid expenses and other assets                                                                                                                                                               |  |                                        | (7,796      | ) |      |   | 96,824     |  
|Deferred revenue                                                                                                                                                                                |  |                                        | 425,894     |   |      |   | (74,687    | )
|Accrued expenses                                                                                                                                                                                |  |                                        | 21,914      |   |      |   | 44,217     |  
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|Net cash used in operating activities                                                                                                                                                           |  |                                        | (6,631,179  | ) |      |   | (2,575,396 | )
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|Investing Activities:                                                                                                                                                                           |  |                                        |             |   |      |   |            |  
|Proceeds received on sale of investments                                                                                                                                                        |  |                                        | 1,713,437   |   |      |   | 2,484,204  |  
|Purchase of short term investments                                                                                                                                                              |  |                                        | (9,748,303  | ) |      |   |           |  
|Acquisition of Knowledge Express (net cash acquired $26,423)                                                                                                                                    |  |                                        | (1,473,577  | ) |      |   |           |  
|Purchases of investment securities                                                                                                                                                              |  |                                        | (545,800    | ) |      |   | (4,507,543 | )
|Purchases of fixed assets                                                                                                                                                                       |  |                                        | (104,046    | ) |      |   | (65,646    | )
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|Net cash used in investing activities                                                                                                                                                           |  |                                        | (10,158,289 | ) |      |   | (2,088,985 | )
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|Financing Activities:                                                                                                                                                                           |  |                                        |             |   |      |   |            |  
|Payments on bank debt                                                                                                                                                                           |  |                                        | (23,516     | ) |      |   |           |  
|Net proceeds from issuance of common stock (including the exercise of common stock options)                                                                                                     |  |                                        | 17,034,255  |   |      |   | 7,291,591  |  
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|Net cash provided by financing activities                                                                                                                                                       |  |                                        | 17,010,739  |   |      |   | 7,291,591  |  
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|Foreign currency translation adjustment                                                                                                                                                         |  |                                        | (12,546     | ) |      |   | 7,878      |  
|                                                                                                                                                                                                |  |                                       
|Increase in cash and cash equivalents                                                                                                                                                           |  |                                        | 208,725     |   |      |   | 2,635,088  |  
|                                                                                                                                                                                                |  |                                       
|Cash and cash equivalents at beginning of period                                                                                                                                                |  |                                        | 3,785,873   |   |      |   | 3,704,327  |  
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|Cash and cash equivalents at end of period                                                                                                                                                      |  | $                                      | 3,994,598   |   |      | $ | 6,339,415  |  
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|Supplemental Disclosures of Non-Cash Investing Activities                                                                                                                                       |  |                                        |             |   |      |   |            |  
|125,715 Shares of Common Stock issued in settlement of Note Payable                                                                                                                             |  |                                        |             |   |      | $ | 847,890    |  
|119,134 Shares of Common Stock issued to purchase Ybor City Group, Inc.                                                                                                                         |  | $                                      | 1,650,000   |   |      |   |            |  
|19,895 Shares of Common Stock issued to purchase INTRA-DMS, Ltd. for $300,000 of unregistered shares of common stock in conjunction with the
acquisition, liabilities were assumed as followed: |  |                                        |             |   |      |   |            |  
|Fair value of assets acquired                                                                                                                                                                   |  | $                                      | 502,035     |   |      |   |            |  
|Consideration given                                                                                                                                                                             |  |                                        | (300,000    | ) |      |   |            |  
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  
|Liabilities assumed                                                                                                                                                                             |  | $                                      | 202,035     |   |      |   |            |  
|                                                                                                                                                                                                |  |                                        |             |   |      |   |            |  



See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Changes in Net Assets

(Unaudited)



|                                                                                                                                                            |  |                               |            |   |      |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                                            |  | Nine Months EndedSeptember 30 |           
|                                                                                                                                                            |  | 2005                          |            |   | 2004 |  
|Changes in net assets from operations:                                                                                                                      |  |                               |            |   |      |   |            |  
|                                                                                                                                                            |  |                              
|Net income from operations                                                                                                                                  |  | $                             | 3,936,275  |   |      | $ | 536,700    |  
|Net realized gain (loss) on sale of investments, net of related income taxes                                                                                |  |                               | (4,037,454 | ) |      |   | 1,379,157  |  
|Change in net unrealized appreciation (depreciation) of investments, net of related deferred taxes                                                          |  |                               | 2,061,229  |   |      |   | (1,465,700 | )
|                                                                                                                                                            |  |                               |            |   |      |   |            |  
|Net increase in net assets from operations                                                                                                                  |  |                               | 1,960,050  |   |      |   | 450,157    |  
|                                                                                                                                                            |  |                               |            |   |      |   |            |  
|Capital stock transactions:                                                                                                                                 |  |                               |            |   |      |   |            |  
|                                                                                                                                                            |  |                              
|Proceeds from issuance of common stock net of offering costs of $2,036,042 and $935,758 for the nine months ended September 30, 2005 and
2004, respectively |  |                               | 15,794,705 |   |      |   | 7,586,531  |  
|Proceeds from the exercise of common stock options, for the nine months ended September 30, 2005 and 2004, respectively                                     |  |                               | 1,239,550  |   |      |   | 552,950    |  
|Unregistered shares of common stock issued in acquisition of UTEKip, Ltd.                                                                                   |  |                               | 300,000    |   |      |   |           |  
|Unregistered shares of common stock issued in acquisition of Ybor City Group, Inc.                                                                          |  |                               | 1,650,000  |   |      |   |           |  
|                                                                                                                                                            |  |                               |            |   |      |   |            |  
|Net increase in net assets from stock transactions                                                                                                          |  |                               | 18,984,255 |   |      |   | 8,139,481  |  
|Foreign currency translation adjustment                                                                                                                     |  |                               | (121,677   | ) |      |   | 7,878      |  
|                                                                                                                                                            |  |                               |            |   |      |   |            |  
|Net increase in net assets                                                                                                                                  |  |                               | 20,822,628 |   |      |   | 8,597,516  |  
|Net assets at beginning of period                                                                                                                           |  |                               | 23,092,943 |   |      |   | 11,152,370 |  
|                                                                                                                                                            |  |                               |            |   |      |   |            |  
|Net assets at end of period                                                                                                                                 |  | $                             | 43,915,571 |   |      | $ | 19,749,886 |  
|                                                                                                                                                            |  |                               |            |   |      |   |            |  



See accompanying notes



Page 6 of 38



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##### Table of Contents

UTEK Corporation

Financial Highlights

(Unaudited)



|                                                                                                                 |  |                               |            |   |      |   |            |  
|---------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                 |  | Nine Months EndedSeptember 30 |           
|                                                                                                                 |  | 2005                          |            |   | 2004 |  
|PER SHARE INFORMATION (1)                                                                                        |  |                               |            |   |      |   |            |  
|                                                                                                                 |  |                              
|Net asset value, beginning of period                                                                             |  | $                             | 3.85       |   |      | $ | 2.33       |  
|Net increase (decrease) from operations (1)                                                                      |  |                               | 0.55       |   |      |   | 0.08       |  
|Net change in realized gains (losses) and unrealized appreciation (depreciation) on investments, after taxes (1) |  |                               | (1.48      | ) |      |   | (.46       | )
|Foreign currency translation adjustment (1)                                                                      |  |                               | (0.02      | ) |      |   |           |  
|Net increase from issuance of shares of common stock (1)                                                         |  |                               | 2.67       |   |      |   | 1.42       |  
|                                                                                                                 |  |                               |            |   |      |   |            |  
|Net assets value, end of period                                                                                  |  | $                             | 5.57       |   |      | $ | 3.37       |  
|                                                                                                                 |  |                               |            |   |      |   |            |  
|Per share market value, end of period                                                                            |  | $                             | 14.00      |   |      | $ | 15.15      |  
|                                                                                                                 |  |                               |            |   |      |   |            |  
|RATIOS/SUPPLEMENTAL DATA                                                                                         |  |                               |            |   |      |   |            |  
|                                                                                                                 |  |                              
|Net assets, end of period                                                                                        |  | $                             | 43,915,571 |   |      | $ | 19,749,886 |  
|Ratio of expenses to average net assets (2)                                                                      |  |                               | 28         | % |      |   | 23         | %
|Ratio of net income to average net assets                                                                        |  |                               | 12         | % |      |   | 3          | %
|Diluted weighted average number of shares outstanding during the period                                          |  |                               | 7,104,371  |   |      |   | 5,727,547  |  

---

|(1) | Calculated based on diluted weighted average number of shares outstanding during the period.
|--- | --------------------------------------------------------------------------------------------

|(2) | Excluding income taxes.
|--- | -----------------------



See accompanying notes



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UTEK CORPORATION



Schedule of
Investments  (unaudited)

September 30, 2005



|            |  |                    |  |                                                                                                                                          |  |              |           |            |   |          
|----------- |  | ------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ---------- | - | ---------
|Shares      |  | Date ofAcquisition |  | Common and preferred stock in non-controlled affiliates 53.0% of our net assets (1)                                                     |  | OriginalCost |           | Fair Value
|1,200,275   |  | 4/04               |  | Xethanol Corp., publicly traded over the counter,  12.2% of our net assets; bioethanol and derivative products                          |  | $            | 3,463,007 |            | $ | 5,329,221
|6,343,573   |  | 4/04               |  | HydroFlo, Inc., publicly traded over the counter,  8.4% of our net assets; waste water treatment solutions                              |  |              | 854,602   |            |   | 3,679,272
|10,000,000  |  | 8/05               |  | Industrial Biotechnology Corp., privately held,  4.6% of our net assets: manufactures and markets flavors and fragrances                |  |              | 2,000,000 |            |   | 2,000,000
|1,000       |  | 11/99              |  | UTEK Real Estate Holdings, Inc., privately held,  4.4% of our net assets; real estate development                                       |  |              | 2,041,605 |            |   | 1,906,353
|2,213,137   |  | 1/02               |  | Circle Group Holdings, Inc., publicly traded on the American Stock Exchange,  4.2% of our net assets; small business holding company    |  |              | 683,219   |            |   | 1,836,904
|3,123,703   |  | 3/04               |  | Health Sciences Group, Inc., publicly traded over the counter,  3.9% of our net assets; nutraceutical and pharmaceutical products       |  |              | 1,685,189 |            |   | 1,718,037
|484,782,608 |  | 9/05               |  | INSEQ Corp., publicly traded over the counter,  3.9% of our net assets; waste minimization                                              |  |              | 2,434,783 |            |   | 1,696,739
|6,400,717   |  | 4/05               |  | Fuel FX International, Inc., privately held,  2.9% of our net assets; reductional environmental emissions                               |  |              | 1,280,142 |            |   | 1,280,143
|7,647,561   |  | 4/04               |  | Manakoa Services Company, publicly traded over the counter,  1.6% of our net assets; compliance analysis and monitoring                 |  |              | 2,258,837 |            |   | 688,280  
|2,100,000   |  | 3/04               |  | Swiss Medica, Inc., publicly traded over the counter,  0.7% of our net assets; health bioscience products                               |  |              | 381,268   |            |   | 315,000  
|50,000      |  | 7/05               |  | Israel Technology Acquisition Corp., publicly traded over the counter,  0.7% of our net assets; special purpose acquisition corporation |  |              | 300,000   |            |   | 305,000  
|40,000      |  | 7/05               |  | Fortress America Acquisition Corp., publicly traded over the counter,  0.5% of our net assets; special purpose acquisition corporation  |  |              | 240,000   |            |   | 240,800  
|645,000     |  | 3/03               |  | Sequiam Corp., publicly traded over the counter,  0.5% of our net assets; authentication and biometrics technologies                    |  |              | 185,726   |            |   | 232,200  
|750,000     |  | 10/04              |  | U.S. Wireless Online, Inc.,publicly traded over the counter,  0.4% of our net assets; wireless broadband networks                       |  |              | 66,000    |            |   | 180,000  
|224,489     |  | 4/05               |  | NutraCea International Corp., publicly traded over the counter,  0.4% of our net assets; rice bran research and development             |  |              | 92,040    |            |   | 172,856  
|720,637     |  | 4/03               |  | Intra-Asia Entertainment Corp., publicly traded over the counter,  0.3% of our net assets; digital television entertainment             |  |              | 1,607,494 |            |   | 151,334  
|118,811     |  | 6/05               |  | Trio Industries Group, Inc, publicly traded over the counter,  0.3% of our net assets; protective powder coating                        |  |              | 64,246    |            |   | 146,138  
|261,234     |  | 7/04               |  | eLinear, Inc., publicly traded on the American Stock Exchange,  0.2% of our net assets; telecommunication security provider             |  |              | 190,763   |            |   | 128,005  
|120,000     |  | 4/05               |  | Rival Technologies, Inc., publicly traded over the counter,  0.2% of our net assets; diesel engine technologies                         |  |              | 82,104    |            |   | 98,400   
|40,000      |  | 8/05               |  | Broadcast International, Inc., publicly traded over the counter,  0.2% of our net assets; telecommunication                             |  |              | 80,916    |            |   | 94,400   
|800,000     |  | 9/05               |  | Quest Minerals & Mining Corp., publicly traded over the counter,  0.2% of our net assets; coal and mineral mining                       |  |              | 81,228    |            |   | 70,400   
|413,482     |  | 5/05               |  | Preservation Sciences Inc., publicly traded over the counter,  0.2% of our net assets; metal and concrete coatings                      |  |              |          |            |   | 70,292   
|20,000      |  | 3/05               |  | AdAl Group, Inc. publicly traded over the counter,  0.2% of our net assets; aluminum extruded products manufacturer                     |  |              | 72,912    |            |   | 67,200   
|342,857     |  | 9/05               |  | American Soil Technologies Inc.,publicly traded over the counter,  0.1% of our net assets; fertilizer innovation                        |  |              | 75,996    |            |   | 65,143   
|85,714      |  | 9/05               |  | New Life Scientific, Inc., publicly traded over the counter,  0.1% of our net assets; pharmaceutical biotechnologies                    |  |              | 81,816    |            |   | 64,285   



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|        |  |       |  |                                                                                                                                                     |  |   |            |  |   |           
|------- |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- |  | - | ----------
|54,857  |  | 5/05  |  | Vitacube Systems Holding, Inc., publicly traded over the counter,  0.1% of our net assets; specialty nutraceuticals                                |  |   | 84,852     |  |   | 63,086    
|31,413  |  | 9/05  |  | Advanced 3-D Ultrasound Services, Inc., publicly traded over the counter,  0.1% of our net assets; energy saving technologies                      |  |   | 71,256     |  |   | 60,627    
|91,885  |  | 10/04 |  | Pacific Biometrics, Inc.,publicly traded over the counter,  0.1% of our net assets; specialty central laboratory services                          |  |   | 59,356     |  |   | 59,725    
|660,000 |  | 6/05  |  | BP International, Inc., publicly traded over the counter,  0.1% of our net assets; shade structures                                                |  |   | 78,852     |  |   | 51,480    
|960,779 |  | 6/99  |  | Clean Water Technologies, Inc., publicly traded over the counter, 0.1% of our net assets; environmental services                                   |  |   | 568,006    |  |   | 49,000    
|50,000  |  | 3/05  |  | Kwikpower International plc, privately held,  0.1% of our net assets; renewable energy                                                             |  |   | 94,500     |  |   | 47,500    
|166,666 |  | 5/05  |  | Hybrid Fuel Systems, Inc., publicly traded over the counter,  0.1% of our net assets; patented natural gas/diesel dual fuel technology             |  |   | 78,852     |  |   | 45,000    
|175,000 |  | 11/04 |  | SinoFresh Healthcare, Inc., publicly traded over the counter,  0.1% of our net assets; treatment of inflammatory and infectious diseases           |  |   | 101,500    |  |   | 40,250    
|221,033 |  | 4/04  |  | Power3 Medical Products, Inc., publicly traded over the counter, .1% of our net assets; healthcare products                                        |  |   | 223,984    |  |   | 37,576    
|925,166 |  | 6/03  |  | E Med Future, Inc., publicly traded over the counter,  0.1% of our net assets; needle destruction device                                           |  |   | 489,624    |  |   | 30,530    
|310,992 |  | 12/03 |  | Magic Media Networks, Inc., publicly traded over the counter,  0.1% of our net assets; digital display monitor networks                            |  |   | 54,173     |  |   | 31,099    
|555,545 |  | 5/05  |  | Meridex Software Corp., publicly traded over the counter,  0.1% of our net assets; software development company                                    |  |   | 28,888     |  |   | 29,999    
|29,999  |  | 7/04  |  | INyX, Inc., publicly traded over the counter,  0.1% of our net assets; aerosol drug delivery                                                       |  |   | 19,813     |  |   | 28,499    
|142,856 |  | 3/04  |  | eFoodSafety.com Inc., publicly traded over the counter, 0.1% of our net assets; safety of fruit, vegetables, poultry, beef and seafood             |  |   | 47,801     |  |   | 27,143    
|36,923  |  | 9/04  |  | Material Technologies, Inc., publicly traded over the counter,  0.1% of our net assets; metal fatigue detection                                    |  |   | 78,672     |  |   | 23,631    
|176,250 |  | 4/05  |  | Maelor PLC, publicly traded over the counter,  0.1% of our net assets; products for niche healthcare applications                                  |  |   | 24,147     |  |   | 22,560    
|750,000 |  | 6/05  |  | Modern Technology Corporation, publicly traded over the counter,  0.1% of our net assets; technology development and acquisition company           |  |   | 82,152     |  |   | 15,000    
|480,000 |  | 4/05  |  | Websky Inc., publicly traded over the counter,  0.1% of our net assets; broadband wireless                                                         |  |   |           |  |   | 14,880    
|133,333 |  | 4/04  |  | Jenex Corp., publicly traded Canadian Venture Exchange,  0.1% of our net assets; consumer and healthcare products                                  |  |   | 25,657     |  |   | 10,933    
|295,500 |  | 7/04  |  | Veridium Corp., publicly traded over the counter,  0.1% of our net assets; environmental services business                                         |  |   | 69,032     |  |   | 8,865     
|333,333 |  | 5/05  |  | Advanced Refractive Technologies, Inc (formerly Visijet, Inc.), publicly traded over the counter,  0.1% of our net assets; ophthalmic technologies |  |   | 40,998     |  |   | 6,333     
|14,796  |  | 1/04  |  | GeneThera, Inc., publicly traded over the counter, 0.1% of our net assets; molecular biotechnology products                                        |  |   | 36,014     |  |   | 4,735     
|        |  |       |  |                                                                                                                                                    
|        |  |       |  | Investments with $0 value - See schedule below                                                                                                      |  |   | 1,776,569  |  |   |          
|        |  |       |  |                                                                                                                                                     |  |   |            |  |   |           
|        |  |       |  | TOTAL INVESTMENTS 53%                                                                                                                              |  | $ | 24,438,591 |  | $ | 23,244,853
|        |  |       |  |                                                                                                                                                     |  |   |            |  |   |           
|        |  |       |  | Cash and other assets, less liabilities 47%                                                                                                        |  |   |            |  |   | 20,670,718
|        |  |       |  |                                                                                                                                                    
|        |  |       |  | Net assets at September 30, 2005100%                                                                                                               |  |   |            |  | $ | 43,915,571
|        |  |       |  |                                                                                                                                                     |  |   |            |  |   |           



Notes
to Schedule of Investments:



| |  |  | The above investments with the exception of UTEK Real Estate Holdings, Inc. are non-income producing. Equity investments that have not paid dividends within the last twelve months
are considered non-income producing.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | The value of all securities for which there is no readily available market value is determined in good faith by the Board of Directors. In making its determination, the Board of
Directors has considered valuation appraisals provided by an independent valuation service provider. (See Note 3 to the consolidated financial statements).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As of September 30, 2005, all of the securities that we own are subject to legal restrictions on resale with the exception of Circle Group Holdings, Inc., Israel Technology
Acquisition Corp. and Fortress America Acquisition Corp. As a result, our ability to sell or otherwise transfer the securities we hold in our portfolio is limited.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We own more than 10% of the outstanding common stock of Clean Water Technologies, Inc., INSEQ Corp., Stealth MediaLabs, Inc., HydroFlo, Inc., Health Sciences Group, Inc., Manakoa
Services Corporation, and Fuel FX International, Inc.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|(1) | We own 100% of UTEK Real Estate Holdings, Inc., which has three subsidiaries; Rosbon LLC, ABM of Tampa Bay, Inc. and Ybor City Group, Inc. We own 150 shares of the total shares
outstanding of Rosbon LLC and all of the outstanding shares of ABM of Tampa Bay, Inc. and Ybor City Group, Inc.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Schedule of Investments with $0 Value at September 30, 2005



|          |  |                    |  |                                                                                                                                                 |  |              |           |           |   |  
|--------- |  | ------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | --------- | - | -
|Shares    |  | Date ofAcquisition |  |                                                                                                                                                 |  | OriginalCost |           | FairValue
|4,221,165 |  | 4/01               |  | Stealth MediaLabs, Inc.publicly traded over the counter  0% of our net assets; software products                                               |  | $            | 1,708,000 |           | $ | 
|100,000   |  | 8/04               |  | Myrmidon Biomaterials, Inc., privately held  0% of our net assets; biomaterial tendon replacement                                              |  |              |          |           |   | 
|480,000   |  | 8/04               |  | TenthGate, Inc., privately held  0% of our net assets; healthcare related products and services                                                |  |              |          |           |   | 
|550,000   |  | 9/04               |  | Uniphyd Corporation, publicly traded over the counter  0% of our net assets; develops and operates managed care plans                          |  |              | 68,569    |           |   | 
|500,000   |  | 12/04              |  | Bioflavorance Technology and Research, Inc., privately held  0.0% of our net assets; develops, manufactures and markets flavors and fragrances |  |              |          |           |   | 
|          |  |                    |  |                                                                                                                                                 |  |              |           |           |   |  
|          |  |                    |  |                                                                                                                                                 |  | $            | 1,776,569 |           | $ | 
|          |  |                    |  |                                                                                                                                                 |  |              |           |           |   |  



Upon approval from the
Board of Directors, management made the decision to sell some of the investments that the Company has carried on its financial statements with a zero value for several quarters. Maintaining these investments was costly and the likelihood of future
value was minimal. The following investments were included in the group of zero value shares: Provision Operation Systems, Inc., Advanced Recycling Sciences, Inc., Graphco Holdings Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical
Corporation, Primapharm Funding Corporation, Silver Screen Studios, Inc., Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid Network Company, GreenWorks Corporation, and Xeminex, Ltd.



See accompanying notes



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##### Table of Contents

UTEK CORPORATION

Schedule of Investments

December 31, 2004



|           |  |                    |  |                                                                                                                                                 |  |               |            |            |   |           
|---------- |  | ------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | ---------- | - | ----------
|Shares     |  | Date ofAcquisition |  | Common stock in non-controlled affiliates60.5% of our net assets                                                                               |  | Original Cost |            | Fair Value
|3,615,705  |  | 1/02               |  | Circle Group Holdings, Inc., publicly traded on the American Stock Exchange,  29.4% our net assets; small business holding company             |  | $             | 851,527    |            | $ | 6,797,526 
|2,460,000  |  | 3/04               |  | Health Sciences Group, Inc., publicly traded over the counter,  5.1% of our net assets; nutraceutical and pharmaceutical products              |  |               | 1,168,826  |            |   | 1,180,800 
|2,550,000  |  | 4/04               |  | Manakoa Services Company, publicly traded over the counter,  5.0% of our net assets; compliance analysis and monitoring                        |  |               | 831,520    |            |   | 1,147,500 
|432,387    |  | 4/04               |  | Xethanol Corporation., privately held , 4.7% of our net assets; bioethanol products                                                            |  |               | 1,043,075  |            |   | 1,080,968 
|6,708,529  |  | 4/04               |  | HydroFlo, Inc., publicly traded over the counter,  4.4% of our net assets; business development company                                        |  |               | 923,944    |            |   | 1,006,279 
|20,550,000 |  | 9/04               |  | Uniphyd Corporation, publicly traded over the counter,  2.3% of our net assets; develops and operates managed care plans                       |  |               | 588,568    |            |   | 534,300   
|1,284,000  |  | 6/03               |  | E Med Future, Inc., publicly traded over the counter,  2.0% of our net assets; needle destruction device                                       |  |               | 684,909    |            |   | 462,240   
|9,255,882  |  | 2/04               |  | Zkid Network Company, publicly traded over the counter,  1.3% of our net assets; developer of proprietary software                             |  |               | 984,437    |            |   | 305,444   
|80,000     |  | 11/04              |  | GreenWorks Corporation, publicly traded over the counter,  0.7% of our net assets; environmental engineering and brownfield development        |  |               | 84,660     |            |   | 155,200   
|500,000    |  | 3/04               |  | Swiss Medica, Inc., publicly traded over the counter,  0.6% of our net assets; bioscience products                                             |  |               | 79,628     |            |   | 140,000   
|221,033    |  | 4/04               |  | Power3 Medical Products, Inc., publicly traded over the counter, 0.6% of our net assets; healthcare products                                   |  |               | 223,984    |            |   | 130,410   
|120,000    |  | 11/04              |  | Xeminex Macedonia Ltd. privately held,  0.5% of our net assets; extraction of metals and minerals from ores and industrial wastes              |  |               | 120,000    |            |   | 120,000   
|645,000    |  | 3/03               |  | Sequiam Corporation, publicly traded over the counter,  0.5% of our net assets; biological authentication and biometrics technologies          |  |               | 185,726    |            |   | 116,100   
|129,730    |  | 10/04              |  | Pacific Biometrics, Inc., publicly traded over the counter,  0.5% of our net assets; specialty central laboratory services                     |  |               | 83,796     |            |   | 105,081   
|20,668     |  | 2/04               |  | Telkonet, Inc., publicly traded over the counter,  0.4% of our net assets; networking and internetworking products                             |  |               | 39,110     |            |   | 87,632    
|175,000    |  | 11/04              |  | SinoFresh Healthcare, Inc., publicly traded over the counter,  0.4% of our net assets; therapies to treat inflammatory and infectious diseases |  |               | 101,500    |            |   | 87,500    
|545,000    |  | 12/03              |  | Magic Media Networks, Inc., publicly traded over the counter,  0.3% of our net assets; digital display monitor networks                        |  |               | 125,179    |            |   | 76,300    
|720,637    |  | 4/03               |  | Intra-Asia Entertainment Corp, publicly traded over the counter, 0.3% of our net assets; digital television entertainment                      |  |               | 1,607,494  |            |   | 64,857    
|150        |  | 11/99              |  | Rosbon, LLC, privately held,  0.3% of our net assets; real estate development                                                                  |  |               | 90,705     |            |   | 61,324    
|204,080    |  | 3/04               |  | eFoodSafety.com, Inc., publicly traded over the counter, 0.3% of our net assets; safety of fruit, vegetables, poultry, beef and seafood        |  |               | 68,005     |            |   | 61,224    
|36,923     |  | 9/04               |  | Material Technologies, Inc., publicly traded over the counter,  0.2% of our net assets; metal fatigue detection                                |  |               | 78,672     |            |   | 50,585    
|56,916     |  | 7/04               |  | eLinear, Inc., publicly traded on the American Stock Exchange,  0.2% of our net assets; technology solutions provider of security              |  |               | 54,424     |            |   | 49,517    
|960,779    |  | 6/99               |  | Clean Water Technologies, Inc.,publicly traded over the counter, 0.2% of our net assets; environmental services.                               |  |               | 568,006    |            |   | 39,392    
|29,999     |  | 7/04               |  | INyX, Inc., publicly traded over the counter,  0.1% of our net assets; aerosol drug delivery technologies                                      |  |               | 19,813     |            |   | 29,399    
|750,000    |  | 10/04              |  | U.S. Wireless Online, Inc., publicly traded over the counter,  0.1% of our net assets; wireless internet broadband networks                    |  |               | 66,000     |            |   | 24,750    
|295,500    |  | 7/04               |  | Veridium Corp., publicly traded over the counter,  0.1% of our net assets; environmental services business                                     |  |               | 69,032     |            |   | 14,775    
|133,333    |  | 4/04               |  | Jenex Corporation, publicly traded Canadian Venture Exchange,  0.1% of our net assets; consumer and healthcare products                        |  |               | 25,657     |            |   | 13,333    
|200,000    |  | 6/02               |  | FullCircle Registry, Inc.,publicly traded over the counter,  0.1% of our net assets; emergency information technology                          |  |               | 168,192    |            |   | 12,000    
|14,796     |  | 1/04               |  | GeneThera, Inc., publicly traded over the counter,  0.1% of our net assets; molecular biotechnology products                                   |  |               | 36,014     |            |   | 10,505    
|4,000      |  | 11/01              |  | Peak Entertainment Holdings, Inc., publicly traded over the counter,  0.1% of our net assets; telecom, educational internet service            |  |               | 12,028     |            |   | 1,000     
|           |  |                    |  | Investments with $0 value - See schedule below                                                                                                  |  |               | 7,480,087  |            |   |          
|           |  |                    |  |                                                                                                                                                 |  |               |            |            |   |           
|           |  |                    |  | TOTAL INVESTMENTS60.5%                                                                                                                         |  | $             | 18,464,518 |            | $ | 13,965,941
|           |  |                    |  |                                                                                                                                                 |  |               |            |            |   |           
|           |  |                    |  | Cash and other assets, less liabilities39.5%                                                                                                   |  |               |            |            |   | 9,127,002 
|           |  |                    |  |                                                                                                                                                 |  |               |            |            |   |           
|           |  |                    |  | Net assets at December 31, 2004100%                                                                                                            |  |               |            |            | $ | 23,092,943
|           |  |                    |  |                                                                                                                                                 |  |               |            |            |   |           



Page 11 of 38



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##### Table of Contents

Notes to Schedule of Investments:



| |  |  | The above investments with the exception of Rosbon, LLC are non-income producing. Equity investments that have not paid dividends within the last twelve months are considered
non-income producing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The value of all securities for which there is no readily available market value is determined in good faith by the Board of Directors. In making its determination, the Board of
Directors has considered valuation appraisals provided by an independent valuation service provider. (See Note 3 to the consolidated financial statements).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As of December 31, 2004, all of the securities that we own are subject to legal restrictions on resale. As a result, our ability to sell or otherwise transfer the securities we
hold in our portfolio is limited.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We own more than 10% of the outstanding common stock of Image Analysis, Inc., Nubar, Inc., Clean Water Technologies, Inc., Rosbon LLC, Stealth MediaLabs, Inc., HydroFlo, Inc. and
Primapharm Funding Corporation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Schedule of
Investments with $0 Value at December 31, 2004



|          |  |                        |  |                                                                                                                                                                        |  |              |           |               |   |  
|--------- |  | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ------------- | - | -
|Shares    |  | Date of    Acquisition |  |                                                                                                                                                                        |  | OriginalCost |           | Fair    Value
|1,344,300 |  | 1/99                   |  | ClearImage, Inc., (formerly Image Analysis, Inc.) privately held,  0% of our net assets; medical and hospital equipment developer                                     |  | $            | 1,349,775 |               | $ | 
|900,000   |  | 5/99                   |  | Nubar, Inc., privately held,  0%; construction materials                                                                                                              |  |              | 126,000   |               |   | 
|136,093   |  | 3/00                   |  | Graphco Holdings Corp., publicly traded over the counter,  0% of our net assets; developer of e-commerce technologies                                                 |  |              | 959,606   |               |   | 
|2,094,052 |  | 6/00                   |  | Advanced Recycling Sciences, Inc.,publicly traded over the counter,  0% of our net assets; tire recycling methodologies                                               |  |              | 1,970,952 |               |   | 
|63,193    |  | 3/01                   |  | Provision Operation Systems, Inc.,publicly traded over the counter,  0% of our net assets; health care technology                                                     |  |              | 39,614    |               |   | 
|4,221,165 |  | 4/01                   |  | Stealth MediaLabs, Inc,.publicly traded over the counter,  0% of our net assets; software products                                                                    |  |              | 1,708,000 |               |   | 
|1,493,550 |  | 9/01                   |  | Prime Pharmaceutical Corporation, privately held,  0% of our net assets; pharmaceutical developments in dermatology                                                   |  |              | 783,344   |               |   | 
|1,000,000 |  | 11/01                  |  | Primapharm Funding Corporation, privately held,  0% of our net assets; intellectual property development                                                              |  |              | 413,617   |               |   | 
|47,615    |  | 1/02                   |  | Silver Screen Studios, Inc.(formerly Group Management Corporation),publicly traded over the counter,  0% of our net assets; corporate management                      |  |              | 46,949    |               |   | 
|633,750   |  | 2/02                   |  | Mixed Entertainment, Inc. (formerly Voice & Wireless Corporation), publicly traded over the counter,  0% of our net assets; internet/technology services and products |  |              | 53,161    |               |   | 
|48,000    |  | 4/02                   |  | Hydrogen Technology Applications, Inc.,privately held,  0% of our net assets; energy technology                                                                       |  |              | 14,040    |               |   | 
|3,871     |  | 12/03                  |  | Assuretec Holdings, Inc.,privately held,  0% of our net assets; security solutions to automate, manage and authenticate identification documents                      |  |              | 15,029    |               |   | 
|100,000   |  | 8/04                   |  | Myrmidon Biomaterials, Inc., privately held,  0% of our net assets; biomaterial tendon replacement                                                                    |  |              |          |               |   | 
|500,000   |  | 12/04                  |  | Bioflavorance Technology and Research, Inc., privately held,  0% of our net assets; develops, manufactures and markets flavors and fragrances                         |  |              |          |               |   | 
|          |  |                        |  |                                                                                                                                                                        |  |              |           |               |   |  
|          |  |                        |  |                                                                                                                                                                        |  | $            | 7,480,087 |               | $ | 
|          |  |                        |  |                                                                                                                                                                        |  |              |           |               |   |  



See accompanying notes



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##### Table of Contents

UTEK Corporation

Notes to Consolidated Financial Statements



(Information as of September 30, 2005 and 2004 and for the three and
ninth month

periods then ended is unaudited)



1. Basis of Presentation



Interim Financial Information



The financial information for UTEK Corporation (the Company, we, us, or UTEK) as of September 30,
2005 and 2004 and for the three and nine month periods then ended is unaudited, but includes all adjustments (consisting only of normal recurring accruals), which, in the opinion of management are necessary in order to make the financial statements
not misleading at such dates and for those periods. These financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes required by accounting principles
generally accepted in the United States. These consolidated financial statements should be read in conjunction with the consolidated audited financial statements and related notes included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2004. Operating results for the three and nine month periods ended September 30, 2005 are not necessarily indicative of the results that may be expected for the entire year.



The Company



UTEK is a market-driven technology-transfer business that assists companies in identifying and acquiring technologies.
Technology-transfer refers to the process by which new technologies, developed in universities, medical research centers and federal research laboratories, or similar research settings, are licensed to companies for commercial development and use.
UTEKs goal is to provide its client-companies an opportunity to acquire and commercialize innovative technologies primarily developed by universities, medical research centers and federal research laboratories.



UTEKs business model generally involves three steps:



| |  |  | First, UTEK seeks to enter into a strategic alliance agreement with its client-companies to learn about their technology needs and identify new discoveries that they want to
acquire.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Second, UTEK forms and capitalizes a new company to acquire the identified technology from a university, medical research center or federal research laboratory.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Third, UTEKs client-companies acquire the identified technology from UTEK in a tax-free stock for stock exchange of shares of UTEKs newly formed entity for shares of the
client-company.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



UTEK calls this unique
technology-transfer investment process U2B®.



The Company is a non-diversified, closed-end management investment company
that has elected to be treated as a business development company (BDC) under the Investment Company Act of 1940 (1940 Act). The Companys investment objective is to increase its net assets by exchanging stock in new
companies that the Company forms to acquire intellectual property for securities, cash and other assets upon the completion of technology-transfer transactions.



2. Stock-Based Compensation



At September 30, 2005, the Company had the following two stock-based equity compensation plans: the UTEK Corporation Amended and Restated Stock
Option Plan (the 1999 Plan) and UTEK Corporation Amended and Restated Non-Qualified Stock Option Plan (the 2000 Plan). The Company accounts for these plans and related grants thereunder using the intrinsic value method
prescribed in APB Opinion No. 25, Accounting for Stock Issued to Employees. No stock-based employee compensation cost is reflected in net increase (decrease) in net assets from operations, as all of the options granted under
those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on the net increase (decrease) in net assets from operations and the related per share
amounts if the Company had applied the fair value recognition provisions of SFAS 123, Accounting for Stock-based Compensation to the stock-based employee awards.



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The pro forma net increase (decrease) in net assets from operations and basic and diluted earnings per
share for the three and nine month periods ended September 30, 2005 and 2004 would have been as follows:



|                                                                                                                                            |  |                                |           |   |                               |   |            |      |  |   |           |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | --------- | - | ----------------------------- | - | ---------- | ---- |  | - | --------- | - |  | - | ------- | -
|                                                                                                                                            |  | Three Months EndedSeptember 30 |           |   | Nine Months EndedSeptember 30 |  
|                                                                                                                                            |  | 2005                           |           |   | 2004                          |   |            | 2005 |  |   | 2004      |  
|Net increase (decrease) in net assets from operations:                                                                                      |  |                                |           |   |                               |   |            |      |  |   |           |   |  |   |         |  
|As reported                                                                                                                                 |  | $                              | 5,663,261 |   |                               | $ | (7,202,711 | )    |  | $ | 1,960,050 |   |  | $ | 450,157 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                | (106,146  | ) |                               |   | (38,371    | )    |  |   | (167,302  | ) |  |   | (93,098 | )
|                                                                                                                                            |  |                                |           |   |                               |   |            |      |  |   |           |   |  |   |         |  
|Pro forma                                                                                                                                   |  | $                              | 5,557,115 |   |                               | $ | (7,241,082 | )    |  | $ | 1,792,748 |   |  | $ | 357,059 |  
|                                                                                                                                            |  |                                |           |  
|Net increase (decrease) in net assets from operations per share  Basic:                                                                    |  |                                |           |   |                               |   |            |      |  |   |           |   |  |   |         |  
|As reported                                                                                                                                 |  | $                              | 0.75      |   |                               | $ | (1.28      | )    |  | $ | 0.28      |   |  | $ | .08     |  
|Pro forma                                                                                                                                   |  | $                              | 0.73      |   |                               | $ | (1.29      | )    |  | $ | 0.26      |   |  | $ | .07     |  
|                                                                                                                                            |  |                                |           |  
|Net increase (decrease) in net assets from operations per share  Diluted:                                                                  |  |                                |           |   |                               |   |            |      |  |   |           |   |  |   |         |  
|As reported                                                                                                                                 |  | $                              | 0.74      |   |                               | $ | (1.28      | )    |  | $ | 0.28      |   |  | $ | .08     |  
|Pro forma                                                                                                                                   |  | $                              | 0.72      |   |                               | $ | (1.29      | )    |  | $ | 0.25      |   |  | $ | .06     |  



The pro forma
compensation costs presented above were determined using the weighted average fair values of options granted under the Companys stock option plans. The fair value of grants was estimated using the Black-Scholes option-pricing model with the
following assumptions:



|                        |  |               |  |              
|----------------------- |  | ------------- |  | -------------
|                        |  | 2005          |  | 2004         
|Dividend yield          |  | 0.00%         |  | 0.00%        
|Expected volatility     |  | 14.88%        |  | 28.11%       
|Risk-free interest rate |  | 3.76% - 4.13% |  | 2.78% - 5.91%
|Expected life           |  | 4 years       |  | 5 years      



During the three and
nine month periods ended September 30, 2005, there were 148,000 and 183,000 options granted, respectively. Options to purchase 272,000 and 120,000 shares of common stock for the three and nine month periods ended September 30, 2005, were
not included in the computation of net asset value per share because the effect of such options would be anti-dilutive. Options to purchase 40,000 shares of common stock for the three and nine month periods ended September 30, 2004, were not
included in the computation of net asset value per share because the effect of such options would be anti-dilutive.



Following the Annual Meeting of Stockholders of UTEK Corporation on August 12, 2005, the Company amended and restated the 1999 Plan to increase the
number of shares available to be issued upon exercise of options granted under the 1999 Plan from 685,000 to 1,385,000.



In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payments
(SFAS No. 123R). The statement originally required the expensing of stock options in the financial statements for periods no later than the annual or interim periods beginning after June 15, 2005. In April 2005, the Securities and Exchange
Commission extended the implementation date of SFAS No. 123R to the beginning of the Companys next fiscal year. Based on the change in the implementation date, UTEK expects to implement the statement beginning with its interim financial
statements for the first quarter of 2006. As of yet the Company has not made a determination of the valuation methodology and, therefore, has not determined the impact to future periods.



3. Investments in Non-Controlled Affiliates



The Company invests in portfolio companies that its management believes are positioned to benefit from the acquisition of new technology. Usually we
execute our investments in portfolio companies through the creation and capitalization of a new company, which we refer to as an intellectual property acquisition company, to acquire a new technology. We will then seek to sell such intellectual
property acquisition company to a company in a non-taxable exchange of shares. In connection with such technology-transfer transactions, we typically receive shares of unregistered common stock in the company in exchange for the securities of our
intellectual property acquisition company.



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##### Table of Contents

In addition to technology-transfer transactions, we offer strategic alliance consulting services.
Strategic alliance services are performed pursuant to service agreements (usually one year in length) in which UTEK provides consulting services by identifying and evaluating technology acquisition opportunities in exchange for unregistered shares
of the client company, or cash. These agreements may be terminated typically with 30 days notice by either party.



Equity securities at September 30, 2005 and December 31, 2004 (53% and 60.5% of net assets, respectively) were valued at fair value as
determined by the Board of Directors, with the assistance of appraisals provided by an independent valuation service provider, in the absence of readily available market values.



The values assigned to these securities are based upon available information and may not reflect amounts that could be
realized if the Company found it necessary to immediately sell such securities, or amounts that ultimately may be realized. Accordingly, the fair values included in the accompanying schedule of investments may differ from the values that would have
been used had a ready market existed for these securities and such differences could be material.



On September 30, 2005, the Company entered into an agreement and plan of acquisition with Ybor City Group, Inc. to acquire all of its issued and
outstanding shares of capital stock for an aggregate purchase price of $3,150,000. Ybor City Group is a real estate holding company that owns a commercial real estate property in Tampa, Florida. UTEK financed the acquisition through the issuance of
119,134 shares of its common stock and a $1,500,000 mortgage. Ybor City Group, Inc. and the associated mortgage are included within UTEK Real Estate Holdings, Inc. within the Companys portfolio investments.



Upon approval from the Board of Directors, management made the decision to
sell some of the investments that the Company has carried on its financial statements with a zero value for several quarters. Maintaining these investments was costly and the likelihood of future value was minimal. The following investments were
included in the group of zero value shares: Provision Operation Systems, Inc., Advanced Recycling Sciences, Inc., Graphco Holdings Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical Corporation, Primapharm Funding Corporation, Silver
Screen Studios, Inc., Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid Network Company, GreenWorks Corporation, and Xeminex, Ltd. .



During the nine months ended September 30, 2005, we completed the following ten technology-transfer transactions and entered into the following
twenty eight strategic alliance agreements:



2005 Technology Transfers:



|             |  |                                |  |                                            |  |                                    
|------------ |  | ------------------------------ |  | ------------------------------------------ |  | -----------------------------------
|Date         |  | Client Company                 |  | Intellectual Property Acquisition Company  |  | Consideration  Unregistered Shares
|January 10   |  | Xethanol Corp.                 |  | Superior Separation Technologies, Inc.     |  | 250,000                            
|February 22  |  | Health Sciences Group, Inc.    |  | Open Cell Biotechnologies, Inc.            |  | 822,845                            
|March 31     |  | Swiss Medica, Inc.             |  | Anti Depression Biohealth Solutions, Inc.  |  | 1,862,069 (1)                      
|June 30      |  | Manakoa Services Corp.         |  | Vigilant Network Technologies, Inc.        |  | 5,365,854                          
|July 18      |  | eLinear Corp.                  |  | Secure Voice Communications, Inc.          |  | 150,528                            
|August 5     |  | Industrial Biotechnology Corp. |  | Advanced Bioscience, Inc.                  |  | 10,000,000 preferred A             
|August 15    |  | Xethanol Corp.                 |  | Xylose Technologies, Inc.                  |  | 567,857                            
|September 1  |  | Fuel FX International Inc.     |  | Emissions-Reduction Technologies, Inc.     |  | 5,715,000                          
|September 15 |  | Inseq Corp.                    |  | Separation and Recovery Technologies, Inc. |  | 434,782,608                        
|September 30 |  | Kwikpower International, PLC   |  | Biodiesel Technologies, Inc.               |  | (2)                                

---

|1) | The Company also received $96,637 in cash.
|-- | ------------------------------------------

|2) | Consideration consisted of a 1.25 million £ convertible debenture ($2,212,000 at September 30, 2005). The Company has recognized the value of the agreement based
upon the fair value of the 1,984,126 common shares underlying the convertible debenture, and has recorded such amount as a receivable in the accompanying statement of net assets.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

2005 Strategic Alliances:



|             |  |                                                                 |  |                                            |   |  |                                     |  
|------------ |  | --------------------------------------------------------------- |  | ------------------------------------------ | - |  | ----------------------------------- | -
|Date         |  | Client Company                                                  |  | Total Shares of Common Stock Per Agreement |   |  | Shares Earned at September 30, 2005 |  
|January 5    |  | Bioflavorance Technology and Research, Inc.                     |  | 48,000                                     |   |  | (1                                  | )
|March 4      |  | KP Renewables, plc                                              |  | 50,000                                     |   |  | 28,827                              |  
|March 16     |  | Small Town Radio, Inc.                                          |  | 6,000,000                                  |   |  | (1                                  | )
|March 22     |  | AdAl Group, Inc.                                                |  | 20,000                                     |   |  | 10,000                              |  
|April 4      |  | Maelor PLC                                                      |  | 177,671                                    |   |  | 176,250                             |  
|April 14     |  | NutraCea, Inc.                                                  |  | 224,489                                    |   |  | 224,489                             |  
|April 19     |  | WebSky, Inc.                                                    |  | 480,000                                    |   |  | 214,667                             |  
|April 25     |  | Rival Technologies, Inc.                                        |  | 120,000                                    |   |  | 51,667                              |  
|May 6        |  | Preservation Sciences, Inc.                                     |  | 413,482                                    |   |  | 165,616                             |  
|May 18       |  | Advanced Refractive Technologies, Inc (formerly Visijet, Inc.)  |  | 333,333                                    |   |  | 252,690                             |  
|May 20       |  | Vitacube Systems Holding, Inc.                                  |  | 54,857                                     |   |  | 19,906                              |  
|May 23       |  | Hybrid Fuel Systems, Inc.                                       |  | 166,666                                    |   |  | 118,281                             |  
|May 23       |  | Incode Technologies Corp.                                       |  | 50,000,000                                 |   |  | (2                                  | )
|May 31       |  | Fuel FX International, Inc.                                     |  | 342,860                                    |   |  | 210,289                             |  
|June 7       |  | Modern Technology Corp.                                         |  | 750,000                                    |   |  | 235,417                             |  
|June 28      |  | BP International, Inc.                                          |  | 660,000                                    |   |  | 168,667                             |  
|June 29      |  | Trio Industries Group, Inc.                                     |  | 118,811                                    |   |  | 30,033                              |  
|August 22    |  | In Veritas Medical Diagnostics, Inc.                            |  | (3                                         | ) |  | (3                                  | )
|August 23    |  | Dataram Corp.                                                   |  | (4                                         | ) |  | (4                                  | )
|August 25    |  | TenthGate                                                       |  | 240,000                                    |   |  | 43,871                              |  
|August 29    |  | Broadcast International, Inc.                                   |  | 40,000                                     |   |  | 3,548                               |  
|September 2  |  | Telecommunications Systems, Inc.                                |  | (5                                         | ) |  | (5                                  | )
|September 6  |  | Episys, Ltd.                                                    |  | (6                                         | ) |  | (6                                  | )
|September 9  |  | World Energy Solutions (Advanced 3-D Ultrasound Services, Inc.) |  | 31,413                                     |   |  | 2,042                               |  
|September 9  |  | New Life Scientific, Inc.                                       |  | 85,714                                     |   |  | 4,999                               |  
|September 9  |  | Fuel FX International, Inc.                                     |  | 342,857                                    |   |  | 19,825                              |  
|September 16 |  | Quest Minerals & Mining Corp.                                   |  | 800,000                                    |   |  | 31,111                              |  
|September 28 |  | American Soil Technologies, Inc.                                |  | 342,857                                    |   |  | 1,905                               |  

---

|1) | The Company has not received the shares and therefore has not recognized any revenue to date.
|-- | ---------------------------------------------------------------------------------------------

|2) | The Company cancelled the strategic alliance agreement and has not recognized any related revenue.
|-- | --------------------------------------------------------------------------------------------------

|3) | The fair value of the agreement is $150,000 in unregistered common shares and has been recorded in receivables in the accompanying statement of net assets. The Company has
recognized consulting fees of $1,500 to date.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4) | The fair value of the agreement is $67,500 in cash. The Company has recognized consulting fees of $27,500 to date.
|-- | ------------------------------------------------------------------------------------------------------------------

|5) | The fair value of the agreement is $150,000 in unregistered common shares and has been recorded as a receivable in the accompanying statement of net assets. The Company has
recognized consulting fees of $7,500 to date.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6) | The fair value of the agreement is 60,000 £ ($106,176 at September 30, 2005). The Company has recognized consulting fees of 5,875 £ ($10,396 at September 30,
2005) to date.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On March 17, 2005, the
Company received 30,000 unregistered shares of common stock from Xethanol Corporation in a renewal of the previous strategic alliance agreement. The Company has recognized consulting fees to date relating to 15,000 shares.



On May 19, 2005, the Company received 555,545 unregistered shares of
common stock from Meridex Software Corp. in a license representation agreement with UTEK-EKMS, Inc, one of our subsidiaries. The Company has recognized consulting fees to date relating to 231,477 shares.



During the nine months ended September 30, 2004, we completed the
following six technology-transfer transactions and entered into the following sixteen strategic alliance agreements:



2004 Technology Transfers:



|             |  |                               |  |                                           |  |                                                    
|------------ |  | ----------------------------- |  | ----------------------------------------- |  | ---------------------------------------------------
|Date         |  | Client Company                |  | Intellectual Property Acquisition Company |  | Consideration  Unregistered Shares of Common Stock
|April 30     |  | Zkid Network Company          |  | Web Safe Technologies, Inc.               |  | 9,550,000                                          
|June 25      |  | Xethanol Corp.                |  | Advanced Biomethanol Technologies, Inc.   |  | 200,000                                            
|August 2     |  | HydroFlo, Inc.                |  | Arsenic Removal Technologies, Inc.        |  | 2,823,529                                          
|August 5     |  | Manakoa Services Company      |  | Advanced Cyber Security, Inc.             |  | 2,000,000                                          
|August 10    |  | Power3 Medical Products, Inc. |  | Ice Technologies, Inc.                    |  | 141,000                                            
|September 30 |  | Xethanol Corp.                |  | Ethanol Extraction Technologies, Inc.     |  | 169,230                                            



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##### Table of Contents

2004 Strategic Alliances:



|             |  |                               |  |                                           |   |  |                                   
|------------ |  | ----------------------------- |  | ----------------------------------------- | - |  | ----------------------------------
|Date         |  | Client Company                |  | Total Shares ofCommon Stock Per Agreement |   |  | Shares Earned atSeptember 30, 2004
|January 26   |  | GeneThera, Inc.               |  | 30,000                                    |   |  | 21,694                            
|February 17  |  | Zkid                          |  | 705,882                                   |   |  | 458,414                           
|February 18  |  | Telkonet, Inc.                |  | 38,585                                    |   |  | 20,668                            
|March 12     |  | Health Sciences Group, Inc.   |  | 100,000                                   |   |  | 58,331                            
|March 29     |  | Swiss Medica, Inc.            |  | 200,000                                   |   |  | 103,835                           
|March 30     |  | eFoodSafety.com, Inc.         |  | 244,987                                   |   |  | 129,485                           
|April 1      |  | Xethanol Corp.                |  | 63,157                                    |   |  | 31,578                            
|April 5      |  | Manakoa Services Company      |  | 150,000                                   |   |  | 72,916                            
|April 16     |  | Power3 Medical Products, Inc. |  | 240,000                                   |   |  | 49,333                            
|April 23     |  | Jenex Corp.                   |  | 133,333                                   |   |  | 133,333                           
|April 28     |  | HydroFlo, Inc.                |  | 400,000                                   |   |  | 168,887                           
|May 27       |  | eLinear, Inc.                 |  | (1                                        | ) |  | 29,558                            
|July 1       |  | INyX, Inc.                    |  | 126,316                                   |   |  | 31,578                            
|July 8       |  | Veridium Corp.                |  | 300,000                                   |   |  | 83,000                            
|September 27 |  | Material Technologies, Inc.   |  | 36,923                                    |   |  | 410                               
|September 28 |  | Uniphyd Corp.                 |  | 300,000                                   |   |  | 2,500                             

---

|1) | Agreement provided for $10,000 per month in unregistered common shares.
|-- | -----------------------------------------------------------------------



On August 2, 2004, the Company assisted Shriners Hospitals for Children in transferring a tendon replacement technology they had developed and
patented to Crystal Point Partners. As consideration for the services it rendered in connection with the transfer, the Company received 50% of the upfront consideration from the license agreement with Shriners Hospitals for Children and Myrmidon
Biomaterials, Inc., including 100,000 unregistered shares of common stock from Myrmidon Biomaterials, Inc.



4. Commitments and Contingencies



From time to time, some of the Companys portfolio companies may receive correspondence or other notices of alleged breach of the technology license agreements relating to technologies transferred by UTEK to such
portfolio companies. Some of these correspondences and notices provide for a period of time in which to cure the alleged breach. The failure of the portfolio companies to cure the alleged breach may have a material adverse impact on such portfolio
companies and, as a result, on the Companys results of operations and financial position.



5. Acquisitions



On
January 29, 2005, the Company purchased 100% of the outstanding stock of INTRA-DMS, Ltd. Accordingly, the results of operations for INTRA-DMS, Ltd. have been included in the accompanying consolidated financial statements from that date forward.
The acquisition was made for the purpose of expanding our strategic alliance services with the analysis of intellectual property. The shares issued are restricted from trading for 12-months following the transaction. As one of our wholly-owned
subsidiaries, INTRA-DMS, Ltd. will be known as UTEKip, Ltd. The aggregate acquisition price was $300,000 worth of restricted shares of the Companys common stock. The value of the stock was determined based on the average market price of
the shares over the five days before the terms of the acquisition agreements were agreed upon and publicly announced.



On July 7, 2005, the Company purchased 100% of the assets of Knowledge Express Data Systems, a U.S. based on-line IP information service, for
$1,500,000 in cash. Knowledge Express Data Systems is positioned to service the IP needs of UTEK Corp, its subsidiaries and its customers. The purchase price has been allocated to the underlying assets purchased (and liabilities) based on
their estimated fair values. The resulting goodwill from this transaction is approximately $1,500,000.



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##### Table of Contents

Following is a condensed balance sheet showing the fair values of the assets acquired and the liabilities
assumed as of the respective dates of acquisition:



|                                                  |  |                 |         |                                |   |          
|------------------------------------------------- |  | --------------- | ------- | ------------------------------ | - | ---------
|                                                  |  | INTRA-DMS, Ltd. |         | Knowledge Express Data Systems
|Assets                                            |  |                 |         |                                |   |          
|Cash and cash equivalents                         |  | $               |        |                                | $ | 26,423   
|Accounts receivable net of allowance for bad debt |  |                 | 18,780  |                                |   | 141,100  
|Prepaid Expenses and other current assets         |  |                 |        |                                |   | 97,477   
|Fixed assets                                      |  |                 | 14,788  |                                |   | 113,000  
|Intangible assets                                 |  |                 | 74,396  |                                |   | 150,000  
|Goodwill acquired in the acquisition              |  |                 | 246,773 |                                |   | 1,488,110
|                                                  |  |                 |         |                                |   |          
|                                                  |  |                 | 354,737 |                                |   | 2,016,110
|                                                  |  |                 |         |                                |   |          
|Liabilities                                       |  |                 |         |                                |   |          
|Accrued Expenses                                  |  |                 | 31,221  |                                |   | 58,102   
|Deferred Income                                   |  |                 |        |                                |   | 458,008  
|Short term debt                                   |  |                 | 23,516  |                                |   |         
|                                                  |  |                 |         |                                |   |          
|                                                  |  |                 | 54,737  |                                |   | 516,110  
|                                                  |  |                 |         |                                |   |          
|Net assets acquired                               |  | $               | 300,000 |                                | $ | 1,500,000
|                                                  |  |                 |         |                                |   |          



Pro forma financial
information for the acquisitions has not been presented as the impact would be immaterial.



6. Equity Securities



On April 11, 2005, the Company sold 1,224,610 shares of its common stock to certain institutional and other investors located outside the United States. The Company received net proceeds, after offering expenses and placement fees, of
approximately $12.5 million. The purchasers of such shares will not be able to resell the shares in the United States without registration under the Securities Act or an applicable exemption from the registration requirements of the Securities Act.
Such shares of common stock may generally be publicly resold in the United States pursuant to Rule 144 under the Securities Act, one year after the date of the issuance of the shares and upon the satisfaction of certain other conditions. In
connection with this offering, the Company listed it shares of common stock for trading on the AIM market of the London Stock Exchange.



On August 12, 2005, the Company entered into agreements to sell 330,960 shares of its common stock for an aggregate offering pricing of $3,690,204 to
four institutional accredited investors, Janus Venture Fund, Oppenheimer Emerging Growth Fund, USAZ Oppenheimer Emerging Growth Fund and Oppenheimer Funds plc - Oppenheimer U.S. Emerging Growth Fund. GunnAllen Financial, Inc. acted as the placement
agent in connection with the offering of such shares and received an aggregate commission of $369,020 for its services in connection therewith.



7. Segment Reporting



The Companys principal area of activity is technology transfer services. The Company has three reportable operating segments: United Kingdom, Israel
and the United States. The United Kingdom segment includes our wholly owned subsidiaries UTEK-Europe, Ltd. and Pharma Transfer, Ltd. The Israel segment includes UTEK-ip, Ltd.



A summary of revenues and other financial information by reportable operating segment is shown below:



|                                                              |  |                                              |           |   |            |   |          |                  |  |              |            |  |   |           
|------------------------------------------------------------- |  | -------------------------------------------- | --------- | - | ---------- | - | -------- | ---------------- |  | ------------ | ---------- |  | - | ----------
|                                                              |  | UnitedKingdom (1)                            |           |   | Israel (2) |   |          | United States(3) |  | Consolidated
|Total assets September 30, 2005                               |  | $                                            | 1,295,934 |   |            | $ | 404,185  |                  |  | $            | 47,153,910 |  | $ | 48,854,029
|Total assets September 30, 2004 (1), (2)                      |  |                                              | 634,610   |   |            |   |         |                  |  |              | 19,946,230 |  |   | 20,580,840
|                                                              | 
|                                                              |  | For the Nine Months ended September 30, 2005
|                                                              |  | UnitedKingdom (1)                            |           |   | Israel (2) |   |          | United States(3) |  | Consolidated
|Income from operations                                        |  | $                                            | 567,986   |   |            | $ | 96,235   |                  |  | $            | 14,865,488 |  | $ | 15,529,709
|Income (loss) before interest, other expense and income taxes |  |                                              | (120,811  | ) |            |   | (213,784 | )                |  |              | 6,645,762  |  |   | 6,311,167 
|Depreciation and amortization                                 |  |                                              | 19,212    |   |            |   | 13,144   |                  |  |              | 67,821     |  |   | 100,177   



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|                                                              |  |                                               |         |   |            |   |         |                  |  |              |            |  |   |           
|------------------------------------------------------------- |  | --------------------------------------------- | ------- | - | ---------- | - | ------- | ---------------- |  | ------------ | ---------- |  | - | ----------
|                                                              |  | For the Nine Months ended September 30, 2004 
|                                                              |  | UnitedKingdom (1)                             |         |   | Israel (2) |   |         | United States(3) |  | Consolidated
|Income from operations                                        |  | $                                             | 471,927 |   |            | $ |        |                  |  | $            | 3,904,245  |  | $ | 4,376,172 
|Income (loss) before interest, other expense and income taxes |  |                                               | (44,259 | ) |            |   |        |                  |  |              | 878,076    |  |   | 833,817   
|Depreciation and amortization                                 |  |                                               | 1,251   |   |            |   |        |                  |  |              | 36,929     |  |   | 38,180    
|                                                              | 
|                                                              |  | For the Three Months ended September 30, 2005
|                                                              |  | UnitedKingdom (1)                             |         |   | Israel (2) |   |         | United States(3) |  | Consolidated
|Income from operations                                        |  | $                                             | 196,539 |   |            | $ | 56,593  |                  |  | $            | 10,195,251 |  | $ | 10,448,383
|Income (loss) before interest, other expense and income taxes |  |                                               | 129     |   |            |   | (82,676 | )                |  |              | 6,068,260  |  |   | 5,985,713 
|Depreciation and amortization                                 |  |                                               | 6,349   |   |            |   | 4,894   |                  |  |              | 32,458     |  |   | 43,701    
|                                                              | 
|                                                              |  | For the Three Months ended September 30, 2004
|                                                              |  | UnitedKingdom (1)                             |         |   | Israel (2) |   |         | United States(3) |  | Consolidated
|Income from operations                                        |  | $                                             | 129,000 |   |            | $ |        |                  |  | $            | 1,911,486  |  | $ | 2,040,486 
|Income (loss) before interest, other expense and income taxes |  |                                               | (69,644 | ) |            |   |        |                  |  |              | 793,701    |  |   | 724,057   
|Depreciation and amortization                                 |  |                                               | 536     |   |            |   |        |                  |  |              | 13,406     |  |   | 13,942    

---

|(1) | Pharma Transfer Ltd. was purchased in December 2004, therefore there is no Pharma Transfer Ltd. financial information included in the United Kingdom operations or assets for the
three and nine months ended September 30, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | UTEK-ip, Ltd. was purchased in January 2005, therefore there is no financial information included for the three and nine months ended September 30, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Knowledge Express Data Systems was purchased on July 7, 2005, therefore there is no financial information included in the three and nine months ended September 30, 2004.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



8. Subsequent Events



Subsequent to September 30, 2005, we completed two technology transfers; one
to Fuel FX International, Inc. for 3,500,000 unregistered shares of common stock and one to Trio Industries Group, Inc. for 1,213,872 unregistered shares of common stock.



The shares acquired by us in the aforementioned transfers were acquired in tax-free stock-for-stock exchanges and are
restricted and may only be resold by us pursuant to the requirements of the Securities Act of 1933. The value of the shares received in connection with such exchanges will be determined based on valuations in accordance with our valuation policy as
of the closing date of each transaction.



Our investments in
HydroFlo, Inc. and Xethanol Corp. represented 20.5% of Net Assets at September 30, 2005. On November 3, 2005, the $0.24 and $4.00 market closing prices per share of HydroFlo, Inc. and Xethanol Corp., respectively, on the OTC Bulletin Board
represented decreases of 70% and 38% from the $0.81 and $6.49 market closing prices per share on September 30, 2005, respectively, which closing prices were used by our board of directors in their determination of the fair value of our investment in
these companies at such date. Management estimates that based upon the decline in the market values of HydroFlo, Inc. and Xethanol Corp., our Net Asset value per share would decrease by approximately $0.37 per share or 6.6% from the Net Asset value
per share reported in our financial statements at September 30, 2005.



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION



The following discussion should be read in conjunction with our financial statements and the notes thereto included elsewhere in this Form 10-Q. This Form 10-Q
contains forward-looking statements regarding the plans and objectives of management for future operations. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or
achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and
expectations, are generally identifiable by use of the words may, will, should, expect, anticipate, estimate, believe, intend or project or
the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that these projections included in these
forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.



Critical Accounting Policies and Estimates



The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Critical accounting policies are those that are both important to the presentation
of our financial condition and results of operations and require managements most difficult, complex, or subjective judgments. Our most critical accounting policy relates to the valuation of our investments.



Pursuant to the requirements of the Investment Company Act of 1940 (the
1940 Act), our Board of Directors is responsible for determining in good faith the fair value of our investments for which market quotations are not readily available. Although the securities of many of our portfolio companies are quoted
on the OTC Bulletin Board or listed on the American Stock Exchange, our Board of Directors is required to determine the fair value of such securities if the validity of the market quotations appears to be questionable, or if the number of quotations
is such as to indicate that there is a thin or illiquid market in the security.



We determine fair value to be the amount for which an investment could be exchanged in an orderly disposition over a reasonable period of time between willing parties other than in a forced or liquidation sale. Our
valuation policy considers the fact that no ready market exists for substantially all of the securities in which we invest. Our valuation policy is intended to provide a consistent basis for determining the fair value of the portfolio. We will
record unrealized depreciation on investments when we believe that an investment has become impaired, including where realization of an equity security is doubtful. We will record unrealized appreciation if we believe that the underlying portfolio
company has appreciated in value. The value of investments in publicly traded securities is determined using quoted market prices discounted for restrictions on resale, if any.



Our equity interests in portfolio companies for which there is no liquid public market are valued using industry valuation
benchmarks, and then the value is assigned a discount reflecting the illiquid nature of the investment as well as our minority, non-control position. When an external event such as a purchase transaction, public offering, or subsequent equity sale
occurs, the pricing indicated by the external event is used to corroborate our valuation. The determined values are generally discounted to account for restrictions on resale and minority ownership positions.



The value of our equity interests in public companies for which market
quotations are readily available is based on the closing public market price on the balance sheet date. Securities that carry certain restrictions on resale are typically valued at a discount from the public market value of the security.



Business



UTEK is a market-driven technology-transfer business that assists companies in identifying and acquiring technologies.
Technology-transfer refers to the process by which new technologies, developed in universities, medical research centers and federal research laboratories, or similar research settings, are licensed to companies for commercial development and use.
Our goal is to provide client-companies an opportunity to acquire and commercialize innovative technologies primarily developed by universities, medical research centers and federal research laboratories.



We are a non-diversified, closed-end management investment company that has
elected to be treated as a business development company (BDC) under the Investment Company Act of 1940 (1940 Act). Our investment objective is to increase net assets by exchanging stock in new companies that we form to
acquire intellectual property (IP) for securities, cash and other assets upon the completion of technology-transfer transactions.



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As a BDC, we must be primarily engaged in the business of furnishing capital and making managerial
assistance available to companies that generally do not have ready access to capital through conventional financial channels. Such companies are termed portfolio companies.



We invest in portfolio companies that our management believes are positioned to benefit from the acquisition of new
technology. We offer to provide portfolio companies with managerial assistance primarily related to technology-transfer. Technology-transfer is the process by which technologies developed by universities or research laboratories are licensed to
companies for commercial use. We may make additional investments in portfolio companies to fund continued research and development of the acquired technologies.



Usually we execute our investments in portfolio companies through the creation and capitalization of a new company to acquire a new technology. We will
then seek to sell such newly formed company to a company in a non-taxable exchange of shares. In connection with such transaction, we receive shares of common stock in the company (which company then becomes a portfolio company) in exchange for the
securities of our newly formed company. In addition to holding a license to a new technology, our newly formed company may also hold cash and other assets. The companies with which we engaged in such transactions frequently have little or no prior
operating history.



To establish on-going consulting
engagements with our clients, we have also developed a strategic alliance arrangement. Our strategic alliances are designed to help technology companies rapidly enhance their new product pipeline through the acquisition of new technologies from
universities, medical research centers and federal research laboratories. Some of our strategic alliance clients engage us to license their existing proprietary technologies and provide patent analysis services.



We seek to provide our client companies a full range of complementary
technology-transfer-related services and products including; technical and business expertise to help companies identify, protect and leverage IP assets, easy to use software to help universities and research centers manage all types of IP, and
several websites providing for efficient research, marketing and exchange of technology opportunities and innovations.



Our expenses include salaries and wages, professional fees, sales and marketing costs as well as general and administrative costs. Sales and marketing
costs include license and sponsored research fees, as well as advertising, commissions, travel and other expenses that vary with revenues. General and administrative costs include rent, depreciation, office, investor relations and other overhead
costs.



Financial Condition



The Companys total assets were $48,854,029 and its net assets were
$43,915,571 at September 30, 2005, compared to $25,879,644 and $23,092,943 at December 31, 2004, respectively. Net asset value per share (NAV) was $5.57 at September 30, 2005 and $3.85 at December 31, 2004.



Net assets increased by $20,822,628 in the nine months ended
September 30, 2005 and increased by $8,597,516 in the nine months ended September 30, 2004.



The changes in total assets, net assets and net asset value per share during the nine months ended September 30, 2005 were primarily attributable to:



| |  | An unrealized net appreciation on investments of approximately $2.1 million mainly due to the increase in value of HydroFlo, Inc. and Xethanol Corp.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  | A net realized loss $4.0 million related to the Companys sale of investments that the Company has carried on its financial statements with a zero value for several quarters.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The sale of some of our investments for approximately $1.7 million.
|- |  | -------------------------------------------------------------------



| |  | The use of approximately $9.2 million to fund our operations.
|- |  | -------------------------------------------------------------



| |  | The issuance of common stock in connection with an exempt offering, private placement and upon the exercise of stock options of approximately $17 million.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Thirty three strategic alliance agreements that generated approximately $986,000.
|- |  | ---------------------------------------------------------------------------------



| |  | Ten technology transfers valued at approximately $12.5 million.
|- |  | ---------------------------------------------------------------



| |  | Two acquisitions valued at $2.0 million.
|- |  | ----------------------------------------



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The changes in total assets, net assets and net asset value per share during the nine months ended
September 30, 2004 were primarily attributable to:



| |  | An unrealized depreciation on investments of approximately $1.5 million, mainly due to the decrease in the value of our investment in Circle Group Holdings, Inc. Circle Group
comprised over 70% of our investment portfolio at value at September 30, 2004
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The sale of some of our investments for approximately $2.5 million.
|- |  | -------------------------------------------------------------------



| |  | The use of approximately $3.5 million in cash to fund our operations.
|- |  | ---------------------------------------------------------------------



| |  | The issuance of common stock in private placement transactions and upon the exercise of stock options of approximately $8.1 million.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  | Seventeen strategic alliance agreements that generated approximately $824,000;
|- |  | ------------------------------------------------------------------------------



| |  | Six technology transfers valued at approximately $2.9 million.
|- |  | --------------------------------------------------------------



The Companys common shares outstanding as of September 30, 2005 were 7,888,673, compared to 6,003,163 at December 31, 2004. The number of
our outstanding common shares increased as a result of the issuance of common shares in connection with an exempt offering and upon exercise of employee stock options, as well as shares that were issued in conjunction with the acquisitions of
Utekip, Ltd. and Ybor City Group, Inc. Ybor City Group is a real estate holding company that owns commercial real estate property in Tampa, Florida. We intend to utilize a portion of the property for the expansion and relocation of our
corporate headquarters.



The Companys financial condition
is dependent on a number of factors including the ability to effectuate technology transfer transactions and the performance of the equity investments that it receives for these transfers. The Company has invested a substantial portion of its assets
in development stage and start-up companies. These businesses are primarily thinly capitalized, unproven, small companies that lack management depth, are dependent on new, commercially unproven technologies and have no history of operations.



At September 30, 2005, $18,010,857 or 77.5% of our
investments consisted of equity securities at fair value in companies whose securities were listed on the American Stock Exchange or the Canadian Venture Exchange or quoted on the OTC Bulletin Board and $5,233,996 or 22.5% of our investments
consisted of equity securities at fair value in privately owned companies.



At December 31, 2004, $12,703,649 or 91% of our investments consisted of equity securities at fair value in companies whose securities were quoted on the OTC Bulletin Board and $1,262,292 or 9% of our investments
consisted of equity securities at fair value in privately owned companies.



A summary of the Companys investment portfolio is as follows:



|                                                            |  |                               |            |   |                  |   |            |  
|----------------------------------------------------------- |  | ----------------------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                            |  | September 30 2005 (Unaudited) |            |   | December 31,2004 |  
|Investments, at cost                                        |  | $                             | 24,438,591 |   |                  | $ | 18,464,518 |  
|Unrealized appreciation (depreciation), before income taxes |  |                               | (1,193,738 | ) |                  |   | (4,498,577 | )
|                                                            |  |                               |            |   |                  |   |            |  
|Investments, at fair value                                  |  | $                             | 23,244,853 |   |                  | $ | 13,965,941 |  
|                                                            |  |                               |            |   |                  |   |            |  



The net increase in
the value of investment securities from $13,965,941 to $23,244,853 in the nine months ended September 30, 2005 is primarily due to the following events:



| |  | The Company entered into twenty eight new strategic alliance agreements that generated approximately $1.4 million in value.
|- |  | ---------------------------------------------------------------------------------------------------------------------------



| |  | The Company sold some of its shares in Circle Group Holdings, Inc., Full Circle Registry, Inc., Telkonet, Inc., E Med Future, Inc., eFoodSafety.com, Inc., Swiss Medica, Inc. Peak
Entertainment, Inc., Silver Screen Studios, Inc., HydroFlo, Inc. and Magic Media Networks, Inc. with a fair value of $1.6 million for $1.7 million.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company completed ten sales of technology rights valued at $12.5 million.
|- |  | -----------------------------------------------------------------------------



The Companys investments can increase/decrease due to factors that are specific to these investments (inability to obtain additional capital,
inability to execute their business model, termination of their technology licenses, etc.) or to general marketplace factors.



The Companys most significant portfolio investments are in Xethanol Corp., HydroFlo, Inc., Industrial Biotechnology Corp., UTEK Real Estate
Holdings, Inc., Circle Group Holdings, Inc., Health Sciences Group, Inc., and INSEQ Corp. at September 30, 2005. These seven investments total $18,166,526 in fair value representing 78.2% of our investments in non-controlled affiliates and
41.4% of net assets.



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Results of Operations



The principal measure of our financial performance is the Net increase (decrease) in net assets from operations which is the sum of three
elements. The first element is Net income (loss) from operations, which is the difference between our income from technology transfer transactions, consulting fees, interest income, dividends, fees and other income and our operating
expenses, net of applicable income tax provision. The second element is Net realized gain (loss) on investments, which is the difference between the proceeds received from dispositions of portfolio securities and their stated cost, net
of applicable income tax provision. The third element, Increase (decrease) in unrealized appreciation on investments, which is the net change in the fair value of our investment portfolio, net of increase (decrease) in deferred income
taxes that would become payable if the unrealized appreciation were realized through the sale or other disposition of the investment portfolio.



We determine the value of each investment in our portfolio on a quarterly basis, and changes in value result in unrealized appreciation or depreciation
being recognized. At September 30, 2005, approximately 53% of our net assets represented investments recorded at fair value. Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which
a market quotation is readily available and (ii) for all other securities and assets, fair value is as determined in good faith by the board of directors.



Although many of the securities we hold in our portfolio are quoted on the OTC Bulletin Board or listed on the American Stock Exchange, our Board of
Directors is required to fair value price such securities if the validity of the market quotations appears to be questionable, or if the number of quotations is such as to indicate that there is a thin market in the security. Since there is
typically no readily available market value for the investments in our portfolio, we value all of our investments at fair value as determined in good faith by the Board of Directors. In making its determination, our Board of Directors may consider
valuation appraisals provided by independent valuation service providers. Because of the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments
determined in good faith by the Board of Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.



Three months ended September 30, 2005 compared to the three months ended
September 30, 2004.



Income from
operations. Income from operations increased 412% to $10,448,383 for the three months ended September 30, 2005 from $2,040,486 for the three months ended September 30, 2004. Approximately 73% and 87% of our income from operations
(revenue) was received in the form of equity securities for the three months ended September 30, 2005 and September 30, 2004, respectively. The increase in income from operations resulted from completing six technology transfer
transactions valued at $9,286,961, which was received in the form of common stock, during the period ended September 30, 2005, as compared to four technology transfer transactions valued at $1,525,949, which was received in the form of common
stock, completed during the quarter ended September 30, 2004. In the three months ended September 30, 2005, we rendered services in connection with strategic alliance agreements (eleven of which began in the three months ended
September 30, 2005) valued at $336,391, as compared to strategic alliance agreements (four of which began during the quarter ended September 30, 2004) valued at $288,235. Consulting income included income of $338,462 generated from
UTEK-Europe Ltd., UTEK-EKMS, Inc., and UTEKip, Ltd., and UTEK Information Services comprise the balance of the consulting income. For the quarter ended September 30, 2004, UTEK Europe, Ltd. and UTEK Information Services generated
$162,048 of income. We did not acquire Knowledge Express, UTEK-EKMS, Pharma Transfer Ltd. and UTEKip Ltd. until after the third quarter of 2004.



Expenses. Total operating expenses for the three months ended September 30, 2005 were $4,462,670, consisting of salaries and
wages of $812,751, professional fees of $204,133, acquisition of technology rights of $2,144,467, sales and marketing expenses of $538,012, and general and administrative expenses of $763,307. These expenses compared to the $1,316,429 reported for
the three months ended September 30, 2004, consisting of salaries and wages of $228,550, professional fees of $122,234, acquisition of technology rights of $370,000, sales and marketing expenses of $323,834, and general and administrative
expenses of $271,811. The 239% increase in total operating expenses was due to the increased costs of completing two additional and greater valued technology transfer transactions, three additional subsidiaries with expenses of approximately
$563,000, approximately $200,000 in additional expenses related to the addition of the Knowledge Express web site to our online services, and an increase in personnel and commissions to outside service providers used strictly to generate strategic
alliance agreements. It is our intention to continue to grow our sales force by increasing the number of sales personnel in locations around the United States, Europe and Canada. The 256% increase in salaries and wages reflects an increase in UTEK
personnel adding approximately $150,000 in expense, as well as an additional $330,000 in salaries from UTEKs new subsidiaries and approximately $100,000 in increase from the salaries for the new Knowledge Express online services. The 480%
increase in acquisition of technology rights expenses was due to the higher cost of completing two additional and greater valued technology transfer transaction. The 66% increase in sales and marketing expenses was due to an increase in the number
of our sales personnel and the amount of



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commission paid related to the value of the technology transfers, commissions paid to outside service providers used
strictly to generate strategic alliance agreements and approximately $130,000 in fees paid to outside research consultants for fulfillment of certain UTEK-EKMS contracts and other expenses related to the three new subsidiaries of approximately
$20,000. The 67% increase in professional fees relates to an increase in the cost of valuations due to an increase in the number of our portfolio companies, as well as an increase in legal fees related to acquisitions and other projects and the 181%
increase in general and administrative costs are related to our cost of UK investor relations, royalties paid for the Knowledge Express online services, other employee benefits related to an increase in employees as well as the increase in expenses
from the new subsidiaries.



Income from operations can vary
substantially on a quarterly basis due to the small number and wide range of value of the transactions. Therefore, quarterly income from operations should not be annualized to predict expected annual results.



Net Realized Gains (Losses)



The Company disposed of a significant number of holdings which had nil fair
value. As a result of these transactions the Company recognized realized losses of approximately $4.5 million, and unrealized gains of $4.5 million., The net effect of these transactions to the change in net assets is $-0-.



Net realized gains (losses) on investments, net of income tax effect,
amounted to $(4,178,503) for the three months ended September 30, 2005 and were related to sales as follows:



|                               |  |                 |  |                      |            |  
|------------------------------ |  | --------------- |  | -------------------- | ---------- | -
|Company Name                   |  | Number ofShares |  | Realized Gain (Loss) |           
|Circle Group Holdings, Inc.    |  | 687,500         |  | $                    | 393,086    |  
|E Med Future, Inc.             |  | 120,000         |  |                      | (36,380    | )
|HydroFlo, Inc.                 |  | 364,956         |  |                      | 88,511     |  
|Silver Screen Studios, Inc.    |  | 47,615          |  |                      | (29,137    | )
|Magic Media Networks, Inc.     |  | 104,008         |  |                      | (10,619    | )
|Peak Entertainment, Inc.       |  | 4,000           |  |                      | (7,056     | )
|Swiss Medica, Inc.             |  | 200,000         |  |                      | 8,683      |  
|Group of zero value shares (1) |  | various         |  |                      | (4,585,591 | )
|                               |  |                 |  |                      |            |  
|Total                          |  |                 |  | $                    | (4,178,503 | )
|                               |  |                 |  |                      |            |  

---

|(1) | Upon approval from the Board of Directors, management made the decision to sell some of the investments that the Company has carried on its financial statements with a zero value
for several quarters. Maintaining these investments was costly and the likelihood of future value was minimal. The following investments were included in the group of zero value shares above: Provision Operation Systems, Inc., Advanced Recycling
Sciences, Inc., Graphco Holdings Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical Corporation, Primapharm Funding Corporation, Silver Screen Studios, Inc., Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid
Network Company, GreenWorks Corporation, and Xeminex, Ltd.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net realized gains on investments, net of income tax effect, amounted to $112,446 for the three months ended September 30, 2004 and were related to sales as follows:



|                            |  |                 |  |                      |        
|--------------------------- |  | --------------- |  | -------------------- | -------
|Company Name                |  | Number ofShares |  | Realized Gain (Loss)
|Circle Group Holdings, Inc  |  | 70,000          |  | $                    | 94,304 
|Duraswitch Industries, Inc. |  | 21,000          |  |                      | 18,142 
|                            |  |                 |  |                      |        
|Total                       |  |                 |  | $                    | 112,446
|                            |  |                 |  |                      |        



Change in
Unrealized Appreciation (Depreciation)



The net
unrealized appreciation on our investments, net of taxes, was $6,108,475 for the three months ended September 30, 2005, compared to net unrealized depreciation of ($7,787,343) on our investments for the three months ended September 30,
2004. The net unrealized appreciation (depreciation) consisted of fluctuations in fair value resulting from the Board of Directors valuation of the Companys assets for the three months ended September 30, 2005 and 2004. There was
significant depreciation in the value of our investments for the three months ended September 30, 2005 including Circle Group Holdings which decreased by $257,000 and Manakoa Services Corp. which decreased by $906,000. This depreciation was
offset by significant appreciation in our investments in Xethanol Corp. of $1.4 million and HydroFlo, Inc. of $1.7 million. The Company disposed of a significant number of holdings which had zero fair value. As a result of these transactions the
Company recognized realized losses of approximately $4.5 million, and unrealized gains of $4.5 million. These transactions resulted in a reversal of preciously recorded unrealized depreciation as a result of recognizing such depreciation as a
realized loss in the third quarter. The net effect of these transactions was $-0-. The other investments as a whole had a net depreciation for the three months ended September 30, 2005 of approximately $20,000. Subsequent to September 30,
2005, HydroFlo, Inc. and Xethanol Corporation experienced a significant decline in market price. (See Recent Developments).



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For the three months ended September 30, 2004, there was a significant decrease in the value in our
investment in Circle Group Holdings, Inc., of $7.0 million. The other investments as a whole had a net depreciation for the three months ended September 30, 2004 of approximately $800,000.



On a quarterly basis net unrealized appreciation and depreciation can vary
substantially, due to a variety of factors. Therefore, quarterly net unrealized appreciation and depreciation should not be annualized to predict expected annual results, and may not be indicative of future performance.



Nine months ended September 30, 2005 compared to the nine months ended
September 30, 2004.



Income from
operations. Income from operations increased 255% to $15,529,709 for the nine months ended September 30, 2005 from $4,376,172 for the nine months ended September 30, 2004. Approximately 73% and 82% of our income from operations
(revenue) was received in the form of equity securities for the nine months ended September 30, 2005 and 2004, respectively. The increase in income from operations was a result of completing ten technology transfer transactions compared to the
six transactions for the nine months ended September 30, 2004; additional revenue generated by UTEK-EKMS, Inc., Pharma Transfer, Ltd. and UTEKip, Ltd. of approximately $1.1 million, which due to the purchase date of these subsidiaries
was not included in the period ended September 30, 2004, and an increase in investment income of $167,000 as a result of the increase in cash and short term investments. In the nine months ended September 30, 2005, we rendered services in
connection with strategic alliance agreements (twenty eight of which began in the nine months ended September 30, 2005) valued at $986,085, as compared to strategic alliance agreements (sixteen of which began during the nine months ended
September 30, 2004) valued at $823,598. Other consulting income included income of $860,897 from UTEK-Europe, Ltd., UTEK-EKMS, Inc., and UTEKip, Ltd. UTEK Information Services comprised the balance of consulting fee income.



Expenses. Total operating expenses for the nine
months ended September 30, 2005 were $9,218,542 consisting of salaries and wages of $1,831,906, professional fees of $547,906, acquisition of technology rights of $3,371,262, sales and marketing expenses of $1,667,597, and general and
administrative expenses of $1,799,871. These expenses compared to the $3,542,355 reported for the nine months ended September 30, 2004, consisting of salaries and wages of $739,694, professional fees of $367,428, acquisition of technology
rights of $620,000, sales and marketing expenses of $752,295, and general and administrative expenses of $1,062,938. The 160% increase in total operating expenses was due to an increased number of employees, increased costs of completing ten sales
of technology rights, commissions to outside service providers used strictly to generate strategic alliance agreements and three additional subsidiaries with expenses of approximately $1.5 million. It is our intention to continue to grow our sales
force by increasing the number of sales personnel in locations around the United States, Europe and Canada. The 148% increase in salaries and wages reflects an increase in the number of UTEK employees as well as pay increases and an additional
$622,000 in salaries from the new subsidiaries and approximately $100,000 in increase from the salaries for the new Knowledge Express online services. The 444% increase in acquisition of technology rights expenses was due to completing ten
technology transfer transactions in the nine months ended September 30, 2005 as compared to six for the nine months ended September 30, 2004. The 122% increase in sales and marketing expenses was due to commissions to outside service
providers used strictly to generate strategic alliance agreements and a significant increase in the number of sales personnel, and the approximately $411,000 in fees paid to outside research consultants for fulfillment of certain UTEK-EKMS
contracts. The 49% increase in professional fees relates to an increase in the cost of valuations due to an increase in the number of our portfolio companies, as well as an increase in legal fees related to acquisitions and other projects. The 69%
increase in general and administrative costs is largely due to the cost of additional outside services related to the UK listing, an additional $357,000 in general and administrative expenses from UTEKs new subsidiaries, royalties and other
general and administrative expenses related to the new acquisition of Knowledge Express online services and an increase in costs related to the increase in the number of employees.



Income from operations can vary substantially on a quarterly basis due to the small number and wide range of value of the
transactions. Therefore, quarterly income from operations should not be annualized to predict expected annual results.



Net Realized Gains (Losses)



The Company disposed of a significant number of holdings which had nil fair value. As a result of these transactions the Company recognized realized
losses of approximately $4.5 million, and unrealized gains of $4.5 million. The net effect of these transactions to the change in net assets is $-0-.



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Net realized gains (losses) on investments, net of income tax effect, amounted to $(4,037,454) for the
nine months ended September 30, 2005 and were related to sales as follows:



|                               |  |                 |  |                      |            |  
|------------------------------ |  | --------------- |  | -------------------- | ---------- | -
|Company Name                   |  | Number ofShares |  | Realized Gain (Loss) |           
|Circle Group Holdings, Inc.    |  | 1,402,568       |  | $                    | 666,098    |  
|E Med Future, Inc.             |  | 358,834         |  |                      | (87,660    | )
|Telkonet, Inc.                 |  | 20,668          |  |                      | 37,317     |  
|Magic Media Networks, Inc.     |  | 234,008         |  |                      | (26,480    | )
|eFoodSafety.com, Inc.          |  | 61,224          |  |                      | (2,355     | )
|Full Circle Registry, Inc.     |  | 200,000         |  |                      | (99,784    | )
|HydroFlo, Inc.                 |  | 364,956         |  |                      | 88,511     |  
|Silver Screen Studios, Inc.    |  | 47,615          |  |                      | (29,137    | )
|Peak Entertainment, Inc.       |  | 4,000           |  |                      | (7,056     | )
|Swiss Medica, Inc.             |  | 200,000         |  |                      | 8,683      |  
|Group of zero value shares (1) |  | Various         |  |                      | (4,585,591 | )
|                               |  |                 |  |                      |            |  
|Total                          |  |                 |  | $                    | (4,037,454 | )
|                               |  |                 |  |                      |            |  

---

|(1) | Upon approval from the Board of Directors, management made the decision to sell some of the investments that the Company has carried on its financial statements with a zero value
for several quarters. Maintaining these investments was costly and the likelihood of future value was minimal. The following investments were included in the group of zero value shares above: Provision Operation Systems, Inc., Advanced Recycling
Sciences, Inc., Graphco Holdings Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical Corporation, Primapharm Funding Corporation, Silver Screen Studios, Inc., Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid
Network Company, GreenWorks Corporation, and Xeminex, Ltd.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net realized gains on investments, net of income tax effect, amounted to $1,379,157 for the nine months ended September 30, 2004 and were related to sales as follows:



|                            |  |                 |  |                      |           |  
|--------------------------- |  | --------------- |  | -------------------- | --------- | -
|Company Name                |  | Number ofShares |  | Realized Gain (Loss) |          
|Circle Group Holdings, Inc  |  | 458,892         |  | $                    | 1,442,288 |  
|Full Circle Registry, Inc.  |  | 188,500         |  |                      | (85,395   | )
|Duraswitch Industries, Inc. |  | 34,872          |  |                      | 33,226    |  
|Pure Bioscience, Inc.       |  | 35,560          |  |                      | (10,962   | )
|                            |  |                 |  |                      |           |  
|Total                       |  |                 |  | $                    | 1,379,157 |  
|                            |  |                 |  |                      |           |  



Change in
Unrealized Appreciation (Depreciation)



The net
unrealized appreciation on our investments, net of taxes, was $2,061,229 for the nine months ended September 30, 2005, compared to net unrealized depreciation of ($1,465,700) on our investments for the nine months ended September 30, 2004.
The net unrealized appreciation (depreciation) consisted of fluctuations in fair value resulting from the Board of Directors valuation of the Companys assets for the nine months ended September 30, 2005 and 2004. There was
significant depreciation in the value in our investments for the nine months ended September 30, 2005 in Circle Group Holdings, Inc. of approximately $3.0 million, Manakoa Services Corp. of approximately $1.1 million and INSEQ Corp of
approximately $500,000. This depreciation was offset by significant appreciation in our investments in Xethanol Corp. of approximately $1.1 million and HydroFlo, Inc. of approximately $1.7. The Company disposed of a significant number of holdings
which had zero fair value. As a result of these transactions the Company recognized realized losses of approximately $4.5 million, and unrealized gains of $4.5 million. These transactions resulted in a reversal of preciously recorded unrealized
depreciation as a result of recognizing such depreciation as a realized loss in the third quarter. The net effect of these transactions was $-0-. The other investments as a whole had a net depreciation for the nine months ended September 30,
2005 of approximately $400,000. Subsequent to September 30, 2005, HydroFlo, Inc. and Xethanol Corporation experienced a significant decline in market price. (See Recent Developments).



There was a significant decrease in fair value in the nine months ended
September 30, 2004 in our investments in Intra-Asia Entertainment Corp. at approximately $300,000, Zkid Network Company at approximately $500,000, and Circle Group Holdings, Inc. at approximately $500,000. The other investments as a whole had a
net depreciation for the nine months ended September 30, 2004 of approximately $200,000.



On a quarterly basis, net realized gains and losses can vary substantially, due to a variety of factors. Therefore, quarterly net realized gains and losses should not be annualized to predict expected annual results,
and may not be indicative of future performance.



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Liquidity and Capital Resources



Net assets increased 90% to $43,915,571 at September 30, 2005 from $23,092,943 at December 31, 2004. This increase
was primarily attributable to the completion of an exempt offering and a private placement of shares of our common stock totaling $15.8 million, net of offering costs, during the nine months and by completion of ten technology transfer transactions
valued at $12.5 million, offset by $2.0 million of net realized losses and net unrealized appreciation in the value of our investments.



On September 30, 2005 and December 31, 2004, we had $19,277,136 and $9,320,108 respectively, in cash and cash equivalents, and short term
investments. We invest our excess cash primarily in CDs and U.S. Treasury Bills which normally have three month to two year maturities.



In the nine months ended September 30, 2005, 73% of our income from operations was paid in the form of equity securities, compared to 82% of our
income from operations for the nine months ended September 30, 2004. Our goal is to monetize the equity stakes we receive in consideration for the technology rights transactions and our consulting services.



Recent Developments



Subsequent to September 30, 2005, we completed two technology transfers; one to Fuel FX International, Inc. for 3,500,000
unregistered shares of common stock and one to Trio Industries Group, Inc. for 1,213,872 unregistered shares of common stock.



The shares acquired by us in the aforementioned transfers were acquired in tax-free stock-for-stock exchanges and are restricted and may only be resold by
us pursuant to the requirements of the Securities Act of 1933. The value of the shares received in connection with such exchanges will be determined based on valuations in accordance with our valuation policy as of the closing date of each
transaction.



Our investments in HydroFlo, Inc. and Xethanol
Corp. represented 20.5% of Net Assets at September 30, 2005. On November 3, 2005, the $0.24 and $4.00 market closing prices per share of HydroFlo, Inc. and Xethanol Corp., respectively, on the OTC Bulletin Board represented decreases of 70% and 38%
from the $0.81 and $6.49 market closing prices per share on September 30, 2005, respectively, which closing prices were used by our board of directors in their determination of the fair value of our investment in these companies at such date.
Management estimates that based upon the decline in the market values of HydroFlo, Inc. and Xethanol Corp., our Net Asset value per share would decrease by approximately $0.37 per share or 6.6% from the Net Asset value per share reported in our
financial statements at September 30, 2005.



Risk Factors



Investing in us involves significant risks relating to our business and investment
objective. As a result, there can be no assurance that we will achieve our investment objective. In addition to the risk factors described below, other factors that could cause actual results to differ materially include:



| |  | changes in the economy;
|- |  | -----------------------



| |  | risk associated with possible disruption in our operations due to terrorism;
|- |  | ----------------------------------------------------------------------------



| |  | future regulatory actions and conditions in our operating areas; and
|- |  | --------------------------------------------------------------------



| |  | other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings.
|- |  | ---------------------------------------------------------------------------------------------------------------



Our investment portfolio is highly concentrated and, as a result, our financial results
are largely dependent upon the performance of certain significant investments.



Our investment portfolio is highly concentrated and, as a result, our financial results are largely dependent upon the performance of certain significant investments; principally, Xethanol Corp., HydroFlo, Inc., Industrial Biotechnology
Corp., UTEK Real Estate Holdings, Inc., Circle Group Holdings, Inc., Health Sciences Group, Inc. and INSEQ Corp. These seven investments total $18,166,526 in fair value at September 30, 2005, representing 78.2% of our investments in
non-controlled affiliates and 41.4% of net assets. As a result, if our investment in one or more of these companies fails to perform as expected, our financial results could be negatively affected.



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Our quarterly and annual results could fluctuate significantly.



Our quarterly and annual operating results could fluctuate significantly due to a number of
factors. These factors include the small number and range of values of the transactions that are completed each quarter, fluctuations in the values of our investments, the timing of the recognition of unrealized gains and losses, the degree to which
we encounter competition in our markets, the volatility of the stock market and its impact on our unrealized gains and losses, as well as other general economic conditions. As a result of these factors, quarterly and annual results are not
necessarily indicative of our performance in future quarters and years.



Our
investment model is highly speculative in nature.



Our investment model is
highly speculative because it involves making investments in new development stage companies and having those companies invest in new, untested technology. We cannot assure you that our investment model will be successful or that any of our
investments will be successful.



Our portfolio companies are development
stage companies dependent upon the successful commercialization of new technologies. Each of our investments in portfolio companies is subject to a high degree of risk, and we may lose all of our investment in a portfolio company if it is not
successful.



We invest in development stage companies that our management
believes can benefit from our expertise in technology transfer. Development stage companies are subject to all of the risks associated with new businesses. In addition, our portfolio companies are also subject to the risks associated with research
and development of new technologies. These risks include the risk that new technologies cannot be identified, developed or commercialized, may not work, or may become obsolete. Our portfolio companies must successfully acquire licenses to new
technologies, and in some cases further develop new technologies. We cannot assure you that any of our investments in our portfolio companies will be successful. Our portfolio companies will be competing with larger, established companies, with
greater access to, and resources for, further development of these new technologies. We may lose our entire investment in any or all of our portfolio companies.



Our portfolio companies depend upon the research and development activities of universities, medical research centers and federal research laboratories, over which
neither our portfolio companies nor we have any control.



Our portfolio
companies depend upon the research activities of universities, medical research centers and federal research laboratories. Neither we, nor our portfolio companies, have any control over the research activities of universities, medical research
centers and federal research laboratories. As neither we nor our portfolio companies provide supervision of any universities, medical research centers and federal research laboratories, we cannot warrant that the research will be done properly and
that the results, which we may license will be reproducible. In addition, we have no control over what types of research are presented to us by universities, medical research centers and federal research laboratories for evaluation and commercial
development. Further, the licenses to technologies that our portfolio companies obtain may be non-exclusive.



Technologies acquired by our portfolio companies may become obsolete before we can sell their securities.



Neither our portfolio companies nor we have any control over the pace of technology development. There is a significant risk that a portfolio company could acquire the
rights to a technology that is currently or is subsequently made obsolete by other technological developments.



The patents on the technologies that our portfolio companies license may infringe upon the rights of others and patent applications that have been submitted may not be granted.



Many of our portfolio companies rely upon patents to protect the technologies that they
license. If the patents on technologies that they license are found to infringe upon the rights of others, or are held to be invalid, then the licenses to such technologies will have little or no value to our portfolio companies. In addition, if a
patent licensed by a portfolio company is found to infringe upon the rights of others, the portfolio company may be liable for monetary damages. Our portfolio companies are dependent upon the universities or government research facilities to file,
secure and protect patents on licensed technologies. In the event that a patent is challenged or violated, our portfolio companies may not have the financial resources to defend the patent either in the preliminary stages of litigation or in court.
In addition, if our portfolio companies acquire licenses to technologies with patents pending, we cannot assure you that such patents will be granted.



If our primary investments are deemed not to be qualifying assets, we could be precluded from investing in the manner described herein or deemed to be in violation of
the 1940 Act.



As a business development company, we must not acquire any
assets other than qualifying assets unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. Currently, if we acquire debt or equity securities from an issuer that has
outstanding marginable securities at the time we make an investment, these acquired assets cannot be treated as qualifying assets. This result is dictated by the definition of eligible portfolio company under the 1940 Act, which in part
looks to whether a company has outstanding marginable securities.



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Amendments promulgated in 1998 by the Federal Reserve expanded the definition of marginable securities under the Federal
Reserves margin rules to include any non-equity security. Thus, any debt securities issued by any entity are marginable securities under the Federal Reserves current margin rules. As a result, the staff of the SEC has raised the question
to the business development company industry as to whether a private company that has outstanding debt securities would qualify as an eligible portfolio company under the 1940 Act.



The SEC has issued proposed rules which would define an eligible portfolio company as any
company that does not have securities listed on a national securities exchange or association. If adopted, the effect of these rules would be to eliminate confusion regarding whether privately-owned companies that issued debt would qualify as
eligible portfolio companies.



Unless and until the proposed rules described
above are adopted by the SEC, if there were a court ruling or regulatory decision that provided that a privately-owned company that has outstanding debt securities (none of which is listed on a national securities exchange or association) was not an
eligible portfolio company, we could be precluded from investing in the manner described herein or deemed to be in violation of the 1940 Act.



Technologies that have been developed with funding from the United States government may have limits on their use, which could affect the value of the technology to a
portfolio company.



Technologies developed with funds provided by the
United States government have restrictions regarding where they may be sold and have limits on exclusivity. A portfolio company that acquires a technology developed with federal funding may be limited as to where it can sell the technology. The
technology may only be allowed to be sold or manufactured within the United States. In addition, the U.S. government has the right to use technologies that it has funded regardless of whether the technology has been licensed to a third party. Such
regulations may limit the marketability of a technology and therefore reduce the value of the technology to our portfolio companies.



We may be unable or decide not to make additional cash investments in our portfolio companies which could result in our losing our initial investment if the portfolio
company fails.



We may have to make additional cash investments in our
portfolio companies to protect our overall investment value in the particular company. We retain the discretion to make any additional investments as our management determines. The failure to make such additional investments may jeopardize the
continued viability of a portfolio company, and our initial (and subsequent) investments. Moreover, additional investments may limit the number of companies in which we can make initial investments. We have no established criteria in determining
whether to make an additional investment except that our management will exercise its business judgment and apply criteria similar to those used when making the initial investment. We cannot assure you that we will have sufficient funds to make any
necessary additional investments, which could adversely affect our success and result in the loss of a substantial portion or all of our investment in a portfolio company.



The securities we hold in our portfolio companies are subject to restriction on resale, and we may not be able to sell the securities we
hold for amounts equal to their recorded value, if at all.



Our portfolio
companies are mainly thinly traded public companies or private companies, and we acquire securities in our portfolio company in private transactions. As a result, all of the securities we hold in our portfolio companies are subject to legal
restrictions on resale. Furthermore, our ability to sell the securities in our portfolio may be limited by, and subject to, the lack of or limited nature of a trading market for such securities. Therefore, we cannot assure you that we will be able
to sell our portfolio company securities for amounts equal to the values that we have ascribed to them or at the time we desire to sell.



We are dependent on sales transactions, structured as tax-free exchanges, to sell the new companies we form to acquire new technologies. A change in the Internal
Revenue Code affecting tax-free exchanges could reduce our ability to sell our intellectual property acquisition companies.



We do not anticipate selling any of the new companies we form to acquire new technologies, except in connection with merger transactions. We anticipate that most, if not
all, of such merger transactions will be structured as tax-free exchanges under Section 368 of the Internal Revenue Code. If Section 368 were to be amended so that we were no longer able to structure our merger transactions as tax-free
exchanges, we may not be able to sell the new companies we form to acquire new technologies on commercially reasonable terms. If we are unable to successfully sell the new companies we form to acquire new technologies in a merger transaction, we may
be required to significantly alter the use of our U2B® investment process.



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The agreements we have with universities, medical research centers and federal research laboratories do not guarantee
that such entities will grant licenses to us for our intellectual property acquisition companies.



The agreements that we have entered into with universities provide us with the ability to evaluate the commercial potential for technologies at an early stage of development. These agreements, however, do not provide
us with any guarantee that following our evaluation, the university, medical research center or federal research laboratory will grant us a license. As a result, we may expend time and resources evaluating a technology and not be able to secure a
license to such technology.



We are dependent upon our managements
ability to identify portfolio companies to acquire the new companies we form to acquire new technologies.



Our investment strategy is based upon selling the new companies we form to acquire new technologies in stock for stock exchanges to portfolio companies that wish to acquire the technologies owned by the new companies
we form to acquire new technologies but which they may have not yet established or may not be operating. We do not expect to sell any securities of the new companies we form to acquire new technologies to the public. Therefore, if we fail to
identify a portfolio company to acquire our newly formed companies, our entire investment could be lost.



We are dependent upon and have little or no control over the efforts of portfolio companies to successfully commercialize the acquired technologies or to retain the license to the technology.



We receive common stock from the portfolio company based upon the mutually agreed upon
values of the intellectual property acquisition company, its licensed technology and the portfolio company. We then intend to sell the securities that we acquire in exchange for intellectual property acquisition companies at some time in the future.
Therefore, our ability to profit from an investment is ultimately dependent upon the price we receive for the shares of the portfolio company. In most cases, the companies that acquire our intellectual property acquisition companies will be
dependent upon successfully commercializing the technologies they acquire. We do not have control over the portfolio companies that acquire our intellectual property acquisition companies. These portfolio companies may face intense competition,
including competition from companies with greater financial resources, more extensive research and development, manufacturing, marketing and service capabilities and a greater number of qualified and experienced managerial and technical personnel.
They may need additional financing which they are unable to secure and we are unable or unwilling to provide or they may be subject to adverse developments unrelated to the technologies they acquire. They may lose the rights granted to them for the
technology for failure to comply with the license agreement. We cannot assure you that any of the portfolio companies will be successful or that we will be able to sell the securities we receive at a profit or for sufficient amounts to even recover
our initial investment in the portfolio companies or that our portfolio companies will not take actions that could be detrimental to our investment.



Our investments in our portfolio companies may be concentrated in one or more industries and if these industries should decline or fail to develop as expected our
investments will be lost.



Our investments in our portfolio companies may
be concentrated in one or more industries. This concentration will mean that our investments will be particularly dependent on the development and performance of those industries. Accordingly, our investments may not benefit from any advantages,
which might be obtained with greater diversification of the industries in which our portfolio companies operate. If those industries should decline or fail to develop as expected, our investments in our portfolio companies in those industries will
be subject to loss.



All of our portfolio investments are recorded at fair
value as determined in good faith by our Board of Directors and, as a result, there is uncertainty regarding the value of our portfolio investments.



At September 30, 2005 and December 31, 2004, investments amounting to $23,244,853 or 53% of net assets and $13,965,941 or 60.5% of net assets, respectively,
have been valued at fair value as determined by our Board of Directors. Pursuant to the requirements of the 1940 Act, the Board of Directors is responsible for determining in good faith the fair value of our investments for which market quotations
are not readily available. Because there is typically no readily available market value for the investments in our portfolio, our Board of Directors determines in good faith the fair value of these investments pursuant to a valuation policy and a
consistently applied valuation process. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment
while employing a consistently applied valuation process for the types of investments we make. If we were required to sell any of such investments, there is no assurance that the fair value, as determined by the Board of Directors, would be
obtained. If we were unable to obtain fair value for such investments, there would be an adverse effect on our net asset value and on the price of our common stock.



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We adjust quarterly the valuation of our portfolio to reflect the Board of Directors determination of the fair
value of each investment in our portfolio. Any changes in fair value are recorded in our statement of operations as Change in net unrealized appreciation (depreciation) of non-controlled affiliate investments.



Our business depends on key personnel.



We rely on, and will continue to be substantially dependent upon, the continued services of
our management, principally our Chief Executive Officer and Chairman, Clifford M. Gross. Our management team is responsible for the review of potential investments by and the provision of advice to our portfolio companies regarding the acquisition
of technologies and additional research and development. We also depend upon our managements key contacts with universities, medical research centers and federal research laboratories to maintain our access to new technologies, and its
relationships with companies in the private sector in order to effectuate the sale of the new companies we form to acquire new technologies.



We have a limited amount of funds available for investment in portfolio companies and, as a result, our investments will lack diversification.



Based on the amount of our existing available funds, it is unlikely that we will be able to
commit our funds to investments in, and the acquisition of, securities of a large number of companies. We intend to continue to operate as a non-diversified investment company within the meaning of the 1940 Act. Prospective investors should
understand that our current investments are not, and in the future may not be, substantially diversified. We will not be able to achieve the same level of diversification as larger entities engaged in similar venture capital activities. Therefore,
our assets may be subject to greater risk of loss than if they were more widely diversified, because the failure of one or more of our limited number of investments would have a material adverse effect on our financial condition and the price of our
common stock.



If our portfolio companies fail to comply with the
requirements of the forum in which their securities are quoted or the trading market on which their securities are listed, the liquidity and prices of our investments would be materially adversely affected.



At September 30, 2005, $19,964,710 or 45% of our total assets consisted of investments
at fair value in companies whose securities are quoted on the OTC Bulletin Board or are listed on the American Stock Exchange or Canadian Venture Exchange. In order for the securities of our portfolio companies to be eligible for continued quotation
on the OTC Bulletin Board or the American Stock Exchange, our portfolio companies must remain in compliance with certain listing standards. Among other things, these standards require that our portfolio companies remain current in their filings with
the SEC and comply with certain of the provisions of the Sarbanes-Oxley Act of 2002. If our portfolio companies are no longer in compliance with these requirements, there would be no forum or market for the quotation or listing of the securities of
our portfolio companies. Without such a forum or market, the liquidity and prices of our investments would be materially adversely affected. We cannot give any assurance that our portfolio companies will remain in compliance with the requirements to
be quoted on the OTC Bulletin Board or listed on the American Stock Exchange or Canadian Venture Exchange.



Changes in the law or regulations that govern us could have a material impact on our operations.



Any change in the law or regulations that govern our business could have a material impact on us, or our operations. Laws and regulations may be changed from time to
time, and the interpretations of the relevant laws and regulations also are subject to change.



We are subject to certain risks associated with our foreign operations.



We have operations in the United Kingdom and Israel. Certain risks are inherent in foreign operations, including:



| |  |  | difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | foreign customers may have longer payment cycles than customers in the U.S.;
| | - |  | ----------------------------------------------------------------------------



| |  |  | tax rates in certain foreign countries may exceed those in the U.S. and foreign earnings may be subject to withholding requirements, exchange controls or other restrictions;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | general economic and political conditions in countries where we operate may have an adverse effect on our operations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | exposure to risks associated with changes in foreign exchange rates;
| | - |  | --------------------------------------------------------------------



| |  |  | difficulties associated with managing a large organization spread throughout various countries;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | difficulties in enforcing intellectual property rights; and
| | - |  | -----------------------------------------------------------



| |  |  | required compliance with a variety of foreign laws and regulations.
| | - |  | -------------------------------------------------------------------



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One of our current stockholders has significant influence over our management and affairs.



Clifford M. Gross, our Chief Executive Officer and Chairman, beneficially owns approximately
25% of our common stock as of November 1, 2005. Therefore, Dr. Gross may be able to exert influence over our management and policies. Dr. Gross may acquire additional equity in our company in the future. The concentration of ownership
may also have the effect of delaying, preventing or deterring a change of control of our company, could deprive our shareholders of an opportunity to receive a premium for their common stock as part of the sale of our company and might ultimately
affect the market price of our common stock.



ITEM 3. Qualitative and Quantitative Disclosures About Market Risks



There has been no material change in the qualitative and quantitative disclosures about market risk since December 31, 2004.



ITEM 4. CONTROLS AND PROCEDURES



Disclosure Controls and Procedures



As of the end of the
period covered by this quarterly report on Form 10-Q, the Companys principal executive officer and principal financial officer conducted an evaluation of the effectiveness of the design and operations of its disclosure controls and procedures,
as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on their evaluation, our principal executive officer and principal financial officer concluded that
our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission (SEC) reports is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms relating to the Company.



Internal Control Over Financial Reporting



There have been no
significant changes in our internal control over financial reporting (as defined in Rule13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) that occurred during the Companys most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect the Companys internal control over financial reporting.



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##### Table of Contents

PART II - OTHER INFORMATION



Item 1. Legal Proceedings



Although the Company may from time to time be involved in litigation and claims arising out of its operations in the normal course of its business, as of September 30, 2005, the Company was not a party to any material pending legal
proceedings.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



Not Applicable.



Item 3. Defaults upon Senior Securities



Not Applicable.



Item 4. Submission of Matters to a Vote of Security Holders



The Company held its annual meeting of stockholders on August 12, 2005. Shareholders voted on five matters; the substance of these matters and the results of the voting of each such matter are described below.



The first item was to elect seven directors: Clifford Gross,
Stuart Brooks, Sam Reiber, Holly Callen-Hamilton, Kwabena Gyimah-Brempong, Arthur Chapnik, John Micek and Keith Witter were elected to continue their terms. Clifford Gross received 5,202,010 votes in favor, 47,900 votes withheld. Kwabena
Gyimah-Brempong received votes 5,200,010 in favor, 49,900 votes withheld, John Micek, Holly Callen-Hamilton and Keith Witter received votes 5,235,910 in favor, 14,000 votes withheld. Stuart Brooks received 5,186,010, votes in favor, 63,900 votes
withheld. Sam Reiber and Arthur Chapnik received 5,235,310 votes in favor, 14,600 votes withheld.



The second item brought for a vote at the annual meeting of stockholders was to approve an amendment to the Companys Amended and Restated Stock
Option Plan. Votes cast were as follows: 3,132,205 votes for the proposal, 78,376 against, 41,250 abstentions, and 1,998,078 non-votes.



The third item brought for a vote at the annual meeting of stockholders was to give the Companys board of directors the authority, for a period of
12 months, to amend the Companys Certificate of Incorporation to effect up to a three-for-one stock split (the Stock Split) of the common stock of the Company. Votes cast were as follows: 5,208,054 votes for the proposal, 27,376
against and 14,480 abstentions.



The fourth item brought for a
vote at the annual meeting of stockholders was to give the Companys board of directors the authority, for a period of 12 months, to amend the Companys Certificate of Incorporation to increase the number of authorized shares of common
stock from 19 million shares to 30 million shares in the event that the board of directors determines to effectuate the Stock Split. Votes cast were as follows: 5,207,130 votes for the proposal, 27,250 against, and 15,530 abstentions



The fifth item brought for a vote at the annual meeting of
stockholders was to ratify the selection of Pender Newkirk and Company as the Companys independent accountants for the year ending December 31, 2005. Votes cast were as follows: 5,194,980 votes for the proposal, 17,450 against, and 37,480
abstentions.



Item 5. Other Information



Not Applicable.



Item 6. Exhibits



|a. | The following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b-32 under the Securities Exchange Act of
1934.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|     |  |   |  |                                                                                                                                
|---- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------
|31.1 |  |  |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.                   
|     |  |  
|31.2 |  |  |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.                   
|     |  |  
|32.1 |  |  |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
|     |  |  
|32.2 |  |  |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |                                     
|---------------------- |  | ------------------------------------
|                       |  | UTEK CORPORATION                    
|                       |  | (Registrant)                        
|                       | 
|Date: November 4, 2005 |  | /s/ Clifford M. Gross               
|                       |  | Clifford M. Gross                   
|                       |  | Chairman and Chief Executive Officer
|                       | 
|Date: November 4, 2005 |  | /s/ Carole R. Wright                
|                       |  | Carole R. Wright, CPA               
|                       |  | Chief Financial Officer             



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