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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 JUNE
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



On August 8, 2005, there were
7,368,019 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 Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004                            |  | 3 
|Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004 (unaudited)  |  | 4 
|Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004 (unaudited)            |  | 5 
|Consolidated Statements of Changes in Net Assets for the Six Months Ended June 30, 2005 and 2004 (unaudited) |  | 6 
|Financial Highlights for the Six Months Ended June 30, 2005 and 2004 (unaudited)                             |  | 7 
|Schedule of Investments as of June 30, 2005 (unaudited) and December 31, 2004                                |  | 8 
|Notes to Consolidated Financial Statements (unaudited)                                                       |  | 12
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                |  | 20
|Item 3.
Quantitative and Qualitative Disclosures about Market Risk                                           |  | 30
|Item 4.
Controls and Procedures                                                                              |  | 30
|                                                                                                             | 
|PART II - OTHER INFORMATION                                                                                  |  |   
|Item 1.
Legal Proceedings                                                                                    |  | 30
|Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds                                          |  | 31
|Item 3.
Defaults Upon Senior Securities                                                                      |  | 31
|Item 4.
Submission of Matters to a Vote of Security Holders                                                  |  | 31
|Item 5.
Other Information                                                                                    |  | 31
|Item 6.
Exhibits                                                                                             |  | 31
|Signatures                                                                                                   |  | 32
|Exhibits                                                                                                     |  | 33



Page 2 of 36



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##### Table of Contents

PART I - FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



UTEK Corporation

Consolidated Balance Sheets



|                                                                                                                                                                                      |  |               |            |   |                   |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                                                      |  | June 30, 2005 |            |   | December 31, 2004 |  
|                                                                                                                                                                                      |  | (Unaudited)   |            |   |                   |  
|ASSETS                                                                                                                                                                                |  |               |            |   |                   |   |            |  
|Investments in non-controlled affiliates (cost $21,788,932 and $18,464,518 at June 30, 2005 and December 31, 2004,
respectively)                                                      |  | $             | 11,720,992 |   |                   | $ | 13,965,941 |  
|Cash and cash equivalents                                                                                                                                                             |  |               | 4,447,870  |   |                   |   | 3,785,873  |  
|Short-term investments                                                                                                                                                                |  |               | 15,158,643 |   |                   |   | 5,534,235  |  
|Accounts receivable, net of allowance for bad debt                                                                                                                                    |  |               | 246,636    |   |                   |   | 189,888    |  
|Prepaid expenses and other assets                                                                                                                                                     |  |               | 246,213    |   |                   |   | 263,203    |  
|Fixed assets, net                                                                                                                                                                     |  |               | 486,025    |   |                   |   | 410,440    |  
|Goodwill                                                                                                                                                                              |  |               | 1,685,092  |   |                   |   | 1,517,922  |  
|Intangible assets                                                                                                                                                                     |  |               | 244,940    |   |                   |   | 212,142    |  
|                                                                                                                                                                                      |  |               |            |   |                   |   |            |  
|TOTAL ASSETS                                                                                                                                                                          |  |               | 34,236,411 |   |                   |   | 25,879,644 |  
|                                                                                                                                                                                      |  |               |            |   |                   |   |            |  
|LIABILITIES                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|Accrued expenses                                                                                                                                                                      |  |               | 308,883    |   |                   |   | 683,272    |  
|Deferred revenue                                                                                                                                                                      |  |               | 1,049,813  |   |                   |   | 788,888    |  
|Deferred income taxes                                                                                                                                                                 |  |               |           |   |                   |   | 1,314,541  |  
|                                                                                                                                                                                      |  |               |            |   |                   |   |            |  
|TOTAL LIABILITIES                                                                                                                                                                     |  |               | 1,358,696  |   |                   |   | 2,786,701  |  
|                                                                                                                                                                                      |  |               |            |   |                   |   |            |  
|NET ASSETS                                                                                                                                                                            |  | $             | 32,877,715 |   |                   | $ | 23,092,943 |  
|                                                                                                                                                                                      |  |               |            |   |                   |   |            |  
|Commitments and Contingencies                                                                                                                                                         |  |               |            |   |                   |   |            |  
|Composition of net assets:                                                                                                                                                            |  |               |            |   |                   |   |            |  
|Common stock, $.01 par value, 19,000,000 shares authorized; 7,368,019 shares issued and outstanding at June 30, 2005 and 6,003,163 shares
issued and outstanding at December 31, 2004 |  | $             | 73,680     |   |                   | $ | 60,032     |  
|Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued and outstanding                                                                                             |  |               |           |   |                   |   |           |  
|Additional paid in capital                                                                                                                                                            |  |               | 34,527,511 |   |                   |   | 20,959,242 |  
|Accumulated income:                                                                                                                                                                   |  |               |            |   |                   |   |            |  
|Accumulated net operating income                                                                                                                                                      |  |               | 4,449,213  |   |                   |   | 4,246,227  |  
|Net realized gain on investments, net of income taxes                                                                                                                                 |  |               | 631,629    |   |                   |   | 490,580    |  
|Net unrealized appreciation (depreciation) of investments, net of deferred income taxes                                                                                               |  |               | (6,853,009 | ) |                   |   | (2,805,763 | )
|Foreign currency translation adjustment                                                                                                                                               |  |               | 48,691     |   |                   |   | 142,625    |  
|                                                                                                                                                                                      |  |               |            |   |                   |   |            |  
|Net assets                                                                                                                                                                            |  | $             | 32,877,715 |   |                   | $ | 23,092,943 |  
|                                                                                                                                                                                      |  |               |            |   |                   |   |            |  
|Net asset value per share                                                                                                                                                             |  | $             | 4.46       |   |                   | $ | 3.85       |  
|                                                                                                                                                                                      |  |               |            |   |                   |   |            |  



See accompanying notes



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UTEK Corporation

Consolidated Statements of Operations

(Unaudited)



|                                                                                                                                                                                                                                                                                                                           |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | - | ------------------------ | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------
|                                                                                                                                                                                                                                                                                                                           |  | Three Months Ended June 30 |           |   | Six Months Ended June 30
|                                                                                                                                                                                                                                                                                                                           |  | 2005                       |           |   | 2004                     |   |            | 2005 |  |   | 2004      
|Income from operations:                                                                                                                                                                                                                                                                                                    |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Sale of technology rights                                                                                                                                                                                                                                                                                                  |  | $                          | 1,503,197 |   |                          | $ | 1,406,300  |      |  | $ | 3,179,340  |   |  | $ | 1,406,300
|Consulting and information services                                                                                                                                                                                                                                                                                        |  |                            | 932,001   |   |                          |   | 494,370    |      |  |   | 1,734,693  |   |  |   | 906,659  
|Investment income, net                                                                                                                                                                                                                                                                                                     |  |                            | 107,599   |   |                          |   | 24,917     |      |  |   | 167,293    |   |  |   | 22,727   
|                                                                                                                                                                                                                                                                                                                           |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|                                                                                                                                                                                                                                                                                                                           |  |                            | 2,542,797 |   |                          |   | 1,925,587  |      |  |   | 5,081,326  |   |  |   | 2,335,686
|                                                                                                                                                                                                                                                                                                                           |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Expenses:                                                                                                                                                                                                                                                                                                                  |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Salaries and wages                                                                                                                                                                                                                                                                                                         |  |                            | 581,996   |   |                          |   | 334,086    |      |  |   | 1,019,155  |   |  |   | 511,144  
|Professional fees                                                                                                                                                                                                                                                                                                          |  |                            | 159,701   |   |                          |   | 157,045    |      |  |   | 343,773    |   |  |   | 245,194  
|Acquisition of technology rights                                                                                                                                                                                                                                                                                           |  |                            | 655,122   |   |                          |   | 250,000    |      |  |   | 1,226,795  |   |  |   | 250,000  
|Sales and marketing                                                                                                                                                                                                                                                                                                        |  |                            | 622,012   |   |                          |   | 201,504    |      |  |   | 1,129,585  |   |  |   | 428,461  
|General and administrative                                                                                                                                                                                                                                                                                                 |  |                            | 477,929   |   |                          |   | 433,023    |      |  |   | 1,036,564  |   |  |   | 791,127  
|                                                                                                                                                                                                                                                                                                                           |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|                                                                                                                                                                                                                                                                                                                           |  |                            | 2,496,760 |   |                          |   | 1,375,658  |      |  |   | 4,755,872  |   |  |   | 2,225,926
|                                                                                                                                                                                                                                                                                                                           |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Income before income taxes                                                                                                                                                                                                                                                                                                 |  |                            | 46,037    |   |                          |   | 549,929    |      |  |   | 325,454    |   |  |   | 109,760  
|                                                                                                                                                                                                                                                                                                                           |  |                            |           |  
|Provision for income taxes                                                                                                                                                                                                                                                                                                 |  |                            | 17,324    |   |                          |   | 207,076    |      |  |   | 122,468    |   |  |   | 45,246   
|                                                                                                                                                                                                                                                                                                                           |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Net income from operations                                                                                                                                                                                                                                                                                                 |  |                            | 28,713    |   |                          |   | 342,853    |      |  |   | 202,986    |   |  |   | 64,514   
|                                                                                                                                                                                                                                                                                                                           |  |                            |           |  
|Net realized and unrealized gains (losses):                                                                                                                                                                                                                                                                                |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Net realized gain on investments, net of income tax expense of $69,936 and $85,100 for the three and six months ended June 30, 2005,
respectively, and $212,391 and $764,252 for the three and six months ended June 30, 2004, respectively                                                                                |  |                            | 115,916   |   |                          |   | 352,028    |      |  |   | 141,049    |   |  |   | 1,266,711
|Change in unrealized appreciation (depreciation) of non-controlled affiliate investments, net of deferred tax expense (benefit) of ($87,263)
and ($1,522,110) for the three and six months ended June 30, 2005, respectively, and ($886,342) and $3,814,608 for the three and six months ended June 30, 2004, respectively |  |                            | (886,667  | ) |                          |   | (1,469,070 | )    |  |   | (4,047,246 | ) |  |   | 6,321,643
|                                                                                                                                                                                                                                                                                                                           |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Net increase (decrease) in net assets from operations                                                                                                                                                                                                                                                                      |  | $                          | (742,038  | ) |                          | $ | (774,189   | )    |  | $ | (3,703,211 | ) |  | $ | 7,652,868
|                                                                                                                                                                                                                                                                                                                           |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Net increase (decrease) in net assets from operations per share:                                                                                                                                                                                                                                                           |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Basic                                                                                                                                                                                                                                                                                                                      |  | $                          | (0.10     | ) |                          | $ | (0.14      | )    |  | $ | (0.53      | ) |  | $ | 1.47     
|Diluted                                                                                                                                                                                                                                                                                                                    |  | $                          | (0.10     | ) |                          | $ | (0.14      | )    |  | $ | (0.53      | ) |  | $ | 1.39     
|Weighted average shares:                                                                                                                                                                                                                                                                                                   |  |                            |           |   |                          |   |            |      |  |   |            |   |  |   |          
|Basic                                                                                                                                                                                                                                                                                                                      |  |                            | 7,228,025 |   |                          |   | 5,433,420  |      |  |   | 7,007,724  |   |  |   | 5,190,736
|Diluted                                                                                                                                                                                                                                                                                                                    |  |                            | 7,228,025 |   |                          |   | 5,433,420  |      |  |   | 7,007,724  |   |  |   | 5,500,397



See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                               |  |                                  |            |   |      |   |             |  
|-------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ---- | - | ----------- | -
|                                                                                                               |  | For the Six Months Ended June 30 |           
|                                                                                                               |  | 2005                             |            |   | 2004 |  
|Operating Activities:                                                                                          |  |                                  |            |   |      |   |             |  
|Net increase (decrease) in net assets from operations                                                          |  | $                                | (3,703,211 | ) |      | $ | 7,652,868   |  
|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                                            |  |                                  | 5,569,364  |   |      |   | (10,136,251 | )
|Depreciation and amortization                                                                                  |  |                                  | 56,745     |   |      |   | 24,238      |  
|(Gain) loss on sale of investments                                                                             |  |                                  | (185,893   | ) |      |   | (2,030,963  | )
|Deferred income taxes                                                                                          |  |                                  | (1,314,541 | ) |      |   | 4,623,568   |  
|Investment securities received in connection with the technology transfer transactions                         |  |                                  | (3,179,340 | ) |      |   | (1,406,300  | )
|Consulting and other services rendered in exchange for investment securities                                   |  |                                  | (370,456   | ) |      |   | (392,148    | )
|Changes in operating assets and liabilities:                                                                   |  |                                  |            |   |      |   |             |  
|Accounts receivable                                                                                            |  |                                  | (37,968    | ) |      |   | 50,357      |  
|Prepaid expenses and other assets                                                                              |  |                                  | 122,884    |   |      |   | (18,089     | )
|Deferred revenue                                                                                               |  |                                  | (39,769    | ) |      |   | (55,084     | )
|Accrued expenses                                                                                               |  |                                  | (405,610   | ) |      |   | (58,614     | )
|                                                                                                               |  |                                  |            |   |      |   |             |  
|Net cash used in operating activities                                                                          |  |                                  | (3,487,755 | ) |      |   | (1,746,418  | )
|                                                                                                               |  |                                  |            |   |      |   |             |  
|Investing Activities:                                                                                          |  |                                  |            |   |      |   |             |  
|Proceeds received on sale of investments                                                                       |  |                                  | 711,928    |   |      |   | 2,275,398   |  
|Purchases of short term investments                                                                            |  |                                  | (9,624,408 | ) |      |   | (4,220,066  | )
|Purchases of fixed assets                                                                                      |  |                                  | (102,235   | ) |      |   | (34,569     | )
|                                                                                                               |  |                                  |            |   |      |   |             |  
|Net cash used in investing activities                                                                          |  |                                  | (9,014,715 | ) |      |   | (1,979,237  | )
|                                                                                                               |  |                                  |            |   |      |   |             |  
|Financing Activities:                                                                                          |  |                                  |            |   |      |   |             |  
|Payments of bank debt                                                                                          |  |                                  | (23,516    | ) |      |   |            |  
|Net proceeds from issuance of common stock                                                                     |  |                                  | 13,281,917 |   |      |   | 3,499,099   |  
|                                                                                                               |  |                                  |            |   |      |   |             |  
|Net cash provided by financing activities                                                                      |  |                                  | 13,258,401 |   |      |   | 3,499,099   |  
|                                                                                                               |  |                                  |            |   |      |   |             |  
|Foreign currency translation adjustment                                                                        |  |                                  | (93,934    | ) |      |   | 9,199       |  
|Increase (decrease) in cash and cash equivalents                                                               |  |                                  | 661,997    |   |      |   | (217,357    | )
|Cash and cash equivalents at beginning of year                                                                 |  |                                  | 3,785,873  |   |      |   | 3,704,327   |  
|                                                                                                               |  |                                  |            |   |      |   |             |  
|Cash and cash equivalents at end of period                                                                     |  | $                                | 4,447,870  |   |      | $ | 3,486,970   |  
|                                                                                                               |  |                                  |            |   |      |   |             |  



See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Changes in Net Assets

(Unaudited)



|                                                                                                                                                                                                                          |  |                          |            |   |      |   |           
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ----------
|                                                                                                                                                                                                                          |  | Six Months Ended June 30
|                                                                                                                                                                                                                          |  | 2005                     |            |   | 2004
|Changes in net assets from operations:                                                                                                                                                                                    |  |                          |            |   |      |   |           
|                                                                                                                                                                                                                          |  |                         
|Net income from operations                                                                                                                                                                                                |  | $                        | 202,986    |   |      | $ | 64,514    
|Net realized gain on sale of investments, net of related income taxes                                                                                                                                                     |  |                          | 141,049    |   |      |   | 1,266,711 
|Change in net unrealized appreciation (depreciation) of investments, net of related deferred taxes                                                                                                                        |  |                          | (4,047,246 | ) |      |   | 6,321,643 
|                                                                                                                                                                                                                          |  |                          |            |   |      |   |           
|Net increase (decrease) in net assets from operations                                                                                                                                                                     |  |                          | (3,703,211 | ) |      |   | 7,652,868 
|                                                                                                                                                                                                                          |  |                          |            |   |      |   |           
|Capital stock transactions:                                                                                                                                                                                               |  |                          |            |   |      |   |           
|Proceeds from issuance of common stock (including the exercise of common stock options to purchase stock), net of offering costs of $1,667,022
and $385,590 for the six months ended June 30, 2005 and 2004, respectively |  |                          | 13,281,917 |   |      |   | 4,346,989 
|Unregistered shares of common stock issued in acquisition of UTEKip, Ltd.                                                                                                                                                 |  |                          | 300,000    |   |      |   |          
|                                                                                                                                                                                                                          |  |                          |            |   |      |   |           
|Net increase in net assets from stock transactions                                                                                                                                                                        |  |                          | 13,581,917 |   |      |   | 4,346,989 
|                                                                                                                                                                                                                          |  |                          |            |   |      |   |           
|Foreign currency translation adjustment                                                                                                                                                                                   |  |                          | (93,934    | ) |      |   | 9,199     
|                                                                                                                                                                                                                          |  |                          |            |   |      |   |           
|Net increase in net assets                                                                                                                                                                                                |  |                          | 9,784,772  |   |      |   | 12,009,056
|Net assets at beginning of year                                                                                                                                                                                           |  |                          | 23,092,943 |   |      |   | 11,152,370
|                                                                                                                                                                                                                          |  |                          |            |   |      |   |           
|Net assets at end of period                                                                                                                                                                                               |  | $                        | 32,877,715 |   |      | $ | 23,161,426
|                                                                                                                                                                                                                          |  |                          |            |   |      |   |           
|                                                                                                                                                                                                                         
|The Company purchased all of the capital stock of 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

Financial Highlights

(Unaudited)



|                                                                                                        |  |                          |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                                        |  | Six Months Ended June 30 |           
|                                                                                                        |  | 2005                     |            |   | 2004 |  
|PER SHARE INFORMATION (1)                                                                               |  |                          |            |   |      |   |            |  
|                                                                                                        |  |                         
|Net asset value, beginning of period                                                                    |  | $                        | 3.85       |   |      | $ | 2.33       |  
|Net increase from operations (1)                                                                        |  |                          | 0.03       |   |      |   | 0.01       |  
|Net change in realized gains and unrealized appreciation (depreciation) on investments, after taxes (1) |  |                          | (1.35      | ) |      |   | 1.08       |  
|Foreign currency translation adjustment (1)                                                             |  |                          | (0.01      | ) |      |   | 0.00       |  
|Net increase from sale of shares of common stock (1)                                                    |  |                          | 1.94       |   |      |   | 0.80       |  
|                                                                                                        |  |                          |            |   |      |   |            |  
|Net assets value, end of period                                                                         |  | $                        | 4.46       |   |      | $ | 4.22       |  
|                                                                                                        |  |                          |            |   |      |   |            |  
|Per share market value, end of period                                                                   |  | $                        | 14.30      |   |      | $ | 15.59      |  
|                                                                                                        |  |                          |            |   |      |   |            |  
|RATIOS/SUPPLEMENTAL DATA                                                                                |  |                          |            |   |      |   |            |  
|                                                                                                        |  |                         
|Net assets, end of period                                                                               |  | $                        | 32,877,715 |   |      | $ | 23,161,426 |  
|Ratio of expenses to average net assets (2)                                                             |  |                          | 9          | % |      |   | 13         | %
|Ratio of net income to average net assets                                                               |  |                          | .1         | % |      |   | .4         | %
|Diluted weighted average number of shares outstanding during the period                                 |  |                          | 7,007,724  |   |      |   | 5,500,397  |  

---

|(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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##### Table of Contents

UTEK CORPORATION

Schedule of Investments

June 30, 2005



|          |  |                    |  |                                                                                                                                                          |  |               |            |            |   |           
|--------- |  | ------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | ---------- | - | ----------
|Shares    |  | Date ofAcquisition |  | Common stock in non-controlled affiliates35.6% of our net assets                                                                                        |  | Original Cost |            | Fair Value
|2,900,637 |  | 1/02               |  | Circle Group Holdings, Inc., publicly traded on the American Stock Exchange,  9.8% of our net assets; small business holding company                    |  |               | 765,719    |            |   | 3,248,713 
|7,647,561 |  | 4/04               |  | Manakoa Services Company, publicly traded over the counter,  6.5% of our net assets; compliance analysis and monitoring                                 |  |               | 2,258,837  |            |   | 2,141,317 
|3,123,703 |  | 3/04               |  | Health Sciences Group, Inc., publicly traded over the counter,  5.3% of our net assets; nutraceutical and pharmaceutical products                       |  |               | 1,685,189  |            |   | 1,749,274 
|602,418   |  | 4/04               |  | Xethanol Corporation, publicly traded over the counter, 4.5% of our net assets; bioethanol products                                                     |  |               | 1,668,075  |            |   | 1,506,045 
|6,708,529 |  | 4/04               |  | HydroFlo Corporation, publicly traded over the counter,  2.8% of our net assets; waste water treatment solutions                                        |  |               | 923,944    |            |   | 939,194   
|2,300,000 |  | 3/04               |  | Swiss Medica, Inc., publicly traded over the counter,  1.5% of our net assets; bioscience products                                                      |  |               | 415,421    |            |   | 506,000   
|720,637   |  | 4/03               |  | Intra-Asia Entertainment Corp., publicly traded over the counter, 0.5% of our net assets; digital television entertainment                              |  |               | 1,607,494  |            |   | 187,366   
|118,811   |  | 6/05               |  | Trio Industries Group, Inc, publicly traded over the counter,  0.3% of our net assets; protective powder coated wood components                         |  |               | 64,246     |            |   | 108,118   
|750,000   |  | 10/04              |  | U.S. Wireless Online, Inc., publicly traded over the counter  0.3% of our net assets; wireless broadband networks                                       |  |               | 66,000     |            |   | 105,000   
|224,489   |  | 4/05               |  | NutraCea International Corporation, publicly traded over the counter,  0.3% of our net assets; rice bran nutrient research and development              |  |               | 92,040     |            |   | 92,040    
|50,000    |  | 3/03               |  | KP Renewables plc., privately held,  0.3% of our net assets; renewable energy                                                                           |  |               | 94,500     |            |   | 91,500    
|116,533   |  | 7/04               |  | eLinear, Inc., publicly traded on the American Stock Exchange  0.2% of our net assets; technology solutions provider of security                        |  |               | 91,444     |            |   | 83,904    
|120,000   |  | 4/05               |  | Rival Technologies, Inc., publicly traded over the counter  0.2% of our net assets; diesel engine technologies                                          |  |               | 82,104     |            |   | 78,000    
|150       |  | 11/99              |  | Rosbon, LLC, privately held  0.2% of our net assets; real estate development                                                                            |  |               | 90,705     |            |   | 74,298    
|342,860   |  | 4/05               |  | Fuel FX International, Inc., publicly traded over the counter  0.2% of our net assets; proprietary products focused on reducing environmental emissions |  |               | 68,572     |            |   | 68,572    
|750,000   |  | 6/05               |  | Modern Technology Corporation, publicly traded over the counter  0.2% of our net assets; technology development and acquisition company                 |  |               | 82,152     |            |   | 66,750    
|20,000    |  | 3/05               |  | AdAl Group, Inc. publicly traded over the counter  0.2% of our net assets; aluminum extruded products manufacturer                                      |  |               | 72,912     |            |   | 63,800    
|660,000   |  | 6/05               |  | BP International, Inc., publicly traded over the counter  0.2% of our net assets; shade structures                                                      |  |               | 78,852     |            |   | 60,720    
|91,885    |  | 10/04              |  | Pacific Biometrics, Inc., publicly traded over the counter  0.2% of our net assets; specialty central laboratory services                               |  |               | 59,356     |            |   | 59,725    
|54,857    |  | 5/05               |  | Vitacube Systems Holding, Inc., publicly traded over the counter  0.2% of our net assets; specialty nutraceuticals                                      |  |               | 84,852     |            |   | 54,308    
|960,779   |  | 6/99               |  | Clean Water Technologies, Inc., publicly traded over the counter0.1% of our net assets; environmental services                                          |  |               | 568,006    |            |   | 52,843    
|1,045,166 |  | 6/03               |  | E Med Future, Inc., publicly traded over the counter,  0.1% of our net assets; needle destruction device                                                |  |               | 553,224    |            |   | 52,258    
|645,000   |  | 3/03               |  | Sequiam Corporation, publicly traded over the counter,  0.1% of our net assets; biological authentication and biometrics technologies                   |  |               | 185,726    |            |   | 41,280    
|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     |            |   | 38,333    
|36,923    |  | 9/04               |  | Material Technologies, Inc., publicly traded over the counter  0.1% of our net assets; metal fatigue detection                                          |  |               | 78,672     |            |   | 33,600    
|221,033   |  | 4/04               |  | Power3 Medical Products, Inc., publicly traded over the counter .1% of our net assets; healthcare products                                              |  |               | 223,984    |            |   | 30,945    
|415,000   |  | 12/03              |  | Magic Media Networks, Inc., publicly traded over the counter,  0.1% of our net assets; digital display monitor networks                                 |  |               | 84,399     |            |   | 30,710    
|555,545   |  | 5/05               |  | Meridex Software Corporation, publicly traded over the counter,  0.1% of our net assets; software development company                                   |  |               | 28,888     |            |   | 28,888    
|177,671   |  | 4/05               |  | Maelor PLC, publicly traded over the counter,  0.1% of our net assets; products for niche healthcare applications                                       |  |               | 24,174     |            |   | 24,483    
|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     |            |   | 22,857    
|175,000   |  | 11/04              |  | SinoFresh Healthcare, Inc., publicly traded over the counter  0.1% of our net assets; therapies to treat inflammatory and infectious diseases           |  |               | 101,500    |            |   | 19,250    
|29,999    |  | 7/04               |  | INyX, Inc., publicly traded over the counter  0.1% of our net assets; aerosol drug delivery                                                             |  |               | 19,813     |            |   | 19,199    
|333,333   |  | 5/05               |  | Visijet, Inc., publicly traded over the counter  0.1% of our net assets; medical device technology with ophthalmolic applications                       |  |               | 40,998     |            |   | 13,667    
|295,500   |  | 7/04               |  | Veridium Corp., publicly traded over the counter  0.1% of our net assets; environmental services business                                               |  |               | 69,032     |            |   | 11,525    
|133,333   |  | 4/04               |  | Jenex Corporation, publicly traded Canadian Venture Exchange,  0.1% of our net assets; consumer and healthcare products                                 |  |               | 25,657     |            |   | 8,000     
|14,796    |  | 1/04               |  | GeneThera, Inc., publicly traded over the counter, 0.1% of our net assets; molecular biotechnology products                                             |  |               | 36,014     |            |   | 7,990     
|4,000     |  | 11/01              |  | Peak Entertainment Holdings, Inc, publicly traded over the counter  0.1% of our net assets; integrated multimedia company                               |  |               | 12,028     |            |   | 520       
|          |  |                    |  |                                                                                                                                                         
|          |  |                    |  | Investments with $0 value - See schedule below                                                                                                           |  |               | 9,257,750  |            |   |          
|          |  |                    |  |                                                                                                                                                          |  |               |            |            |   |           
|          |  |                    |  | TOTAL INVESTMENTS35.6%                                                                                                                                  |  | $             | 21,788,932 |            | $ | 11,720,992
|          |  |                    |  |                                                                                                                                                          |  |               |            |            |   |           
|          |  |                    |  | Cash and other assets, less liabilities64.4%                                                                                                            |  |               |            |            |   | 21,156,723
|          |  |                    |  |                                                                                                                                                          |  |               |            |            |   |           
|          |  |                    |  | Net assets at June 30, 2005100%                                                                                                                         |  |               |            |            | $ | 32,877,715
|          |  |                    |  |                                                                                                                                                          |  |               |            |            |   |           



Page 8 of 36



---

##### Table of Contents

Notes to Schedule of Investments:



| |  |  | The above investments with the exception of 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 Notes 1 and 2 to the consolidated financial statements).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As of June 30, 2005, all of the securities that we own are subject to legal restrictions on resale with the exception of Circle Group Holdings, Inc. 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 Clear Image, Inc., Nubar, Inc., Clean Water Technologies, Inc., Rosbon LLC, Stealth MediaLabs, Inc., HydroFlo Corporation,
Health Sciences Group, Inc. and Primapharm Funding Corporation.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|           |  |                    |  |                                                                                                                                                 |  |              |           |           |   |  
|---------- |  | ------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | --------- | - | -
|Shares     |  | Date ofAcquisition |  | Schedule of Investments with $0 Value at June 30, 2005                                                                                          |  | OriginalCost |           | FairValue
|1,344,300  |  | 1/99               |  | ClearImage, 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%; developer of 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 |           |   | 
|46,277     |  | 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., publicly traded over the counter  0% of our net assets; corporate management                                      |  |              | 46,949    |           |   | 
|633,750    |  | 2/02               |  | Mixed Entertainment, Inc., 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 for identification documents                                |  |              | 15,029    |           |   | 
|9,255,882  |  | 2/04               |  | Zkid Network Company, publicly traded over the counter,  0% of our net assets; proprietary software                                            |  |              | 984,436   |           |   | 
|100,000    |  | 8/04               |  | Myrmidon Biomaterials, Inc., privately held  0% of our net assets; biomaterial tendon replacement                                              |  |              |          |           |   | 
|140,000    |  | 8/04               |  | TenthGate, Inc., privately held  0% of our net assets; healthcare related products and services                                                |  |              |          |           |   | 
|20,550,000 |  | 9/04               |  | Uniphyd Corporation, publicly traded over the counter  0% of our net assets; develops and operates managed care plans                          |  |              | 588,567   |           |   | 
|548,000    |  | 12/04              |  | Bioflavorance Technology and Research, Inc., privately held  0.0% of our net assets; develops, manufactures and markets flavors and fragrances |  |              |          |           |   | 
|6,000,000  |  | 3/05               |  | Small Town Radio, publicly traded over the counter  0.0% of our net assets; Nano platform technologies                                         |  |              |          |           |   | 
|80,000     |  | 11/04              |  | GreenWorks Corporation, privately held,  0% of our net assets; environmental engineering and brownfield development                            |  |              | 84,660    |           |   | 
|120,000    |  | 11/04              |  | Xeminex Ltd. privately held  0% of our net assets; extraction of metals and minerals from ores and industrial wastes                           |  |              | 120,000   |           |   | 
|413,482    |  | 5/05               |  | Preservation Sciences, Inc., publicly traded over the counter,  0% of our net assets; industrial coatings                                      |  |              |          |           |   | 
|480,000    |  | 4/05               |  | WebSky, Inc., publicly traded over the counter,  0% of our net assets, wireless broadband services                                             |  |              |          |           |   | 
|50,000,000 |  | 5/05               |  | Inseq Technologies, Inc. publicly traded over the counter,  0% of our net assets; waste minimalization                                         |  |              |          |           |   | 
|           |  |                    |  |                                                                                                                                                 |  |              |           |           |   |  
|           |  |                    |  |                                                                                                                                                 |  | $            | 9,257,750 |           | $ | 
|           |  |                    |  |                                                                                                                                                 |  |              |           |           |   |  



See accompanying notes



Page 9 of 36



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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 Corporation, 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, 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 .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 10 of 36



---

##### 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 Notes 1 and 2 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 Corporation
and Primapharm Funding Corporation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|          |  |                    |  |                                                                                                                                                                        |  |              |           |           |   |  
|--------- |  | ------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | --------- | - | -
|Shares    |  | Date ofAcquisition |  | Schedule of Investments with $0 Value at December 31, 2004                                                                                                             |  | OriginalCost |           | FairValue
|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  0.0% of our net assets; biomaterial tendon replacement                                                                   |  |              |          |           |   | 
|500,000   |  | 12/04              |  | Bioflavorance Technology and Research, Inc., privately held  0.0% of our net assets; develops, manufactures and markets flavors and fragrances                        |  |              |          |           |   | 
|          |  |                    |  |                                                                                                                                                                        |  |              |           |           |   |  
|          |  |                    |  |                                                                                                                                                                        |  | $            | 7,480,087 |           | $ | 
|          |  |                    |  |                                                                                                                                                                        |  |              |           |           |   |  



See accompanying notes



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UTEK Corporation

Notes to Consolidated Financial Statements



(Information as of June 30, 2005 and 2004 and for the three and six month

periods then ended is unaudited)



1. Nature of Business and Significant Accounting Policies



Interim Financial Information



The financial information for UTEK Corporation (the Company, we, us, or UTEK) as of June 30, 2005 and 2004
and for three and six 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 Form 10-K for the year ended December 31, 2004. Operating
results for the three or six months ended June 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.



The Company commenced operations in 1997, as UTEK Corporation (UTEK Florida), which was incorporated under the
laws of the State of Florida in August 1996. UTEK Florida was engaged in the business of technology transfer. On December 31, 1998, we formed UTEK, LLC, a limited liability company organized under the laws of the State of Florida. Subsequent
thereto, the shareholders of UTEK Florida exchanged their shares of common stock for membership units in UTEK, LLC. In July 1999, we formed UTEK Corporation under the laws of the State of Delaware and in October 1999, UTEK LLC was merged into UTEK
Corporation. In October 2000, we conducted an initial public offering of our shares of common stock in which 1,000,000 shares of our common stock were sold by us at a price of $6.00 per share.



In September 2001, UTEK Corporation acquired 100% of the outstanding common
stock of UTEK-Pax Ltd., a United Kingdom corporation, in a stock for stock transaction. In May 2002, UTEK acquired 100% of the outstanding common stock of TechEx Acquisition Corporation (TechEx) in a stock for stock transaction. TechEx
principle assets was the TechEx.com website and database. The TechEx.com website, founded at Yale University, is used by many technology transfer and research professionals to efficiently exchange biomedical licensing opportunities and innovations
available for partnering. The financial position and results of operation of UTEK-Pax Ltd. and TechEx have been consolidated into the financial position and results of operation of UTEK since the dates of the respective acquisitions.



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In November 2003, UTEK acquired the UVentures.com website and certain other intellectual property assets
from UVentures, Inc., an innovative Internet-based exchange primarily used for the marketing of physical science technologies developed at universities and research organizations.



In November 2004, UTEK acquired the assets of EKMS, Inc., an intellectual property management firm. UTEK purchased the
assets of EKMS, Inc. through the acquisition of all of the outstanding shares of common stock of UTEK-EKMS, Inc., a wholly-owned subsidiary of EKMS, Inc., in a tax-free stock-for-stock exchange. EKMS, Inc. was founded in 1986, and provides technical
and business expertise to help companies identify, assess, protect and leverage IP assets to enhance market leadership and profitability. The financial position and results of operation of UTEK-EKMS, Inc. have been consolidated into the financial
position and results of operation of UTEK since the dates of the acquisition.



In December 2004, we acquired the business and assets of Pharma-Transfer, Ltd., a United Kingdom based pharmaceutical research firm, in a stock transaction. The Pharma-Transfer.com website tracks the research and
development efforts of leading universities, research institutions and life science companies in order to locate and deliver advanced technology acquisition opportunities to corporate subscribers in the pharmaceutical industry. The financial
position and results of operation of Pharma-Transfer, Ltd. have been consolidated into the financial position and results of operation of UTEK since the date of acquisition.



In December 2004, UTEK acquired 100% of the outstanding common stock of ABM of Tampa Bay, Inc. in a stock for stock
transaction. ABM of Tampa Bay, Inc.s main asset was a piece of vacant commercial land located in Tampa, Florida. The financial position and results of operation of ABM of Tampa Bay, Inc. have been consolidated into the financial position and
results of operation of UTEK since the date of acquisition.



In
January 2005, we acquired the business and assets of INTRA-DMS, Ltd., in a stock transaction. INTRA-DMS, Ltd. is an intellectual property software company based in Rishon Letzion, Israel. Subsequent to the acquisition, INTRA-DMS., Ltd. changed its
name to UTEKip, Ltd. and operates as a wholly owned subsidiary. The financial position and results of operation of UTEKip, Ltd. have been consolidated into the financial position and results of operation of UTEK since the dates of the
respective acquisition.



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.



The Company invests in portfolio companies that its management believes are
positioned to benefit from the acquisition of new technology. The Company investments in portfolio companies generally are used by the portfolio companies to acquire the license rights to new technologies developed at universities, medical research
centers and federal research laboratories. The Company offers 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. The Company also may make additional investments in its 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, 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 transaction, we receive shares of common stock in the company (which company then becomes a portfolio company) in exchange for the securities of our intellectual property acquisition company. In addition
to holding a license to a new technology, our intellectual property acquisition company may also hold cash and other assets. The companies with which we engage in such transactions frequently have little or no prior operating history.



To establish on-going consulting engagements with its clients, the Company
has also developed a strategic alliance arrangement. UTEKs strategic alliances are designed to help technology companies rapidly enhance their new product pipeline through the acquisition of proprietary intellectual capital 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.



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 securities and assets for which market quotations are not readily



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available. In making its determination, the Board of Directors has considered valuation appraisals provided by an
independent valuation service provider. With respect to equity securities in privatelyowned companies, each investment is 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 private
equity valuation. Equity securities in public companies that carry certain restrictions on resale are generally valued at a discount from the market value of the securities as quoted on the national securities exchange or by the national securities
association. In addition, restricted and unrestricted publicly traded stocks may also be valued at further discounts due to the size of our investment or market liquidity concerns.



The Board of Directors bases its determination upon, among other things, applicable quantitative and qualitative factors.
These factors may include, but are not limited to, type of securities, nature of business, marketability, market price of unrestricted securities of the same issue (if any), comparative valuation of securities of publicly-traded companies in the
same or similar industries, current financial conditions and operating results, sales and earnings growth, operating revenues, competitive conditions and current and prospective conditions in the overall stock market.



Without a readily available market value, the value of our portfolio of
equity securities may differ significantly from the values that would be placed on the portfolio if there existed a ready market for such equity securities. All equity securities owned at June 30, 2005 and December 31, 2004, (35.6% and 60.5% of net
assets, respectively) are stated at fair value as determined by the Board of Directors, in the absence of readily available fair values. The Company uses the first-in, first-out (FIFO) method of accounting for sales of its investments.



Revenue Recognition



Sale of Technology Rights



The Company recognizes revenue from the sale of technology rights upon the exchange of the shares of our intellectual property acquisition companies with
companies (which companies then become our portfolio companies). The Company records revenue, based on the fair value as determined by the Board of Directors, of the consideration received. In most cases, the consideration received for the rights is
unregistered shares of common stock of the portfolio company. The common stock received is recorded as an investment at fair value as determined by the Board of Directors.



Consulting and Information Services



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 portfolio company, or cash. These agreements may
be terminated with 30 days notice by either party.



Revenues from strategic alliance agreements in which unregistered shares of common stock are received before they are earned are deferred and recognized over the term of each agreement. For strategic alliance agreements in which the stock
is received ratably over the agreement, revenue is recognized as earned. The common stock received as payment is recorded as an investment at fair value as determined by the Board of Directors. In some cases the Company is paid a fee in connection
with a technology transfer transaction. In these instances, revenue is recognized upon consummation of the transaction.



The Companys consolidated subsidiaries, UTEK-Pax Ltd., UTEK-EKMS, Inc. and UTEKip, Ltd. derive their revenue primarily from consulting contracts
with third parties. Revenue from consulting contracts is recognized ratably over the term of the contract. These contracts are generally paid in the form of cash.



Information services revenue is derived from the sale of subscriptions to the TechEx.com, UVentures.com and
Pharma-Transfer.com websites generally is received in the form of cash and initially is deferred and subsequently recognized ratably over the term of the subscription.



Foreign currency translation



The Company translates the assets and liabilities of its non-U.S. functional currency subsidiary into dollars at the current rates of exchange in effect
at the end of each reporting period. Revenues and expenses are translated using rates that approximate those in effect during the period. Translation adjustments are included in the Consolidated Statement of Net Assets under the caption
Foreign currency translation adjustment.



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Stock-Based Compensation



At June 30, 2005, the Company had the following two stock-based equity compensation plans: the UTEK Corporation Amended and Restated Stock Option Plan
and UTEK Corporation Amended and Restated Non-Qualified Stock Option 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 net increase (decrease) in net assets from operations per share if the Company had applied the fair
value recognition provisions of SFAS 123, Accounting for Stock-based Compensation to the stock-based employee awards.



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



|                                                                                                                                            |  |                           |          |   |                          |   |            |      |  |   |            |   |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ------------------------ | - | ---------- | ---- |  | - | ---------- | - |  | - | --------- | -
|                                                                                                                                            |  | Three Months Ended June30 |          |   | Six Months Ended June 30 |  
|                                                                                                                                            |  | 2005                      |          |   | 2004                     |   |            | 2005 |  |   | 2004       |  
|Net increase (decrease) in net assets from operations:                                                                                      |  |                           |          |   |                          |   |            |      |  |   |            |   |  |   |           |  
|As reported                                                                                                                                 |  | $                         | (742,038 | ) |                          | $ | (774,189   | )    |  | $ | (3,703,211 | ) |  | $ | 7,652,868 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                           | (74,261  | ) |                          |   | (318,648   | )    |  |   | (74,261    | ) |  |   | (516,820  | )
|                                                                                                                                            |  |                           |          |   |                          |   |            |      |  |   |            |   |  |   |           |  
|Pro forma                                                                                                                                   |  | $                         | (816,299 | ) |                          | $ | (1,092,837 | )    |  | $ | (3,777,472 | ) |  | $ | 7,136,048 |  
|                                                                                                                                            |  |                           |          |  
|Net increase (decrease) in net assets from operations per share  Basic:                                                                    |  |                           |          |   |                          |   |            |      |  |   |            |   |  |   |           |  
|As reported                                                                                                                                 |  | $                         | (0.10    | ) |                          | $ | (.14       | )    |  | $ | (0.53      | ) |  | $ | 1.47      |  
|Pro forma                                                                                                                                   |  | $                         | (0.11    | ) |                          | $ | (.20       | )    |  | $ | (0.54      | ) |  | $ | 1.37      |  
|                                                                                                                                            |  |                           |          |  
|Net increase (decrease) in net assets from operations per share  Diluted:                                                                  |  |                           |          |   |                          |   |            |      |  |   |            |   |  |   |           |  
|As reported                                                                                                                                 |  | $                         | (0.10    | ) |                          | $ | (.14       | )    |  | $ | (0.53      | ) |  | $ | 1.39      |  
|Pro forma                                                                                                                                   |  | $                         | (0.11    | ) |                          | $ | (.20       | )    |  | $ | (0.54      | ) |  | $ | 1.30      |  



During the quarter ended June 30,
2005, there were 5,000 options granted.



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.



2. Investments



Equity securities at June 30, 2005 and December 31, 2004
(35.6 % 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.



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On January 26, 2004, the Company received 30,000 unregistered shares of common stock from GeneThera, Inc.
in a strategic alliance agreement. The strategic alliance was terminated in October 2004 and 15,204 shares were returned to GeneThera, Inc.



On February 17, 2004, the Company received 705,882 unregistered shares of common stock from ZKid Network Company in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 705,882 shares.



On February 18, 2004, the Company received 38,585 unregistered shares of common stock from Telkonet, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to 20,668
shares. The strategic alliance was terminated in July 2004, and 17,917 shares were returned to Telkonet, Inc.



On March 12, 2004, the Company received 100,000 unregistered shares of common stock from Health Sciences Group, Inc. in a strategic alliance agreement.
The Company has recognized consulting fees to date relating to 100,000 shares.



On March 29, 2004, the Company received 200,000 unregistered shares of common stock from Swiss Medica, Inc. in a six-month strategic alliance agreement. The Company has recognized consulting fees to date relating to
200,000 shares.



On March 30, 2004, the Company entered into a
strategic alliance agreement with eFoodSafety.com, Inc. The agreement provides for a total of 244,987 unregistered shares of eFoodSafety.com, Inc.s common stock to be distributed to the Company pro rata during the term of the agreement. The
Company has received 204,080 and recognized to date consulting fees in relation to 204,080 unregistered shares of eFoodSafety.com, Inc. The agreement was terminated at December 31, 2004.



On April 1, 2004, the Company received 63,157 unregistered shares of common stock from Xethanol Corporation in a strategic
alliance agreement. The Company has recognized consulting fees to date relating to 63,157 shares.



On April 5, 2004, the Company received 150,000 unregistered shares of common stock from Manakoa Services Company in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 150,000 shares.



On April 16, 2004, the Company received 240,000 unregistered shares of common stock from Power3 Medical Products, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to
80,000 shares. The strategic alliance was terminated in August 2004 and 160,000 shares were returned to Power3 Medical Products, Inc.



On April 23, 2004, the Company received 133,333 unregistered shares of common stock from The Jenex Corporation in a four-month strategic alliance
agreement. The Company has recognized consulting fees to date relating to 133,333 shares.



On April 28, 2004, the Company received 400,000 unregistered shares of common stock from HydroFlo Corporation in a strategic alliance agreement. The Company has recognized consulting fees to date relating to 400,000
shares.



On April 30, 2004, the Company sold its Web Safe
Technologies, Inc. intellectual property acquisition Company to Xethanol Corporation for 9,550,000 unregistered shares of Zkid Network Companys common stock in a non-taxable exchange.



On May 27, 2004, the Company entered into a strategic alliance agreement with
eLinear, Inc. The agreement provides for a monthly fee of $10,000 per month of unregistered shares of eLinear, Inc. common stock to be distributed to the Company during the term of the agreement. The Company has recognized consulting fees to date in
relation to 116,533 unregistered shares of eLinear, Inc.



On
June 25, 2004, the Company sold its Advanced Bioethanol Technologies, Inc. intellectual property acquisition Company to Xethanol Corporation for 200,000 unregistered shares of Xethanol Corporations common stock in a non-taxable exchange.



On July 1, 2004, the Company entered into a strategic alliance
agreement with INyX, Inc. The agreement provides for a total of 126,316 unregistered shares of INyX, Inc. common stock to be distributed to the Company pro rata during the term of the agreement. The Company has received 31,578 and recognized to date
consulting fees in relation to 31,578 unregistered shares of INyX, Inc. The agreement was terminated on October 1, 2004.



On July 8, 2004, the Company received 300,000 unregistered shares of common stock from Veridium Corporation in a strategic alliance agreement. The Company
has recognized consulting fees to date relating to 300,000 shares.



On August 2, 2004, the Company sold its Arsenic Removal Technologies, Inc. intellectual property acquisition Company to Hydroflo, Inc. for 2,823,529 unregistered shares of Hydroflo, Inc.s common stock in a non-taxable exchange.



On August 2, 2004, the Company under contract with the
Shriners Hospitals for Children assisted the Shriners Hospitals for Children in transferring a tendon replacement technology it had developed and patented to Crystal Point Partners. In partial consideration for its assistance in the transfer, the
Company received 50% of the upfront consideration from the license agreement with Shriners Hospitals for Children and Myrmidon Biomaterials, Inc., which included 100,000 unregistered shares of common stock from Myrmidon Biomaterials, Inc.



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On August 5, 2004, the Company sold its Advanced Cyber Security, Inc. intellectual property acquisition
Company to Manakoa Services Company for 1,900,000 unregistered shares of Manakoa Services Companys common stock in a non-taxable exchange.



On August 10, 2004, the Company sold its Ice Technologies, Inc. intellectual property acquisition Company to Power3 Medical, Inc. for 141,000 unregistered
shares of Power3 Medical Products, Inc.s common stock in a non-taxable exchange.



On September 27, 2004, the Company received 36,923 unregistered shares of common stock from Material Technologies, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to
28,094 shares.



On September 28, 2004, the Company received
300,000 unregistered shares of common stock from Uniphyd Corporation in a strategic alliance agreement with Global Fasteners, Inc. In October 2004, the Company received an additional 250,000 shares due to a significant decrease in the value of
Uniphyd Corporation. The Company has recognized consulting fees to date relating to 414,997 shares.



On September 30, 2004, the Company received 129,730 unregistered shares of common stock from Pacific Biometrics, Inc. in a strategic alliance agreement.
The Company has recognized consulting fees to date relating to 91,885 shares. The strategic alliance was terminated in August 2004 and 37,845 shares were returned to Pacific Biometrics, Inc.



On October 1, 2004, the Company received 300,000 unregistered shares of
common stock from Swiss Medica, Inc. renewing their six-month strategic alliance agreement. The Company has recognized consulting fees to date relating to 300,000 shares.



On October 17, 2004, the Company received 750,000 unregistered shares of common stock from US Wireless Online, Inc. in a
strategic alliance agreement. The Company has recognized consulting fees to date relating to 525,000 shares.



On October 25, 2004, the Company sold its Polyman Technologies, Inc. intellectual property acquisition Company to Health Sciences Group, Inc. for
1,160,000 unregistered shares of Health Sciences Group, Inc.s common stock in a non-taxable exchange.



On November 16, 2004, the Company received 80,000 unregistered shares of common stock from GreenWorks Corporation in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 49,780 shares.



On November 22, 2004, the Company sold its Apple Peel Technologies, Inc. intellectual property acquisition Company to Health Sciences Group, Inc. for 1,200,000 unregistered shares of Health Sciences Group, Inc.s
common stock in a non-taxable exchange.



On November 29, 2004,
the Company received 120,000 unregistered shares of common stock from Xeminex, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to 80,000 shares.



On December 17, 2004, the Company sold its Advanced Flavors and Fragrances,
Inc. intellectual property acquisition Company to BioFlavorance Technology and Research, Inc. for 20,000,000 unregistered shares of Uniphyd Corporations common stock, 175,000 unregistered shares of SinoFresh Healthcare, Inc.s common
stock and 500,000 unregistered shares of BioFlavorance Technology and Research, Inc.s common stock in a non-taxable exchange.



On December 20, 2004, the Company sold its Safety Scan Technologies, Inc. intellectual property acquisition Company to HydroFlo Corporation for 3,485,000
unregistered shares of HydroFlo Corporations common stock in a non-taxable exchange.



On January 5, 2005, the Company received 48,000 unregistered shares of common stock from Bioflavorance Technology and Research, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to
date relating to 23,360 shares.



On January 10, 2005, the
Company sold its Superior Separation Technologies, Inc. intellectual property acquisition Company to Xethanol Corporation for 250,000 unregistered shares of Xethanol Corporations common stock in a non-taxable exchange.



On February 22, 2005, the Company sold its Open Cell Biotechnologies, Inc.
intellectual property acquisition Company to Health Sciences Group, Inc. for 822,845 unregistered shares of common stock of Health Sciences Group, Inc.s common stock in a non-taxable exchange.



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On March 4, 2005, the Company received 50,000 unregistered shares of common stock from KP Renewables, plc
in a strategic alliance agreement with Kwikpower International plc. The Company has recognized consulting fees to date relating to 16,126 shares.



On March 16, 2005, the Company received 6,000,000 unregistered shares of common stock from Small Town Radio, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 1,750,000 shares.



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 7,500 shares.



On March 22, 2005, the Company
received 20,000 unregistered shares of common stock from AdAl Group, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to 5,000 shares.



On March 31, 2005, the Company sold its 90% ownership in Anti Depression Biohealth Solutions, Inc. intellectual property
acquisition Company to Swiss Medica, Inc. for 1,862,069 unregistered shares of common stock and $96,637.



On April 4, 2005, the Company received 177,671 unregistered shares of common stock from Maelor PLC in a strategic alliance agreement. The Company has
recognized consulting fees to date relating to 121,409 shares.



On April 14, 2005, the Company received 224,489 unregistered shares of common stock from NutraCea, Inc. in a strategic alliance agreement with UTEK-EKMS. The Company has recognized consulting fees to date relating to 138,886 shares.



On April 19, 2005, the Company received 480,000 unregistered
shares of common stock from WebSky, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to 94,667 shares.



On April 25, 2005, the Company received 120,000 unregistered shares of common stock from Rival Technologies, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 21,667 shares.



On May 6, 2005, the Company received 413,482 unregistered shares of common stock from Preservation Sciences, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to
62,245 shares.



On May 18, 2005, the Company received 333,333
unregistered shares of common stock from Visijet, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to 86,022 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. The Company has recognized consulting fees to date relating to 138,886 shares.



On May 20, 2005, the Company received 54,857 unregistered shares of common stock from Vitacube Systems Holding, Inc. in a strategic alliance agreement.
The Company has recognized consulting fees to date relating to 6,193 shares.



On May 23, 2005, the Company received 166,666 unregistered shares of common stock from Hybrid Fuel Systems, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to 34,947
shares.



On May 23, 2005, the Company received 50,000,000
unregistered shares of common stock from Incode Technologies Corporation in a strategic alliance agreement with Inseq Corporation. The Company has recognized consulting fees to date relating to 5,107,527 shares.



On May 31, 2005, the Company received 342,860 unregistered shares of common
stock from Fuel FX International, Inc. in a strategic alliance agreement. This agreement was for a combination of UTEK Corporation and UTEK-EKMS services. The Company has recognized consulting fees to date relating to 323,762 shares.



On June 7, 2005, the Company received 750,000 unregistered shares of common
stock from Modern Technology Corporation. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to 47,917 shares.



On June 28, 2005, the Company received 660,000 unregistered shares of common stock from BP International, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 3,667 shares.



On June 29, 2005, the Company received 118,811 unregistered shares of common stock from Trio Industries Group, Inc. in a strategic alliance agreement. The Company has recognized consulting fees to date relating to 330
shares.



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On June 30, 2005, the Company sold its Vigilant Network Technologies, Inc. intellectual property
acquisition Company to Manakoa Services Corporation for 5,365,854 unregistered shares of common stock of Manakoa Services Corporations common stock in a non-taxable exchange.



3. 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 license agreement.
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 the Companys results of
operations and financial position.



4. Valuations



The Board of Directors bases its determination of fair value upon, among
other things, applicable quantitative and qualitative factors. These factors may include, but are not limited to, type of securities, nature of business, marketability, market price of unrestricted securities of the same issue (if any), comparative
valuation of securities of publicly-traded companies in the same or similar industries, current financial conditions and operating results, sales and earnings growth, operating revenues, competitive conditions and current and prospective conditions
in the overall stock market.



5. 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-Pax, 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:



|                                                              |  |                                          |           |   |            |   |          |               |  |              |            |  |   |           
|------------------------------------------------------------- |  | ---------------------------------------- | --------- | - | ---------- | - | -------- | ------------- |  | ------------ | ---------- |  | - | ----------
|                                                              |  | United Kingdom (1)                       |           |   | Israel (2) |   |          | United States |  | Consolidated
|Total assets June 30, 2005                                    |  | $                                        | 1,295,919 |   |            | $ | 433,955  |               |  | $            | 32,506,537 |  | $ | 34,236,411
|Total assets June 30, 2004 (1)                                |  |                                          | 722,328   |   |            |   |         |               |  |              | 27,746,721 |  |   | 28,469,049
|                                                              |  |                                          |           |   |            |   |          |               |  |              |            |  |   |           
|                                                              |  |                                          |           |   |            |   |          |               |  |              |            |  |   |           
|                                                              |  | For the Six Months ended June 30, 2005  
|                                                              |  | United Kingdom (1)                       |           |   | Israel (2) |   |          | United States |  | Consolidated
|Income from operations                                        |  | $                                        | 384,310   |   |            | $ | 39,642   |               |  | $            | 4,657,374  |  | $ | 5,081,326 
|Income (loss) before interest, other expense and income taxes |  |                                          | (120,940  | ) |            |   | (131,108 | )             |  |              | 633,978    |  |   | 381,930   
|Depreciation and amortization                                 |  |                                          | 12,863    |   |            |   | 8,250    |               |  |              | 35,363     |  |   | 56,476    
|                                                              |  |                                          |           |   |            |   |          |               |  |              |            |  |   |           
|                                                              |  |                                          |           |   |            |   |          |               |  |              |            |  |   |           
|                                                              |  | For the Six Months ended June 30, 2004  
|                                                              |  | United Kingdom (1)                       |           |   | Israel (2) |   |          | United States |  | Consolidated
|Income from operations                                        |  | $                                        | 342,927   |   |            | $ |         |               |  | $            | 1,992,759  |  | $ | 2,335,686 
|Income (loss) before interest, other expense and income taxes |  |                                          | 25,385    |   |            |   |         |               |  |              | 108,613    |  |   | 133,998   
|Depreciation and amortization                                 |  |                                          | 715       |   |            |   |         |               |  |              | 23,523     |  |   | 24,238    
|                                                              |  |                                          |           |   |            |   |          |               |  |              |            |  |   |           
|                                                              |  |                                          |           |   |            |   |          |               |  |              |            |  |   |           
|                                                              |  | For the Three Months ended June 30, 2005
|                                                              |  | United Kingdom (1)                       |           |   | Israel (2) |   |          | United States |  | Consolidated
|Income from operations                                        |  | $                                        | 175,180   |   |            | $ | 32,081   |               |  | $            | 2,335,536  |  | $ | 2,542,797 
|Income (loss) before interest, other expense and income taxes |  |                                          | ( 54,466  | ) |            |   | ( 76,520 | )             |  |              | 206,269    |  |   | 75,283    
|Depreciation and amortization                                 |  |                                          | 6,220     |   |            |   | 4,964    |               |  |              | 18,062     |  |   | 29,246    
|                                                              |  |                                          |           |   |            |   |          |               |  |              |            |  |   |           
|                                                              |  |                                          |           |   |            |   |          |               |  |              |            |  |   |           
|                                                              |  | For the Three Months ended June 30, 2004
|                                                              |  | United Kingdom (1)                       |           |   | Israel (2) |   |          | United States |  | Consolidated
|Income from operations                                        |  | $                                        | 148,495   |   |            | $ |         |               |  | $            | 1,777,092  |  | $ | 1,925,587 
|Income (loss) before interest, other expense and income taxes |  |                                          | (7,014    | ) |            |   |         |               |  |              | 569,411    |  |   | 562,397   
|Depreciation and amortization                                 |  |                                          | 354       |   |            |   |         |               |  |              | 12,114     |  |   | 12,468    

---

|(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 the three
and six months ended June 30, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



6. Impact of Recently Issued Accounting Pronouncement



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.



7. Subsequent Events



On July 7, 2005, the company purchased 100% of the assets of Knowledge
Express Data Systems; a US 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 will be allocated to
the underlying assets purchased (and liabilities) based on their estimated fair values. The resulting goodwill from this transaction is currently estimated at $1,500,000.



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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 are 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.



General



Our primary investment objective is to increase our net assets by exchanging stock in new companies that we form to acquire
intellectual property rights, which we refer to as an intellectual property acquisition company, for cash and other assets upon the completion of technology transfer. We seek to sell our intellectual property acquisition companies to
publicly traded portfolio companies whenever possible, as this provides us with the potential for added liquidity. We intend to sell our intellectual property acquisition companies to privately owned and publicly traded companies (which we refer to
as portfolio companies or our investments) in tax-free stock for stocks exchanges. It is our plan that shares of those privately owned and publicly traded companies received in those exchanges will be sold for cash or other
assets in the course of our business, to permit us to acquire additional technologies and to fund our operations.



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To facilitate establishing on-going consulting engagements with our clients, we have developed a
strategic alliance process. Our strategic alliances are designed to help technology companies enhance their new product pipeline through the acquisition of proprietary intellectual capital primarily from universities and federal laboratories. We
normally receive unregistered shares of common stock from our clients as payment for the services we render under our strategic alliance consulting engagements. Whenever appropriate we will seek to receive cash payments as compensation for our
services.



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 $34,236,411 and its net assets were $32,877,715 at June 30, 2005, compared to $25,879,644 and $23,092,943 at December
31, 2004, respectively. Net asset value per share (NAV) was $4.46 at June 30, 2005 and $3.85 at December 31, 2004.



Net assets increased by $9,784,772 in the six months ended June 30, 2005 and increased by $12,009,056 in the six months ended June 30, 2004.



The changes in total assets, net assets and net asset value during the
three months ended June 30, 2005 were primarily attributable to:



| |  | An unrealized depreciation on investments of approximately $974,000, mainly due to the decrease in value of Health Sciences Group, Inc. and Xethanol Corp.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The sale of some of our investments for approximately $651,000.
|- |  | ---------------------------------------------------------------



| |  | The use of approximately $2.5 million in cash to fund our operations.
|- |  | ---------------------------------------------------------------------



| |  | The issuance of common stock in connection with an exempt offering and upon the exercise of stock options of approximately $13.3 million.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | One technology transfer valued at approximately $1.5 million.
|- |  | -------------------------------------------------------------



The changes in total assets, net assets and net asset value during the three months ended June 30, 2004 were primarily attributable to:



| |  | An unrealized depreciation on investments of approximately $2.4 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 June 30, 2004
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The sale of some of our investments for approximately $780,000.
|- |  | ---------------------------------------------------------------



| |  | The use of approximately $1.4 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 $1.3 million.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  | Two technology transfers valued at approximately $1.4 million.
|- |  | --------------------------------------------------------------



The Companys common shares outstanding as of June 30, 2005 were 7,368,019, 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 that were exercised during the quarter ended June 30, 2005.



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



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At June 30, 2005, $11,486,622 or 98% 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 $234,370 or 2% of our investments consisted of equity securities at fair value in private 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 private companies.



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



|                                                            |  |                         |             |   |                   |   |            |  
|----------------------------------------------------------- |  | ----------------------- | ----------- | - | ----------------- | - | ---------- | -
|                                                            |  | June 30 2005(Unaudited) |             |   | December 31, 2004 |  
|Investments, at cost                                        |  | $                       | 21,788,932  |   |                   | $ | 18,464,518 |  
|Unrealized appreciation (depreciation), before income taxes |  |                         | (10,067,940 | ) |                   |   | (4,498,577 | )
|                                                            |  |                         |             |   |                   |   |            |  
|Investments, at fair value                                  |  | $                       | 11,720,992  |   |                   | $ | 13,965,941 |  
|                                                            |  |                         |             |   |                   |   |            |  



The net decrease in
the value of investment securities from $13,965,941 to $11,720,992 in the six months ended June 30, 2005 is primarily due to the following events:



| |  | The Company entered into eleven new strategic alliance agreements that generated approximately $823,000 in value.
|- |  | -----------------------------------------------------------------------------------------------------------------



| |  | The Company sold some of its shares in Circle Group Holdings, Inc., Full Circle Registry, Inc., Telkonet, Inc., E Med Future, Inc. and Magic Media Networks, Inc. with a fair value
of $680,000 for $711,000.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company completed four sales of technology rights valued at $3.2 million.
|- |  | -----------------------------------------------------------------------------



| |  | The Company experienced an overall decrease in the value of its public company securities. This decrease is primarily attributable to a decrease in the value of Circle Group
Holdings, Inc. of approximately $3 million. The Companys other investments experienced a net decrease in their fair value of approximately $1 million. The Companys investments can 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.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.



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



Income from operations. Income from operations increased 32%
to $2,542,797 for the three months ended June 30, 2005 from $1,925,587 for the three months ended June 30, 2004. Approximately 71% and 86% of our income from operations (revenue) was received in the form of equity securities for the three months
ended June 30, 2005 and June 30, 2004, respectively. The increase in income from operations resulted from completing one technology transfer transaction valued at $1,502,439, which was received in the form of common stock, during the period ended
June 30, 2005, as compared to two technology transfer transactions valued at $1,406,300, which was received in the form of common stock, completed during the quarter ended June 30, 2004. In the three months ended June 30, 2005, we rendered services
in connection with twenty-nine strategic alliance agreements (fifteen of which began in the three months ended June 30, 2005) valued at $331,833, as compared to seven strategic alliance agreements (seven of which began during the quarter ended June
30, 2004) valued at $311,874. Consulting income included income of $600,168 generated from UTEK-Pax Ltd., UTEK-EKMS, Inc., and UTEKip, Ltd., and UTEK Information Services comprise the balance of the consulting income. For the quarter ended
June 30, 2004, UTEK Pax Ltd. and the UTEK Information Services generated $182,496 of income. We did not acquire UTEK-EKMS, Pharma Transfer Ltd. and UTEKip Ltd. until after the second quarter of 2004.



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Our Board of Directors determines the fair value of the shares we receive in the absence of readily
determinable market values. In making its determination, the Board of Directors has considered valuation appraisals provided by an independent valuation service provider.



Expenses. Total operating expenses for the three months ended June 30, 2005 were $2,496,760, consisting of
salaries and wages of $581,996, professional fees of $159,701, acquisition of technology rights of $655,122, sales and marketing expenses of $622,012, and general and administrative expenses of $477,929. These expenses compared to the $1,375,658
reported for the three months ended June 30, 2004, consisting of salaries and wages of $334,086, professional fees of $157,045, acquisition of technology rights of $250,000, sales and marketing expenses of $201,504, and general and administrative
expenses of $433,023. The 81% increase in total operating expenses was due to the increased costs of completing a large technology transfer transaction, three additional subsidiaries with expenses of approximately $535,000, 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 74% increase in salaries and wages reflects an increase in UTEK personnel, as well as an additional $200,000 in salaries from UTEKs new subsidiaries. The 162% increase in acquisition of technology rights expenses was due to the
higher cost of completing a large technology transfer transaction. The 209% increase in sales and marketing expenses was due to an increase in the number of our sales personnel, commissions paid to outside service providers used strictly to generate
strategic alliance agreements and approximately $160,000 in fees paid to outside research consultants for fulfillment of certain UTEK-EKMS contracts. The 2% increase in professional fees and the 10% increase in general and administrative costs are
due to 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)



Net realized gains on investments, net of income tax effect, amounted to
$115,916 for the three months ended June 30, 2005 and were related to sales as follows:



|                            |  |                 |  |                      |         |  
|--------------------------- |  | --------------- |  | -------------------- | ------- | -
|Company Name                |  | Number ofShares |  | Realized Gain (Loss) |        
|Circle Group Holdings, Inc. |  | 670,068         |  | $                    | 240,843 |  
|E Med Future, Inc.          |  | 220,334         |  |                      | (44,244 | )
|Telkonet, Inc.              |  | 20,668          |  |                      | 37,317  |  
|Magic Media Networks, Inc.  |  | 130,000         |  |                      | (15,861 | )
|eFoodSafety.com, Inc.       |  | 61,224          |  |                      | (2,355  | )
|Full Circle Registry, Inc.  |  | 200,000         |  |                      | (99,784 | )
|                            |  |                 |  |                      |         |  
|Total                       |  |                 |  | $                    | 115,916 |  
|                            |  |                 |  |                      |         |  



Net realized gains on
investments, net of income tax effect, amounted to $352,028 for the three months ended June 30, 2004 and were related to sales as follows:



|                            |  |                 |  |                      |         |  
|--------------------------- |  | --------------- |  | -------------------- | ------- | -
|Company Name                |  | Number ofShares |  | Realized Gain (Loss) |        
|Circle Group Holdings, Inc  |  | 331,500         |  | $                    | 433,301 |  
|Full Circle Registry, Inc.  |  | 188,500         |  |                      | (85,395 | )
|Duraswitch Industries, Inc. |  | 13,782          |  |                      | 15,084  |  
|Pure Bioscience, Inc.       |  | 35,560          |  |                      | (10,962 | )
|                            |  |                 |  |                      |         |  
|Total                       |  |                 |  | $                    | 352,028 |  
|                            |  |                 |  |                      |         |  



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.



Six months ended June 30, 2005 compared to the
six months ended June 30, 2004.



Income from operations.
Income from operations increased 118% to $5,081,326 for the six months ended June 30, 2005 from $2,335,686 for the six months ended June 30, 2004. Approximately 72% and 71% of our income from operations (revenue) was received in the form of equity
securities for the six months ended June 30, 2005 and 2004, respectively. The increase in income from operations was a result of completing four technology transfer transactions with greater value than the two transactions for the



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six months ended June 30, 2004; additional revenue generated by UTEK-EKMS, Inc., Pharma Transfer, Ltd. and UTEKip,
Ltd. of approximately $794,000, which due to the purchase date of these subsidiaries was not included in the quarter ended June 30, 2004 and an increase in investment income of $145,000 as a result of the increase in cash and short term investments.
In the six months ended June 30, 2005, we rendered services in connection with thirty two strategic alliance agreements (fifteen of which began in the six months ended June 30, 2005) valued at $594,698, as compared to seventeen strategic alliance
agreements (eleven of which began during the six months ended June 30, 2004) valued at $392,148. Other consulting income included income of $1,033,854 from UTEK-Pax Ltd., UTEK-EKMS, Inc., and UTEKip, Ltd. and UTEK Information Services comprised the
balance of consulting fee income. Our Board of Directors determines the fair value of the shares we receive in the absence of readily determinable market values. In making its determination, the Board of Directors has considered valuation appraisals
provided by an independent valuation service provider.



Expenses. Total operating expenses for the six months ended June 30, 2005 were $4,755,872 consisting of salaries and wages of $1,019,155, professional fees of $343,773, acquisition of technology rights of $1,226,795, sales and
marketing expenses of $1,129,585, and general and administrative expenses of $1,036,564. These expenses compared to the $2,225,926 reported for the six months ended June 30, 2004, consisting of salaries and wages of $511,144, professional fees of
$245,194, sales and marketing expenses of $678,461, and general and administrative expenses of $791,127. The 114% increase in total operating expenses was due to an increased number of employees, increased costs of completing sales of technology
rights, commissions to outside service providers used strictly to generate strategic alliance agreements and three additional subsidiaries with expenses of approximately $937,000. 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 99% increase in salaries and wages reflects an increase in the number of UTEK employees as well as pay increases and an additional $363,000 in salaries from
the new subsidiaries. The 391% increase in acquisition of technology rights expenses was due to completing four technology transfer transactions in the six months ended June 30, 2005 as compared to two for the six months ended June 30, 2004. The
164% 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 $279,000 in
fees paid to outside research consultants for fulfillment of certain UTEK-EKMS contracts. The 36% decrease in professional fees is largely due a significant decrease in accounting fees, professional fees that were associated with a specific first
quarter project in 2004 that were not repeated in 2005, as well as a decrease in legal fees. The 31% increase in general and administrative costs is largely due to the cost of additional outside services related to the UK listing, an additional
$241,000 in general and administrative expenses from the UTEKs new subsidiaries 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)



Net realized gains on investments, net of income tax effect, amounted to $141,049 for the six months ended June 30, 2005 and were related to sales as
follows:



|                            |  |                 |  |                      |         |  
|--------------------------- |  | --------------- |  | -------------------- | ------- | -
|Company Name                |  | Number ofShares |  | Realized Gain (Loss) |        
|Circle Group Holdings, Inc. |  | 715,068         |  | $                    | 273,012 |  
|E Med Future, Inc.          |  | 238,834         |  |                      | (51,280 | )
|Telkonet, Inc.              |  | 20,668          |  |                      | 37,317  |  
|Magic Media Networks, Inc.  |  | 130,000         |  |                      | (15,861 | )
|eFoodSafety.com, Inc.       |  | 61,224          |  |                      | (2,355  | )
|Full Circle Registry, Inc.  |  | 200,000         |  |                      | (99,784 | )
|                            |  |                 |  |                      |         |  
|Total                       |  |                 |  | $                    | 141,049 |  
|                            |  |                 |  |                      |         |  



Net realized gains on
investments, net of income tax effect, amounted to $1,266,711 for the six months ended June 30, 2004 and were related to sales as follows:



|                            |  |                 |  |                      |           |  
|--------------------------- |  | --------------- |  | -------------------- | --------- | -
|Company Name                |  | Number ofShares |  | Realized Gain (Loss) |          
|Circle Group Holdings, Inc  |  | 331,500         |  | $                    | 1,347,984 |  
|Full Circle Registry, Inc.  |  | 188,500         |  |                      | (85,395   | )
|Duraswitch Industries, Inc. |  | 13,782          |  |                      | 15,084    |  
|Pure Bioscience, Inc.       |  | 35,560          |  |                      | (10,962   | )
|                            |  |                 |  |                      |           |  
|Total                       |  |                 |  | $                    | 1,266,711 |  
|                            |  |                 |  |                      |           |  



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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.



Changes in Unrealized Appreciation or Depreciation.



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 June 30, 2005, approximately 35.6% 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.



The net unrealized depreciation on our investments, net of
taxes, was $886,667 for the three months ended June 30, 2005, compared to net unrealized depreciation of $1,469,070 on our investments for the three months ended June 30, 2004. The net unrealized depreciation consisted of fluctuations in fair value
resulting from the Board of Directors valuation of the Companys assets for the three months ended June 30, 2005 and 2004. There was a significant decrease in the value in our investment in Health Sciences Group, Inc. for the three months
ended June 30, 2005, which was offset by a significant increase in our investment in Circle Group Holdings, Inc. The other investments as a whole had a net depreciation for the three months ended June 30, 2005. For the three months ended June 30,
2004, there was a significant decrease in the value in our investment in Circle Group Holdings, Inc., as well as minor decreases in some of our other investments. However, this was offset slightly by an increase in appreciation related to our
investments in Duraswitch Industries, Inc., Intra-Asia Entertainment Corp. (formerly GloTech Industries, Inc.), AssureTec Holdings Inc. and eFoodSafety.com, Inc.



The Companys most significant portfolio investments are in Circle Group Holdings, Inc., Health Sciences Group, Inc.,
Manakoa Services Company and Xethanol Corporation at June 30, 2005. The following is a simplified summary of the methodology that we used to determine the fair value of this investment.



Circle Group Holdings, Inc. At June 30, 2005, the fair value of our investment in Circle Group was
approximately $3.2 million. The fair value of our investment in Circle Group increased by approximately $1.3 million for the three months ended June 30, 2005. The increase in the fair value of our investment in Circle Group resulted from our Board
of Directors determination that our investment in Circle Group had appreciated by 67% in fair value. In determining the fair value of our investment in Circle Group, our Board of Directors discounted the public market value of Circle Group Holdings
shares of common stock in light of the legal restrictions imposed upon our resale of such shares.



Manakoa Services CompanyAt June 30, 2005, the fair value of our investment in Manakoa Services Company was approximately $2.1. The fair
value of our investment in Manakoa Services Company increased by approximately $1.5 for the three months ended June 30, 2005. The increase was due to the completion of a technology-transfer valued at $1.5. In determining the fair value of our
investment in Manakoa Services Company, our Board of Directors discounted the public market value of Manakoa Services Companys shares of common stock in light of the legal restrictions imposed upon our resale of such shares.



Health Sciences Group, Inc. At June 30, 2005, the fair value of
our investment in Health Sciences Group was approximately $1.7 million. The fair value of our investment in Health Sciences Group decreased by approximately $1.1 for the three months ended June 30, 2005. The decrease in the fair value of our
investment in Health Sciences Group resulted from our Board of Directors determination that our investment in Health Sciences Group had depreciated by 40% in fair value. In determining the fair value of our investment in Health Sciences Group, our
Board of Directors discounted the public market value of Health Sciences Groups shares of common stock in light of the legal restrictions imposed upon our resale of such shares.



Xethanol Corp. At June 30, 2005, the fair value of our investment in Xethanol was approximately $1.5 million.
The fair value of our investment in Xethanol decreased by approximately $600,000 for the three months ended June 30, 2005. The remaining decrease in the fair value of our investment in Xethanol resulted from our Board of Directors determination that
our



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investment in Xethanol had appreciated by 28% in fair value. In determining the fair value of our investment in Health
Sciences Group, our Board of Directors discounted the public market value of Xethanol Corps shares of common stock in light of the legal restrictions imposed upon our resale of such shares.



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.



Liquidity and Capital Resources



Net assets increased 42% to $32,877,715 at June 30, 2005 from $23,092,943 at
December 31, 2004. This increase was primarily attributable to the completion of an exempt offering of shares of our common stock totaling $12.5 million, net of offering costs, during the six months and by completion of four technology transfer
transactions valued at $3.2 million, offset by a $4.0 million of net unrealized depreciation in the value of our non-controlled affiliate investments.



On June 30, 2005 and December 31, 2004, we had $19,606,513 and $9,320,108 respectively, in cash and cash equivalents, and short term investments. In the
six months ended June 30, 2005, 72% or our income from operations was paid in the form of equity securities. Our goal is to monetize the equity stakes we receive in consideration for the technology rights transactions and our consulting services.



Recent Developments



Risk Factors



Investing in us involves significant risks relating our business and investment objective. As a result, there can be no assurance that we
will achieve its 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 financial results are largely dependent upon the performance of Health Science Group,
Inc., Circle Group Holdings, Inc., Manakoa Servcies Corporation and Xethanol Corp.



Our financial results are largely dependent upon the performance of Circle Group Holdings, Inc., Manakoa Services Company, Health Science Group, Inc., and Xethanol Corp. As of June 30, 2005, the value of our investment in these companies
was approximately $8.6 million, which constituted approximately 26.1% of our net assets.



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 since 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.



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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 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. We cannot assure you that any of our portfolio companies will successfully acquire, develop and transfer any new technology.



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.



Our ability to invest in certain private and public companies may be limited to certain
circumstances.



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.



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
recently issued proposed rules to correct the unintended consequence of the Federal Reserves 1998 margin rule amendments of apparently limiting the investment opportunities of business development companies. In general, the SECs proposed
rules would define an eligible portfolio company as any company that does not have securities listed on a national securities exchange or association. We are currently in the process of the reviewing the SECs proposed rules and assessing their
impact, to the extent such proposed rules are subsequently approved by the SEC, on our investment activities. We do not believe that these proposed rules will have a material adverse effect on our operations. Until the SEC or its staff has taken a
final public position with respect to the issue discussed above. We will continue to monitor this issue closely, and may be required to adjust our investment focus to comply with any future administrative position or action taken by the SEC.



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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 our
intellectual property acquisition companies. 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 our intellectual property acquisition companies, 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 our intellectual property acquisition companies on commercially reasonable terms. If we are unable to successfully sell our intellectual property
acquisition companies in a merger transaction, we may lose our investment.



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 our intellectual property acquisition
companies.



Our investment strategy is based upon selling our intellectual
property acquisition companies in stock for stock exchanges to portfolio companies that wish to acquire the technologies owned by our intellectual property acquisition companies but which they may be neither operating nor established. We do not
expect to sell any securities of our intellectual property acquisition companies to the public. Therefore, if we fail to identify a portfolio company to acquire an intellectual property acquisition company, our entire investment could be lost.



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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 us.



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 June 30, 2005 and December 31,
2004, investments amounting to $11,720,992 or 35.6% 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. Since 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.



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 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 our intellectual property acquisition companies.



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



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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 June 30, 2005,
$11,486,622 or 34% 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.



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 who may have longer payment cycles than customers in the United States;
| | - |  | -----------------------------------------------------------------------------------------

| |  |  | tax rates in certain foreign countries that may exceed those in the United States and foreign earnings that 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;
| | - |  | ---------------------------------------------------------------------------------------------------------------------

| |  |  | 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.
| | - |  | -------------------------------------------------------------------



As we continue to expand our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other
risks. We cannot assure you that these and other factors will not have a material adverse effect on our international operations or our business as a whole.





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 27% of our common stock as of August 1, 2005. Therefore, Dr. Gross may be able to exert influence over our management and policies. Dr. Gross may acquire additional equity 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.



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 June 30, 2005, the Company was not a party to any material pending legal
proceedings.



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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



Not Applicable



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.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|     |  |   |  |                                                                                                                                
|---- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------
|10.1 |  |  |  | Form of incentive stock option agreement.                                                                                      
|     |  |  
|10.2 |  |  |  | Form of nonqualified stock option agreement.                                                                                   
|     |  |  
|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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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: August 8, 2005 |  | /s/ Clifford M. Gross               
|                     |  | Clifford M. Gross                   
|                     |  | Chairman and Chief Executive Officer



|                     |  |                        
|-------------------- |  | -----------------------
|                     | 
|Date: August 8, 2005 |  | /s/ Carole R. Wright   
|                     |  | Carole R. Wright, CPA  
|                     |  | Chief Financial Officer



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