##### 



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934



FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2002
 
COMMISSION FILE NUMBER: 001-15941

UTEK CORPORATION
(Exact Name of Registrant as Specified in its Charter)

DELAWARE
(State or Jurisdiction of
Incorporation or Organization)
59-3603677
(IRS Employer
Identification No.)

202 S. Wheeler Street
Plant City, FL 33566
(Address of Principal Executive Offices)

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

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value

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 [ ]

On May 9, 2002, there were 3,915,672 shares outstanding of the
Registrants common stock, $0.01 par value.



Page 1 of 24



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UTEK CORPORATION

FORM 10-Q INDEX

|                              |                                                                                               |                                                                                                                 |  |    |   | 
|----------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- |  | -- | - | 
|PART I. FINANCIAL INFORMATION |                                                                                               |                                                                                                                 |  |   
|                              | Item 1. Financial Statements                                                                  |                                                                                                                 |  |    |  
|                              |                                                                                               | Consolidated Balance Sheets as of March 31, 2002 (unaudited) and December 31, 2001                              |  |    | 3 | 
|                              |                                                                                               | Consolidated Statements of Operations  For the Three Months Ended March 31, 2002, and 2001
(unaudited)         |  |    | 4 | 
|                              |                                                                                               | Consolidated Statements of Cash Flows  For the Three Months Ended March 31, 2002 and 2001
(unaudited)          |  |    | 5 | 
|                              |                                                                                               | Consolidated Statements of Changes in Net Assets For the Three Months Ended March 31, 2002
and 2001 (unaudited) |  |    | 6 | 
|                              |                                                                                               | Financial Highlights For the Three Months Ended March 31, 2002 and 2001
(unaudited)                             |  |    | 7 | 
|                              |                                                                                               | Schedule of Investments as of March 31, 2002 (unaudited) and December 31, 2001                                  |  |    | 8 | 
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                 |  | 13 |  
|                             
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                                 |  | 23 |  
|                             
|                             
|PART II. OTHER INFORMATION    |                                                                                               |                                                                                                                 |  |   
|                              | Item 1. Legal Proceedings                                                                     |                                                                                                                 |  | 23 |  
|                              | Item 2. Changes in Securities and Use of Proceeds                                             |                                                                                                                 |  | 23 |  
|                              | Item 3. Defaults Upon Senior Securities                                                       |                                                                                                                 |  | 23 |  
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                                                 |  | 23 |  
|                              | Item 5. Other Information                                                                     |                                                                                                                 |  | 23 |  
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                 |  | 23 |  
|                              | Signatures                                                                                    |                                                                                                                 |  | 24 |  

Page 2 of 24



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##### 



PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

UTEK Corporation
Consolidated Balance Sheets

|                              |                   |                                                                                                                                             |                                                                          |         |             |            |              |         |           |            |  
|----------------------------- | ----------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ------- | ----------- | ---------- | ------------ | ------- | --------- | ---------- | -
|                              |                   |                                                                                                                                             |                                                                          |         | March 31,   |            | December 31,
|                              |                   |                                                                                                                                             |                                                                          |         | 2002        |            | 2001        
|                              |                   |                                                                                                                                             |                                                                          |         |             |            |             
|                              |                   |                                                                                                                                             |                                                                          |         | (Unaudited) |            |              |         |          
|ASSETS                        |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|                              |                   | Investments in non-controlled affiliates
(cost $9,998,515 and $10,018,959 at March 31,
2002 and December 31, 2001, respectively)            |                                                                          | $       | 9,625,498   |            |              | $       | 9,988,772 |           
|                              |                   | Cash and cash equivalents                                                                                                                   |                                                                          |         | 1,313,548   |            |              |         | 1,432,473 |           
|                              |                   | Short-term marketable securities                                                                                                            |                                                                          |         |            |            |              |         | 282,284   |           
|                              |                   | Prepaid expenses and other assets                                                                                                           |                                                                          |         | 142,648     |            |              |         | 192,450   |           
|                              |                   | Fixed assets, net                                                                                                                           |                                                                          |         | 83,511      |            |              |         | 88,286    |           
|                              | Intangible assets |                                                                                                                                             |                                                                          | 418,353 |             |            |              | 426,693 |          
|                              |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|                              |                   |                                                                                                                                             | TOTAL ASSETS                                                             |         |             | 11,583,558 |              |         |           | 12,410,958 |  
|                              |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|LIABILITIES                   |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|                              |                   | Accrued expenses                                                                                                                            |                                                                          |         | 100,553     |            |              |         | 90,125    |           
|                              |                   | Deferred revenue                                                                                                                            |                                                                          |         | 504,554     |            |              |         | 523,406   |           
|                              |                   | Deferred income taxes                                                                                                                       |                                                                          |         | 1,591,197   |            |              |         | 1,887,987 |           
|                              |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|                              |                   |                                                                                                                                             | TOTAL LIABILITIES                                                        |         |             | 2,196,304  |              |         |           | 2,501,518  |  
|                              |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|                              |                   |                                                                                                                                             | NET ASSETS                                                               |         | $           | 9,387,254  |              |         | $         | 9,909,440  |  
|                              |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|Commitments and Contingencies |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|Composition of net assets:    |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|                              |                   | Common stock, $.01 par value, 19,000,000
shares authorized; 3,915,672 shares issued
and outstanding at March 31, 2002
and December 31, 2001 |                                                                          | $       | 39,157      |            |              | $       | 39,157    |           
|                              |                   | Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued and outstanding                                                   |                                                                          |         |            |            |              |         |          |           
|                              |                   | Additional paid in capital                                                                                                                  |                                                                          |         | 6,988,141   |            |              |         | 6,988,141 |           
|                              |                   | Accumulated income:                                                                                                                         |                                                                          |         |             |            |              |         |           |           
|                              |                   |                                                                                                                                             | Accumulated net operating income                                         |         |             | 2,698,244  |              |         |           | 2,969,294  |  
|                              |                   |                                                                                                                                             | Net realized loss on investments,
net of income taxes                    |         |             | (90,842    | )            |         |           | (62,863    | )
|                              |                   |                                                                                                                                             | Net unrealized depreciation of investments,
net of deferred income taxes |         |             | (232,650   | )            |         |           | (18,827    | )
|                              |                   |                                                                                                                                             | Foreign currency translation adjustment                                  |         |             | (14,796    | )            |         |           | (5,462     | )
|                              |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|Net assets                    |                   | $                                                                                                                                           | 9,387,254                                                                |         |             | $          | 9,909,440    |        
|                              |                   |                                                                                                                                             |                                                                          |         |             |            |              |        
|Net asset value per share     |                   | $                                                                                                                                           | 2.40                                                                     |         |             | $          | 2.53         |        
|                              |                   |                                                                                                                                             |                                                                          |         |             |            |              |        

See accompanying notes

Page 3 of 24



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##### 



UTEK Corporation
Consolidated Statements of Operations
(Unaudited)

|                                                                 |                                                                                                                                                                                            |         |          |                             |           |      |           |           |           | 
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------- | -------- | --------------------------- | --------- | ---- | --------- | --------- | --------- | 
|                                                                 |                                                                                                                                                                                            |         |          | Three Months Ended March 31
|                                                                 |                                                                                                                                                                                            |         |          |                            
|                                                                 |                                                                                                                                                                                            |         |          | 2002                        |           | 2001
|                                                                 |                                                                                                                                                                                            |         |          |                             |           |     
|Income from operations:                                          |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|                                                                 | Sale of technology rights                                                                                                                                                                  |         | $        |                            |           |      | $         | 1,446,153 |          
|                                                                 | Consulting fees                                                                                                                                                                            |         |          | 263,936                     |           |      |           |          |          
|                                                                 | Investment income, net                                                                                                                                                                     |         |          | 6,018                       |           |      |           | 46,382    |          
|                                                                 |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|                                                                 |                                                                                                                                                                                            |         | 269,954  |                             |           |      | 1,492,535 |          
|                                                                 |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|Expenses:                                                        |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|                                                                 | Salaries and wages                                                                                                                                                                         |         |          | 210,964                     |           |      |           | 103,173   |          
|                                                                 | Professional fees                                                                                                                                                                          |         |          | 157,242                     |           |      |           | 153,380   |          
|                                                                 | Sales and marketing                                                                                                                                                                        |         |          | 95,680                      |           |      |           | 235,290   |          
|                                                                 | General and administrative                                                                                                                                                                 |         |          | 228,020                     |           |      |           | 139,655   |          
|                                                                 |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|                                                                 |                                                                                                                                                                                            |         | 691,906  |                             |           |      | 631,498   |          
|                                                                 |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|Income (loss) before income taxes                                |                                                                                                                                                                                            |         | (421,952 | )                           |           |      | 861,037   |          
|Provision for income taxes (benefit)                             |                                                                                                                                                                                            |         | (150,902 | )                           |           |      | 321,863   |          
|                                                                 |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|                                                                 | Net income (loss) from operations                                                                                                                                                          |         |          | (271,050                    | )         |      |           | 539,174   |          
|                                                                
|Net realized and unrealized gains (losses):                      |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|                                                                 | Net realized loss on investments, net of
income tax benefit of $16,881 and $246 for 2002
and 2001, respectively                                                                            |         |          | (27,979                     | )         |      |           | (409      | )        
|                                                                 | Change in unrealized appreciation (depreciation)
of non-controlled affiliate investments, net of
deferred tax expense (benefit) of ($129,007)
and $129,467 for 2002 and 2001,
respectively |         |          | (213,823                    | )         |      |           | 214,588   |          
|                                                                 |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|Net increase (decrease) in net assets from operations            |                                                                                                                                                                                            | $       | (512,852 | )                           |           | $    | 753,353   |          
|                                                                 |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|Net increase (decrease) in net assets from operations per share: |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|                                                                 |                                                                                                                                                                                            | Basic   |          | $                           | (.13      | )    |           | $         | .20       | 
|                                                                 |                                                                                                                                                                                            | Diluted |          | $                           | (.13      | )    |           | $         | .20       | 
|Weighted average shares:                                         |                                                                                                                                                                                            |         |          |                             |           |      |           |          
|                                                                 |                                                                                                                                                                                            | Basic   |          |                             | 3,915,672 |      |           |           | 3,782,226 | 
|                                                                 |                                                                                                                                                                                            | Diluted |          |                             | 3,915,672 |      |           |           | 3,803,083 | 

See accompanying notes

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UTEK Corporation
Consolidated Statements of Cash Flows
(Unaudited)

|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |        |         |            |          |  
|---------------------------------------------- | ------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ----------------------------------------------------------------- | -------- | ----------------------------------- | --------- | ------ | ------- | ---------- | -------- | -
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          | For the Three Months Ended March 31
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                    
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          | 2002                                |           | 2001  
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |       
|Operating Activities:                          |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |       
|                                               |                                                   | Net increase (decrease) in net assets from operations                                                                        |                                                                 | $                                                                 | (512,852 | )                                   |           | $      | 753,353 |           
|                                               |                                                   | Adjustments to reconcile net increase (decrease)
in net assets from operations to net cash
provided by operating activities: |                                                                 |                                                                   |          |                                     |           |        |         |           
|                                               |                                                   |                                                                                                                              |                                                                 | (Increase) decrease in net unrealized appreciation
of investments |          |                                     | 342,830   |        |         |            | (387,374 | )
|                                               |                                                   |                                                                                                                              | Depreciation                                                    |                                                                   |          | 8,098                               |           |        |         | 5,297      |         
|                                               |                                                   |                                                                                                                              | Loss on disposal of fixed asset                                 |                                                                   |          | 1,024                               |           |        |         |           |         
|                                               |                                                   |                                                                                                                              | Loss on sale of investments                                     |                                                                   |          | 44,860                              |           |        |         | 655        |         
|                                               |                                                   |                                                                                                                              | Deferred income taxes                                           |                                                                   |          | (296,790                            | )         |        |         | 451,084    |         
|                                               |                                                   |                                                                                                                              | Investment securities received from sale of portfolio
companies |                                                                   |          |                                    |           |        |         | (1,446,153 | )       
|                                               |                                                   |                                                                                                                              | Services rendered in exchange for investment securities         |                                                                   |          | (188,511                            | )         |        |         |           |         
|                                               |                                                   | Changes in operating assets and liabilities:                                                                                 |                                                                 |                                                                   |          |                                     |           |        |         |           
|                                               |                                                   |                                                                                                                              |                                                                 | Prepaid expenses and other assets                                 |          |                                     | 49,802    |        |         |            | 51,829   |  
|                                               |                                                   |                                                                                                                              |                                                                 | Deferred revenue                                                  |          |                                     | (26,263   | )      |         |            | (26,511  | )
|                                               |                                                   |                                                                                                                              |                                                                 | Accrued expenses                                                  |          |                                     | 10,428    |        |         |            |         |  
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |       
|                                               |                                                   |                                                                                                                              |                                                                 | Net cash used in operating activities                             |          |                                     | (567,374  | )      |         |            | (597,820 | )
|Investing Activities:                          |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |       
|                                               |                                                   | Proceeds received on sale of investments                                                                                     |                                                                 |                                                                   | 453,790  |                                     |           |        | 21,425  |           
|                                               |                                                   | Purchases of fixed assets                                                                                                    |                                                                 |                                                                   | (4,455   | )                                   |           |        | (5,560  | )         
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |        |         |           
|                                               |                                                   |                                                                                                                              |                                                                 | Net cash provided by investing activities                         |          |                                     | 449,335   |        |         |            | 15,865   |  
|                                              
|Financing Activities:                          |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |       
|                                               |                                                   | Repayments on short-term borrowings                                                                                          |                                                                 |                                                                   |         |                                     |           |        | (39,975 | )         
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |        |         |           
|                                               |                                                   |                                                                                                                              |                                                                 | Net cash used in financing activities                             |          |                                     |          |        |         |            | (39,975  | )
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |        |         |           
|Foreign currency translation adjustment        |                                                   |                                                                                                                              | (886                                                            | )                                                                 |          |                                     |          |       
|Decrease in cash and cash equivalents          |                                                   |                                                                                                                              | (118,925                                                        | )                                                                 |          |                                     | (621,930  | )     
|Cash and cash equivalents at beginning of year |                                                   |                                                                                                                              | 1,432,473                                                       |                                                                   |          |                                     | 3,952,280 |       
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |       
|Cash and cash equivalents at end of period     |                                                   | $                                                                                                                            | 1,313,548                                                       |                                                                   |          | $                                   | 3,330,350 |       
|                                               |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |       
|Supplemental Cash Flow Information             |                                                   |                                                                                                                              |                                                                 |                                                                   |          |                                     |           |       
|                                               |                                                   | Cash paid for interest                                                                                                       |                                                                 | $                                                                 |         |                                     |           | $      | 582     |           
|                                               | Stock received in satisfaction of note receivable |                                                                                                                              | $                                                               |                                                                  |          |                                     | $         | 39,614 |        

See accompanying notes

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##### 



UTEK Corporation
Consolidated Statements of Changes in Net Assets
(Unaudited)

|                                        |                                                                                                    |                                                       |           |                             |          |      |           |         |         | 
|--------------------------------------- | -------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | --------- | --------------------------- | -------- | ---- | --------- | ------- | ------- | 
|                                        |                                                                                                    |                                                       |           | Three Months Ended March 31
|                                        |                                                                                                    |                                                       |           |                            
|                                        |                                                                                                    |                                                       |           | 2002                        |          | 2001
|                                        |                                                                                                    |                                                       |           |                             |          |     
|Changes in net assets from operations:  |                                                                                                    |                                                       |           |                             |          |      |           |        
|                                        | Net income (loss) from operations                                                                  |                                                       | $         | (271,050                    | )        |      | $         | 539,174 |        
|                                        | Net realized loss on sale of investments                                                           |                                                       |           | (27,979                     | )        |      |           | (409    | )      
|                                        | Change in net unrealized appreciation (depreciation) of
investments, net of related deferred taxes |                                                       |           | (213,823                    | )        |      |           | 214,588 |        
|                                        |                                                                                                    |                                                       |           |                             |          |      |           |        
|                                        |                                                                                                    | Net increase (decrease) in net assets from operations |           |                             | (512,852 | )    |           |         | 753,353 | 
|                                        |                                                                                                    |                                                       |           |                             |          |      |           |        
|Foreign currency translation adjustment |                                                                                                    |                                                       | (9,334    | )                           |          |      |          |        
|                                        |                                                                                                    |                                                       |           |                             |          |      |           |        
|Net increase (decrease) in net assets   |                                                                                                    |                                                       | (522,186  | )                           |          |      | 753,353   |        
|Net assets at beginning of year         |                                                                                                    |                                                       | 9,909,440 |                             |          |      | 8,455,002 |        
|                                        |                                                                                                    |                                                       |           |                             |          |      |           |        
|Net assets at end of period             |                                                                                                    | $                                                     | 9,387,254 |                             |          | $    | 9,208,355 |        
|                                        |                                                                                                    |                                                       |           |                             |          |      |           |        

See accompanying notes

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##### 



UTEK Corporation
Financial Highlights
(Unaudited)

|                                                                        |                                                                                                |   |                             |        |      |   |           |      | 
|----------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | - | --------------------------- | ------ | ---- | - | --------- | ---- | 
|                                                                        |                                                                                                |   | Three Months Ended March 31
|                                                                        |                                                                                                |   |                            
|                                                                        |                                                                                                |   | 2002                        |        | 2001
|                                                                        |                                                                                                |   |                             |        |     
|PER SHARE INFORMATION                                                   |                                                                                                |   |                             |        |      |   |           |     
|Net asset value, beginning of period                                    |                                                                                                | $ | 2.53                        |        |      | $ | 2.24      |     
|                                                                        | Net increase (decrease) from operations (1)                                                    |   |                             | ( 0.07 | )    |   |           | 0.14 | 
|                                                                        | Net change in realized and unrealized appreciation
(depreciation) on investments (after taxes) |   |                             | (0.06  | )    |   |           | 0.05 | 
|                                                                        |                                                                                                |   |                             |        |      |   |           |     
|Net asset value, end of period                                          |                                                                                                | $ | 2.40                        |        |      | $ | 2.43      |     
|                                                                        |                                                                                                |   |                             |        |      |   |           |     
|Per share market value, end of period                                   |                                                                                                | $ | 7.00                        |        |      | $ | 7.38      |     
|                                                                        |                                                                                                |   |                             |        |      |   |           |     
|                                                                       
|RATIOS/SUPPLEMENTAL DATA                                                |                                                                                                |   |                             |        |      |   |           |     
|                                                                       
|Net assets, end of period                                               |                                                                                                | $ | 9,387,254                   |        |      | $ | 9,208,355 |     
|Ratio of expenses to average net
assets (2)                             |                                                                                                |   | 7                           | %      |      |   | 7         | %   
|Ratio of net income (loss) to average net
assets                        |                                                                                                |   | (6                          | )%     |      |   | 9         | %   
|Diluted weighted average number of shares
outstanding during the period |                                                                                                |   | 3,915,672                   |        |      |   | 3,803,083 |     



|(1) |  | Calculated based on diluted weighted average number of shares
outstanding during the period.
|--- |  | --------------------------------------------------------------------------------------------
|   
|(2) |  | Excluding income taxes                                                                      

See accompanying notes

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##### 



UTEK CORPORATION
Schedule of Investments
March 31, 2002
(Unaudited)

|          |  |             |  |                                                                                                                                             |  |          |           |       |  |   |           |  
|--------- |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | --------- | ----- |  | - | --------- | -
|          |  | Original    |  |                                                                                                                                             |  |          |           |       |  |   |           |  
|          |  | Date of     |  |                                                                                                                                             |  | Original |           | Fair 
|Shares    |  | Acquisition |  |                                                                                                                                             |  | Cost     |           | Value
|          |  |             |  |                                                                                                                                             |  |          |           |      
|          |  |             |  | Common stock in non-controlled affiliates102.5%                                                                                            |  |          |           |       |  |   |           |  
|236,000   |  | 3/01        |  | Lexon, Inc.publicly traded over the counter.2%;
developer of health care technology                                                       |  | $        | 39,614    |       |  | $ | 21,240    |  
|879,300   |  | 1/99        |  | Image Analysis, Inc., privately held18.2%; medical and
hospital equipment developer                                                        |  |          | 219,825   |       |  |   | 1,705,842 |  
|1,584,000 |  | 5/99        |  | Centrex, Inc., publicly traded over the counter5.4%;
developer of water and purification methodologies                                     |  |          | 522,720   |       |  |   | 506,880   |  
|900,000   |  | 5/99        |  | Nubar, Inc., privately held0%; developer of construction materials                                                                         |  |          | 126,000   |       |  |   |          |  
|1,037,957 |  | 6/99        |  | NuElectric Corporation, publicly traded over the counter3.9%;
environmental services                                                       |  |          | 590,388   |       |  |   | 363,285   |  
|150       |  | 11/99       |  | Rosbon, Inc., privately held0.8%; real estate development                                                                                  |  |          | 90,705    |       |  |   | 76,626    |  
|100,799   |  | 3/00        |  | Graphco Technologies, Inc., privately held6.0%;
developer of e-commerce technologies                                                       |  |          | 952,362   |       |  |   | 563,466   |  
|2,291,053 |  | 6/00        |  | Advanced
Recycling Sciences, Inc., (formerly The Quantum Group, Inc.),
publicly traded over the counter11.2%; tire recycling methodologies |  |          | 2,130,522 |       |  |   | 1,053,885 |  
|974,854   |  | 11/00       |  | Torvec, Inc., publicly traded over the counter11.2%; advanced
automotive technologies                                                      |  |          | 1,959,457 |       |  |   | 1,052,842 |  
|641,667   |  | 4/01        |  | Bitzmart, Inc., privately held19.9%; software products                                                                                     |  |          | 1,658,000 |       |  |   | 1,867,251 |  
|1,850,000 |  | 5/01        |  | Sense Holdings, Inc., publicly traded over the counter13.4%;
biometric technologies                                                        |  |          | 481,000   |       |  |   | 1,258,000 |  
|810,000   |  | 9/01        |  | Prime Pharmaceutical Corporation, privately held4.3%;
pharmaceutical developments in dermatology                                           |  |          | 486,000   |       |  |   | 405,000   |  
|1,000,000 |  | 11/01       |  | Primapharm Funding Corporation, privately held5.2%; intellectual
property development                                                      |  |          | 490,000   |       |  |   | 490,000   |  
|400,000   |  | 11/01       |  | Palladium
Communications, Inc. (formerly USAOnestar.Net Inc.), publicly
traded over the counter .1%; telecom, educational internet service |  |          | 16,490    |       |  |   | 8,000     |  
|114,276   |  | 1/02        |  | Group Management Corporation,publicly traded over the counter
 2.4%; corporate management                                                  |  |          | 206,232   |       |  |   | 223,981   |  
|8,000     |  | 1/02        |  | Circle Group Internet, Inc.,publicly traded over the counter, .2%;
digital design and consulting                                           |  |          | 16,240    |       |  |   | 16,240    |  
|135,000   |  | 2/02        |  | Voice and Wireless Corporation, publicly traded over the
counter, .1%; internet / technology services and products                         |  |          | 12,960    |       |  |   | 12,960    |  
|          |  |             |  |                                                                                                                                             |  |          |           |       |  |   |           |  
|          |  |             |  | TOTAL INVESTMENTS102.5%                                                                                                                    |  | $        | 9,998,515 |       |  | $ | 9,625,498 |  
|          |  |             |  |                                                                                                                                             |  |          |           |       |  |   |           |  
|          |  |             |  | Cash and other assets, less liabilities(2.5)%                                                                                              |  |          |           |       |  |   | (238,244  | )
|          |  |             |  |                                                                                                                                             |  |          |           |       |  |   |           |  
|          |  |             |  | Net assets at March 31, 2002100%                                                                                                           |  |          |           |       |  | $ | 9,387,254 |  
|          |  |             |  |                                                                                                                                             |  |          |           |       |  |   |           |  

Notes to Schedule of Investments:



|o |  | The above investments are non-income producing. Equity investments that have not paid dividends within the last twelve months are considered non-income producing.                                                                                                                                                                                                                                                                                                                  
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|o |  | The value of all restricted securities is determined in good faith by the Board of Directors. In making its determination, the Board of Directors has considered
valuation appraisals provided by independent financial experts. (Notes 1 and 2).                                                                                                                                                                                                                                   
| 
|o |  | As of March 31, 2002, all of the securities that we have received in exchange for our portfolio companies are restricted securities, as that term is defined
under Rule 144 of the Securities Act of 1933. These securities may not be sold in the absence of registration under the Securities Act of 1933 or an exemption
therefrom. As a result, our ability to sell or otherwise transfer the securities we hold in our portfolio is limited.                                 
| 
|o |  | The Company owns more than 10% of the outstanding common stock of each of the above investments with the exception of Graphco Technologies, Inc., Torvec, Inc.,
Lexon, Inc., Prime Pharmaceutical Corporation, Voice and Wireless Corporation, Circle Group Internet, Inc. and Group Management Corporation. As such, the Company
is deemed to be an affiliate of the above companies, as defined under Rule 144 of the Securities Act of 1933, except for those specifically noted.

See accompanying notes

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UTEK CORPORATION
Schedule of Investments
December 31, 2001

|          |  |             |  |                                                                                                                                    |  |          |            |       |  |   |           |  
|--------- |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ---------- | ----- |  | - | --------- | -
|          |  | Original    |  |                                                                                                                                    |  |          |            |       |  |   |           |  
|          |  | Date of     |  |                                                                                                                                    |  | Original |            | Fair 
|Shares    |  | Acquisition |  |                                                                                                                                    |  | Cost     |            | Value
|          |  |             |  |                                                                                                                                    |  |          |            |      
|          |  |             |  | Common stock in non-controlled affiliates 100.8%                                                                                   |  |          |            |       |  |   |           |  
|236,000   |  | 3/01        |  | Lexon, Inc.publicly traded over the counter.2%;
developer of health care technology                                              |  | $        | 39,614     |       |  | $ | 21,240    |  
|879,300   |  | 1/99        |  | Image Analysis, Inc., privately held17.2%; medical and
hospital equipment developer                                               |  |          | 219,825    |       |  |   | 1,705,842 |  
|1,584,000 |  | 5/99        |  | Centrex, Inc., publicly traded over the counter15.7%;
developer of water and purification methodologies                           |  |          | 522,720    |       |  |   | 1,552,320 |  
|900,000   |  | 5/99        |  | Nubar, Inc., privately held0%; developer of construction materials                                                                |  |          | 126,000    |       |  |   |          |  
|1,037,957 |  | 6/99        |  | NuElectric Corporation, publicly traded over the counter3.8%;
environmental services                                              |  |          | 590,388    |       |  |   | 373,665   |  
|150       |  | 11/99       |  | Rosbon, Inc., privately held0.8%; real estate development                                                                         |  |          | 90,705     |       |  |   | 76,768    |  
|100,799   |  | 3/00        |  | Graphco Technologies, Inc., privately held5.1%;
developer of e-commerce technologies                                              |  |          | 952,362    |       |  |   | 511,050   |  
|2,326,153 |  | 6/00        |  | Advanced Recycling Sciences, Inc., (The Quantum Group, Inc.),
publicly traded over the counter10.6%; tire recycling methodologies |  |          | 2,158,953  |       |  |   | 1,046,769 |  
|1,068,354 |  | 11/00       |  | Torvec, Inc., publicly traded over the counter8.7%; advanced
automotive technologies                                              |  |          | 2,147,392  |       |  |   | 865,367   |  
|641,667   |  | 4/01        |  | Bitzmart, Inc., privately held18.8%; software products                                                                            |  |          | 1,658,000  |       |  |   | 1,867,251 |  
|1,850,000 |  | 5/01        |  | Sense Holdings, Inc., publicly traded over the counter10.3%;
biometric technologies                                               |  |          | 481,000    |       |  |   | 1,017,500 |  
|810,000   |  | 9/01        |  | Prime Pharmaceutical Corporation, privately held4.1%;
pharmaceutical developments in dermatology                                  |  |          | 486,000    |       |  |   | 405,000   |  
|1,000,000 |  | 11/01       |  | Primapharm Funding Corporation, privately held4.9%; intellectual
property development                                             |  |          | 490,000    |       |  |   | 490,000   |  
|400,000   |  | 11/01       |  | Palladium Communications, Inc.(USAOnestar.Net Inc)., publicly
traded over the counter.6%; telecom,educational internet service    |  |          | 56,000     |       |  |   | 56,000    |  
|          |  |             |  |                                                                                                                                    |  |          |            |       |  |   |           |  
|          |  |             |  | TOTAL INVESTMENTS100.8%                                                                                                           |  | $        | 10,018,959 |       |  | $ | 9,988,772 |  
|          |  |             |  |                                                                                                                                    |  |          |            |       |  |   |           |  
|          |  |             |  | Cash and other assets, less liabilities(.8)%                                                                                      |  |          |            |       |  |   | (79,332   | )
|          |  |             |  |                                                                                                                                    |  |          |            |       |  |   |           |  
|          |  |             |  | Net assets at December 31, 2001100%                                                                                               |  |          |            |       |  | $ | 9,909,440 |  
|          |  |             |  |                                                                                                                                    |  |          |            |       |  |   |           |  

Notes to Schedule of Investments:



|o |  | The above investments are non-income producing. Equity investments that have not paid dividends within the last twelve months are considered non-income producing.                                                                                                                                                                                                                                        
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|o |  | The value of all restricted securities is determined in good faith by the Board of Directors. In making its determination, the Board of Directors may consider valuation appraisals provided by
independent financial experts. (Notes 1 and 2).                                                                                                                                                           
| 
|o |  | As of December 31, 2001, all of the securities that we have received in exchange for our portfolio companies are restricted securities, as that term is defined under Rule 144. These securities may
not be sold in the absence of registration under the 1933 Act or an exemption therefrom. As a result, our ability to sell or otherwise transfer the securities we hold in our portfolio is limited.
| 
|o |  | The Company owns more than 10% of the outstanding common stock of each of the above investments with the exception of Graphco Technologies, Inc., Torvec, Inc., Lexon, Inc. and Prime Pharmaceutical
Corporation. As such, the Company is deemed to be an affiliate of the above companies, as defined under Rule 144, except for those specifically noted.                                               

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UTEK Corporation
Notes to Consolidated Financial Statements

(Information as of March 31, 2002 and 2001 and for each of the three months
periods then ended is Unaudited)

1.     Nature of Business and Significant Accounting Policies

Interim Financial Information

The financial information for UTEK Corporation (the Company) as of March
31, 2002 and 2001 and for each of the three 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, 2001. Operating
results for the three months ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the entire year.

The Company

We are a non-diversified, closed-end management investment company that
has elected to be treated as a Business Development Company (BDC) under the
Investment Company Act of 1940 (1940 Act).

We 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
September 2001, UTEK Corporation acquired 100% of the outstanding common stock
of PAX Technology Transfer Ltd., a United Kingdom corporation, in a stock for
stock transaction.

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

The Company invests in portfolio companies that management believes are
positioned to benefit from the acquisition of new technology. The Companys
investments in portfolio companies generally are used by the portfolio
companies to acquire the license rights to new technologies developed at
universities and/or government research facilities. The Company provides
portfolio companies with managerial assistance in 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 to fund continued
research and development of the acquired technologies.

The Company seeks merger partners for portfolio companies, whereby the
Company generally receives common stock in the merger partner in a non-taxable
exchange for shares of the portfolio company. The Company generally seeks
merger partners that are in the early stages of development. The merger
partners normally have little or no prior operating history.

To facilitate establishing on-going consulting engagements with its
clients, the Company has developed a strategic alliance process. 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 and federal laboratories.

Investments

Pursuant to the requirements of 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 available. In making its
determination, the Board of Directors has considered valuation appraisals
provided by independent financial experts. With respect to private equity
securities, 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 sale are generally valued at a discount from the public
market value of the securities.

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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 ascertainable market value, the estimated 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. Equity securities at March 31, 2002 and December 31, 2001
(102.5% and 100.8% of net assets, respectively) are stated at fair value as
determined by the Board of Directors, in the absence of readily ascertainable
fair values.

Revenue Recognition

The Company recognizes revenue from the sale of technology rights upon the
exchange of the shares of portfolio companies with unrelated merger partners.
The Company records revenue based on the value of the consideration received.
In most cases, the consideration received for the rights is the common stock of
the purchaser. The common stock received is recorded as an investment at value.
Revenue derived from consulting services is recognized as earned, over the life
of the underlying consulting agreements. In some cases, the Company is paid a
fee for negotiating a successful technology transfer. In these instances,
revenue is recognized upon consummation of the transaction.

Revenues from strategic alliance agreements in which shares of common
stock are received before they are earned, are deferred and recognized over the
term of each agreement, typically twelve months. For strategic alliance
agreements in which the stock is received ratably over the agreement, revenue
is recognized as earned. These agreements are cancelable at any time.

The Companys consolidated subsidiary derives its revenue primarily from
consulting contracts with third parties. Revenue from consulting contracts are
deferred and recognized ratably over the term of the contract, typically ninety
days.

Research and Development

Research and development costs consist of expenditures incurred during the
course of planned searches and investigations aimed at discovery of new
knowledge that will be useful in developing new products or processes. The
Company expenses all research and development costs as they are incurred.
During the periods ended March 31, 2002 and 2001, the Company incurred $-0- and
$125,000, respectively, in such costs.

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 net assets under the caption Foreign
currency translation adjustment.

Impact of New Accounting Standards

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets(SFAS 142). SFAS 142 revises the standards of accounting
for goodwill and indefinite-lived intangible assets. SFAS 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives and
requires that these assets be reviewed for impairment at least annually, or
more frequently if impairment indicators arise. Intangible assets with finite
lives will continue to be amortized over their estimated useful lives. The
non-amortization provisions of SFAS 142 apply to goodwill and indefinite lived
intangible assets acquired in a business combination after June 30, 2001. As a
result, the goodwill recorded in connection with the Companys September 2001
acquisition of PAX Technology Transfer Ltd. will not be amortized. Effective
January 1, 2002, the Company fully adopted the provisions of SFAS 142.

The provisions of SFAS 142 require that a transitional impairment test for
goodwill be performed as of the adoption date. The Company is currently
performing this test and has not determined the impact, if any, of applying
SFAS 142 in its financial statements. On an ongoing basis, absent any
impairment indicators, the Company expects to perform its annual evaluation
during the fourth quarter.

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2.     Investments

Equity securities at March 31, 2002 and December 31, 2001, (102.5% and
100.8% of net assets, respectively) were valued at fair value as determined by
the Board of Directors, with the assistance of appraisals provided by
independent financial experts, in the absence of readily ascertainable market
values.

The values assigned to these securities are based upon available
information and do not reflect amounts that could be realized upon immediate
sale, nor 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 significant.

As of March 31, 2002 and December 31, 2001, the Company had established
four portfolio companies, with $-0- net assets.

On February 19, 2001, the Company sold its Technology Development, Inc.
portfolio company to Advanced Recycling Sciences, Inc., (formerly known as The
Quantum Group, Inc.) for 1,446,153 unregistered shares of Advanced Recycling
Sciences, Inc. common stock in a non-taxable exchange.

On April 20, 2001, the Company sold its Watermark Technologies, Inc.
portfolio company to Bitzmart, Inc. for 450,000 unregistered shares of
Bitzmart, Inc. common stock in a non-taxable exchange.

On May 31, 2001, the Company sold its Micro Sensor Technologies, Inc.
portfolio company to Sense Holdings, Inc. for 1,850,000 unregistered shares of
Sense Holdings, Inc. common stock in a non-taxable exchange.

On September 28, 2001, the Company sold its Advanced Microsphere
Technology, Inc. portfolio company to Prime Pharmaceutical Corporation for
560,000 shares of Prime Pharmaceutical Corporation common stock in a
non-taxable exchange.

On August 14, 2001, the Company acquired 41,667 unregistered shares of
common stock from Bitzmart, Inc. at $3.00 per share for $125,000.

On September 27, 2001, the Company acquired 250,000 unregistered shares of
common stock from Prime Pharmaceutical Corporation at $.60 per share for
$150,000.

On September 14, 2001, the Company received 100,000 unregistered shares of
common stock from Bitzmart, Inc. at $2.31 per share in connection
with a strategic alliance
agreement.

On October 29, 2001, the Company received 1,000,000 unregistered shares of
common stock from Primapharm Funding Corporation in connection with a strategic alliance
agreement. The Company has recognized consulting fees to date relating to
391,780 shares.

On November 1, 2001, the Company received 50,000 unregistered shares of
common stock from Bitzmart, Inc. at $2.91 per share in connection
with a strategic alliance
agreement.

On November 28, 2001, the Company received 400,000 unregistered shares of
common stock from Palladium Communications, Inc. (formerly USAOnestar.net, Inc.) in a strategic alliance agreement. The Company has
recognized consulting fees to date relating to 142,739 shares.

On January 11, 2002, the Company entered into a strategic alliance
agreement with Circle Group Internet, Inc. The agreement provides for a total
of 48,000 unregistered shares of Circle Group Internet, Inc.s common stock to
be distributed to the Company pro rata during the term of the agreement. The
Company received and recognized consulting fees in relation to 8,000
unregistered shares of Circle Group Internet, Inc. during the three month period
ended March 31, 2002.

On January 21, 2002, the Company received 114,276 unregistered shares of
Group Management Corporations common stock in connection with a strategic alliance agreement
for the period ended March 31, 2002. The Company recognized consulting fees
related to 28,569 shares during the three month period ended March 31, 2002.

On February 11, 2002, the Company entered into a strategic alliance
agreement with Voice and Wireless Corporation. The agreement provides for a
total of 540,000 unregistered shares of Voice and Wireless Corporations common
stock to be distributed to the Company pro rata during the term of the
agreement. The Company received 135,000 unregistered shares of Voice and
Wireless

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##### 



Corporations common stock during the three month period ended March 31,
2002. The Company recognized consulting fees related to 90,000 shares during
the three month period ended March 31, 2002.

3.     Income Taxes

Prior to October 14, 1999, the Companys business was structured as a
limited liability company (LLC). The LLC elected to be treated as a
partnership under the provisions of Subchapter K of the Internal Revenue Code.
Under those provisions, the LLC did not pay corporate income taxes on its
taxable income. Instead, the owners of the LLC were individually liable for
income taxes on the LLCs taxable income. The LLCs subsidiaries, including
UTEK Holdings and UTEK Corporation, were all taxed as C corporations.

On October 14, 1999, the Company restructured its business, whereby the
members of the LLC contributed their membership interests to the Company, a
newly created corporation. As a result, all of the LLCs assets, including the
stock of its subsidiaries, were transferred to the Company and the LLC was
dissolved. In addition, UTEK Holdings and UTEK Corporation were liquidated into
the Company. As of October 14, 1999, the Company is taxable as a C corporation.

4.     Commitments and Contingencies

On September 10, 2001, the Company secured a $500,000 revolving line of
credit with a local financial institution. Advances under the line of credit
bear interest at the financial institutions prime rate less .25%. The line of
credit is due on demand and is secured by a pledge of a portion of our
investments in non-controlled affiliates. At March 31, 2002 and December 31,
2001, we had no borrowings outstanding under the line of credit.

5.     Subsequent Events

In May 2002, Digital Image Enhancement Technologies, Inc., a portfolio
company (formed in April 2002), merged with Image Analyis, Inc. In connection
with the merger, we received 465,000 unregistered shares of common stock of
Image Analysis, Inc. Image Analysis, Inc. is a privately held development
stage company that develops medical and hospital equipment. As a result of the
merger, Image Analysis, Inc. acquired the worldwide license to a technology for
enhancing the digital images from an M.R.I.

In May 2002, Nitrone Scientific, Inc., a portfolio company (formed in
April 2002), merged with Prime Pharmaceutical Corporation. In connection with
the merger, we received 683,550 unregistered shares of common stock of Prime
Pharmaceutical Corporation. Prime Pharmaceutical Corporation is a privately
held development stage company that develops medical and hospital equipment. As
a result of the merger, Prime Pharmaceutical Corporation acquired the worldwide
license to a new class of Nitrone-based antioxidant technology.

Page 13 of 24



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

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. On a regular basis, management reviews these
estimates and assumptions including those related to revenue
recognition and the valuation of investments.

Management believes
the following critical accounting policies, among others, affect it
more significant judgments and estimates used in the preparation of
its consolidated financial statements.

Revenue Recognition

The Company recognizes revenue from the sale of technology rights upon the
exchange of the shares of portfolio companies with unrelated merger partners.
The Company records revenue based on the value of the consideration received.
In most cases, the consideration received for the rights is the common stock of
the purchaser. The common stock received is recorded as an investment at value.
Revenue derived from consulting services is recognized as earned, over the life
of the underlying consulting agreements. In some cases, the Company is paid a
fee for negotiating a successful technology transfer. In these instances,
revenue is recognized upon consummation of the transaction.

Revenues from
strategic alliance agreements in which shares of common stock are
received before they are earned, are deferred and recognized over the
term of each agreement, typically twelve months. For strategic
alliance agreements in which the stock is received ratably over the
agreement, revenue is recognized as earned. These agreements are
cancelable at any time.

The Company's
consolidated subsidiary derives its revenue primarily from consulting
contracts with third parties. Revenue from consulting contracts are
deferred and recognized ratably over the term of the contract,
typically ninety days.

Valuation of Investments:

The income that we
derive from our investments in our portfolio companies consists of
both cash and equity securities that we receive upon disposition of
our portfolio companies. The value of the equities that we receive
makes up most of our revenues. Pursuant to the requirements of 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 available. In making its
determination, the Board of Directors may consider valuation
appraisals provided by independent financial experts. With respect
to private equity securities, 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 sale are generally
valued at a discount from the public market value of the securities.

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.

Without a readily ascertainable market value, the estimated 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. Any changes in estimated value are recorded in the
Companys Statement of Operations as Net realized and
unrealized gains (losses) during the period of change.

We have retained
Bolten Financial Consulting, Inc., to provide us with valuations of
the securities we receive in exchange for portfolio companies,
updated to each quarterly valuation date.

Without a readily
ascertainable market value, the estimated 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. Any changes in estimated value are recorded in the
Companys Statement of Operations as Net realized and
unrealized gains (losses) during the period of change.

We have retained
Bolten Financial Consulting, Inc., to provide us with valuations of
the securities we receive in exchange for portfolio companies,
updated to each quarterly valuation date.

GENERAL

Our primary business is to make investments in companies that possess or
will likely identify emerging and established technologies and markets for
those technologies. Our primary investment objective is to increase our net
assets by exchanging stock in our portfolio companies for cash and other
assets, which we will use to acquire licenses to additional technologies. We
believe that we will be able to achieve our objectives by concentrating on
investments in companies which we believe are likely to benefit from our
managements expertise in technology transfer.

The income that we derive from our investments in our portfolio companies
consists of both cash and equity securities that we receive upon disposition of
our portfolio companies. The value of the equities that we receive generally
makes up most of our revenues. Pursuant to the requirements of 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
available. In making its determination, the Board of Directors has considered
valuation appraisals provided by independent financial experts. With respect to
private equity securities, 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 sale are generally valued at a
discount from the public market value of the securities.

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 ascertainable market value, the estimated 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. Any changes in estimated value are recorded in the
Companys Consolidated Statement of Operations as Net realized and unrealized
gains (losses) during the period of change.

We have retained Bolten Financial Consulting, Inc. to provide us with
valuations of the securities we receive in exchange for portfolio companies,
updated to each quarterly valuation date. We pay Bolten Financial Consulting,
Inc. a fee each time it values our investments. For the three months ended
March 31, 2002 and 2001 we paid Bolten Financial Consulting, Inc. a total of
$17,292 and $12,021, respectively for its valuation 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.

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Financial Condition

The Companys total assets were $11,583,558 and its net assets were
$9,387,254 at March 31, 2002, compared to $12,410,958 and $9,909,440 at
December 31, 2001, respectively.

Net asset value per share (NAV) was $2.40 at March 31, 2002, compared to
$2.53 at December 31, 2001. Net assets decreased by $522,186 in the three
months ended March 31, 2002 and increased by $1,454,438 in the year ended
December 31, 2001.

The Companys common shares outstanding as of March 31, 2002 and December
31, 2001 were 3,915,672.

The Companys financial condition is dependent on a number of factors
including the ability to effectuate technology transfers, strategic alliances,
and the performance of the equity stakes that we receive for these transfers.
The Company has invested a substantial portion of its assets in private
development stage or start-up companies. These private businesses are thinly
capitalized, unproven, small companies that lack management depth, are
dependent on new, commercially unproven technologies and have no history of
operations. At March 31, 2002, $4,527,692 or 48% of the Companys total assets
consisted of investments at fair value in publicly traded securities, of which
net unrealized depreciation, after income tax effect, was $(909,547); the
remaining $5,097,806 or 54% of the Companys total assets consisted of
non-publicly traded securities at fair value of which net unrealized
appreciation, after income tax effect, was $676,897. See Note 2 to the
Consolidated Financial Statements.

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

|                                           |  |             |           |              |  |   |            |  
|------------------------------------------ |  | ----------- | --------- | ------------ |  | - | ---------- | -
|                                           |  | March 31,   |           | December
31,
|                                           |  | 2002        |           | 2001        
|                                           |  | (Unaudited) |           |              |  |  
|                                           |  |             |           |             
|Investments, at cost                       |  | $           | 9,998,514 |              |  | $ | 10,018,958 |  
|Unrealized depreciation, before income tax |  |             | (373,016  | )            |  |   | (30,186    | )
|                                           |  |             |           |              |  |   |            |  
|Investments, at fair value                 |  | $           | 9,625,498 |              |  | $ | 9,988,772  |  
|                                           |  |             |           |              |  |   |            |  

Following an initial investment in a portfolio company, the Company may
make additional investments in such portfolio company or subsequent acquirer in
order to: (1) increase its ownership percentage; (2) exercise warrants or
options that were acquired in a prior financing; (3) preserve the Companys
proportionate ownership in a subsequent financing; (4) transfer additional
technologies to enhance the portfolio companys intellectual capital or (5)
attempt to preserve or enhance the value of the Companys investment. Such
additional investments are referred to as follow-on investments. There can be
no assurance that the Company will make follow-on investments or have
sufficient funds to make additional investments. The failure to make such
follow-on investments could jeopardize the viability of the portfolio company
and the Companys investment or could result in a missed opportunity for the
Company to participate to a greater extent in a portfolio companys successful
operations. The Company attempts to maintain adequate liquid capital to make
follow-on investments in its private portfolio companies. However, there can be
no assurance that the Company will have liquid capital. The Company may elect
not to make a follow-on investment either because it does not want to increase
its concentration of risk, because it prefers other opportunities, or because
it is inhibited by compliance with Business Development Company (BDC)
requirements, even though the follow-on investment opportunity appears
attractive.

Results of Operations

The Company accounts for its operations under generally accepted
accounting principles for investment companies. On this basis, the principal
measure of a Companys 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
the Companys income from technology transfers, interest, dividends, fees and
other income and its 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, is the net change in the fair value of the Companys
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.

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Three months ended March 31, 2002 compared to the three months ended March 31, 2001.

Income from operations. Income from operations decreased 82% to $269,954
for the three months ended March 31, 2002 from $1,492,535 for the three months
ended March 31, 2001. The decrease in income from operations resulted from not
completing a sale of technology rights during the period. In the three months
ended March 31, 2002, we rendered services in connection with five strategic
alliances (three of which began in the three months ended March 31, 2002)
valued at $188,511 such amount represents the value of stock, as
determined by the Company's Board of directors, received in
connection with rendering such services. In the three months ended March 31, 2002 we did not
complete a sale of technology rights, compared to one sale valued at $1,446,153
for the three months ended March 31, 2001. Our Board of Directors determines
the fair value of the shares we receive in the absence of readily ascertainable
market values. In making its determination, the Board of Directors has
considered valuation appraisals provided by independent financial experts. In
our transactions during the three months ended March 31, 2001 with Advanced
Recycling Sciences, Inc. (formerly The Quantum Group, Inc.), on February 19,
2001 we received 1,446,153 shares of common stock of Advanced Recycling
Sciences, Inc. that were valued at $1.00 per share

Expenses.Total operating expenses for the three months ended March 31,
2002 were $691,906; consisting of salaries and wages of $210,964, professional
fees of $157,242, sales and marketing expenses of $95,680, and general and
administrative expenses of $228,020. These expenses compared to the $631,498
reported for the three months ended March 31, 2001; consisting of salaries and
wages of $103,173, professional fees of $153,380, sales and marketing expenses
of $235,290, and general and administrative expenses of $139,655. The 10%
increase in total operating expenses was due to the increased number of
employees, the cost of recruiting new employees, increased costs of insurance,
and our ongoing marketing effort to develop the UTEK U2B(SM) brand. The 59% decrease in
sales and marketing expenses was due to the lack of a sale of technology rights
as compared with one for March 31, 2001. The 104% increase in salaries and
wages reflects increased salary costs as well as the addition of three
full-time employees and one part-time employee. The 2% increase in professional
fees is largely due to the costs associated with increased accounting fees. The
63% increase in general and administrative costs is largely due to costs of
recruiting new employees, an increase in insurance costs, and a continued
increase in expenses related to the requirements of being a public company such
as investor relations costs, printing and mailing costs, and other related
costs.

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 and Unrealized Gains and Income Taxes.Net realized losses
on investments amounted to $27,979 for the three months ended March 31, 2002
and related to the sales of 35,100 shares of its Advanced Recycling Sciences,
Inc. common stock for $19,997 in cash and the sales of 91,500 shares of its
Torvec, Inc. common stock for $151,509 in cash. Net realized losses on
investments amounted to $409 for the three months ended March 31, 2001 and
related to the February 2001 sale of 69,000 shares of its Lexon, Inc. common
stock for $21,425 in cash.

The net unrealized appreciation of investments decreased by $428,411 for
the three months ended March 31, 2002, a 200% decrease from the increase in
unrealized appreciation of $214,588 for the three months ended March 31, 2001.
The net unrealized appreciation consisted of increases and declines in fair
value resulting from the Board of Directors valuation of the Companys assets
for the three months ended March 31, 2002. There were declines in the values
related to our investments in Centrex, Inc., NuElectric, Inc., and Rosbon, Inc.
The decline from those investments was partially offset by an increase in the
values related to our investments in Torvec, Inc., Sense Holdings, Inc.,
Advanced Recycling Sciences, Inc. and Graphco Technologies, Inc.

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

Our effective tax rate was a provision of 36% for the three months ended
March 31, 2002 compared to 37% for the three months ended March 31, 2001.

Liquidity and Capital Resources

Net assets decreased 5% to $9,387,254 at March 31, 2002 from $9,909,440 at
December 31, 2001, primarily attributable to realized losses and the unrealized
depreciation of non-controlled affiliate investments

Our primary source of liquidity and capital through March 31, 2002 was
from the issuance of common stock rather than income from operations. Our
income from operations consists primarily of the sale of technology rights for
equity securities rather than cash. During 2001, we completed a private
placement transaction resulting in proceeds of $375,617.

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On September 10, 2001, the Company secured a $500,000 revolving line of
credit with a local financial institution. Advances under the line of credit
bear interest at the financial institutions prime rate less .25%. The line of
credit is due on demand and is secured by a pledge of a portion of our
investments in non-controlled affiliates. At March 31, 2002 and December 31,
2001, we had no borrowings outstanding under the line of credit.

On March 31, 2002 and December 31, 2001 we had $1,313,548 and $1,432,473,
respectively, in cash and cash equivalents. We anticipate needing to raise
additional equity to fund our operations and anticipated growth in our
investment portfolio. We may be able to accomplish this through private
placement offerings, or sales of our investments in non-controlled affiliates.

Impact of New Accounting Standards

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets(SFAS 142). SFAS 142 revises the standards of accounting
for goodwill and indefinite-lived intangible assets. SFAS 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives and
requires that these assets be reviewed for impairment at least annually, or
more frequently if impairment indicators arise. Intangible assets with finite
lives will continue to be amortized over their estimated useful lives. The
non-amortization provisions of SFAS 142 apply to goodwill and indefinite lived
intangible assets acquired in a business combination after June 30, 2001. As a
result, the goodwill recorded in connection with the Companys September 2001
acquisition of PAX Technology Transfer Ltd. will not be amortized. The Company
has applied the remaining provisions of SFAS 142 in the first quarter of 2002
and the application of those provisions does not have a material impact on the
Companys financial position or its results of operations.

The provisions of SFAS 142 require that a transitional impairment test for
goodwill be performed as of the adoption date. The Company is currently
performing this test and has not determined the impact, if any, of applying
SFAS 142 in its financial statements. On an ongoing basis, absent any
impairment indicators, the Company expects to perform its annual evaluation
during the fourth quarter.

Investment Considerations

Our quarterly and annual results could fluctuate significantly.

The Companys 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,
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 as it relates to 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 the Companys performance in future
quarters and years.

Our investment model is speculative in nature and our history of investments
using the model is limited.

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. Furthermore, we have only been using our
investment model for a relatively short period of time and have little or no
historical information upon which to judge whether or not the model is
successful. We cannot assure you that our investment model will be successful
or that any of our investments will be successful.

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

We invest in development stage companies that our management believes can
benefit from our expertise in technology transfer. Development stage companies
are subject to all of the risks associated with new businesses. In addition,
our portfolio companies are also subject to the risks associated with research
and development of new technologies. These risks include the risk that new
technologies cannot be identified, developed or commercialized, may not work,
or are obsolete. Our portfolio companies must successfully acquire licenses to
new technologies, and in some cases further develop new technologies, and then
complete a merger transaction for our investments to be successful. 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. In addition, for an investment to be successful, our
portfolio companies often must develop the technology and identify buyers who
are willing to acquire the technology, in exchange for their common stock or
other consideration. We cannot assure you that any of our portfolio companies
will be successful or that we will successfully sell our

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portfolio companies or sell or relicense the technology rights held by our
portfolio companies. 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 and laboratories, over which neither our portfolio
companies nor we have any control.

Our portfolio companies depend upon the research activities of
universities and government research facilities. Neither we, nor our portfolio
companies, have any control over the research activities of universities and
research laboratories. As neither we nor our portfolio companies provide
supervision of any university or laboratory research, 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 and government research facilities
for evaluation and commercial development. Further, the licenses to
technologies that our portfolio companies obtain may be non-exclusive. In the
event that we make an investment in a portfolio company, and we are unable to
locate a new technology to be acquired by the portfolio company, we could lose
our entire investment.

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

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 universities or
laboratories have filed 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.

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, under Section 23 of the United States Code, 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 need to make additional investments in our portfolio companies to
provide them with capital to further develop licensed technologies.

We may have to make additional investments in portfolio companies to
protect our initial investments. 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.

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We may be unable or decide not to make additional investments in our
portfolio companies, which could result in our losing our initial investment if
the portfolio company fails. Our ownership and control may be diluted if a
portfolio company obtains additional funds from third party investors.

Our agreement with the underwriters in connection with our IPO restricts
the size of our investment in any single portfolio company and, as a result,
could prohibit an additional investment in a portfolio company in the event
that our initial investment represented 10% or more of our assets. Even if we
are able to make an additional investment in a portfolio company within the
prescribed limits, we may elect not to make an additional investment in a
portfolio company in order to limit the size of our investment, which is at
risk. It is also our policy not to make loans to our portfolio companies, which
in the aggregate exceed 25% of our net assets. Therefore, if a portfolio
company requires additional funds to continue operating, and we cannot or
choose not to make an additional investment, our investment in the portfolio
company may decline in value. In addition, to the extent that a portfolio
company seeks additional financing from third parties, our ownership interest
and control of the portfolio company may be diluted.

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

Our portfolio companies are all private entities 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 restricted securities, as
defined under the Securities Act of 1933 and are subject to restrictions on
resale. Furthermore, we do not anticipate that a public market will exist for
any of the securities we hold in our portfolio companies. Therefore, any sale
or other transfer of the securities we hold in portfolio companies will be made
in private transactions and 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.

We are dependent on merger transactions, structured as tax-free exchanges
to sell our portfolio companies. A change in the Internal Revenue Code
affecting tax-free exchanges could reduce or eliminate our ability to sell
portfolio companies.

We do not anticipate selling any of our portfolio 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 portfolio companies on commercially reasonable
terms. If we are unable to successfully sell a portfolio company in a merger
transaction, we may lose our investment.

We have been dependent on a small number of companies controlled by the
same investor group for the purchase of our portfolio companies. We have only
limited experience selling our portfolio companies and of the fifteen
transactions that we have completed, six have been with companies controlled by
the same group of investors.

At March 31, 2002, we have completed only fifteen transactions, including
fourteen mergers and one stock sale, wherein we sold portfolio companies to
other companies and six of these sales have been made to companies that are
controlled by the same investor group. As a result, we have only had the
benefit and experience of negotiating such agreements with a small number of
investors. We cannot assure you that we will be able to successfully negotiate
merger transactions for the sales of our portfolio companies in the future.

The agreements we have with universities do not guarantee that the
universities will grant licenses to our portfolio 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, a university 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 for one of our portfolio
companies.

We are dependent upon our managements ability to identify acquirers for
our portfolio companies.

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

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We are dependent upon and have little or no control over the efforts of
companies that acquire our portfolio companies to successfully commercialize
the acquired technologies.

When we sell a portfolio company, we receive common stock from the
acquiring company based upon the mutually agreed upon values of the portfolio
company, its licensed technology and the acquiring company. We then intend to
sell the securities that we acquire in exchange for our portfolio companies at
some time in the future. Therefore, our ability to profit from an investment in
a portfolio company is ultimately dependent upon the price we receive for the
shares of the acquiring company. In most cases, the companies that acquire our
portfolio companies will be dependent upon successfully commercializing the
technologies they acquire. We do not have control over the companies that
acquire our portfolio companies and we do not intend to provide them with
managerial assistance. These operating 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 face additional risks of product and
technological obsolescence and government regulation over which we will have
little or no control. 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. We cannot
assure you that any of the companies that acquire our 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 company.

The companies that
have merged with our portfolio companies and the companies for which
we render services in connection with strategic alliances to date are
development stage companies and, as a result, the value of the securities that
we receive in such merger transactions is subject to significant fluctuations.

Historically we have merged, and we intend to continue to merge, our
portfolio companies with companies in related fields that are development stage
companies. In addition, the companies for which we render services in
connection with strategic alliances are development stage companies.
As a result, the securities that we receive in such transactions are subject to all of the risks associated with securities of
development stage companies. The values of these securities may be subject to
significant fluctuations. We cannot assure you that when we sell these
securities; we will receive the value ascribed to the securities either at the
time of acquisition or during subsequent valuation periods.

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.

We generally receive equity securities of the companies that acquire our
portfolio companies and for the services we render in connection with
strategic alliances, rather than cash. We record revenues from these
transactions; however, the securities that we receive will be subject to
restrictions on resale, which will limit our ability to sell these securities
and attain liquidity.

The securities that
we receive in exchange for our portfolio companies and in connection
with strategic alliances
will be subject to restrictions on resale, which will limit our ability to sell
these securities.

As of March 31, 2002, all of the securities we have received in exchange
for our portfolio companies and in connection with strategic alliances are restricted securities, as such term is
defined under Rule 144 of the Securities Act of 1933. These shares are
restricted securities because they were issued in private transactions not
involving a public offering and may not be sold in the absence of registration
other than in accordance with Rule 144 the Securities Act of 1933 or another
exemption from registration. As a result of such restrictions, our ability to
sell or otherwise transfer the securities will be limited. We cannot assure you
that we will be able to receive upon resale, the recorded value of our
portfolio company securities.

We may not be able to merge our portfolio companies with publicly traded
entities and may receive non-publicly traded securities in exchange for our
portfolio companies. We may be required to sell the securities we receive at a
substantial discount to their appraised value if no public market exists.

As of March 31, 2002, we have completed fifteen sales of portfolio
companies. Of these sales, eight have been to companies that are currently
public, and the remaining transactions been with non-public companies. We are
substantially dependent upon the ability of non-public acquirers of our
portfolio companies to implement a plan, which would facilitate a trading
market for their securities, or

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other strategy, which would allow for the potential sale of our ownership
interest. In addition, to the extent that we own more than 10% of an acquirers
shares, we may be deemed to be an affiliate of the acquirer which would limit
our ability to dispose of securities we receive for our portfolio companies.
Further, our ability to sell the securities we receive for our portfolio
companies may be limited by, and subject to, the lack of or limited nature of a
trading market for the securities and the volatility of the stock market as a
whole. Such limitations could prevent or delay any sale of our investments or
significantly reduce the amount of proceeds, if any that might otherwise be
realized there from. The values we place on our investments may not accurately
reflect their future value or the value that we will receive for them when we
sell them.

The values we place on our investments may not accurately reflect their
future value or the value that we will receive for them when we sell them.

At March 31, 2002 and December 31, 2001, respectively, equity securities
amounting to $9,625,498 or 102.5% of net assets and $9,988,772 or 100.8% of net
assets, have been valued at fair value as estimated by our Board of Directors.
As a general matter, restricted securities and securities without an active
trading market are more difficult to accurately value than unrestricted,
actively traded securities of public companies. Pursuant to the requirements of
the 1940 Act, the 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 available. In making its determination, the Board of Directors
has considered valuation appraisals provided by independent financial experts.
See our financial statements. 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.

Your ownership interest and the value of the shares of our common stock
may be diluted by the exercise of stock options and warrants we have granted or
may grant in the future.

We have adopted two stock option plans under which certain of our
employees, officers and directors may be granted options. As of March 31, 2002,
we have granted options to purchase 548,000 shares of our common stock to
certain officers and employees. We have also reserved an additional 202,000
shares of our common stock for issuance under our two stock option plans to key
employees and directors. In addition, we issued warrants to an
underwriter in connection with our IPO. Upon payment of the purchase price of $.0003 per
warrant, the underwriter may purchase 100,000 shares of our common stock at an exercise price of $9.90 per
share. The warrants expire on October 25, 2005. The issuance and sale of these
shares of common stock will dilute the ownership interest of investors and may
have an adverse effect on the price of our common stock.

Our business depends on key personnel.

We rely, and will continue to be substantially dependent upon, the
continued services of our management, including our Chief Executive Officer and
Chairman of the Board, Clifford M. Gross, and our President, Uwe Reischl. 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, to maintain our access to new
technologies, and their relationships with companies in the private sector in
order to effectuate the sale of our portfolio companies.

Any transactions we engage in with affiliates may involve conflicts of
interest.

The 1940 Act restricts transactions between the Company and any of our
affiliates, including our officers, directors or employees and principal
stockholders. In many cases, the 1940 Act prohibits transactions between such
persons and ourselves unless we first apply for and obtain an exemptive order
from the SEC. Delays and costs in obtaining necessary approvals may decrease or
even eliminate any profitability of such transactions or make it impracticable
or impossible to consummate such transactions. These affiliations could cause
circumstances that would require the SECs approval in advance of proposed
transactions by us in portfolio companies. Further, depending upon the extent
of our managements influence and control with respect to such portfolio
companies, the selection of the affiliates of management to perform such
services may not be a disinterested decision, and the terms and conditions for
the performance of such services and the amount and terms of such compensation
may not be determined in arms-length negotiations.

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

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company within the meaning of the 1940 Act. Prospective investors should
understand that our current investments are not, and in the future may not be,
substantially diversified. We will not be able to achieve the same level of
diversification as larger entities engaged in similar venture capital
activities. Therefore, our assets may be subject to greater risk of loss than
if they were more widely diversified, because the failure of one or more of our
limited number of investments could have a material adverse effect on our
financial condition and the price of our common stock.

We are subject to substantial government regulations because of our status
as a business development company.

We have elected to be
treated as a BDC under the Small Business Incentive Act of 1980, which
modified the 1940 Act. Although the Incentive Act relieves BDCs from compliance
with many of the provisions of the 1940 Act, the Incentive Act imposes on BDCs
greater restrictions on permitted types of investments. Moreover, the
applicable provisions of the 1940 Act impose numerous restrictions on our
activities, including restrictions on the nature of our investments and
transactions with affiliates. We cannot assure you that this legislation will
be interpreted or administratively implemented in a manner consistent with our
objectives and manner of operations. Upon approval of a majority of our
stockholders, we may elect to withdraw our status as a BDC. If we elect to
withdraw our election, or if we otherwise fail to qualify as a BDC, we may be
subject to substantially greater regulation under the 1940 Act. Compliance with
such regulations would significantly increase our costs of doing business.

We have a limited operating history upon which you can assess our
prospects and we are subject to the risks associated with any new business.

As a result of our short history of operations, we have only consummated
transactions with a very small number of companies. Therefore, there is little
historical information regarding our operations upon which you can base your
investment decision. In addition, we are subject to all of the business risks
and uncertainties associated with any new business enterprise. We cannot assure
you that our investment objective will be attained.

Our management has limited experience operating a technology transfer
business, and managing and operating a business development company.

The members of our management have been engaged in the operation of our
business for a short period of time and so have limited experience. Some of our
directors and executive officers only have experience in science and research.
Furthermore, we commenced operations as a business development company in June
2000 and so our directors and executive officers have only had experience
operating a business development company since June 2000. In addition, some of
our management have had limited experience in the areas of corporate finance
and corporate mergers.

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

Clifford M. Gross, our Chief Executive Officer and Chairman of the Board,
beneficially owns approximately 50% of our common stock as of March 31, 2002.
Therefore, Dr. Gross will be able, among other things, to elect directors,
change our investment policies, and withdraw our election to operate as a BDC.

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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, 2001.

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 our operations in the normal
course of our business, as of March 31, 2002, the Company was
not a party to any material pending legal proceedings.

Item 2. Changes in 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 and Reports on Form 8-K

(a)  List of 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.
|3.(i)(1)   |  | Certificate of Incorporation, dated July 6, 1999, as filed and
recorded with the Secretary of State of the State of Delaware on July 13, 1999.                                        
|3.(ii)(2)  |  | Certificate of Amendment to Certificate of Incorporation, dated
October 14, 1999, as filed and recorded with the Secretary of State of the
State of Delaware on October 15, 1999.     
|3.(iii)(3) |  | By-Laws of UTEK Corporation.                                                                                                                                                          
|4.1(4)     |  | Form of Representatives Warrant.                                                                                                                                                     
|4.2(5)     |  | Certificate of Merger of UTEK Corporation and UTEK LLC, dated
October 18, 1999, as filed and recorded with the Secretary of State of the
State of Delaware on October 25, 1999.       
|4.3(6)     |  | Specimen Common Stock Certificate.                                                                                                                                                    



|    |  |                                                                                                                                                                 
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | Incorporated by reference to Exhibit 3.1 to the Company's
registration statement on Form N-2A filed with the Commission on
October 2, 2000 (File No. 333-93913).
|(2) |  | Incorporated by reference to Exhibit 3.2 to the Company's
registration statement on Form N-2A filed with the Commission on
October 2, 2000 (File No. 333-93913).
|(3) |  | Incorporated by reference to Exhibit 3.3 to the Company's
registration statement on Form N-2A filed with the Commission on
October 2, 2000 (File No. 333-93913).
|(4) |  | Incorporated by reference to Exhibit 4.1 to the Company's
registration statement on Form N-2A filed with the Commission on
October 2, 2000 (File No. 333-93913).
|(5) |  | Incorporated by reference to Exhibit 4.2 to the Company's
registration statement on Form N-2A filed with the Commission on
October 2, 2000 (File No. 333-93913).

(b)  Reports on Form 8-K.

No reports on Form 8-K were filed during the quarter ended March 31, 2002.

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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                                                                              
|                  
|                   |  |                                                                                               
|Date: May 15, 2002 |  | /s/ Clifford M.
GrossClifford M. GrossChairman and Chief Executive Officer                    
|                  
|                   |  |                                                                                               
|Date: May 15,
2002 |  | /s/ Michael O.
SullivanMichael O. SullivanChief Financial Officer(Principal
Financial Officer)

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