##### Table of Contents



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, 2004 COMMISSION FILE NUMBER: 001-15941 UTEK CORPORATION  DELAWARE
(State or Jurisdiction of
Incorporation or Organization) 59-3603677
(IRS Employer
Identification No.) 202 S. Wheeler Street
Plant City, FL 33563
(Address of Principal Executive Offices) REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 754-4330    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 o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act). YES o NO x On May 2, 2004, there were 5,429,251 shares outstanding of the
Registrants common stock, $0.01 par value.       Page 1 of  33




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UTEK CORPORATION FORM 10-Q TABLE OF CONTENTS  
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2004 (unaudited) and December 31, 2003
    
    
    3Consolidated Statements of Operations  For the Three Months Ended March 31, 2004, and 2003 (unaudited)
    
    
    4Consolidated Statements of Cash Flows  For the Three Months Ended March 31, 2004 and 2003 (unaudited)
    
    
    5Consolidated Statements of Changes in Net Assets For the Three Months Ended March 31, 2004 and 2003 (unaudited)
    
    
    6Financial Highlights For the Three Months Ended March 31, 2004 and 2003 (unaudited)
    
    
    7Schedule of Investments as of March 31, 2004 (unaudited) and December 31, 2003
    
    
    8Notes to Consolidated Financial Statements (unaudited)Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    27Item 3. Defaults Upon Senior Securities.
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 5. Other Information
    
    
    27Item 6. Exhibits and Reports on Form 8-K
    
    
    27Signatures
    
    
    29ExhibitsEx-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CFO CertificationEx-32.1 Section 906 CEO CertificationEx-32.2 Section 906 CFO Certification
   
 Page 2 of  33




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##### Table of Contents



PART 1. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS 
 UTEK Corporation
Consolidated Balance Sheets March 31,
    
    December 31,2004
    
    2003(Unaudited)ASSETSInvestments in non-controlled affiliates
(cost $12,464,432 and $11,861,995 at March 31,
2004 and December 31, 2003, respectively)
    
    $
    20,838,914
    
    
    $
    7,745,354Cash and cash equivalents
    
    
    3,215,878
    
    
    
    3,704,327Certificates of deposit
    
    
    3,316,004Accounts receivable, net of allowance for bad debt
    
    
    102,482
    
    
    
    177,138Prepaid expenses and other assets
    
    
    214,876
    
    
    
    200,353Deferred tax asset
    
    
    
    
    
    
    67,075Fixed assets, net
    
    
    106,050
    
    
    
    82,946Goodwill
    
    
    540,189
    
    
    
    523,807Intangible assets
    
    
    44,903
    
    
    
    48,448TOTAL ASSETS
    
    
    28,379,296
    
    
    
    12,549,448LIABILITIESNotes payable
    
    
    
    
    
    
    847,890Accrued expenses
    
    
    117,033
    
    
    
    187,897Deferred revenue
    
    
    594,357
    
    
    
    361,291Deferred income taxes
    
    
    5,023,371
    
    
    
    TOTAL LIABILITIES
    
    
    5,734,761
    
    
    
    1,397,078NET ASSETS
    
    $
    22,644,535
    
    
    $
    11,152,370Commitments and ContingenciesComposition of net assets:Common stock, $.01 par value, 19,000,000 shares authorized;
5,329,251 shares issued and outstanding at March 31, 2004
and 4,790,550 shares issued and outstanding at December 31, 2003
    
    $
    53,293
    
    
    $
    47,906Common stock subscribed
    
    
    
    
    
    
    388,412Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued and outstanding
    
    
    
    
    
    
    Additional paid in capital
    
    
    14,372,964
    
    
    
    10,943,549Accumulated income:Accumulated net operating income
    
    
    3,025,166
    
    
    
    3,303,505Net realized loss on investments, net of income taxes
    
    
    (150,313
    )
    
    
    (1,064,996
    )Net unrealized appreciation (depreciation) of
investments, net of
deferred income taxes
    
    
    5,223,164
    
    
    
    (2,567,549
    )Foreign currency translation adjustment
    
    
    120,261
    
    
    
    101,543Net assets
    
    $
    22,644,535
    
    
    $
    11,152,370Net asset value per share
    
    $
    4.25
    
    
    $
    2.33
 See accompanying notes Page 3 of  33




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##### Table of Contents



UTEK Corporation
Consolidated Statements of Operations
(Unaudited) Three Months Ended
March 312004
    
    2003Income from operations:Sale of technology rights
    
    $
    
    
    
    $
    262,857Consulting fees
    
    
    412,289
    
    
    
    239,823Investment income (loss), net
    
    
    (2,190
    )
    
    
    1,591410,099
    
    
    
    504,271Expenses:Salaries and wages
    
    
    177,058
    
    
    
    177,312Professional fees
    
    
    88,149
    
    
    
    260,861Sales and marketing
    
    
    226,957
    
    
    
    91,464General and administrative
    
    
    358,104
    
    
    
    285,711850,268
    
    
    
    815,348Loss before income taxes
    
    
    (440,169
    )
    
    
    (311,077
    )Provision for income taxes (benefit)
    
    
    (161,830
    )
    
    
    292,397Net loss from operations
    
    
    (278,339
    )
    
    
    (603,474
    )Net realized and unrealized gains (losses):Net realized gain (loss) on investments, net of income tax expense
(benefit) of $551,861 and ($101,669) for 2004 and 2003, respectively
    
    
    914,683
    
    
    
    (168,511
    )Change in unrealized appreciation (depreciation) of
non-controlled affiliate investments, net of deferred tax expense (benefit) of
$4,700,410 and ($456,933) for 2004 and 2003, respectively
    
    
    7,790,713
    
    
    
    (3,019,455
    )Net increase (decrease) in net assets from operations
    
    $
    8,427,057
    
    
    $
    (3,791,440
    )Net increase (decrease) in net assets from operations per share:Basic
    
    $
    1.70
    
    
    $
    (.97
    )Diluted
    
    $
    1.60
    
    
    $
    (.97
    )Weighted average shares:Basic
    
    
    4,954,301
    
    
    
    3,925,672Diluted
    
    
    5,263,086
    
    
    
    3,925,672
 See accompanying notes Page 4 of  33




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##### Table of Contents



UTEK Corporation
Consolidated Statements of Cash Flows
(Unaudited) For the Three Months Ended March 312004
    
    2003Operating Activities:Net increase (decrease) in net assets from operations
    
    
    8,427,057
    
    
    $
    (3,791,440
    )Adjustments to reconcile net increase (decrease) in net assets
from operations to net cash provided by operationsChange in unrealized appreciation (depreciation) of investments
    
    
    (12,491,123
    )
    
    
    3,476,388Depreciation and amortization
    
    
    11,770
    
    
    
    7,490(Gain) loss on sale of investments
    
    
    (1,466,544
    )
    
    
    270,180Deferred income taxes
    
    
    5,090,446
    
    
    
    (245,589
    )Investment securities received from assignment of license
    
    
    
    
    
    
    (262,857
    )Services rendered in exchange for investment securities
    
    
    (146,889
    )
    
    
    (42,963
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    74,656
    
    
    
    76,776Prepaid expenses and other assets
    
    
    (44,903
    )
    
    
    43,137Deferred revenue
    
    
    (38,945
    )
    
    
    1,100Accrued expenses
    
    
    (70,864
    )
    
    
    96,879Net cash used in operating activities
    
    
    (655,339
    )
    
    
    (370,899
    )Investing Activities:Proceeds received on sale of investments
    
    
    1,496,051
    
    
    
    223,592Purchases of investments
    
    
    (3,529,048
    )Purchases of fixed assets
    
    
    (31,331
    )
    
    
    Net cash provided by (used by) investing activities
    
    
    (2,064,328
    )
    
    
    223,592Financing Activities:Net proceeds
from issuance of common stock (including the exercise of common stock
options)
    
    
    2,212,500
    
    
    
    Net cash provided by financing activities
    
    
    2,212,500
    
    
    
    Foreign currency translation adjustment
    
    
    18,718
    
    
    
    (18,574
    )Decrease in cash and cash equivalents
    
    
    (488,449
    )
    
    
    (165,881
    )Cash and cash equivalents at beginning of year
    
    
    3,704,237
    
    
    
    745,926Cash and cash equivalents at end of period
    
    $
    3,215,878
    
    
    $
    580,045Supplemental Disclosures of Non-Cash Investing Activities125,715 Shares of Common Stock Issued in Settlement of Note Payable
    
    $
    833,890
    
    
    $
    
 See accompanying notes Page 5 of  33




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##### Table of Contents



UTEK Corporation
Consolidated Statements of Changes in Net Assets
(Unaudited) Three Months Ended March 312004
    
    2003Changes in net assets from operations:Net loss from operations
    
    $
    (278,339
    )
    
    $
    (603,474
    )Net realized gain (loss) on sale of investments
    
    
    914,683
    
    
    
    (168,511
    )Change in
net unrealized appreciation (depreciation) of
investments, net of related deferred taxes
    
    
    7,790,713
    
    
    
    (3,019,455
    )Net increase (decrease) in net assets from operations
    
    
    8,427,057
    
    
    
    (3,791,440
    )Capital stock transactions:Proceeds from issuance of common stock (including the exercise of
common stock options)
    
    
    3,046,390
    
    
    
    Net increase in net assets from stock transactions
    
    
    3,046,390
    
    
    
    Foreign currency translation adjustment
    
    
    18,718
    
    
    
    (18,574
    )Net increase (decrease) in net assets
    
    
    11,492,165
    
    
    
    (3,810,014
    )Net assets at beginning of year
    
    
    11,152,370
    
    
    
    7,346,057Net assets at end of period
    
    $
    22,644,535
    
    
    $
    3,536,043
 See accompanying notes Page 6 of  33




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##### Table of Contents



UTEK Corporation
Financial Highlights
(Unaudited) Three Months Ended March 312004
    
    2003PER SHARE INFORMATION (1)Net asset value, beginning of period
    
    $
    2.33
    
    
    $
    1.87Net decrease from operations
    
    
    (.05
    )
    
    
    (0.15
    )Net change in realized gains (losses) and unrealized appreciation
(depreciation) on investments, after taxes
    
    
    1.38
    
    
    
    (0.81
    )Foreign currency translation adjustment
    
    
    0.01
    
    
    
    (0.01
    )Net increase from stock transactions
    
    
    0.58
    
    
    
    0.00Net asset value, end of period
    
    $
    4.25
    
    
    $
    .90Per share market value, end of period
    
    $
    15.59
    
    
    $
    5.70RATIOS/SUPPLEMENTAL DATANet assets, end of period
    
    $
    22,644,535
    
    
    $
    3,536,043Ratio of expenses to average net assets (2)
    
    
    5
    %
    
    
    15
    %Ratio of net loss to average net assets
    
    
    (1
    )%
    
    
    (11
    )%Diluted weighted average number of shares outstanding during the period
    
    
    5,263,086
    
    
    
    3,925,672
   (1)
    
    Calculated based on diluted weighted average number of shares
outstanding during the period.(2)
    
    Excluding income taxes See accompanying notes Page 7 of  33




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##### Table of Contents



UTEK CORPORATION
Schedule of Investments
March 31, 2004 OriginalDate of
    
    
    
    Original
    
    FairShares
    
    Acquisition
    
    
    
    Cost
    
    ValueCommon stock in non-controlled
affiliates92.0% of our net assets1,344,300
    
    
    
    1/99
    
    
    ClearImage, Inc., (formerly Image
Analysis, Inc.) privately held 0% of our
net assets; medical and hospital equipment
developer
    
    $
    1,349,775
    
    
    $
    900,000
    
    
    
    5/99
    
    
    Nubar,
Inc., privately held0%; developer
of construction materials
    
    
    126,000
    
    
    
    960,779
    
    
    
    6/99
    
    
    Clean
Water Technologies, Inc., publicly
traded over the counter0.9% of our net
assets; environmental services.
    
    
    568,006
    
    
    
    192,156150
    
    
    
    11/99
    
    
    Rosbon,
LLC, privately held.2% of our net
assets; real estate development
    
    
    90,705
    
    
    
    54,986136,093
    
    
    
    3/00
    
    
    Graphco
Holdings Corp., publicly traded
over the counter 0% of our net assets;
developer of e-commerce technologies
    
    
    959,606
    
    
    
    2,094,052
    
    
    
    6/00
    
    
    Advanced
Recycling Sciences, Inc.,
publicly traded over the counter 0% of
our net assets; tire recycling
methodologies
    
    
    1,970,952
    
    
    
    236,000
    
    
    
    3/01
    
    
    Lexon,
Inc., publicly traded over the
counter0% of our net assets; developer
of health care technology
    
    
    39,614
    
    
    
    4,221,165
    
    
    
    4/01
    
    
    Stealth
MediaLabs, Inc., publicly traded
over the counter  0% of our net assets;
software products
    
    
    1,708,000
    
    
    
    1,493,550
    
    
    
    9/01
    
    
    Prime
Pharmaceutical Corporation,
privately held0% of our net assets;
pharmaceutical developments in dermatology
    
    
    783,344
    
    
    
    1,000,000
    
    
    
    11/01
    
    

Primapharm
Funding Corporation, privately
held0% of our net assets; intellectual
property development
    
    
    413,617
    
    
    
    4,000
    
    
    
    11/01
    
    
    Peak Entertainment Holdings, Inc.
(formerly Palladium Communications, Inc.),
publicly traded over the counter.1% of
our net assets; telecom, educational
internet service
    
    
    12,028
    
    
    
    1,12047,615
    
    
    
    1/02
    
    
    Silver
Screen Studios, Inc. (formerly
Group Management Corporation), publicly
traded over the counter 0% of our net
assets; corporate management
    
    
    46,949
    
    
    
    4,054,745
    
    
    
    1/02
    
    
    Circle Group Holdings, Inc. (formerly
Circle Group Internet, Inc.), listed on
the American Stock Exchange, 82.5% of our
net assets; digital design and consulting
    
    
    904,212
    
    
    
    18,692,375633,750
    
    
    
    2/02
    
    
    Voice and
Wireless Corporation, publicly
traded over the counter, 0%; of our net
assets; internet/technology services and
products
    
    
    53,161
    
    
    
    48,000
    
    
    
    4/02
    
    
    Hydrogen
Technology Applications, Inc.,
privately held, 0% of our net assets;
developer of energy technology
    
    
    14,040
    
    
    
    388,500
    
    
    
    6/02
    
    

FullCircle
Registry, Inc., publicly traded
over the counter,0.5% of our net assets;
developer of emergency information
technology
    
    
    324,002
    
    
    
    120,43534,782
    
    
    
    1/03
    
    

Duraswitch
Industries, Inc., publicly
traded over the counter,0.3% of our net
assets; developer of electronic switch
technologies
    
    
    29,031
    
    
    
    57,390645,000
    
    
    
    3/03
    
    
    Sequiam
Corporation, publicly traded over
the counter, 1.3% of our net assets;
developer of biological authentication and
biometrics technologies
    
    
    185,726
    
    
    
    296,700595,637
    
    
    
    4/03
    
    
    Intra-Asia Entertainment Corp. (formerly
GloTech Industries, Inc.), publicly traded
over the counter,1.1% of our net assets;
developer of lighted technology devices
    
    
    1,553,521
    
    
    
    256,1241,284,000
    
    
    
    6/03
    
    
    E Med
Future, Inc., publicly traded over
the counter, 2.5% of our net assets;
manufacturer of needle destruction device
    
    
    685,309
    
    
    
    577,800545,000
    
    
    
    12/03
    
    
    Magic
Media Networks, Inc., publicly
traded over the counter,.5% of our net
assets; operator of digital display
monitor networks
    
    
    138,059
    
    
    
    114,450240,000
    
    
    
    12/03
    
    
    Assuretec
Holdings, Inc., privately held,.1%
of our net assets; security
solutions to automate, manage and
authenticate identification documents
    
    
    31,297
    
    
    
    32,400
 Page 8 of  33




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OriginalDate of
    
    
    
    Original
    
    FairShares
    
    Acquisition
    
    
    
    Cost
    
    Value30,000
    
    
    
    1/04
    
    

GeneThera,
Inc., publicly traded over
the counter,0.2% of our net
assets; molecular biotechnology products
    
    
    54,671
    
    
    
    52,800705,882
    
    
    
    2/04
    
    
    Zkid
Network Company, publicly traded over the
counter, 0.3% of our
net assets; developer of proprietary software
    
    
    78,142
    
    
    
    77,64738,585
    
    
    
    2/04
    
    
    Telkonet,
Inc., publicly traded over the
counter,0.5% of our net
assets; networking and internetworking products
    
    
    106,358
    
    
    
    107,266200,000
    
    
    
    3/04
    
    
    Swiss
Medica, Inc., publicly traded over the
counter, 0.2% of our
net assets; developer of bioscience products
    
    
    42,000
    
    
    
    42,000100,000
    
    
    
    3/04
    
    
    Health
Sciences Group, Inc., publicly traded
over the counter,.4% of our net assets;
nutraceutical, pharmaceutical, and cosmeceutical
products
    
    
    80,000
    
    
    
    80,000244,897
    
    
    
    12/03
    
    

eFoodSafety.com,
Inc., publicly traded over
the counter,.4% of our net assets; safety of
fruit, vegetables, poultry, beef and seafood
    
    
    83,265
    
    
    
    83,26535,560
    
    
    
    1/04
    
    
    Pure
Bioscience, publicly traded Nasdaq Small Cap.,
0.0% of our net
assets; developer of anti-microbial technology
    
    
    33,042
    
    
    
    TOTAL
INVESTMENTS92.0%
    
    $
    12,464,432
    
    
    $
    20,838,914Cash and
other assets, less liabilities8.0%
    
    
    
    
    
    
    1,805,621Net assets at March 31, 2004100%
    
    
    
    
    
    $
    22,644,535
 Notes to Schedule of Investments:  
    
    The above investments with the exception of Rosbon, LLC are non-income
producing. Equity investments that have not paid dividends within the
last twelve months are considered non-income producing.
    
    The value of all securities for which there is no readily available
market value is determined in good faith by the Board of Directors. In
making its determination, the Board of Directors has considered
valuation appraisals provided by an independent valuation service
provider. (See Notes 1 and 2 to the consolidated financial
statements).
    
    As of March 31, 2004, all of the securities that we own are subject to
legal restrictions on resale. As a result, our ability to sell or
otherwise transfer the securities we hold in our portfolio is limited.
    
    We own more than 10% of the outstanding common stock of Image
Analysis, Inc., Nubar, Inc., Clean Water Technologies, Inc., Rosbon
LLC, Stealth MediaLabs, Inc., Circle Group Holdings, Inc., and
Primapharm Funding Corporation. See accompanying notes Page 9 of  33




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##### Table of Contents



UTEK CORPORATION
Schedule of Investments
December 31, 2003 OriginalDate of
    
    
    
    Original
    
    FairShares
    
    Acquisition
    
    
    
    Cost
    
    ValueCommon stock in non-controlled affiliates69.5% of our net assets1,344,300
    
    
    
    1/99
    
    

ClearImage,
Inc., (formerly Image Analysis, Inc.) privately held 0% of
our net assets; medical and hospital equipment developer
    
    $
    1,349,775
    
    
    $
    900,000
    
    
    
    5/99
    
    
    Nubar,
Inc., privately held0%; developer of construction materials
    
    
    126,000
    
    
    
    960,779
    
    
    
    6/99
    
    
    Clean
Water Technologies, Inc., publicly traded over the counter1.0% of
our net assets; environmental services.
    
    
    568,006
    
    
    
    115,294150
    
    
    
    11/99
    
    
    Rosbon,
LLC, privately held.5% of our net assets; real estate
development
    
    
    90,705
    
    
    
    55,290136,093
    
    
    
    3/00
    
    
    Graphco
Holdings Corp., publicly traded over the counter 0% of our net
assets; developer of e-commerce technologies
    
    
    959,606
    
    
    
    2,094,052
    
    
    
    6/00
    
    
    Advanced
Recycling Sciences, Inc., publicly traded over the counter 0%
of our net assets; tire recycling methodologies
    
    
    1,970,952
    
    
    
    236,000
    
    
    
    3/01
    
    
    Lexon,
Inc., publicly traded over the counter0% of our net assets;
developer of health care technology
    
    
    39,614
    
    
    
    4,221,165
    
    
    
    4/01
    
    
    Stealth
MediaLabs, Inc., publicly traded over the counter   0% of our net
assets; software products
    
    
    1,708,000
    
    
    
    1,493,550
    
    
    
    9/01
    
    
    Prime
Pharmaceutical Corporation, privately held0% of our net assets;
pharmaceutical developments in dermatology
    
    
    783,344
    
    
    
    1,000,000
    
    
    
    11/01
    
    

Primapharm
Funding Corporation, privately held0% of our net assets;
intellectual property development
    
    
    413,617
    
    
    
    4,000
    
    
    
    11/01
    
    
    Peak Entertainment Holdings, Inc. (formerly Palladium Communications,
Inc.), publicly traded over the counter.1% of our net assets; telecom,
educational internet service
    
    
    12,028
    
    
    
    1,52047,615
    
    
    
    1/02
    
    
    Silver
Screen Studios, Inc. (formerly Group Management Corporation),
publicly traded over the counter 0% of our net assets; corporate
management
    
    
    46,949
    
    
    
    3,800,637
    
    
    
    1/02
    
    
    Circle
Group Holdings, Inc. (formerly Circle Group Internet, Inc.),
publicly traded over the counter,53.0% of our net assets; digital
design and consulting
    
    
    753,719
    
    
    
    5,908,898633,750
    
    
    
    2/02
    
    
    Voice and
Wireless Corporation, publicly traded over the counter, 0%;
of our net assets; internet/technology services and products
    
    
    53,161
    
    
    
    48,000
    
    
    
    4/02
    
    
    Hydrogen
Technology Applications, Inc., privately held, 0% of our net
assets; developer of energy technology
    
    
    14,040
    
    
    
    388,500
    
    
    
    6/02
    
    

FullCircle
Registry, Inc., publicly traded over the counter,0.1% of our
net assets; developer of emergency information technology
    
    
    324,002
    
    
    
    15,54034,782
    
    
    
    1/03
    
    

Duraswitch
Industries, Inc., publicly traded over the counter,0.3% of
our net assets; developer of electronic switch technologies
    
    
    29,031
    
    
    
    39,999645,000
    
    
    
    3/03
    
    
    Sequiam
Corporation, publicly traded over the counter, 1.4% of our net
assets; developer of biological authentication and biometrics
technologies
    
    
    181,887
    
    
    
    154,8003,198,571
    
    
    
    4/03
    
    
    GloTech
Industries, Inc., publicly traded over the counter, 5.2% of our
net assets; developer of lighted technology devices
    
    
    1,554,218
    
    
    
    575,7431,284,000
    
    
    
    6/03
    
    
    E Med
Future, Inc., publicly traded over the counter, 6.1% of our net
assets; manufacturer of needle destruction device
    
    
    685,591
    
    
    
    680,520545,000
    
    
    
    12/03
    
    
    Magic
Media Networks, Inc., publicly traded over the counter,1.5% of
our net assets; operator of digital display monitor networks
    
    
    168,950
    
    
    
    168,950240,000
    
    
    
    12/03
    
    
    Assuretec
Holdings, Inc., privately held,0.3% of our net assets;
security solutions to automate, manage and authenticate identification
documents
    
    
    28,800
    
    
    
    28,800TOTAL INVESTMENTS69.5%
    
    $
    11,861,995
    
    
    $
    7,745,354Cash and other assets, less liabilities30.5%
    
    
    
    
    
    
    3,407,016Net assets at December 31, 2003100%
    
    
    
    
    
    $
    11,152,370
 Page 10 of  33




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Notes to Schedule of Investments:  
    
    The above investments with the exception of Rosbon, LLC are non-income
producing. Equity investments that have not paid dividends within the
last twelve months are considered non-income producing.
    
    The value of all securities for which there is no readily available
market value is determined in good faith by the Board of Directors. In
making its determination, the Board of Directors has considered
valuation appraisals provided by an independent valuation service
provider. (See Notes 1 and 2 to the consolidated financial
statements).
    
    As of December 31, 2003, all of the securities that we own are subject
to legal restrictions on resale. As a result, our ability to sell or
otherwise transfer the securities we hold in our portfolio is limited.
    
    We own more than 10% of the outstanding common stock of Image
Analysis, Inc., Nubar, Inc., Clean Water Technologies, Inc., Rosbon
LLC, Stealth MediaLabs, Inc., Circle Group Holdings, Inc., GloTech
Industries, Inc. and Primapharm Funding Corporation. See accompanying notes Page 11 of  33




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UTEK Corporation
Notes to Consolidated Financial Statements
(Information as of March 31, 2004 and 2003 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, 2004 and 2003 and for 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, 2003. Operating results for
the three months ended March 31, 2004 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. In May 2002, UTEK Corporation acquired 100% of the
outstanding common stock of TechEx Acquisition Corporation (TechEx) in a
stock for stock transaction. TechEx owned the TechEx.com website. The
TechEx.com website, founded at Yale University, is used by many technology
transfer and research professionals to efficiently exchange biomedical
licensing opportunities and innovations available for partnering. The financial
position and results of operation of PAX Technology Transfer Ltd. and Techex
Acquisition Corporation have been consolidated into the financial position and
results of operation of the Company, since the dates of their respective
acquisition. In November 2003, UTEK Corporation acquired the UVentures.com website and
certain other intellectual property assets from UVentures, Inc., an innovative
Internet-based exchange primarily used for the marketing of physical science
technologies developed at universities and research organizations. As a BDC, we must be primarily engaged in the business of furnishing capital
and making available managerial assistance to companies that generally do not
have ready access to capital through conventional financial channels. Such
companies are termed portfolio companies. The Company invests in portfolio companies that 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 offers to
provide portfolio companies with managerial assistance primarily related to
technology transfer. Technology transfer is the process by which technologies
developed by universities or research laboratories are licensed to companies
for commercial use. The Company also may make additional investments to fund
continued research and development of the acquired technologies, but has not
done so to date. Usually we have executed or will execute our investments in portfolio companies
through the creation and capitalization of a wholly owned subsidiary company of
UTEK, which we refer to as an intellectual property acquisition company, to acquire
a new technology. We will then seek to sell such intellectual
property acquisition company to a company in a non-taxable exchange
of shares.  In connection with such transaction, we receive shares of
common stock in the company (which company then becomes a portfolio
company) in exchange
for the securities of our intellectual property acquisition company. In
addition to holding a license to a new technology, our intellectual property
acquisition company may also hold cash and other assets. The companies which we
engage in such transactions frequently have little or no prior operating
history. Page 12 of  33




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To establish on-going consulting engagements with its clients, the Company
has also developed a strategic alliance arrangement. UTEKs strategic alliances
are designed to help technology companies rapidly enhance their new product
pipeline through the acquisition of proprietary intellectual capital from
universities and federal laboratories. Some of our strategic alliance clients
engage us to license their existing proprietary technologies. Investments Pursuant to the requirements of the Investment Company Act of 1940 (the
1940 Act), our Board of Directors is responsible for determining, in good
faith, the fair value of our securities and assets for which market quotations
are not readily available. In making its determination, the Board of Directors
has considered valuation appraisals provided by an independent valuation
service provider. With respect to equity securities in privately-owned
companies, each investment is valued using industry valuation benchmarks, and
then the value is assigned a discount reflecting the illiquid nature of the
investment as well as our minority, non-control position. When an external
event such as a purchase transaction, public offering, or subsequent equity
sale occurs, the pricing indicated by the external event is used to corroborate
our private equity valuation. Equity securities in public companies that carry
certain restrictions on resale are generally valued at a discount from the
market value of the securities as quoted on a national securities exchange
or national securities association. In addition restricted and unrestricted
publicly traded stocks may also be valued at further discounts due to the size
of our investment or market liquidity concerns. The Board of Directors bases its determination upon, among other things,
applicable quantitative and qualitative factors. These factors may include,
but are not limited to, type of securities, nature of business, marketability,
market price of unrestricted securities of the same issue (if any), comparative
valuation of securities of publicly-traded companies in the same or similar
industries, current financial conditions and operating results, sales and
earnings growth, operating revenues, competitive conditions and current and
prospective conditions in the overall stock market. Without a readily available market value, the value of our portfolio of
equity securities may differ significantly from the values that would be placed
on the portfolio if there existed a ready market for such equity securities.
All equity securities owned at March 31, 2004 and December 31, 2003, (92.0% and
69.5% of net assets, respectively) are stated at fair value as determined by
the Board of Directors, in the absence of readily available fair values. The
Company uses the first-in, first-out (FIFO) method of accounting for sales of
its investments. Revenue Recognition Sale Of Technology Rights The Company recognizes revenue from the sale of technology rights upon the
exchange of the shares of our intellectual property acquisition
companies with other companies (which companies then become our portfolio companies). The Company records
revenue, based on the fair value as determined by the Board of Directors, of
the consideration received. In most cases, the consideration received for the
rights is unregistered shares of common stock of the portfolio company. The
common stock received is recorded as an investment at fair value as determined
by the Board of Directors. Consulting and Other Services In addition to technology transfer transactions, we offer the strategic
alliance consulting services. A method of technology transfer already being
used by PAX Technology Transfer Ltd., strategic alliance services are performed
pursuant to service agreements (usually one year in length) in which UTEK
provides consulting services by identifying and evaluating technology
acquisition opportunities in exchange for unregistered shares of the company,
or cash. These agreements are cancelable at any time. Revenues from strategic alliance agreements in which unregistered shares
of common stock are received before they are earned are deferred and recognized
over the term of each agreement. For strategic alliance agreements in which the
stock is received ratably over the agreement, revenue is recognized as earned.
The common stock received as payment is recorded as an investment at fair value
as determined by the Board of Directors. In some cases the Company is paid a
fee in connection with a technology transfer transaction. In these instances,
revenue is recognized upon consummation of the transaction. The Companys consolidated subsidiary, PAX Technology Transfer, Ltd.,
derives its revenue primarily from consulting contracts with third parties.
Revenue from consulting contracts is recognized ratably over the term of the
contract, typically ninety days. These contracts are generally paid in the form
of cash. Revenue from the sale of subscriptions to the TechEx.com and UVentures.com
websites generally is received in the form of cash and initially is deferred
and subsequently recognized ratably over the term of the subscription. Page 13 of  33




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Foreign currency translation The Company translates the assets and liabilities of its non-U.S.
functional currency subsidiary into dollars at the current rates of exchange in
effect at the end of each reporting period. Revenues and expenses are
translated using rates that approximate those in effect during the period.
Translation adjustments are included in the Consolidated Balance Sheets under
the caption Foreign currency translation adjustment. Stock-Based Compensation At March 31, 2004, the Company had the following two stock-based equity
compensation plans: The UTEK Corporation Stock Option Plan and 2000
Non-Qualified Stock Option Plan of UTEK Corporation. The Company accounts for
these plans and related grants thereunder using the intrinsic value method
prescribed in APB Opinion No. 25, Accounting for Stock
Issued to Employees.
No stock-based employee compensation cost is reflected in net increase
(decrease) in net assets from operations, as all of the options granted under
those plans had an exercise price equal to the market value of the underlying
common stock on the date of grant. The following table illustrates the effect
of the net increase (decrease) in net assets from operations and the net
increase (decrease) in net assets from operations per share if the Company had
applied the fair value recognition provisions of SFAS 123, Accounting for
Stock-based Compensation to the stock-based employee awards. The pro forma net increase (decrease) in net assets from operations and basic
and diluted earnings per share for the quarters ended March 31, 2004 and 2003
would have been as follows: Three months endedMarch 31, 2004
    
    March 31, 2003Net increase (decrease) in net assets from operations:As reported
    
    $
    8,427,057
    
    
    $
    (3,791,440
    )Deduct: Total stock-based employee compensation expense
determined under fair value based
method for all awards, net of related tax effects
    
    
    (198,172
    )
    
    
    (25,013
    )Pro forma
    
    $
    8,228,885
    
    
    $
    (3,816,453
    )Net increase (decrease) in net assets from operations per share  Basic:As reported
    
    $
    1.70
    
    
    $
    (.97
    )Pro forma
    
    $
    1.66
    
    
    $
    (.99
    )Net increase (decrease) in net assets from operations per share  Diluted:As reported
    
    $
    1.60
    
    
    $
    (.97
    )Pro forma
    
    $
    1.56
    
    
    $
    (.99
    )
 During the quarter ended March 31, 2004, there were no options granted. 2. Investments Equity securities at March 31, 2004 and December 31, 2003 (92.0 % and
69.5% of net assets, respectively) were valued at fair value as determined by
the Board of Directors, with the assistance of appraisals provided by an
independent valuation service provider, in the absence of readily available
market values. The values assigned to these securities are based upon available
information and may not reflect amounts that could be realized if the Company
found it necessary to immediately sell such securities, or amounts that
ultimately may be realized. Accordingly, the fair values included in the
accompanying schedule of investments may differ from the values that would have
been used had a ready market existed for these securities and such differences
could be significant. As of March 31, 2004 and 2003, the Company had established three and four
intellectual property acquisition companies, respectively, which had $-0- net
assets. Page 14 of  33




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On March 4, 2003, Peak Entertainment Holdings, Inc. (formerly Palladium
Communications, Inc.) completed a 100 for 1 reverse split, which reduced the
number of shares the Company holds to 4,000 from 400,000 shares. On March 18, 2003, the Company received 160,000 unregistered shares of
common stock from Sequiam Corporation in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 125,778 shares. On March 26, 2003, the Company received 35,294 unregistered shares of
common stock from Graphco Technologies, Inc. in a strategic alliance agreement.
The Company has recognized consulting fees to date relating to 26,953 shares. On March 26, 2003, the Company received 821,429 unregistered shares of
common stock from Circle Group Holdings, Inc. in connection with an assignment
of a technology license. On April 11, 2003, the Company received 68,571 unregistered shares of
common stock from GloTech Industries, Inc., (now known as Intra-Asia
Entertainment Corp.) in a strategic alliance agreement. The Company has
recognized consulting fees to date relating to 49,141 shares. On June 17, 2003, the Company received 34,000 unregistered shares of
common stock from E Med Future, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 18,228 shares. On June 23, 2003, the Company sold its Advanced Illumination Technologies,
Inc. intellectual property acquisition company to GloTech Industries, Inc.,
(now known as Intra-Asia Entertainment Corp.) for 1,000,000 unregistered
shares of GloTech Industries, Inc.s common stock in a non-taxable exchange. On July 23, 2003, the Company received 130,208 unregistered shares of
common stock from Circle Group Holdings, Inc. in connection with an assignment
of a technology license. On August 28, 2003, the Company sold its Sports Technologies, Inc.
intellectual property acquisition company to GloTech Industries, Inc., (now
known as Intra-Asia Entertainment Corp.) for 2,130,000 unregistered shares of
GloTech Industries, Inc.s common stock in a non-taxable exchange. On September 10, 2003, the Company sold its Fingerprint Detection
Technologies, Inc. intellectual property acquisition company to Sequiam
Corporation for 485,000 unregistered shares of Sequiam Corporations common
stock in a non-taxable exchange. On December 3, 2003, the Company received 545,000 unregistered shares of
common stock from Magic Media Networks, Inc. in a six-month strategic alliance
agreement. The Company has recognized consulting fees to date relating to
82,043 shares. On December 10, 2003, the Company received 240,000 unregistered shares of
common stock from AssureTec Holdings, Inc. in a strategic alliance agreement.
The Company has recognized consulting fees to date relating to 13,548 shares On December 30, 2003, the Company sold its Medical Safety Technologies,
Inc. intellectual property acquisition company to E Med Future, Inc. for
1,250,000 unregistered shares of E Med Future, Inc.s common stock in a
non-taxable exchange. On January 26, 2004, the Company received 30,000 unregistered shares of
common stock from GeneThera, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 6,694 shares. On February 18, 2004, the Company received 38,585 unregistered shares of
common stock from Telkonet, Inc. in a strategic alliance agreement. The Company
has recognized consulting fees to date relating to 4,545 shares. On February 17, 2004, the Company received 705,882 unregistered shares of
common stock from ZKid Network Company in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 105,476 shares. On March 12, 2004, the Company received 100,000 unregistered shares of
common stock from Health Sciences Group, Inc. in a strategic alliance
agreement. The Company has recognized consulting fees to date relating to 8,333
shares. On March 29, 2004, the Company received 200,000 unregistered shares of
common stock from Swiss Medica, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 3,836 shares. Page 15 of  33




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On March 30, 2004, the Company received 244,897 unregistered shares of
common stock from eFoodSafety.com, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 7,037 shares. 3. Commitments and Contingencies From time to time, some of the Companys portfolio companies may receive
correspondence or other notices of alleged breach of the license agreement.
Some of these correspondences and notices provide for a period of time in which
to cure the alleged breach. The failure of the portfolio companies to cure the
alleged breach may have a material adverse impact on the Companys results of
operations and financial position. Effective September 1, 1999, the Company entered into a five year
employment agreement with its CEO providing for an annual base salary of
$150,000 for his services. 4. Valuations The Board of Directors bases its determination of fair value upon, among
other things, applicable quantitative and qualitative factors. These factors
may include, but are not limited to, type of securities, nature of business,
marketability, market price of unrestricted securities of the same issue (if
any), comparative valuation of securities of publicly-traded companies in the
same or similar industries, current financial conditions and operating results,
sales and earnings growth, operating revenues, competitive conditions and
current and prospective conditions in the overall stock market. 5. Subsequent Events In April 2004, the Company completed a private placement transaction with
accredited investors of 100,000 shares of its common stock at $10.00 per share.
The purchasers of the shares of common stock agreed not to sell or otherwise
transfer the shares for a period of one-year after the completion of the
private placement transaction. The net proceeds after investment banking fees
of $100,000 was $900,000. Page 16 of  33




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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. Critical accounting policies are those that are both important to
the presentation of our financial condition and results of operations and
require managements most difficult, complex, or subjective judgments. Our
most critical accounting policy relates to the valuation of our investments. Pursuant to the requirements of the Investment Company Act of 1940 (the
1940 Act), our Board of Directors is responsible for determining in good
faith the fair value of our investments for which market quotations are not
readily available. Although the securities of many of our portfolio companies
are quoted on the OTC Bulletin Board or listed on the American Stock
Exchange, our Board of Directors is required to
determine the fair value of such securities if the validity of the market
quotations appears to be questionable, or if the number of quotations is such
as to indicate that there is a thin or illiquid market in the security. We determine fair value to be the amount for which an investment could be
exchanged in an orderly disposition over a reasonable period of time between
willing parties other than in a forced or liquidation sale. Our valuation
policy considers the fact that no ready market exists for substantially all of
the securities in which we invest. Our valuation policy is intended to provide
a consistent basis for determining the fair value of the portfolio. We will
record unrealized depreciation on investments when we believe that an
investment has become impaired, including where realization of an equity
security is doubtful. We will record unrealized appreciation if we believe
that the underlying portfolio company has appreciated in value and, therefore,
our equity security has also appreciated in value. Our equity interests in portfolio companies for which there is no liquid
public market are valued using industry valuation benchmarks, and then the
value is assigned a discount reflecting the illiquid nature of the investment
as well as our minority, non-control position. When an external event such as
a purchase transaction, public offering, or subsequent equity sale occurs, the
pricing indicated by the external event is used to corroborate our valuation.
The determined values are generally discounted to account for restrictions on
resale and minority ownership positions. The value of our equity interests in public companies for which market
quotations are readily available is based on the public market price on
the balance sheet date. Securities that carry certain restrictions on
resale are typically valued at a discount from the public market value of the security. General Our primary investment objective is to increase our net assets by
exchanging stock in new companies that we form to acquire intellectual
property, which we refer to as an intellectual property
acquisition company,
for cash and other assets upon the completion of technology transfer
transactions. We seek to achieve our investment objective by creating
intellectual property acquisition companies to identify, license and market new
technologies invented primarily by employees of universities and federal
research laboratories. We intend to sell our intellectual property acquisition
companies principally to privately owned and publicly traded companies (which
we refer to as portfolio companies or our investments) in tax-free stock
for stock Page 17 of  33




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exchanges. It is our plan that shares of those privately owned and
publicly traded companies received in those exchanges will, in the course of
our business, be sold for cash or other assets to permit us to acquire
additional technologies and to fund our operations. We seek to sell our
intellectual property acquisition companies into publicly traded portfolio
companies whenever possible, as this provides us with the potential for added
liquidity. To facilitate establishing on-going consulting engagements with our clients, we
have developed a strategic alliance process. Our strategic alliances are
designed to help technology companies enhance their new product pipeline
through the acquisition of proprietary intellectual capital primarily from
universities and federal laboratories. We normally receive unregistered shares
of common stock from our clients as payment for the services we render under
our strategic alliance consulting engagements. Whenever possible, we will seek
to receive cash payments as compensation for our services. Our expenses include salaries and wages, professional fees, sales and
marketing costs as well as general and administrative costs. Sales and
marketing costs include license and sponsored research fees, as well as
advertising, commissions, travel and other expenses that vary with revenues.
General and administrative costs include rent, depreciation, office, investor
relations and other overhead costs. Financial Condition The Companys total assets were $28,379,296 and its net assets were
$22,644,535 at March 31, 2004, compared to $12,549,448 and $11,152,370 at
December 31, 2003, respectively. Net asset value per share (NAV) was $4.25 at March 31, 2004 and $2.33 at
December 31, 2003. Net assets increased by $11,492,165 for the three months
ended March 31, 2004 and decreased by $3,810,014 for the three months ended
March 31, 2003. The net increase in our total assets, net assets and net asset value
during the three months ended March 31, 2004 was primarily attributable to:  
    
    An unrealized appreciation on investments of approximately $7.8 million.  
    
    Cash generated from the sale of our investments of approximately $1.5 million.  
    
    The use of approximately $655,000 in cash to fund our operations.  
    
    Cash generated from the issuance of common stock in private placement
transactions and upon the exercise of stock options of approximately
$2.2 million. The net decrease in our total assets, net assets and net asset value
during the three months ended March 31, 2003 was primarily attributable to:  
    
    Completion of one technology transfer transaction valued at
approximately $263,000 and nine strategic alliance agreements and other
consulting agreements with earned revenue of approximately $240,000.  
    
    An unrealized depreciation of approximately $3 million in the value of the Companys investments.  
    
    A loss on sale of approximately $169,000 as a result of sales of the Companys investments of $224,000  
    
    The use of approximately $371,000 in cash to fund the Companys operations. The Companys common shares outstanding as of March 31, 2004 were
5,329,251, compared to 4,790,550 at December 31, 2003. The number of our
outstanding common shares increased as a result of the completion of private
placement transactions as well as the issuance of common shares upon the
exercise of employee stock options that were exercised during the quarter ended
March 31, 2004. The Companys financial condition is dependent on a number of factors
including the ability to effectuate technology transfer transactions and the
performance of the equity securities 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, 2004, $20,751,258 or 99.5% of our investments consisted of
equity securities at fair value in companies whose securities were listed on
the American Stock Exchange or quoted on the OTC Bulletin Board and $87,386 or
..5% of our investments consisted of equity securities at fair value in private
companies. Page 18 of  33




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At December 31, 2003, $7,661,264 or 99% of our investments consisted of
equity securities at fair value in companies whose securities were quoted on
the OTC Bulletin Board and $84,090 or 1% of our investments consisted of equity
securities at fair value in private companies. The net increase in the value of publicly traded securities from
$7,745,354 to $20,838,914 in the three months ended March 31, 2004 is primarily
due to the following events:  
    
    The Company exercised warrants to purchased 500,000 shares of common
stock of Circle Group Holdings, Inc. for $180,000 with a fair value of
$2,125,000.  
    
    The Company entered into three new strategic alliance agreements that
generated $443,000 in value.  
    
    The Company sold 245,892 of its shares in Circle Group Holdings, Inc.
for $1,496,051 with a fair value of $346,707.  
    
    The Company experienced an overall increase in the value of its
public company securities. This increase is primarily attributable to an
increase in the value of Circle Group Holdings, Inc. of approximately
$11,300,000. The Companys other investments experienced an additional
net increase in their fair value of approximately $134,000. The
Companys investments can decrease due to factors that are specific to
these investments (inability to obtain additional capital, inability to
execute their business model, termination of their technology licenses,
etc.) or to general marketplace factors. A summary of the Companys investment portfolio is as follows: March 31, 2004
    
    December 31, 2003(Unaudited)Investments, at cost
    
    $
    12,464,432
    
    
    $
    11,861,995Unrealized appreciation (depreciation), before income taxes
    
    
    8,374,482
    
    
    
    (4,116,641
    )Investments, at fair value
    
    $
    20,838,914
    
    
    $
    7,745,354
 Results of Operations The principal measure of our financial performance is the Net increase in
net assets from operations which is the sum of three elements. The first
element is Net income from operations, which is the difference between our
income from technology transfer transactions, consulting fees, interest income,
dividends, fees and other income and our operating expenses, net of applicable
income tax provision. The second element is Net realized gain (loss) on
investments, which is the difference between the proceeds received from
dispositions of portfolio securities and their stated cost, net of applicable
income tax provision. The third element, Increase (decrease) in unrealized
appreciation on investments, is the net change in the fair value of our
investment portfolio, net of increase (decrease) in deferred income taxes that
would become payable if the unrealized appreciation were realized through the
sale or other disposition of the investment portfolio. Three months ended March 31, 2004 compared to the three months ended March 31,
2003. Income from operations. Income from operations decreased 19% to $410,099
for the three months ended March 31, 2004 from $504,271 for the three months
ended March 31, 2003. Approximately 36 % and 59% of our income from operations
(revenue) was received in the form of equity securities for the three months
ended March 31, 2004. The decrease in income from operations resulted from not
completing a technology transfer transaction during the period ended March 31,
2004, as compared to one technology transfer transaction completed during the
quarter ended March 31, 2003. In the three months ended March 31, 2004, we
rendered services in connection with eleven strategic alliance agreements (six
of which began in the three months ended March 31, 2004) valued at $146,889, as
compared to seven strategic alliance agreements (three of which began during the
quarter ended March 31, 2003) in the three months ended March
31, 2003. Other services including income from Pax
Technology Transfer, Ltd. and subscription income from the two websites owned
by UTEK comprise the balance of consulting fees. Our Board of Directors
determines the fair value of the shares we receive in the absence of readily
determinable market values. In making its determination, the Board of
Directors has considered valuation appraisals provided by an independent
valuation service provider. Expenses.Total operating expenses for the three months ended March 31,
2004 were $850,268, consisting of salaries and wages of $177,058, professional
fees of $88,149, sales and marketing expenses of $226,957, and general and
administrative expenses of $358,104. These expenses compared to the $815,348
reported for the three months ended March 31, 2003, consisting of salaries and
wages of $177,312, professional fees of $260,861, sales and marketing expenses
of $91,464, and general and Page 19 of  33




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administrative expenses of $285,711. The 4% increase in total operating
expenses was due to the increased costs of marketing our business, an increase
in the number of our sales personnel and investor relations services provided
by a third party vendor. The 148% increase in sales and marketing expenses was
due to an increase in the number of our sales personnel, commissions to outside
salesman and an extended marketing effort at various conferences in order to
increase the number of potential strategic alliance customers. The 66% decrease
in professional fees is largely due to the costs associated with a specific
project in the first quarter of 2003. The 25% increase in general and
administrative costs is largely due to an interest expense on our loan and an
increase in the number of temporary staff. We repaid the loan in January 2004. Income from operations can vary substantially on a quarterly basis due to
the small number and wide range of value of the transactions. Therefore,
quarterly income from operations should not be annualized to predict expected
annual results. Net Realized Gains (Losses) Net realized gains on investments net of income tax effect amounted to
$914,683 for the three months ended March 31, 2004 and were related to sales as
follows: Number of
    
    RealizedCompany Name
    
    Shares
    
    GainCircle Group Holdings, Inc.
    
    
    245,892
    
    
    $
    914,683Total
    
    
    
    
    
    $
    914,683
 Net realized losses on investments net of income tax effect amounted to
$168,511 for the three months ended March 31, 2003 and were related to sales as
follows: Number of
    
    RealizedCompany Name
    
    Shares
    
    LossAdvanced Recycling Sciences, Inc.
    
    
    9,000
    
    
    $
    (3,556
    )Centrex, Inc.
    
    
    1,343,400
    
    
    
    (160,284
    )Sense Holdings, Inc.
    
    
    166,000
    
    
    
    (4,671
    )Total
    
    
    
    
    
    $
    (168,511
    )
 On a quarterly basis, net realized gains and losses can vary
substantially, due to a variety of factors. Therefore, quarterly net realized
gains and losses should not be annualized to predict expected annual results,
and may not be indicative of future performance. Changes in Unrealized Appreciation or Depreciation. We determine the value of each investment in our portfolio on a quarterly
basis, and changes in value result in unrealized appreciation or depreciation
being recognized. At March 31, 2004, approximately 91.8% of our net assets
represented investments recorded at fair value. Value, as defined in Section
2(a)(41) of the 1940 Act, is (i) the market price for those securities for
which a market quotation is readily available and (ii) for all other securities
and assets, fair value is as determined in good faith by the board of
directors. Although many of the securities we hold in our portfolio are quoted
on the OTC Bulletin Board or listed on the American Stock Exchange, our Board
of Directors is required to fair value price such securities if the validity of
the market quotations appears to be questionable, or if the number of
quotations is such as to indicate that there is a thin market in the security.
Since there is typically no readily determinable market value for the
investments in our portfolio, we value substantially all of our investments at
fair value as determined in good faith by the Board of Directors. In making its
determination, our Board of Directors may consider valuation appraisals
provided by independent valuation service providers. Because of the inherent
uncertainty of determining the fair value of investments that do not have a
readily available market value, the fair value of our investments determined in
good faith by the Board of Directors may differ significantly from the values
that would have been used had a ready market existed for the investments, and
the differences could be material. There is no single standard for determining fair value in good faith. As
a result, determining fair value requires that judgment be applied to the
specific facts and circumstances of each portfolio investment while employing a
consistently applied valuation process for the types of investments we make. We
will record unrealized depreciation on investments when we believe that an
investment has become impaired, including where realization of an equity
security is doubtful. Conversely, we Page 20 of  33




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will record unrealized appreciation if we have an indication that the
underlying portfolio company has appreciated in value and, therefore, our
equity security has also appreciated in value, where appropriate. Our
equity interests in portfolio companies for which their is no liquid
public market are valued using
industry valuation benchmarks, and then the value is assigned a discount
reflecting the illiquid nature of the investment as well as our minority,
non-control position. When an external event such as a purchase transaction,
public offering, or subsequent equity sale occurs, the pricing indicated by the
external event is used to corroborate our private equity valuation.
The determined values are generally discounted to account for
restrictions on resale and minority ownership positions. The
value of our equity interests in public companies for which market
quotations are readily available is based on the public market price.
Securities that carry certain restrictions on resale are typically
valued at a discount from the public market value of the security. 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. We have retained Bolten Financial Consulting, Inc. to provide us with
quarterly valuations of our portfolio of equity securities. The net unrealized appreciation on our investments, net of taxes,
increased by $7,790,713 for the three months ended March 31, 2004, compared to
net unrealized depreciation of $3,019,455 on our investments for the three
months ended March 31, 2003. The net unrealized appreciation and depreciation
consisted of fluctuations in fair value resulting from the Board of Directors
valuation of the Companys assets for the three months ended March 31, 2004 and
2003, respectively. There was an increase in value in the three months ended
March 31, 2004 in our investments in Clean Water Technologies, Inc., Circle
Group Holdings, Inc., FullCircle Registry, Inc., Duraswitch Industries, Inc.,
Sequiam Corporation, Intra-Asia Entertainment Corp. (formerly Glo-Tech
Industries, Inc.) and AssureTec Holdings. Inc. However, this was offset
slightly by a decline in value related to our investments in Rosbon, Inc., Peak
Entertainment Holdings, Inc., E Med Future, Inc. and Magic Media Networks, Inc. The Companys most significant portfolio investment is in Circle Group
Holdings, Inc., which represented a substantial amount of the increase in
unrealized appreciation in the quarter ended March 31, 2004. The following is a simplified summary of the methodology that we
used to determine the fair value of this investment. At March 31, 2004, the fair value of our investment in Circle Group was
approximately $18.7 million. The value of our investment in Circle Group
increased by approximately $11.3 million for the quarter ended March 31, 2004.
Approximately 19% of the increase in the fair value of our investment in
Circle Group resulted from warrants to purchase 500,000 shares of common stock
of Circle Group for $.36 per share. The remaining increase in the value of our
investment in Circle Group resulted from our Board of Directors determination
that our investment in Circle Group had appreciated by 209% because of a
significant increase in the market price of shares of common stock of
Circle Group. The Board of Directors determined
that market quotations for shares of common stock of Circle Group on the
American Stock Exchange are readily available. As a result, the Board of
Directors took the closing market price for a share of common stock of Circle
Group on the American Stock Exchange as of the balance sheet date and then
discounted such market price to take in account that the shares of common stock
of Circle Group that the Company holds are subject to legal restrictions on
resale. On a quarterly basis net unrealized appreciation and depreciation can vary
substantially, due to a variety of factors. Therefore, quarterly net unrealized
appreciation and depreciation should not be annualized to predict expected
annual results, and may not be indicative of future performance Liquidity and Capital Resources Net assets increased 103% to $22,644,535 at March 31, 2004 from
$11,152,370 at December 31, 2003. This increase was primarily attributable to a
the completion of private placement transactions totaling $2.2 million during
the three months as well as net realized gains of approximately $915,000, and
the $7.8 million increase in the net unrealized appreciation in the value of
our non-controlled affiliate investments. Our primary source of liquidity and capital for the three months ended
March 31, 2004 was from the sales of our investments totaling approximately
$1.5 million as well as cash received from private placement transactions
totaling $2.2 million. Page 21 of  33




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On March 31, 2004 and December 31, 2003, we had $3,215,878 and $3,704,327,
respectively, in cash and cash equivalents. In
March  2004, we completed the private placement of 107,986 shares of
our common stock at $7.00 per share. The purchasers of the shares of common
stock agreed not to sell or otherwise transfer the shares for a period of
one-year after the completion of the private placement transaction. The total
net proceeds received inclusive of the December receipts of $388,412 was
$680,312, net of investment banking fees of $75,590. In
March  2004, we completed an additional private placement of 300,000
shares of our common stock at $7.00 per share. The purchasers of the shares of
common stock agreed not to sell or otherwise transfer the shares for a period
of one-year after the completion of the private placement transaction. The net
proceeds after investment banking fees of $210,000 was $1,890,000. In
March  2004, we repaid the loan we obtained in April 2003, by issuing
125,715 shares of our common shares to the lender. The balance owed at the
time the shares were issued was $880,000. The shares were issued at an
effective value of $7.00 per share. Risk Factors Investing in the Company involves a number of significant risks relating
to its business and investment objective. As a result, there can be no
assurance that the Company will achieve its investment objective. In addition
to the risk factors described below, other factors that could cause actual
results to differ materially include:  
    
    changes in the economy;  
    
    risk associated with possible disruption in the Companys operations due to terrorism;  
    
    future regulatory actions and conditions in the Companys operating areas; and  
    
    other risks and uncertainties as may be detailed from time to time in the Companys
public announcements and SEC filings. Our financial results are largely dependent upon the performance of Circle
Group Holdings, Inc. Our financial results are largely dependent upon the performance of Circle
Group Holdings, Inc. As of March 31, 2004 the value of our investment in Circle
Group Holdings, Inc. was approximately $18.7 million or 82% of our net assets. Our quarterly and annual results could fluctuate significantly. Our quarterly and annual operating results could fluctuate significantly due to
a number of factors. These factors include the small number and range of values
of the transactions that are completed each quarter, fluctuations in the values
of our investments, the timing of the recognition of unrealized gains and
losses, the degree to which we encounter competition in our markets, the
volatility of the stock market and its impact on our unrealized gains and
losses, as well as other general economic conditions. As a result of these
factors, quarterly and annual results are not necessarily indicative of our
performance in future quarters and years. Our investment model is highly speculative in nature and our history of 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. Page 22 of  33




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We invest in development stage companies that our management believes can
benefit from our expertise in technology transfer. Development stage companies
are subject to all of the risks associated with new businesses. In addition,
our portfolio companies are also subject to the risks associated with research
and development of new technologies. These risks include the risk that new
technologies cannot be identified, developed or commercialized, may not work,
or become obsolete. Our portfolio companies must successfully acquire licenses
to new technologies, and in some cases further develop new technologies. We
cannot assure you that any of our investments in our portfolio companies will
be successful. Our portfolio companies will be competing with larger,
established companies, with greater access to, and resources for, further
development of these new technologies. We may lose our entire investment in any
or all of our portfolio companies. Our portfolio companies depend upon the research and development activities of
universities and research 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 their securities. Neither our portfolio companies nor we have any control over the pace of
technology development. There is a significant risk that a portfolio company
could acquire the rights to a technology that is currently or is subsequently
made obsolete by other technological developments. We cannot assure you that
any of our portfolio companies will successfully acquire, develop and transfer
any new technology. The patents on the technologies that our portfolio companies license may
infringe upon the rights of others and patent applications that the
universities have submitted may not be granted. Many of our portfolio companies rely upon patents to protect the technologies
that they license. If the patents on technologies that they license are found
to infringe upon the rights of others, or are held to be invalid, then the
licenses to such technologies will have little or no value to our portfolio
companies. In addition, if a patent licensed by a portfolio company is found to
infringe upon the rights of others, the portfolio company may be liable for
monetary damages. Our portfolio companies are dependent upon the universities
or government research facilities to file, secure and protect patents on
licensed technologies. In the event that a patent is challenged or violated,
our portfolio companies may not have the financial resources to defend the
patent either in the preliminary stages of litigation or in court. In addition,
if our portfolio companies acquire licenses to technologies with patents
pending, we cannot assure you that such patents will be granted. Technologies that have been developed with funding from the United States
government may have limits on their use, which could affect the value of the
technology to a portfolio company. Technologies developed with funds provided by the United States government have
restrictions regarding where they may be sold and have limits on exclusivity. A
portfolio company that acquires a technology developed with federal funding may
be limited as to where it can sell the technology. The technology may only be
allowed to be sold or manufactured within the United States. In addition, the
U.S. government has the right to use technologies that it has funded regardless
of whether the technology has been licensed to a third party. Such regulations
may limit the marketability of a technology and therefore reduce the value of
the technology to our portfolio companies. We may need to make additional cash investments in our portfolio companies to
provide them with capital to further develop licensed technologies. We may have to make additional cash investments in our portfolio companies to
protect our overall investment value in the particular company. We retain the
discretion to make any additional investments as our management determines. The
failure to make such additional investments may jeopardize the continued
viability of a portfolio, 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 Page 23 of  33




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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. 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 third-party investors 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 that 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 subject to restriction on
resale and we may not be able to sell the securities we hold for amounts equal
to their recorded value, if at all. Our portfolio companies are mainly private entities or thinly traded public
companies and we acquire securities in our portfolio company in private
transactions. As a result, all of the securities we hold in our portfolio
companies are subject to legal restrictions on resale. Furthermore, our ability
to sell the securities in our portfolio may be limited by, and subject to, the
lack of or limited nature of a trading market for such securities. Therefore,
we cannot assure you that we will be able to sell our portfolio company
securities for amounts equal to the values that we have ascribed to them or at
the time we desire to sell. We are dependent on sales transactions, structured as tax-free exchanges to
sell our intellectual property acquisition companies. A change in the Internal
Revenue Code affecting tax-free exchanges could reduce our ability to sell our
intellectual property acquisition companies. We do not anticipate selling any of our intellectual property acquisition
companies, except in connection with these type transactions. We anticipate
that most, if not all, of such merger transactions will be structured as
tax-free exchanges under Section 368 of the Internal Revenue Code. If Section
368 were to be amended so that we were no longer able to structure our merger
transactions as tax-free exchanges, we may not be able to sell our intellectual
property acquisition companies on commercially reasonable terms. If we are
unable to successfully sell our intellectual property acquisition companies in
a merger transaction, we may lose our investment. The agreements we have with universities do not guarantee that the universities
will grant licenses to us our intellectual property acquisition companies. The agreements that we have entered into with universities provide us with the
ability to evaluate the commercial potential for technologies at an early stage
of development. These agreements, however, do not provide us with any guarantee
that following our evaluation, 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 intellectual
property acquisition companies. We are dependent upon our managements ability to identify portfolio companies
to acquire our intellectual property acquisition companies. Our investment strategy is based upon selling our intellectual property
acquisition companies in stock for stock exchanges to portfolio companies that
wish to acquire the technologies owned by our intellectual property acquisition
companies but which they may be neither operating nor established. We do not
expect to sell any securities of our intellectual property acquisition
companies to the public. Therefore, if we fail to identify a portfolio company
to acquire an intellectual property acquisition companies, our entire
investment could be lost. We are dependent upon and have little or no control over the efforts of
portfolio companies to successfully commercialize the acquired technologies or
to retain the license to the technology. Page 24 of  33




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We receive common stock from the portfolio company based upon the mutually
agreed upon values of the intellectual property acquisition company, its
licensed technology and the portfolio company. We then intend to sell the
securities that we acquire in exchange for intellectual property acquisition
companies at some time in the future. Therefore, our ability to profit from an
investment is ultimately dependent upon the price we receive for the shares of
the portfolio company. In most cases, the companies that acquire our
intellectual property acquisition companies will be dependent upon successfully
commercializing the technologies they acquire. We do not have control over the
portfolio companies that acquire our intellectual property acquisition
companies. These portfolio companies may face intense competition, including
competition from companies with greater financial resources, more extensive
research and development, manufacturing, marketing and service capabilities and
a greater number of qualified and experienced managerial and technical
personnel. They may need additional financing which they are unable to secure
and we are unable or unwilling to provide or they may be subject to adverse
developments unrelated to the technologies they acquire. They may lose the
rights granted to them for the technology for failure to comply with the
license agreement. We cannot assure you that any of the portfolio companies
will be successful or that we will be able to sell the securities we receive at
a profit or for sufficient amounts to even recover our initial investment in
the portfolio companies or that our portfolio companies will not take actions
that could be detrimental to us. Our investments in our portfolio companies may be concentrated in one or more
industries and if these industries should decline or fail to develop as
expected our investments will be lost. Our investments in our portfolio companies may be concentrated in one or more
industries. This concentration will mean that our investments will be
particularly dependent on the development and performance of those industries.
Accordingly, our investments may not benefit from any advantages, which might
be obtained with greater diversification of the industries in which our
portfolio companies operate. If those industries should decline or fail to
develop as expected, our investments in our portfolio companies in those
industries will be subject to loss. All of our portfolio investments are recorded at fair value as determined in
good faith by our Board of Directors and, as a result, there is uncertainty
regarding the value of our portfolio investments. At March 31, 2004 and December 31, 2003, respectively, investments amounting to
$20,838,914 or 92.0% of net assets and $7,745,354 or 69.5% of net assets, have
been valued at fair value as determined by our Board of Directors. Pursuant to
the requirements of the 1940 Act, the Board of Directors is responsible for
determining in good faith the fair value of our investments for which market
quotations are not readily available. Since there is typically no readily
available market value for the investments in our portfolio, our Board of
Directors determines in good faith the fair value of these investments pursuant
to a valuation policy and a consistently applied valuation process. There is no
single standard for determining fair value in good faith. As a result,
determining fair value requires that judgment be applied to the specific facts
and circumstances of each portfolio investment while employing a consistently
applied valuation process for the types of investments we make. If we were
required to sell any of such investments, there is no assurance that the fair
value, as determined by the Board of Directors, would be obtained. If we were
unable to obtain fair value for such investments, there would be an adverse
effect on our net asset value and on the price of our common stock. We adjust quarterly the valuation of our portfolio to reflect the Board of
Directors determination of the fair value of each investment in our portfolio.
Any changes in fair value are recorded in our statement of operations as
Change in unrealized appreciation (depreciation) of non-controlled affiliate
investments. Our business depends on key personnel. We rely on, and will continue to be substantially dependent upon, the continued
services of our management, principally our Chief Executive Officer and
Chairman, Clifford M. Gross. Our management team is responsible for the review
of potential investments by and the provision of advice to our portfolio
companies regarding the acquisition of technologies and additional research and
development. We also depend upon our managements key contacts with
universities to maintain our access to new technologies, and its relationships
with companies in the private sector in order to effectuate the sale of our
intellectual property acquisition company. Any transactions we engage in with affiliates may involve conflicts of
interest. The 1940 Act restricts transactions between us 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 Page 25 of  33




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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 at arms-length
negotiations. We have a limited amount of funds available for investment in either portfolio
or intellectual property acquisition companies and, as a result, our
investments will lack diversification. Based on the amount of our existing available funds, it is unlikely that we
will be able to commit our funds to investments in, and the acquisition of,
securities of a large number of companies. We intend to continue to operate as
a non-diversified investment company within the meaning of the 1940 Act.
Prospective investors should understand that our current investments are not,
and in the future may not be, substantially diversified. We will not be able to
achieve the same level of diversification as larger entities engaged in similar
venture capital activities. Therefore, our assets may be subject to greater
risk of loss than if they were more widely diversified, because the failure of
one or more of our limited number of investments would have a material adverse
effect on our financial condition and the price of our common stock. If our portfolio companies fail to comply with the requirements of the forum in
which their securities are quoted or the trading market on which their
securities are listed, the liquidity and prices of our investments would be
materially adversely affected. At March 31, 2004, $20,838,914 or 92.0% of our total assets consisted of
investments at fair value in companies whose securities are quoted on the OTC
Bulletin Board or listing on the American Stock Exchange. In order for the
securities of our portfolio companies to be eligible for continued quotation on
the OTC Bulletin Board or the American Stock Exchange, our portfolio companies
must remain in compliance with certain listing standards. Among other things,
these standards require that our portfolio companies remain current in their
filings with the SEC and comply with certain of the provisions of the
Sarbanes-Oxley Act of 2002. If our portfolio companies are no longer in
compliance with these requirements, there would be no forum or market for the
quotation or listing of the securities of our portfolio companies. Without such
a forum or market, the liquidity and prices of our investments would be
materially adversely affected. We cannot give any assurance that our portfolio
companies will remain in compliance with the requirements to be quoted on the
OTC Bulletin Board or listed on the American Stock Exchange. We are subject to government regulations because of our status as a business
development company. We have elected to be treated as a BDC under the 1940 Act. The 1940 Act imposes
numerous restrictions on our activities, including restrictions on the nature
of our investments and transactions with affiliates. Any change in the law or
regulations that govern our business could have a material impact on us or our
operations. Laws and regulations may be changed from time to time, and the
interpretations of the relevant laws and regulations also are subject to
change. One of our current stockholders has significant influence over our management
and affairs. Clifford M. Gross, our Chief Executive Officer and Chairman, beneficially owns
approximately 37% of our common stock as of March 31, 2004. Therefore Dr. Gross
may be able to exert influence over our management and policies. Dr. Gross may
acquire additional equity in the future. The concentration of ownership may
also have the effect of delaying, preventing or deterring a change of control
of our company, could deprive our shareholders of an opportunity to receive a
premium for their common stock as part of the sale of our company and might
ultimately affect the market price of our common stock. 
 ITEM 3. Qualitative and Quantitative Disclosures About Market Risks There has been no material change in the qualitative and quantitative
disclosures about market risk since December 31, 2003. 
 ITEM 4. CONTROLS AND PROCEDURES  Disclosure Controls and ProceduresAs of the end of the period covered by this quarterly report
on Form 10-Q,
the Companys principal executive officer and principal financial officer
conducted an evaluation of the effectiveness of the design and operations
of its disclosure controls and procedures, as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of Page 26 of  33




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1934, Based on their evaluation, our principal executive
officer and principal financial officer concluded that our disclosure
controls and procedures are effective in timely alerting them to
material information relating to the Company, including its
consolidated subsidiaries, that is required to be disclosed in the
reports it files or submits under the Securities Exchange Act of 1934.Internal control over financial reportingThere have been no significant changes in our internal control over
financial reporting (as defined in Rule13a-15f of the Securities Exchange
Act of 1934) that occurred during the Companys most recently completed
fiscal quarter that has materially affected, or is reasonably likely to
materially affect the Companys internal control over financial
reporting. 
 PART II OTHER INFORMATION 
 Item 1. Legal Proceedings Although the Company may from time to time be involved in litigation and
claims arising out of its operations in the normal course of our business, as
of March 31, 2004, the Company was not a party to any material pending legal
proceedings. 
 Item 2. Changes in Securities and Use of Proceeds On March 3, 2004, the Company issued 125,715 shares of our common stock in
repayment of a loan in the amount of $833,890 pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended, under
Section 4(2) of the Securities Act. On March 5, 2004, the Company issued 407,986 shares of our common stock
for an aggregate offering pricing of $2,570,312 to accredited investors
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended, under Section 4(2) of the Securities Act or Regulation
D promulgated thereunder as transactions by an issuer not involving any public
offering. GunnAllen Financial, Inc. acted as the placement agent in connection
with the offering of such shares and received an aggregate commission of
$285,590 for its services in connection therewith. 
 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. Page 27 of  33




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a.
    
    The following exhibits are filed with this report or are incorporated
herein by reference to a prior filing, in accordance with Rule
12b-32 under the Securities Exchange Act of 1934. 31.1*
    
    
    
    Certification of the Chief Executive Officer
pursuant to Rule 13a-14 of the Securities Exchange
Act of 1934.31.2*
    
    
    
    Certification of the Chief Financial Officer
pursuant to Rule 13a-14 of the Securities Exchange
Act of 1934.32.1*
    
    
    
    Certification of the Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, 18 U.S.C. Section 1350.32.2*
    
    
    
    Certification of the Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, 18 U.S.C. Section 1350.
 (b) Reports on Form 8-K. On March 23, 2004, the Company furnished a Form 8-K pursuant to Item 12
reporting the issuance of a press release announcing the Companys financial
results for the quarter and year ended December 31, 2003. Page 28 of  33




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. UTEK CORPORATION(Registrant)Date: May 7, 2004
    
    /s/  Clifford M. Gross
Clifford M. Gross
Chairman and Chief Executive OfficerDate: May 7, 2004
    
    /s/  Carole R. Wright
Carole R. Wright, CPA
Chief Financial Officer