##### 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 JUNE 30, 2002

COMMISSION FILE NUMBER: 001-15941

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

DELAWARE
(State or Jurisdiction of
Incorporation or Organization)

59-3603677
(IRS Employer
Identification No.)

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

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

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 [   ]      NO [X]

On August 2, 2002, there were 3,925,672 shares outstanding of the Registrants
common stock, $0.01 par value.



---

---



---

TABLE OF CONTENTS



|                                                 |                                                                     |  |  |  |  |  |  | 
|------------------------------------------------ | ------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                  
|                                                 | ITEM 1. FINANCIAL STATEMENTS                                       
|Consolidated Balance Sheets                     
|Consolidated Statements of Operations           
|Consolidated Statements of Cash Flows           
|Consolidated Statements of Changes in Net Assets
|Financial Highlights                            
|Schedule of Investments                         
|Schedule of Investments                         
|Notes to Consolidated Financial Statements      
|                                                 | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
|                                                 | ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS
|                                                 | Item 1. Legal Proceedings                                          
|                                                 | Item 2. Changes in Securities and Use of Proceeds                  
|                                                 | Item 3. Defaults upon Senior Securities                            
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders        
|                                                 | Item 5. Other Information                                          
|                                                 | Item 6. Exhibits and Reports on Form 8-K                           
|SIGNATURES                                      
|Section 906 Certification of CEO                
|Section 906 Certification of CFO                



---



##### Table of Contents



UTEK CORPORATION

FORM 10-Q INDEX

|                               |  |                                                                                               |                                                                                                              |  |    |   | 
|------------------------------ |  | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ |  | -- | - | 
|PART I  FINANCIAL INFORMATION |  |                                                                                               |                                                                                                              | 
|                              
|                               |  | Item 1. Financial Statements                                                                  |                                                                                                              |  |    |  
|                              
|                               |  |                                                                                               | Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December 31, 2001                            |  |    | 3 | 
|                              
|                               |  |                                                                                               | Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2002
and 2001 (unaudited)  |  |    | 4 | 
|                              
|                               |  |                                                                                               | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001
(unaudited)            |  |    | 5 | 
|                              
|                               |  |                                                                                               | Consolidated Statements of Changes in Net Assets for the Six Months Ended June 30, 2002
and 2001 (unaudited) |  |    | 6 | 
|                              
|                               |  |                                                                                               | Financial Highlights for the Six Months Ended June 30, 2002 and 2001
(unaudited)                             |  |    | 7 | 
|                              
|                               |  |                                                                                               | Schedule of Investments as of June 30, 2002 (unaudited) and December 31, 2001                                |  |    | 8 | 
|                              
|                               |  | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                              |  | 15 |  
|                              
|
|                               |  | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                              |  | 26 |  
|                              
|PART II  OTHER INFORMATION    |  |                                                                                               |                                                                                                              | 
|                              
|                               |  | Item 1. Legal Proceedings                                                                     |                                                                                                              |  | 26 |  
|                              
|                               |  | Item 2. Changes in Securities and Use of Proceeds                                             |                                                                                                              |  | 26 |  
|                              
|                               |  | Item 3. Defaults Upon Senior Securities                                                       |                                                                                                              |  | 26 |  
|                              
|                               |  | Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                                              |  | 26 |  
|                              
|                               |  | Item 5. Other Information                                                                     |                                                                                                              |  | 26 |  
|                              
|                               |  | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                              |  | 27 |  
|                              
|Signatures                     |  |                                                                                               | 28                                                                                                           | 
|                              
|Exhibits                       |  |                                                                                               |                                                                                                              | 



---



##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

UTEK Corporation




Consolidated Balance Sheets


|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |           |            |         |  
|----------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------------------------- | --------- | ----------- | ---------- | ------------ | --------- | ---------- | ------- | -
|                              |                                                                                                                                                                                       |                                                       |                              |           | June 30,    |            | December 31,
|                              |                                                                                                                                                                                       |                                                       |                              |           | 2002        |            | 2001        
|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |             
|                              |                                                                                                                                                                                       |                                                       |                              |           | (Unaudited) |            |              |           |           
|ASSETS                        |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|                              | Investments in non-controlled affiliates
(cost $11,177,757 and $10,018,958 at June 30,
2002 and December 31, 2001, respectively)                                                      |                                                       | $                            | 8,417,202 |             |            | $            | 9,988,772 |           
|                              | Cash and cash equivalents                                                                                                                                                             |                                                       |                              | 643,242   |             |            |              | 1,432,473 |           
|                              | Short-term marketable securities                                                                                                                                                      |                                                       |                              |          |             |            |              | 282,284   |           
|                              | Prepaid expenses and other assets                                                                                                                                                     |                                                       |                              | 177,180   |             |            |              | 192,450   |           
|                              | Fixed assets, net                                                                                                                                                                     |                                                       |                              | 147,313   |             |            |              | 88,286    |           
|                              | Intangible assets                                                                                                                                                                     |                                                       |                              | 447,564   |             |            |              | 426,693   |           
|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|                              |                                                                                                                                                                                       | TOTAL ASSETS                                          |                              |           | 9,832,501   |            |              |           | 12,410,958 |        
|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|LIABILITIES                   |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|                              | Accrued expenses                                                                                                                                                                      |                                                       |                              | 132,770   |             |            |              | 90,125    |           
|                              | Deferred revenue                                                                                                                                                                      |                                                       |                              | 297,848   |             |            |              | 523,406   |           
|                              | Deferred income taxes                                                                                                                                                                 |                                                       |                              | 954,905   |             |            |              | 1,887,987 |           
|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|                              |                                                                                                                                                                                       | TOTAL LIABILITIES                                     |                              |           | 1,385,523   |            |              |           | 2,501,518  |        
|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|                              |                                                                                                                                                                                       | NET ASSETS                                            |                              | $         | 8,446,978   |            |              | $         | 9,909,440  |        
|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|Commitments and Contingencies |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|Composition of net assets:    |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|                              | Common stock, $.01 par value, 19,000,000 shares authorized; 3,925,672
shares issued and outstanding at June 30, 2002 and 3,915,672 shares
issued and outstanding at December 31, 2001 |                                                       | $                            | 39,257    |             |            | $            | 39,157    |           
|                              | Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued and outstanding                                                                                             |                                                       |                              |          |             |            |              |          |           
|                              | Additional paid in capital                                                                                                                                                            |                                                       |                              | 7,058,941 |             |            |              | 6,988,141 |           
|                              | Accumulated income:                                                                                                                                                                   |                                                       |                              |           |             |            |              |           |           
|                              |                                                                                                                                                                                       | Accumulated net operating income                      |                              |           | 3,215,894   |            |              |           | 2,969,294  |        
|                              |                                                                                                                                                                                       | Net realized loss on investments,
net of income taxes |                              |           | (165,382    | )          |              |           | (62,863    | )      
|                              |                                                                                                                                                                                       | Net unrealized depreciation of investments,           |                              |           |             |            |              |           |            |        
|                              |                                                                                                                                                                                       |                                                       | net of deferred income taxes |           |             | (1,721,758 | )            |           |            | (18,827 | )
|                              |                                                                                                                                                                                       | Foreign currency translation adjustment               |                              |           | 20,026      |            |              |           | (5,462     | )      
|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|Net assets                    |                                                                                                                                                                                       | $                                                     | 8,446,978                    |           |             | $          | 9,909,440    |          
|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          
|Net asset value per share     |                                                                                                                                                                                       | $                                                     | 2.15                         |           |             | $          | 2.53         |          
|                              |                                                                                                                                                                                       |                                                       |                              |           |             |            |              |          

See accompanying notes

3



---



##### Table of Contents



UTEK Corporation




Consolidated Statements of Operations


(Unaudited)


|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |           |           | 
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ---------- | -------------------------- | --------- | ------------------------ | --------- | --------- | --------- | ---- | ---------- | ---------- | --------- | - | --------- | --------- | --------- | 
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            | Three Months Ended June 30 |           | Six Months Ended June 30
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                         
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            | 2002                       |           | 2001                     |           | 2002      |           | 2001
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |     
|Income from operations:                                          |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|                                                                 | Sale of technology rights                                                                                                                                                                                                                                                                               |         | $          | 1,623,104                  |           |                          | $         | 1,637,500 |           |      | $          | 1,623,104  |           |   | $         | 3,083,653 |          
|                                                                 | Consulting fees                                                                                                                                                                                                                                                                                         |         |            | 310,477                    |           |                          |           |          |           |      |            | 574,413    |           |   |           |          |          
|                                                                 | Investment income, net                                                                                                                                                                                                                                                                                  |         |            | 23,679                     |           |                          |           | 19,759    |           |      |            | 29,697     |           |   |           | 79,507    |          
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|                                                                 |                                                                                                                                                                                                                                                                                                         |         | 1,957,260  |                            |           |                          | 1,657,259 |           |           |      | 2,227,214  |            |           |   | 3,163,160 |          
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|Expenses:                                                        |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|                                                                 | Salaries and wages                                                                                                                                                                                                                                                                                      |         |            | 208,013                    |           |                          |           | 118,398   |           |      |            | 418,977    |           |   |           | 221,571   |          
|                                                                 | Professional fees                                                                                                                                                                                                                                                                                       |         |            | 154,519                    |           |                          |           | 81,221    |           |      |            | 311,761    |           |   |           | 234,601   |          
|                                                                 | Sales and marketing                                                                                                                                                                                                                                                                                     |         |            | 344,463                    |           |                          |           | 442,110   |           |      |            | 440,143    |           |   |           | 703,140   |          
|                                                                 | General and administrative                                                                                                                                                                                                                                                                              |         |            | 425,505                    |           |                          |           | 195,842   |           |      |            | 653,525    |           |   |           | 323,124   |          
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|                                                                 |                                                                                                                                                                                                                                                                                                         |         | 1,132,500  |                            |           |                          | 837,571   |           |           |      | 1,824,406  |            |           |   | 1,482,436 |          
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|Income before income taxes                                       |                                                                                                                                                                                                                                                                                                         |         | 824,760    |                            |           |                          | 819,688   |           |           |      | 402,808    |            |           |   | 1,680,724 |          
|Provision for income taxes                                       |                                                                                                                                                                                                                                                                                                         |         | 307,110    |                            |           |                          | 313,550   |           |           |      | 156,208    |            |           |   | 635,412   |          
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|                                                                 | Net income from operations                                                                                                                                                                                                                                                                              |         |            | 517,650                    |           |                          |           | 506,138   |           |      |            | 246,600    |           |   |           | 1,045,312 |          
|Net realized and unrealized (gains) losses:                      |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|                                                                 | Net realized loss on investments, net of
income tax benefit of $44,973 and
$61,854 for the three and six months
ended June 30, 2002 and $550 and $795
for the three and six months
ended June 30, 2001,
respectively                                                                                    |         |            | (74,540                    | )         |                          |           | (911      | )         |      |            | (102,519   | )         |   |           | (1,321    | )        
|                                                                 | Change in unrealized appreciation
(depreciation) of non-controlled
affiliate investments, net of deferred
tax expense (benefit) of
$(898,428) and $(1,027,438) for the
three and six months ended June 30,
2002 and $60,740 and $193,186 for the
three and six months
ended June 30, 2001, respectively |         |            | (1,489,108                 | )         |                          |           | 105,607   |           |      |            | (1,702,931 | )         |   |           | 320,195   |          
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|Net increase (decrease) in net assets
from operations            |                                                                                                                                                                                                                                                                                                         | $       | (1,045,998 | )                          |           | $                        | 610,834   |           |           | $    | (1,558,850 | )          |           | $ | 1,364,186 |          
|                                                                 |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|Net increase (decrease) in net assets
from operations per share: |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|                                                                 |                                                                                                                                                                                                                                                                                                         | Basic   |            | $                          | (0.27     | )                        |           | $         | .16       |      |            | $          | (0.40     | ) |           | $         | .36       | 
|                                                                 |                                                                                                                                                                                                                                                                                                         | Diluted |            | $                          | (0.27     | )                        |           | $         | .16       |      |            | $          | (0.40     | ) |           | $         | .36       | 
|Weighted average shares:                                         |                                                                                                                                                                                                                                                                                                         |         |            |                            |           |                          |           |           |           |      |            |            |           |   |           |          
|                                                                 |                                                                                                                                                                                                                                                                                                         | Basic   |            |                            | 3,918,969 |                          |           |           | 3,806,617 |      |            |            | 3,917,329 |   |           |           | 3,794,489 | 
|                                                                 |                                                                                                                                                                                                                                                                                                         | Diluted |            |                            | 3,918,969 |                          |           |           | 3,847,088 |      |            |            | 3,917,329 |   |           |           | 3,825,153 | 

See accompanying notes

4



---



##### Table of Contents



UTEK Corporation




Consolidated Statements of Cash Flows


(Unaudited)


|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |        |            |         |            |  
|--------------------------------------------------------- | --------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ----------------------------------------------------------------- | ---------- | -------------------------------- | ---------- | ------ | ---------- | ------- | ---------- | -
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            | For the Six Months Ended June 30
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                 
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            | 2002                             |            | 2001  
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|Operating Activities:                                     |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|                                                          |                                               | Net increase (decrease) in net assets from operations                                                                        |                                           | $                                                                 | (1,558,850 | )                                |            | $      | 1,364,186  |        
|                                                          |                                               | Adjustments to reconcile net increase (decrease)
in net assets from operations to net cash
provided by operating activities: |                                           |                                                                   |            |                                  |            |        |            |        
|                                                          |                                               |                                                                                                                              |                                           | (Increase) decrease in net unrealized appreciation
of investments |            |                                  | 2,730,369  |        |            |         | (513,381   | )
|                                                          |                                               |                                                                                                                              |                                           | Depreciation                                                      |            |                                  | 15,586     |        |            |         | 11,027     |  
|                                                          |                                               |                                                                                                                              |                                           | Loss on disposal of fixed asset                                   |            |                                  | 1,024      |        |            |         |           |  
|                                                          |                                               |                                                                                                                              |                                           | Loss on sale of investments                                       |            |                                  | 164,373    |        |            |         | 2,116      |  
|                                                          |                                               |                                                                                                                              |                                           | Deferred income taxes                                             |            |                                  | (933,082   | )      |            |         | 827,803    |  
|                                                          |                                               |                                                                                                                              |                                           | Investment securities received for sale of portfolio companies    |            |                                  | (1,623,105 | )      |            |         | (3,083,653 | )
|                                                          |                                               |                                                                                                                              |                                           | Services rendered in exchange for investment securities           |            |                                  | (350,476   | )      |            |         |           |  
|                                                          |                                               |                                                                                                                              |                                           | Changes in operating assets and liabilities:                      |            |                                  |            |        |            |         |            |  
|                                                          |                                               |                                                                                                                              |                                           | Prepaid expenses and other assets                                 |            |                                  | (5,883     | )      |            |         | (24,740    | )
|                                                          |                                               |                                                                                                                              |                                           | Deferred revenue                                                  |            |                                  | (9,289     | )      |            |         |           |  
|                                                          |                                               |                                                                                                                              |                                           | Accrued expenses                                                  |            |                                  | 42,645     |        |            |         | (38,407    | )
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|                                                          |                                               | Net cash used in operating activities                                                                                        |                                           |                                                                   | (1,526,688 | )                                |            |        | (1,455,049 | )      
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|Investing Activities:                                     |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|                                                          |                                               | Proceeds received on sale of investments                                                                                     |                                           |                                                                   | 716,424    |                                  |            |        | 41,421     |        
|                                                          |                                               | Purchases of fixed assets                                                                                                    |                                           |                                                                   | (4,455     | )                                |            |        | (14,363    | )      
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|                                                          |                                               | Net cash provided by investing activities                                                                                    |                                           |                                                                   | 711,969    |                                  |            |        | 27,058     |        
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|Financing Activities:                                     |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|                                                          |                                               |                                                                                                                              | Proceeds from issuance of common stock    |                                                                   |            |                                 |            |        |            | 375,617 |           
|                                                          |                                               |                                                                                                                              | Repayments on short-term borrowings       |                                                                   |            |                                 |            |        |            | (39,975 | )         
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|                                                          |                                               |                                                                                                                              | Net cash provided by financing activities |                                                                   |            |                                 |            |        |            | 335,642 |           
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|Foreign currency translation adjustment                   |                                               |                                                                                                                              | 25,488                                    |                                                                   |            |                                  |           |       
|Decrease in cash and cash equivalents                     |                                               |                                                                                                                              | (789,231                                  | )                                                                 |            |                                  | (1,092,349 | )     
|Cash and cash equivalents at beginning of period          |                                               |                                                                                                                              | 1,432,473                                 |                                                                   |            |                                  | 3,952,280  |       
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|Cash and cash equivalents at end of period                |                                               | $                                                                                                                            | 643,242                                   |                                                                   |            | $                                | 2,859,931  |       
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|Supplemental Disclosures of Non Cash Investing Activities |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|                                                          | Acquisition of Techex Acquisition Corporation |                                                                                                                              | $                                         | 70,900                                                            |            |                                  | $          |       |           
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       
|                                                          | Stock Received in Settlement of Receivable    |                                                                                                                              | $                                         |                                                                  |            |                                  | $          | 39,615 |           
|                                                          |                                               |                                                                                                                              |                                           |                                                                   |            |                                  |            |       

See accompanying notes

5



---



##### Table of Contents



UTEK Corporation




Consolidated Statements of Changes in Net Assets


(Unaudited)


|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |      |           |         |           | 
|-------------------------------------- |  | -------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------- | ------------------------ | ---------- | ---- | --------- | ------- | --------- | 
|                                       |  |                                                                                                    |                                                                                        |                                                       |            | Six Months Ended June 30
|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                         
|                                       |  |                                                                                                    |                                                                                        |                                                       |            | 2002                     |            | 2001
|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     
|Changes in net assets from operations: |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     
|                                       |  | Net income from operations                                                                         |                                                                                        | $                                                     | 246,600    |                          |            | $    | 1,045,312 |        
|                                       |  | Net realized loss on sale of investments                                                           |                                                                                        |                                                       | (102,519   | )                        |            |      | (1,321    | )      
|                                       |  | Change in net unrealized appreciation (depreciation) of
investments, net of related deferred taxes |                                                                                        |                                                       | (1,702,931 | )                        |            |      | 320,195   |        
|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     
|                                       |  |                                                                                                    |                                                                                        | Net increase (decrease) in net assets from operations |            |                          | (1,558,850 | )    |           |         | 1,364,186 | 
|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     
|Capital stock transactions:            |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     
|                                       |  |                                                                                                    | 73,986 shares of common stock issued for cash                                          |                                                       |            |                         |            |      |           | 375,617 |          
|                                       |  |                                                                                                    | 10,000 shares of common stock issued for acquisition of Techex
Acquisition Corporation |                                                       |            | 70,900                   |            |      |           |        |          
|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     
|                                       |  |                                                                                                    |                                                                                        | Net increase in net assets from stock transactions    |            |                          | 70,900     |      |           |         | 375,617   | 
|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     
|Foreign currency exchange adjustment   |  |                                                                                                    | 25,488                                                                                 |                                                       |            |                          |           |     
|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     
|Net increase (decrease) in net assets  |  |                                                                                                    | (1,462,462                                                                             | )                                                     |            |                          | 1,739,803  |     
|Net assets at beginning of year        |  |                                                                                                    | 9,909,440                                                                              |                                                       |            |                          | 8,455,002  |     
|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     
|Net assets at end of period            |  | $                                                                                                  | 8,446,978                                                                              |                                                       |            | $                        | 10,194,805 |     
|                                       |  |                                                                                                    |                                                                                        |                                                       |            |                          |            |     

See accompanying notes

6



---



##### Table of Contents



UTEK Corporation




Financial Highlights


(Unaudited)


|                                                                        |                                                                                               |   |                          |      |      |   |            |      | 
|----------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | - | ------------------------ | ---- | ---- | - | ---------- | ---- | 
|                                                                        |                                                                                               |   | Six Months Ended June 30
|                                                                        |                                                                                               |   |                         
|                                                                        |                                                                                               |   | 2002                     |      | 2001
|                                                                        |                                                                                               |   |                          |      |     
|PER SHARE INFORMATION                                                   |                                                                                               |   |                          |      |      |   |            |     
|Net asset value, beginning of period                                    |                                                                                               | $ | 2.53                     |      |      | $ | 2.24       |     
|                                                                        | Net increase from operations (1)                                                              |   |                          | 0.06 |      |   |            | 0.27 | 
|                                                                        | Net change in realized and unrealized appreciation
(depreciation)on investments (after taxes) |   |                          | (.46 | )    |   |            | 0.03 | 
|                                                                        | Net increase from stock transactions                                                          |   |                          | 0.02 |      |   |            | 0.10 | 
|                                                                        |                                                                                               |   |                          |      |      |   |            |     
|Net assets value, end of period                                         |                                                                                               | $ | 2.15                     |      |      | $ | 2.64       |     
|                                                                        |                                                                                               |   |                          |      |      |   |            |     
|Per share market value, end of period                                   |                                                                                               | $ | 7.25                     |      |      | $ | 8.00       |     
|                                                                        |                                                                                               |   |                          |      |      |   |            |     
|RATIOS/SUPPLEMENTAL DATA                                                |                                                                                               |   |                          |      |      |   |            |     
|Net assets, end of period                                               |                                                                                               | $ | 8,446,978                |      |      | $ | 10,194,805 |     
|Ratio of expenses to average net assets (2)(3)                          |                                                                                               |   | 20                       | %    |      |   | 18         | %   
|Ratio of net income to average net assets (3)                           |                                                                                               |   | 3                        | %    |      |   | 16         | %   
|Diluted weighted average number of shares
outstanding during the period |                                                                                               |   | 3,917,329                |      |      |   | 3,825,153  |     



---

|(1) |  | Calculated based on diluted weighted average number of shares outstanding
during the period.
|--- |  | --------------------------------------------------------------------------------------------
|   
|(2) |  | Excluding income taxes                                                                      
|   
|(3) |  | Ratios are on an annualized basis                                                           

See accompanying notes

7



---



##### Table of Contents



UTEK Corporation




Schedule of Investments


June 30, 2002
(Unaudited)


|       |           |             |  |          |       |  |      |                                                                                                                                            |                                                 |   |            |  |  |   |           |  | 
|------ | --------- | ----------- |  | -------- | ----- |  | ---- | ------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------- | - | ---------- |  |  | - | --------- |  | 
|       |           |             |  | Original |       |  |      |                                                                                                                                            |                                                 |   |            |  |  |   |          
|       |           |             |  | Date of  |       |  |      |                                                                                                                                            | Original                                        |   | Fair      
|Shares |           | Acquisition |  |          |       |  | Cost |                                                                                                                                            | Value                                          
|       |           |             |  |          |       |  |      |                                                                                                                                            |                                                
|       |           |             |  |          |       |  |      |                                                                                                                                            | Common stock in non-controlled affiliates99.6% |   |            |  |  |   |           |  | 
|      
|       | 236,000   |             |  |          | 3/01  |  |      | Lexon, Inc.publicly traded over the counter.2%;
developer of health care technology                                                      |                                                 | $ | 39,614     |  |  | $ | 13,452    | 
|      
|       | 1,344,300 |             |  |          | 1/99  |  |      | Image Analysis, Inc.,privately held30.8%; medical and
hospital equipment developer                                                        |                                                 |   | 1,349,775  |  |  |   | 2,607,942 | 
|      
|       | 1,584,000 |             |  |          | 5/99  |  |      | Centrex, Inc.,publicly traded over the counter7.3%;
developer of water and purification methodologies                                     |                                                 |   | 522,720    |  |  |   | 617,760   | 
|      
|       | 900,000   |             |  |          | 5/99  |  |      | Nubar, Inc.,privately held0%; developer of
construction materials                                                                         |                                                 |   | 126,000    |  |  |   |          | 
|      
|       | 1,037,957 |             |  |          | 6/99  |  |      | Clean Water Technologies, Inc. (formerly
NuElectric Corporation);publicly traded over the counter.9%;
environmental services              |                                                 |   | 590,388    |  |  |   | 78,885    | 
|      
|       | 150       |             |  |          | 11/99 |  |      | Rosbon, LLC (formerly Rosbon, Inc.),privately held0.9%;
real estate development                                                           |                                                 |   | 90,705     |  |  |   | 73,474    | 
|      
|       | 100,799   |             |  |          | 3/00  |  |      | Graphco Technologies, Inc.,privately held3.9%;
developer of e-commerce technologies                                                       |                                                 |   | 952,362    |  |  |   | 327,597   | 
|      
|       | 2,268,053 |             |  |          | 6/00  |  |      | Advanced Recycling Sciences, Inc., (formerly The
Quantum Group, Inc.),publicly traded over the
counter2.5%; tire recycling methodologies  |                                                 |   | 2,111,892  |  |  |   | 208,661   | 
|      
|       | 794,000   |             |  |          | 11/00 |  |      | Torvec, Inc.,publicly traded over the counter15.1%;
advanced automotive technologies                                                      |                                                 |   | 1,595,940  |  |  |   | 1,278,340 | 
|      
|       | 641,667   |             |  |          | 4/01  |  |      | Bitzmart, Inc.,privately held15.2%; software products                                                                                     |                                                 |   | 1,658,000  |  |  |   | 1,283,334 | 
|      
|       | 1,850,000 |             |  |          | 5/01  |  |      | Sense Holdings, Inc.,publicly traded over the counter7.4%;
biometric technologies                                                         |                                                 |   | 481,000    |  |  |   | 629,000   | 
|      
|       | 1,493,550 |             |  |          | 9/01  |  |      | Prime Pharmaceutical Corporation,privately held6.6%;
pharmaceutical developments in dermatology                                           |                                                 |   | 783,344    |  |  |   | 558,588   | 
|      
|       | 1,000,000 |             |  |          | 11/01 |  |      | Primapharm Funding Corporation,privately held6.0%;
intellectual property development                                                      |                                                 |   | 499,665    |  |  |   | 510,000   | 
|      
|       | 400,000   |             |  |          | 11/01 |  |      | Palladium Communications, Inc. (formerly
USAOnestar.Net Inc.),publicly traded over the
counter .1%; telecom, educational internet service |                                                 |   | 12,877     |  |  |   | 2,160     | 
|      
|       | 47,615    |             |  |          | 1/02  |  |      | Group Management Corporation,publicly traded over the counter
 .1%; corporate management                                                  |                                                 |   | 46,949     |  |  |   | 3,809     | 
|      
|       | 20,000    |             |  |          | 1/02  |  |      | Circle Group Internet, Inc.,publicly traded over the counter,
.1%; digital design and consulting                                          |                                                 |   | 20,080     |  |  |   | 7,200     | 
|      
|       | 543,750   |             |  |          | 2/02  |  |      | Voice and Wireless Corporation,publicly traded over the counter,
.4%; internet/technology services and products                           |                                                 |   | 48,458     |  |  |   | 33,168    | 
|      
|       | 48,000    |             |  |          | 4/02  |  |      | Hydrogen Technology Applications, Inc.,privately held,  .4%;
developer of energy technology                                               |                                                 |   | 37,440     |  |  |   | 37,440    | 
|      
|       | 98,250    |             |  |          | 6/02  |  |      | FullCircle Registry, Inc.,publicly traded over the counter,
1.7%; developer of emergency information technology                            |                                                 |   | 210,548    |  |  |   | 146,392   | 
|       |           |             |  |          |       |  |      |                                                                                                                                            |                                                 |   |            |  |  |   |           | 
|       |           |             |  |          |       |  |      | TOTAL INVESTMENTS99.6%                                                                                                                    |                                                 | $ | 11,177,757 |  |  | $ | 8,417,202 | 
|       |           |             |  |          |       |  |      |                                                                                                                                            |                                                 |   |            |  |  |   |           | 
|       |           |             |  |          |       |  |      | Cash and other assets, less liabilities.4%                                                                                                |                                                 |   |            |  |  |   | 29,776    | 
|       |           |             |  |          |       |  |      |                                                                                                                                            |                                                 |   |            |  |  |   |           | 
|       |           |             |  |          |       |  |      | Net assets at June 30, 2002100%                                                                                                           |                                                 |   |            |  |  | $ | 8,446,978 | 
|       |           |             |  |          |       |  |      |                                                                                                                                            |                                                 |   |            |  |  |   |           | 

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 restricted securities is determined in good
faith by the Board of Directors. In making its determination,
the Board of Directors has considered valuation appraisals
provided by an independent financial expert. (Notes 1 and 2).                                                                                                                                                                                                                                                                                      
|
| |  |  | As of June 30, 2002, all of the securities that we have
received in exchange for our portfolio companies are
restricted securities, as that term is defined under Rule
144 of the Securities Act of 1933. These securities may not be
sold in the absence of registration under the Securities Act
of 1933 or an exemption therefrom. As a result, our ability to
sell or otherwise transfer the securities we hold in our
portfolio is limited.                                                                                       
|
| |  |  | The Company owns more than 10% of the outstanding common stock
of each of the above investments with the exception of
Centrex, Inc., Graphco Technologies, Inc., Torvec, Inc.,
Lexon, Inc., Voice and Wireless Corporation, Circle Group
Internet, Inc., Palladium Communications, Inc., Hydrogen
Technology Applications, Inc. and Group Management
Corporation. As such, the Company is deemed to be an affiliate
of the above companies, as defined under Rule 144 of the
Securities Act of 1933, except for those specifically noted.

See accompanying notes

8



---



##### Table of Contents



UTEK Corporation




Schedule of Investments


December 31, 2001


|       |           |             |  |          |       |  |  |                                                                                                                                     |  |                                                   |            |      |  |   |           |   |  | 
|------ | --------- | ----------- |  | -------- | ----- |  |  | ----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------- | ---------- | ---- |  | - | --------- | - |  | 
|       |           |             |  | Original |       |  |  |                                                                                                                                     |  |                                                   |            |      |  |   |           |  
|       |           |             |  | Date of  |       |  |  |                                                                                                                                     |  | Original                                          |            | Fair
|Shares |           | Acquisition |  |          |       |  |  | Cost                                                                                                                                |  | Value                                            
|       |           |             |  |          |       |  |  |                                                                                                                                     |  |                                                  
|       |           |             |  |          |       |  |  |                                                                                                                                     |  | Common stock in non-controlled affiliates -100.8% |            |      |  |   |           |   |  | 
|       | 236,000   |             |  |          | 3/01  |  |  | Lexon, Inc.- publicly traded over the
counter  .2%; developer of health care technology                                            |  | $                                                 | 39,614     |      |  | $ | 21,240    |  
|      
|       | 879,300   |             |  |          | 1/99  |  |  | Image Analysis, Inc.,privately held - 17.2%;
medical and hospital equipment developer                                               |  |                                                   | 219,825    |      |  |   | 1,705,842 |  
|      
|       | 1,584,000 |             |  |          | 5/99  |  |  | Centrex, Inc.,publicly traded over the counter - 15.7%;
developer of water and purification methodologies                           |  |                                                   | 522,720    |      |  |   | 1,552,320 |  
|      
|       | 900,000   |             |  |          | 5/99  |  |  | Nubar, Inc.,privately held - 0%; developer
of construction materials                                                                |  |                                                   | 126,000    |      |  |   |          |  
|      
|       | 1,037,957 |             |  |          | 6/99  |  |  | NuElectric Corporation,publicly traded over the counter -
3.8%; environmental services                                              |  |                                                   | 590,388    |      |  |   | 373,665   |  
|      
|       | 150       |             |  |          | 11/99 |  |  | Rosbon, Inc.,privately held - 0.8%; real
estate development                                                                         |  |                                                   | 90,705     |      |  |   | 76,768    |  
|      
|       | 100,799   |             |  |          | 3/00  |  |  | Graphco Technologies, Inc.,privately held - 5.1%;
developer of e-commerce technologies                                              |  |                                                   | 952,362    |      |  |   | 511,050   |  
|      
|       | 2,326,153 |             |  |          | 6/00  |  |  | Advanced Recycling Sciences, Inc.,(The Quantum
Group, Inc.), publicly traded over the
counter - 10.6%; tire recycling methodologies |  |                                                   | 2,158,952  |      |  |   | 1,046,769 |  
|      
|       | 1,068,354 |             |  |          | 11/00 |  |  | Torvec, Inc.,publicly traded over the counter - 8.7%;
advanced automotive technologies                                              |  |                                                   | 2,147,392  |      |  |   | 865,367   |  
|      
|       | 641,667   |             |  |          | 4/01  |  |  | Bitzmart, Inc.,privately held - 18.8%; software products                                                                            |  |                                                   | 1,658,000  |      |  |   | 1,867,251 |  
|      
|       | 1,850,000 |             |  |          | 5/01  |  |  | Sense Holdings, Inc.,publicly traded over the counter -
10.3%; biometric technologies                                               |  |                                                   | 481,000    |      |  |   | 1,017,500 |  
|      
|       | 810,000   |             |  |          | 9/01  |  |  | Prime Pharmaceutical Corporation,privately held -
4.1%; pharmaceutical developments in dermatology                                  |  |                                                   | 486,000    |      |  |   | 405,000   |  
|      
|       | 1,000,000 |             |  |          | 11/01 |  |  | Primapharm Funding Corporation,privately held -
4.9%; intellectual property development                                             |  |                                                   | 490,000    |      |  |   | 490,000   |  
|      
|       | 400,000   |             |  |          | 11/01 |  |  | Palladium Communications, Inc., (USAOnestar.Net Inc),
publicly traded over the counter  .6%; telecom,
educational internet service |  |                                                   | 56,000     |      |  |   | 56,000    |  
|       |           |             |  |          |       |  |  |                                                                                                                                     |  |                                                   |            |      |  |   |           |  
|       |           |             |  |          |       |  |  | TOTAL INVESTMENTS - 100.8%                                                                                                          |  | $                                                 | 10,018,958 |      |  | $ | 9,988,772 |  
|       |           |             |  |          |       |  |  |                                                                                                                                     |  |                                                   |            |      |  |   |           |  
|       |           |             |  |          |       |  |  | Cash and other assets, less liabilities  (.8)%                                                                                     |  |                                                   |            |      |  |   | (79,332   | )
|       |           |             |  |          |       |  |  |                                                                                                                                     |  |                                                   |            |      |  |   |           |  
|       |           |             |  |          |       |  |  | Net assets at December 31, 2001 - 100%                                                                                              |  |                                                   |            |      |  | $ | 9,909,440 |  
|       |           |             |  |          |       |  |  |                                                                                                                                     |  |                                                   |            |      |  |   |           |  

Notes to Schedule of Investments:


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

See accompanying notes

9



---



##### Table of Contents



UTEK Corporation




Notes to Consolidated Financial Statements


(Information as of June 30, 2002 and 2001 and for the three and six month
periods then ended is Unaudited)

1. Nature of Business and Significant Accounting Policies

Interim Financial Information

The financial information for UTEK Corporation (the Company) as of June
30, 2002 and 2001 and for the six month periods then ended is unaudited, but
includes all adjustments (consisting only of normal recurring accruals), which,
in the opinion of management are necessary in order to make the financial
statements not misleading at such dates and for those periods. These financial
statements have been prepared in accordance with the instructions for Form 10-Q
and, therefore, do not include all information and footnotes required by
accounting principles generally accepted in the United States. These
consolidated financial statements should be read in conjunction with the
consolidated audited financial statements and related notes included in the
Companys Form 10-K for the year ended December 31, 2001. Operating results for
the three or six months ended June 30, 2002 are not necessarily indicative of
the results that may be expected for the entire year.

The Company

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

We commenced operations in 1997 as UTEK Corporation (UTEK Florida), which
was incorporated under the laws of the State of Florida in August 1996. UTEK
Florida was engaged in the business of technology transfer. On December 31,
1998, we formed UTEK, LLC, a limited liability company organized under the laws
of the State of Florida. Subsequent thereto, the shareholders of UTEK Florida
exchanged their shares of common stock for membership units in UTEK, LLC. In
July 1999, we formed UTEK Corporation under the laws of the State of Delaware
and in October 1999, UTEK LLC was merged into UTEK Corporation. In September
2001, UTEK Corporation acquired 100% of the outstanding common stock of PAX
Technology Transfer Ltd., a United Kingdom corporation, in a stock for stock
transaction. In May 2002, UTEK Corporation acquired 100% of the outstanding
common stock of Techex Acquisition Corporation (TechEx) in a stock for stock
transaction. TechEx held the TechEx.com website. The TechEx.com website is used
by many technology transfer and research professionals to efficiently exchange
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.

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

The Company invests in portfolio companies that management believes are
positioned to benefit from the acquisition of new technology. The Companys
investments in portfolio companies generally are used by the portfolio companies
to acquire the license rights to new technologies developed at universities
and/or government research facilities. The Company provides portfolio companies
with managerial assistance in technology transfer. Technology transfer is the
process by which technologies developed by universities or research laboratories
are licensed to companies for commercial use. The Company also may make
additional investments to fund continued research and development of the
acquired technologies.

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

To facilitate establishing on-going consulting engagements with its
clients, the Company has developed a strategic alliance process. UTEKs
strategic alliances are designed to help technology companies rapidly enhance
their new product pipeline through the acquisition of proprietary intellectual
capital from universities and federal laboratories.

Investments

Pursuant to the requirements of the 1940 Act, our Board of Directors is
responsible for determining, in good faith, the fair value of our securities and
assets for which market quotations are not readily available. In making its
determination, the Board of Directors has considered valuation appraisals
provided by an independent financial expert. With respect to private equity
securities, each investment is valued using industry valuation benchmarks, and
then the value is assigned a discount reflecting

10



---



##### Table of Contents



the illiquid nature of the
investment as well as our minority, non-control position. When an external event
such as a purchase transaction, public offering, or subsequent equity sale
occurs, the pricing indicated by the external event is used to corroborate our
private equity valuation. Equity securities in public companies that carry
certain restrictions on sale are generally valued at a discount from the public
market value of the securities.

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

Without a readily ascertainable market value, the estimated value of our
portfolio of equity securities may differ significantly from the values that
would be placed on the portfolio if there existed a ready market for such equity
securities. Equity securities at June 30, 2002 and December 31, 2001 (99.6% and
100.8% of net assets, respectively) are stated at fair value as determined by
the Board of Directors, in the absence of readily ascertainable fair values.

Revenue Recognition

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

In addition to technology transfer merger transactions; we have put in place
the strategic alliance agreement. A method of technology transfer already being
used by PAX Technology Transfer Ltd., the strategic alliance agreement is a
service agreement in which UTEK provides consulting services by identifying and
evaluating technology acquisition opportunities. The contract term is usually
one year, and the form of payment for UTEK customers, (as with the merger
transactions) is in the form of unregistered shares of the company for which the
services are provided.

Revenues from strategic alliance agreements in which shares of common stock
are received before they are earned, are deferred and recognized over the term
of each agreement, typically twelve months. For strategic alliance agreements in
which the stock is received ratably over the agreement, revenue is recognized as
earned. The common stock received is recorded as an investment at fair value as
determined by the Board of Directors. These agreements are cancelable at any
time.

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

Research and Development

Research and development costs consist of expenditures incurred during the
course of planned search and investigation aimed at discovery of new knowledge
that will be useful in developing new products or processes. The Company
expenses all research and development costs as they are incurred. During the six
months ended June 30, 2002 and 2001, the Company incurred $-0- and $356,000,
respectively, in such costs.

Foreign currency translation

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

Impact of New Accounting Standards

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets(SFAS 142). SFAS 142 revises the standards of accounting for
goodwill and indefinite-lived intangible assets. SFAS 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives

11



---



##### Table of Contents



and
requires that these assets be reviewed for impairment at least annually, or more
frequently if impairment indicators arise. Intangible assets with finite lives
will continue to be amortized over their estimated useful lives. The
non-amortization provisions of SFAS 142 apply to goodwill and indefinite lived
intangible assets acquired in a business combination after June 30, 2001. As a
result, the goodwill recorded in connection with the Companys September 2001
acquisition of PAX Technology Transfer Ltd. will not be amortized. Effective
January 1, 2002, the Company had fully adopted the provisions of SFAS 142.

The provisions of SFAS 142 require that a transitional impairment test for
goodwill be performed as of the adoption date. The Company has performed this
test and has determined that there is no impact in applying SFAS 142 in its
financial statements. On an ongoing basis, absent any impairment indicators, the
Company expects to perform its annual evaluation during the fourth quarter.

On October 3, 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS 144 supercedes SFAS 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of. SFAS 144 applies to all long-lived assets (including discontinued
operations) and consequently amends Accounting Principles Board Opinion No. 30.
SFAS 144 develops one accounting model for long-lived assets that are to be
disposed of by sale. SFAS 144 requires that long-lived assets that are to be
disposed of by sale be measured at the lower of book value or fair value less
cost to sell. Additionally, SFAS 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. The Company has
fully adopted the provisions of SFAS 144 and has determined there is no impact
as a result of the adoption.

2. Investments

Equity securities at June 30, 2002 and December 31, 2001, (99.6 % and 100.8%
of net assets, respectively) were valued at fair value as determined by the
Board of Directors, with the assistance of appraisals provided by an independent
financial expert, in the absence of readily ascertainable market values.

The values assigned to these securities are based upon available
information and do not reflect amounts that could be realized upon immediate
sale, nor amounts that ultimately may be realized. Accordingly, the fair values
included in the accompanying schedule of investments may differ from the values
that would have been used had a ready market existed for these securities and
such differences could be significant.

As of June 30, 2002 and December 31, 2001, the Company had established four
portfolio companies with $-0- net assets.

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

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

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

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

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

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

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

On October 29, 2001, the Company received 1,000,000 unregistered shares of
common stock from Primapharm Funding Corporation in connection with a strategic
alliance agreement. The Company has recognized consulting fees to date relating
to 641,781 shares.

12



---



##### Table of Contents



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

On November 28, 2001, the Company received 400,000 unregistered shares of
common stock from Palladium Communications, Inc. (formerly known as
USAOnestar.net, Inc.) in a strategic alliance agreement. The Company has
recognized consulting fees to date relating to 242,740 shares.

On January 11, 2002, the Company entered into a strategic alliance
agreement with Circle Group Internet, Inc. The agreement provides for a total of
48,000 unregistered shares of Circle Group Internet, Inc.s common stock to be
distributed to the Company pro rata during the term of the agreement. The
Company has received and recognized to date consulting fees in relation to
20,000 unregistered shares of Circle Group Internet, Inc.

On January 21, 2002, the Company received 114,276 unregistered shares of
Group Management Corporations common stock in connection with a strategic
alliance agreement. The Company has recognized consulting fees to date related
to 47,615 shares. The strategic alliance was cancelled in June 2002 and 66,661
shares were returned to Group Management Corporation.

On February 11, 2002, the Company entered into a strategic alliance
agreement with Voice and Wireless Corporation. The agreement provides for a
total of 540,000 unregistered shares of Voice and Wireless Corporations common
stock to be distributed to the Company pro rata during the term of the
agreement. The Company received and recognized to date consulting fees in
relation to 225,000 unregistered shares of Voice and Wireless Corporation.

On April 2, 2002, the Company received 48,000 unregistered shares of common
stock from Hydrogen Technology Applications, Inc. in a strategic alliance
agreement. The Company has recognized consulting fees to date relating to 12,000
shares.

On May 7, 2002, the Company sold its Nitrone Scientific, Inc. portfolio
company to Prime Pharmaceutical Corporation for 683,550 shares of Prime
Pharmaceutical Corporations common stock in a non-taxable exchange.

On May 7, 2002, the Company sold its Digital Image Enhancement
Technologies, Inc. portfolio company to Image Analysis, Inc. for 465,000
unregistered shares of Image Analysis, Inc.s common stock in a non-taxable
exchange.

On May 31, 2002, the Company received 30,000 unregistered shares of common
stock from Full Circle Registry, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 2,500 shares.

On June 11, 2002, the Company sold its Energy Management Technologies, Inc.
portfolio company to Voice and Wireless Corporation for 318,750 unregistered
shares of Voice and Wireless Corporations common stock in a non-taxable
exchange.

On June 12, 2002, the Company sold its Electronic Luminescent Technologies,
Inc. portfolio company to Full Circle Registry, Inc. for 68,250 unregistered
shares of Full Circle Registry, Inc.s common stock in a non-taxable exchange.

3. Income Taxes

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

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

4. Commitments and Contingencies

On September 10, 2001, the Company secured a $500,000 revolving line of
credit with a local financial institution. Advances under the line of credit
bear interest at the financial institutions prime rate less .25%. The line of
credit is due on demand and is secured by a pledge of a portion of our
investments in non-controlled affiliates. At June 30, 2002 and December 31,
2001, we had no borrowings outstanding under the line of credit.

13



---



##### Table of Contents



5. Acquisition of Techex Acquisition Corporation

In May 2002, UTEK Corporation acquired 100% of the outstanding common stock
of Techex Acquisition Corporation in a stock for stock transaction. TechEx held
the TechEx.com website. The TechEx.com website is used by many technology
transfer and research professionals to efficiently exchange licensing
opportunities and innovations available for partnering. The acquisition,
recorded under the purchase method of accounting, included the purchase of all
outstanding shares of Techex Acquisition Corporation. The purchase price has
been allocated to assets acquired. The Company completed the acquisition for
$70,900 in UTEK Corporation common stock, (10,000 shares based on the closing
price at May 31, 2002). There was no goodwill associated with
this transaction. There were no operating results for Techex Acquisition
Corporation for the three and six month period ended June 30, 2002.

6. Subsequent Events

Effective as of September 1, 2002, Uwe Reischl, our President will leave
the Company to pursue other business interests.

On July 2, 2002, the Company filed Form S-8, Registration Statement Under
the Securities Act of 1933, for the registration of 500,000 shares of the
Companys common stock that may be issued upon exercise of stock options granted
pursuant to the UTEK Corporation Stock Option Plan and 250,000 shares of the
Companys common stock that may be issued upon exercise of stock options granted
pursuant to the 2000 Non-Qualified Stock Option Plan of UTEK Corporation.

Subsequent to
June 30, 2002, three companies that the Company has investments
inLexon, Inc., Image Analysis, Inc., and Centrex,
Inc.have received notices of termination of certain licenses
which these companies hold. As of June 30, 2002, the fair value
of the investments in these companies totaled approximately
$3.2 million. The notices are based upon the allegations of the
licensor that these companies are in material default of certain
terms and provisions of their license agreements. The licensor has
given these companies until September 14, 2002 to cure the
alleged default. These companies are controlled by the same group of
shareholders. The Company is not a party to these license disputes;
however, these companies did acquire the disputed licenses in
transactions with the Company.

The Company has a
significant investment in these companies and the underlying licenses
have a material effect on the valuation of these companies, the
failure of these companies to successfully negotiate or cure the
alleged breaches would have a material adverse effect on the
valuation of these companies. There can be no assurance that these
companies will be able to cure the alleged breaches. A failure to
cure the alleged breaches would have a material negative impact on the
Companys financial condition and results of operations.

14



---



##### Table of Contents






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

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. You should understand that our reported operating results, financial
condition and changes in financial condition depend on estimates and assumptions
we use in applying these significant accounting policies. On a regular basis,
management reviews these estimates and assumptions including those related to
revenue recognition and the valuation of investments.

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

Revenue Recognition

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

Revenues from strategic alliance agreements in which shares of common stock
are received before they are earned, are deferred and recognized over the term
of each agreement, typically twelve months. For strategic alliance agreements in
which the stock is received ratably over the agreement, revenue is recognized as
earned. The common stock received is recorded as an investment at fair value as
determined by the Board of Directors. These agreements are cancelable at any
time.

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

Valuation of Investments

The income that we derive from our investments in our portfolio companies
consists of both cash and equity securities that we receive upon disposition of
our portfolio companies. The value of the equities that we receive makes up most
of our revenues. Pursuant to the requirements of the 1940 Act, our Board of
Directors is responsible for determining in good faith the fair value of our
securities and assets for which market quotations are not readily available. In
making its determination, the Board of Directors has considered valuation
appraisals provided by an independent financial expert. With respect to private
equity securities, each investment is valued using industry valuation
benchmarks, and then the value is assigned a discount reflecting the illiquid
nature of the investment as well as our minority, non-control position. When an
external event such as a purchase transaction, public offering, or subsequent
equity sale occurs, the pricing indicated by the external event is used to
corroborate our private equity valuation. Equity securities in public companies
that carry certain restrictions on sale are generally valued at a discount from
the public market value of the securities.

15



---



##### Table of Contents



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.

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

Without a readily ascertainable market value, the estimated value of our
portfolio of equity securities may differ significantly from the values that
would be placed on the portfolio if there existed a ready market for such equity
securities. Any changes in estimated value are recorded in the Companys
Statement of Operations as Net realized and unrealized gains (losses) during
the period of change. For the six months ended June 30, 2002, our net asset
value per share would have decreased by approximately $0.22 per share if our
estimate of the fair value of our portfolio assets had been 10% lower.

GENERAL

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

The income that we derive from our investments in our portfolio companies
consists of both cash and equity securities that we receive upon disposition of
our portfolio companies. The value of the equities that we receive makes up most
of our revenues. Pursuant to the requirements of the 1940 Act, our Board of Directors is responsible for
determining in good faith the fair value of our securities and assets for which
market quotations are not readily available. In making its determination, the
Board of Directors has considered valuation appraisals provided by an
independent financial expert. With respect to private equity securities, each
investment is valued using industry valuation benchmarks, and then the value is
assigned a discount reflecting the illiquid nature of the investment as well as
our minority, non-control position. When an external event such as a purchase
transaction, public offering, or subsequent equity sale occurs, the pricing
indicated by the external event is used to corroborate our private equity
valuation. Equity securities in public companies that carry certain restrictions
on sale are generally valued at a discount from the public market value of the
securities.

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

Without a readily ascertainable market value, the estimated value of our
portfolio of equity securities may differ significantly from the values that
would be placed on the portfolio if there existed a ready market for such equity
securities. Any changes in estimated value are recorded in the Companys
Consolidated Statement of Operations as Net realized and unrealized gains
(losses) during the period of change.

We have retained Bolten Financial Consulting, Inc. to provide us with
valuations of the securities we receive in exchange for portfolio companies,
updated to each quarterly valuation date. We pay Bolten Financial Consulting,
Inc. a fee each time it values our investments. For the six months ended June
30, 2002 and 2001, we paid Bolten Financial Consulting, Inc. a total of $39,997
and $23,951, respectively, for its valuation services.

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

Financial Condition

The Companys total assets were $9,832,501 and its net assets were
$8,446,978 at June 30, 2002, compared to $12,410,958 and $9,909,440 at December
31, 2001, respectively.

16



---



##### Table of Contents



Net asset value per share (NAV) was $2.15 at June 30, 2002, compared to
$2.53 at December 31, 2001. Net assets decreased by $1,462,462 in the six months
ended June 30, 2002 and increased by $1,454,438 in the year ended December 31,
2001.

The Companys common shares outstanding as of June 30, 2002 and December
31, 2001 were 3,925,672 and 3,915,672, respectively.

The Companys financial condition is dependent on a number of factors
including the ability to effectuate technology transfers and the performance of
the equity stakes that we receive for these transfers. The Company has invested
a substantial portion of its assets in private development stage or start-up
companies. These private businesses are thinly capitalized, unproven, small
companies that lack management depth, are dependent on new, commercially
unproven technologies and have no history of operations. At June 30, 2002,
$3,018,827 or 31% of the Companys total assets consisted of investments at fair
value in publicly traded securities, of which net unrealized depreciation, after
income tax effect, was ($1,660,062); the remaining $5,398,375 of the investments
which represents 55% of the Companys total assets consisted of non-publicly
traded securities at fair value of which net unrealized depreciation, after
income tax effect, was ($61,696). See Note 2 to the accompanying consolidated
financial statements.

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

|                                           |  |             |            |              |  |   |            |  
|------------------------------------------ |  | ----------- | ---------- | ------------ |  | - | ---------- | -
|                                           |  | June
30,    |            | December 31,
|                                           |  | 2002        |            | 2001        
|                                           |  |             |            |             
|                                           |  | (Unaudited) |            |              |  |  
|Investments, at cost                       |  | $           | 11,177,757 |              |  | $ | 10,018,958 |  
|Unrealized depreciation, before income tax |  |             | (2,760,555 | )            |  |   | (30,186    | )
|                                           |  |             |            |              |  |   |            |  
|Investments, at fair value                 |  | $           | 8,417,202  |              |  | $ | 9,988,772  |  
|                                           |  |             |            |              |  |   |            |  

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

Results of Operations

The Company accounts for its operations under generally accepted accounting
principles for investment companies. On this basis, the principal measure of a
Companys financial performance is the Net increase (decrease) in net assets
from operations which is the sum of three elements. The first element is Net
income (loss) from operations, which is the difference between the Companys
income from technology transfers, consulting fees, interest, dividends, fees and
other income and its operating expenses, net of applicable income tax provision.
The second element is Net realized gain (loss) on investment, which is the
difference between the proceeds received from dispositions of portfolio
securities and their stated cost, net of applicable income tax provision. The
third element, Increase (decrease) in unrealized appreciation on investments,
is the net change in the fair value of the Companys investment portfolio, net
of increase (decrease) in deferred income taxes that would become payable if the
unrealized appreciation were realized through the sale or other disposition of
the investment portfolio.

Three months ended June 30, 2002 compared to the three months ended June 30, 2001.

Income from operations.Income from operations increased 18% to $1,957,260
for the three months ended June 30, 2002 from $1,657,259 for the three months
ended June 30, 2001. For the three months ended June 30, 2002,
approximately 87% of our income from operations (revenue) was
received in the form of stock, which was received for the sale of
technology rights and for providing consulting services. The increase in income from operations resulted from
services rendered in connection with seven strategic alliances (two of which
began in the three months ended June 30, 2002) valued at $168,964, as well as
consulting income from the wholly owned subsidiary PAX Technology Transfer, Ltd.
(PAX) of $141,513. PAX was not acquired until September 28, 2001; therefore no
income was included from their operations in the three months ended June 30,
2001. During the three months ended June 30, 2002, we completed four sales of
technology rights valued at $1,623,104, compared to two sales valued
at $1,637,500 for the three months

17



---



##### Table of Contents



ended June 30, 2001. Our Board of Directors
determines the fair value of the shares we receive in the absence of readily
ascertainable market values. In making its determination, the Board of Directors
has considered valuation appraisals provided by an independent financial expert.
During the three months ended June 30, 2002, we completed transactions with
Prime Pharmaceutical Corporation, in which we received 683,550 shares of
unregistered common stock of Prime Pharmaceutical Corporation that were valued
at the time of sale at $.435 per share; with Image Analysis, Inc., in which we
received 465,000 shares of unregistered common stock of Image Analysis, Inc.
valued at the time of sale at $2.43; with Voice and Wireless Corporation in
which we received we received 318,750 unregistered shares of Voice and Wireless
Corporation valued at the time of sale at $.094; and with Full Circle Registry,
Inc., in which we received 68,250 of unregistered common stock of Full Circle
Registry, Inc. valued at the time of sale at $2.43.

Expenses.Total operating expenses for the three months ended June 30, 2002
were $1,132,500 consisting of salaries and wages of $208,013, professional fees
of $154,519, sales and marketing expenses of $344,463, and general and
administrative expenses of $425,505. These expenses compared to the $837,571
reported for the three months ended June 30, 2001, consisting of salaries and
wages of $118,398, professional fees of $81,221, sales and marketing expenses of
$442,110, and general and administrative expenses of $195,842. The 35% increase
in total operating expenses was due to the increased number of employees
including the PAX employees, the operating costs of PAX, the cost of recruiting
new employees, increased costs of insurance and professional fees, costs to
related financing efforts and our ongoing effort to develop the UTEK U2B(®)
brand. The 22% decrease in sales and marketing expenses was due to lower costs
related to the sales of technology rights. The 76% increase in salaries and
wages reflects increased salary costs as well as the addition of one full-time
UTEK employee and the PAX employees. The 90% increase in professional fees is
largely due to the costs associated with increased audit fees, valuation fees,
as well as legal costs related to financing efforts. The 117% increase in
general and administrative costs is largely due to costs of recruiting new
employees, an increase in insurance, printing costs, new stock exchange fees, as
well as the costs related to financing efforts.

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

Net Realized and Unrealized Gains (Losses) and Income Taxes.Net realized
losses on investments amounted to $74,540 for the three months ended June 30,
2002 and related to sale of 23,000 shares of Advanced Recycling Sciences, Inc.
common stock for $9,260 in cash and the sale of 180,854 shares of Torvec, Inc.
common stock for $253,374 in cash during the reporting period. Net realized
losses on investments amounted to $911 for the three months ended June 30, 2001
and related to the sale of 78,629 shares of its Lexon, Inc. common stock for
$23,700 in cash during the reporting period.

The net unrealized depreciation of investments increased by $1,489,108 for
the three months ended June 30, 2002, versus an increase in unrealized
appreciation of $105,607 for the three months ended June 30, 2001. The net
unrealized depreciation consisted of a net decline in the fair value resulting
from the Board of Directors valuation of the Companys assets for the three
months ended June 30, 2002. The net decline in fair value of our portfolio was
primarily a result of an overall decline in value of the United States Stock
Markets. There were declines in value related to all of our investments with the
exception of our investments in Torvec, Inc., Centrex, Inc. and Primapharm
Funding Corporation which had increases in value for the quarter ended June 30,
2002.

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

Our effective tax rate was a provision of 37% and 38%, respectively for the
three months ended June 30, 2002 and June 30, 2001.

Subsequent to
June 30, 2002, three companies that the Company has investments
inLexon, Inc., Image Analysis, Inc., and Centrex,
Inc.have received notices of termination of certain licenses
which these companies hold. As of June 30, 2002, the fair value
of the investments in these companies totaled approximately
$3.2 million. The notices are based upon the allegations of the
licensor that these companies are in material default of certain
terms and provisions of their license agreements. The licensor has
given these companies until September 14, 2002 to cure the
alleged default. These companies are controlled by the same group of
shareholders. The Company is not a party to these license disputes;
however, these companies did acquire the disputed licenses in
transactions with the Company.

The Company has a
significant investment in these companies and the underlying licenses
have a material effect on the valuation of these companies, the
failure of these companies to successfully negotiate or cure the
alleged breaches would have a material adverse effect on the
valuation of these companies. There can be no assurance that these
companies will be able to cure the alleged breaches. A failure to
cure the alleged breaches would have a material negative impact on the
Companys financial condition and results of operations.

Six months ended June 30, 2002 compared to the six months ended June 30, 2001.

Income from operations.Income from operations decreased 30% to $2,227,214
for the six months ended June 30, 2002 from $3,163,160 for the six months ended
June 30, 2001. For the six months ending June 30, 2002,
approximately 89% of our income from operations (revenue) was
received in the form of stock, which was received for the sale of
technology rights and for providing consulting services. The decrease in income from operations resulted from completing
four sales of technology rights with substantially less value attributed to such
transactions, which was offset by an increase in consulting income from services
rendered in connection with seven strategic alliances (five of which began in
the six months ended June 30, 2002) valued at $357,475, as well as consulting
income from the wholly owned subsidiary PAX Technology Transfer, Ltd. (PAX) of
$216,938. PAX was not acquired until September 28, 2001, therefore no income was
included from their operation in the six months ended June 30,2001. As described
below, in the six months ended June 30, 2002 we completed four sales of
technology rights valued at $1,623,104, compared to three sales of technology
rights valued at $3,083,653 for the six months ended June 30, 2001. Our Board of
Directors determines the fair value of the shares we receive in the absence of
readily ascertainable market values. In making its determination, the Board of
Directors has considered valuation

18



---



##### Table of Contents



appraisals provided by an independent
financial expert. During the six months ended June 30, 2002, we completed
transactions with Prime Pharmaceutical Corporation, in which we received 683,550
shares of unregistered common stock of Prime Pharmaceutical Corporation that
were valued at the time of sale at $.435 per share; with Image Analysis, Inc.,
in which we received 465,000 shares of unregistered common stock of Image
Analysis, Inc. valued at the time of sale at $2.43; with Voice and Wireless
Corporation, in which we received 318,750 unregistered shares of Voice and
Wireless Corporation valued at the time of sale at $.094; with Full Circle
Registry, Inc., in which we received 68,250 of unregistered common stock of Full
Circle Registry, Inc. valued at the time of sale at $2.43; with Bitzmart, Inc.,
in which we received 450,000 shares of common stock valued at the time of sale
at $2.31 per share; with Sense Holdings, Inc., in which we received 1,850,000
shares valued at the time of sale at $.26 per share; and with Advanced Recycling
Sciences, Inc. (formerly The Quantum Group, Inc.), in which we received
1,446,153 shares of common stock valued at the time of sale at $1.00 per share.

Expenses.Total operating expenses for the six months ended June 30, 2002
were $1,824,406 consisting of salaries and wages of $418,977, professional fees
of $311,761, sales and marketing expenses of $440,143, and general and
administrative expenses of $653,525. These expenses compared to the $1,482,436
reported for the six months ended June 30, 2001, consisting of salaries and
wages of $221,571, professional fees of $234,601, sales and marketing expenses
of $703,140, and general and administrative expenses of $323,124. The 23%
increase in total operating expenses was due to the increased number of
employees including the PAX employees, the operating costs of PAX, the cost of
recruiting new employees, increased costs of insurance, professional fees, costs
to related financing efforts and our ongoing effort to develop the UTEK U2B(®)
brand. The 37% decrease in sales and marketing expenses was due to lower costs
related to the sales of technology rights. The 89% increase in salaries and
wages reflects increased salary costs as well as the addition of one full-time
employee and the addition of PAX salaries. The 33% increase in professional fees
is largely due to the costs associated with increased audit fees and an increase
in valuation costs with the increased number of investments. The 102% increase
in general and administrative costs is largely due to costs of recruiting new
employees, an increase in insurance, printing costs, new stock exchange fees, as
well as the costs related to financing efforts.

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

Net Realized and Unrealized Gains (Losses) and Income Taxes.Net realized
losses on investments amounted to $102,519 for the six months ended June 30,
2002 and related to the sale of 58,100 shares of Advanced Recycling Sciences,
Inc. common stock for $29,256 in cash and the sales of 274,354 shares of Torvec,
Inc. common stock for $404,883 in cash during the reporting period. Net realized
losses on investments amounted to $1,321 for the six months ended June 30, 2001
and related to the sale of 147,629 share of Lexon, Inc. common stock for $45,125
in cash during the reporting period.

The net unrealized depreciation of investments increased by $1,702,931 for
the six months ended June 30, 2002, versus an increase in unrealized
appreciation of $320,195 for the six months ended June 30, 2001. The net
unrealized depreciation consisted of increases and declines in fair value
resulting from the Board of Directors valuation of the Companys assets for the
six months ended June 30, 2002. There were declines in value related to all of
our investments with the exception of our investments in Torvec, Inc. and
Primapharm Funding had which had increases in value for the six months ended
June 30, 2002.

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

Our effective tax rate was a provision of approximately 39% and 38%,
respectively for the six months ended June 30, 2002 and June 30, 2001.

Subsequent to
June 30, 2002, three companies that the Company has investments
inLexon, Inc., Image Analysis, Inc., and Centrex,
Inc.have received notices of termination of certain licenses
which these companies hold. As of June 30, 2002, the fair value
of the investments in these companies totaled approximately
$3.2 million. The notices are based upon the allegations of the
licensor that these companies are in material default of certain
terms and provisions of their license agreements. The licensor has
given these companies until September 14, 2002 to cure the
alleged default. These companies are controlled by the same group of
shareholders. The Company is not a party to these license disputes;
however, these companies did acquire the disputed licenses in
transactions with the Company.

The Company has a
significant investment in these companies and the underlying licenses
have a material effect on the valuation of these companies, the
failure of these companies to successfully negotiate or cure the
alleged breaches would have a material adverse effect on the
valuation of these companies. There can be no assurance that these
companies will be able to cure the alleged breaches. A failure to
cure the alleged breaches would have a material negative impact on the
Companys financial condition and results of operations.

Liquidity and Capital Resources

Net assets decreased 15% to $8,446,978 at June 30, 2002 from $9,909,440 at
December 31, 2001, attributable to income from operations and the acquisition of
Techex Acquisition Corporation (TechEx) offset by the unrealized depreciation
of non-controlled affiliate investments. TechEx held the TechEx.com website and
other intangible assets. The TechEx.com website is used by many technology
transfer and research professionals to efficiently exchange licensing
opportunities and innovations available for partnering.

Our primary source of liquidity through June 30, 2002 was from the and
sales of investments in non-controlled affiliates. Our income from operations
consists primarily of the sale of technology rights for equity securities rather
than cash. During the six months ended June 30, 2002, we generated $434,139 in
proceeds from sales of investments. During 2001, we completed a private
placement transaction resulting in proceeds of $375,617 and generated $395,342
in proceeds from sales of investments.

19



---



##### Table of Contents



On September 10, 2001, the Company secured a $500,000 revolving line of
credit with a local financial institution. Advances under the line of credit
bear interest at the financial institutions prime rate less .25%. The line of
credit is due on demand and is secured by a pledge of a portion of our
investments in non-controlled affiliates. At June 30, 2002 and December 31,
2001, we had no borrowings outstanding under the line of credit.

On June 30, 2002
and December 31, 2001, we had $643,242 and $1,432,473,
respectively, in cash and cash equivalents. While management believes that we
have the sufficient resources to meet our funding requirements for the remainder
of the year, we will need to complete additional financing initiatives
in 2002 or early 2003 to generate the liquidity necessary to continue
our operations. Due to current economic conditions, we may not be able
to secure additional financing on terms it deems acceptable. If we obtain
additional funds by selling any of our equity securities, the percentage
ownership of our stockholders will be reduced, stockholders may experience
additional dilution, or the equity securities may have rights, preferences or
privileges senior to the common stock. If we obtain additional funds by selling
our investments, there can be no assurance that we will be able to negotiate a
favorable price for those investments or that the loss of those investments will
not affect our future business prospects. If adequate funds are not available to
us on satisfactory terms, we may be required to limit our
marketing and research and development activities or other operations, or
otherwise modify our business strategy.

Impact of New Accounting Standards

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

The provisions of SFAS 142 require that a transitional impairment test for
goodwill be performed as of the adoption date. The Company has performed this
test and has determined there is no impact in applying SFAS 142 in its financial
statements. On an ongoing basis, absent any impairment indicators, the Company
expects to perform its annual evaluation during the fourth quarter.

Investment Considerations

Our quarterly and annual results could fluctuate significantly.

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

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

Our investment model is highly speculative since it involves making
investments in new development stage companies and having those companies invest
in new, untested technology. Furthermore, we have only been using our investment
model for a relatively short period of time and have little or no historical
information upon which to judge whether or not the model is successful. We
cannot assure you that our investment model will be successful or that any of
our investments will be successful.

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

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

20



---



##### Table of Contents



development of
these new technologies. In addition, for an investment to be successful, our
portfolio companies often must develop the technology and identify buyers who
are willing to acquire the technology, in exchange for their common stock or
other consideration. We cannot assure you that any of our portfolio companies
will be successful or that we will successfully sell our portfolio companies or
sell or relicense the technology rights held by our portfolio companies. We may
lose our entire investment in any or all of our portfolio companies.

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

Our portfolio companies depend upon the research activities of universities
and government research facilities. Neither we, nor our portfolio companies,
have any control over the research activities of universities and research
laboratories. As neither we, nor our portfolio companies provide supervision of
any university or laboratory research, we cannot warrant that the research will
be done properly and that the results, which we may license will be
reproducible. In addition, we have no control over what types of research are
presented to us by universities and government research facilities for
evaluation and commercial development. Further, the licenses to technologies
that our portfolio companies obtain may be non-exclusive. In the event that we
make an investment in a portfolio company, and we are unable to locate a new
technology to be acquired by the portfolio company, we could lose our entire
investment.

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

Neither our portfolio companies nor we have any control over the pace of
technology development. There is a significant risk that a portfolio company
could acquire the rights to a technology that is currently or is subsequently
made obsolete by other technological developments. We cannot assure you that any
of our portfolio companies will successfully acquire, develop and transfer any
new technology.

The patents on the technologies that our portfolio companies license may
infringe upon the rights of others and patent applications that 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, under Section 23 of the United States Code, the U.S.
government has the right to use technologies that it has funded regardless of
whether the technology has been licensed to a third party. Such regulations may
limit the marketability of a technology and therefore reduce the value of the
technology to our portfolio companies.

We may need to make additional investments in our portfolio companies to provide
them with capital to further develop licensed technologies.

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

21



---



##### Table of Contents



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

Our portfolio companies are all private entities and we acquire securities
in our portfolio company in private transactions. As a result, all of the
securities we hold in our portfolio companies are restricted securities, as
defined under the Securities Act of 1933, and are subject to restrictions on
resale. Furthermore, we do not anticipate that a public market will exist for
any of the securities we hold in our portfolio companies. Therefore, any sale or
other transfer of the securities we hold in portfolio companies will be made in
private transactions and we cannot assure you that we will be able to sell our
portfolio company securities for amounts equal to the values that we have
ascribed to them.

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

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

We have been dependent on a small number of
companies, several of which are controlled by the same
investor group for the purchase of our portfolio companies. We have only limited
experience selling our portfolio companies and of the nineteen transactions that
we have completed, seven have been to companies controlled by the same group of
investors.

As of June 30, 2002, we have completed only nineteen transactions,
including eighteen mergers and one stock sale, wherein we sold portfolio
companies to other companies and seven of these sales have been made to
companies that are controlled by the same investor group. As of
June 30, 2002, the same investor group had control of Lexon,
Inc., Image Analysis, Inc., Centrex, Inc., and Nubar, Inc. As a result, we have
only had the benefit and experience of negotiating such agreements with a small
number of investors. We cannot assure you that we will be able to successfully
negotiate merger transactions for the sale of our portfolio companies in the
future.

The agreements we have with universities do not guarantee that the universities
will grant licenses to our portfolio companies.

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

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

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

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

22



---



##### Table of Contents



When we sell a portfolio company, we receive common stock from the
acquiring company based upon the mutually agreed upon values of the portfolio
company, its licensed technology and the acquiring company. We then intend to
sell the securities that we acquire in exchange for our portfolio companies at
some time in the future. Therefore, our ability to profit from an investment in
a portfolio company is ultimately dependent upon the price we receive for the
shares of the acquiring company. In most cases, the companies that acquire our
portfolio companies will be dependent upon successfully commercializing the
technologies they acquire. We do not have control over the companies that
acquire our portfolio companies and we do not intend to provide them with
managerial assistance. These operating companies may face intense competition,
including competition from companies with greater financial resources, more
extensive research and development, manufacturing, marketing and service
capabilities and a greater number of qualified and experienced managerial and
technical personnel. They may face additional risks of product and technological
obsolescence and government regulation over which we will have little or no
control. They may need additional financing which they are unable to secure and
we are unable or unwilling to provide or they may be subject to adverse
developments unrelated to the technologies they acquire. We cannot assure you
that any of the companies that acquire our portfolio companies will be
successful or that we will be able to sell the securities we receive at a profit
or for sufficient amounts to even recover our initial investment in the
portfolio company.

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

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

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

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

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

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

As of June 30, 2002, all of the securities we have received in exchange for
our portfolio companies and in connection with strategic alliances are
restricted securities, as such term is defined under Rule 144 of the
Securities Act of 1933. These shares are restricted securities because they were
issued in private transactions not involving a public offering and may not be
sold in the absence of registration other than in accordance with Rule 144 under
the Securities Act of 1933 or another exemption from registration. As a result
of such restrictions, our ability to sell or otherwise transfer the securities
will be limited. We cannot assure you that we will be able to receive upon
resale, the recorded value of our portfolio company securities.

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

At June 30, 2002, we have completed nineteen sales of portfolio companies.
Of these sales, eleven have been to companies that are currently public, and the
remaining transactions have been with non-public companies. We are substantially
dependent upon the ability of non-public acquirers of our portfolio companies to
implement a plan, which would facilitate a trading market for their securities,
or other strategy, which would allow for the potential sale of our ownership
interest. In addition, to the extent that we own more than 10% of an acquirers
shares, we may be deemed to be an affiliate of the acquirer which would limit
our ability to dispose of securities

23



---



##### Table of Contents



we receive for our portfolio companies.
Further, our ability to sell the securities we receive for our portfolio
companies may be limited by, and subject to, the lack of or limited nature of a
trading market for the securities and the volatility of the stock market as a
whole. Such limitations could prevent or delay any sale of our investments or
significantly reduce the amount of proceeds, if any, that might otherwise be
realized there from. The values we place on our investments may not accurately
reflect their future value or the value that we will receive for them when we
sell them.

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

At June 30, 2002 and December 31, 2001 respectively, equity securities
amounting to $8,417,202 or 99.6% of net assets and $9,988,772 or 100.8% of net
assets, have been valued at fair value as estimated by our Board of Directors.
As a general matter, restricted securities and securities without an active
trading market are more difficult to accurately value than unrestricted,
actively traded securities of public companies. Pursuant to the requirements of
the 1940 Act, the Board of Directors is responsible for determining in good
faith the fair value of our securities and assets for which market quotations
are not readily available. In making its determination, the Board of Directors
has considered valuation appraisals provided by an independent financial expert.
If we were required to sell any of such investments, there is no assurance that
the fair value, as determined by the Board of Directors, would be obtained. If
we were unable to obtain fair value for such investments, there would be an
adverse effect on our net asset value and on the price of our common stock.

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

We have adopted two stock option plans under which certain of our
employees, officers and directors may be granted options. As of June 30, 2002,
we have granted options to purchase 697,500 shares of our common stock to
certain officers and employees. We have also reserved an additional 52,500
shares of our common stock for issuance under our two stock option plans to key
employees and directors. In addition, we have issued warrants to the
underwriter, upon payment of the purchase price of $.0003 per warrant, to
purchase 100,000 shares of common stock at an exercise price of $9.90 per share.
The warrants expire on October 25, 2005. The issuance and sale of these shares
of common stock will dilute the ownership interest of investors and may have an
adverse effect on the price of our common stock.

Our business depends on key personnel.

We rely, and will continue to be substantially dependent upon, the
continued services of our management, principally our Chief Executive Officer
and Chairman of the Board, 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 their
relationships with companies in the private sector in order to effectuate the
sale of our portfolio companies.

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

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

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

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

24



---



##### Table of Contents



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

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

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

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

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

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

Clifford M. Gross, our Chief Executive Officer and Chairman, beneficially
owns approximately 50% of our common stock as of June 30, 2002. Therefore, Dr.
Gross will be able, among other things, to elect directors, change our
investment policies, and withdraw our election to operate as a BDC.

We are dependent upon the availability of additional financings.

On June 30, 2002
and December 31, 2001, we had $643,242 and $1,432,473,
respectively, in cash and cash equivalents. While management believes that we
have the sufficient resources to meet our funding requirements for the remainder
of the year, we will need to complete additional financing initiatives
in 2002 or early 2003 to generate the liquidity necessary to continue
our operations. Due to current economic conditions, we may not be able
to secure additional financing on terms it deems acceptable. If we obtain
additional funds by selling any of our equity securities, the percentage
ownership of our stockholders will be reduced, stockholders may experience
additional dilution, or the equity securities may have rights, preferences or
privileges senior to the common stock. If we obtain additional funds by selling
our investments, there can be no assurance that we will be able to negotiate a
favorable price for those investments or that the loss of those investments will
not affect our future business prospects. If adequate funds are not available to
us on satisfactory terms, we may be required to limit our
marketing and research and development activities or other operations, or
otherwise modify our business strategy.

25



---



##### Table of Contents






ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS

There has been no material change in the qualitative and quantitative
disclosures about market risk since December 31, 2001.

PART II  OTHER INFORMATION




Item 1. Legal Proceedings

Although the Company may from time to time be involved in litigation and
claims arising out of its operations in the normal course of our business, as of
June 30, 2002, the Company was not a party to any material pending legal
proceedings.




Item 2. Changes in Securities and Use of Proceeds

On May 31, 2002, the Company issued 10,000 shares of unregistered common
stock to acquire 100% of the outstanding shares of common stock of Techex
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of
Intellectual Property Technology Exchange, Inc., in a tax-free stock for stock
exchange. Techex Acquisition Corporation held the TechEx.com website certain
intangible assets. The value of the consideration paid by UTEK Corporation was
estimated at $70,900 based on the closing price of $7.09 of UTEK Corporation on
May 31, 2002. The shares of common stock were deemed to be exempt from
registration under the Securities Act of 1933 in reliance on section 4(2)
thereunder.




Item 3. Defaults upon Senior Securities

Not Applicable.




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

The Company held its annual meeting on May 20, 2002. The following
directors were elected to continue their terms as director: Clifford M. Gross,
Sam Reiber, Stuart Brooks, Kwabena Gyimah-Brempong, Arthur Chapnik, Carl Nisser,
and John Micek. Each director with the exception of Sam Reiber received
3,098,205 votes in favor, 1,800 votes withheld. Sam Reiber received 3,078,205
votes in favor, with 21,800 votes withheld.

The other proposal brought for a vote at the annual meeting was to ratify
the selection of Ernst & Young, LLP as the Companys independent accountants for
the year ended December 31, 2002. Votes cast were as follows: 3,078,205 votes
for the proposal, 800 against, and 1,500 abstentions.




Item 5. Other Information

On August 2, 2002, the Company announced that its President, Uwe Reischl,
Ph.D., M.D., had submitted his resignation effective September 1, 2002. Dr.
Reischl will pursue other interests.

26



---



##### Table of Contents






Item 6. Exhibits and Reports on Form 8-K

(a)  List of exhibits.

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

|           |  |                                                                                                                                                                                  
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.(i)(1)   |  | Certificate of Incorporation, dated July 6, 1999, as filed and
recorded with the Secretary of State of the State of Delaware on
July 13, 1999.                                   
|          
|3.(ii)(2)  |  | Certificate of Amendment to Certificate of Incorporation, dated
October 14, 1999, as filed and recorded with the Secretary of
State of the State of Delaware on October 15, 1999.
|          
|3.(iii)(3) |  | By-Laws of UTEK Corporation.                                                                                                                                                     
|          
|3.(iv)(4)  |  | Certificate of Amendment to Certificate of Incorporation, dated
October 14, 1999, as filed and recorded with the Secretary of
State of the State of Delaware on July 24, 2001.   
|          
|4.1(4)     |  | Form of Representatives Warrant.                                                                                                                                                
|          
|4.2(5)     |  | Certificate of Merger of UTEK Corporation and UTEK LLC, dated
October 18, 1999, as filed and recorded with the Secretary of
State of the State of Delaware on October 25, 1999.  
|          
|4.3(6)     |  | Specimen Common Stock Certificate.                                                                                                                                               
|          
|99.1       |  | Certification of Clifford M. Gross Pursuant to 18
U.S.C. 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                             
|          
|99.2       |  | Certification of Michael O. Sullivan Pursuant to 18
U.S.C. 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                           



---

|(1) |  | Incorporated by reference to Exhibit 3.1 to the Companys registration
statement on Form N-2A filed with the Commission on October 2, 2000
(File No. 333-93913).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference to Exhibit 3.2 to the Companys registration
statement on Form N-2A filed with the Commission on October 2, 2000
(File No. 333-93913).
|   
|(3) |  | Incorporated by reference to Exhibit 3.3 to the Companys registration
statement on Form N-2A filed with the Commission on October 2, 2000
(File No. 333-93913).
|   
|(4) |  | Incorporated by reference to Exhibit 4.1 to the Companys registration
statement on Form N-2A filed with the Commission on October 2, 2000
(File No. 333-93913).
|   
|(5) |  | Incorporated by reference to Exhibit 4.2 to the Companys registration
statement on Form N-2A filed with the Commission on October 2, 2000
(File No. 333-93913).
|   
|(6) |  | Incorporated by reference to Exhibit 4.3 to the Companys registration
statement on Form N-2A filed with the Commission on October 2, 2000
(File No. 333-93013).

(b)  Reports on Form 8-K.

The Company filed a Current Report on Form 8-K on May 22, 2002 regarding the
disposition of Digital Image Enhancement Technologies, Inc. and Nitrone
Scientific, Inc.

The Company filed a Current Report on Form 8-K on June 17, 2002 regarding the
acquisition of Techex Acquisition Corporation.

The Company filed a Current Report on Form 8-K on June 26, 2002 regarding the
disposition of Energy Management Technologies, Inc. and Electronic Luminescent
Technologies, Inc.

27



---



##### Table of Contents






SIGNATURES

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

|                      |  |                                                       
|--------------------- |  | ------------------------------------------------------
|                      |  | UTEK CORPORATION                                      
|                      |  |                                                       
|                      |  | (Registrant)                                          
|                     
|                     
|                     
|Date: August 13,
2002 |  |                                                       
|                      |  | /s/ Clifford M.
Gross                                 
|                      |  | Clifford M. Gross
Chairman and Chief Executive Officer
|                     
|                     
|Date: August 13,
2002 |  |                                                       
|                      |  | /s/ Michael O.
Sullivan                               
|                      |  | Michael O. Sullivan
Chief Financial Officer           

28