##### Table of Contents



SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

FORM 10-Q

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



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FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 2003

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 33563
(Address of Principal Executive Offices)

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

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods as the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  YES x NO o

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

On August 6, 2003, there were 4,263,172 shares outstanding of the
Registrants common stock, $0.01 par value.



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Page 1 of 36



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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 4. CONTROLS AND PROCEDURES                                    
|PART II   OTHER INFORMATION              
|                                           | 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                                                         
|Ex-10.1 License Agreement with the (NIOSH)
|Ex-31.1 Section 302 CEO Certification     
|Ex-31.2 Section 302 CFO Certification     
|Ex-32.1 Section 906 CEO Certification     
|Ex-32.2 Section 906 CFO Certification     



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##### Table of Contents



UTEK CORPORATION

FORM 10-Q INDEX

|                               |                                                                                               |  |    |    |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- |  | -- | -- |  |  |  |  | 
|PART I  FINANCIAL INFORMATION |                                                                                               |  |    |    |  | 
|                               | Item 1. Financial Statements                                                                  |  |    |    |  |  | 
|                               | Consolidated Balance Sheets as of June 30, 2003 (unaudited) and December 31, 2002             |  |    | 3  | 
|                               | Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2003        |  |    |    | 
|                               | and 2002 (unaudited)                                                                          |  |    | 4  | 
|                               | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002         |  |    |    | 
|                               | (unaudited)                                                                                   |  |    | 5  | 
|                               | Consolidated Statements of Changes in Net Assets for the Six Months Ended June 30, 2003       |  |    |    | 
|                               | and 2002 (unaudited)                                                                          |  |    | 6  | 
|                               | Financial Highlights for the Six Months Ended June 30, 2003 and 2002 (unaudited)              |  |    | 7  | 
|                               | Schedule of Investments as of June 30, 2003 (unaudited) and December 31, 2002                 |  |    | 8  | 
|                               | Notes to Consolidated Financial Statements (unaudited)                                        |  |    | 12 | 
|                               | Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 18 |   
|                               | Item 3.
Quantitative and Qualitative Disclosures about Market Risk                            |  | 29 |   
|                               | Item 4.
Controls and Procedures                                                               |  | 29 |   
|PART II  OTHER INFORMATION    |                                                                                               | 
|                               | Item 1. Legal Proceedings                                                                     |  | 30 |   
|                               | Item 2.
 Changes in Securities and Use of Proceeds                                            |  | 30 |   
|                               | Item 3.
 Defaults Upon Senior Securities                                                      |  | 30 |   
|                               | Item 4.
Submission of Matters to a Vote of Security Holders                                   |  | 30 |   
|                               | Item 5.
Other Information                                                                     |  | 30 |   
|                               | Item 6.
Exhibits and Reports on Form 8-K                                                      |  | 30 |   
|                               | Signatures                                                                                    |  | 32 |   
|                               | Exhibits                                                                                      |  |    |   

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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




UTEK Corporation
Consolidated Balance Sheets

|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |         |           |            |  
|----------------------------- | --------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | --------- | ----------- | ---------- | ------------ | ------- | --------- | ---------- | -
|                              |                       |                                                                                                                                                                                       |                                                                          |           | June 30,    |            | December 31,
|                              |                       |                                                                                                                                                                                       |                                                                          |           | 2003        |            | 2002        
|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |             
|                              |                       |                                                                                                                                                                                       |                                                                          |           | (Unaudited) |            |              |         |          
|ASSETS                        |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|                              |                       | Investments in non-controlled affiliates
(cost $9,812,866 and $9,541,631 at June 30,
2003 and December 31, 2002, respectively)                                                        |                                                                          | $         | 3,972,153   |            |              | $       | 6,208,090 |           
|                              |                       | Cash and cash equivalents                                                                                                                                                             |                                                                          |           | 1,619,204   |            |              |         | 745,926   |           
|                              |                       | Prepaid expenses and other assets                                                                                                                                                     |                                                                          |           | 456,032     |            |              |         | 308,722   |           
|                              |                       | Fixed assets, net                                                                                                                                                                     |                                                                          |           | 57,412      |            |              |         | 65,255    |           
|                              | Intangible assets     |                                                                                                                                                                                       |                                                                          | 545,524   |             |            |              | 535,147 |          
|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|                              |                       |                                                                                                                                                                                       | TOTAL ASSETS                                                             |           |             | 6,650,325  |              |         |           | 7,863,140  |  
|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|LIABILITIES                   |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|                              | Notes payable         |                                                                                                                                                                                       |                                                                          | 1,000,000 |             |            |              |        |          
|                              | Accrued expenses      |                                                                                                                                                                                       |                                                                          | 103,896   |             |            |              | 126,947 |          
|                              | Income taxes payable  |                                                                                                                                                                                       |                                                                          | 17,233    |             |            |              | 16,781  |          
|                              | Deferred revenue      |                                                                                                                                                                                       |                                                                          | 213,016   |             |            |              | 127,766 |          
|                              | Deferred income taxes |                                                                                                                                                                                       |                                                                          |          |             |            |              | 245,589 |          
|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|                              |                       |                                                                                                                                                                                       | TOTAL LIABILITIES                                                        |           |             | 1,334,145  |              |         |           | 517,083    |  
|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|                              |                       |                                                                                                                                                                                       | NET ASSETS                                                               |           | $           | 5,316,180  |              |         | $         | 7,346,057  |  
|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|Commitments and Contingencies |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|Composition of net assets:    |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|                              |                       | Common stock, $.01 par value, 19,000,000
shares authorized; 4,255,672 shares issued
and outstanding at June 30, 2003 and
3,925,672 shares issued and outstanding
at December 31, 2002 |                                                                          | $         | 42,557      |            |              | $       | 39,257    |           
|                              |                       | Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued and outstanding                                                                                             |                                                                          |           |            |            |              |         |          |           
|                              |                       | Additional paid in capital                                                                                                                                                            |                                                                          |           | 7,946,141   |            |              |         | 7,058,941 |           
|                              |                       | Accumulated income:                                                                                                                                                                   |                                                                          |           |             |            |              |         |           |           
|                              |                       |                                                                                                                                                                                       | Accumulated net operating income                                         |           |             | 2,506,164  |              |         |           | 3,122,937  |  
|                              |                       |                                                                                                                                                                                       | Net realized loss on investments,
net of income taxes                    |           |             | (1,011,565 | )            |         |           | (836,125   | )
|                              |                       |                                                                                                                                                                                       | Net unrealized depreciation of investments,
net of deferred income taxes |           |             | (4,226,382 | )            |         |           | (2,091,988 | )
|                              |                       |                                                                                                                                                                                       | Foreign currency translation adjustment                                  |           |             | 59,265     |              |         |           | 53,035     |  
|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|Net assets                    |                       | $                                                                                                                                                                                     | 5,316,180                                                                |           |             | $          | 7,346,057    |        
|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        
|Net asset value per share     |                       | $                                                                                                                                                                                     | 1.25                                                                     |           |             | $          | 1.87         |        
|                              |                       |                                                                                                                                                                                       |                                                                          |           |             |            |              |        

See accompanying notes

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UTEK Corporation
Consolidated Statements of Operations
(Unaudited)

|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |            |           |           |  
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ------- | -------------------------- | --------- | ------------------------ | ---------- | --------- | --------- | ---------- | ---------- | -------- | --------- | ---------- | ---------- | --------- | --------- | -
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         | Three Months Ended June 30 |           | Six Months Ended June 30
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                         
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         | 2003                       |           | 2002                     |            | 2003      |           | 2002      
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |           
|Income from operations:                                          |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          | Sale of technology rights                                                                                                                                                                                                                |         | $       | 300,000                    |           |                          | $          | 1,623,104 |           |            | $          | 562,857  |           |            | $          | 1,623,104 |          
|                                                                 |                                                                                                                                                                                                                                                                                                                          | Consulting fees                                                                                                                                                                                                                          |         |         | 304,729                    |           |                          |            | 310,477   |           |            |            | 544,552  |           |            |            | 574,413   |          
|                                                                 |                                                                                                                                                                                                                                                                                                                          | Investment income, net                                                                                                                                                                                                                   |         |         | 1,906                      |           |                          |            | 23,679    |           |            |            | 3,497    |           |            |            | 29,697    |          
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          | 606,635 |         |                            |           | 1,957,260                |            |           |           | 1,110,906  |            |          |           | 2,227,214  |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|Expenses:                                                        |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          | Salaries and wages                                                                                                                                                                                                                       |         |         | 164,104                    |           |                          |            | 208,013   |           |            |            | 341,416  |           |            |            | 418,977   |          
|                                                                 |                                                                                                                                                                                                                                                                                                                          | Professional fees                                                                                                                                                                                                                        |         |         | 122,149                    |           |                          |            | 154,519   |           |            |            | 383,010  |           |            |            | 311,761   |          
|                                                                 |                                                                                                                                                                                                                                                                                                                          | Sales and marketing                                                                                                                                                                                                                      |         |         | 97,102                     |           |                          |            | 344,463   |           |            |            | 188,566  |           |            |            | 440,143   |          
|                                                                 |                                                                                                                                                                                                                                                                                                                          | General and administrative                                                                                                                                                                                                               |         |         | 316,554                    |           |                          |            | 425,505   |           |            |            | 602,265  |           |            |            | 653,525   |          
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          | 699,909 |         |                            |           | 1,132,500                |            |           |           | 1,515,257  |            |          |           | 1,824,406  |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|Income (loss) before income taxes                                |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          | (93,274 | )       |                            |           | 824,760                  |            |           |           | (404,351   | )          |          |           | 402,808    |           
|Provision for income taxes (benefit)                             |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          | (79,975 | )       |                            |           | 307,110                  |            |           |           | 212,422    |            |          |           | 156,208    |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          | Net income (loss) from operations                                                                                                                                                                                                        |         |         | (13,299                    | )         |                          |            | 517,650   |           |            |            | (616,773 | )         |            |            | 246,600   |          
|Net realized and unrealized (gains)
losses:                      |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          | Net realized loss on
investments, net of income tax
benefit of $4,180 and $105,849
for the three and six months
ended June 30, 2003,
respectively and $44,973 and
$61,854 for the three and six
months ended June 30, 2002,
respectively |         |         | (6,929                     | )         |                          |            | (74,540   | )         |            |            | (175,440 | )         |            |            | (102,519  | )        
|                                                                 | Change in unrealized appreciation
(depreciation) of
non-controlled affiliate
investments, net of deferred
tax expense (benefit) of
$357,809 and ($361,327) for
the three and six months
ended June 30, 2003,
respectively and $(898,428)
and $(1,027,438) for the
three and six months ended
June 30, 2002, respectively |                                                                                                                                                                                                                                          |         | 885,061 |                            |           |                          | (1,489,108 | )         |           |            | (2,134,394 | )        |           |            | (1,702,931 | )        
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|Net increase (decrease) in net
assets from operations            |                                                                                                                                                                                                                                                                                                                          | $                                                                                                                                                                                                                                        | 864,833 |         |                            | $         | (1,045,998               | )          |           | $         | (2,926,607 | )          |          | $         | (1,558,850 | )         
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|Net increase (decrease) in net
assets from operations per share: |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          | Basic   |         | $                          | 0.20      |                          |            | $         | (0.27     | )          |            | $        | (0.72     | )          |            | $         | (0.40     | )
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          | Diluted |         | $                          | 0.20      |                          |            | $         | (0.27     | )          |            | $        | (0.72     | )          |            | $         | (0.40     | )
|Weighted average shares:                                         |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          |         |         |                            |           |                          |            |           |           |            |            |          |           |            |           
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          | Basic   |         |                            | 4,220,287 |                          |            |           | 3,918,969 |            |            |          | 4,073,794 |            |            |           | 3,917,329 |  
|                                                                 |                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                          | Diluted |         |                            | 4,259,058 |                          |            |           | 3,918,969 |            |            |          | 4,073,794 |            |            |           | 3,917,329 |  

See accompanying notes

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UTEK Corporation
Consolidated Statements of Cash Flows
(Unaudited)

|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |        |            |            |        |  
|--------------------------------------------------------- | --------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | --------------------------------- | ---------- | -------------------------------- | --------- | ------ | ---------- | ---------- | ------ | -
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            | For the Six Months Ended June 30
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                 
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            | 2003                             |           | 2002  
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|Operating Activities:                                     |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|                                                          |                                               | Net decrease in net assets from operations                                                                        |                                                                | $                                 | (2,926,607 | )                                |           | $      | (1,558,850 | )         
|                                                          |                                               | Adjustments to reconcile net decrease
in net assets from operations to net cash
provided by operating activities: |                                                                |                                   |            |                                  |           |        |            |           
|                                                          |                                               |                                                                                                                   | Increase in net unrealized depreciation
of investments         |                                   |            | 2,507,172                        |           |        |            | 2,730,369  |       
|                                                          |                                               |                                                                                                                   | Depreciation and amortization                                  |                                   |            | 14,033                           |           |        |            | 15,586     |       
|                                                          |                                               |                                                                                                                   | Loss on disposal of fixed asset                                |                                   |            |                                 |           |        |            | 1,024      |       
|                                                          |                                               |                                                                                                                   | Loss on sale of investments                                    |                                   |            | 281,289                          |           |        |            | 164,373    |       
|                                                          |                                               |                                                                                                                   | Deferred income taxes                                          |                                   |            | (245,589                         | )         |        |            | (933,082   | )     
|                                                          |                                               |                                                                                                                   | Investment securities received for sale of portfolio companies |                                   |            | (562,857                         | )         |        |            | (1,623,105 | )     
|                                                          |                                               |                                                                                                                   | Services rendered in exchange for investment securities        |                                   |            | (143,072                         | )         |        |            | (350,476   | )     
|                                                          |                                               |                                                                                                                   | Changes in operating assets and liabilities:                   |                                   |            |                                  |           |        |            |            |       
|                                                          |                                               |                                                                                                                   |                                                                | Prepaid expenses and other assets |            |                                  | (159,295  | )      |            |            | (5,883 | )
|                                                          |                                               |                                                                                                                   |                                                                | Deferred revenue                  |            |                                  | (108      | )      |            |            | (9,289 | )
|                                                          |                                               |                                                                                                                   |                                                                | Accrued expenses                  |            |                                  | (23,051   | )      |            |            | 42,645 |  
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|                                                          |                                               | Net cash used in operating activities                                                                             |                                                                |                                   | (1,258,085 | )                                |           |        | (1,526,688 | )         
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|Investing Activities:                                     |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|                                                          |                                               | Proceeds received on sale of investments                                                                          |                                                                |                                   | 238,763    |                                  |           |        | 716,424    |           
|                                                          |                                               | Purchases of fixed assets                                                                                         |                                                                |                                   | (4,130     | )                                |           |        | (4,455     | )         
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|                                                          |                                               | Net cash provided by investing activities                                                                         |                                                                |                                   | 234,633    |                                  |           |        | 711,969    |           
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|Financing Activities:                                     |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|                                                          |                                               | Proceeds from issuance of common stock                                                                            |                                                                |                                   | 890,500    |                                  |           |        |           |           
|                                                          |                                               | Proceeds from long-term borrowings                                                                                |                                                                |                                   | 1,000,000  |                                  |           |        |           |           
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|                                                          |                                               | Net cash provided by financing activities                                                                         |                                                                |                                   | 1,890,500  |                                  |           |        |           |           
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|Foreign currency translation adjustment                   |                                               |                                                                                                                   | 6,230                                                          |                                   |            |                                  | 25,488    |       
|Increase (decrease) in cash and cash equivalents          |                                               |                                                                                                                   | 873,278                                                        |                                   |            |                                  | (789,231  | )     
|Cash and cash equivalents at beginning of period          |                                               |                                                                                                                   | 745,926                                                        |                                   |            |                                  | 1,432,473 |       
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|Cash and cash equivalents at end of period                |                                               | $                                                                                                                 | 1,619,204                                                      |                                   |            | $                                | 643,242   |       
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|Supplemental Disclosures of Non Cash Investing Activities |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       
|                                                          | Acquisition of Techex Acquisition Corporation |                                                                                                                   | $                                                              |                                  |            |                                  | $         | 70,900 |           
|                                                          |                                               |                                                                                                                   |                                                                |                                   |            |                                  |           |       

See accompanying notes

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

|                                       |                                                                                                    |                                            |                                                    |            |                          |         |            |            |            |        | 
|-------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------------------------------------------------- | ---------- | ------------------------ | ------- | ---------- | ---------- | ---------- | ------ | 
|                                       |                                                                                                    |                                            |                                                    |            | Six Months Ended June 30
|                                       |                                                                                                    |                                            |                                                    |            |                         
|                                       |                                                                                                    |                                            |                                                    |            | 2003                     |         | 2002      
|                                       |                                                                                                    |                                            |                                                    |            |                          |         |           
|Changes in net assets from operations: |                                                                                                    |                                            |                                                    |            |                          |         |            |           
|                                       | Net income (loss) from operations                                                                  |                                            | $                                                  | (616,773   | )                        |         | $          | 246,600    |           
|                                       | Net realized loss on sale of investments                                                           |                                            |                                                    | (175,440   | )                        |         |            | (102,519   | )         
|                                       | Change in net unrealized appreciation (depreciation) of
investments, net of related deferred taxes |                                            |                                                    | (2,134,394 | )                        |         |            | (1,702,931 | )         
|                                       |                                                                                                    |                                            |                                                    |            |                          |         |            |           
|                                       |                                                                                                    | Net decrease in net assets from operations |                                                    |            | (2,926,607               | )       |            |            | (1,558,850 | )     
|                                       |                                                                                                    |                                            |                                                    |            |                          |         |            |           
|Capital stock transactions:            |                                                                                                    |                                            |                                                    |            |                          |         |            |           
|                                       | 330,000 shares of common stock issued for cash                                                     |                                            |                                                    | 890,500    |                          |         |            |           |           
|                                       | 10,000 shares of common stock issued for acquisition of TechEx
Acquisition Corporation             |                                            |                                                    |           |                          |         |            | 70,900     |           
|                                       |                                                                                                    |                                            |                                                    |            |                          |         |            |           
|                                       |                                                                                                    |                                            | Net increase in net assets from stock transactions |            |                          | 890,500 |            |            |            | 70,900 | 
|                                       |                                                                                                    |                                            |                                                    |            |                          |         |            |           
|Foreign currency exchange adjustment   |                                                                                                    |                                            | 6,230                                              |            |                          |         | 25,488     |           
|                                       |                                                                                                    |                                            |                                                    |            |                          |         |            |           
|Net decrease in net assets             |                                                                                                    |                                            | (2,029,877                                         | )          |                          |         | (1,462,462 | )         
|Net assets at beginning of year        |                                                                                                    |                                            | 7,346,057                                          |            |                          |         | 9,909,440  |           
|                                       |                                                                                                    |                                            |                                                    |            |                          |         |            |           
|Net assets at end of period            |                                                                                                    | $                                          | 5,316,180                                          |            |                          | $       | 8,446,978  |           
|                                       |                                                                                                    |                                            |                                                    |            |                          |         |            |           

See accompanying notes

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UTEK Corporation
Financial Highlights
(Unaudited)

|                                                                        |                                                                                                |   |                          |      |      |   |           |      |  
|----------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | - | ------------------------ | ---- | ---- | - | --------- | ---- | -
|                                                                        |                                                                                                |   | Six Months Ended June 30
|                                                                        |                                                                                                |   |                         
|                                                                        |                                                                                                |   | 2003                     |      | 2002
|                                                                        |                                                                                                |   |                          |      |     
|PER SHARE INFORMATION                                                   |                                                                                                |   |                          |      |      |   |           |     
|Net asset value, beginning of period                                    |                                                                                                | $ | 1.87                     |      |      | $ | 2.53      |     
|                                                                        | Net
increase (decrease) from operations (1)                                                    |   |                          | (.15 | )    |   |           | .06  |  
|                                                                        | Net change in realized and unrealized appreciation
(depreciation) on investments (after taxes) |   |                          | (.68 | )    |   |           | (.46 | )
|                                                                        | Net increase from stock transactions                                                           |   |                          | .21  |      |   |           | .02  |  
|                                                                        |                                                                                                |   |                          |      |      |   |           |     
|Net assets value, end of period                                         |                                                                                                | $ | 1.25                     |      |      | $ | 2.15      |     
|                                                                        |                                                                                                |   |                          |      |      |   |           |     
|Per share market value, end of period                                   |                                                                                                | $ | 8.45                     |      |      | $ | 7.25      |     
|                                                                        |                                                                                                |   |                          |      |      |   |           |     
|RATIOS/SUPPLEMENTAL DATA                                                |                                                                                                |   |                          |      |      |   |           |     
|Net assets, end of period                                               |                                                                                                | $ | 5,316,180                |      |      | $ | 8,446,978 |     
|Ratio of expenses to average net assets (2)(3)                          |                                                                                                |   | 22                       | %    |      |   | 20        | %   
|Ratio of net income to average net assets (3)                           |                                                                                                |   | (9                       | )%   |      |   | 3         | %   
|Diluted weighted average number of shares
outstanding during the period |                                                                                                |   | 4,073,794                |      |      |   | 3,917,329 |     



---

|(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

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UTEK CORPORATION
Schedule of Investments
June 30, 2003
(Unaudited)

|          |  |             |  |                                                                                                                                                          |  |            |  |           
|--------- |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- |  | ----------
|          |  | Original    |  |                                                                                                                                                          |  |            |  |           
|          |  | Date of     |  |                                                                                                                                                          |  | Original   |  | Fair      
|Shares    |  | Acquisition |  |                                                                                                                                                          |  | Cost       |  | Value     
|          |  |             |  |                                                                                                                                                          |  |            |  |           
|          |  |             |  | Common stock in
non-controlled affiliates74.7% of net assets                                                                                            |  |            |  |           
|236,000   |  | 3/01        |  | Lexon, Inc.,publicly traded over the counter 0%;
developer of health care technology                                                                    |  | $39,614    |  | $        
|1,344,300 |  | 1/99        |  | Image Analysis, Inc., privately held  0%; medical and
hospital equipment developer                                                                      |  | 1,349,775  |  |          
|900,000   |  | 5/99        |  | Nubar, Inc., privately held0%; developer of construction materials                                                                                      |  | 126,000    |  |          
|980,778   |  | 6/99        |  | Clean Water Technologies, Inc. (formerly NuElectric Corporation),
publicly traded over the counter1.3%; environmental services.                         |  | 573,806    |  | 66,693    
|150       |  | 11/99       |  | Rosbon, LLC
(formerly Rosbon, Inc.), privately held1.1%;
real estate development                                                                        |  | 90,705     |  | 61,061    
|136,093   |  | 3/00        |  | Graphco Holdings
Corp.(formerly Graphco Technologies, Inc.), publicly traded over the counter 
0%; developer of e-commerce technologies                 |  | 959,606    |  |          
|2,094,053 |  | 6/00        |  | Advanced Recycling Sciences, Inc. (formerly The Quantum Group, Inc.)
publicly traded over the counter  1.8%; tire recycling methodologies               |  | 1,970,952  |  | 94,232    
|4,221,165 |  | 4/01        |  | Stealth MediaLabs, Inc. (formerly BitzMart, Inc.)publicly traded
over the counter  0%; software products                                                |  | 1,708,000  |  |          
|28,089    |  | 5/01        |  | Sense Holdings, Inc., publicly traded over the counter .1%;
biometric technologies                                                                      |  | 7,303      |  | 3,371     
|1,493,550 |  | 9/01        |  | Prime
Pharmaceutical Corporation, privately held 3.0%;
pharmaceutical developments in dermatology                                                       |  | 783,344    |  | 158,316   
|1,000,000 |  | 11/01       |  | Primapharm
Funding Corporation, privately held 3.1%; intellectual
property development                                                                  |  | 413,617    |  | 163,000   
|400,000   |  | 11/01       |  | Park Entertainment Holdings, Inc. (formerly Palladium Communications,
Inc.), publicly traded over the counter 0%; telecom, educational
internet service |  | 12,028     |  |          
|47,615    |  | 1/02        |  | Group Management Corporation,publicly traded over the counter  0%;
corporate management                                                                 |  | 46,949     |  |          
|3,677,429 |  | 1/02        |  | Circle Group Holdings, Inc. (formerly Circle Group Internet, Inc.),
publicly traded over the counter, 53.7%; digital design and consulting              |  | 615,475    |  | 2,854,200 
|633,750   |  | 2/02        |  | Voice and Wireless Corporation, publicly traded over the counter,
 0%; internet/technology services and products                                        |  | 53,161     |  |          
|48,000    |  | 4/02        |  | Hydrogen
Technology Applications, Inc.,privately held,  0.6%;
developer of energy technology                                                            |  | 14,040     |  |          
|486,750   |  | 6/02        |  | FullCircle Registry, Inc.,publicly traded over the counter,.7%;
developer of emergency information technology                                           |  | 517,936    |  | 33,099    
|120,000   |  | 9/02        |  | Innovative
Medical Services, Inc., publicly traded Nasdaq Small Cap,
 1.1%; developer of anti-microbial technology                                      |  | 56,467     |  | 60,000    
|34,782    |  | 1/03        |  | Duraswitch Industries, Inc., publicly traded over the counter,
0.9%; developer of electronic switch technologies                                        |  | 29,031     |  | 50,782    
|160,000   |  | 3/03        |  | Sequiam
Corporation, publicly traded over the counter,  1.8%;
developer of biological authentication and biometrics technologies                        |  | 94,007     |  | 97,600    
|1,068,571 |  | 4/03        |  | GloTech
Industries, Inc.,publicly traded over the counter, 5.6%;
developer of lighted technology devices                                                |  | 320,450    |  | 299,199   
|34,000    |  | 6/03        |  | E Med Future, Inc.,publicly traded over the counter,  .6%
manufacturer of needle destruction device                                                     |  | 30,600     |  | 30,600    
|          |  |             |  |                                                                                                                                                          |  |            |  |           
|          |  |             |  | TOTAL
INVESTMENTS74.7%                                                                                                                                  |  | $9,812,866 |  | $3,972,153
|          |  |             |  |                                                                                                                                                          |  |            |  |           
|          |  |             |  | Cash and other
assets, less liabilities25.3%                                                                                                            |  |            |  | 1,344,027 
|          |  |             |  |                                                                                                                                                          |  |            |  |           
|          |  |             |  | Net assets at June 30, 2003100%                                                                                                                         |  |            |  | $5,316,180
|          |  |             |  |                                                                                                                                                          |  |            |  |           

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.


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| |  |  | The value of all securities for which there is no readily available
market value is determined in good faith by the Board of Directors. In
making its determination, the Board of Directors has considered
valuation appraisals provided by an independent valuation service
provider. (See Notes 1 and 2 to the consolidated financial statements).                                                                                                                                                                                                                                                                                                                                                                             
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | As of June 30, 2003, all of the securities that we own 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 Full Circle
Registry, Inc., Graphco Holdings Corp., Prime Pharmaceutical
Corporation, Lexon, Inc., Voice and Wireless Corporation, Palladium
Communications, Inc., Hydrogen Technology Applications, Inc., Innovative
Medical Services, Inc., GloTech Industries, Inc., Sequiam Corporation, E
Med Future, Inc., Sense Holdings, Inc., Advanced Recycling Sciences,
Inc., Duraswitch Industries, Inc. and Group Management Corporation. As
such, the Company is deemed to be an affiliate of these companies, as
defined under Rule 144 of the Securities Act of 1933, except for those
specifically noted.

See accompanying notes

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UTEK CORPORATION
Schedule of Investments
December 31, 2002

|          |  |             |  |                                                                                                                                            |  |            |  |           
|--------- |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------- |  | ----------
|          |  | Original    |  |                                                                                                                                            |  |            |  |           
|          |  | Date of     |  |                                                                                                                                            |  | Original   |  | Fair      
|Shares    |  | Acquisition |  |                                                                                                                                            |  | Cost       |  | Value     
|          |  |             |  |                                                                                                                                            |  |            |  |           
|          |  |             |  | Common stock in non-controlled affiliates84.5%
of net assets                                                                              |  |            |  |           
|236,000   |  | 3/01        |  | Lexon, Inc.,publicly traded over the counter 0%;
developer of health care technology                                                      |  | $39,614    |  | $        
|1,344,300 |  | 1/99        |  | Image Analysis, Inc., privately held  0%; medical and
hospital equipment developer                                                        |  | 1,349,775  |  |          
|1,343,400 |  | 5/99        |  | Centrex, Inc., publicly traded over the counter3.5%;
developer of water and purification methodologies                                    |  | 443,322    |  | 255,246   
|900,000   |  | 5/99        |  | Nubar, Inc., privately held0%; developer of construction materials                                                                        |  | 126,000    |  |          
|980,778   |  | 6/99        |  | Clean Water Technologies, Inc. (formerly NuElectric Corporation),
publicly traded over the counter.6%; environmental services             |  | 573,806    |  | 45,116    
|150       |  | 11/99       |  | Rosbon, LLC (formerly Rosbon, Inc.), privately held1.0%;
real estate development                                                          |  | 90,705     |  | 76,451    
|100,799   |  | 3/00        |  | Graphco Technologies, Inc., privately held 2.8%; developer
of e-commerce technologies                                                     |  | 952,551    |  | 207,646   
|2,103,053 |  | 6/00        |  | Advanced Recycling Sciences, Inc. (formerly The Quantum Group, Inc.)
publicly traded over the counter  3.1%; tire recycling methodologies |  | 1,978,242  |  | 231,336   
|4,221,165 |  | 4/01        |  | Stealth MediaLabs, Inc. (formerly BitzMart, Inc.)publicly traded
over the counter  62.5%; software products                               |  | 1,708,000  |  | 4,586,435 
|228,089   |  | 5/01        |  | Sense Holdings, Inc., publicly traded over the counter 1.0%;
biometric technologies                                                       |  | 59,303     |  | 70,708    
|1,493,550 |  | 9/01        |  | Prime Pharmaceutical Corporation, privately held 1.4%;
pharmaceutical developments in dermatology                                         |  | 783,344    |  | 104,548   
|1,000,000 |  | 11/01       |  | Primapharm Funding Corporation, privately held 1.4%;intellectual
property development                                                     |  | 393,001    |  | 100,000   
|400,000   |  | 11/01       |  | Palladium Communications, Inc. (formerly USAOnestar.Net Inc.),
publicly traded over the counter 0%; telecom, educational
internet service |  | 12,028     |  |          
|47,615    |  | 1/02        |  | Group Management Corporation,publicly traded over the counter  0%;
corporate management                                                   |  | 46,949     |  |          
|2,844,000 |  | 1/02        |  | Circle Group Holdings, Inc. (formerly Circle Group Internet, Inc.),
publicly traded over the counter   .8%; digital design and consulting |  | 358,102    |  | 59,724    
|633,750   |  | 2/02        |  | Voice and Wireless Corporation, publicly traded over the counter,
.2%; internet/technology services and products                          |  | 53,161     |  | 13,942    
|48,000    |  | 4/02        |  | Hydrogen Technology Applications, Inc.,privately held,  0%;
developer of energy technology                                                |  | 14,040     |  |          
|486,750   |  | 6/02        |  | FullCircle Registry, Inc.,publicly traded over the counter, 5.6%;
developer of emergency information technology                           |  | 519,803    |  | 413,738   
|120,000   |  | 9/02        |  | Innovative Medical Services, Inc., publicly traded over the counter,
- .6% developer of anti-microbial technology                          |  | 39,885     |  | 43,200    
|          |  |             |  |                                                                                                                                            |  |            |  |           
|          |  |             |  | TOTAL INVESTMENTS84.5%                                                                                                                    |  | $9,541,631 |  | $6,208,090
|          |  |             |  |                                                                                                                                            |  |            |  |           
|          |  |             |  | Cash and other assets, less liabilities15.5%                                                                                              |  |            |  | 1,137,967 
|          |  |             |  |                                                                                                                                            |  |            |  |           
|          |  |             |  | Net assets at
December 31, 2002100%                                                                                                       |  |            |  | $7,346,057
|          |  |             |  |                                                                                                                                            |  |            |  |           

Notes to Schedule of Investments:



| |  |  | The above investments with the exception of Rosbon, LLC are
non-income producing. Equity investments that have not paid dividends
within the last twelve months are considered non-income producing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | The value of all securities for which there is no readily available
market value is determined in good faith by the Board of Directors. In
making its determination, the Board of Directors has considered
valuation appraisals provided by an independent valuation service
provider. (See Notes 1 and 2 to the consolidated financial statements).                                                                                                                                                                                                                                                                                                                                                            
| |  |  | As of December 31, 2002, all of the securities that we own 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 Full Circle Registry, Inc., Centrex,
Inc., Graphco Technologies, Inc., Prime Pharmaceutical Corporation,
Lexon, Inc., Voice and Wireless Corporation, Palladium Communications,
Inc.,

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| |  |  | Hydrogen Technology Applications, Inc., Innovative Medical Services, Inc.,
Sense Holdings, Inc., Advanced Recycling Sciences, Inc. and Group
Management Corporation. As such, the Company is deemed to be an affiliate
of these companies, as defined under Rule 144 of the Securities Act of
1933, except for those specifically noted.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes

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UTEK Corporation
Notes to Consolidated Financial Statements

(Information as of June 30, 2003 and 2002 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, 2003 and 2002, and for the three and six month periods then ended is
unaudited, but includes all adjustments (consisting only of normal recurring
accruals), which, in the opinion of management are necessary in order to make
the financial statements not misleading at such dates and for those periods.
These financial statements have been prepared in accordance with the
instructions for Form 10-Q and, therefore, do not include all information and
footnotes required by accounting principles generally accepted in the United
States. These consolidated financial statements should be read in conjunction
with the consolidated audited financial statements and related notes included
in the Companys Form 10-K for the year ended December 31, 2002. Operating
results for the three or six months ended June 30, 2003 are not necessarily
indicative of the results that may be expected for the entire year.

The Company

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

We commenced operations in 1997 as UTEK Corporation (UTEK Florida),
which was incorporated under the laws of the State of Florida in August 1996.
UTEK Florida was engaged in the business of technology transfer. On December
31, 1998, we formed UTEK, LLC, a limited liability company organized under the
laws of the State of Florida. Subsequent thereto, the shareholders of UTEK
Florida exchanged their shares of common stock for membership units in UTEK,
LLC. In July 1999, we formed UTEK Corporation under the laws of the State of
Delaware and in October 1999, UTEK LLC was merged into UTEK Corporation.

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

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

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

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

To establish on-going consulting engagements with its clients, The Company
has also developed strategic alliance consulting services. UTEKs strategic
alliances are designed to help technology companies rapidly enhance their new
product pipeline through the acquisition of proprietary intellectual capital
from universities and federal laboratories. Some of our strategic alliance
clients engage us to find others to license their existing
proprietary technologies.

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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 valuation service provider. With respect to equity
securities in privately owned companies, each investment is valued using
industry valuation benchmarks, and then the value is assigned a discount
reflecting the illiquid nature of the investment as well as our minority,
non-control position. When an external event such as a purchase transaction,
public offering, or subsequent equity sale occurs, the pricing indicated by the
external event is used to corroborate our private equity valuation. Equity
securities in public companies that carry certain restrictions on sale are
generally valued at a discount from the market value of the securities as
quoted on the stock exchanges. In addition, restricted and unrestricted
publicly traded stocks may also be valued at further discounts due to the size
of our investment or market liquidity concerns.

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

Without a readily available market value, the value of our portfolio of
equity securities may differ significantly from the values that would be placed
on the portfolio if there existed a ready market for such equity securities.
All equity securities owned at June 30, 2003 and
December 31, 2002 (74.7% and
84.5% of net assets, respectively) are stated at fair value as determined by
the Board of Directors, in the absence of readily ascertainable fair values.
The Company uses the first-in, first-out (FIFO) method of accounting for sales
of its investments.

Revenue Recognition

Sale of Technology Rights

The Company recognizes revenue from the sale of technology rights upon the
exchange of the shares of its subsidiary companies with unrelated portfolio
companies. The Company records revenue, based on the fair value as determined
by the Board of Directors, of the consideration received. In most cases, the
consideration received for the rights is unregistered shares of common stock of
the purchaser. The common stock received is recorded as an investment at fair
value as determined by the Board of Directors.

Consulting and Other Services

Revenue derived from consulting services is generally paid in unregistered
shares of common stock of the client. When unregistered shares of common stock
are received from the client, revenue is recognized as earned, ratably over the
term of the underlying consulting agreements. The unregistered shares of common
stock received are recorded as an investment at fair value as determined by the
Board of Directors. In some cases, the Company is paid a fee in connection with
a technology transfer transaction. In these instances, revenue is recognized
upon consummation of the transaction.

In addition to technology transfer merger transactions, we offer strategic
alliance consulting services. A method of technology transfer already being
used by PAX Technology Transfer Ltd., strategic alliance services are performed
pursuant to service agreements (usually one year in length) in which the
Company provides consulting services by identifying and evaluating technology
acquisition opportunities in exchange for unregistered shares of the company,
or cash. These agreements are cancelable at any time.

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

The Companys consolidated subsidiary, PAX Technology Transfer, Ltd.,
derives its revenue primarily from consulting contracts with third parties.
Revenue from consulting contracts is recognized ratably over the term of the
contract, typically ninety days. These contracts are generally paid in the form
of cash.

Revenue from the sale of subscriptions to the TechEx.com website,
generally is received in the form of cash, and initially is deferred and
subsequently recognized ratably over the term of the subscription.

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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
periods ended June 30, 2003 and 2002, the Company incurred no 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.

Stock-Based Compensation

At June 30, 2003, the Company had the following two stock-based equity
compensation plans: The UTEK Corporation Stock Option Plan and 2000
Non-Qualified Stock Option Plan of UTEK Corporation. The Company accounts for
these plans and related grants thereunder using the intrinsic value method
prescribed in APB Opinion No. 25, Accounting for Stock
Issued to Employees.
However, pro forma information regarding net income and earnings per share as
required by Statement of Financial Accounting Standards No. 123, Accounting
for Stock Based Compensation, (SFAS 123) was provided in our annual report on
Form 10-K for the year ended December 31, 2003; and was determined as if we had
accounted for our employee and non-employee director stock options under the
fair value method of SFAS 123.

Outstanding options as of June 30, 2003 had a weighted average remaining
contractual life of 3.7 years. The per share weighted average fair value of
options granted during the three months ended June 30, 2003 and 2002 was $2.33
and $2.38, respectively.

Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if we had accounted for our employee stock options granted subsequent to
December 31, 1994 under the fair value method set forth in SFAS 123. The fair
value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions:

|                                          |  |               |      |               |  |  |      | 
|----------------------------------------- |  | ------------- | ---- | ------------- |  |  | ---- | 
|                                          |  | June 30, 2003 |      | June 30, 2002
|                                          |  |               |      |              
|Risk-free interest rate                   |  |               | 4.41 |               |  |  | 4.81 | 
|Volatility factor                         |  |               | .31  |               |  |  | .19  | 
|Dividend yield                            |  |               |     |               |  |  |     | 
|Weighted average expected life of options |  |               | 5    |               |  |  | 5    | 

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Under the fair value method of accounting prescribed under SFAS
123, employee compensation cost related to stock options, net of related income
tax effects, would have been $76,842 and $68,088 for the quarters ended June
30, 2003 and 2002, respectively, and $101,855 and $100,773 for the six months
ended June 30, 2003 and 2002, respectively. The pro forma net increase
(decrease) in net assets from operations and basic and diluted earnings per
share for the three and six months ended June 30, 2003 and 2002 would have been
as follows:

|                                                       |                                       |  |                    |         |                  |  |               |            |               |  |   |            |   |  |   |            |  
|------------------------------------------------------ | ------------------------------------- |  | ------------------ | ------- | ---------------- |  | ------------- | ---------- | ------------- |  | - | ---------- | - |  | - | ---------- | -
|                                                       |                                       |  | Three months ended |         | Six months ended
|                                                       |                                       |  |                    |         |                 
|                                                       |                                       |  | June 30, 2003      |         | June 30, 2002    |  | June 30, 2003 |            | June 30, 2002
|                                                       |                                       |  |                    |         |                  |  |               |            |              
|Net increase (decrease) in net assets from operations: |                                       |  |                    |         |                  |  |               |            |               |  |   |            |   |  |   |           
|                                                       | As reported                           |  | $                  | 864,833 |                  |  | $             | (1,045,998 | )             |  | $ | (2,926,607 | ) |  | $ | (1,558,850 | )
|                                                       | Fair value stock compensation expense |  |                    | (76,842 | )                |  |               | (68,088    | )             |  |   | (101,855   | ) |  |   | (100,773   | )
|                                                       |                                       |  |                    |         |                  |  |               |            |               |  |   |            |   |  |   |           
|                                                       | Pro forma                             |  | $                  | 787,991 |                  |  |               | (1,114,086 | )             |  | $ | (3,028,462 | ) |  | $ | (1,659,623 | )
|Earnings per share  Basic:                            |                                       |  |                    |         |                  |  |               |            |               |  |   |            |   |  |   |           
|                                                       | As reported                           |  | $                  | .20     |                  |  | $             | (.27       | )             |  | $ | (.72       | ) |  | $ | (.40       | )
|                                                       | Pro forma                             |  | $                  | .19     |                  |  | $             | (.28       | )             |  | $ | (.74       | ) |  | $ | (.42       | )

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|                              |             |  |                    |     |                  |  |               |      |               |  |   |      |   |  |   |      |  
|----------------------------- | ----------- |  | ------------------ | --- | ---------------- |  | ------------- | ---- | ------------- |  | - | ---- | - |  | - | ---- | -
|                              |             |  | Three months ended |     | Six months ended
|                              |             |  |                    |     |                 
|                              |             |  | June 30, 2003      |     | June 30, 2002    |  | June 30, 2003 |      | June 30, 2002
|                              |             |  |                    |     |                  |  |               |      |              
|Earnings per share  Diluted: |             |  |                    |     |                  |  |               |      |               |  |   |      |   |  |   |     
|                              | As reported |  | $                  | .20 |                  |  | $             | (.27 | )             |  | $ | (.72 | ) |  | $ | (.40 | )
|                              | Pro forma   |  | $                  | .19 |                  |  | $             | (.28 | )             |  | $ | (.74 | ) |  | $ | (.42 | )

2.   Investments

All
equity securities at June 30, 2003 and December 31, 2002,
(74.7% and
84.5% of net assets, respectively) were valued at fair value as determined by
the Board of Directors, with the assistance of valuation appraisals provided by
an independent valuation service provider, in the absence of readily available
market values.

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

As of June 30, 2003 and December 31, 2002, the Company had established
three and four subsidiary companies, respectively, with $-0- net assets.

On January 11, 2002, the Company entered into a strategic alliance
agreement with Circle Group Holdings, Inc. (formerly Circle Group Internet,
Inc.). The agreement provides for a total of 48,000 unregistered shares of
Circle Group Holdings, Inc.s common stock to be distributed to the Company pro
rata during the term of the agreement. The Company has recognized consulting
fees in relation to 48,000 unregistered shares of Circle Group Holdings, Inc.
The strategic alliance was renewed in February 2003.

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 recognized consulting fees 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 recognized consulting fees related to 315,000 shares.
The strategic alliance was cancelled in August 2002.

On April 2, 2002, the Company received 48,000 unregistered shares of
common stock from Hydrogen Technology Applications, Inc. in a strategic
alliance agreement. As of June 30, 2003, the Company has recognized consulting
fees to date relating to 48,000 shares.

On May 7, 2002, the Company sold its Nitrone Scientific, Inc. subsidiary
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. subsidiary 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 FullCircle Registry, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees relating to 30,000 shares.

On June 11, 2002, the Company sold its Energy Management Technologies,
Inc. subsidiary 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. subsidiary company to FullCircle Registry, Inc. for 68,250
unregistered shares of FullCircle Registry, Inc.s common stock in a
non-taxable exchange.

On August 27, 2002, the Company sold its Fiber-Gel Technologies, Inc.
subsidiary company to Circle Group Holdings, Inc. (formerly Circle Group
Internet, Inc.) for 2,800,000 unregistered shares of Circle Group Holdings,
Inc.s common stock and a warrant to purchase an additional 500,000 shares of
its common stock at $0.36 per share in a non-taxable exchange.

On September 27, 2002, the Company sold its Spoken Data Technologies, Inc.
subsidiary company to FullCircle Registry, Inc. for 157,500 unregistered shares
of FullCircle Registry, Inc.s common stock in a non-taxable exchange.

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On September 12, 2002, the Company received 120,000 unregistered shares of
common stock from Innovative Medical Services, Inc. in a strategic alliance
agreement. As of June 30, 2003, the Company has recognized consulting fees to
date relating to 95,922 shares.

On December 24, 2002, the Company received 231,000 unregistered shares of
common stock from FullCircle Registry, Inc. at $.86 in connection with a
consulting agreement. The Company has recognized consulting fees relating to
231,000 shares.

On January 15, 2003, the Company received 83,478 unregistered shares of
common stock from Duraswitch Industries, Inc. in a strategic alliance
agreement. The Company has recognized consulting fees relating to 34,782
shares. The strategic alliance was cancelled in June 2003 and 48,696 shares
were returned to Duraswitch Industries, Inc.

On February 5, 2003, the Company entered into a strategic alliance
agreement with Circle Group Holdings, Inc. (formerly Circle Group Internet,
Inc.). The agreement provides for a total of 48,000 unregistered shares of
Circle Group Holdings, Inc.s common stock to be distributed to the Company pro
rata during the term of the agreement. As of June 30, 2003, the Company has
received and recognized to date consulting fees in relation to 20,000
unregistered shares of Circle Group Holdings, Inc.

On March 18, 2003, the Company received 160,000 unregistered shares of
common stock from Sequiam Corporation in a strategic alliance agreement. The
Company has recognized consulting fees relating to 45,778 shares.

On March 26, 2003, the Company received 35,294 unregistered shares of
common stock from Graphco Technologies, Inc. in a strategic alliance agreement.
The Company has recognized consulting fees to date relating to 9,307 shares.

On March 26, 2003, the Company received 821,429 unregistered shares of
common stock from Circle Group Holdings, Inc. at $.32 per share in connection
with an assignment of license. The Company has recognized technology transfer
income to date relating to the 821,429 shares received.

On April 11, 2003, the Company received 68,571 unregistered shares of
common stock from GloTech Industries, Inc. in a strategic alliance agreement.
The Company has recognized consulting fees to date relating to 14,856 shares.

On June 17, 2003, the Company received 34,000 unregistered shares of
common stock from E Med Future, Inc. in a strategic alliance agreement. The
Company has recognized consulting fees to date relating to 1,228 shares.

On June 23, 2003, the Company sold its Advanced Illumination Technologies,
Inc. subsidiary company to GloTech Industries, Inc. for 1,000,000 unregistered
shares of GloTech Industries, Inc.s common stock in a non-taxable exchange.

3.   Commitments and Contingencies

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

4.   Note Payable

In April 2003, the Company obtained a loan for $1,000,000 at 12% per
annum. The loan is due April 7, 2005, and no principal payments are required
prior to maturity. The loan is non-recourse except with respect to 360,360
unissued shares of common stock of UTEK Corporation pledged as collateral to
secure the loan. The net amount received by the Company was $760,000 after the
prepayment of the total interest due for the two-year period.

5.   Valuations

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

6.   Recent
Accounting Pronouncements

In
January 2003, the FASB issued FASB Interpretation No. 46
Consolidation of Variable Interest Entities. This
interpretation of Accounting Research Bulletin No. 51
Consolidated Financial Statements, addresses
consolidation by business enterprises of variable interest entities.
Under current practice, two enterprises generally have been included
in consolidated financial statements because one enterprise controls
the other through voting interests. This interpretation defines the
concept of variable interests and requires existing
unconsolidated variable interest entities to be consolidated by their
primary beneficiaries if the entities do not effectively disperse the
risks among the parties involved. This interpretation applies
immediately to variable interest entities created after
January 31, 2003, and to variable interest entities in which an
enterprise obtains an interest after that date. It applies in the
first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a
variable interest that it acquired before February 1, 2003. If
it is reasonably possible that an enterprise will consolidate or
disclose information about a variable interest entity when this
interpretation becomes effective, the enterprise shall disclose
information about those entities in all financial statements issued
after January 31, 2003. The interpretation may be applied
prospectively with a cumulative-effect adjustment as of the date on
which it is first applied or by restating previously issued financial
statements for one or more years with a cumulative-effect adjustment
as of the beginning of the first year restated. We do not believe
this interpretation will have a material impact on our financial
position or results of operations.

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7. Subsequent Events

On July 23, 2003, UTEK acquired the worldwide exclusive license to a
Nutritional Analysis Tool (NAT) website developed by the Department of Food
Science and Human Nutrition at the University of Illinois. The Company has
assigned the license to Circle Group Holdings, Inc. in a stock transaction. The
Company received 130,208 shares of Circle Group Holdings, Inc common stock in
the transaction valued at approximately $107,000.

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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 our subsidiaries with unrelated merger partners. 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
in connection with a technology transfer transaction. In these instances,
revenue is recognized upon consummation of the transaction.

Revenue from strategic alliance agreements in which shares of common
stock are received before they are earned, is 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 the sale of technology rights and the
provision of consulting services consists of both cash and equity securities
that we receive. The value of the equity securities that we receive makes up
most of our revenues. Pursuant to the requirements of the 1940 Act, our Board
of Directors is responsible for determining in good faith the fair value of our
securities and assets for which market quotations are not readily available. In
making its determination, the Board of Directors may consider valuation
appraisals provided by independent valuation service providers. With respect to
private equity securities, each investment is valued using industry valuation
benchmarks, and then the value is assigned a discount reflecting the illiquid
nature of the investment as well as our minority, non-control position. When an
external event such as a purchase transaction, public offering, or subsequent
equity sale occurs, the pricing indicated by the external event is used to
corroborate our private equity valuation. Equity securities in public companies
that carry certain restrictions on sale are generally valued at a discount from
the public market value of the securities.

The Board of Directors bases its determination of fair value upon, among
other things, applicable quantitative and qualitative factors. These factors
may include, but are not limited to, type of securities, nature of business,
marketability, market price of

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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 our investments (the securities we own), and also updated
valuations as of each quarter end. We pay Bolten Financial Consulting, Inc. a
fee each time it values our investments. For the six months ended June 30, 2003
and 2002, we paid Bolten Financial Consulting, Inc. a total of $46,539 and
$39,997, respectively, for its valuation services.

General

Our primary business is to invest 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 subsidiary 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.

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 $6,650,325 and its net assets were
$5,316,180 at June 30, 2003, compared to $7,863,140 and $7,346,057 at
December 31, 2002, respectively.

Net
asset value per share (NAV) was $1.25 at June 30, 2003, compared
to $1.87 at December 31, 2002. Net assets decreased by $2,029,877 in the six
months ended June 30, 2003 and decreased by $1,462,462 in the six months
ended June 30, 2002.

The net decrease in total assets, net assets and net asset value during
the three months ended June 30, 2003 were primarily attributable to:



| |  | One technology transfer valued at approximately $300,000 and strategic alliance agreements and other consulting agreements with
earned revenue of approximately $304,000.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | A loss on sale, net of income tax benefit, of approximately $6,929, as result of sales of the Companys investments of $15,171.                                          
| 
| |  | An increase of approximately $605,000 in the value of the Companys investments.                                                                                         
| 
| |  | The completion of a private placement and loan proceeds, net of expenses and prepaid interest, of $1,650,500 in cash to fund
the Companys operations.                   

The net decrease in total assets, net assets and net asset value during
the three months ended June 30, 2002 were primarily attributable to:



| |  | Four technology transfers valued at approximately $1,623,000 and strategic alliance agreements and other consulting agreements
with earned revenue of approximately $310,000.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | A decline of approximately $1,489,000 in the value of the Companys investments.                                                                                             
| 
| |  | A loss on sale, net of income tax benefit of approximately $75,000, as a result of sales of the Companys investments of
$263,000                                            

The Companys common shares outstanding as of June 30, 2003 and December
31, 2002 were 4,255,672 and 3,925,672, 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 investments that we receive. The Company has invested a
substantial portion of its assets in private development stage or start-up
companies. These private businesses are thinly capitalized, thinly
traded unproven, small
companies that lack management depth, are dependent on new, commercially
unproven technologies and have no history of operations. At June 30, 2003,
$3,589,776 or 54% of the Companys total assets consisted of investments at
fair value in thinly traded public companies, of which net unrealized
depreciation was $2,149,025; an additional $382,377 or 6%

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of the Companys total assets consisted of non-publicly traded
securities at fair value of which net unrealized depreciation was
$1,493,826.

At December 31, 2002, $5,719,445 or 73% of the Companys total assets
consisted of investments at fair value in thinly traded public companies, of
which net unrealized depreciation, was $70,334; an additional $488,645 or 7%
of the Companys total assets consisted of non-publicly traded securities at
fair value, of which net unrealized depreciation was $2,021,654.

The net decrease in the value of publicly traded securities from
$5,719,445 to $3,589,776 in the six months ended June 30, 2003 is primarily due
to the following events:



| |  | During the six months ended June 30, 2003, the Company completed two
technology transfer transactions with publicly traded companies. A
transaction was completed with Circle Group Holdings, Inc. and added
$262,857 in initial value of investments, as well as a transaction with
GloTech Industries, Inc., which added $300,000 in initial value of
investments. Transactions of this nature result in an increase in the
value of publicly traded securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | During the six months ended June 30, 2003, the Company sold all of its
shares in Centrex, Inc. and a portion of its shares in Sense Holdings,
Inc. and Circle Group Holdings, Inc. As a result of these sales, the value
of the publicly traded securities decreased by approximately
$317,000. Transactions of this nature result in a decrease in the value of
publicly traded securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| 
| |  | During the six months ended June 30, 2003, the Company experienced an
overall decrease in the fair market value of its publicly traded securities. This decrease is primarily attributable to a decrease in the
value of Stealth MediaLabs, Inc. of approximately $4,586,000 partially
offset by an increase in value of Circle Group Holdings, Inc. of
approximately $2,794,000. The Companys other investments in
publicly traded companies also experienced significant declines in their fair
market value. The Companys investments can decrease due to factors that
are specific to these investments (inability to obtain additional capital,
inability to execute their business model, termination of their technology
licenses, etc.) or to general marketplace factors. As a result of these
conditions, the value of our portfolio decreased by
$2,507,000 of this total decrease, $1,937,000 was related to publicly
traded companies.

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

|                                           |  |             |            |              |  |   |            |  
|------------------------------------------ |  | ----------- | ---------- | ------------ |  | - | ---------- | -
|                                           |  | June 30     |            | December 31,
|                                           |  | 2003        |            | 2002        
|                                           |  |             |            |             
|                                           |  | (Unaudited) |            |             
|Investments, at cost                       |  | $           | 9,812,866  |              |  | $ | 9,541,631  |  
|Unrealized depreciation, before income tax |  |             | (5,840,713 | )            |  |   | (3,333,541 | )
|                                           |  |             |            |              |  |   |            |  
|Investments, at fair value                 |  | $           | 3,972,153  |              |  | $ | 6,208,090  |  
|                                           |  |             |            |              |  |   |            |  

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

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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, 2003 compared to the three months ended June 30,
2002.

Income
from operations. Income from operations decreased 69% to $606,635
for the three months ended June 30, 2003 from $1,957,260 for the three months
ended June 30, 2002. For the three months ended June 30, 2003, approximately
63% of our income from operations (revenue) was received in the form of equity
securities, which was received for the sale of technology rights and for
providing consulting services. The decrease in income from operations resulted
from a decline in the number of technology rights transactions for the quarter
ended June 30, 2003. During the three months ended June 30, 2003, we completed
one technology rights transaction valued at $300,000, compared to four
transactions valued at $1,623,104 for the three months ended June 30, 2002.
During the three months ended June 30, 2003, we completed one technology
transfer transaction with Glotech Industries, Inc. in which we received
1,000,000 shares valued at $.30 per share. 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.

Expenses.Total operating expenses for the three months ended June 30,
2003 were $699,909 consisting of salaries and wages of $164,104, professional
fees of $122,149, sales and marketing expenses of $97,102, and general and
administrative expenses of $316,554. These expenses compared to the $1,132,500
reported for the three months ended June 30, 2002, 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. The 38%
decrease in total operating expenses was due a decreased number of employees,
fewer technology transfer costs, and an ongoing effort to cut overhead costs.
The 72% decrease in sales and marketing expenses was due to lower costs related
to completing fewer technology rights transactions. The 21% decrease in
salaries and wages reflects a reduction of two full-time employees, including
the full time CFO. The 21% decrease in professional fees is due to a reduction
in accounting fees associated with an acquisition in the quarter ended June 30,
2002. The 26% decrease in general and administrative costs is largely due to an
overall planned reduction in overhead, more specifically the reduction in costs
associated with the annual stockholders meeting and board meeting, annual
report printing costs, telephone and investor relation costs, in addition a
reduction of those administrative costs related to a reduction in staff.

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 (net of deferred taxes) amounted to $6,929 for the three months ended
June 30, 2003 and related to the sale of 12,000 shares of Circle Group
Holdings, Inc. for $9,685 in cash and 34,000 shares of Sense Holdings, Inc.
for $5,834 in cash. 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.

The net
unrealized depreciation of investments (net of deferred taxes)
decreased by $885,061 for
the three months ended June 30, 2003, versus an increase in unrealized
depreciation of $1,489,108 for the three months ended June 30, 2002. The net
unrealized gains for June 30, 2003 consisted of a net increase in the fair
value resulting from the Board of Directors valuation of the Companys
assets for the three months ended June 30, 2003. There were increases in
value related to all of our investments with the exception of our investments
in Graphco Technologies, Inc., Advanced Recycling Sciences, Inc., Stealth
MediaLabs, Inc., Sense Holdings, Inc., Voice and Wireless Corporation,
FullCircle Registry, Inc., Rosbon, Inc., GloTech Industries, Inc. and
Innovative Medical Services, Inc. which had decreases in value for the
quarter ended June 30, 2003.

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.

Six months ended June 30, 2003 compared to the six months ended June 30,
2002.

Income from operations. Income from operations decreased 50% to
$1,110,906 for the six months ended June 30, 2003 from $2,227,214 for the six
months ended June 30, 2002. The decrease in income from operations resulted
from completing two technology rights transactions as compared with four
transactions for the six months ended June 30, 2002. As described below, in the
six months ended June 30, 2003 we completed two sales of technology rights
valued at $562,857, compared to four sales of technology rights valued at
$1,623,104 for the six months ended June 30, 2002. During the six months ended
June 30, 2003, we completed sale of technology rights transactions with Circle
Group Holdings, Inc. in which we received 821,429 shares of common stock of
that were valued at $.32 per share and Glotech Industries, Inc. in which we
received 1,000,000

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shares valued at $.30 per share. Our Board of Directors determines the
fair value of the shares we receive in the absence of readily available market
values. In making its determination, the Board of Directors has considered
valuation appraisals provided by an independent financial expert.

Expenses.Total operating expenses for the six months ended June 30,
2003 were $1,515,257 consisting of salaries and wages of $341,416, professional
fees of $383,010, sales and marketing expenses of $188,566, and general and
administrative expenses of $602,265. These expenses compared to the $1,824,406
reported for the six months ended June 30, 2002, 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. The 17%
decrease in total operating expenses was due to a decreased number of employees, less cost due to fewer sales of technology rights, and an ongoing effort to
reduce overhead costs. The 57% decrease in sales and marketing expenses was due
to lower costs related to fewer sales of technology rights. The 19% decrease in
salaries and wages reflects the reduction of two full-time employees in the
second quarter. The 23% increase in professional fees is largely due to the
costs associated with a specific first quarter project. The 8% decrease in
general and administrative costs is largely due to ongoing effort to reduce
overhead costs, more specifically the costs associated with the annual
stockholders meeting and board meeting costs, annual report printing costs,
telephone and investor relation costs, in addition a reduction of those
administrative costs related to a reduction in staff.

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 (net of deferred taxes) amounted to $175,440 for the six months ended June 30,
2003 and were related to sales as follows:

|                                  |  |           |           |          |  |   |          |  
|--------------------------------- |  | --------- | --------- | -------- |  | - | -------- | -
|                                  |  | Number of |           | Realized
|Company Name                      |  | Shares    |           | Loss    
|                                  |  |           |           |         
|Advanced Recycling Sciences, Inc. |  |           | 9,000     |          |  | $ | (3,556   | )
|Centrex, Inc.                     |  |           | 1,343,400 |          |  |   | (160,284 | )
|Sense Holdings, Inc.              |  |           | 200,000   |          |  |   | (6,763   | )
|Circle Group Holdings, Inc.       |  |           | 12,000    |          |  |   | (4,837   | )
|                                  |  |           |           |          |  |   |          |  
|Total                             |  |           |           |          |  | $ | (175,440 | )
|                                  |  |           |           |          |  |   |          |  

The net unrealized depreciation of investments, net of taxes, increased by
$2,134,394 for the six months ended June 30, 2003, compared to
an increase of net unrealized
depreciation of $1,702,931 for the six months ended June 30, 2002. The net
unrealized losses resulted from a decline in the value of the
Companys assets for the six months ended June 30, 2003 and 2002. There was an
increase in value in the six months ended June 30, 2003 in our investments in
Clean Water Technologies, Inc., Circle Group Holdings, Inc., Prime
Pharmaceutical Corporation, Primapharm Funding Corporation, Duraswitch
Industries, Inc., Sequiam Corp, and Innovative Medical Services, Inc. However,
this was fully offset by a decline in value related to our investments in
Rosbon, Inc., Advanced Recycling Sciences, Inc., Stealth MediaLabs, Inc., Sense
Holdings, Inc., Voice and Wireless, Inc., FullCircle Registry, Inc. and Graphco
Technologies, Inc. Stealth MediaLabs, Inc. had a significant decline in value
during the six months ended June 30, 2003 due to publicly-disclosed information
about its financial condition and agreement to sell a substantial number of
shares for eight cents per share.

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.

Liquidity and Capital Resources

Net
assets decreased 28% to $5,316,180 at June 30, 2003 from $7,346,057 at
December 31, 2002, attributable to a significant decline in the value of our
investments, as well as realized losses related to operations and
sales of investments.

Our primary source of liquidity and capital for the three months ended
June 30, 2003 was from the completion of a private placement of our securities
and loan proceeds, as described below. Our income from operations consists
primarily of the sale of technology rights and consulting income from strategic
alliances for equity securities rather than cash.

On June 30, 2003 and December 31, 2002, we had $1,619,204 and $745,926,
respectively, in cash and cash equivalents.

In April 2003, the Company completed a private placement transaction of
330,000 shares of its common stock at $3.00 per share. The purchasers of the
shares of common stock agreed not to sell or otherwise transfer the shares for
a period of one-year

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after the completion of the private placement transaction. In addition,
the purchasers of the shares of common stock were granted certain piggyback
registration rights, which will allow them to include their shares in a
registered offering initiated by the Company within the next twelve months.

In April 2003, the Company also obtained a loan for $1,000,000 at 12% per
annum with interest paid in advance. The term of the loan is two years and is
non-recourse except with respect to 360,360 unissued shares of common stock of
the Company pledged as collateral under the loan.

The total net proceeds of these transactions to UTEK Corporation, after
deducting investment banking fees and prepaid interest, was $1,650,500.

Recent Developments

Currently, our income from operations consists primarily of the sale of
technology rights and the consulting income from strategic alliances for equity
securities rather than cash. The equity securities that we receive are
generally illiquid and subject to restrictions on resale or transferability.
Thus, we have decided to focus on growing the amount of cash we generate from
our operations. To augment our current business, we may seek to grow the amount of cash generated from our
operations through the acquisition of businesses, whether or not complementary
to our business, with proven cash flow revenue streams. In this regard, we
believe that there may be a number of opportunities to accomplish our goal
through the acquisition of businesses in the real estate service industry,
including title insurance companies, and other related businesses. We intend to finance most acquisitions through the
issuance of our equity securities. There can be no assurance that we will be
able to identify and make acquisitions on acceptable terms or that we will be
able to obtain financing for such acquisitions on acceptable terms. Even if we
complete acquisitions, we may experience:



| |  | delays in realizing the benefits of any acquired company or product lines;                                         
|- |  | -------------------------------------------------------------------------------------------------------------------
| 
| |  | diversion of our managements time and attention from our business;                                                
| 
| |  | adverse market reaction;                                                                                           
| 
| |  | difficulties in retaining key employees of the acquired business who are
necessary to manage these acquisitions; or
| 
| |  | additional risks we may assume in connection with our acquisitions.                                                

Risk Factors

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



| |  | the ongoing global economic downturn;                                                                                    
|- |  | -------------------------------------------------------------------------------------------------------------------------
| 
| |  | risks associated with possible disruption in the Companys operations due to terrorism;                                  
| 
| |  | future regulatory actions and conditions in the Companys operating areas; and                                           
| 
| |  | other risks and uncertainties as may be detailed from time to time in the Companys
public announcements and SEC filings.

The Companys financial results are presently dependent upon the
performance of Circle Group Holdings, Inc.

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The Companys financial results are presently dependent upon the
performance of Circle Group Holdings, Inc. As of June 30, 2003, the value of
its investment in Circle Group Holdings, Inc. was approximately $2.8 million or
54% of its net assets.

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,
fluctuations in the values of our investments, the timing of the recognition of
unrealized gains and losses, the degree to which we encounter competition in
our markets, the volatility of the stock market and its impact on our
unrealized gains and losses, as well as other general economic conditions. As a
result of these factors, quarterly and annual results are not necessarily
indicative of 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 become obsolete. Our portfolio companies must successfully acquire licenses
to new technologies, and in some cases further develop new technologies. We
cannot assure you that any of our investments in our portfolio companies will
be successful. Our portfolio companies will be competing with larger,
established companies, with greater access to, and resources for, further
development of these new technologies. We may lose our entire investment in any
or all of our portfolio companies.

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

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

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

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

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

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

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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 cash investments in our portfolio companies
to provide them with capital to further develop licensed technologies.

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

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

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

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

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

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

We do not anticipate selling any of our subsidiary 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 subsidiary companies on commercially reasonable
terms. If we are unable to successfully sell our subsidiary companies 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 subsidiary
companies. We have only limited experience selling our subsidiary companies

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and of the twenty-three transactions that we have completed, seven have
been to companies controlled by the same group of investors.

As of June 30, 2003, we have completed only twenty-three transactions,
including twenty-two mergers and one stock sale, wherein we merged our
subsidiary with a portfolio company and seven of these mergers have been made
to companies that are controlled by the same investor group. As of June 30,
2003, 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 in the future.

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

We are dependent upon our managements ability to identify portfolio
companies to acquire our subsidiary companies.

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

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

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

Our investments are in 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
subsidiary 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

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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 as payment for the services we
render, rather than cash. 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 are subject to restrictions on resale,
which will limit our ability to sell these securities. As of June 30, 2003, all
of the securities we have received 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 subsidiary companies with publicly traded
entities and so we may receive non-publicly traded securities in exchange for
our subsidiary companies. We may be required to sell the securities we receive
at a substantial discount to their fair value if no public market exists.

At June 30, 2003, we have completed twenty-three sales of subsidiary
companies. Of these sales, fifteen have been to companies that are currently
publicly traded, and the remaining transactions have been with privately-owned
companies. We are substantially dependent upon the ability of non-public
acquirers of our subsidiary 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 portfolio companys shares, we may
be deemed to be an affiliate of the portfolio company which would limit our
ability to dispose of securities we receive for our subsidiary companies.
Further, our ability to sell the securities we receive for our subsidiary
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 therefrom.

Substantially
all of our portfolio investments are recorded at fair value as
determined in good faith by our board of directors and, as a result,
there is uncertainty regarding the value of our portfolio investments.

At June 30, 2003 and December 31, 2002, respectively, investments
amounting to $3,972,153 or 74.7% of net assets and $6,208,090 or 84.5% of net
assets, have been valued at fair value as determined by our Board of Directors. Pursuant to the requirements of
the 1940 Act, the Board of Directors is responsible for determining in good
faith the fair value of our investments for which market quotations
are not readily available. Since there is typically no readily
available market value for the investments in our portfolio, our
board of directors determines in good faith the fair value of these
investments pursuant to a valuation policy and a consistently applied
valuation process. There is no single standard for determining fair
value in good faith. As a result, determining fair value requires
that judgment be applied to the specific facts and circumstances of
each portfolio investment while employing a consistently applied
valuation process for the types of investments we make. If we were required to sell any of such investments, there is
no assurance that the fair value, as determined by the Board of Directors,
would be obtained. If we were unable to obtain fair value for such investments,
there would be an adverse effect on our net asset value and on the price of our
common stock.

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

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, 2003,
we have granted options to purchase 650,017 shares of our common stock to
certain officers and employees. We have also reserved an additional 99,983
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 of our initial public offering, 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 subsidiaries.

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We may need to undertake additional financings to continue our operations.

We
anticipate that cash revenue from our operations for the foreseeable future
will not be sufficient to meet our operating and capital requirements. As a
result, we will likely be required to undertake additional financings to
continue or expand our operations. We have no formal commitments for any financings, and there
can be no assurance that any such commitments can be obtained on terms
acceptable to us, if at all. Any equity financing may be dilutive to our
stockholders, and debt financing, if available, may involve restrictive
covenants with respect to raising future capital and other financial and
operational matters. If we are unable to obtain financing as needed, we may be
required to reduce the scope of our operations, which could have a material
adverse effect on us.

We have been prohibited from selling our investment in Advanced Recycling
Sciences, Inc. and the failure to remove such prohibition would have a material
adverse impact on our financial condition and results of operation.

In February of 2002, Advanced Recycling Sciences, Inc. notified us that
Advanced Recycling Sciences, Inc. had issued instructions to its transfer agent
that effectively prevents us from selling at least the majority if not all of
the shares of Advanced Recycling Sciences, Inc. that we hold. This action was
taken as a result of a dispute that exists between Advanced Recycling Sciences,
Inc. and licensor of certain technology to Advanced Recycling Sciences, Inc.
We are not a party to this license dispute; however, Advanced Recycling
Sciences, Inc. did acquire the disputed license in a transaction with us.

We intend to pursue all remedies available to us in order to resume the
sale of our investment in Advanced Recycling Sciences, Inc. There can be no
assurance that we will be successful in our efforts to resume the sale of our
investment in Advanced Recycling Sciences, Inc. A failure to resume the sale
of our investment in Advanced Recycling Sciences, Inc. would have an adverse
impact on our financial condition and results of operations.

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 either
portfolio or subsidiary companies and, as a result, our investments will lack
diversification.

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

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

At
June 30, 2003, $3,589,776 or 54% of our total assets consisted
of investments at fair value in companies whose securities are quoted
on the OTC Bulletin Board or listed on the Nasdaq SmallCap Market. In
order for the securities of our portfolio companies to be eligible
for continued quotation on the OTC Bulletin Board or listing on the
Nasdaq SmallCap Market, our portfolio companies must remain in
compliance certain standards. Among other things, these standards
require that our portfolio companies remain current in their filings
with the SEC and comply with certain of the provisions of the
Sarbanes-Oxley Act of 2002. If our portfolio companies are no longer
in compliance with these requirements, there would be no forum or
market for the quotation or listing of the securities of our
portfolio companies. Without such a forum or market, the liquidity
and prices of our investments would be materially adversely affected.
We cannot give any assurance that our portfolio companies will remain
in compliance with the requirements to be quoted on the OTC Bulletin
Board or listed on the Nasdaq SmallCap Market.

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.

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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
September 2000 and so our directors and executive officers have only had
limited 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, 2003. 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.




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, 2002.




ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

The Companys Chief Executive Officer and Chief Financial Officer have
evaluated the Companys disclosure controls and procedures (as defined in Rule
13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934) as of the end of
period covered by this Quarterly Report on Form 10-Q. Based upon such
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Companys disclosure controls and procedures are effective
in timely alerting them to material information relating to the Company that is
required to be disclosed in the reports it files or submits under the
Securities Exchange Act of 1934.

Internal controls

There been no changes in the Companys internal control over financial
reporting that occurred during the six ended June 30, 2003 that have materially
affected or are reasonably likely to materially affect the Companys internal
control over financial reporting.

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PART II   OTHER INFORMATION




Item 1. Legal Proceedings

Although the Company may from time to time be involved in litigation and
claims arising out of its operations in the normal course of its business, as
of June 30, 2003, the Company was not a party to any material pending legal
proceedings.




Item 2. Changes in Securities and Use of Proceeds

In April 2003, the Company completed a private placement transaction of
330,000 shares of its common stock at $3.00 per share. The purchasers of the
shares of common stock agreed not to sell or otherwise transfer the shares for
a period of one-year after the completion of the private placement transaction.
In addition, the purchasers of the shares of common stock were granted certain
piggyback registration rights, which will allow them to include their shares in
a registered offering initiated by UTEK Corporation within the next twelve
months.

The total net proceeds from the private placement transaction to the
Company, after deducting placement agent fees $890,000.




Item 3. Defaults upon Senior Securities

Not Applicable.




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

The Company held its annual meeting of stockholders on June 3, 2003.
Shareholders voted on two matters; the substance of these matters and the
results of the voting of each such matter are described below. There were no
broker non-votes for either matter.

The following directors were elected to continue their terms as director:
Clifford M. Gross, Stuart Brooks, Kwabena Gyimah-Brempong, John Micek and Keith
Witter. Each of these directors received 3,573,143 votes in favor, 196 votes
withheld. Arthur Chapnik was elected and received votes 3,539,543 in favor,
33,796 votes withheld. Sam Reiber was elected and received votes 3,539,643 in
favor, 33,696 votes withheld.

The other item brought for a vote at the annual meeting of stockholders
was to ratify the selection of Ernst & Young, LLP as the Companys independent
accountants for the year ending December 31, 2003. Votes cast were as follows:
3,568,537 votes for the proposal, 4,802 against, and no abstentions.




Item 5. Other Information

Not applicable.




Item 6. Exhibits and Reports on Form 8-K

(a)  List of exhibits.

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



|10.1 |  | License Agreement with the National Institute of Occupational Safety and
Health (NIOSH) for Advanced Illumination Technologies, Inc.      
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|    
|31.1 |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or
15d-14(a) under the Securities Exchange Act of 1934.               
|    
|31.2 |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or
15d-14(a) under the Securities Exchange Act of 1934.               
|    
|32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|    
|32.2 |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

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(b) Reports on Form 8-K.

The Company filed a Current Report on Form 8-K pursuant to Item 5 on April 11,
2003 disclosing that it had completed a private placement transaction of
250,000 shares of common stock at $3.00 per share, and a secured a loan for
$1,000,000 at 12% per annum with interest paid in advance.

The Company filed a Current Report on Form 8-K pursuant to item 5 on May 29,
2003, regarding the issuance of a press release announcing that it had not yet
filed its Form 10-Q for the quarter ended March 31, 2003 with the Securities
and Exchange Commission. The press release also disclosed certain information
regarding the Companys financial results for the quarter ended March 31, 2003.

The Company filed a Current Report on Form 8-K pursuant to Item 5 on June 6,
2003 regarding the issuance of a press release announcing its financial results
for the quarter ended March 31, 2003.

The Company filed a Current Report on Form 8-K pursuant to Item 5 on June 25,
2003 regarding the disposition of Advanced Illumination Technologies, Inc., its
wholly owned subsidiary, to GloTech Industries, Inc. and issuance of a press
release announcing the closing of such transaction.

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SIGNATURES

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

|                     |  |                                                                             
|-------------------- |  | ----------------------------------------------------------------------------
|                     |  | UTEK CORPORATION(Registrant)                                                
|                    
|Date: August 8, 2003 |  | /s/  Clifford M. GrossClifford M. Gross
Chairman and Chief Executive Officer
|                    
|Date: August 8, 2003 |  | /s/  Carole R. WrightCarole R. Wright, CPA
Chief Financial Officer          

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