##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

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

For the quarterly period ended September 30, 2006



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

Commission File Number 001-15941



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UTEK CORPORATION

(Exact name of
registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 59-3603677                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

2109 Palm Avenue

Tampa, FL 33605

(Address of principal executive offices)

(813) 754-4330

(Registrants
telephone number)



(Former name, former address and former
fiscal year, if changed since last report)

None



---

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 period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



|                         |  |                      |  |                       
|------------------------ |  | -------------------- |  | ----------------------
|Large accelerated filer ̈ |  | Accelerated filer  x |  | Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x

On November 1, 2006 there were 8,934,009 shares outstanding of registrants common stock, $0.01 par value.



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##### Table of Contents

UTEK CORPORATION

FORM 10-Q TABLE OF CONTENTS



|                                                                                                                     |  |                                                                                       |  |   
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION                                                                                        |  |                                                                                      
|Item 1.                                                                                                              |  | Financial Statements                                                                  |  |   
|Consolidated Statements of Assets and Liabilities as of September 30, 2006 (unaudited) and December 31, 2005         |  | 3                                                                                    
|Consolidated Statements of Operations  For the Three and Nine Months Ended September 30, 2006 and 2005 (unaudited)  |  | 4                                                                                    
|Consolidated Statements of Cash Flows  For the Nine Months Ended September 30, 2006 and 2005 (unaudited)            |  | 5                                                                                    
|Consolidated Statements of Changes in Net Assets  For the Nine Months Ended September 30, 2006 and 2005 (unaudited) |  | 7                                                                                    
|Financial Highlights For the Nine Months Ended September 30, 2006 and 2005 (unaudited)                               |  | 8                                                                                    
|Schedule of Investments as of September 30, 2006 (unaudited) and December 31, 2005                                   |  | 9                                                                                    
|Notes to Consolidated Financial Statements (unaudited)                                                               |  | 19                                                                                   
|Item 2.                                                                                                              |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 27
|Item 3.                                                                                                              |  | Quantitative and Qualitative Disclosures about Market Risks                           |  | 38
|Item 4.                                                                                                              |  | Controls and Procedures                                                               |  | 38
|                                                                                                                     | 
|PART II. OTHER INFORMATION                                                                                           |  |                                                                                      
|Item 1.                                                                                                              |  | Legal Proceedings                                                                     |  | 38
|Item 1A.                                                                                                             |  | Risk Factors                                                                          |  | 38
|Item 2.                                                                                                              |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 40
|Item 3.                                                                                                              |  | Defaults Upon Senior Securities                                                       |  | 40
|Item 4.                                                                                                              |  | Submission of Matters to a Vote of Security Holders                                   |  | 40
|Item 5.                                                                                                              |  | Other Information                                                                     |  | 40
|Item 6.                                                                                                              |  | Exhibits                                                                              |  | 41
|Signatures                                                                                                           |  | 42                                                                                   
|Exhibits                                                                                                             |  |                                                                                      



Page 2 of 42



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UTEK Corporation

Consolidated Statements of Assets and Liabilities



|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ----------- | - | ---------------- | - | ---------- | -
|                                                                                                                                                                                           |  | September 30,2006 |             |   | December 31,2005 |  
|                                                                                                                                                                                           |  | (Unaudited)       |             |   |                  |  
|ASSETS                                                                                                                                                                                     |  |                   |             |   |                  |   |            |  
|Investments:                                                                                                                                                                               |  |                   |             |   |                  |   |            |  
|Non-affiliate investments (cost: 2006 - $29,081,597; 2005 - $12,482,927)                                                                                                                   |  | $                 | 15,162,503  |   |                  | $ | 9,805,423  |  
|Affiliate investments (cost: 2006 - $36,054,058; 2005 - $17,656,837)                                                                                                                       |  |                   | 30,066,816  |   |                  |   | 15,457,750 |  
|Control investments (cost: 2006 - $11,524,605; 2005 - $2,126,573)                                                                                                                          |  |                   | 15,041,085  |   |                  |   | 1,888,396  |  
|U.S. Treasuries and certificates of deposit (cost: 2006 - $10,537,328; 2005 - $11,601,357)                                                                                                 |  |                   | 10,537,328  |   |                  |   | 11,601,357 |  
|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  
|Total investments                                                                                                                                                                          |  |                   | 70,807,732  |   |                  |   | 38,752,926 |  
|Cash and cash equivalents                                                                                                                                                                  |  |                   | 5,053,917   |   |                  |   | 5,275,626  |  
|Accounts receivable, net of allowance for bad debt                                                                                                                                         |  |                   | 296,501     |   |                  |   | 746,207    |  
|Prepaid expenses and other assets                                                                                                                                                          |  |                   | 280,797     |   |                  |   | 448,810    |  
|Fixed assets, net                                                                                                                                                                          |  |                   | 597,077     |   |                  |   | 311,103    |  
|Goodwill                                                                                                                                                                                   |  |                   | 2,995,760   |   |                  |   | 3,128,139  |  
|Intangible assets, net                                                                                                                                                                     |  |                   | 275,268     |   |                  |   | 343,149    |  
|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  
|TOTAL ASSETS                                                                                                                                                                               |  |                   | 80,307,052  |   |                  |   | 49,005,960 |  
|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  
|LIABILITIES                                                                                                                                                                                |  |                   |             |   |                  |   |            |  
|Accrued expenses                                                                                                                                                                           |  |                   | 425,004     |   |                  |   | 367,763    |  
|Deferred revenue                                                                                                                                                                           |  |                   | 2,405,242   |   |                  |   | 1,606,242  |  
|Deferred tax liability                                                                                                                                                                     |  |                   | 9,904,850   |   |                  |   | 2,590,837  |  
|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  
|TOTAL LIABILITIES                                                                                                                                                                          |  |                   | 12,735,096  |   |                  |   | 4,564,842  |  
|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  
|NET ASSETS                                                                                                                                                                                 |  | $                 | 67,571,956  |   |                  | $ | 44,441,118 |  
|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  
|Commitments and Contingencies                                                                                                                                                              |  |                   |             |   |                  |   |            |  
|Composition of net assets:                                                                                                                                                                 |  |                   |             |   |                  |   |            |  
|Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued and outstanding                                                                                                  |  |                   |            |   |                  |   |           |  
|Common stock, $.01 par value, 19,000,000 shares authorized; 8,930,384 shares issued and outstanding at September 30, 2006 and 7,961,505
shares issued and outstanding at December 31, 2005 |  | $                 | 89,304      |   |                  | $ | 79,616     |  
|Additional paid-in capital                                                                                                                                                                 |  |                   | 51,380,598  |   |                  |   | 40,347,663 |  
|Accumulated income:                                                                                                                                                                        |  |                   |             |   |                  |   |            |  
|Accumulated net operating income                                                                                                                                                           |  |                   | 27,359,723  |   |                  |   | 10,134,057 |  
|Net realized loss on investments, net of tax                                                                                                                                               |  |                   | (1,145,357  | ) |                  |   | (2,968,399 | )
|Net unrealized depreciation of investments, net of deferred tax                                                                                                                            |  |                   | (10,222,355 | ) |                  |   | (3,138,939 | )
|Foreign currency translation adjustment                                                                                                                                                    |  |                   | 110,043     |   |                  |   | (12,880    | )
|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  
|Net assets                                                                                                                                                                                 |  | $                 | 67,571,956  |   |                  | $ | 44,441,118 |  
|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  
|Net asset value per share                                                                                                                                                                  |  | $                 | 7.57        |   |                  | $ | 5.58       |  
|                                                                                                                                                                                           |  |                   |             |   |                  |   |            |  

See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Operations

(Unaudited)





|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                                                                                                                                                                                                                                 |  | Three Months Ended September 30 |            |   | Nine Months Ended September 30 |  
|                                                                                                                                                                                                                                                                                                                 |  | 2006                            |            |   | 2005                           |   |            | 2006 |  |   | 2005       |  
|Income from operations:                                                                                                                                                                                                                                                                                          |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Sale of technology rights                                                                                                                                                                                                                                                                                        |  | $                               | 12,173,009 |   |                                | $ | 9,286,961  |      |  | $ | 44,012,206 |   |  | $ | 12,466,301 |  
|Consulting and other services                                                                                                                                                                                                                                                                                    |  |                                 | 1,275,790  |   |                                |   | 1,010,452  |      |  |   | 3,822,114  |   |  |   | 2,745,145  |  
|Investment income, net                                                                                                                                                                                                                                                                                           |  |                                 | 163,377    |   |                                |   | 150,970    |      |  |   | 644,169    |   |  |   | 318,263    |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 | 13,612,176 |   |                                |   | 10,448,383 |      |  |   | 48,478,489 |   |  |   | 15,529,709 |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Expenses:                                                                                                                                                                                                                                                                                                        |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Acquisition of technology rights                                                                                                                                                                                                                                                                                 |  |                                 | 4,089,649  |   |                                |   | 2,144,467  |      |  |   | 11,236,776 |   |  |   | 3,371,262  |  
|Salaries and wages                                                                                                                                                                                                                                                                                               |  |                                 | 746,916    |   |                                |   | 812,751    |      |  |   | 2,339,161  |   |  |   | 1,831,906  |  
|Professional fees                                                                                                                                                                                                                                                                                                |  |                                 | 331,550    |   |                                |   | 204,133    |      |  |   | 914,846    |   |  |   | 547,906    |  
|Sales and marketing                                                                                                                                                                                                                                                                                              |  |                                 | 781,200    |   |                                |   | 538,012    |      |  |   | 2,521,375  |   |  |   | 1,667,597  |  
|General and administrative                                                                                                                                                                                                                                                                                       |  |                                 | 1,132,889  |   |                                |   | 763,307    |      |  |   | 3,575,020  |   |  |   | 1,799,871  |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 | 7,082,204  |   |                                |   | 4,462,670  |      |  |   | 20,587,178 |   |  |   | 9,218,542  |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Income before income taxes                                                                                                                                                                                                                                                                                       |  |                                 | 6,529,972  |   |                                |   | 5,985,713  |      |  |   | 27,891,311 |   |  |   | 6,311,167  |  
|Provision for income taxes                                                                                                                                                                                                                                                                                       |  |                                 | 2,503,371  |   |                                |   | 2,252,424  |      |  |   | 10,487,780 |   |  |   | 2,374,892  |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net income from operations                                                                                                                                                                                                                                                                                       |  |                                 | 4,026,601  |   |                                |   | 3,733,289  |      |  |   | 17,403,531 |   |  |   | 3,936,275  |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |  
|Net realized and unrealized gains (losses):                                                                                                                                                                                                                                                                      |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net realized gain (loss) on investments, net of income tax expense (benefit) of ($234,851) and $1,099,905 for the three and nine months ended
September 30, 2006, respectively, and ($2,766,652) and ($2,435,937) for the three and nine months ended September 30, 2005, respectively                           |  |                                 | (389,255   | ) |                                |   | (4,178,503 | )    |  |   | 1,823,042  |   |  |   | (4,037,454 | )
|Change in unrealized appreciation (depreciation) of investments, net of deferred tax expense (benefit) of ($4,893,610) and ($4,273,672) for
the three and nine months ended September 30, 2006, respectively, and $2,765,722 and $1,243,611 for the three and nine months ended September 30, 2005, respectively |  |                                 | (8,110,934 | ) |                                |   | 6,108,475  |      |  |   | (7,083,416 | ) |  |   | 2,061,229  |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net increase (decrease) in net assets from operations                                                                                                                                                                                                                                                            |  | $                               | (4,473,588 | ) |                                | $ | 5,663,261  |      |  | $ | 12,143,157 |   |  | $ | 1,960,050  |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net increase (decrease) in net assets from operations per share:                                                                                                                                                                                                                                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                                                                                                                                                                                                                                                                            |  | $                               | (0.50      | ) |                                | $ | 0.75       |      |  | $ | 1.39       |   |  | $ | 0.28       |  
|Diluted                                                                                                                                                                                                                                                                                                          |  | $                               | (0.50      | ) |                                | $ | 0.74       |      |  | $ | 1.37       |   |  | $ | 0.28       |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |  
|Weighted average shares:                                                                                                                                                                                                                                                                                         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                                                                                                                                                                                                                                                                            |  |                                 | 8,906,918  |   |                                |   | 7,563,853  |      |  |   | 8,737,230  |   |  |   | 6,957,300  |  
|Diluted                                                                                                                                                                                                                                                                                                          |  |                                 | 8,906,918  |   |                                |   | 7,685,283  |      |  |   | 8,869,276  |   |  |   | 7,104,371  |  
|                                                                                                                                                                                                                                                                                                                 |  |                                 |            |  
|Dividend declared per share:                                                                                                                                                                                                                                                                                     |  |                                 |           |   |                                |   |           |      |  | $ | .02        |   |  |   |           |  

See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                                            |  |                                        |             |   |      |   |             |  
|--------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                            |  | For the Nine Months Ended September 30 |            
|                                                                                                                            |  | 2006                                   |             |   | 2005 |  
|Operating Activities:                                                                                                       |  |                                        |             |   |      |   |             |  
|Net increase in net assets from operations                                                                                  |  | $                                      | 12,143,157  |   |      | $ | 1,960,050   |  
|Adjustments to reconcile net increase (decrease) in net assets from operations to net cash flows from operating activities: |  |                                        |             |   |      |   |             |  
|Change in net unrealized (appreciation) depreciation of investments                                                         |  |                                        | 11,357,088  |   |      |   | (3,304,838  | )
|Depreciation and amortization                                                                                               |  |                                        | 161,379     |   |      |   | 100,177     |  
|Goodwill impairment - UTEKip, Ltd.                                                                                          |  |                                        | 234,940     |   |      |   |            |  
|(Gain)/loss on sale of investments                                                                                          |  |                                        | (2,922,947  | ) |      |   | 6,473,482   |  
|Loss on disposal of fixed assets                                                                                            |  |                                        | 38,965      |   |      |   |            |  
|Bad debt expense                                                                                                            |  |                                        | 60,755      |   |      |   |            |  
|Stock compensation                                                                                                          |  |                                        | 395,752     |   |      |   |            |  
|Deferred income taxes                                                                                                       |  |                                        | 7,314,013   |   |      |   | 1,182,576   |  
|Investment securities received in connection with the sale of technology rights                                             |  |                                        | (44,012,206 | ) |      |   | (12,368,870 | )
|Consulting and other services rendered in exchange for investment securities                                                |  |                                        | (1,501,538  | ) |      |   | (1,207,201  | )
|Changes in operating assets and liabilities:                                                                                |  |                                        |             |   |      |   |             |  
|Accounts receivable                                                                                                         |  |                                        | 428,692     |   |      |   | 93,433      |  
|Prepaid expenses and other assets                                                                                           |  |                                        | 168,013     |   |      |   | (7,796      | )
|Deferred revenue                                                                                                            |  |                                        | (4,321      | ) |      |   | 425,894     |  
|Accrued expenses                                                                                                            |  |                                        | 57,242      |   |      |   | 21,914      |  
|                                                                                                                            |  |                                        |             |   |      |   |             |  
|Net cash flows from operating activities                                                                                    |  |                                        | (16,081,016 | ) |      |   | (6,631,179  | )
|                                                                                                                            |  |                                        |             |   |      |   |             |  
|Investing Activities:                                                                                                       |  |                                        |             |   |      |   |             |  
|Acquisition of 22ndStreet of Ybor City, Inc.                                                                                |  |                                        | (1,000,000  | ) |      |   |            |  
|Acquisition of Knowledge Express (net cash acquired $26,423)                                                                |  |                                        |            |   |      |   | (1,473,577  | )
|Net proceeds from sale (purchases) of short-term investments                                                                |  |                                        | 1,064,029   |   |      |   | (9,748,303  | )
|Proceeds received on sale of equity investments                                                                             |  |                                        | 7,304,113   |   |      |   | 1,713,437   |  
|Purchases of investment securities                                                                                          |  |                                        | (685,365    | ) |      |   | (545,800    | )
|Purchases of fixed assets                                                                                                   |  |                                        | (415,399    | ) |      |   | (104,046    | )
|                                                                                                                            |  |                                        |             |   |      |   |             |  
|Net cash flows from investing activities                                                                                    |  |                                        | 6,267,378   |   |      |   | (10,158,289 | )
|                                                                                                                            |  |                                        |             |   |      |   |             |  
|Financing Activities:                                                                                                       |  |                                        |             |   |      |   |             |  
|Distributions to shareholders                                                                                               |  |                                        | (177,865    | ) |      |   |            |  
|Payments of bank debt                                                                                                       |  |                                        |            |   |      |   | (23,516     | )
|Net proceeds from issuance of common stock                                                                                  |  |                                        | 8,955,182   |   |      |   | 15,794,705  |  
|Proceeds from exercise of stock options                                                                                     |  |                                        | 691,689     |   |      |   | 1,239,550   |  
|                                                                                                                            |  |                                        |             |   |      |   |             |  
|Net cash flows from financing activities                                                                                    |  |                                        | 9,469,006   |   |      |   | 17,010,739  |  
|                                                                                                                            |  |                                        |             |   |      |   |             |  
|Foreign currency translation adjustment                                                                                     |  |                                        | 122,923     |   |      |   | (12,546     | )
|                                                                                                                            |  |                                        |             |   |      |   |             |  
|Increase/(decrease) in cash and cash equivalents                                                                            |  |                                        | (221,709    | ) |      |   | 208,725     |  
|Cash and cash equivalents at beginning of year                                                                              |  |                                        | 5,275,626   |   |      |   | 3,785,873   |  
|                                                                                                                            |  |                                        |             |   |      |   |             |  
|Cash and cash equivalents at end of period                                                                                  |  | $                                      | 5,053,917   |   |      | $ | 3,994,598   |  
|                                                                                                                            |  |                                        |             |   |      |   |             |  

See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Cash Flows (continued)

(Unaudited)



|                                                                                                                                                                          |  |   |           |  |   |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | ---------
|Supplemental Disclosures of Non-Cash Investing Activities                                                                                                                 |  |   |           |  |   |          
|The Company purchased all of the capital stock of INTRA-DMS, Ltd. for $300,000 in common stock. In conjunction with the acquisition,
liabilities were assumed as follows: |  |   |           |  |   |          
|Fair value of assets acquired                                                                                                                                             |  |   |           |  | $ | 502,035  
|Consideration given                                                                                                                                                       |  |   |           |  |   | 300,000  
|                                                                                                                                                                          |  |   |           |  |   |          
|Liabilities assumed                                                                                                                                                       |  |   |           |  | $ | 202,035  
|                                                                                                                                                                          |  |   |           |  |   |          
|The Company issued 119,134 shares of common stock to purchase Ybor City Group, Inc.                                                                                       |  |   |           |  | $ | 1,650,000
|                                                                                                                                                                          |  |   |           |  |   |          
|The Company issued 82,919 shares of common stock to purchase 22ndStreet of Ybor City, Inc.                                                                                |  | $ | 1,000,000 |  |   |          
|                                                                                                                                                                          |  |   |           |  |   |          
|Investment securities received for unearned strategic alliance services                                                                                                   |  | $ | 2,265,117 |  | $ | 1,477,653
|                                                                                                                                                                          |  |   |           |  |   |          

See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Changes in Net Assets

(Unaudited)



|                                                                                                                                                               |  |                                |            |   |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                                               |  | Nine Months Ended September 30 |           
|                                                                                                                                                               |  | 2006                           |            |   | 2005 |  
|Changes in net assets from operations:                                                                                                                         |  |                                |            |   |      |   |            |  
|Net income from operations                                                                                                                                     |  | $                              | 17,403,531 |   |      | $ | 3,936,275  |  
|Net realized gain (loss) on sale of investments, net of related income taxes                                                                                   |  |                                | 1,823,042  |   |      |   | (4,037,454 | )
|Change in net unrealized appreciation (depreciation) of investments, net of related deferred taxes                                                             |  |                                | (7,083,416 | ) |      |   | 2,061,229  |  
|                                                                                                                                                               |  |                                |            |   |      |   |            |  
|Net increase in net assets from operations                                                                                                                     |  |                                | 12,143,157 |   |      |   | 1,960,050  |  
|                                                                                                                                                               |  |                                |            |   |      |   |            |  
|Distribution to Stockholders:                                                                                                                                  |  |                                |            |   |      |   |            |  
|From net income from operations                                                                                                                                |  |                                | (177,865   | ) |      |   |           |  
|                                                                                                                                                               |  |                                |            |   |      |   |            |  
|Capital stock transactions:                                                                                                                                    |  |                                |            |   |      |   |            |  
|Proceeds from issuance of common stock, net of offering costs of $1,044,860 and $2,036,042 for the nine months ended September 30, 2006
and 2005, respectively |  |                                | 8,955,182  |   |      |   | 15,794,705 |  
|Proceeds from the exercise of stock options                                                                                                                    |  |                                | 691,689    |   |      |   | 1,239,550  |  
|Stock compensation  options                                                                                                                                   |  |                                | 395,752    |   |      |   |           |  
|Common stock issued in acquisition of 22ndStreet of Ybor City, Inc.                                                                                            |  |                                | 1,000,000  |   |      |   |           |  
|Common stock issued in acquisition of Ybor City Group, Inc.                                                                                                    |  |                                |           |   |      |   | 1,650,000  |  
|Common stock issued in acquisition of UTEKip, Ltd.                                                                                                             |  |                                |           |   |      |   | 300,000    |  
|                                                                                                                                                               |  |                                |            |   |      |   |            |  
|Net increase in net assets from stock transactions                                                                                                             |  |                                | 11,042,623 |   |      |   | 18,984,255 |  
|                                                                                                                                                               |  |                                |            |   |      |   |            |  
|Foreign currency translation adjustment                                                                                                                        |  |                                | 122,923    |   |      |   | (121,677   | )
|                                                                                                                                                               |  |                                |            |   |      |   |            |  
|Net increase in net assets                                                                                                                                     |  |                                | 23,130,838 |   |      |   | 20,822,628 |  
|Net assets at beginning of year                                                                                                                                |  |                                | 44,441,118 |   |      |   | 23,092,943 |  
|                                                                                                                                                               |  |                                |            |   |      |   |            |  
|Net assets at end of period                                                                                                                                    |  | $                              | 67,571,956 |   |      | $ | 43,915,571 |  
|                                                                                                                                                               |  |                                |            |   |      |   |            |  

See accompanying notes



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##### Table of Contents

UTEK Corporation

Financial Highlights

(Unaudited)



|                                                                                                                 |  |                                |            |   |      |   |            |   
|---------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ---- | - | ---------- | --
|                                                                                                                 |  | Nine Months Ended September 30 |           
|                                                                                                                 |  | 2006                           |            |   | 2005 |  
|PER SHARE INFORMATION                                                                                            |  |                                |            |   |      |   |            |   
|Net asset value, beginning of period                                                                             |  | $                              | 5.58       |   |      | $ | 3.85       |   
|Net income from operations (1)                                                                                   |  |                                | 1.96       |   |      |   | 0.55       |   
|Net change in realized gains (losses) and unrealized appreciation (depreciation) on investments, after taxes (2) |  |                                | (1.20      | ) |      |   | (1.48      | ) 
|Foreign currency translation adjustment (1)                                                                      |  |                                | 0.01       |   |      |   | (0.02      | ) 
|Net increase from stock transactions (1)                                                                         |  |                                | 1.24       |   |      |   | 2.67       |   
|Distribution to shareholders from net income from operations                                                     |  |                                | (0.02      | ) |      |   |           |   
|                                                                                                                 |  |                                |            |   |      |   |            |   
|Net asset value, end of period                                                                                   |  | $                              | 7.57       |   |      | $ | 5.57       |   
|                                                                                                                 |  |                                |            |   |      |   |            |   
|Per share market value, end of period                                                                            |  | $                              | 20.03      |   |      | $ | 14.00      |   
|                                                                                                                 |  |                                |            |   |      |   |            |   
|Investment return, based on market price at end of period                                                        |  |                                | 45         | % |      |   | (7         | )%
|                                                                                                                 |  |                                |            |   |      |   |            |   
|RATIOS/SUPPLEMENTAL DATA                                                                                         |  |                                |            |   |      |   |            |   
|Net assets, end of period                                                                                        |  | $                              | 67,571,956 |   |      | $ | 43,915,571 |   
|                                                                                                                 |  |                               
|Ratio of expenses to average net assets                                                                          |  |                                | 37         | % |      |   | 28         | % 
|Ratio of net income from operations to average net assets                                                        |  |                                | 31         | % |      |   | 12         | % 
|Diluted weighted average number of shares outstanding during the period                                          |  |                                | 8,869,276  |   |      |   | 7,104,371  |   

---

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

|(2) | Calculated as the balancing figure from the other figures in the statement.
|--- | ---------------------------------------------------------------------------

See accompanying notes



Page 8 of 42



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##### Table of Contents

UTEK CORPORATION

Schedule of Investments

September 30, 2006

(unaudited)



|           |  |                           |  |                                                    |  |                     |           |       |   |                        |  |     |  
|---------- |  | ------------------------- |  | -------------------------------------------------- |  | ------------------- | --------- | ----- | - | ---------------------- |  | --- | -
|Shares     |  | Initial DateofAcquisition |  |                                                    |  | Original Cost Basis |           | Value |   | Percentageof NetAssets | 
|           |  |                           |  | Non-Affiliate Investments (1)                      |  |                     |           |       |   |                        |  |     |  
|           |  |                           |  | Advanced Refractive Technologies, Inc.             |  |                     |           |       |   |                        |  |     |  
|           |  |                           |  | Opthalmic technologies                             |  |                     |           |       |   |                        |  |     |  
|100,000    |  | 4/06                      |  | Preferred D Stock                                  |  | $                   | 1,996,176 |       | $ | 1,111,082              |  | 1.6 | %
|97,000     |  | 3/06                      |  | Preferred C Stock                                  |  |                     | 2,066,063 |       |   | 2,137,787              |  | 3.2 |  
|97,000     |  | 12/05                     |  | Preferred B Stock                                  |  |                     | 1,032,675 |       |   | 2,203,904              |  | 3.3 |  
|5,533,333  |  | 5/05                      |  | Common Stock                                       |  |                     | 158,364   |       |   | 88,533                 |  | 0.1 |  
|869,423    |  | 4/04                      |  | Xethanol Corporation(12) (15)                      |  |                     | 3,122,521 |       |   | 1,989,917              |  | 2.9 |  
|           |  |                           |  | Bioethanol and derivative products                 |  |                     |           |       |   |                        |  |     |  
|           |  |                           |  | Advanced Medical Isotope Corporation (14)          |  |                     |           |       |   |                        |  |     |  
|           |  |                           |  | Development of isotopes to treat diseases          |  |                     |           |       |   |                        |  |     |  
|95,000     |  | 9/06                      |  | Preferred Stock                                    |  |                     | 1,803,417 |       |   | 1,829,938              |  | 2.7 |  
|600,000    |  | 5/06                      |  | Common Stock                                       |  |                     | 63,000    |       |   | 51,000                 |  | .01 |  
|           |  |                           |  | American Soil Technologies, Inc                    |  |                     |           |       |   |                        |  |     |  
|           |  |                           |  | Fertilizer innovation                              |  |                     |           |       |   |                        |  |     |  
|4,275,000  |  | 3/06                      |  | Preferred B Stock                                  |  |                     | 1,571,691 |       |   | 1,624,500              |  | 2.4 |  
|342,857    |  | 9/05                      |  | Common Stock                                       |  |                     | 75,996    |       |   | 61,714                 |  | 0.1 |  
|984,360    |  | 8/05                      |  | Broadcast International, Inc.                      |  |                     | 1,223,592 |       |   | 1,063,109              |  | 1.6 |  
|           |  |                           |  | Telecommunications                                 |  |                     |           |       |   |                        |  |     |  
|16,131,142 |  | 5/06                      |  | Avalon Oil and Gas, Inc.                           |  |                     | 1,350,439 |       |   | 610,209                |  | 0.9 |  
|           |  |                           |  | Oil and gas producers                              |  |                     |           |       |   |                        |  |     |  
|171,432    |  | 11/05                     |  | Shumate Industries, Inc.                           |  |                     | 78,852    |       |   | 157,717                |  | 0.2 |  
|           |  |                           |  | Energy field service applications                  |  |                     |           |       |   |                        |  |     |  
|134,693    |  | 4/05                      |  | NutraCea International Corporation                 |  |                     | 55,224    |       |   | 153,550                |  | 0.2 |  
|           |  |                           |  | Rice bran research and development                 |  |                     |           |       |   |                        |  |     |  
|60,000     |  | 12/05                     |  | Metamorphix Global (privately held) (15)           |  |                     | 120,000   |       |   | 120,000                |  | 0.2 |  
|           |  |                           |  | Design and manufacture of countertops              |  |                     |           |       |   |                        |  |     |  
|40,000     |  | 7/06                      |  | Bacterin International(privately held)             |  |                     | 120,000   |       |   | 120,000                |  | 0.2 |  
|           |  |                           |  | Bioactive coatings for medical devices             |  |                     |           |       |   |                        |  |     |  
|160,000    |  | 8/06                      |  | Pride Business Development Holdings, Inc.          |  |                     | 73,500    |       |   | 78,400                 |  | 0.1 |  
|           |  |                           |  | Manufacture of personal protective coating         |  |                     |           |       |   |                        |  |     |  
|1,635,000  |  | 3/04                      |  | Swiss Medica, Inc.                                 |  |                     | 304,987   |       |   | 76,845                 |  | 0.1 |  
|           |  |                           |  | Health bioscience products                         |  |                     |           |       |   |                        |  |     |  
|960,000    |  | 7/06                      |  | aeroTelesis, Inc.                                  |  |                     | 83,484    |       |   | 76,800                 |  | 0.1 |  
|           |  |                           |  | Satellite and wireless bandwidth utilization       |  |                     |           |       |   |                        |  |     |  
|2,254,151  |  | 8/06                      |  | Magnitude Information Systems, Inc.                |  |                     | 83,724    |       |   | 67,625                 |  | 0.1 |  
|           |  |                           |  | Computer ergonomics                                |  |                     |           |       |   |                        |  |     |  
|120,000    |  | 4/05                      |  | Rival Technologies, Inc.                           |  |                     | 82,104    |       |   | 62,400                 |  | 0.1 |  
|           |  |                           |  | Diesel engine technologies                         |  |                     |           |       |   |                        |  |     |  
|1,250,010  |  | 5/06                      |  | IVMD Ltd.                                          |  |                     | 74,400    |       |   | 57,500                 |  | 0.1 |  
|           |  |                           |  | Medical devices designs and testing                |  |                     |           |       |   |                        |  |     |  
|109,091    |  | 7/06                      |  | Turbine Truck Engines, Inc.                        |  |                     | 72,000    |       |   | 52,364                 |  | 0.1 |  
|           |  |                           |  | Heavy-duty highway truck engines                   |  |                     |           |       |   |                        |  |     |  
|1,481,484  |  | 6/06                      |  | Cyberlux Corporation                               |  |                     | 80,820    |       |   | 50,370                 |  | 0.1 |  
|           |  |                           |  | LED lighting solutions                             |  |                     |           |       |   |                        |  |     |  
|720,639    |  | 4/03                      |  | Intra-Asia Entertainment Corporation               |  |                     | 1,607,494 |       |   | 45,400                 |  | 0.1 |  
|           |  |                           |  | Digital television entertainment                   |  |                     |           |       |   |                        |  |     |  
|4,838,710  |  | 8/06                      |  | Cargo Connection Logistics Holdings, Inc.          |  |                     | 78,684    |       |   | 38,710                 |  | 0.1 |  
|           |  |                           |  | World trade logistics                              |  |                     |           |       |   |                        |  |     |  
|6,315,790  |  | 7/06                      |  | PracticeXpert, Inc.                                |  |                     | 73,464    |       |   | 37,895                 |  | 0.1 |  
|           |  |                           |  | Operational efficiencies for medical practitioners |  |                     |           |       |   |                        |  |     |  



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|          |  |                           |  |                                                       |  |                     |  |         |  |                       
|--------- |  | ------------------------- |  | ----------------------------------------------------- |  | ------------------- |  | ------- |  | ----------------------
|Shares    |  | Initial DateofAcquisition |  |                                                       |  | Original Cost Basis |  | Value   |  | Percentageof NetAssets
|2,011,765 |  | 5/06                      |  | Rheologics, Inc.(12)                                  |  | 86,100              |  | 36,212  |  | 0.1                   
|          |  |                           |  | Study of blood viscosity                              |  |                     |  |         |  |                       
|720,000   |  | 5/06                      |  | U.S. Starcom, Inc.                                    |  | 68,724              |  | 36,720  |  | 0.1                   
|          |  |                           |  | Communications services and products                  |  |                     |  |         |  |                       
|18,228    |  | 12/05                     |  | Amazing Technologies Corporation                      |  | 46,525              |  | 36,091  |  | 0.1                   
|          |  |                           |  | Web services supplier and integrator                  |  |                     |  |         |  |                       
|750,000   |  | 6/05                      |  | Modern Technology Corporation                         |  | 82,152              |  | 21,000  |  | <.1                   
|          |  |                           |  | Technology development and acquisition company        |  |                     |  |         |  |                       
|1,411,765 |  | 7/06                      |  | MM2 Group, Inc.                                       |  | 56,004              |  | 19,765  |  | <.1                   
|          |  |                           |  | Financial consulting for nutraceuticals               |  |                     |  |         |  |                       
|232,211   |  | 5/05                      |  | Preservation Sciences, Inc.                           |  |                    |  | 19,274  |  | <.1                   
|          |  |                           |  | Metal and concrete coatings                           |  |                     |  |         |  |                       
|54,857    |  | 5/05                      |  | XLER8, Inc. (Vitacube Systems, Inc).                  |  | 84,852              |  | 19,200  |  | <.1                   
|          |  |                           |  | Specialty nutraceuticals                              |  |                     |  |         |  |                       
|660,000   |  | 6/05                      |  | BP International, Inc.                                |  | 78,852              |  | 18,480  |  | <.1                   
|          |  |                           |  | Shade structures                                      |  |                     |  |         |  |                       
|122,449   |  | 1/06                      |  | 5 G Wireless Communications, Inc.                     |  | 78,851              |  | 18,367  |  | <.1                   
|          |  |                           |  | Broadband wireless                                    |  |                     |  |         |  |                       
|387,097   |  | 6/06                      |  | Tradequest International, Inc.                        |  | 76,092              |  | 17,806  |  | <.1                   
|          |  |                           |  | Provider of voice over internet protocol              |  |                     |  |         |  |                       
|          |  |                           |  | UBA Technology, Inc. (12)                             |  |                     |  |         |  |                       
|          |  |                           |  | Software development                                  |  |                     |  |         |  |                       
|2,482,521 |  | 2/06                      |  | Common Stock                                          |  | 1,691,419           |  | 17,326  |  | <.1                   
|95,000    |  | 4/06                      |  | Convertible Preferred A                               |  | 1,619,849           |  | 794,042 |  | 1.2                   
|176,250   |  | 4/05                      |  | Maelor Plc(5)                                         |  | 24,147              |  | 16,744  |  | <.1                   
|          |  |                           |  | Products for niche healthcare applications            |  |                     |  |         |  |                       
|118,913   |  | 9/05                      |  | World Energy Solutions, Inc.                          |  | 127,714             |  | 16,648  |  | <.1                   
|          |  |                           |  | Energy saving technologies                            |  |                     |  |         |  |                       
|258,064   |  | 5/06                      |  | IPORUSSIA, Inc.                                       |  | 24,000              |  | 16,000  |  | <.1                   
|          |  |                           |  | Business advisory services provider                   |  |                     |  |         |  |                       
|2,142,857 |  | 6/06                      |  | Universal Detection Technology                        |  | 84,000              |  | 12,857  |  | <.1                   
|          |  |                           |  | Detection devices for bacterial spores                |  |                     |  |         |  |                       
|750,000   |  | 10/04                     |  | U.S. Wireless Online, Inc.                            |  | 66,000              |  | 12,000  |  | <.1                   
|          |  |                           |  | Wireless broadband networks                           |  |                     |  |         |  |                       
|269,230   |  | 8/06                      |  | Protocall Technologies, Inc.                          |  | 11,577              |  | 11,577  |  | <.1                   
|          |  |                           |  | On-demand software and entertainment                  |  |                     |  |         |  |                       
|141,033   |  | 4/04                      |  | Power3 Medical Products, Inc.                         |  | 194,580             |  | 11,001  |  | <.1                   
|          |  |                           |  | Healthcare products                                   |  |                     |  |         |  |                       
|285,714   |  | 7/06                      |  | Inverted Paradigms Corporation                        |  | 80,720              |  | 10,571  |  | <.1                   
|          |  |                           |  | Safety and security software                          |  |                     |  |         |  |                       
|808,529   |  | 4/04                      |  | HydroFlo, Inc. (9)                                    |  | 125,861             |  | 10,511  |  | <.1                   
|          |  |                           |  | Business development company                          |  |                     |  |         |  |                       
|666,668   |  | 9/05                      |  | Quest Minerals & Mining Corporation                   |  | 69,044              |  | 8,667   |  | <.1                   
|          |  |                           |  | Coal and mineral mining                               |  |                     |  |         |  |                       
|105,600   |  | 5/06                      |  | HumWare Media Corporation                             |  | 14,236              |  | 3,379   |  | <.1                   
|          |  |                           |  | Media advertising                                     |  |                     |  |         |  |                       
|300,000   |  | 5/06                      |  | Mobile Ready Entertainment Corporation                |  | 66,084              |  | 3,300   |  | <.1                   
|          |  |                           |  | Aggregator of digital media, wireless, mobile devices |  |                     |  |         |  |                       
|140,000   |  | 3/05                      |  | AdAl Group, Inc. (5)                                  |  | 72,912              |  | 2,940   |  | <.1                   
|          |  |                           |  | Aluminum extruded products manufacturer               |  |                     |  |         |  |                       
|50,925    |  | 7/06                      |  | Global General Technologies, Inc.                     |  | 13,228              |  | 2,699   |  | <.1                   
|          |  |                           |  | Homeland security systems                             |  |                     |  |         |  |                       
|85,714    |  | 9/05                      |  | New Life Scientific, Inc.                             |  | 81,816              |  | 2,057   |  | <.1                   
|          |  |                           |  | Pharmaceutical biotechnologies                        |  |                     |  |         |  |                       
|          |  |                           |  | KP Renewables Plc (Kwikpower International Plc) (5)   |  |                     |  |         |  |                       
|          |  |                           |  | Renewable energy                                      |  |                     |  |         |  |                       



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##### Table of Contents

|            |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|----------- |  | ------------------------- |  | ----------------------------------------------------------------- |  | ------------------- | ---------- | ----- | - | ---------------------- |  | ---- | -
|Shares      |  | Initial DateofAcquisition |  |                                                                   |  | Original Cost Basis |            | Value |   | Percentageof NetAssets | 
|(6)         |  | 5/06                      |  | Convertible Debenture, due 5/10/07                                |  |                     | 4,433,404  |       |   |                       |  | <.1  |  
|(7)         |  | 9/05                      |  | Convertible Debenture, due 9/30/06                                |  |                     | 1,884,920  |       |   |                       |  | <.1  |  
|50,000      |  | 3/05                      |  | Common Stock (8)                                                  |  |                     | 94,500     |       |   |                       |  | <.1  |  
|261,234     |  | 7/04                      |  | eLinear, Inc. (5)                                                 |  |                     | 190,763    |       |   |                       |  | <.1  |  
|            |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Telecommunication security provider                               |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Total Investments in Non-Affiliates                               |  | $                   | 29,081,597 |       | $ | 15,162,503             |  | 22.4 | %
|            |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  |                                                                   | 
|            |  |                           |  | Affiliate Investments (2)                                         |  |                     |            |       |   |                        |  |      |  
|7,787,565   |  | 6/05                      |  | Trio Industries Group, Inc.                                       |  | $                   | 12,389,405 |       | $ | 11,590,493             |  | 17.2 | %
|            |  |                           |  | Protective powder coating                                         |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Fuel FX International, Inc.                                       |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Reductional environmental emissions                               |  |                     |            |       |   |                        |  |      |  
|9,900,717   |  | 4/05                      |  | Common stock                                                      |  |                     | 1,980,142  |       |   | 4,950,359              |  | 7.3  |  
|100,000     |  | 1/06                      |  | Preferred Series B Stock                                          |  |                     | 2,100,000  |       |   | 2,100,000              |  | 3.1  |  
|4,466,136   |  | 5/06                      |  | DME Interactive Holdings (11)                                     |  |                     | 789,535    |       |   | 2,543,698              |  | 3.8  |  
|            |  |                           |  | Multi-media entertainment                                         |  |                     |            |       |   |                        |  |      |  
|23,421,327  |  | 3/06                      |  | Klegg Electronics, Inc.                                           |  |                     | 2,470,894  |       |   | 1,776,661              |  | 2.6  |  
|            |  |                           |  | Manufacturer/distributor for retail electronic products           |  |                     |            |       |   |                        |  |      |  
|2,040,000   |  | 4/06                      |  | Cytodyn, Inc. (11)                                                |  |                     | 3,640,772  |       |   | 1,591,200              |  | 2.4  |  
|            |  |                           |  | Development stage biotechnology company                           |  |                     |            |       |   |                        |  |      |  
|33,730,000  |  | 4/05                      |  | WebSky Inc.                                                       |  |                     | 897,750    |       |   | 1,248,010              |  | 1.8  |  
|            |  |                           |  | Broadband wireless                                                |  |                     |            |       |   |                        |  |      |  
|16,037,500  |  | 7/06                      |  | Liberty Diversified Holdings, Inc.                                |  |                     | 1,245,258  |       |   | 958,650                |  | 1.4  |  
|            |  |                           |  | Printing and packaging                                            |  |                     |            |       |   |                        |  |      |  
|37,119,468  |  | 9/04                      |  | Material Technologies, Inc. (11)                                  |  |                     | 1,839,969  |       |   | 927,987                |  | 1.4  |  
|            |  |                           |  | Metal fatigue detection                                           |  |                     |            |       |   |                        |  |      |  
|461,222,608 |  | 9/05                      |  | GS Energy Corporation (INSEQ Corp.)                               |  |                     | 2,434,783  |       |   | 784,078                |  | 1.2  |  
|            |  |                           |  | Waste minimization                                                |  |                     |            |       |   |                        |  |      |  
|8,512,064   |  | 4/04                      |  | Manakoa Services Company (14)                                     |  |                     | 2,306,893  |       |   | 732,038                |  | 1.1  |  
|            |  |                           |  | Compliance analysis and monitoring                                |  |                     |            |       |   |                        |  |      |  
|7,165,000   |  | 5/06                      |  | NetFabric Holdings (11)                                           |  |                     | 608,694    |       |   | 673,150                |  | 1.0  |  
|            |  |                           |  | Information technology services                                   |  |                     |            |       |   |                        |  |      |  
|4,221,165   |  | 4/01                      |  | Stealth MediaLabs, Inc.                                           |  |                     | 1,708,000  |       |   |                       |  | <.1  |  
|            |  |                           |  | Software products                                                 |  |                     |            |       |   |                        |  |      |  
|3,023,703   |  | 3/04                      |  | Health Sciences Group, Inc.                                       |  |                     | 1,601,963  |       |   | 190,492                |  | 0.3  |  
|            |  |                           |  | Nutraceutical and pharmaceutical products                         |  |                     |            |       |   |                        |  |      |  
|1,280,000   |  | 8/04                      |  | TenthGate, Inc.(11)                                               |  |                     | 40,000     |       |   |                       |  | <.1  |  
|            |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Healthcare related products and services                          |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Total Investments in Affiliates                                   |  | $                   | 36,054,058 |       | $ | 30,066,816             |  | 44.5 | %
|            |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  |                                                                   | 
|            |  |                           |  | Control Investments (3)                                           |  |                     |            |       |   |                        |  |      |  
|21,933,451  |  | 8/05                      |  | Industrial Biotechnology Corporation (13)                         |  | $                   | 6,351,998  |       | $ | 10,514,829             |  | 15.6 | %
|            |  |                           |  | Manufactures and markets flavors and fragrances                   |  |                     |            |       |   |                        |  |      |  
|1,000       |  | 11/99                     |  | UTEK Real Estate Holdings, Inc., (privately held)                 |  |                     | 4,121,574  |       |   | 3,475,223              |  | 5.1  |  
|            |  |                           |  | Real estate development                                           |  |                     |            |       |   |                        |  |      |  
|(10)        |  | 1/06                      |  | Ybor City Group, Inc. (privately held)                            |  |                     | 1,051,033  |       |   | 1,051,033              |  | 1.6  |  
|            |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | (Demand note, interest rate @ 5%)                                 |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Total Investments in Control Investments                          |  | $                   | 11,524,605 |       | $ | 15,041,085             |  | 22.3 | %
|            |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  |                                                                   | 
|            |  |                           |  | U.S. Treasuries and Certificates of Deposit (4)                   |  |                     |            |       |   |                        |  |      |  
|Par Value   |  |                           |  | U.S. Treasuries:                                                  |  |                     |            |       |   |                        |  |      |  
|2,000,000   |  | 8/06                      |  | United States Treasury, maturity 10/12/06, interest rate @ 4.920% |  | $                   | 1,997,000  |       | $ | 1,997,000              |  | 3.0  | %
|2,000,000   |  | 5/06                      |  | United States Treasury, maturity 11/30/06, interest rate @ 4.962% |  |                     | 1,988,300  |       |   | 1,988,300              |  | 2.9  |  



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|          |  |                           |  |                                                                    |  |                     |            |       |   |            |                        |  |       |   
|--------- |  | ------------------------- |  | ------------------------------------------------------------------ |  | ------------------- | ---------- | ----- | - | ---------- | ---------------------- |  | ----- | --
|Shares    |  | Initial DateofAcquisition |  |                                                                    |  | Original Cost Basis |            | Value |   |            | Percentageof NetAssets | 
|2,000,000 |  | 8/06                      |  | United States Treasury, maturity 1/18/07, interest rate @ 5.045%   |  |                     | 1,970,480  |       |   | 1,970,480  |                        |  | 2.9   |   
|1,000,000 |  | 5/06                      |  | United States Treasury, maturity 9/30/06, interest rate @ 4.952%   |  |                     | 1,004,000  |       |   | 1,004,000  |                        |  | 1.5   |   
|1,000,000 |  | 9/06                      |  | United States Treasury, maturity 12/21/06, interest rate @ 4.751%  |  |                     | 989,300    |       |   | 989,300    |                        |  | 1.5   |   
|1,000,000 |  | 5/06                      |  | United States Treasury, maturity 11/16/06, interest rate @ 4.85%   |  |                     | 994,190    |       |   | 994,190    |                        |  | 1.5   |   
|1,000,000 |  | 2/06                      |  | United States Treasury, maturity 11/15/06, interest rate @ 4.606%  |  |                     | 994,170    |       |   | 994,170    |                        |  | 1.5   |   
|          |  |                           |  |                                                                    |  |                     |            |       |   |            |                        |  |       |   
|          |  |                           |  | Total U.S. Treasuries                                              |  | $                   | 9,937,440  |       | $ | 9,937,440  |                        |  | 14.7  | % 
|          |  |                           |  |                                                                    |  |                     |            |       |   |            |                        |  |       |   
|          |  |                           |  |                                                                    | 
|          |  |                           |  | Certificates of Deposit:                                           |  |                     |            |       |   |            |                        |  |       |   
|100,000   |  | 8/06                      |  | Washington Mutual Bank CD, maturity 1/30/07, interest rate @ 5.00% |  | $                   | 100,000    |       | $ | 100,000    |                        |  | 0.1   | % 
|100,000   |  | 2/06                      |  | Bridgeview Bank CD, maturity 11/28/06, interest rate @ 4.65%       |  |                     | 99,888     |       |   | 99,888     |                        |  | 0.1   |   
|100,000   |  | 2/06                      |  | Bank Fairfield Wash CD, maturity 11/17/06, interest rate @ 4.60%   |  |                     | 100,000    |       |   | 100,000    |                        |  | 0.1   |   
|100,000   |  | 2/06                      |  | First Finl Bank CD, maturity 11/24/06, interest rate @ 4.60%       |  |                     | 100,000    |       |   | 100,000    |                        |  | 0.1   |   
|100,000   |  | 2/06                      |  | Coastal Federal Bank, maturity 12/01/06, interest rate @ 4.65%     |  |                     | 100,000    |       |   | 100,000    |                        |  | 0.1   |   
|100,000   |  | 2/06                      |  | Bank Hapoalim CD, maturity 11/28/06, interest rate @ 4.75%         |  |                     | 100,000    |       |   | 100,000    |                        |  | 0.1   |   
|          |  |                           |  |                                                                    |  |                     |            |       |   |            |                        |  |       |   
|          |  |                           |  | Total Certificates of Deposit                                      |  | $                   | 599,888    |       | $ | 599,888    |                        |  | 0.9   | % 
|          |  |                           |  |                                                                    |  |                     |            |       |   |            |                        |  |       |   
|          |  |                           |  | Total Investments in U.S. Treasuries and CDs                       |  | $                   | 10,537,328 |       | $ | 10,537,328 |                        |  | 15.6  | % 
|          |  |                           |  |                                                                    |  |                     |            |       |   |            |                        |  |       |   
|          |  |                           |  | TOTAL INVESTMENTS                                                  |  | $                   | 87,197,588 |       | $ | 70,807,732 |                        |  | 104.6 | % 
|          |  |                           |  |                                                                    |  |                     |            |       |   |            |                        |  |       |   
|          |  |                           |  | Cash and other assets, less liabilities                            |  |                     |            |       |   | (3,235,776 | )                      |  | (4.8  | )%
|          |  |                           |  |                                                                    |  |                     |            |       |   |            |                        |  |       |   
|          |  |                           |  | Net assets at September 30, 2006                                   |  |                     |            |       | $ | 67,571,956 |                        |  | 100.0 | % 
|          |  |                           |  |                                                                    |  |                     |            |       |   |            |                        |  |       |   

Notes to Schedule of Investments:



| |  |  | Except where otherwise noted, all of our investments listed above are in common stock of companies that are publicly quoted on the OTC Bulletin Board or listed on the American Stock
Exchange or other similar markets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The above investments, with the exception of the U.S. Treasuries and certificates of deposits, 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 Note 3 to the consolidated financial statements.)
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As of September 30, 2006, all of the securities that we own are subject to legal restrictions on resale. As a result, our ability to sell or otherwise transfer the securities
we hold in our portfolio is limited.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

|(1) | Non-affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns less than 5% of the voting securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns at least 5% but not more than 25% of the voting
securities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | Control investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns more than 25% of the voting securities. We own 100% of UTEK
Real Estate Holdings, Inc. (UREHI), which holds four investments: Rosbon LLC, ABM of Tampa Bay, Inc., 22ndStreet of Ybor City, Inc. and Ybor City Group, Inc. UREHI holds 150 equity interests of the total equity interests outstanding of Rosbon LLC and all of the outstanding shares of capital stock of ABM of Tampa Bay, Inc.,
22ndStreet of Ybor City, Inc. and Ybor City Group, Inc.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The Company invests excess cash in a number of U.S. Treasury Bills and certificates of deposit. These short-term investments normally have three month to one year maturities and do
not qualify as cash or cash equivalents.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Non-U.S. company or the companys principal place of business is outside the U.S.
|--- | ---------------------------------------------------------------------------------

|(6) | Investment consists of a £3.67 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 7,200,000 common shares
underlying the convertible debenture. As these shares are not currently trading, we have assigned a zero value to the debenture. See note (8) below for further discussion.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Investment consists of a £1.25 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 1,984,126 common shares
underlying the convertible debenture. See note (8) below for further discussion. The convertible debenture matured on September 30, 2006. We are currently seeking to negotiate an extension of the convertible debenture agreement. It is
uncertain at this time whether or not we will extend the debenture, and what if any the future value of the debenture will be.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | The Companys valuation of KP Renewables Plc (KPR) was based on KPRs September 21, 2006 announcement that KPR had requested a suspension of the trading
of its securities on AIM as it arranges additional financing to fund working capital needs. As a result, KPRs interim results for the six months ended June 30, 2006 will be delayed pending clarification of its financial position.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Closed-end management investment company that has elected to be regulated as a business development company under the Investment Act of 1940. During the nine months ended
September 30, 2006, the Company made a gift of 5.1 million shares of HydroFlo, Inc. common stock to certain not-for-profit institutions and abandoned its right, title and interest in and to 400,000 shares of HydroFlo, Inc.s common
stock (See note 3 to the consolidated financial statements).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Investment consists of a loan receivable.
|---- | -----------------------------------------

|(11) | During the period ended September 30, 2006, the Company reclassified this investment from Non-affiliated investments to Affiliate investments based on the criteria in notes
(1) and (2).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | During the period ended September 30, 2006, the Company reclassified this investment from Affiliate investments to Non-affiliate investments based on the criteria in notes
(1) and (2).
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | During the period ended September 30, 2006, the Company reclassified this investment from Affiliate investments to Control investments based on the criteria in notes
(2) and (3).
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Advanced Medical Isotope Corporation and Manakoa Services Company are related parties through common management.
|---- | ----------------------------------------------------------------------------------------------------------------

|(15) | Xethanol Corporation and Metamorphix Global are related parties though common management.
|---- | -----------------------------------------------------------------------------------------

See accompanying notes



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UTEK CORPORATION

Schedule of Investments

December 31, 2005

(unaudited)



|          |  |                           |  |                                                         |  |                    |           |       |   |                        |  |     |  
|--------- |  | ------------------------- |  | ------------------------------------------------------- |  | ------------------ | --------- | ----- | - | ---------------------- |  | --- | -
|Shares    |  | Initial DateofAcquisition |  |                                                         |  | OriginalCost Basis |           | Value |   | Percentageof NetAssets | 
|          |  |                           |  | Non-Affiliate Investments (1)                           |  |                    |           |       |   |                        |  |     |  
|1,200,275 |  | 4/04                      |  | Xethanol Corporation (9)                                |  | $                  | 3,463,007 |       | $ | 3,480,797              |  | 7.8 | %
|          |  |                           |  | Bioethanol and derivative products                      |  |                    |           |       |   |                        |  |     |  
|(6)       |  | 9/05                      |  | KP Renewables Plc (Kwikpower International Plc)(5)      |  |                    |           |       |   |                        |  |     |  
|          |  |                           |  | (Convertible Debenture, due 9/30/06)                    |  |                    |           |       |   |                        |  |     |  
|          |  |                           |  | Renewable energy                                        |  |                    | 1,884,920 |       |   | 1,666,666              |  | 3.7 |  
|973,508   |  | 1/02                      |  | Circle Group Holdings, Inc.                             |  |                    | 430,506   |       |   | 973,508                |  | 2.2 |  
|          |  |                           |  | Small business holding company                          |  |                    |           |       |   |                        |  |     |  
|97,000    |  | 12/05                     |  | Advanced Refractive Technologies, Inc.(preferred stock) |  |                    | 1,114,671 |       |   | 964,075                |  | 2.1 |  
|          |  |                           |  | Opthalmic technologies                                  |  |                    |           |       |   |                        |  |     |  
|250,000   |  | 5/05                      |  | Harborlight Diversified Fund, LP(privately held) (7)    |  |                    | 250,000   |       |   | 262,020                |  | 0.5 |  
|          |  |                           |  | Diversified mutual and hedge funds                      |  |                    |           |       |   |                        |  |     |  
|50,000    |  | 7/05                      |  | Israel Technology Acquisition Corp. (5)                 |  |                    | 300,000   |       |   | 251,500                |  | 0.5 |  
|          |  |                           |  | Special purpose acquisition corp.                       |  |                    |           |       |   |                        |  |     |  
|40,000    |  | 7/05                      |  | Fortress America Acquisition Corp.                      |  |                    | 240,000   |       |   | 240,800                |  | 0.5 |  
|          |  |                           |  | Special purpose acquisition corp.                       |  |                    |           |       |   |                        |  |     |  
|359,182   |  | 4/05                      |  | NutraCea International Corporation                      |  |                    | 147,265   |       |   | 204,734                |  | 0.4 |  
|          |  |                           |  | Rice bran research and development                      |  |                    |           |       |   |                        |  |     |  
|2,100,000 |  | 3/04                      |  | Swiss Medica, Inc.                                      |  |                    | 381,268   |       |   | 191,100                |  | 0.4 |  
|          |  |                           |  | Health bioscience products                              |  |                    |           |       |   |                        |  |     |  
|720,637   |  | 4/03                      |  | Intra-Asia Entertainment Corporation                    |  |                    | 1,607,494 |       |   | 136,921                |  | 0.3 |  
|          |  |                           |  | Digital television entertainment                        |  |                    |           |       |   |                        |  |     |  
|645,000   |  | 3/03                      |  | Sequiam Corp.                                           |  |                    | 185,726   |       |   | 135,450                |  | 0.3 |  
|          |  |                           |  | Authentication and biometrics technologies              |  |                    |           |       |   |                        |  |     |  
|60,000    |  | 12/05                     |  | Metamorphix Global (privately held) (9)                 |  |                    | 120,000   |       |   | 120,000                |  | 0.2 |  
|          |  |                           |  | Design and manufacture of countertops                   |  |                    |           |       |   |                        |  |     |  
|800,000   |  | 9/05                      |  | Quest Minerals & Mining Corporation                     |  |                    | 81,228    |       |   | 104,000                |  | 0.2 |  
|          |  |                           |  | Coal and mineral mining                                 |  |                    |           |       |   |                        |  |     |  
|171,432   |  | 11/05                     |  | Shumate Industries, Inc.                                |  |                    | 78,852    |       |   | 94,288                 |  | 0.2 |  
|          |  |                           |  | Energy field service applications                       |  |                    |           |       |   |                        |  |     |  
|120,000   |  | 4/05                      |  | Rival Technologies, Inc.                                |  |                    | 82,104    |       |   | 76,800                 |  | 0.2 |  
|          |  |                           |  | Diesel engine technologies                              |  |                    |           |       |   |                        |  |     |  
|30,379    |  | 12/05                     |  | Amazing Technologies Corporation                        |  |                    | 77,544    |       |   | 76,555                 |  | 0.2 |  
|          |  |                           |  | Web services supplier and integrator                    |  |                    |           |       |   |                        |  |     |  
|261,234   |  | 7/04                      |  | eLinear, Inc. (5)                                       |  |                    | 190,763   |       |   | 75,758                 |  | 0.2 |  
|          |  |                           |  | Telecommunication security provider                     |  |                    |           |       |   |                        |  |     |  
|750,000   |  | 10/04                     |  | U.S. Wireless Online, Inc.                              |  |                    | 66,000    |       |   | 75,000                 |  | 0.2 |  
|          |  |                           |  | Wireless broadband networks                             |  |                    |           |       |   |                        |  |     |  
|91,885    |  | 10/04                     |  | Pacific Biometrics, Inc.                                |  |                    | 59,356    |       |   | 74,427                 |  | 0.2 |  
|          |  |                           |  | Specialty central laboratory services                   |  |                    |           |       |   |                        |  |     |  
|31,413    |  | 9/05                      |  | World Energy Solutions, Inc.                            |  |                    | 71,256    |       |   | 57,172                 |  | 0.1 |  
|          |  |                           |  | Energy saving technologies                              |  |                    |           |       |   |                        |  |     |  
|342,857   |  | 9/05                      |  | American Soil Technologies, Inc.                        |  |                    | 75,996    |       |   | 54,857                 |  | 0.1 |  
|          |  |                           |  | Fertilizer innovation                                   |  |                    |           |       |   |                        |  |     |  
|54,857    |  | 5/05                      |  | Vitacube Systems Holding, Inc.                          |  |                    | 84,852    |       |   | 54,308                 |  | 0.1 |  
|          |  |                           |  | Specialty nutraceuticals                                |  |                    |           |       |   |                        |  |     |  
|40,000    |  | 8/05                      |  | Broadcast International, Inc.                           |  |                    | 80,916    |       |   | 54,000                 |  | 0.1 |  
|          |  |                           |  | Telecommunication                                       |  |                    |           |       |   |                        |  |     |  
|660,000   |  | 6/05                      |  | BP International, Inc.                                  |  |                    | 78,852    |       |   | 50,160                 |  | 0.1 |  
|          |  |                           |  | Shade structures                                        |  |                    |           |       |   |                        |  |     |  
|333,332   |  | 5/05                      |  | Hybrid Fuel Systems, Inc.                               |  |                    | 78,852    |       |   | 43,333                 |  | 0.1 |  
|          |  |                           |  | Patented natural gas/diesel dual fuel technology        |  |                    |           |       |   |                        |  |     |  



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|            |  |                           |  |                                                        |  |                     |            |       |   |                        |  |      |  
|----------- |  | ------------------------- |  | ------------------------------------------------------ |  | ------------------- | ---------- | ----- | - | ---------------------- |  | ---- | -
|Shares      |  | Initial DateofAcquisition |  |                                                        |  | Original Cost Basis |            | Value |   | Percentageof NetAssets | 
|50,000      |  | 3/05                      |  | KP Renewables Plc (Kwikpower International Plc) (5)    |  |                     | 94,500     |       |   | 42,000                 |  | 0.1  |  
|            |  |                           |  | Renewable energy                                       |  |                     |            |       |   |                        |  |      |  
|29,999      |  | 7/04                      |  | INyX, Inc.                                             |  |                     | 19,813     |       |   | 41,399                 |  | 0.1  |  
|            |  |                           |  | Aerosol drug delivery                                  |  |                     |            |       |   |                        |  |      |  
|413,482     |  | 5/05                      |  | Preservation Sciences, Inc.                            |  |                     |           |       |   | 30,184                 |  | 0.1  |  
|            |  |                           |  | Metal and concrete coatings                            |  |                     |            |       |   |                        |  |      |  
|675,032     |  | 6/03                      |  | E Med Future, Inc.                                     |  |                     | 357,767    |       |   | 26,326                 |  | 0.1  |  
|            |  |                           |  | Needle destruction device                              |  |                     |            |       |   |                        |  |      |  
|750,000     |  | 6/05                      |  | Modern Technology Corporation                          |  |                     | 82,152     |       |   | 22,500                 |  | 0.1  |  
|            |  |                           |  | Technology development and acquisition company         |  |                     |            |       |   |                        |  |      |  
|221,033     |  | 4/04                      |  | Power3 Medical Products, Inc.                          |  |                     | 223,984    |       |   | 20,998                 |  | 0.1  |  
|            |  |                           |  | Healthcare products                                    |  |                     |            |       |   |                        |  |      |  
|140,000     |  | 3/05                      |  | AdAl Group, Inc. (5)                                   |  |                     | 72,912     |       |   | 18,200                 |  | 0.1  |  
|            |  |                           |  | Aluminum extruded products manufacturer                |  |                     |            |       |   |                        |  |      |  
|85,714      |  | 9/05                      |  | New Life Scientific, Inc.                              |  |                     | 81,816     |       |   | 16,286                 |  | 0.1  |  
|            |  |                           |  | Pharmaceutical biotechnologies                         |  |                     |            |       |   |                        |  |      |  
|176,250     |  | 4/05                      |  | Maelor Plc (5)                                         |  |                     | 24,147     |       |   | 16,039                 |  | 0.1  |  
|            |  |                           |  | Products for niche healthcare applications             |  |                     |            |       |   |                        |  |      |  
|1,533,333   |  | 5/05                      |  | Advanced Refractive Technologies, Inc.                 |  |                     | 81,996     |       |   | 15,333                 |  | 0.1  |  
|            |  |                           |  | (formerly Visijet, Inc.)                               |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Ophthalmic technologies                                |  |                     |            |       |   |                        |  |      |  
|480,000     |  | 4/05                      |  | WebSky Inc.                                            |  |                     |           |       |   | 12,000                 |  | 0.1  |  
|            |  |                           |  | Broadband wireless                                     |  |                     |            |       |   |                        |  |      |  
|61,224      |  | 3/04                      |  | eFoodSafety.com Inc.                                   |  |                     | 20,863     |       |   | 9,796                  |  | 0.1  |  
|            |  |                           |  | Safety of fruit, vegetables, poultry, beef and seafood |  |                     |            |       |   |                        |  |      |  
|67,904      |  | 12/03                     |  | Magic Media Networks, Inc.                             |  |                     | 7,831      |       |   | 6,722                  |  | <.1  |  
|            |  |                           |  | Digital display monitor networks                       |  |                     |            |       |   |                        |  |      |  
|36,923      |  | 9/04                      |  | Material Technologies, Inc.                            |  |                     | 78,672     |       |   | 4,800                  |  | <.1  |  
|            |  |                           |  | Metal fatigue detection                                |  |                     |            |       |   |                        |  |      |  
|295,500     |  | 7/04                      |  | Veridium Corp.                                         |  |                     | 69,032     |       |   | 3,546                  |  | <.1  |  
|            |  |                           |  | Environmental services business                        |  |                     |            |       |   |                        |  |      |  
|14,796      |  | 1/04                      |  | GeneThera, Inc.                                        |  |                     | 36,014     |       |   | 1,065                  |  | <.1  |  
|            |  |                           |  |                                                        |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Molecular biotechnology products                       |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  | Total Investments in Non-Affiliates                    |  | $                   | 12,482,927 |       | $ | 9,805,423              |  | 22.1 | %
|            |  |                           |  |                                                        |  |                     |            |       |   |                        |  |      |  
|            |  |                           |  |                                                        | 
|            |  |                           |  | Affiliate Investments (2)                              |  |                     |            |       |   |                        |  |      |  
|13,240,000  |  | 8/05                      |  | Industrial Biotechnology Corporation                   |  | $                   | 2,170,068  |       | $ | 5,693,200              |  | 12.8 | %
|            |  |                           |  | Manufactures and markets flavors and fragrances        |  |                     |            |       |   |                        |  |      |  
|2,915,489   |  | 6/05                      |  | Trio Industries Group, Inc.                            |  |                     | 3,997,210  |       |   | 4,985,486              |  | 11.2 |  
|            |  |                           |  | Protective powder coating                              |  |                     |            |       |   |                        |  |      |  
|9,900,717   |  | 4/05                      |  | Fuel FX International, Inc. (privately held)           |  |                     | 1,980,142  |       |   | 1,980,143              |  | 4.5  |  
|            |  |                           |  | Reductional environmental emissions                    |  |                     |            |       |   |                        |  |      |  
|3,123,703   |  | 3/04                      |  | Health Sciences Group, Inc.                            |  |                     | 1,685,189  |       |   | 874,637                |  | 2.0  |  
|            |  |                           |  | Nutraceutical and pharmaceutical products              |  |                     |            |       |   |                        |  |      |  
|484,782,608 |  | 9/05                      |  | INSEQ Corp.                                            |  |                     | 2,434,783  |       |   | 727,174                |  | 1.6  |  
|            |  |                           |  | Waste minimization                                     |  |                     |            |       |   |                        |  |      |  
|6,343,573   |  | 4/04                      |  | HydroFlo, Inc. (8)                                     |  |                     | 854,602    |       |   | 596,296                |  | 1.4  |  
|            |  |                           |  | Business development company                           |  |                     |            |       |   |                        |  |      |  
|7,647,561   |  | 4/04                      |  | Manakoa Services Company                               |  |                     | 2,258,837  |       |   | 504,739                |  | 1.1  |  
|            |  |                           |  | Compliance analysis and monitoring                     |  |                     |            |       |   |                        |  |      |  
|960,779     |  | 6/99                      |  | Clean Water Technologies, Inc.                         |  |                     | 568,006    |       |   | 92,235                 |  | 0.2  |  
|            |  |                           |  | Environmental services                                 |  |                     |            |       |   |                        |  |      |  
|480,000     |  | 8/04                      |  | TenthGate, Inc.                                        |  |                     |           |       |   | 3,840                  |  | <.1  |  
|            |  |                           |  | Healthcare related products and services               |  |                     |            |       |   |                        |  |      |  



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|          |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|--------- |  | ------------------------- |  | ----------------------------------------------------------------- |  | ------------------- | ---------- | ----- | - | ---------------------- |  | ---- | -
|Shares    |  | Initial DateofAcquisition |  |                                                                   |  | Original Cost Basis |            | Value |   | Percentageof NetAssets | 
|4,221,165 |  | 4/01                      |  | Stealth MediaLabs, Inc.                                           |  |                     | 1,708,000  |       |   |                       |  | 0.0  |  
|          |  |                           |  | Software products                                                 |  |                     |            |       |   |                        |  |      |  
|100,000   |  | 8/04                      |  | Myrmidon Biomaterials, Inc.,( privately held)                     |  |                     |           |       |   |                       |  | 0.0  |  
|          |  |                           |  | Biomaterial tendon replacement                                    |  |                     |            |       |   |                        |  |      |  
|          |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|          |  |                           |  | Total Investments in Affiliates                                   |  | $                   | 17,656,837 |       | $ | 15,457,750             |  | 34.8 | %
|          |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|          |  |                           |  |                                                                   | 
|          |  |                           |  | Control Investment (3)                                            |  |                     |            |       |   |                        |  |      |  
|1,000     |  | 11/99                     |  | UTEK Real Estate Holdings, Inc., (privately held)                 |  | $                   | 2,126,573  |       | $ | 1,888,396              |  | 4.2  | %
|          |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|          |  |                           |  | Real estate development                                           |  |                     |            |       |   |                        |  |      |  
|          |  |                           |  | Total Investment in Control Investment                            |  | $                   | 2,126,573  |       | $ | 1,888,396              |  | 4.2  | %
|          |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|          |  |                           |  |                                                                   | 
|          |  |                           |  | U.S. Treasuries and Certificates of Deposit (4)                   |  |                     |            |       |   |                        |  |      |  
|Par Value |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|          |  |                           |  | U.S. Treasuries                                                   |  |                     |            |       |   |                        |  |      |  
|1,000,000 |  | 11/05                     |  | United States Treasury, maturity 1/19/06, interest rate @ 3.712%  |  | $                   | 998,250    |       | $ | 998,250                |  | 2.3  | %
|1,000,000 |  | 11/05                     |  | United States Treasury, maturity 2/23/06, interest rate @ 3.841%  |  |                     | 994,600    |       |   | 994,600                |  | 2.2  |  
|1,000,000 |  | 11/05                     |  | United States Treasury, maturity 4/20/06, interest rate @ 4.068%  |  |                     | 988,010    |       |   | 988,010                |  | 2.2  |  
|1,000,000 |  | 8/05                      |  | United States Treasury, maturity 5/15/06, interest rate @ 3.747%  |  |                     | 984,330    |       |   | 984,330                |  | 2.2  |  
|1,000,000 |  | 8/05                      |  | United States Treasury, maturity 5/15/06, interest rate @ 3.759%  |  |                     | 984,330    |       |   | 984,330                |  | 2.2  |  
|4,000,000 |  | 11/05                     |  | United States Treasury, maturity 8/15/06, interest rate @ 4.234%  |  |                     | 3,894,200  |       |   | 3,894,200              |  | 8.8  |  
|1,000,000 |  | 11/05                     |  | United States Treasury, maturity 3/23/06, interest rate @ 3.923%  |  |                     | 991,340    |       |   | 991,340                |  | 2.2  |  
|          |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|          |  |                           |  | Total U.S. Treasuries                                             |  | $                   | 9,835,060  |       | $ | 9,835,060              |  | 22.1 | %
|          |  |                           |  |                                                                   |  |                     |            |       |   |                        |  |      |  
|100,000   |  | 8/05                      |  | Community Cent Bank CD, maturity 2/17/06, interest rate @ 3.15%   |  | $                   | 99,831     |       | $ | 99,831                 |  | 0.3  | %
|100,000   |  | 8/05                      |  | Acacia Fed Savgs Bank CD, maturity 2/23/06, interest rate @ 3.15% |  |                     | 99,807     |       |   | 99,807                 |  | 0.3  |  
|100,000   |  | 8/05                      |  | Banco Popular CD, maturity 2/23/06, interest rate @ 3.15%         |  |                     | 99,807     |       |   | 99,807                 |  | 0.3  |  
|100,000   |  | 8/05                      |  | Western Bank CD, maturity 2/24/06, interest rate @ 3.2%           |  |                     | 99,810     |       |   | 99,810                 |  | 0.3  |  
|100,000   |  | 8/05                      |  | First Fed Sav Bank CD, maturity 3/8/06, interest rate @ 3.5%      |  |                     | 99,820     |       |   | 99,820                 |  | 0.3  |  
|100,000   |  | 8/05                      |  | Merchants & Fmrs Bank CD, maturity 2/28/06, interest rate @ 3.15% |  |                     | 99,788     |       |   | 99,788                 |  | 0.2  |  
|100,000   |  | 8/05                      |  | Franklin Bank CD, maturity 3/2/06, interest rate @ 3.15%          |  |                     | 99,795     |       |   | 99,795                 |  | 0.2  |  
|100,000   |  | 8/05                      |  | Sky Bank CD, maturity 3/3/06, interest rate @ 3.25%               |  |                     | 99,791     |       |   | 99,791                 |  | 0.2  |  
|100,000   |  | 8/05                      |  | Indymac Bank CD, maturity 3/9/06, interest rate @ 3.25%           |  |                     | 99,768     |       |   | 99,768                 |  | 0.2  |  
|100,000   |  | 8/05                      |  | Oriental Bank CD, maturity 3/9/06, interest rate @ 3.3%           |  |                     | 99,777     |       |   | 99,777                 |  | 0.2  |  
|100,000   |  | 8/05                      |  | Park Cities Bank CD, maturity 3/10/06, interest rate @ 3.25%      |  |                     | 99,784     |       |   | 99,784                 |  | 0.2  |  



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|        |  |                           |  |                                                                     |  |                     |            |       |   |                        |  |       |  
|------- |  | ------------------------- |  | ------------------------------------------------------------------- |  | ------------------- | ---------- | ----- | - | ---------------------- |  | ----- | -
|Shares  |  | Initial DateofAcquisition |  |                                                                     |  | Original Cost Basis |            | Value |   | Percentageof NetAssets | 
|100,000 |  | 8/05                      |  | Wright Express Finl Serv CD, maturity 3/15/06, interest rate @ 3.5% |  |                     | 99,798     |       |   | 99,798                 |  | 0.2   |  
|100,000 |  | 8/05                      |  | First Bank CD, maturity 3/15/06, interest rate @ 3.6%               |  |                     | 99,791     |       |   | 99,791                 |  | 0.2   |  
|100,000 |  | 8/05                      |  | Baylake Bank CD, maturity 6/23/06, interest rate @ 3.7%             |  |                     | 99,527     |       |   | 99,527                 |  | 0.2   |  
|71,000  |  | 9/05                      |  | Capital Crossing Bank CD, maturity 6/28/06, interest rate @ 3.8%    |  |                     | 70,700     |       |   | 70,700                 |  | 0.1   |  
|100,000 |  | 9/05                      |  | New Frontier Bank CD, maturity 6/28/06, interest rate @ 3.8%        |  |                     | 99,577     |       |   | 99,577                 |  | 0.2   |  
|100,000 |  | 8/05                      |  | Doral Bank CD, maturity 6/23/06, interest rate @ 3.7%               |  |                     | 99,507     |       |   | 99,507                 |  | 0.2   |  
|100,000 |  | 9/05                      |  | UnionBank CD, maturity 6/30/06, interest rate @ 3.9%                |  |                     | 99,619     |       |   | 99,619                 |  | 0.2   |  
|        |  |                           |  |                                                                     |  |                     |            |       |   |                        |  |       |  
|        |  |                           |  | Total Certificates of Deposit                                       |  | $                   | 1,766,297  |       | $ | 1,766,297              |  | 4.0   | %
|        |  |                           |  |                                                                     |  |                     |            |       |   |                        |  |       |  
|        |  |                           |  | Total Investments in U.S. Treasuries and CDs                        |  | $                   | 11,601,357 |       | $ | 11,601,357             |  | 26.1  | %
|        |  |                           |  |                                                                     |  |                     |            |       |   |                        |  |       |  
|        |  |                           |  | TOTAL INVESTMENTS                                                   |  | $                   | 43,867,694 |       | $ | 38,752,926             |  | 87.2  | %
|        |  |                           |  |                                                                     |  |                     |            |       |   |                        |  |       |  
|        |  |                           |  | Cash and other assets, less liabilities                             |  |                     |            |       |   | 5,688,192              |  | 12.8  | %
|        |  |                           |  |                                                                     |  |                     |            |       |   |                        |  |       |  
|        |  |                           |  | Net assets at December 31, 2005                                     |  |                     |            |       | $ | 44,441,118             |  | 100.0 | %
|        |  |                           |  |                                                                     |  |                     |            |       |   |                        |  |       |  

Notes to Schedule of Investments:



| |  |  | Except where otherwise noted, all of our investments listed above are in common stock of companies that are publicly quoted on the OTC Bulletin Board or listed on the American Stock
Exchange or other similar markets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The above investments, with the exception of the U.S. Treasuries and certificates of deposits, 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As of December 31, 2005, all of the securities that we own are subject to legal restrictions on resale with the exception of Circle Group Holdings, Inc., Israel Technology
Acquisition Corp. and Fortress America Acquisition Corp. As a result, our ability to sell or otherwise transfer the securities we hold in our portfolio is limited.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Upon approval by the Board of Directors, management made the decision in the quarter ended September 30, 2005 to sell some of the investments that the Company had carried on its
financial statements with a zero value for several quarters. Management determined that maintaining these investments was costly and the likelihood of future value was minimal. The following assets were removed from the schedule of investments as a
result of this transaction: Provision Operation Systems, Inc., Advanced Recycling Sciences, Inc., Graphco Holdings Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical Corporation, Primapharm Funding Corp., Silver Screen Studios, Inc.,
Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid Network Company, GreenWorks Corp. and Xeminex, Ltd.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

|(1) | Non-affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns less than 5% of the voting securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns at least 5% but not more than 25% of the voting
securities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Control investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns more than 25% of the voting securities. We own 100% of UTEK
Real Estate Holdings, Inc. (UREHI), which holds three investments: Rosbon LLC, ABM of Tampa Bay, Inc. and Ybor City Group, Inc. UREHI holds 150 equity interests of the total equity interests outstanding of Rosbon LLC and all of the
outstanding shares of capital stock of ABM of Tampa Bay, Inc. and Ybor City Group, Inc.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(4) | The Company invests excess cash in a number of U.S. Treasury Bills and certificates of deposit. These short-term investments normally have three-month to one year maturities and do
not qualify as cash or cash equivalents.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Non-U.S. company or the companys principal place of business is outside the U.S.
|--- | ---------------------------------------------------------------------------------

|(6) | Investment consists of a £1.25 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 1,984,126 common shares
underlying the convertible debenture.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Non-registered investment company.
|--- | ----------------------------------

|(8) | Closed-end management investment company that has elected to be regulated as a business development company under the Investment Act of 1940.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Xethanol Corporation and Metamorphix Global are related parties through common management.
|--- | ------------------------------------------------------------------------------------------

See accompanying notes



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UTEK Corporation

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2006 and 2005

(unaudited)

1. Nature of Business and Significant Accounting Policies

Interim Financial Information

The financial information for UTEK
Corporation (the Company, we, us or UTEK) as of September 30, 2006 and 2005 and for the three and nine 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 consolidated financial statements not misleading at such dates and for those periods. These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for interim financial information and, therefore, do not include all information and footnotes required by accounting principles generally accepted in the
United States of America for complete consolidated financial statements. 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, 2005. Operating results for the three or nine months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the entire year.

The Company

UTEK is a market-driven technology transfer business
that assists companies in identifying and acquiring technologies. Technology transfer refers to the process by which new technologies, developed in universities, medical research centers, government research facilities, or similar research settings,
are licensed to companies for commercial development and use. UTEKs goal is to provide companies an opportunity to acquire and commercialize innovative technologies primarily developed by universities, medical centers and federal research
laboratories.

Strategic Alliance Agreements

Our strategic alliances are designed to help companies enhance their new product pipeline through the acquisition of new technology primarily from universities, medical centers and federal research laboratories. We normally receive
unregistered shares of common stock from companies as payment for the services we render under our strategic alliance consulting engagements. Whenever appropriate we will seek to receive cash payments as compensation for our services. All of our
technology transfer transactions are generally completed pursuant to our strategic alliance agreements with companies.

Technology
Transfers

To effectuate a technology transfer, we will typically create a newly formed company to acquire a new technology from a university, medical
center or federal research laboratory and then exchange the securities of such newly formed company for securities in the company that acquires such newly formed company and the technology held by such newly formed company. We call this unique
technology transfer process U2B®. A benefit of
effectuating technology transfers through our U2B®
process is that such transactions do not result in a taxable event for us for income tax purposes. We have not acquired, and do not currently intend to acquire, a new technology from a university, medical center and federal research laboratory in
connection with our U2B® process without the
agreement of a company to immediately acquire such new technology from us. It is our plan that shares of those privately owned and publicly traded companies received in those exchanges will be sold for cash or other assets in the course of our
business to permit us to acquire additional technologies and to fund our operations. We seek to sell such newly formed companies to publicly traded companies whenever possible, as this provides us with the potential for added liquidity.

We may also enter into technology transfers pursuant to which we receive cash in exchange for new technologies.

The Company is a non-diversified, closed-end management investment company that has elected to be treated as a business development company (BDC) under the
Investment Company Act of 1940 (1940 Act). The Companys investment objective is to increase its net assets by effectuating technology transfers with companies pursuant to which the Company receives the securities of, or cash from,
such companies in exchange for new technologies.

Principles of Consolidation

UTEK Corporation commenced operations in 1997 in the business of technology transfer originally incorporated under the laws of the State of Florida, and subsequently under the laws of the State of Delaware in July
1999. The consolidated financial statements include the accounts of UTEK Corporation and its wholly owned subsidiaries: UTEK-Europe, Ltd. (Europe) and



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UTEKipLtd. (Israel). The UTEK-EKMS, Inc. legal entity was dissolved during the three months ended September 30, 2006 and is now operating as a
division of UTEK Corporation. All intercompany transactions and balances are eliminated in consolidation.

These operating subsidiaries provide
comprehensive technology transfer related services to the Company and its portfolio companies. Portfolio investments are held for the purpose of deriving investment income and future capital gains. The financial results of the Companys
portfolio investments are not consolidated in the Companys financial statements.

Reclassifications

Certain reclassifications have been made to the 2005 balances to conform to the 2006 financial statement presentation.

Use of Estimates

The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The
most significant estimate relates to the fair value of the investments. Actual results could differ from those estimates.

Recently Issued Accounting
Pronouncements

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
157, Fair Value Measurements. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that
prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007 and interim periods within those fiscal years, with early adoption permitted. The Company does not expect the adoption of SFAS No. 157 to materially impact its consolidated financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year
Misstatements When Quantifying Current Year Misstatements. SAB No. 108 requires analysis of misstatements using both an income statement (rollover) approach and a balance sheet (iron curtain) approach in assessing materiality and provides a
one-time cumulative effect transition adjustment. SAB No. 108 is effective for our 2006 annual financial statements. We are currently assessing the potential impact that the adoption of SAB No. 108 will have on our consolidated financial statements.
The adoption of SAB No. 108 is not expected to materially impact the consolidated financial statements.

Net Increase in Net Assets from Operations per
Share (EPS)

Basic EPS is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted earnings
per share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares consist
of outstanding stock options.

Components of basic and diluted earnings per share are as follows:



|                                                    |  |                    |  |                   |  |           |  |          
|--------------------------------------------------- |  | ------------------ |  | ----------------- |  | --------- |  | ---------
|                                                    |  | Three Months Ended |  | Nine Months Ended
|                                                    |  | 2006               |  | 2005              |  | 2006      |  | 2005     
|Weighted average outstanding shares of common stock |  | 8,906,918          |  | 7,563,853         |  | 8,737,230 |  | 6,957,300
|Dilutive effect of stock options                    |  |                   |  | 121,430           |  | 132,046   |  | 147,071  
|                                                    |  |                    |  |                   |  |           |  |          
|Common stock and common stock equivalents           |  | 8,906,918          |  | 7,685,283         |  | 8,869,276 |  | 7,104,371
|                                                    |  |                    |  |                   |  |           |  |          
|Shares excluded from calculation of diluted EPS (1) |  | 558,250            |  | 272,000           |  | 102,000   |  | 120,000  
|                                                    |  |                    |  |                   |  |           |  |          

---

|(1) | These shares attributable to outstanding stock options were excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive. The shares excluded
from the calculation for the three months ended September 30, 2006 would have been anti-dilutive because there was a net decrease in net assets from operations during the period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Goodwill Impairment

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company decided during the first quarter of 2006 to make
significant changes in strategy for UTEKip, Ltd., primarily switching the focus of operations in Israel from software to technology transfer, the Companys core business. These changes were other-than-temporary; therefore management
determined there was an impairment of the original purchase goodwill. The Company recorded a total impairment of the goodwill for UTEKipin the first quarter of 2006. This resulted in a write-down of approximately $235,000, $147,000 after
tax, which is included as general and administrative expenses in the statement of operations for the nine months ended September 30, 2006.

2.
Stock Compensation

The Company had two stock-based equity compensation plans at September 30, 2006. See Note 7 of our consolidated financial
statements included in the Companys Form 10-K for the year ended December 31, 2005.

Options under both plans are granted at the fair market
value of the stock on the date of grant, except in the case of a more than 10% shareholder, for which grants are exercisable at 110% of fair market value of the stock on the date of grant. Options generally become fully vested three to four years
from the date of grant and expire five years from the date of grant. During the nine months ended September 30, 2006 and 2005, we granted 161,000 and 183,000 options to purchase shares of common stock with a weighted average grant date fair
value of $8.70 and $4.22 per option, respectively. The weighted average grant date fair value of options granted during the three months ended September 30, 2006 and 2005 was $9.77 and $4.04, respectively. At September 30, 2006, the
Company had 622,870 shares available for future stock option grants under existing plans.

Effective January 1, 2006, the Company adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 123 (R), Share-Based Payment. Prior to the adoption of SFAS 123(R), we accounted for stock option grants using the intrinsic value method prescribed in
APB Opinion No. 25, Accounting for Stock Issued to Employees, and accordingly, recognized no compensation expense for stock option grants.

Under the modified prospective approach, SFAS 123(R) applies to new awards granted subsequent to the date of adoption, January 1, 2006. Compensation cost recognized during the nine months ended September 30, 2006 includes
compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and compensation cost for all share
based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). Prior periods were not restated to reflect the impact of adopting the new standard, and there
is no cumulative effect.

The following table illustrates the impact SFAS 123(R) has had on our net increase (decrease) in net assets from operations (net
earnings (loss)) and related per share information for the three and nine months ended September 30, 2006 and the pro forma effects on our net increase in net assets from operations (net earnings) and related per share information (earnings per
share) for the three and nine months ended September 30, 2005 had SFAS 123(R) been in effect in 2005.



|                                                                       |  |                                |            |                               |      |   |           |  |      |            |  |   |          
|---------------------------------------------------------------------- |  | ------------------------------ | ---------- | ----------------------------- | ---- | - | --------- |  | ---- | ---------- |  | - | ---------
|                                                                       |  | Three Months EndedSeptember 30 |            | Nine Months EndedSeptember 30
|                                                                       |  | 2006                           |            |                               | 2005 |   | 2006      |  | 2005
|Net (loss) earnings, as reported                                       |  | $                              | (4,473,588 | )                             |      | $ | 5,663,261 |  | $    | 12,143,157 |  | $ | 1,960,050
|Earnings (loss) per share, as reported                                 |  |                                |            |                               |      |   |           |  |      |            |  |   |          
|Basic                                                                  |  | $                              | (0.50      | )                             |      | $ | 0.75      |  | $    | 1.39       |  | $ | 0.28     
|Diluted                                                                |  | $                              | (0.50      | )                             |      | $ | 0.74      |  | $    | 1.37       |  | $ | 0.28     
|Compensation expense per SFAS 123, net of related tax effect*          |  |                                | 157,937    |                               |      |   |          |  |      | 373,315    |  |   |         
|Pro forma effects                                                      |  |                                |            |                               |      |   |           |  |      |            |  |   |          
|Pro forma compensation expense per SFAS 123, net of related tax effect |  |                                |           |                               |      |   | 106,146   |  |      |           |  |   | 167,302  
|Net (loss) earnings, pro forma                                         |  | $                              | (4,315,651 | )                             |      | $ | 5,557,115 |  | $    | 12,516,472 |  | $ | 1,792,748
|Earnings per share, pro forma                                          |  |                                |            |                               |      |   |           |  |      |            |  |   |          
|Basic                                                                  |  | $                              | (0.48      | )                             |      | $ | 0.73      |  | $    | 1.43       |  | $ | 0.26     
|Diluted                                                                |  | $                              | (0.48      | )                             |      | $ | 0.72      |  | $    | 1.41       |  | $ | 0.25     

---

|* | Tax effect pertains only to certain non-qualified stock options.
|- | ----------------------------------------------------------------



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Our results of operations include stock-based compensation for the three and nine months ended September 30, 2006 as
follows:



|                                          |  |              |         |   |             |   |         |  
|----------------------------------------- |  | ------------ | ------- | - | ----------- | - | ------- | -
|                                          |  | Three Months |         |   | Nine Months |  
|Salaries and wages                        |  | $            | 84,143  |   |             | $ | 194,641 |  
|Sales and marketing                       |  |              | 46,847  |   |             |   | 141,490 |  
|General and administrative                |  |              | 43,208  |   |             |   | 59,622  |  
|Less: Tax effect of non-qualified options |  |              | (16,261 | ) |             |   | (22,438 | )
|                                          |  |              |         |   |             |   |         |  
|                                          |  | $            | 157,937 |   |             | $ | 373,315 |  
|                                          |  |              |         |   |             |   |         |  

We use the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date of
grant. The assumptions employed in the calculation of the fair value of share-based compensation expense for the three and nine months ended September 24, 2006 were calculated as follows:



| |  |  | Expected dividend yield  based on the Companys historical dividend yield.
| | - |  | ---------------------------------------------------------------------------



| |  |  | Expected volatility  based on the Companys historical market price at consistent points in a period equal to the expected life of the options.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Risk-free interest rate  based on the U.S. Treasury yield curve in effect at the time of grant.
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | Expected life of options  calculated using the simplified method as prescribed in Staff Accounting Bulletin No. 107, where the expected life is equal to the sum of the
vesting period and the contractual term divided by two.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the assumptions used to estimate the fair value of
stock options granted during the nine months ended September 30, 2006 and 2005.



|                         |  |      |                |   |      |   |               |  
|------------------------ |  | ---- | -------------- | - | ---- | - | ------------- | -
|                         |  | 2006 |                |   | 2005 |  
|Expected dividend yield  |  |      | 0-0.12         | % |      |   | 0             | %
|Expected volatility      |  |      | 53.99-59.57    | % |      |   | 28.88         | %
|Risk-free interest rate  |  |      | 4.35-5.21      | % |      |   | 3.76-4.13     | %
|Expected life of options |  |      | 3.5-3.75 years |   |      |   | 3.5-4.0 years |  
|Grant date fair value    |  | $    | 5.96-$10.65    |   |      | $ | 3.68-$5.08    |  

Net cash proceeds from the exercise of stock options were approximately $692,000 for the nine months ended
September 30, 2006. At September 30, 2006, there was $1,186,000 of unrecognized compensation cost related to share-based payments which is expected to be recognized over a weighted average period of 1.6 years.

The following table represents stock option activity as of and for the nine months ended September 30, 2006:



|                                             |  |                 |   |  |                              |       |                                          |            |                         |   |          
|-------------------------------------------- |  | --------------- | - |  | ---------------------------- | ----- | ---------------------------------------- | ---------- | ----------------------- | - | ---------
|                                             |  | Numberof Shares |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractual Life |            | AggregateIntrinsicValue
|Options Outstanding - January 1, 2006        |  | 504,767         |   |  | $                            | 11.16 |                                          |            |                         |   |          
|Granted                                      |  | 161,000         |   |  |                              | 19.03 |                                          |            |                         |   |          
|Exercised                                    |  | (69,630         | ) |  |                              | 9.58  |                                          |            |                         | $ | 500,000  
|Forfeited/expired/cancelled                  |  | (37,887         | ) |  |                              | 13.64 |                                          |            |                         |   |          
|                                             |  |                 |   |  |                              |       |                                          |            |                         |   |          
|Options Outstanding - September 30, 2006     |  | 558,250         |   |  | $                            | 13.27 |                                          | 3.01 years |                         | $ | 3,907,000
|                                             |  |                 |   |  |                              |       |                                          |            |                         |   |          
|Outstanding Exercisable - September 30, 2006 |  | 358,594         |   |  | $                            | 10.89 |                                          | 2.27 years |                         | $ | 3,279,000
|                                             |  |                 |   |  |                              |       |                                          |            |                         |   |          

The total grant date fair value of options vested during the nine months ended September 30, 2006 and 2005
was $495,000 and $325,000, respectively.



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The following table represents our nonvested stock option activity for the nine months ended September 30, 2006:



|                                       |  |                 |   |  |                                       |     
|-------------------------------------- |  | --------------- | - |  | ------------------------------------- | ----
|                                       |  | Numberof Shares |   |  | Weighted AverageGrant Date Fair Value
|Nonvested options - January 1, 2006    |  | 180,747         |   |  | $                                     | 4.06
|Granted                                |  | 161,000         |   |  |                                       | 8.70
|Vested                                 |  | (108,580        | ) |  |                                       | 4.55
|Forfeited/expired/cancelled            |  | (33,511         | ) |  |                                       | 4.87
|                                       |  |                 |   |  |                                       |     
|Nonvested Options  September 30, 2006 |  | 199,656         |   |  | $                                     | 7.40
|                                       |  |                 |   |  |                                       |     

3. Investments

The Company invests in portfolio companies that its management believes are positioned to benefit from the acquisition of new technology. Usually we execute our investments in portfolio companies through our U2B® technology transfer process.

Strategic alliance services are performed pursuant to service agreements (usually one year in length) in which UTEK provides consulting services by identifying and
evaluating technology acquisition opportunities in exchange for unregistered shares of the client company, or cash. These agreements may be terminated typically with 30 days notice by either party.

At September 30, 2006 and December 31, 2005, approximately 84% and 59% of our net assets, respectively, represented investments recorded at fair value as
determined by the Board of Directors, with the assistance of appraisals provided by an independent valuation service provider, in the absence of readily available market values.

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

The 1940 Act prohibits the Company from acquiring (i) more than 3% of the total outstanding shares of another investment company;
(ii) shares of another investment company having an aggregate value in excess of 5% of the value of the Companys total assets; or (iii) shares of another registered investment company and all other investment companies having an
aggregate value in excess of 10% of the value of the Companys total assets. Subsequent to the Companys acquisition of shares of common stock in HydroFlo, Inc., the Company became aware that HydroFlo, Inc. was a closed-end management
investment company that had elected to be treated as a BDC under the 1940. Because the Companys ownership of HydroFlo, Inc. exceeded certain of the limits set forth above, the Company made a gift of 5,100,000 shares of HydroFlo, Inc.s
common stock to certain nonprofit organizations during the nine months ended September 30, 2006. The fair market value of such shares immediately prior to such gift was approximately $663,000. As a result, the Company recorded an expense in the
amount of $663,000, which is included in general and administrative expenses in the accompanying statement of operations for the nine months ended September 30, 2006.

During the nine months ended September 30, 2006, the Company also elected to abandon its right, title and interest in and to 400,000 shares of common stock of HydroFlo, Inc. because HydroFlo, Inc. may have issued
such shares in violation of the 1940 Act. Such shares were originally issued by HydroFlo, Inc. to the Company pursuant to a strategic alliance agreement. Such action resulted in the Companys recognition of a $7,000 capital loss, net of income
tax, during the nine months ended September 30, 2006.

The Company typically invests its excess cash in U.S. Treasuries and certificates of deposit
which normally have three month to one year maturities.

Strategic Alliances:

During the nine months ended September 30, 2006, we entered into thirty-nine strategic alliance agreements. Of these, four were terminated during the nine months ended September 30, 2006 and eight were
terminated subsequent to September 30, 2006. The fair value of the Companys assets increased by $2.6 million for the nine months ended September 30, 2006 as a result of these agreements. The income recognized from all strategic
alliance agreements for the three and nine months ended September 30, 2006 was approximately $644,000 and $1,501,000, respectively. At September 30, 2006, the Company had thirty-eight active strategic alliance clients.

During the nine months ended September 30, 2005, we entered into thirty-three strategic alliance agreements, of which, five were subsequently terminated in 2005 and
two were terminated in 2006. The fair value of the Companys assets increased by $1.6



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million at September 30, 2005 as a result of these agreements. The income recognized from all strategic alliance agreements for the three and nine
months ended September 30, 2005 was approximately $830,000 and $1,200,000, respectively. At September 30, 2005 the Company had thirty active strategic alliance clients.

Technology Transfers:

All of our technology transfers are generally completed according to our strategic alliance
service agreements with our clients. During the nine months ended September 30, 2006, we completed the following twenty-four technology transfers:



|                                                                                                      |  |                                                    |  |                                                  |  |                                  |  |                   |       
|----------------------------------------------------------------------------------------------------- |  | -------------------------------------------------- |  | ------------------------------------------------ |  | -------------------------------- |  | ----------------- | ------
|Date                                                                                                  |  | Name of Company Acquiring the Newly Formed Company |  | Newly Formed Company                             |  | ConsiderationUnregisteredShares |  | Price perShare(1)
|January 20                                                                                            |  | Fuel FX International, Inc.                        |  | Emissions-Detection Technologies, Inc.           |  | 100,000(2)                       |  | $                 | 21.000
|January 27                                                                                            |  | Broadcast International, Inc.                      |  | Video Processing Technologies, Inc.              |  | 944,360                          |  |                   | 1.210 
|January 30                                                                                            |  | WebSky, Inc.                                       |  | Strategic Wireless Solutions, Inc.               |  | 33,250,000                       |  |                   | 0.027 
|March 6                                                                                               |  | Trio Industries Group, Inc.                        |  | Ultra Fine Coating Systems, Inc.                 |  | 1,805,000                        |  |                   | 1.350 
|March 15                                                                                              |  | American Soil Technologies, Inc.                   |  | Advanced Fertilizer Technologies, Inc.           |  | 4,275,000                        |  |                   | 0.0367
|March 16                                                                                              |  | Advanced Refractive Technologies, Inc.             |  | Ocular Therapeutics, Inc.                        |  | 97,000 (3)                       |  |                   | 21.30 
|April 3                                                                                               |  | Trio Industries Group, Inc.                        |  | Natural Adhesive Technologies, Inc.              |  | 1,566,089                        |  |                   | 2.090 
|April 4                                                                                               |  | Advanced Refractive Technologies, Inc.             |  | Advanced Glaucoma Technologies, Inc.             |  | 100,000(4)                       |  |                   | 19.960
|April 5                                                                                               |  | UBA Technology, Inc.                               |  | Intellitouch Technologies, Inc.                  |  | 48,614,797(5)                    |  |                   | 0.034 
|May 1                                                                                                 |  | Industrial Biotechnology Corp.                     |  | Bio-Repellant Technologies, Inc.                 |  | 3,865,979                        |  |                   | 0.720 
|May 12                                                                                                |  | Kwikpower International Plc                        |  | Hydrocarbon Synthesis Technologies, Inc.         |  | (6)                              |  |                   |       
|May 12                                                                                                |  | Kwikpower International Plc                        |  | Advanced BioEnergy Technologies, Inc.            |  | (7)                              |  |                   |       
|June 1                                                                                                |  | Trio Industries Group, Inc.                        |  | Advanced Powder Coating Technologies, Inc.       |  | 1,470,987                        |  |                   | 1.770 
|June 12                                                                                               |  | Kwikpower International Plc                        |  | Advanced Biofuel Technologies, Inc.              |  | (8)                              |  |                   |       
|June 13                                                                                               |  | Xethanol Corporation                               |  | Advanced Biomass Gasification Technologies, Inc. |  | 136,838                          |  |                   | 6.400 
|June 20                                                                                               |  | Klegg Electronics, Inc.                            |  | Smart Speaker Technologies, Inc.                 |  | 24,148,765                       |  |                   | 0.104 
|July 12                                                                                               |  | Avalon Oil & Gas, Inc.                             |  | Ultrasonic Mitigation Technologies, Inc.         |  | 15,437,500                       |  |                   | 0.082 
|July 14                                                                                               |  | DME Interactive Holdings, Inc.                     |  | Multimedia Control Technologies, Inc.            |  | 4,426,136                        |  |                   | 0.170 
|July 18                                                                                               |  | Cytodyn, Inc.                                      |  | Advanced Influenza Technologies, Inc.            |  | 2,000,000                        |  |                   | 1.780 
|August 11                                                                                             |  | NetFabric Holdings, Inc                            |  | Intrusion Detection Technologies, Inc.           |  | 7,125,000                        |  |                   | 0.083 
|August 18                                                                                             |  | Material Technologies, Inc.                        |  | Materials Monitoring Technologies, Inc.          |  | 35,749,213                       |  |                   | 0.047 
|August 29                                                                                             |  | Industrial Biotechnology Corp.                     |  | Advanced Pheromone Technologies, Inc.            |  | 4,642,857                        |  |                   | 0.290 
|September 12                                                                                          |  | Liberty Diversified Holdings, Inc.                 |  | Innovative Packaging Technologies, Inc.          |  | 15,437,500                       |  |                   | 0.076 
|September 22                                                                                          |  | Advanced Medical Isotope Corp.                     |  | Neu-Hope Technologies, Inc.                      |  | 95,000(9)                        |  |                   | 18.983
|                                                                                                     
|During the nine months ended September 30, 2005, we completed the following ten technology transfers:
|Date                                                                                                  |  | Name of Company Acquiring the Newly Formed Company |  | Newly Formed Company                             |  | ConsiderationUnregisteredShares |  | Price perShare(1)
|January 10                                                                                            |  | Xethanol Corporation                               |  | Superior Separation Technologies, Inc.           |  | 250,000                          |  | $                 | 2.500 
|February 22                                                                                           |  | Health Sciences Group, Inc.                        |  | Open Cell Biotechnologies, Inc.                  |  | 822,845                          |  |                   | 0.730 
|March 31                                                                                              |  | Swiss Medica, Inc.                                 |  | Anti Depression Biohealth Solutions, Inc.        |  | 1,862,069(10)                    |  |                   | 0.190 
|June 30                                                                                               |  | Manakoa Services Corporation                       |  | Vigilant Network Technologies, Inc.              |  | 5,365,854                        |  |                   | 0.280 
|July 18                                                                                               |  | eLinear Corporation                                |  | Secure Voice Communications, Inc.                |  | 150,528                          |  |                   | 0.690 
|August 5                                                                                              |  | Industrial Biotechnology Corp.                     |  | Advanced Bioscience, Inc.                        |  | Preferred A10,000,000            |  |                   | 0.200 
|August 15                                                                                             |  | Xethanol Corporation                               |  | Xylose Technologies, Inc.                        |  | 567,857                          |  |                   | 3.020 
|September 1                                                                                           |  | Fuel FX International Inc.                         |  | Emissions-Reduction Technologies, Inc.           |  | 5,715,000                        |  |                   | 0.200 
|September 15                                                                                          |  | INSEQ Corp.                                        |  | Separation and Recovery Technologies, Inc.       |  | 434,782,608                      |  |                   | 0.0056
|September 30                                                                                          |  | Kwikpower International Plc                        |  | Biodiesel Technologies, Inc.                     |  | (11)                             |  |                   |       



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---

|* | Unless otherwise noted, the Company received unregistered shares of common stock of the company acquiring the Companys newly formed company.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(1) | Represents the valuation price per share at the date of acquisition.
|--- | --------------------------------------------------------------------

|(2) | Preferred B shares convertible into common shares based on a value of $2.1 million.
|--- | -----------------------------------------------------------------------------------

|(3) | Preferred C shares convertible into common shares based on a value of $2.8 million.
|--- | -----------------------------------------------------------------------------------

|(4) | Preferred D shares convertible into common shares based on a value of $2.0 million.
|--- | -----------------------------------------------------------------------------------

|(5) | The Company also received 95,000 Preferred A shares convertible into common shares based on a value of $2.5 million.
|--- | --------------------------------------------------------------------------------------------------------------------

|(6) | Consideration consisted of a £1.2 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 2.4 million common
shares underlying the convertible debenture.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Consideration consisted of a £1.3 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 2.5 million common
shares underlying the convertible debenture.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Consideration consisted of a £1.2 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 2.3 million common
shares underlying the convertible debenture.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | 5% Preferred A shares convertible into common shares based on a value of $3,182,500.
|--- | ------------------------------------------------------------------------------------

|(10) | The Company also received $96,637 in cash.
|---- | ------------------------------------------

|(11) | Consideration consisted of a £1.25 million convertible debenture. The Company has recognized the value of the investment based upon the fair value of the 1,984,126 common
shares underlying the convertible debenture.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4. Commitments and Contingencies

From time to time, some of the Companys portfolio companies may receive correspondence or other notices of alleged breach of a 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 Companys portfolio companies to cure the alleged breach may have a material adverse impact on the Companys results of
operations and financial position.

5. Equity Securities

On February 8, 2006, the Company consummated a financing which raised approximately $10 million (before expenses) from the sale of 816,330 shares of common stock. Piper Jaffray, & Co. received an aggregate commission of
$702,000.

On March 30, 2006, the Company declared a dividend of $0.02 per share to stockholders of record as of April 28, 2006. The dividend was
paid on May 19, 2006.

6. Acquisition

On
March 30, 2006, the Company entered into an agreement and plan of acquisition with 22ndStreet of Ybor City,
Inc. to acquire all of its issued and outstanding shares of capital stock for an aggregate purchase price of $2.0 million. 22ndStreet of Ybor City, Inc. is a real estate holding company that owns a commercial real estate property in Tampa, Florida. UTEK acquired 100% of the outstanding shares of 22ndStreet of Ybor City, Inc. through the issuance of 82,919 shares of unregistered common stock with a market value of $1.0 million plus a cash payment of $1.0
million. The acquired business will be operated by UTEK Real Estate Holdings, Inc., one of UTEKs portfolio companies.

7. Segment Reporting

The Companys principal area of activity is technology transfer services. The Company has three reportable operating segments: United Kingdom,
Israel and the United States. The United Kingdom segment includes our wholly owned subsidiary UTEK-Europe, Ltd., the Israel segment includes UTEKip, Ltd., and the United States segment includes UTEK Corporation and UTEK-EKMS, Inc.

A summary of income from operations and other financial information by reportable operating segment is shown below:



|                                |  |               |           |        |   |               |  |       |            |  |   |           
|------------------------------- |  | ------------- | --------- | ------ | - | ------------- |  | ----- | ---------- |  | - | ----------
|                                |  | UnitedKingdom |           | Israel |   | United States |  | Total
|Total assets September 30, 2006 |  | $             | 786,011   |        | $ | 93,297        |  | $     | 79,427,744 |  | $ | 80,307,052
|Total assets December 31, 2005  |  |               | 1,251,491 |        |   | 432,453       |  |       | 47,322,016 |  |   | 49,005,960



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|                                                              |  |                                               |         |   |        |   |         |               |  |       |            |  |   |           
|------------------------------------------------------------- |  | --------------------------------------------- | ------- | - | ------ | - | ------- | ------------- |  | ----- | ---------- |  | - | ----------
|                                                              |  | For the three months ended September 30, 2006
|                                                              |  | UnitedKingdom                                 |         |   | Israel |   |         | United States |  | Total
|Income from operations                                        |  | $                                             | 85,803  |   |        | $ | 30,957  |               |  | $     | 13,495,416 |  | $ | 13,612,176
|Income (loss) before interest, other expense and income taxes |  |                                               | (85,386 | ) |        |   | (71,691 | )             |  |       | 6,687,049  |  |   | 6,529,972 
|Depreciation and amortization                                 |  |                                               | 946     |   |        |   | 5,012   |               |  |       | 57,504     |  |   | 63,462    



|                                                              |  |                                               |         |        |   |         |               |  |       |            |  |   |           
|------------------------------------------------------------- |  | --------------------------------------------- | ------- | ------ | - | ------- | ------------- |  | ----- | ---------- |  | - | ----------
|                                                              |  | For the three months ended September 30, 2005
|                                                              |  | United Kingdom                                |         | Israel |   |         | United States |  | Total
|Income from operations                                        |  | $                                             | 196,539 |        | $ | 56,593  |               |  | $     | 10,195,251 |  | $ | 10,448,383
|Income (loss) before interest, other expense and income taxes |  |                                               | 129     |        |   | (82,676 | )             |  |       | 6,068,260  |  |   | 5,985,713 
|Depreciation and amortization                                 |  |                                               | 6,349   |        |   | 4,894   |               |  |       | 32,458     |  |   | 43,701    





|                                                              |  |                                              |         |   |        |   |          |               |  |       |            |  |   |           
|------------------------------------------------------------- |  | -------------------------------------------- | ------- | - | ------ | - | -------- | ------------- |  | ----- | ---------- |  | - | ----------
|                                                              |  | For the nine months ended September 30, 2006
|                                                              |  | UnitedKingdom                                |         |   | Israel |   |          | United States |  | Total
|Income from operations (2)                                    |  | $                                            | 450,944 |   |        | $ | 111,753  |               |  | $     | 47,915,792 |  | $ | 48,478,489
|Income (loss) before interest, other expense and income taxes |  |                                              | (38,401 | ) |        |   | (469,597 | )             |  |       | 28,399,309 |  |   | 27,891,311
|Depreciation and amortization                                 |  |                                              | 2,596   |   |        |   | 15,742   |               |  |       | 143,041    |  |   | 161,379   





|                                                              |  |                                              |          |   |        |   |          |               |  |       |            |  |   |           
|------------------------------------------------------------- |  | -------------------------------------------- | -------- | - | ------ | - | -------- | ------------- |  | ----- | ---------- |  | - | ----------
|                                                              |  | For the nine months ended September 30, 2005
|                                                              |  | UnitedKingdom                                |          |   | Israel |   |          | United States |  | Total
|Income from operations (1)                                    |  | $                                            | 567,986  |   |        | $ | 96,235   |               |  | $     | 14,865,488 |  | $ | 15,529,709
|Income (loss) before interest, other expense and income taxes |  |                                              | (120,811 | ) |        |   | (213,784 | )             |  |       | 6,645,762  |  |   | 6,311,167 
|Depreciation and amortization                                 |  |                                              | 19,212   |   |        |   | 13,144   |               |  |       | 67,821     |  |   | 100,177   

---

|(1) | Our website Knowledge Express was purchased by the Company on July 7, 2005; therefore, the nine months ended September 30, 2005 only includes three months of
related financial information. Knowledge Express is part of the Companys United States segment.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | During the first quarter of 2006, the Company recorded goodwill impairment for UTEKip Ltd. of approximately $235,000, which is included in general and administrative expenses in the
accompanying statement of operations for the nine months ended September 30, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8. Related Party Transactions

Sam Reiber, our General Counsel and a member of our Board of Directors, is also a partner with the law firm Linsky & Reiber in Tampa, Florida. Linsky &
Reiber has received approximately $39,000 and $26,000 in compensation in the nine months ended September 30, 2006 and 2005, respectively, for services performed for us. Linsky & Reiber also holds 6,100 shares of our common stock as of
September 30, 2006.

During the nine months ended September 30, 2006, we loaned funds for operations and real estate improvements of
approximately $1,051,000 to Ybor City Group, Inc., a wholly owned subsidiary of UTEK Real Estate Holdings, Inc., one of UTEKs portfolio companies. In addition, we paid rent of approximately $74,000 to Ybor City Group, Inc. during the nine
months ended September 30, 2006.

9. Subsequent Events

Subsequent to September 30, 2006, we completed two technology transfers in which we received unregistered shares of stock from companies that acquired our newly formed companies. The shares acquired by us in these transactions were
acquired in tax-free stock-for-stock exchanges and are restricted and may only be resold by us pursuant to the requirements of the Securities Act of 1933. The revenue associated with the shares received will be determined based upon valuations in
accordance with our valuation policy as of the closing date of each transaction. Additionally, eight strategic alliance agreements were terminated.



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

The
following discussion should be read in conjunction with our consolidated 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. These forward-looking statements 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 the 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.

General

We are a market-driven technology transfer business that assists companies in identifying and acquiring technologies. Technology transfer refers to the process by which
new technologies, developed in universities, government research facilities or similar research settings, are licensed to companies for commercial development and use.

Income

We generate income in the form of securities and cash primarily in connection with our strategic alliance
agreements and technology transfer transactions.

Strategic Alliance Agreements (Consulting and Other Services)

Our strategic alliances are designed to help companies enhance their new product pipeline through the acquisition of new technology primarily from universities, medical
centers and federal research laboratories. We normally receive unregistered shares of common stock from companies as payment for the services we render under our strategic alliance consulting agreements. Whenever appropriate we will seek to receive
cash payments as compensation for our services. All of our technology transfer transactions are generally completed pursuant to our strategic alliance agreements with companies.

Technology Transfers (Sale of Technology Rights)

To
effectuate a technology transfer, we will typically create a newly formed company to acquire a new technology from a university, medical center or federal research laboratory and then exchange the securities of such newly formed company for
securities in the company that acquires such newly formed company and the technology held by such newly formed company. We call this unique technology transfer process U2B®. A benefit of effectuating technology transfers through our U2B® process is that such transactions do not result in a taxable event for us for income
tax purposes. We will not acquire a new technology from a university, medical center and federal research laboratory in connection with our U2B® process without the agreement of a company to immediately acquire such new technology from us. It is our plan that shares of those privately owned and
publicly traded companies received in those exchanges will be sold for cash or other assets in the course of our business to permit us to acquire additional technologies and to fund our operations. We seek to sell such newly formed companies to
publicly traded companies whenever possible as this provides us with the potential for added liquidity.

We may also enter into technology transfers
pursuant to which we receive cash in exchange for new technologies.

Expenses

Our expenses include costs associated with the acquisition of technology rights, salaries and wages, professional fees, sales and marketing costs as well as general and administrative costs. Acquisition of technology
rights expenses may include cash to further accelerate commercialization efforts, license fees to acquire new technologies, consulting fees with the inventor of the technologies, and sponsored research fees with the university or research facility
transferring the technologies. Sales and marketing costs include advertising, sales commissions, travel and other selling expenses. General and administrative costs include rent, depreciation, investor relations and other overhead costs.



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Financial Condition

Our total assets were $80.3 million and our net assets were $67.6 million at September 30, 2006, compared to $49.0 million and $44.4 million at December 31, 2005, respectively. Net asset value per share was $7.57 at
September 30, 2006 and $5.58 at December 31, 2005. Net assets increased by $23.1 million or 52% in the nine months ended September 30, 2006.

The changes in total assets, net assets and net asset value per share during the nine months ended September 30, 2006 were primarily attributable to:



| |  |  | The completion of 24 technology transfers valued at approximately $44.0 million;
| | - |  | --------------------------------------------------------------------------------



| |  |  | The sale of certain of our investments for $7.3 million, including realized gains of $1.8 million (net of income tax);
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | The issuance of 816,330 shares of our common stock in a registered offering for approximately $9.0 million, net;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | The use of approximately $16.1 million to fund operations;
| | - |  | ----------------------------------------------------------



| |  |  | An increase in our deferred tax liability of approximately $7.3 million;
| | - |  | ------------------------------------------------------------------------



| |  |  | The acquisition of 22ndStreet of Ybor City,
Inc. valued at $2.0 million through the issuance of 82,919 shares of our common stock with a market value of $1.0 million and $1.0 million in cash; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A net unrealized loss of $7.1 million (net of income tax) in the fair value of our investments.
| | - |  | -----------------------------------------------------------------------------------------------

Our common shares outstanding as of September 30, 2006 were 8,930,384 compared to 7,961,505 at December 31, 2005. The number of our outstanding common shares increased as a result of the issuance of common
shares in connection with a registered offering, upon the exercise of stock options and in conjunction with the acquisition of 22ndStreet of Ybor City, Inc.

Our financial condition is dependent on a number of factors including our ability to effectuate technology
transfers and the performance of the equity investments that we receive in connection with these transfers. We have invested a substantial portion of our assets in development stage and start-up companies and thinly traded public companies. These
businesses are thinly capitalized, unproven, small companies that lack management depth, are dependent on new, commercially unproven technologies and have no or a limited history of operations.

At September 30, 2006, $48.5 million or 68% of our investments consisted of investments at fair value in companies whose securities are quoted on the OTC Bulletin
Board or listed on the American Stock Exchange or other similar markets, $11.8 million or 17% of our investments consisted of equity securities at fair value in privately owned companies, and $10.5 million or 15% were in U.S. Treasuries or
certificates of deposit.

At December 31, 2005, $22.9 million or 59% of our investments consisted of investments at value in companies whose
securities are quoted on the OTC Bulletin Board or listed on the American Stock Exchange or other similar markets, $4.3 million or 11% of our investments consisted of equity securities at fair value in privately owned companies, and $11.6 million or
30% were in U.S. Treasuries or certificates of deposit.

A summary of our investment portfolio is as follows:



|                                             |  |                   |             |   |                  |   |            |  
|-------------------------------------------- |  | ----------------- | ----------- | - | ---------------- | - | ---------- | -
|                                             |  | September 30,2006 |             |   | December 31,2005 |  
|Investments, at cost                         |  | $                 | 87,197,588  |   |                  | $ | 43,867,694 |  
|Unrealized depreciation, before income taxes |  |                   | (16,389,856 | ) |                  |   | (5,114,768 | )
|                                             |  |                   |             |   |                  |   |            |  
|Investments, at value                        |  | $                 | 70,807,732  |   |                  | $ | 38,752,926 |  
|                                             |  |                   |             |   |                  |   |            |  

The net increase in the value of investment securities from $38.8 million at December 31, 2005 to $70.8
million at September 30, 2006 is primarily due to the following events:



| |  |  | The completion of 24 technology transfers valued at approximately $44.0 million;
| | - |  | --------------------------------------------------------------------------------



| |  |  | The donation of 5.1 million shares of HydroFlo, Inc. valued at $663,000 to four not-for-profit institutions;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | The sale of some or all of our shares in Circle Group Holdings, Inc., Xethanol Corporation, Sequiam Corp., Israel Technology Acquisition Corp, Fortress America Acquisition Corp.,
Harborlight Diversified Fund, LP and NutraCea International Corporation for approximately $7.3 million;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The acquisition of 22nd Street of Ybor City, Inc. valued at $2.0 million through the issuance of 82,919 shares of our common stock with a market value of $1.0 million and $1.0
million in cash; and,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Decrease of approximately $1.1 million in U.S. Treasuries and certificates of deposit.
| | - |  | --------------------------------------------------------------------------------------



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Our most significant portfolio investments at September 30, 2006 were in Trio Industries Group, Inc., Industrial
Biotechnology Corp., Fuel FX International, Inc. and Advanced Refractive Technologies, Inc. These four investments total $34.7 million in fair value, representing 49% of our investments and 51% of net assets at September 30, 2006.

The value of our investments can fluctuate due to factors that are specific to each investment (e.g., inability to obtain additional capital, inability to execute
business model, termination of technology licenses, etc.) or to general marketplace factors.

Following an initial investment in a portfolio company, we
may make additional investments in such portfolio company or subsequent acquirer in order to: (1) increase our ownership percentage; (2) exercise warrants or options that were acquired in a prior financing; (3) preserve our
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 our investment. Such additional
investments are referred to as follow-on investments. There can be no assurance that we 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 our investment or could result in a missed opportunity for us to participate to a greater extent in a portfolio companys successful operations. We attempt to maintain adequate liquid
capital to make follow-on investments in our portfolio companies. However, there can be no assurance that we will have liquid capital. We may elect not to make a follow-on investment either because we do not want to increase our concentration of
risk, because we prefer other opportunities, or because we are inhibited by compliance with BDC requirements, even though the follow-on investment opportunity appears attractive.

Results of Operations

The principal measure of our financial performance is the Net increase in net assets
from operations, which is the sum of three elements. The first element is Net income from operations, which is the difference between our income from the sale of technology rights, consulting fees and other services, and interest
and dividends, and our operating expenses, net of applicable income tax provision. The second element is Net realized gain (loss) on investments, which is the difference between the proceeds received from dispositions of portfolio
securities and their stated cost, net of applicable income tax provision. The third element, Change in unrealized appreciation (depreciation) of investments, is the net change in the value of our investment portfolio, net of
increase (decrease) in deferred income taxes that would become payable if the unrealized appreciation were realized through the sale or other disposition of the investment portfolio.

Income from Operations (Revenue)



|                                   |  |                                 |        |                  |   |        |                                |    |                  |  |   |        |  |   |        |  |     |  
|---------------------------------- |  | ------------------------------- | ------ | ---------------- | - | ------ | ------------------------------ | -- | ---------------- |  | - | ------ |  | - | ------ |  | --- | -
|                                   |  | Three months endedSeptember 30, |        | PercentageChange |   |        | Nine months endedSeptember 30, |    | PercentageChange | 
|(in thousands, except percentages) |  | 2006                            |        | 2005             |   |        | 2006                           |    | 2005             | 
|Sale of Technology Rights          |  | $                               | 12,173 |                  | $ | 9,287  |                                | 31 | %                |  | $ | 44,012 |  | $ | 12,467 |  | 253 | %
|Consulting and Other Services      |  |                                 | 1,276  |                  |   | 1,010  |                                | 26 | %                |  |   | 3,822  |  |   | 2,745  |  | 39  | %
|Other Income, net                  |  |                                 | 163    |                  |   | 151    |                                | 8  | %                |  |   | 644    |  |   | 318    |  | 102 | %
|                                   |  |                                 |        |                  |   |        |                                |    |                  |  |   |        |  |   |        |  |     |  
|Income from Operations             |  | $                               | 13,612 |                  | $ | 10,448 |                                | 30 | %                |  | $ | 48,478 |  | $ | 15,530 |  | 212 | %
|                                   |  |                                 |        |                  |   |        |                                |    |                  |  |   |        |  |   |        |  |     |  

The increase in sale of technology rights resulted from completing eight technology transfers during the three
months ended September 30, 2006 with a greater average value than the six technology transfer completed during the three months ended September 30, 2005. The greater average value of the technology transfer is a function of the increased
cost to acquire the technology rights offset by a decrease in the technology transfer multiple. The technology transfer multiple is the revenue markup on the acquisition of technology rights costs. The average technology transfer multiple was 2.98
and 4.33 for the three months ended September 30, 2006 and 2005, respectively. The decrease in the average technology transfer multiple during the three months ended September 30, 2006 was due to two technology transfers at multiples
significantly lower than our targeted multiple. All of the income from the sale of technology rights was received in the form of equity securities for both the three months ended September 30, 2006 and 2005.

The increase in sale of technology rights resulted from completing twenty-four technology transfers during the nine months ended September 30, 2006 with a greater
average value than the ten technology transfer completed during the nine ended September 30, 2005. The greater average value of the technology transfer is a function of the increased cost to acquire the technology rights, as well as an increase
in the technology transfer multiple. The average technology transfer multiple was 3.92 and 3.7 for the nine months ended September 30, 2006 and 2005, respectively. All of the income from the sale of technology rights was received in the form of
equity securities for both the nine months ended September 30, 2006 and 2005.



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The increase in consulting fees and other services resulted primarily from providing services under fifteen new strategic
alliance agreements during the three months ended September 30, 2006, as compared to eleven during the three months ended September 30, 2005. In addition, we had a higher total number of strategic alliances in process during 2006. In the
three months ended September 30, 2006, we rendered services in connection with strategic alliance agreements that generated approximately $644,000 in revenue, as compared to strategic alliance agreements that generated approximately $336,000 in
revenue for the three months ended September 30, 2005. Other consulting income for the three months ended September 30, 2006 included income of $118,000 from our subsidiaries UTEK-Europe, Ltd., UTEK-EKMS, Inc., and UTEKip, Ltd., as
compared to $338,000 for the three months ended September 30, 2005. UTEK Information Services comprised the balance of consulting fee and other services income for 2006.

The increase in consulting fees and other services resulted primarily from providing services under thirty-nine new strategic alliance agreements during the nine months ended September 30, 2006, as compared to
thirty-three during the nine months ended September 30, 2005. In the nine months ended September 30, 2006, we rendered services in connection with strategic alliance agreements that generated approximately $1,502,000 in revenue, as
compared to strategic alliance agreements that generated approximately $986,000 in revenue for the nine months ended September 30, 2005. Other consulting income for the nine months ended September 30, 2006 included income of $917,000 from
our subsidiaries UTEK-Europe, Ltd., UTEK-EKMS, Inc., and UTEKip, Ltd., as compared to $861,000 for the nine months ended September 30, 2005. UTEK Information Services comprised the balance of consulting fee and other services income for
2006.

Of the total consulting and other income received during the three months ended September 30, 2006, 52% was paid in the form of equity
securities and the balance was paid in cash, as compared to 34% for the three months ended September 30, 2005. Of such income received during the nine months ended September 30, 2006, 41% was paid in the form of equity securities and the
balance was paid in cash, as compared to 36% for the nine months ended September 30, 2005.

The increase in our strategic alliances and technology
transfers is primarily a result of an increase in the overall demand for our services. We are growing our customer base as a result of increased sales and marketing efforts and better recognition in the business community regarding the value and
availability of our services.

In the absence of readily available market values, our Board of Directors determines the fair value of the securities we
receive in connection with our technology transfers and strategic alliance agreements. In making its determination, the Board of Directors considers valuation appraisals provided by an independent valuation service provider.

Our income from operations can vary substantially on a quarterly basis due to a variety of factors. Therefore, quarterly income from operations should not be annualized
to predict expected annual results and may not be indicative of future performance.

Expenses

Acquisition of Technology Rights



|                                          |  |                                  |       |   |                   |   |       |                                 |      |    |                  |      |   |        |   |  |   |       |   |  |     |     
|----------------------------------------- |  | -------------------------------- | ----- | - | ----------------- | - | ----- | ------------------------------- | ---- | -- | ---------------- | ---- | - | ------ | - |  | - | ----- | - |  | --- | ----
|                                          |  | Three months ended September 30, |       |   | Percentage Change |   |       | Nine months ended September 30, |      |    | PercentageChange |     
|(In thousands, except percentages)        |  | 2006                             |       |   | 2005              |   |       |                                 | 2006 |    |                  | 2005 |   |       
|Acquisition of technology rights          |  | $                                | 4,090 |   |                   | $ | 2,144 |                                 |      | 91 | %                |      | $ | 11,237 |   |  | $ | 3,371 |   |  | 233 | %   
|As a percent of sale of technology rights |  |                                  | 34    | % |                   |   | 23    | %                               |      | 11 | ppt              |      |   | 26     | % |  |   | 27    | % |  | (1  | )ppt

Acquisition of technology rights costs consist of the direct costs associated with the technology transfers, which
include cash to further accelerate commercialization efforts, license fees to acquire new technologies, consulting fees with the inventor of the technologies, and sponsored research fees with the university or research facility transferring the
technologies. The overall increase in acquisition of technology rights was due to completing 2 additional technology transfers in the three months ended September 30, 2006 than in 2005 and 14 additional technology transfers in the nine months
ended September 30, 2006 than in 2005. The average cost per technology transfer increased approximately $154,000 or 43% during the three months ended September 30, 2006, and approximately $131,000 or 39% during the nine months ended
September 30, 2006.



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The following tables provide certain information relating to the acquisition of technology rights expenses we incurred in
connection with our technology transfer transactions during the three and nine months ended September 30, 2006:



|                                                                                                                                                                                                                                          |  |                                                    |  |                                                  |  |                         |           
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------- |  | ------------------------------------------------ |  | ----------------------- | ----------
|Date                                                                                                                                                                                                                                      |  | Name of Company Acquiring the Newly Formed Company |  | Newly Formed Company                             |  | DollarAmount ofExpenses
|09/22/06                                                                                                                                                                                                                                  |  | Advanced Medical Isotope Corp.                     |  | Neu-Hope Technologies, Inc.                      |  | $                       | 335,000   
|09/12/06                                                                                                                                                                                                                                  |  | Liberty Diversified Holdings, Inc.                 |  | Innovative Packaging Technologies, Inc.          |  |                         | 435,000   
|08/29/06                                                                                                                                                                                                                                  |  | Industrial Biotechnology Corporation               |  | Advanced Pheromone Technologies, Inc.            |  |                         | 325,000   
|08/18/06                                                                                                                                                                                                                                  |  | Material Technologies, Inc.                        |  | Materials Monitoring Technologies, Inc.          |  |                         | 589,000   
|08/11/06                                                                                                                                                                                                                                  |  | NetFabric Holdings, Inc                            |  | Intrusion Detection Technologies, Inc.           |  |                         | 523,600   
|07/18/06                                                                                                                                                                                                                                  |  | Cytodyn, Inc.                                      |  | Advanced Influenza Technologies, Inc.            |  |                         | 934,399   
|07/14/06                                                                                                                                                                                                                                  |  | DME Interactive Holdings, Inc.                     |  | Multimedia Control Technologies, Inc.            |  |                         | 512,650   
|07/12/06                                                                                                                                                                                                                                  |  | Avalon Oil & Gas, Inc.                             |  | Ultrasonic Mitigation Technologies, Inc.         |  |                         | 410,000   
|                                                                                                                                                                                                                                          |  | Other                                              |  |                                                  |  |                         | 25,000    
|                                                                                                                                                                                                                                          |  |                                                    |  |                                                  |  |                         |           
|                                                                                                                                                                                                                                          |  |                                                    |  | Total for three months ended September 30, 2006  |  |                         | 4,089,649 
|                                                                                                                                                                                                                                          |  |                                                    |  |                                                  |  |                         |           
|06/20/06                                                                                                                                                                                                                                  |  | Klegg Electronics, Inc.                            |  | Smart Speaker Technologies, Inc.                 |  |                         | 528,628   
|06/13/06                                                                                                                                                                                                                                  |  | Xethanol Corporation                               |  | Advanced Biomass Gasification Technologies, Inc. |  |                         | 450,000   
|06/12/06                                                                                                                                                                                                                                  |  | Kwikpower International Plc                        |  | Advanced Biofuel Technologies, Inc.              |  |                         | 375,000   
|06/01/06                                                                                                                                                                                                                                  |  | Trio Industries Group, Inc.                        |  | Advanced Powder Coating Technologies, Inc.       |  |                         | 550,000   
|05/12/06                                                                                                                                                                                                                                  |  | Kwikpower International Plc                        |  | Advanced BioEnergy Technologies, Inc.            |  |                         | 380,000   
|05/12/06                                                                                                                                                                                                                                  |  | Kwikpower International Plc                        |  | Hydrocarbon Synthesis Technologies, Inc.         |  |                         | 407,500   
|05/01/06                                                                                                                                                                                                                                  |  | Industrial Biotechnology Corporation               |  | Bio-Repellant Technologies, Inc.                 |  |                         | 375,000   
|04/05/06                                                                                                                                                                                                                                  |  | UBA Technology, Inc.                               |  | Intellitouch Technologies, Inc.                  |  |                         | 502,000   
|04/04/06                                                                                                                                                                                                                                  |  | Advanced Refractive Technologies, Inc.             |  | Advanced Glaucoma Technologies, Inc.             |  |                         | 399,999   
|04/03/06                                                                                                                                                                                                                                  |  | Trio Industries Group, Inc.                        |  | Natural Adhesive Technologies, Inc.              |  |                         | 555,000   
|03/16/06                                                                                                                                                                                                                                  |  | Advanced Refractive Technologies, Inc.             |  | Ocular Theraputics, Inc.                         |  |                         | 400,000   
|03/15/06                                                                                                                                                                                                                                  |  | American Soil Technologies, Inc.                   |  | Advanced Fertilizer Technologies, Inc.           |  |                         | 500,000   
|03/06/06                                                                                                                                                                                                                                  |  | Trio Industries Group, Inc.                        |  | Ultra Fine Coating Systems, Inc.                 |  |                         | 534,000   
|01/30/06                                                                                                                                                                                                                                  |  | WebSky, Inc.                                       |  | Strategic Wireless Solutions, Inc                |  |                         | 265,000   
|01/27/06                                                                                                                                                                                                                                  |  | Broadcast International, Inc.                      |  | Video Processing Technologies, Inc.              |  |                         | 625,000   
|01/20/06                                                                                                                                                                                                                                  |  | Fuel FX International, Inc.                        |  | Emissions Detection Technologies, Inc.           |  |                         | 300,000   
|                                                                                                                                                                                                                                          |  |                                                    |  |                                                  |  |                         |           
|                                                                                                                                                                                                                                          |  |                                                    |  | Total for nine months ended September 30, 2006   |  | $                       | 11,236,776
|                                                                                                                                                                                                                                          |  |                                                    |  |                                                  |  |                         |           
|                                                                                                                                                                                                                                         
|The following tables provide certain information relating to the acquisition of technology rights expenses we incurred in connection with
our technology transfer transactions during the three and nine months ended September 30, 2005:
|Date                                                                                                                                                                                                                                      |  | Name of Company Acquiring the Newly Formed Company |  | Newly Formed Company                             |  | DollarAmount ofExpenses
|09/30/05                                                                                                                                                                                                                                  |  | Kwikpower International Plc                        |  | Biodiesel Technologies, Inc.                     |  | $                       | 487,491   
|09/15/05                                                                                                                                                                                                                                  |  | INSEQ Corp.                                        |  | Separation and Recovery Technologies, Inc.       |  |                         | 400,000   
|09/01/05                                                                                                                                                                                                                                  |  | Fuel FX International Inc.                         |  | Emissions-Reduction Technologies, Inc.           |  |                         | 351,722   
|08/15/05                                                                                                                                                                                                                                  |  | Xethanol Corporation                               |  | Xylose Technologies, Inc.                        |  |                         | 530,080   
|08/05/05                                                                                                                                                                                                                                  |  | Industrial Biotechnology Corporation               |  | Advanced Bioscience, Inc.                        |  |                         | 350,174   
|07/18/05                                                                                                                                                                                                                                  |  | eLinear Corporation                                |  | Secure Voice Communications, Inc.                |  |                         | 25,000    
|                                                                                                                                                                                                                                          |  |                                                    |  |                                                  |  |                         |           
|                                                                                                                                                                                                                                          |  |                                                    |  | Total for three months ended September 30, 2005  |  |                         | 2,144,467 
|                                                                                                                                                                                                                                          |  |                                                    |  |                                                  |  |                         |           
|06/30/05                                                                                                                                                                                                                                  |  | Manakoa Services Corporation                       |  | Vigilant Network Technologies, Inc.              |  |                         | 655,122   
|03/31/05                                                                                                                                                                                                                                  |  | Swiss Medica, Inc.                                 |  | Anti-Depression Biohealth Solutions, Inc.        |  |                         | 196,673   
|02/22/05                                                                                                                                                                                                                                  |  | Health Sciences Group, Inc.                        |  | Open Cell Biotechnologies, Inc.                  |  |                         | 265,000   
|01/10/05                                                                                                                                                                                                                                  |  | Xethanol Corporation                               |  | Superior Separation Technologies, Inc.           |  |                         | 110,000   
|                                                                                                                                                                                                                                          |  |                                                    |  |                                                  |  |                         |           
|                                                                                                                                                                                                                                          |  |                                                    |  | Total for nine months ended September 30, 2005   |  | $                       | 3,371,262 
|                                                                                                                                                                                                                                          |  |                                                    |  |                                                  |  |                         |           



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Salaries and Wages



|                                   |  |                                  |     |   |                  |   |     |                                 |      |    |                  |      |   |       |   |  |   |       |   |  |    |     
|---------------------------------- |  | -------------------------------- | --- | - | ---------------- | - | --- | ------------------------------- | ---- | -- | ---------------- | ---- | - | ----- | - |  | - | ----- | - |  | -- | ----
|                                   |  | Three months ended September 30, |     |   | PercentageChange |   |     | Nine months ended September 30, |      |    | PercentageChange |     
|(In thousands, except percentages) |  | 2006                             |     |   | 2005             |   |     |                                 | 2006 |    |                  | 2005 |   |      
|Salaries and wages                 |  | $                                | 747 |   |                  | $ | 813 |                                 |      | (8 | )%               |      | $ | 2,339 |   |  | $ | 1,832 |   |  | 28 | %   
|As a percent of revenue            |  |                                  | 5   | % |                  |   | 8   | %                               |      | (3 | )ppt             |      |   | 5     | % |  |   | 12    | % |  | (7 | )ppt

Salaries and wages include non-sales employee and officer salaries and related benefits including bonuses. The
increase in salaries and wages for the nine months ended September 30, 2006 reflects pay increases for existing employees, additional salaries from the addition of employees relating to our Knowledge Express website acquired July 1, 2005,
additional accounting personnel and a bonus of $100,000 to our chief executive officer. Salaries and wages decreased $150,000 during the three months ended September 30, 2006 due primarily to the restructuring of our UTEKip, Ltd.
subsidiary which resulted in a headcount decrease of 5.

Professional Fees



|                                   |  |                                  |     |   |                  |   |     |                                 |      |    |                  |      |   |     |   |  |   |     |   |  |    |     
|---------------------------------- |  | -------------------------------- | --- | - | ---------------- | - | --- | ------------------------------- | ---- | -- | ---------------- | ---- | - | --- | - |  | - | --- | - |  | -- | ----
|                                   |  | Three months ended September 30, |     |   | PercentageChange |   |     | Nine months ended September 30, |      |    | PercentageChange |     
|(In thousands, except percentages) |  | 2006                             |     |   | 2005             |   |     |                                 | 2006 |    |                  | 2005 |   |    
|Professional fees                  |  | $                                | 332 |   |                  | $ | 204 |                                 |      | 62 | %                |      | $ | 915 |   |  | $ | 548 |   |  | 67 | %   
|As a percent of revenue            |  |                                  | 2   | % |                  |   | 2   | %                               |      | 0  | ppt              |      |   | 2   | % |  |   | 4   | % |  | (2 | )ppt

Professional fees include accounting fees, legal fees and valuation expenses for our investments. The increase in
professional fees for the three and nine months ended September 30, 2006 relates to legal and accounting fees related to our recent registration statement filings, as well as additional valuation costs as a result of the increased number of our
portfolio companies throughout the year.

Sales and Marketing



|                                   |  |                                  |     |   |                  |   |     |                                 |      |      |                  |      |   |       |   |  |   |       |   |  |    |     
|---------------------------------- |  | -------------------------------- | --- | - | ---------------- | - | --- | ------------------------------- | ---- | ---- | ---------------- | ---- | - | ----- | - |  | - | ----- | - |  | -- | ----
|                                   |  | Three months ended September 30, |     |   | PercentageChange |   |     | Nine months ended September 30, |      |      | PercentageChange |     
|(In thousands, except percentages) |  | 2006                             |     |   | 2005             |   |     |                                 | 2006 |      |                  | 2005 |   |      
|Sales and marketing                |  | $                                | 781 |   |                  | $ | 538 |                                 |      | 45   | %                |      | $ | 2,521 |   |  | $ | 1,668 |   |  | 51 | %   
|As a percent of revenue            |  |                                  | 6   | % |                  |   | 5   | %                               |      | 1ppt |                  |      |   | 5     | % |  |   | 11    | % |  | (6 | )ppt

Sales and marketing expenses include advertising, marketing, sales salaries and wages, commissions, travel and
other selling expenses. Commissions increased $74,000 and $101,000 for the three and nine months ended September 30, 2006 as a result of the increased number of technology transfers and an increase in technology transfer values. There were
eight and twenty-four technology transfers during the three and nine months ended September 30, 2006, as compared to six and ten for the three and nine months ended September 30, 2005. Sales salaries and wages increased $104,000 and
$493,000 for the three and nine months ended September 30, 2006 due to an increase in our sales force.

It is our intention to continue to grow our
sales force by increasing the number of sales personnel in locations around the United States, Europe and Canada.



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General and Administrative



|                                   |  |                                  |       |   |                  |   |     |                                 |      |    |                  |      |   |       |   |  |   |       |   |  |    |     
|---------------------------------- |  | -------------------------------- | ----- | - | ---------------- | - | --- | ------------------------------- | ---- | -- | ---------------- | ---- | - | ----- | - |  | - | ----- | - |  | -- | ----
|                                   |  | Three months ended September 30, |       |   | PercentageChange |   |     | Nine months ended September 30, |      |    | PercentageChange |     
|(In thousands, except percentages) |  | 2006                             |       |   | 2005             |   |     |                                 | 2006 |    |                  | 2005 |   |      
|General and administrative         |  | $                                | 1,133 |   |                  | $ | 763 |                                 |      | 48 | %                |      | $ | 3,575 |   |  | $ | 1,800 |   |  | 99 | %   
|As a percent of revenue            |  |                                  | 8     | % |                  |   | 7   | %                               |      | 1  | ppt              |      |   | 7     | % |  |   | 12    | % |  | (5 | )ppt

The increase in general and administrative costs for the three and nine months ended September 30, 2006 is
largely due to charitable contributions, outside services, printing and reproduction and rent expense. Charitable contributions include a gift of 5.1 million common shares of HydroFlo, Inc. valued at $663,000. Outside services increased
$122,000 and $316,000 during the three and nine months ended September 30, 2006, respectively, due primarily to the cost of royalties paid related to our Knowledge Express website acquired on July 1, 2005, as well as increases in board of
directors fees and fees paid to employment placement agencies. Printing and reproduction increased approximately $174,000 for both the three and nine months ended September 30, 2006 due to costs associated with our recent registration statement
filings. Rent increased $75,000 and $111,000 during the three and nine months ended September 30, 2006 due to the buy-out of the lease at our Massachusetts location due to the relocation of the EKMS division to the corporate headquarters in
Tampa, Florida, as well as the new lease for the corporate headquarters. The increase to general and administrative costs was reduced by the write-down of goodwill due to impairment in one of our subsidiaries totaling $235,000.

Net Realized Gains (Losses) on Investments

Net realized
losses on investments, net of income tax effect, amounted to ($389,255) for the three months ended September 30, 2006 and were related to sales as follows:



|                                                                                                                                                                           |  |                 |  |                      |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- |  | -------------------- | ---------- | -
|Company Name                                                                                                                                                               |  | Number ofShares |  | Realized Gain (Loss) |           
|E Med Future, Inc.                                                                                                                                                         |  | 675,032         |  | $                    | (218,444   | )
|GS CleanTech Corporation                                                                                                                                                   |  | 295,500         |  |                      | (36,180    | )
|Harborlight Diversified Fund, LP                                                                                                                                           |  | 250,000         |  |                      | 17,116     |  
|Health Sciences Group, Inc.                                                                                                                                                |  | 100,000         |  |                      | (47,511    | )
|HydroFlo, Inc.                                                                                                                                                             |  | 35,044          |  |                      | (2,559     | )
|Magic Media Networks, Inc.                                                                                                                                                 |  | 67,904          |  |                      | 328        |  
|Manakoa Services Company                                                                                                                                                   |  | 58,574          |  |                      | (11,759    | )
|NutraCea International Corporation                                                                                                                                         |  | 224,489         |  |                      | 106,270    |  
|Pacific Biometrics, Inc.                                                                                                                                                   |  | 91,885          |  |                      | 16,539     |  
|Power3 Medical Products, Inc.                                                                                                                                              |  | 40,000          |  |                      | (13,537    | )
|SheerVision Inc.                                                                                                                                                           |  | 129,835         |  |                      | (330,063   | )
|Swiss Medica, Inc.                                                                                                                                                         |  | 165,000         |  |                      | (9,172     | )
|US Energy Initiatives                                                                                                                                                      |  | 166,000         |  |                      | (9,240     | )
|Xethanol Corp.                                                                                                                                                             |  | 68,466          |  |                      | 148,957    |  
|                                                                                                                                                                           |  |                 |  |                      |            |  
|Total                                                                                                                                                                      |  |                 |  | $                    | (389,255   | )
|                                                                                                                                                                           |  |                 |  |                      |            |  
|                                                                                                                                                                          
|Net realized losses on investments, net of income tax effect, amounted to ($4,178,503) for the three months ended September 30, 2005
and were related to sales as follows: | 
|Company Name                                                                                                                                                               |  | Number ofShares |  | Realized Gain (Loss) |           
|Circle Group Holdings, Inc.                                                                                                                                                |  | 687,500         |  | $                    | 393,086    |  
|E Med Future, Inc.                                                                                                                                                         |  | 120,000         |  |                      | (36,380    | )
|HydroFlo, Inc.                                                                                                                                                             |  | 364,956         |  |                      | 88,511     |  
|Silver Screen Studios, Inc.                                                                                                                                                |  | 47,615          |  |                      | (29,137    | )
|Magic Media Networks, Inc.                                                                                                                                                 |  | 104,008         |  |                      | (10,619    | )
|Peak Entertainment, Inc.                                                                                                                                                   |  | 4,000           |  |                      | (7,056     | )
|Swiss Medica, Inc.                                                                                                                                                         |  | 200,000         |  |                      | 8,683      |  
|Group of zero value shares (1)                                                                                                                                             |  | various         |  |                      | (4,585,591 | )
|                                                                                                                                                                           |  |                 |  |                      |            |  
|Total                                                                                                                                                                      |  |                 |  | $                    | (4,178,503 | )
|                                                                                                                                                                           |  |                 |  |                      |            |  



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Net realized gains on investments, net of income tax effect, amounted to $1,823,042 for the nine months ended
September 30, 2006 and were related to sales as follows:



|                                              |  |                 |  |                     |           |  
|--------------------------------------------- |  | --------------- |  | ------------------- | --------- | -
|Company Name                                  |  | Number ofShares |  | RealizedGain (Loss) |          
|Sequiam Corp.                                 |  | 645,000         |  | $                   | 3,015     |  
|INYX, Inc.                                    |  | 29,999          |  |                     | 29,733    |  
|Swiss Medica, Inc.                            |  | 465,000         |  |                     | (12,832   | )
|Circle Group Holdings, Inc.                   |  | 973,508         |  |                     | 395,271   |  
|Israel Technology Acquisition Corp.           |  | 50,000          |  |                     | 6,732     |  
|Israel Technology Acquisition Corp. -warrants |  | 100,000         |  |                     | 2,739     |  
|Fortress America Acquisition Corp.            |  | 40,000          |  |                     | 18,971    |  
|Xethanol Corporation                          |  | 492,638         |  |                     | 1,971,681 |  
|eFoodSafety.com, Inc.                         |  | 61,224          |  |                     | (3,380    | )
|HydroFlo, Inc. (2)                            |  | 5,535,044       |  |                     | (40,721   | )
|Genethera, Inc.                               |  | 14,796          |  |                     | (21,583   | )
|Magic Media Networks, Inc.                    |  | 97,904          |  |                     | 225       |  
|E Med Future, Inc.                            |  | 675,032         |  |                     | (218,444  | )
|GS CleanTech Corporation                      |  | 295,500         |  |                     | (36,180   | )
|Harborlight Diversified Fund, LP              |  | 250,000         |  |                     | 17,116    |  
|Health Sciences Group, Inc.                   |  | 100,000         |  |                     | (47,511   | )
|Manakoa Services Company                      |  | 58,574          |  |                     | (11,759   | )
|NutraCea International Corporation            |  | 224,489         |  |                     | 106,270   |  
|Pacific Biometrics, Inc.                      |  | 91,885          |  |                     | 16,539    |  
|Power3 Medical Products, Inc.                 |  | 40,000          |  |                     | (13,537   | )
|SheerVision Inc.                              |  | 129,835         |  |                     | (330,063  | )
|US Energy Initiatives                         |  | 166,000         |  |                     | (9,240    | )
|                                              |  |                 |  |                     |           |  
|Total                                         |  |                 |  | $                   | 1,823,042 |  
|                                              |  |                 |  |                     |           |  

Net realized losses on investments, net of income tax effect, amounted to ($4,037,454) for the nine months ended
September 30, 2005 and were related to sales as follows:



|                               |  |                 |  |                      |            |  
|------------------------------ |  | --------------- |  | -------------------- | ---------- | -
|Company Name                   |  | Number ofShares |  | Realized Gain (Loss) |           
|Circle Group Holdings, Inc.    |  | 1,402,568       |  | $                    | 666,098    |  
|E Med Future, Inc.             |  | 358,834         |  |                      | (87,660    | )
|Telkonet, Inc.                 |  | 20,668          |  |                      | 37,317     |  
|Magic Media Networks, Inc.     |  | 234,008         |  |                      | (26,480    | )
|eFoodSafety.com, Inc.          |  | 61,224          |  |                      | (2,355     | )
|Full Circle Registry, Inc.     |  | 200,000         |  |                      | (99,784    | )
|HydroFlo, Inc.                 |  | 364,956         |  |                      | 88,511     |  
|Silver Screen Studios, Inc.    |  | 47,615          |  |                      | (29,137    | )
|Peak Entertainment, Inc.       |  | 4,000           |  |                      | (7,056     | )
|Swiss Medica, Inc.             |  | 200,000         |  |                      | 8,683      |  
|Group of zero value shares (1) |  | Various         |  |                      | (4,585,591 | )
|                               |  |                 |  |                      |            |  
|Total                          |  |                 |  | $                    | (4,037,454 | )
|                               |  |                 |  |                      |            |  

---

|(1) | Upon approval from the Board of Directors, management made the decision to sell some of the investments that we had carried on our financial statements with a zero value for several
quarters. Maintaining these investments was costly and the likelihood of future value was minimal. The following investments were included in the group of zero value shares above: Provisional Operation Systems, Inc., Advanced Recycling Sciences,
Inc., Graphco Holdings Corp., Nubar, Inc., Assuretec Holdings, Inc., Prime Pharmaceutical Corporation, Primapharm Funding Corporation, Mixed Entertainment, Inc., Hydrogen Technology Applications, Inc., Zkid Network Company, Green Works Corporation,
and Xeminex, Ltd.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | We elected to abandon our right, title and interest in and to 400,000 shares common stock of HydroFlo, Inc. See note 3 to our consolidated financial statements elsewhere in the Form
10-Q.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

Changes
in Unrealized Appreciation or Depreciation on Investments

We determine the value of each investment in our portfolio on a quarterly basis, and
changes in value result in unrealized appreciation or depreciation being recognized. At September 30, 2006, approximately 84% of our net assets represented investments recorded at fair value. Value, as defined in Section 2(a)(41) of the
1940 Act, is (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is as determined in good faith by the Board of Directors. Although many of
the securities we hold in our portfolio are quoted on the OTC Bulletin Board or listed on the American Stock Exchange, our Board of Directors is required to determine the fair value of such securities if the validity of the market quotations appears
to be questionable, or if the number of quotations is such as to indicate that there is a thin market in the security. The fair value of these securities is frequently less than the market quotations for such securities. Because there is typically
no readily available market value for the investments in our portfolio, we value substantially all of our investments at fair value as determined in good faith by the Board of Directors. In making its determination, our Board of Directors may
consider valuation appraisals provided by independent valuation service providers. Because of the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments
determined in good faith by the Board of Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.



|                                       |  |                                  |        |                  |      |   |                                 |      |                  |    |      |   |        |   |  |   |       |  |      |   
|-------------------------------------- |  | -------------------------------- | ------ | ---------------- | ---- | - | ------------------------------- | ---- | ---------------- | -- | ---- | - | ------ | - |  | - | ----- |  | ---- | --
|                                       |  | Three months ended September 30, |        | PercentageChange |      |   | Nine months ended September 30, |      | PercentageChange |   
|(In thousands, except percentages)     |  | 2006                             |        |                  | 2005 |   |                                 | 2006 |                  |    | 2005 |  
|Unrealized appreciation/(depreciation) |  | $                                | (8,111 | )                |      | $ | 6,108                           |      | (233             | )% |      | $ | (7,083 | ) |  | $ | 2,061 |  | (444 | )%

The net unrealized appreciation (depreciation) consisted of fluctuations in fair value resulting from the Board of
Directors valuation of our assets for the three and nine months ended September 30, 2006 and 2005. During the three months ended September 30, 2006, there was a significant decline in fair value in Xethanol Corporation of
approximately $2.7 million, KP Renewables Plc of approximately $2.6 million, Cytodyn, Inc. of approximately $1.3 million, UTEK Real Estate Holdings, Inc. of approximately $1.1 million, Klegg Electronics, Inc. of approximately $800,000 and Material
Technologies, Inc. of approximately $500,000. These declines were offset by significant gains in DME Interactive Holdings of approximately $1.1 million and Industrial Biotechnology Corporation of approximately $650,000. Our other investments
experienced a total net decrease in fair value of approximately $850,000.

During the nine months ended September 30, 2006, there was a significant
decline in fair value in KP Renewables Plc of approximately $3.8 million, UBA Technology Corp. of approximately $1.6 million, Cytodyn, Inc. of approximately $1.3 million, Trio Industries Group, Inc. of approximately $1.1 million, Xethanol
Corporation of approximately $700,000, and Material Technologies, Inc. of approximately $500,000. These declines were offset by significant gains in Fuel FX International, Inc. of approximately $1.9 million and DME Interactive Holdings of
approximately $1.1 million. Our other investments experienced a total net decrease in their fair value of approximately $1.1 million. Our 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.

On a quarterly
basis, changes in unrealized appreciation or depreciation can vary substantially due to a variety of factors. Therefore, current quarterly net results should not be annualized to predict expected annual results, and may not be indicative of future
performance.

Liquidity and Capital Resources

Net
assets increased 52% to $67.6 million at September 30, 2006 from $44.4 million at December 31, 2005. This increase was primarily attributable to the completion of a registered offering of shares of our common stock totaling $9.0 million,
net of offering costs, and by our completion of twenty-four technology transfers with a net value of $33.0 million during the nine months ended September 30, 2006. Net assets were also reduced by an increase in the deferred tax liability of
$7.3 million and net unrealized depreciation on investments of $7.1 million.



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Our primary source of liquidity and capital for the nine months ended September 30, 2006 was from the completion of
a registered offering of shares of our common stock, which, net of offering costs, was $9.0 million, as well as $7.3 million in cash generated from the sale of shares in our portfolio companies.

During the nine months ended September 30, 2006, we loaned to Ybor City Group, Inc., a wholly owned subsidiary of UTEK Real Estate Holdings, Inc., one of our
portfolio companies, $1,051,000 for real estate improvements to our corporate offices located in Tampa, Florida. We also invested $1.0 million in cash and issued 82,919 shares of our common stock with a market value of $1.0 million for the
acquisition of 22ndStreet of Ybor City, Inc., which is also a wholly owned subsidiary of UTEK Real Estate Holdings,
Inc.

Our income from operations consists primarily of the sale of technology rights and consulting income from strategic alliances in exchange for equity
securities rather than cash. In the nine months ended September 30, 2006, 94% of our income from operations was paid in the form of equity securities compared to 86% of our income from operations for the nine months ended September 30,
2005. Our goal is to monetize the equity securities we receive in consideration for technology transfers and our strategic alliances.

At
September 30, 2006, we had cash and cash equivalents of $5.1 million. We also had investments in U.S. Treasuries and certificates of deposit (CDs) of $10.5 million. We typically invest our excess cash in U.S. Treasuries and CDs, which normally
have three month to one year maturities. These investments do not qualify as cash equivalents. We anticipate using our cash on hand to fund our technology transfer business for the remainder of 2006. We had no debt outstanding at September 30,
2006. On March 30, 2006, we declared a dividend of $0.02 per share to stockholders of record as of April 28, 2006. The dividend was paid on May 19, 2006.

Recent Developments

Subsequent to September 30, 2006, we completed two technology transfers in which we
received unregistered shares of stock in companies that acquired our newly formed companies. The shares received by us in these transactions were acquired in tax-free stock-for-stock exchanges and are restricted and may only be resold by us pursuant
to the requirements of the Securities Act of 1933. The revenue associated with the shares received will be determined based upon valuations in accordance with our valuation policy as of the closing date of each transaction. Additionally, eight
strategic alliance agreements were terminated.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the financial statements. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require managements most
difficult, complex, or subjective judgments. Our most critical accounting policy relates to the valuation of our investments and our recognition of revenue in connection with the receipt of unregistered securities pursuant to our strategic alliance
agreements and technology transfers.

Valuation Methodology

Pursuant to the requirements of the 1940 Act, our Board of Directors is responsible for determining in good faith the fair value of our investments for which market quotations are not readily available. Although the securities of many of
our portfolio companies are quoted on the OTC Bulletin Board or listed on the American Stock Exchange or other similar markets, our Board of Directors is required to determine the fair value of such securities if the validity of the market
quotations appears to be questionable, or if the number of quotations is such as to indicate that there is a thin or illiquid market in the security.

We
determine fair value to be the amount for which an investment could be exchanged in an orderly disposition over a reasonable period of time between willing parties other than in a forced or liquidation sale. Our valuation process is intended to
provide a consistent basis for determining the fair value of our portfolio investments. We will record unrealized depreciation on investments when we believe that an investment has become impaired, including where realization of an equity security
is doubtful. We will record unrealized appreciation if we believe that the underlying portfolio company has appreciated in value and, therefore, our equity security has also appreciated in value.

Our equity interests in portfolio companies for which there is no liquid public market are valued using industry valuation benchmarks, and then the value is assigned a
discount reflecting the illiquid nature of the investment as well as our minority, non-control position. When an external event such as a purchase transaction, public offering, or subsequent equity sale occurs, the pricing indicated by the external
event is used to corroborate our valuation. The determined values are generally discounted to account for restrictions on resale and minority ownership positions.



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The value of our equity interests in public companies for which market quotations are readily available is based on the
public market price on the balance sheet date. Securities that carry certain restrictions on resale are typically valued at a discount from the public market value of the security.

We continue to utilize independent valuation service providers to assist the board of directors in determining the fair value of our portfolio. On September 7, 2006, our current independent valuation service
provider notified us of their resignation effective September 30, 2006. We have appointed a new third-party valuation consultant effective October 1, 2006.

Strategic Alliance Agreements

Strategic alliance consulting services are performed pursuant to service agreements
(usually one year in length) in which UTEK provides consulting services by identifying and evaluating technology acquisition opportunities in exchange for unregistered shares of the company or cash. These agreements are typically cancelable with 30
days notice.

Revenue 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. We record revenue based on the fair value of the consideration received.

Technology Transfers

We recognize revenue from the
sale of technology rights upon the receipt of unregistered shares of stock of the entities acquiring our newly formed companies in exchange for the shares of our newly formed companies. The entities in which we receive stock then become our
portfolio companies. We record revenue based on the fair value of the consideration received. In most cases, the consideration received for the rights is unregistered shares of common stock of the portfolio company. Revenue is recognized upon
consummation of the transaction.

Net Realized Gains/Losses and Net Change in Unrealized Appreciation/Depreciation

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the original cost basis of the investment without regard
to unrealized appreciation or depreciation previously recognized. The original cost basis of the securities we receive in connection with our strategic alliance agreements and technology transfers is equal to the amount of revenue we recognized upon
the receipt of such securities.

Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the
reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Acquisition
of Technology Rights

The expenses we incur in connection with our technology transfers are recorded as a separate line item expense in our statements
of operations under the caption acquisition of technology rights.

Stock Compensation

Effective January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 123 (R), Share-Based
Payment. Prior to the adoption of SFAS 123(R) we accounted for stock option grants using the intrinsic value method prescribed in APB Opinion No. 25, Accounting for Stock Issued to Employees, and accordingly, recognized no
compensation expense for stock option grants.

As a result of adopting SFAS 123(R), our income from operations before taxes, net increase in net assets,
basic earnings per share and diluted earnings per share were approximately $174,000, $158,000, $0.02 and $0.02 lower, respectively, for the three months ended September 30, 2006 and $396,000, $373,000, $0.04 and $0.04 lower, respectively, for
the nine months ended September 30, 2006, than if we had continued to account for stock-based compensation under APB Opinion No. 25 for our stock option grants.

The impact on our income from operations before taxes, net increase in net assets, basic earnings per share and diluted earnings per share had we accounted for stock-based compensation in accordance with SFAS 123(R)
in 2005 would have been approximately $108,000, $106,000, $0.02 and $0.02 lower, respectively, for the three months ended September 30, 2005 and $175,000, $167,000, $0.02 and $0.03 lower, respectively, for the nine months ended September 30, 2005.
Prior periods were not restated to reflect the impact of adopting the new standard and there is no cumulative effect.

We use the Black-Scholes option
pricing model to estimate the fair value of stock-based awards on the date of grant, using assumptions for volatility, expected term, risk-free interest rate and dividend yield. We have used one grouping for the



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assumptions as our option grants are primarily basic with similar characteristics. The expected term of options granted has been derived based upon our
history of actual exercise behavior and represents the period of time that options granted are expected to be outstanding. Historical data was also used to estimate option exercises and employee terminations. Estimated volatility is based upon our
historical market price at consistent points in a period equal to the expected life of the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and the dividend yield is based on the our
historical dividend yield.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risks

There has been no material change in the quantitative
and qualitative disclosures about market risk since December 31, 2005.

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, our principal executive officer and principal financial officer conducted an evaluation of the
effectiveness of the design and operations of its disclosure controls and procedures, (as is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934). Based on their evaluation, our principal executive officer and principal financial
officer concluded that our disclosure controls and procedures were effective such that the information required to be included in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to our
management, including our principal executive officer and principal financial officer as appropriate to allow timely decisions regarding required disclosure.

Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule13a-15(f)
of the Securities Exchange Act of 1934) that occurred during the our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Although we 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 September 30, 2006, we were not a party to any material pending legal proceedings.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. As a result, there can be no
assurance that we will achieve our investment objective. You should consider carefully the risks described in our Annual Report on Form 10-K and below. In addition to these risk factors, other factors that could cause actual results to differ
materially include:



| |  | changes in the economy;
|- |  | -----------------------



| |  | risks associated with possible disruption in our operations due to terrorism;
|- |  | -----------------------------------------------------------------------------



| |  | future regulatory actions and conditions in our operating areas; and
|- |  | --------------------------------------------------------------------



| |  | other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings.
|- |  | ---------------------------------------------------------------------------------------------------------------

We may not be able to sell the securities we receive in connection with our strategic alliance agreements and technology transfer transactions for an amount equal to
the revenue we previously recognized in connection with such transactions.

We recognize revenue in connection with our strategic alliance agreements
and technology transfer transactions in an amount equal to the fair value of the securities we receive in connection with such transactions. With respect to our strategic alliance agreements, we recognize such revenue as earned in accordance with
the contractual terms of each strategic alliance agreement. In connection with our technology transfer transactions, we recognize such revenue upon the consummation of each technology transfer transaction. Because the securities we receive in
connection with such transactions are subject to legal restrictions on resale and mainly issued by thinly traded public companies or private companies, our ability to sell such securities may be limited. Given these facts as well as the subjective
judgments and estimates inherent in fair value accounting, we may not be able to sell the securities we receive in connection with our strategic alliance agreements and technology transfer transactions for an amount equal to the revenue we
previously recognized in connection with such transactions.



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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 September 30, 2006 and December 31,
2005, investments amounting to $59.2 million or 84% of our net assets and $26.4 million or 59% of our net assets, respectively, have been valued at fair value as determined by our Board of Directors. Pursuant to the requirements of the 1940 Act, our
Board of Directors is responsible for determining in good faith the fair value of our investments for which market quotations are not readily available. Because there is typically no readily available market value for the investments in our
portfolio, our board of directors determines in good faith the fair value of these investments pursuant to a valuation policy and a consistently applied valuation process. There is no single standard for determining fair value in good faith. As a
result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. If we were required
to sell any of such investments, there is no assurance that the fair value, as determined by the Board of Directors, would be obtained. If we were unable to obtain fair value for such investments, there would be an adverse effect on our net asset
value and on the price of our common stock.

We adjust quarterly the valuation of our portfolio to reflect the Board of Directors determination of
the fair value of each investment in our portfolio. Any changes in fair value are recorded in our statement of operations as Change in net unrealized appreciation (depreciation) of investments.

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 September 30, 2006, $48.4 million or 68% of our
total assets consisted of investments at value in companies whose securities are quoted on the OTC Bulletin Board or are listed on the American Stock Exchange or other similar markets. In order for the securities of our portfolio companies to be
eligible for continued listing on those markets or quotation systems, our portfolio companies must remain in compliance with certain listing standards. Among other things, these standards require that our portfolio companies remain current in their
filings with the SEC and comply with certain of the provisions of the Sarbanes-Oxley Act of 2002. If our portfolio companies are no longer in compliance with these and other related requirements, there would be no forum or market for the quotation
or listing of the securities of our portfolio companies. Without such a forum or market, the liquidity and prices of our investments would be materially adversely affected. We cannot give any assurance that our portfolio companies will remain in
compliance with the requirements to be quoted on the OTC Bulletin Board or listed on the American Stock Exchange or any other market or quotation system.

We are subject to certain risks associated with our foreign operations and investments.

We have operations in the United Kingdom and Israel
and make investments in foreign companies. As of September 30, 2006, approximately 1% of our assets were comprised of assets in foreign operations and investments in foreign companies.

Certain risks are inherent in foreign operations, including:



| |  |  | difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | foreign customers may have longer payment cycles than customers in the U.S.;
| | - |  | ----------------------------------------------------------------------------



| |  |  | tax rates in certain foreign countries may exceed those in the U.S., and foreign earnings may be subject to withholding requirements, exchange controls or other restrictions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | general economic and political conditions in countries where we operate may have an adverse effect on our operations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | exposure to risks associated with changes in foreign exchange rates;
| | - |  | --------------------------------------------------------------------



| |  |  | difficulties in enforcing intellectual property rights;
| | - |  | -------------------------------------------------------



| |  |  | difficulties associated with managing a large organization spread throughout various countries; and
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | required compliance with a variety of foreign laws and regulations.
| | - |  | -------------------------------------------------------------------

Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in foreign exchange rates, exchange control regulations, political and social
instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers,
less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.



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

Investing in our shares may involve an above average degree of risk.

The investments we make in accordance with our investment objective and strategies may result in a higher amount of risk than alternative investment options. Our investments in portfolio companies may be highly speculative and aggressive
and, therefore, an investment in our shares may not be suitable for someone with lower risk tolerance.

Our common stock may not continue to trade at a
premium to our net asset value.

Our common stock continues to trade in excess of our net asset value. See Financial Highlights For the Nine
months ended September 30, 2006 and 2005 contained in our consolidated financial statements included in this Form 10-Q.There can be no assurance, however, that our common stock will continue to trade at a premium to our net asset value.
The possibility that our common stock will trade at premiums that are unsustainable over the long term is separate and distinct from the risk that our net asset value will decrease. It is not possible to predict whether the shares offered hereby
will trade at, above or below our net asset value.

We may issue shares of our common stock at a discount to the market price for such shares, which may
put downward pressure on the market price for shares of our common stock.

In February 2006, we issued shares of our common stock at a discount to the
market price for such shares in connection with a registered equity offering. The discount in such offering was approximately 15%. If we issue shares of our common stock at a discount to the market price for such shares, it may put downward pressure
on the market price for shares of our common stock. Such downward pressure could in turn encourage short sales or similar trading with respect to shares of our common stock, which could in itself place further downward pressure on the market price
for shares of our common stock.

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

Clifford M. Gross, Ph.D., our Chief Executive Officer and Chairman, beneficially owns approximately 22% of our common stock as of September 30, 2006. Therefore,
Dr. Gross may be able to exert influence over our management and policies. Dr. Gross may acquire additional equity in our company in the future. The concentration of ownership may also have the effect of delaying, preventing or deterring a
change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of the sale of our company and might ultimately affect the market price of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable

Item 3. Defaults upon Senior Securities

Not Applicable

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

Not Applicable

Item 5. Other Information

Not Applicable



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Item 6. Exhibits

The following exhibits are filed with this report on Form 10-Q



|     |  |   |  |                                                                                                                                
|---- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------
|31.1 |  |  |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.                
|     |  |  
|31.2 |  |  |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.                
|     |  |  
|32.1 |  |  |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
|     |  |  
|32.2 |  |  |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.



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SIGNATURES

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



|                       |  |                                     
|---------------------- |  | ------------------------------------
|                       |  | UTEK CORPORATION                    
|                       |  | (Registrant)                        
|                       | 
|Date: November 3, 2006 |  | /s/ Clifford M. Gross               
|                       |  | Clifford M. Gross, Ph.D.            
|                       |  | Chairman and Chief Executive Officer
|                       | 
|Date: November 3, 2006 |  | /s/ Carole R. Wright                
|                       |  | Carole R. Wright, CPA               
|                       |  | Chief Financial Officer             



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