##### 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 June 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 ofincorporation or organization) |  | (I.R.S. EmployerIdentification 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)

202 S. Wheeler Street

Plant City,
FL 33563



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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 August 3, 2006 there were 8,898,254 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 June 30, 2006 (unaudited) and December 31, 2005        |  | 3 
|Consolidated Statements of Operations  For the Three and Six Months Ended June 30, 2006 and 2005 (unaudited)  |  | 4 
|Consolidated Statements of Cash Flows  For the Six Months Ended June 30, 2006 and 2005 (unaudited)            |  | 5 
|Consolidated Statements of Changes in Net Assets  For the Six Months Ended June 30, 2006 and 2005 (unaudited) |  | 6 
|Financial Highlights For the Six Months Ended June 30, 2006 and 2005 (unaudited)                               |  | 7 
|Schedule of Investments as of June 30, 2006 (unaudited) and December 31, 2005                                  |  | 8 
|Notes to Consolidated Financial Statements (unaudited)                                                         |  | 18
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                  |  | 25
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                                             |  | 34
|Item 4. Controls and Procedures                                                                                |  | 34
|                                                                                                               | 
|PART II. OTHER INFORMATION                                                                                     |  |   
|Item 1. Legal Proceedings                                                                                      |  | 34
|Item 1A. Risk Factors                                                                                          |  | 35
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                            |  | 36
|Item 3. Defaults Upon Senior Securities                                                                        |  | 36
|Item 4. Submission of Matters to a Vote of Security Holders                                                    |  | 36
|Item 5. Other Information                                                                                      |  | 37
|Item 6. Exhibits                                                                                               |  | 37
|Signatures                                                                                                     |  | 38
|Exhibits                                                                                                       |  |   



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UTEK Corporation

Consolidated Statements of Assets and Liabilities



|                                                                                                                                                                                      |  |               |            |   |                  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                                                                                      |  | June 30, 2006 |            |   | December 31,2005 |  
|                                                                                                                                                                                      |  | (Unaudited)   |            |   |                  |  
|ASSETS                                                                                                                                                                                |  |               |            |   |                  |   |            |  
|Investments:                                                                                                                                                                          |  |               |            |   |                  |   |            |  
|Non-affiliate investments (cost: 2006 - $23,889,334; 2005 - $12,482,927)                                                                                                              |  | $             | 20,535,310 |   |                  | $ | 9,805,423  |  
|Affiliate investments (cost: 2006 - $36,400,144; 2005 - $17,656,837)                                                                                                                  |  |               | 35,208,305 |   |                  |   | 15,457,750 |  
|Control investments (cost: 2006 - $4,991,823; 2005 - $2,126,573)                                                                                                                      |  |               | 6,152,373  |   |                  |   | 1,888,396  |  
|U.S. Treasuries and certificates of deposit (cost: 2006 - $14,694,190; 2005 - $11,601,357)                                                                                            |  |               | 14,694,190 |   |                  |   | 11,601,357 |  
|                                                                                                                                                                                      |  |               |            |   |                  |   |            |  
|Total investments                                                                                                                                                                     |  |               | 76,590,178 |   |                  |   | 38,752,926 |  
|Cash and cash equivalents                                                                                                                                                             |  |               | 5,713,841  |   |                  |   | 5,275,626  |  
|Accounts receivable, net of allowance for bad debt                                                                                                                                    |  |               | 681,670    |   |                  |   | 746,207    |  
|Prepaid expenses and other assets                                                                                                                                                     |  |               | 282,531    |   |                  |   | 448,810    |  
|Fixed assets, net                                                                                                                                                                     |  |               | 483,427    |   |                  |   | 311,103    |  
|Goodwill                                                                                                                                                                              |  |               | 2,988,869  |   |                  |   | 3,128,139  |  
|Intangible assets                                                                                                                                                                     |  |               | 299,130    |   |                  |   | 343,149    |  
|                                                                                                                                                                                      |  |               |            |   |                  |   |            |  
|TOTAL ASSETS                                                                                                                                                                          |  |               | 87,039,646 |   |                  |   | 49,005,960 |  
|                                                                                                                                                                                      |  |               |            |   |                  |   |            |  
|                                                                                                                                                                                      |  |              
|LIABILITIES                                                                                                                                                                           |  |               |            |   |                  |   |            |  
|Accrued expenses                                                                                                                                                                      |  |               | 680,951    |   |                  |   | 367,763    |  
|Deferred revenue                                                                                                                                                                      |  |               | 2,387,958  |   |                  |   | 1,606,242  |  
|Deferred tax liability                                                                                                                                                                |  |               | 12,529,941 |   |                  |   | 2,590,837  |  
|                                                                                                                                                                                      |  |               |            |   |                  |   |            |  
|TOTAL LIABILITIES                                                                                                                                                                     |  |               | 15,598,850 |   |                  |   | 4,564,842  |  
|                                                                                                                                                                                      |  |               |            |   |                  |   |            |  
|NET ASSETS                                                                                                                                                                            |  | $             | 71,440,796 |   |                  | $ | 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; 8,898,254 shares issued and outstanding at June 30, 2006 and 7,961,505 shares
issued and outstanding at December 31, 2005 |  | $             | 88,983     |   |                  | $ | 79,616     |  
|Additional paid-in capital                                                                                                                                                            |  |               | 50,791,138 |   |                  |   | 40,347,663 |  
|Accumulated income:                                                                                                                                                                   |  |               |            |   |                  |   |            |  
|Accumulated net operating income                                                                                                                                                      |  |               | 23,333,121 |   |                  |   | 10,134,057 |  
|Net realized loss on investments, net of tax                                                                                                                                          |  |               | (756,102   | ) |                  |   | (2,968,399 | )
|Net unrealized depreciation of investments, net of deferred tax                                                                                                                       |  |               | (2,111,421 | ) |                  |   | (3,138,939 | )
|Foreign currency translation adjustment                                                                                                                                               |  |               | 95,077     |   |                  |   | (12,880    | )
|                                                                                                                                                                                      |  |               |            |   |                  |   |            |  
|Net assets                                                                                                                                                                            |  | $             | 71,440,796 |   |                  | $ | 44,441,118 |  
|                                                                                                                                                                                      |  |               |            |   |                  |   |            |  
|Net asset value per share                                                                                                                                                             |  | $             | 8.03       |   |                  | $ | 5.58       |  
|                                                                                                                                                                                      |  |               |            |   |                  |   |            |  

See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Operations

(Unaudited)



|                                                                                                                                                                                                                                                                                                |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------------------ | - | --------- | ---- |  | ---- | ---------- |  | - | ---------- | -
|                                                                                                                                                                                                                                                                                                |  | Three Months Ended June 30 |            |   | Six Months Ended June 30 |  
|                                                                                                                                                                                                                                                                                                |  | 2006                       |            |   | 2005                     |   |           | 2006 |  | 2005 |           
|Income from operations:                                                                                                                                                                                                                                                                         |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Sale of technology rights                                                                                                                                                                                                                                                                       |  | $                          | 21,624,267 |   |                          | $ | 1,503,197 |      |  | $    | 31,839,197 |  | $ | 3,179,340  |  
|Consulting and other services                                                                                                                                                                                                                                                                   |  |                            | 1,192,843  |   |                          |   | 932,001   |      |  |      | 2,546,324  |  |   | 1,734,693  |  
|Investment income, net                                                                                                                                                                                                                                                                          |  |                            | 242,197    |   |                          |   | 107,599   |      |  |      | 480,792    |  |   | 167,293    |  
|                                                                                                                                                                                                                                                                                                |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|                                                                                                                                                                                                                                                                                                |  |                            | 23,059,307 |   |                          |   | 2,542,797 |      |  |      | 34,866,313 |  |   | 5,081,326  |  
|                                                                                                                                                                                                                                                                                                |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Expenses:                                                                                                                                                                                                                                                                                       |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Acquisition of technology rights                                                                                                                                                                                                                                                                |  |                            | 4,523,127  |   |                          |   | 655,122   |      |  |      | 7,147,127  |  |   | 1,226,795  |  
|Salaries and wages                                                                                                                                                                                                                                                                              |  |                            | 898,627    |   |                          |   | 581,996   |      |  |      | 1,592,245  |  |   | 1,019,155  |  
|Professional fees                                                                                                                                                                                                                                                                               |  |                            | 301,870    |   |                          |   | 159,701   |      |  |      | 583,296    |  |   | 343,773    |  
|Sales and marketing                                                                                                                                                                                                                                                                             |  |                            | 931,002    |   |                          |   | 622,012   |      |  |      | 1,740,175  |  |   | 1,129,585  |  
|General and administrative                                                                                                                                                                                                                                                                      |  |                            | 830,697    |   |                          |   | 477,929   |      |  |      | 2,442,131  |  |   | 1,036,564  |  
|                                                                                                                                                                                                                                                                                                |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|                                                                                                                                                                                                                                                                                                |  |                            | 7,485,323  |   |                          |   | 2,496,760 |      |  |      | 13,504,974 |  |   | 4,755,872  |  
|                                                                                                                                                                                                                                                                                                |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Income before income taxes                                                                                                                                                                                                                                                                      |  |                            | 15,573,984 |   |                          |   | 46,037    |      |  |      | 21,361,339 |  |   | 325,454    |  
|Provision for income taxes                                                                                                                                                                                                                                                                      |  |                            | 5,806,628  |   |                          |   | 17,324    |      |  |      | 7,984,409  |  |   | 122,468    |  
|                                                                                                                                                                                                                                                                                                |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Net income from operations                                                                                                                                                                                                                                                                      |  |                            | 9,767,356  |   |                          |   | 28,713    |      |  |      | 13,376,930 |  |   | 202,986    |  
|                                                                                                                                                                                                                                                                                                |  |                            |            |  
|Net realized and unrealized gains (losses):                                                                                                                                                                                                                                                     |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Net realized gain on investments, net of income tax expense of $1,103,928 and $1,334,756 for the three and six months ended June 30,
2006, respectively, and $69,936 and $85,100 for the three and six months ended June 30, 2005, respectively                                                 |  |                            | 1,829,711  |   |                          |   | 115,916   |      |  |      | 2,212,297  |  |   | 141,049    |  
|Change in unrealized appreciation (depreciation) of investments, net of deferred tax expense (benefit) of ($324,261) and $619,938 for the
three and six months ended June 30, 2006, respectively, and ($87,263) and ($1,522,110) for the three and six months ended June 30, 2005, respectively |  |                            | (537,448   | ) |                          |   | (886,667  | )    |  |      | 1,027,518  |  |   | (4,047,246 | )
|                                                                                                                                                                                                                                                                                                |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Net increase (decrease) in net assets from operations                                                                                                                                                                                                                                           |  | $                          | 11,059,619 |   |                          | $ | (742,038  | )    |  | $    | 16,616,745 |  | $ | (3,703,211 | )
|                                                                                                                                                                                                                                                                                                |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Net increase (decrease) in net assets from operations per share:                                                                                                                                                                                                                                |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Basic                                                                                                                                                                                                                                                                                           |  | $                          | 1.25       |   |                          | $ | (0.10     | )    |  | $    | 1.92       |  | $ | (0.53      | )
|Diluted                                                                                                                                                                                                                                                                                         |  | $                          | 1.23       |   |                          | $ | (0.10     | )    |  | $    | 1.90       |  | $ | (0.53      | )
|Weighted average shares:                                                                                                                                                                                                                                                                        |  |                            |            |   |                          |   |           |      |  |      |            |  |   |            |  
|Basic                                                                                                                                                                                                                                                                                           |  |                            | 8,871,871  |   |                          |   | 7,228,025 |      |  |      | 8,663,083  |  |   | 7,007,724  |  
|Diluted                                                                                                                                                                                                                                                                                         |  |                            | 8,997,310  |   |                          |   | 7,228,025 |      |  |      | 8,759,178  |  |   | 7,007,724  |  
|                                                                                                                                                                                                                                                                                                |  |                            |            |  
|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 Six Months Ended June 30 |            
|                                                                                                                                                                          |  | 2006                             |             |   | 2005 |  
|Operating Activities:                                                                                                                                                     |  |                                  |             |   |      |   |            |  
|Net increase (decrease) in net assets from operations                                                                                                                     |  | $                                | 16,616,745  |   |      | $ | (3,703,211 | )
|Adjustments to reconcile net increase (decrease) in net assets from operations to net cash used in operating activities:                                                  |  |                                  |             |   |      |   |            |  
|Change in net unrealized (appreciation) depreciation of investments                                                                                                       |  |                                  | (1,647,456  | ) |      |   | 5,569,364  |  
|Depreciation and amortization                                                                                                                                             |  |                                  | 97,714      |   |      |   | 56,745     |  
|Goodwill impairment - UTEKip, Ltd.                                                                                                                                        |  |                                  | 234,940     |   |      |   |           |  
|(Gain) on sale of investments                                                                                                                                             |  |                                  | (3,547,053  | ) |      |   | (185,893   | )
|Loss on disposal of fixed assets                                                                                                                                          |  |                                  | 13,555      |   |      |   |           |  
|Stock compensation                                                                                                                                                        |  |                                  | 221,555     |   |      |   |           |  
|Deferred income taxes                                                                                                                                                     |  |                                  | 9,939,104   |   |      |   | (1,314,541 | )
|Investment securities received in connection with the sale of technology rights                                                                                           |  |                                  | (31,839,197 | ) |      |   | (3,179,340 | )
|Consulting and other services rendered in exchange for investment securities                                                                                              |  |                                  | (892,452    | ) |      |   | (370,456   | )
|Changes in operating assets and liabilities:                                                                                                                              |  |                                  |             |   |      |   |            |  
|Accounts receivable                                                                                                                                                       |  |                                  | 122,279     |   |      |   | (37,968    | )
|Prepaid expenses and other assets                                                                                                                                         |  |                                  | 166,279     |   |      |   | 122,884    |  
|Deferred revenue                                                                                                                                                          |  |                                  | 151,904     |   |      |   | (39,729    | )
|Accrued expenses                                                                                                                                                          |  |                                  | 313,188     |   |      |   | (405,610   | )
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|Net cash used in operating activities                                                                                                                                     |  |                                  | (10,048,895 | ) |      |   | (3,487,755 | )
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|Investing Activities:                                                                                                                                                     |  |                                  |             |   |      |   |            |  
|Acquisition of 22ndStreet of Ybor City, Inc.                                                                                                                              |  |                                  | (1,000,000  | ) |      |   |           |  
|Proceeds received on sale of equity investments                                                                                                                           |  |                                  | 6,116,428   |   |      |   | 711,928    |  
|Purchases of investments                                                                                                                                                  |  |                                  | (3,551,122  | ) |      |   | (9,624,408 | )
|Purchases of fixed assets                                                                                                                                                 |  |                                  | (239,574    | ) |      |   | (102,235   | )
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|Net cash provided by (used in) investing activities                                                                                                                       |  |                                  | 1,325,732   |   |      |   | (9,014,715 | )
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|Financing Activities:                                                                                                                                                     |  |                                  |             |   |      |   |            |  
|Distributions to shareholders                                                                                                                                             |  |                                  | (177,865    | ) |      |   |           |  
|Payments of bank debt                                                                                                                                                     |  |                                  |            |   |      |   | (23,516    | )
|Net proceeds from issuance of common stock                                                                                                                                |  |                                  | 8,955,182   |   |      |   | 13,281,917 |  
|Proceeds from exercise of stock options                                                                                                                                   |  |                                  | 276,104     |   |      |   |           |  
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|Net cash provided by financing activities                                                                                                                                 |  |                                  | 9,053,421   |   |      |   | 13,258,401 |  
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|Foreign currency translation adjustment                                                                                                                                   |  |                                  | 107,957     |   |      |   | (93,934    | )
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|Increase in cash and cash equivalents                                                                                                                                     |  |                                  | 438,215     |   |      |   | 661,997    |  
|Cash and cash equivalents at beginning of year                                                                                                                            |  |                                  | 5,275,626   |   |      |   | 3,785,873  |  
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|Cash and cash equivalents at end of period                                                                                                                                |  | $                                | 5,713,841   |   |      | $ | 4,447,870  |  
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|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 82,919 shares of common stock to purchase 22ndStreet of Ybor City, Inc.                                                                                |  | $                                | 1,000,000   |   |      |   |            |  
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  
|Investment securities received for unearned strategic alliance services                                                                                                   |  | $                                | 1,464,522   |   |      | $ | 300,694    |  
|                                                                                                                                                                          |  |                                  |             |   |      |   |            |  

See accompanying notes



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##### Table of Contents

UTEK Corporation

Consolidated Statements of Changes in Net Assets

(Unaudited)



|                                                                                                                                                                                                                            |  |                          |            |   |      |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                                                                                                            |  | Six Months Ended June 30 |           
|                                                                                                                                                                                                                            |  | 2006                     |            |   | 2005 |  
|Changes in net assets from operations:                                                                                                                                                                                      |  |                          |            |   |      |   |            |  
|Net income from operations                                                                                                                                                                                                  |  | $                        | 13,376,930 |   |      | $ | 202,986    |  
|Net realized gain on sale of investments, net of related income taxes                                                                                                                                                       |  |                          | 2,212,297  |   |      |   | 141,049    |  
|Change in net unrealized appreciation (depreciation) of investments, net of related deferred taxes                                                                                                                          |  |                          | 1,027,518  |   |      |   | (4,047,246 | )
|                                                                                                                                                                                                                            |  |                          |            |   |      |   |            |  
|Net increase (decrease) in net assets from operations                                                                                                                                                                       |  |                          | 16,616,745 |   |      |   | (3,703,211 | )
|                                                                                                                                                                                                                            |  |                          |            |   |      |   |            |  
|Distribution to Stockholders:                                                                                                                                                                                               |  |                          |            |   |      |   |            |  
|From net income from operations                                                                                                                                                                                             |  |                          | (177,865   | ) |      |   |           |  
|                                                                                                                                                                                                                            |  |                          |            |   |      |   |            |  
|Capital stock transactions:                                                                                                                                                                                                 |  |                          |            |   |      |   |            |  
|Proceeds from issuance of common stock (including the exercise of common stock options to purchase stock), net of offering costs of $1,044,860
and $1,667,022 for the six months ended June 30, 2006 and 2005, respectively |  |                          | 8,955,182  |   |      |   | 13,281,917 |  
|Proceeds from the exercise of stock options                                                                                                                                                                                 |  |                          | 276,104    |   |      |   |           |  
|Stock compensation - options                                                                                                                                                                                                |  |                          | 221,555    |   |      |   |           |  
|Common stock issued in acquisition of 22ndStreet of Ybor City, Inc.                                                                                                                                                         |  |                          | 1,000,000  |   |      |   |           |  
|Common stock issued in acquisition of UTEKip, Ltd.                                                                                                                                                                          |  |                          |           |   |      |   | 300,000    |  
|                                                                                                                                                                                                                            |  |                          |            |   |      |   |            |  
|Net increase in net assets from stock transactions                                                                                                                                                                          |  |                          | 10,452,841 |   |      |   | 13,581,917 |  
|                                                                                                                                                                                                                            |  |                          |            |   |      |   |            |  
|Foreign currency translation adjustment                                                                                                                                                                                     |  |                          | 107,957    |   |      |   | (93,934    | )
|                                                                                                                                                                                                                            |  |                          |            |   |      |   |            |  
|Net increase in net assets                                                                                                                                                                                                  |  |                          | 26,999,678 |   |      |   | 9,784,772  |  
|                                                                                                                                                                                                                            |  |                         
|Net assets at beginning of year                                                                                                                                                                                             |  |                          | 44,441,118 |   |      |   | 23,092,943 |  
|                                                                                                                                                                                                                            |  |                          |            |   |      |   |            |  
|Net assets at end of period                                                                                                                                                                                                 |  | $                        | 71,440,796 |   |      | $ | 32,877,715 |  
|                                                                                                                                                                                                                            |  |                          |            |   |      |   |            |  

See accompanying notes



6



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##### Table of Contents

UTEK Corporation

Financial Highlights

(Unaudited)



|                                                                                                                 |  |                          |            |   |      |   |            |   
|---------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | --
|                                                                                                                 |  | Six Months Ended June 30 |           
|                                                                                                                 |  | 2006                     |            |   | 2005 |  
|PER SHARE INFORMATION                                                                                            |  |                          |            |   |      |   |            |   
|                                                                                                                 |  |                         
|Net asset value, beginning of period                                                                             |  | $                        | 5.58       |   |      | $ | 3.85       |   
|Net income from operations (1)                                                                                   |  |                          | 1.53       |   |      |   | 0.03       |   
|Net change in realized gains (losses) and unrealized appreciation (depreciation) on investments, after taxes (2) |  |                          | (0.26      | ) |      |   | (1.35      | ) 
|Foreign currency translation adjustment (1)                                                                      |  |                          | .01        |   |      |   | (0.01      | ) 
|Net increase from stock transactions (1)                                                                         |  |                          | 1.19       |   |      |   | 1.94       |   
|Distribution to shareholders from net income from operations                                                     |  |                          | (0.02      | ) |      |   |           |   
|                                                                                                                 |  |                          |            |   |      |   |            |   
|Net asset value, end of period                                                                                   |  | $                        | 8.03       |   |      | $ | 4.46       |   
|                                                                                                                 |  |                          |            |   |      |   |            |   
|Per share market value, end of period                                                                            |  | $                        | 20.05      |   |      | $ | 14.30      |   
|                                                                                                                 |  |                          |            |   |      |   |            |   
|Investment return, based on market price at end of period                                                        |  |                          | 45         | % |      |   | (5         | )%
|                                                                                                                 |  |                          |            |   |      |   |            |   
|RATIOS/SUPPLEMENTAL DATA                                                                                         |  |                          |            |   |      |   |            |   
|Net assets, end of period                                                                                        |  | $                        | 71,440,796 |   |      | $ | 32,877,715 |   
|Ratio of expenses to average net assets                                                                          |  |                          | 23         | % |      |   | 17         | % 
|Ratio of net income from operations to average net assets                                                        |  |                          | 23         | % |      |   | 1          | % 
|Diluted weighted average number of shares outstanding during the period                                          |  |                          | 8,759,178  |   |      |   | 7,007,724  |   

---

|(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



7



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##### Table of Contents

UTEK CORPORATION

Schedule of Investments (unaudited)

June 30, 2006



|          |   |  |                           |  |                                                                                          |  |                    |  |           |  |                          |  
|--------- | - |  | ------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------ |  | --------- |  | ------------------------ | -
|Shares    |   |  | Initial DateofAcquisition |  |                                                                                          |  | OriginalCost Basis |  | Value     |  | Percentage of Net Assets |  
|          |   |  |                           |  | Non-Affiliate Investments (1)                                                            |  |                    |  |           |  |                          |  
|932,889   |   |  | 4/04                      |  | Xethanol Corporation (12) Bioethanol and derivative products                             |  | 3,302,129          |  | 6,510,092 |  | 9.1                      | %
|          |   |  |                           |  | KP Renewables (Kwikpower International plc) (5) Renewable energy                         |  |                    |  |           |  |                          |  
|(6        | ) |  | 5/06                      |  | Convertible Debenture                                                                    |  | 4,433,404          |  | 3,240,000 |  | 4.5                      |  
|(7        | ) |  | 9/05                      |  | Convertible Debenture                                                                    |  | 1,884,920          |  | 912,698   |  | 1.3                      |  
|50,000    |   |  | 3/05                      |  | Common Stock                                                                             |  | 94,500             |  | 23,000    |  | <.1                      |  
|          |   |  |                           |  | Advanced Refractive Technologies, Inc. Opthalmic technologies                            |  |                    |  |           |  |                          |  
|100,000   |   |  | 4/06                      |  | Preferred D Stock                                                                        |  | 1,996,176          |  | 1,919,591 |  | 2.7                      |  
|97,000    |   |  | 3/06                      |  | Preferred C Stock                                                                        |  | 2,066,063          |  | 1,862,003 |  | 2.6                      |  
|97,000    |   |  | 12/05                     |  | Preferred B Stock                                                                        |  | 1,032,675          |  | 967,740   |  | 1.4                      |  
|5,533,333 |   |  | 5/05                      |  | Common Stock                                                                             |  | 158,364            |  | 77,467    |  | 0.1                      |  
|          |   |  |                           |  | American Soil Technologies,Inc Fertilizer innovation                                     |  |                    |  |           |  |                          |  
|4,275,000 |   |  | 3/06                      |  | Preferred B Stock                                                                        |  | 1,571,691          |  | 1,457,386 |  | 2.0                      |  
|342,857   |   |  | 9/05                      |  | Common Stock                                                                             |  | 75,996             |  | 92,571    |  | 0.1                      |  
|984,360   |   |  | 8/05                      |  | Broadcast International, Inc. Telecommunications                                         |  | 1,223,592          |  | 994,204   |  | 1.4                      |  
|250,000   |   |  | 5/05                      |  | Harborlight Diversified Fund, LP (privately held) (8) Diversified mutual and hedge funds |  | 250,000            |  | 279,045   |  | 0.4                      |  
|359,182   |   |  | 4/05                      |  | NutraCea International Corporation Rice bran research and development                    |  | 147,265            |  | 265,795   |  | 0.4                      |  
|1,800,000 |   |  | 3/04                      |  | Swiss Medica, Inc. Health bioscience products                                            |  | 335,793            |  | 178,200   |  | 0.2                      |  
|171,432   |   |  | 11/05                     |  | Shumate Industries, Inc. Energy field service applications                               |  | 78,852             |  | 157,717   |  | 0.2                      |  
|60,000    |   |  | 12/05                     |  | Metamorphix Global (privately held) Design and manufacture of countertops                |  | 120,000            |  | 120,000   |  | 0.2                      |  
|300,000   |   |  | 5/06                      |  | Mobile Ready Entertainment Corp. Aggregator of digital media, wireless, mobile devices   |  | 66,084             |  | 114,000   |  | 0.2                      |  
|129,835   |   |  | 6/99                      |  | SheerVision, Inc.(Clean Water Technologies, Inc.) Environmental services                 |  | 568,006            |  | 102,570   |  | 0.1                      |  
|387,097   |   |  | 6/06                      |  | Tradequest International, Inc. Provider of voice over internet protocol                  |  | 76,092             |  | 100,645   |  | 0.1                      |  
|91,885    |   |  | 10/04                     |  | Pacific Biometrics, Inc. Specialty central laboratory services                           |  | 59,356             |  | 79,940    |  | 0.1                      |  
|720,639   |   |  | 4/03                      |  | Intra-Asia Entertainment Corp. Digital television entertainment                          |  | 1,607,494          |  | 79,270    |  | 0.1                      |  
|1,250,010 |   |  | 5/06                      |  | IVMD Ltd. Medical devices designs and testing                                            |  | 74,400             |  | 77,501    |  | 0.1                      |  
|40,000    |   |  | 4/06                      |  | Cytodyn, Inc. Development stage biotechnology company                                    |  | 80,772             |  | 70,000    |  | 0.1                      |  
|843,573   |   |  | 4/04                      |  | HydroFlo, Inc. (9) Business development company                                          |  | 130,417            |  | 45,553    |  | 0.1                      |  
|774,193   |   |  | 5/06                      |  | IPORUSSIA, Inc. Business advisory services provider                                      |  | 72,000             |  | 60,387    |  | 0.1                      |  
|120,000   |   |  | 4/05                      |  | Rival Technologies, Inc. Diesel engine technologies                                      |  | 82,104             |  | 56,400    |  | 0.1                      |  
|1,481,484 |   |  | 6/06                      |  | Cyberlux Corporation LED lighting solutions                                              |  | 80,820             |  | 48,889    |  | 0.1                      |  



8



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##### Table of Contents

|          |  |       |  |                                                                                                    |  |   |            |  |   |            |  |      |  
|--------- |  | ----- |  | -------------------------------------------------------------------------------------------------- |  | - | ---------- |  | - | ---------- |  | ---- | -
|693,642   |  | 5/06  |  | Avalon Oil and Gas, Inc. Oil and gas producers                                                     |  |   | 84,564     |  |   | 47,168     |  | 0.1  |  
|720,000   |  | 5/06  |  | U.S. Starcom, Inc. Communications services and products                                            |  |   | 68,724     |  |   | 45,360     |  | 0.1  |  
|660,000   |  | 6/05  |  | BP International, Inc. Shade structures                                                            |  |   | 78,852     |  |   | 43,560     |  | 0.1  |  
|261,234   |  | 7/04  |  | eLinear, Inc. (5) Telecommunication security provider                                              |  |   | 190,763    |  |   | 41,797     |  | 0.1  |  
|18,228    |  | 12/05 |  | Amazing Technologies Corporation Web services supplier and integrator                              |  |   | 46,525     |  |   | 39,372     |  | 0.1  |  
|648,649   |  | 6/06  |  | Innova Pure Water Water treatment products                                                         |  |   | 80,004     |  |   | 38,919     |  | 0.1  |  
|750,000   |  | 6/05  |  | Modern Technology Corporation Technology development and acquisition company                       |  |   | 82,152     |  |   | 34,500     |  | <.1  |  
|31,413    |  | 9/05  |  | World Energy Solutions, Inc. Energy saving technologies                                            |  |   | 71,256     |  |   | 32,355     |  | <.1  |  
|122,449   |  | 1/06  |  | 5 G Wireless Communications, Inc. Broadband wireless                                               |  |   | 78,851     |  |   | 30,612     |  | <.1  |  
|160,000   |  | 5/06  |  | NetFabric Holdings Information technology services                                                 |  |   | 65,148     |  |   | 30,400     |  | <.1  |  
|2,142,857 |  | 6/06  |  | Universal Detection Technology Detection devices for bacterial spores                              |  |   | 84,000     |  |   | 30,000     |  | <.1  |  
|166,000   |  | 5/05  |  | US Energy Initiatives (Hybrid Fuel Systems, Inc.) Patented natural gas/diesel dual fuel technology |  |   | 39,145     |  |   | 28,220     |  | <.1  |  
|600,000   |  | 5/06  |  | Advanced Medical Isotope Corporation Development of isotopes to treat diseases                     |  |   | 63,000     |  |   | 25,200     |  | <.1  |  
|54,857    |  | 5/05  |  | XLER8, Inc. (Vitacube Systems, Inc). Specialty nutraceuticals                                      |  |   | 84,852     |  |   | 24,686     |  | <.1  |  
|295,500   |  | 7/04  |  | GS Clean Tech Corporation (Veridium Corp.) Environmental services business                         |  |   | 69,032     |  |   | 19,798     |  | <.1  |  
|221,033   |  | 4/04  |  | Power3 Medical Products, Inc. Healthcare products                                                  |  |   | 223,984    |  |   | 17,240     |  | <.1  |  
|750,000   |  | 10/04 |  | U.S. Wireless Online, Inc. Wireless broadband networks                                             |  |   | 66,000     |  |   | 16,500     |  | <.1  |  
|176,250   |  | 4/05  |  | Maelor PLC(5) Products for niche healthcare applications                                           |  |   | 24,147     |  |   | 16,215     |  | <.1  |  
|680,000   |  | 9/05  |  | Quest Minerals & Mining Corporation Coal and mineral mining                                        |  |   | 69,044     |  |   | 14,280     |  | <.1  |  
|40,000    |  | 5/06  |  | DME Interactive Holdings Multi-media entertainment                                                 |  |   | 37,092     |  |   | 13,600     |  | <.1  |  
|675,032   |  | 6/03  |  | E Med Future, Inc. Needle destruction device                                                       |  |   | 357,767    |  |   | 13,501     |  | <.1  |  
|232,211   |  | 5/05  |  | Preservation Sciences Inc. Metal and concrete coatings                                             |  |   |           |  |   | 13,468     |  | <.1  |  
|107,200   |  | 5/06  |  | HumWare Media Corporation Media advertising                                                        |  |   | 14,236     |  |   | 9,112      |  | <.1  |  
|67,904    |  | 12/03 |  | Magic Media Networks, Inc. Digital display monitor networks                                        |  |   | 7,831      |  |   | 5,297      |  | <.1  |  
|140,000   |  | 3/05  |  | AdAl Group, Inc.(5) Aluminum extruded products manufacturer                                        |  |   | 72,912     |  |   | 5,180      |  | <.1  |  
|85,714    |  | 9/05  |  | New Life Scientific, Inc. Pharmaceutical biotechnologies                                           |  |   | 81,816     |  |   | 3,943      |  | <.1  |  
|36,923    |  | 9/04  |  | Material Technologies, Inc. Metal fatigue detection                                                |  |   | 78,672     |  |   | 2,363      |  | <.1  |  
|          |  |       |  |                                                                                                    |  |   |            |  |   |            |  |      |  
|          |  |       |  | Total Investments in Non-Affiliates                                                                |  | $ | 23,889,334 |  | $ | 20,535,310 |  | 28.7 | %
|          |  |       |  |                                                                                                    |  |   |            |  |   |            |  |      |  



9



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##### Table of Contents

|            |   |  |       |  |                                                                                 |  |   |            |  |   |            |  |      |  
|----------- | - |  | ----- |  | ------------------------------------------------------------------------------- |  | - | ---------- |  | - | ---------- |  | ---- | -
|            |   |  |       |  | Affiliate Investments (2)                                                       |  |   |            |  |   |            |  |      |  
|            |   |  |       |  |                                                                                
|7,757,565   |   |  | 6/05  |  | Trio Industries Group, Inc. Protective powder coating                           |  | $ | 12,310,732 |  | $ | 12,244,874 |  | 17.1 |  
|17,290,594  |   |  | 8/05  |  | Industrial Biotechnology Corp. Manufactures and markets flavors and fragrances  |  |   | 5,005,569  |  |   | 8,146,972  |  | 11.4 |  
|            |   |  |       |  | Fuel FX International, Inc. Reductional environmental emissions                 |  |   |            |  |   |            |  |      |  
|9,900,717   |   |  | 4/05  |  | Common stock                                                                    |  |   | 1,980,142  |  |   | 4,950,359  |  | 6.9  |  
|100,000     |   |  | 1/06  |  | Preferred Series B Stock                                                        |  |   | 2,100,000  |  |   | 2,100,000  |  | 2.9  |  
|23,421,327  |   |  | 3/06  |  | Klegg Electronics, Inc. Manufacturer/distributor for retail electronic products |  |   | 2,470,894  |  |   | 3,035,173  |  | 4.2  |  
|461,222,608 |   |  | 9/05  |  | GS Energy Corporation (INSEQ Corp.) Waste minimization                          |  |   | 2,434,783  |  |   | 1,337,546  |  | 1.9  |  
|            |   |  |       |  | UBA Technology, Inc.Software development                                        |  |   |            |  |   |            |  |      |  
|2,530,740   |   |  | 2/06  |  | Common Stock                                                                    |  |   | 1,727,299  |  |   | 479,841    |  | 0.7  |  
|95,000      |   |  | 4/06  |  | Convertible Preferred A                                                         |  |   | 1,619,849  |  |   | 905,208    |  | 1.3  |  
|8,570,638   |   |  | 4/04  |  | Manakoa Services Company Compliance analysis and monitoring                     |  |   | 2,333,837  |  |   | 857,064    |  | 1.2  |  
|33,730,000  |   |  | 4/05  |  | Websky Inc. Broadband wireless                                                  |  |   | 897,750    |  |   | 809,520    |  | 1.1  |  
|3,123,703   |   |  | 3/04  |  | Health Sciences Group, Inc. Nutraceutical and pharmaceutical products           |  |   | 1,685,189  |  |   | 259,267    |  | 0.4  |  
|2,011,765   |   |  | 5/06  |  | Rheologics, Inc. Study of blood viscosity                                       |  |   | 86,100     |  |   | 82,481     |  | 0.1  |  
|4,221,165   |   |  | 4/01  |  | Stealth Media Labs, Inc. Software products                                      |  |   | 1,708,000  |  |   |           |  | <.1  |  
|1,280,000   |   |  | 8/04  |  | TenthGate, Inc.(privately held) (11) Healthcare related products and services   |  |   | 40,000     |  |   |           |  | <.1  |  
|            |   |  |       |  |                                                                                 |  |   |            |  |   |            |  |      |  
|            |   |  |       |  | Total Investments in Affiliates                                                 |  | $ | 36,400,144 |  | $ | 35,208,305 |  | 49.3 | %
|            |   |  |       |  |                                                                                 |  |   |            |  |   |            |  |      |  
|            |   |  |       |  |                                                                                
|            |   |  |       |  | Control Investments (3)                                                         |  |   |            |  |   |            |  |      |  
|            |   |  |       |  |                                                                                
|1,000       |   |  | 11/99 |  | UTEK Real Estate Holdings, Inc., (privately held) Real estate development       |  | $ | 4,121,574  |  | $ | 5,282,124  |  | 7.4  |  
|(10         | ) |  | 1/06  |  | Ybor City Group, Inc. (privately held)(Demand note, interest rate @ 5%)         |  |   | 870,249    |  |   | 870,249    |  | 1.2  |  
|            |   |  |       |  |                                                                                 |  |   |            |  |   |            |  |      |  
|            |   |  |       |  | Total Investments in Control Investments                                        |  | $ | 4,991,823  |  | $ | 6,152,373  |  | 8.6  | %
|            |   |  |       |  |                                                                                 |  |   |            |  |   |            |  |      |  
|            |   |  |       |  |                                                                                
|            |   |  |       |  | U.S. Treasuries and Certificates of Deposit (4)                                 |  |   |            |  |   |            |  |      |  
|            |   |  |       |  |                                                                                
|Par Value   |   |  |       |  | U.S. Treasuries:                                                                |  |   |            |  |   |            |  |      |  
|            |   |  |       |  |                                                                                
|4,000,000   |   |  | 11/05 |  | United States Treasury, maturity 8/15/06, interest rate @ 4.234%                |  |   | 3,975,800  |  |   | 3,975,800  |  | 5.6  |  
|            |   |  |       |  |                                                                                
|2,000,000   |   |  | 4/06  |  | United States Treasury, maturity 8/17/06, interest rate @ 4.789%                |  |   | 1,988,240  |  |   | 1.988,240  |  | 2.8  |  
|            |   |  |       |  |                                                                                
|2,000,000   |   |  | 6/06  |  | United States Treasury, maturity 7/13/06, interest rate @ 4.513%                |  |   | 1,997,680  |  |   | 1,997,680  |  | 2.8  |  
|            |   |  |       |  |                                                                                
|2,000,000   |   |  | 5/06  |  | United States Treasury, maturity 11/30/06, interest rate @ 4.962%               |  |   | 1,974,678  |  |   | 1,974,678  |  | 2.8  |  
|            |   |  |       |  |                                                                                
|1,000,000   |   |  | 5/06  |  | United States Treasury, maturity 9/30/06, interest rate @ 4.952%                |  |   | 997,524    |  |   | 997,524    |  | 1.4  |  
|            |   |  |       |  |                                                                                
|1,000,000   |   |  | 5/06  |  | United States Treasury, maturity 8/31/06, interest rate @ 4.866%                |  |   | 995,740    |  |   | 995,740    |  | 1.4  |  
|            |   |  |       |  |                                                                                
|1,000,000   |   |  | 5/06  |  | United States Treasury, maturity 11/16/06, interest rate @ 4.85%                |  |   | 981,330    |  |   | 981,330    |  | 1.4  |  



10



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|          |  |      |  |                                                                                |  |   |            |  |   |            |   |  |       |   
|--------- |  | ---- |  | ------------------------------------------------------------------------------ |  | - | ---------- |  | - | ---------- | - |  | ----- | --
|1,000,000 |  | 2/06 |  | United States Treasury, maturity 11/15/06, interest rate @ 4.606%              |  |   | 981,220    |  |   | 981,220    |   |  | 1.4   |   
|          |  |      |  |                                                                                |  |   |            |  |   |            |   |  |       |   
|          |  |      |  | Total U.S. Treasuries                                                          |  | $ | 13,892,212 |  | $ | 13,892,212 |   |  | 19.5  | % 
|          |  |      |  |                                                                                |  |   |            |  |   |            |   |  |       |   
|          |  |      |  |                                                                                | 
|          |  |      |  | Certificates of Deposit:                                                       |  |   |            |  |   |            |   |  |       |   
|100,000   |  | 5/06 |  | Spirit Bank CD, maturity 9/25/06, interest rate @ 4.85%                        |  |   | 99,861     |  |   | 99,861     |   |  | 0.1   |   
|100,000   |  | 4/06 |  | First National Bank Chester County CD, maturity 8/28/06, interest rate @ 4.60% |  |   | 99,898     |  |   | 99,898     |   |  | 0.1   |   
|100,000   |  | 2/06 |  | Bridgeview Bank CD, maturity 11/28/06, interest rate @ 4.60%                   |  |   | 99,650     |  |   | 99,650     |   |  | 0.1   |   
|100,000   |  | 2/06 |  | Bank Fairfield Wash CD, maturity 11/17/06, interest rate @ 4.60%               |  |   | 99,625     |  |   | 99,625     |   |  | 0.1   |   
|100,000   |  | 2/06 |  | First Finl Bank CD, maturity 11/24/06, interest rate @ 4.60%                   |  |   | 99,603     |  |   | 99,603     |   |  | 0.1   |   
|100,000   |  | 2/06 |  | Coastal Federal Bank, maturity 12/01/06, interest rate @ 4.65%                 |  |   | 99,600     |  |   | 99,600     |   |  | 0.1   |   
|100,000   |  | 2/06 |  | Bank Hapoalim CD, maturity 11/28/06, interest rate @ 4.60%                     |  |   | 99,649     |  |   | 99,649     |   |  | 0.1   |   
|100,000   |  | 6/05 |  | Countrywide Bank CD, maturity 4/1/06, interest rate @ 4.00%                    |  |   | 104,092    |  |   | 104,092    |   |  | 0.1   |   
|          |  |      |  |                                                                                |  |   |            |  |   |            |   |  |       |   
|          |  |      |  | Total Certificates of Deposit                                                  |  | $ | 801,978    |  | $ | 801,978    |   |  | 1.1   | % 
|          |  |      |  |                                                                                |  |   |            |  |   |            |   |  |       |   
|          |  |      |  | Total Investments in U.S. Treasuries and CDs                                   |  | $ | 14,694,190 |  | $ | 14,694,190 |   |  | 20.6  | % 
|          |  |      |  |                                                                                |  |   |            |  |   |            |   |  |       |   
|          |  |      |  | TOTAL INVESTMENTS                                                              |  | $ | 79,975,491 |  | $ | 76,590,178 |   |  | 107.2 | % 
|          |  |      |  |                                                                                |  |   |            |  |   |            |   |  |       |   
|          |  |      |  | Cash and other assets, less liabilities                                        |  |   |            |  |   | (5,149,382 | ) |  | (7.2  | )%
|          |  |      |  |                                                                                |  |   |            |  |   |            |   |  |       |   
|          |  |      |  | Net assets at June 30, 2006                                                    |  |   |            |  | $ | 71,440,796 |   |  | 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, certificates of deposits, UTEK Real Estate Holdings, Inc. and Ybor City Group, Inc. (see (3) below), 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 June 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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11



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| | 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.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (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.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (8) | Non-registered investment company.
| | --- | ----------------------------------



| | (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 six months ended
June 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 June 30, 2006, the Company reclassed this investment from Non-affiliate investments to Affiliate investments based on the criteria in notes (1) and
(2).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

See accompanying notes



12



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UTEK CORPORATION

Schedule of Investments

December 31, 2005



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



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|            |  |       |  |                                                                                       |  |   |            |  |   |           |  |      |  
|----------- |  | ----- |  | ------------------------------------------------------------------------------------- |  | - | ---------- |  | - | --------- |  | ---- | -
|333,332     |  | 5/05  |  | Hybrid Fuel Systems, Inc.Patented natural gas/diesel dual fuel technology             |  |   | 78,852     |  |   | 43,333    |  | 0.1  |  
|50,000      |  | 3/05  |  | KP Renewables (Kwikpower International plc)(5)Renewable energy                        |  |   | 94,500     |  |   | 42,000    |  | 0.1  |  
|29,999      |  | 7/04  |  | INyX, Inc.Aerosol drug delivery                                                       |  |   | 19,813     |  |   | 41,399    |  | 0.1  |  
|413,482     |  | 5/05  |  | Preservation Sciences Inc.Metal and concrete coatings                                 |  |   |           |  |   | 30,184    |  | 0.1  |  
|675,032     |  | 6/03  |  | E Med Future, Inc.Needle destruction device                                           |  |   | 357,767    |  |   | 26,326    |  | 0.1  |  
|750,000     |  | 6/05  |  | Modern Technology CorporationTechnology development and acquisition company           |  |   | 82,152     |  |   | 22,500    |  | 0.1  |  
|221,033     |  | 4/04  |  | Power3 Medical Products, Inc.Healthcare products                                      |  |   | 223,984    |  |   | 20,998    |  | 0.1  |  
|140,000     |  | 3/05  |  | AdAl Group, Inc.(5)Aluminum extruded products manufacturer                            |  |   | 72,912     |  |   | 18,200    |  | 0.1  |  
|85,714      |  | 9/05  |  | New Life Scientific, Inc.Pharmaceutical biotechnologies                               |  |   | 81,816     |  |   | 16,286    |  | 0.1  |  
|176,250     |  | 4/05  |  | Maelor PLC(5)Products for niche healthcare applications                               |  |   | 24,147     |  |   | 16,039    |  | 0.1  |  
|1,533,333   |  | 5/05  |  | Advanced Refractive Technologies, Inc.(formerly Visijet, Inc.)Ophthalmic technologies |  |   | 81,996     |  |   | 15,333    |  | 0.1  |  
|480,000     |  | 4/05  |  | Websky Inc.Broadband wireless                                                         |  |   |           |  |   | 12,000    |  | 0.1  |  
|61,224      |  | 3/04  |  | eFoodSafety.com Inc.Safety of fruit, vegetables, poultry, beef and seafood            |  |   | 20,863     |  |   | 9,796     |  | 0.1  |  
|67,904      |  | 12/03 |  | Magic Media Networks, Inc.Digital display monitor networks                            |  |   | 7,831      |  |   | 6,722     |  | <.1  |  
|36,923      |  | 9/04  |  | Material Technologies, Inc.Metal fatigue detection                                    |  |   | 78,672     |  |   | 4,800     |  | <.1  |  
|295,500     |  | 7/04  |  | Veridium Corp.Environmental services business                                         |  |   | 69,032     |  |   | 3,546     |  | <.1  |  
|14,796      |  | 1/04  |  | GeneThera, Inc.Molecular biotechnology products                                       |  |   | 36,014     |  |   | 1,065     |  | <.1  |  
|            |  |       |  |                                                                                       |  |   |            |  |   |           |  |      |  
|            |  |       |  | Total Investments in Non-Affiliates                                                   |  | $ | 12,482,927 |  | $ | 9,805,423 |  | 22.1 | %
|            |  |       |  |                                                                                       |  |   |            |  |   |           |  |      |  
|            |  |       |  |                                                                                       | 
|            |  |       |  | Affiliate Investments (2)                                                             |  |   |            |  |   |           |  |      |  
|            |  |       |  |                                                                                       | 
|13,240,000  |  | 8/05  |  | Industrial Biotechnology Corp.Manufactures and markets flavors and fragrances         |  | $ | 2,170,068  |  | $ | 5,693,200 |  | 12.8 | %
|2,915,489   |  | 6/05  |  | Trio Industries Group, Inc.Protective powder coating                                  |  |   | 3,997,210  |  |   | 4,985,486 |  | 11.2 |  
|9,900,717   |  | 4/05  |  | Fuel FX International, Inc. (privately held)Reductional environmental emissions       |  |   | 1,980,142  |  |   | 1,980,143 |  | 4.5  |  
|3,123,703   |  | 3/04  |  | Health Sciences Group, Inc.Nutraceutical and pharmaceutical products                  |  |   | 1,685,189  |  |   | 874,637   |  | 2.0  |  
|484,782,608 |  | 9/05  |  | INSEQ Corp.Waste minimization                                                         |  |   | 2,434,783  |  |   | 727,174   |  | 1.6  |  
|6,343,573   |  | 4/04  |  | HydroFlo, Inc. (8)Business development company                                        |  |   | 854,602    |  |   | 596,296   |  | 1.4  |  
|7,647,561   |  | 4/04  |  | Manakoa Services CompanyCompliance analysis and monitoring                            |  |   | 2,258,837  |  |   | 504,739   |  | 1.1  |  
|960,779     |  | 6/99  |  | Clean Water Technologies, Inc.Environmental services                                  |  |   | 568,006    |  |   | 92,235    |  | 0.2  |  
|480,000     |  | 8/04  |  | TenthGate, Inc.(privately held)Healthcare related products and services               |  |   |           |  |   | 3,840     |  | <.1  |  



14



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|          |  |       |  |                                                                             |  |   |            |  |   |            |  |      |  
|--------- |  | ----- |  | --------------------------------------------------------------------------- |  | - | ---------- |  | - | ---------- |  | ---- | -
|          |  |       |  |                                                                             | 
|4,221,165 |  | 4/01  |  | Stealth Media Labs, Inc.Software products                                   |  |   | 1,708,000  |  |   |           |  | 0.0  |  
|          |  |       |  |                                                                             | 
|100,000   |  | 8/04  |  | Myrmidon Biomaterials, Inc.,( privately held)Biomaterial tendon replacement |  |   |           |  |   |           |  | 0.0  |  
|          |  |       |  |                                                                             |  |   |            |  |   |            |  |      |  
|          |  |       |  | 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)Real estate development    |  |   | 2,126,573  |  |   | 1,888,396  |  | 4.2  |  
|          |  |       |  |                                                                             |  |   |            |  |   |            |  |      |  
|          |  |       |  | 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  |  
|100,000   |  | 8/05  |  | Wright Express Finl Serv CD, maturity 3/15/06, interest rate @ 3.5%         |  |   | 99,798     |  |   | 99,798     |  | 0.2  |  



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|        |  |      |  |                                                                  |  |   |            |  |   |            |  |       |  
|------- |  | ---- |  | ---------------------------------------------------------------- |  | - | ---------- |  | - | ---------- |  | ----- | -
|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, certificates of deposits and UTEK Real Estate Holdings, Inc. (see (3) below), 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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes



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##### Table of Contents

UTEK Corporation

Notes to Consolidated Financial Statements

(Information as of June 30, 2006 and 2005 and for each of the three and six month periods

then ended is unaudited)

1. Nature of Business and
Significant Accounting Policies

Interim Financial Information

The financial information for UTEK Corporation (the Company, we, us or UTEK) as of June 30, 2006 and 2005 and for the three and six month periods then ended is
unaudited, but includes all adjustments (consisting only of normal recurring accruals), which, in the opinion of management are necessary in order to make the financial statements not misleading at such dates and for those periods. These financial
statements have been prepared in accordance with 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 six months ended June 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.



18



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##### Table of Contents

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), UTEKipLtd. (Israel) and UTEK-EKMS, Inc. 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 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. Actual results could differ from those estimates.

Net Increase in Net Assets From Operations Per Share (EPS)

Basic EPS is calculated based upon the weighted average number of shares
outstanding during the period, while diluted EPS also gives effect to all potential dilutive common shares outstanding during each period such as common stock options and warrants. Diluted EPS for the three months ended June 30, 2006 and
2005 includes 125,439 and -0- potentially dilutive equivalent shares, respectively. Diluted EPS for the six months ended June 30, 2006 and 2005 includes 96,095 and -0- potentially dilutive equivalent shares, respectively. Options to
purchase 30,000 and 489,017 shares of common stock were not included in the computation of diluted EPS for the three months ended June 30, 2006 and 2005, respectively, because the effect of such options would be anti-dilutive. Options
to purchase 122,500 and 609,017 shares of common stock were not included in the computation of diluted EPS for the six months ended June 30, 2006 and 2005, respectively, because the effect of such options would be anti-dilutive.

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 six months ended June 30, 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
impairment of the original purchase goodwill. The Company recorded a total impairment of the goodwill for UTEKip in the first quarter. 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 six months ended June 30, 2006.

2. Stock Compensation

The Company had two stock-based equity compensation plans at June 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 six months ended June 30, 2006, we granted 64,000 options to purchase shares of common stock with a weighted average grant date fair value of $15.83 per option. At June 30, 2006, the Company had 689,494 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 six months ended June 30, 2006 includes compensation cost for all



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##### Table of Contents

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.

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 $141,000, $88,000, $0.01, and $0.01 lower, respectively, for the three month period ended June 30, 2006 and
$222,000, $138,000, $0.02, and $0.02 lower, respectively, for the six month period ended June 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 operating results and per share information had the Company accounted for stock-based compensation in accordance with SFAS 123(R) for the six month period
ended June 30, 2005 would be immaterial.

We use the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date
of grant, using weighted average assumptions as noted in the following table. We have used one grouping for the assumptions as our option grants are primarily basic with similar characteristics. The expected term of options granted has been derived
based upon the Companys 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 the Companys 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 Companys historical dividend yield.



|                         |  |      |            |   |      |   |            |  
|------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                         |  | 2006 |            |   | 2005 |  
|Expected dividend yield  |  |      | 0-0.14     | % |      |   | 0          | %
|Expected volatility      |  |      | 53.99      | % |      |   | 28.88      | %
|Risk-free interest rate  |  |      | 4.35-5.21  | % |      |   | 3.82-4.04  | %
|Expected life of options |  |      | 3.67 years |   |      |   | 3.5 years  |  
|Grant date fair value    |  | $    | 5.96-$8.37 |   |      | $ | 3.75-$4.16 |  

Net cash proceeds from the exercise of stock options were approximately $276,000 for the six months ended
June 30, 2006. At June 30, 2006, there was $586,000 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 for the six months ended June 30, 2006:



|                                        |  |                 |   |  |                               |       |                                           |           
|--------------------------------------- |  | --------------- | - |  | ----------------------------- | ----- | ----------------------------------------- | ----------
|                                        |  | Number ofshares |   |  | WeightedAverageExercise Price |       | Weighted AverageRemainingContractual Life
|Options Outstanding - January 1, 2006   |  | 504,767         |   |  | $                             | 11.16 |                                           |           
|                                        |  |                 |  
|Granted                                 |  | 64,000          |   |  |                               | 15.83 |                                           |           
|Exercised                               |  | (37,500         | ) |  |                               | 7.36  |                                           |           
|Forfeited                               |  | (7,511          | ) |  |                               | 14.42 |                                           |           
|                                        |  |                 |   |  |                               |       |                                           |           
|Options Outstanding  June 30, 2006     |  | 523,756         |   |  | $                             | 11.95 |                                           | 3.00 years
|                                        |  |                 |   |  |                               |       |                                           |           
|Outstanding Exercisable  June 30, 2006 |  | 339,020         |   |  | $                             | 10.68 |                                           | 2.43 years
|                                        |  |                 |   |  |                               |       |                                           |           

At June 30, 2006, the aggregate intrinsic value of options outstanding was $4,241,000 and the aggregate
intrinsic value of options exercisable was $3,177,000. Total intrinsic value of options exercised was $220,000 for the six months ended June 30, 2006. The total fair value of options vested during the six months ended June 30, 2006 was
$268,000.



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



|                                    |  |                 |   |  |                                       |     
|----------------------------------- |  | --------------- | - |  | ------------------------------------- | ----
|                                    |  | Number ofShares |   |  | Weighted AverageGrant Date Fair Value
|Nonvested options - January 1, 2006 |  | 180,747         |   |  | $                                     | 4.06
|Granted                             |  | 64,000          |   |  |                                       | 7.09
|Vested                              |  | (56,000         | ) |  |                                       | 4.78
|Forfeited                           |  | (4,011          | ) |  |                                       | 3.97
|                                    |  |                 |   |  |                                       |     
|Nonvested Options  June 30, 2006   |  | 184,736         |   |  | $                                     | 4.90
|                                    |  |                 |   |  |                                       |     

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 June 30, 2006 and December 31, 2005, approximately 86% 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 six months ended June 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 six months ended June 30, 2006.

During the six months ended June 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 six months ended June 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 six months ended June 30, 2006, we entered into twenty-three strategic alliance agreements. The fair value of the Companys assets increased by $1.6 million at June 30, 2006 as a result of
these agreements. The income recognized from all strategic alliance agreements for the three and six months ended June 30, 2006 was approximately $472,000 and $858,000, respectively. At June 30, 2006, the Company had thirty-six active
strategic alliance clients.

During the six months ended June 30, 2005, we entered into twenty-one strategic alliance agreements. The fair value of
the Companys assets increased by $1.0 million at June 30, 2005 as a result of these agreements. The income recognized from all strategic alliance agreements for the three and six months ended June 30, 2005 was approximately $304,000
and $595,000, respectively. At June 30, 2005 the Company had twenty-five active strategic alliance clients.



21



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Technology Transfers:

All of our technology transfers are generally completed according to our strategic alliance service agreements with our clients.

During the six
months ended June 30, 2006, we completed the following sixteen technology transfers:



|           |  |                                                   |  |                                                  |  |                                  |  |                  
|---------- |  | ------------------------------------------------- |  | ------------------------------------------------ |  | -------------------------------- |  | -----------------
|Date       |  | Name of Company Acquiringthe 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)                        |  | 45.254           
|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)                    |  |                  
|May 1      |  | Industrial Biotechnology Corporation              |  | 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            

During the six months ended June 30, 2005, we completed the following four
technology transfers:



|            |  |                                                   |  |                                           |  |                                  |  |                   |      
|----------- |  | ------------------------------------------------- |  | ----------------------------------------- |  | -------------------------------- |  | ----------------- | -----
|Date        |  | Name of Company Acquiringthe Newly Formed Company |  | Newly Formed Company                      |  | ConsiderationUnregisteredShares |  | Price perShare(1)
|January 10  |  | Xethanol Corp.                                    |  | 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(9)                     |  |                   | 0.190
|June 30     |  | Manakoa Services Corporation                      |  | Vigilant Network Technologies, Inc.       |  | 15,365,854                       |  |                   | 0.280

---

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



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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 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 million plus a cash payment of $1 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 revenues and other financial information by reportable operating segment is shown below:



|                                                              |  |                                          |           |   |            |   |          |                   |  |       |            |  |   |           
|------------------------------------------------------------- |  | ---------------------------------------- | --------- | - | ---------- | - | -------- | ----------------- |  | ----- | ---------- |  | - | ----------
|                                                              |  | UnitedKingdom                            |           |   | Israel     |   |          | United States     |  | Total
|Total assets June 30, 2006                                    |  | $                                        | 865,002   |   |            | $ | 139,710  |                   |  | $     | 86,034,934 |  | $ | 87,039,646
|Total assets December 31, 2005 (1) (2)                        |  |                                          | 1,251,491 |   |            |   | 432,453  |                   |  |       | 47,322,016 |  |   | 49,005,960
|                                                              | 
|                                                              |  | For the six months ended June 30, 2006  
|                                                              |  | UnitedKingdom                            |           |   | Israel (3) |   |          | United States     |  | Total
|Income from operations                                        |  | $                                        | 363,598   |   |            | $ | 80,796   |                   |  | $     | 34,421,919 |  | $ | 34,866,313
|Income (loss) before interest, other expense and income taxes |  |                                          | 9,129     |   |            |   | (397,906 | )                 |  |       | 21,750,116 |  |   | 21,361,339
|Depreciation and amortization                                 |  |                                          | 1,650     |   |            |   | 10,730   |                   |  |       | 85,537     |  |   | 97,917    
|                                                              | 
|                                                              |  | For the six months ended June 30, 2005  
|                                                              |  | United Kingdom                           |           |   | Israel     |   |          | United States (1) |  | Total
|Income from operations (1) (2)                                |  | $                                        | 384,310   |   |            | $ | 39,642   |                   |  | $     | 4,657,374  |  | $ | 5,081,326 
|Income (loss) before interest, other expense and income taxes |  |                                          | (120,940  | ) |            |   | (131,108 | )                 |  |       | 633,978    |  |   | 381,930   
|Depreciation and amortization                                 |  |                                          | 12,863    |   |            |   | 8,250    |                   |  |       | 35,362     |  |   | 56,475    
|                                                              | 
|                                                              |  | For the three months ended June 30, 2006
|                                                              |  | UnitedKingdom                            |           |   | Israel     |   |          | United States (1) |  | Total
|Income from operations                                        |  | $                                        | 106,252   |   |            | $ | 43,901   |                   |  | $     | 22,909,154 |  | $ | 23,059,307
|Income (loss) before interest, other expense and income taxes |  |                                          | (98,203   | ) |            |   | (55,276  | )                 |  |       | 15,727,463 |  |   | 15,573,984
|Depreciation and amortization                                 |  |                                          | 924       |   |            |   | 5,813    |                   |  |       | 34,999     |  |   | 41,736    



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|                                                              |  |                                          |         |   |        |   |         |               |  |       |           |  |   |          
|------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | ------ | - | ------- | ------------- |  | ----- | --------- |  | - | ---------
|                                                              |  | For the three months ended June 30, 2005
|                                                              |  | UnitedKingdom                            |         |   | Israel |   |         | United States |  | Total
|Income from operations (1) (2)                                |  | $                                        | 175,180 |   |        | $ | 32,081  |               |  | $     | 2,335,536 |  | $ | 2,542,797
|Income (loss) before interest, other expense and income taxes |  |                                          | (54,466 | ) |        |   | (76,520 | )             |  |       | 206,269   |  |   | 75,283   
|Depreciation and amortization                                 |  |                                          | 6,220   |   |        |   | 4,964   |               |  |       | 18,062    |  |   | 29,246   

---

|(1) | Our newly acquired website Knowledge Express was purchased by the Company on July 7, 2005; therefore, there is no related financial information included in the
three and six month periods ended June 30, 2005. Knowledge Express is part of the Companys information services division.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | UTEKip, Ltd. was purchased in January 2005; therefore, there are only five months of financial information included in the financial statements for the six months ended
June 30, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | 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 six months ended June 30, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8. Related Party Transactions

Sam Reiber, the Companys General Counsel and a director of the Company, is also a partner with the law firm Linsky & Reiber in Tampa, Florida.
Linsky & Reiber has received approximately $26,000 and $19,000 in compensation in the six months ended June 30, 2006 and 2005, respectively, for services performed for the Company and holds 6,100 shares of the Companys common
stock as of June 30, 2006.

During the six months ended June 30, 2006, the Company loaned funds for operations and real estate improvements of
approximately $870,000 to Ybor City Group, Inc., a wholly owned subsidiary of UTEK Real Estate Holdings, Inc., one of UTEKs portfolio companies. In addition, the Company paid rent of approximately $19,000 to Ybor City Group, Inc. during the
six months ended June 30, 2006.

9. Subsequent Events

Subsequent to June 30, 2006, we completed three technology transfers in which we received unregistered shares of stock in certain entities that acquired certain of 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.



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##### Table of Contents

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. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or
achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words may,
will, should, expect, anticipate, estimate, believe, intend or project or the negative of these words or other variations on these words or comparable
terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that these projections included in these forward-looking statements will come to pass. Our actual results could differ materially
from those expressed or implied by the forward-looking statements as a result of various factors.

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 engagements. Whenever appropriate we will seek to receive
cash payments as compensation for our services. All of our technology transfer transactions are 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 license fees to acquire new technologies,
pre-paid consulting fees with the inventor of the technologies, sponsored research fees with the university or research facility transferring the technologies and additional cash to further accelerate commercialization efforts. 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 $87.0 million and our net assets were $71.4 million at June 30, 2006, compared to $49.0 million and $44.4 million at December 31, 2005, respectively. Net asset value per share was $8.03 at June 30, 2006
and $5.58 at December 31, 2005. Net assets increased by $27.0 million or 61% in the six months ended June 30, 2006.

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



| |  |  | The completion of 16 technology transfers valued at approximately $31.8 million;
| | - |  | --------------------------------------------------------------------------------



| |  |  | The sale of certain of our investments for $6.1 million, including realized gains of $2.2 million (net of income tax);
| | - |  | ----------------------------------------------------------------------------------------------------------------------



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



| |  |  | The use of approximately $10.0 million to fund operations;
| | - |  | ----------------------------------------------------------



| |  |  | An increase in our deferred tax liability of approximately $9.9 million;
| | - |  | ------------------------------------------------------------------------



| |  |  | The acquisition of 22ndStreet of Ybor City,
Inc. 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 gain of $1.0 million (net of income tax) in the fair value of our investments.
| | - |  | -----------------------------------------------------------------------------------------------

Our common shares outstanding as of June 30, 2006 were 8,898,254 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 June 30, 2006, $48.3 million or 63% 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, $13.6 million or 18% of our investments consisted of equity securities at fair value in privately owned companies, and $14.7 million or 19% 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:



|                                             |  |               |            |   |                  |   |            |  
|-------------------------------------------- |  | ------------- | ---------- | - | ---------------- | - | ---------- | -
|                                             |  | June 30, 2006 |            |   | December 31,2005 |  
|Investments, at cost                         |  | $             | 79,975,491 |   |                  | $ | 43,867,694 |  
|Unrealized depreciation, before income taxes |  |               | (3,385,313 | ) |                  |   | (5,114,768 | )
|                                             |  |               |            |   |                  |   |            |  
|Investments, at value                        |  | $             | 76,590,178 |   |                  | $ | 38,752,926 |  
|                                             |  |               |            |   |                  |   |            |  

The net increase in the value of investment securities from $38.8 million at December 31, 2005 to $76.6
million at June 30, 2006 is primarily due to the following events:



| |  |  | The completion of 16 technology transfers valued at approximately $31.8 million;
| | - |  | --------------------------------------------------------------------------------



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



| |  |  | A net realized gain of $2.2 million related to the sale of some of our shares in Circle Group Holdings, Inc., Swiss Medica, Inc., Xethanol Corp., Sequiam Corp., Genethera, Inc.,
Israel Technology Acquisition Corp, Fortress America Acquisition Corp., eFoodsafety.com, Inc. and Magic Media Networks, Inc.;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Investment of approximately $10.6 million in U.S. Treasuries and certificates of deposit.
| | - |  | -----------------------------------------------------------------------------------------



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Our most significant portfolio investments at June 30, 2006 were in Trio Industries Group, Inc., Xethanol Corp.,
Industrial Biotechnology Corp., Fuel FX International, Inc., UTEK Real Estate Holdings, Inc., KP Renewables, Klegg Electronics, Inc. and Advanced Refractive Technologies, Inc. These eight investments total $51.3 million in fair value, representing
67% of our investments and 72% of net assets at June 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
technology transfers, consulting fees, interest, dividends, fees and other income and our operating expenses, net of applicable income tax provision. The second element is Net realized gain (loss) on investments, which is the difference
between the proceeds received from dispositions of portfolio securities and their stated cost, net of applicable income tax provision. The third element, Increase (decrease) in unrealized appreciation on investments, is the net
change in the value of our investment portfolio, net of increase (decrease) in deferred income taxes that would become payable if the unrealized appreciation were realized through the sale or other disposition of the investment portfolio.

Three months ended June 30, 2006 compared to the three months ended June 30, 2005.

Income from operations. Income from operations (revenue) increased to $23.0 million for the three months ended June 30, 2006 from $2.5 million
for the three months ended June 30, 2005. Approximately 96% and 71% of our income from operations was received in the form of equity securities for the three months ended June 30, 2006 and 2005, respectively. The increase in income from
operations resulted from completing 10 technology transfers during the quarter ended June 30, 2006 with a greater average value than the 1 technology transfer completed during the quarter ended June 30, 2005. Additional revenue was
generated by the consulting services of UTEKEurope, Ltd., UTEK-EKMS, Inc., UTEKip, Ltd. and subscription income from the websites owned by UTEK, as well as $242,000 in investment income as a result of the increase in cash, U.S.
Treasuries and certificates of deposit.

In the three months ended June 30, 2006, we completed 10 technology transfers, which generated $21.6 million
and had acquisition of technology rights costs of $4.5 million, as compared to 1 technology transfer, which generated $1.5 million and had acquisition of technology rights costs of $655,000 for the three months ended June 30, 2005. The average
revenue associated with technology transfers increased 44% from $2.2 million in 2006, as compared to $1.5 million in 2005. The increase in the Companys technology transfers is primarily a result of an increase in the overall demand for the
Companys 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.

Consulting fees and other services increased to $1.2 million in the three months ended June 30, 2006 from $932,000 in the three months ended June 30, 2005. In
the three months ended June 30, 2006, the Company entered into 19 strategic alliance agreements, as compared to 16 agreements during the three months ended June 30, 2005. The increase in the Companys strategic alliances is a result
of its growing customer base. In the three months ended June 30, 2006, we rendered services in connection with strategic alliance agreements that generated $472,000 in revenue, as compared to strategic alliance agreements that generated
$304,000 in revenue for the three months ended June 30, 2005. Other consulting income for the three months ended June 30, 2006 included income of $235,000 from our subsidiaries UTEK-Europe, Ltd., UTEK-EKMS, Inc., and UTEKip, Ltd.,
as compared to $507,000 for the three months ended June 30, 2005. UTEK Information Services comprised the balance of consulting fee income for 2006. Our newly acquired website Knowledge Express, part of the Companys
information services division, was purchased in July 2005; therefore, there is no related financial information included in the three months ended June 30, 2005.



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Of the total consulting and other income received during the three months ended June 30, 2006, 41% was paid in the
form of equity securities in companies and the balance was paid in cash. Of such income received during the three months ended June 30, 2005, 38% was paid in the form of equity securities and the balance was paid in cash.

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.

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. Total operating expenses for the three months ended June 30, 2006 were $7.5 million,
consisting of acquisition of technology rights expenses of $4.5 million, salaries and wages of $899,000, professional fees of $302,000, sales and marketing expenses of $931,000 and general and administrative expenses of $831,000. These expenses
compared to the $2.5 million reported for the three months ended June 30, 2005, consisting of acquisition of technology rights expenses of $655,000, salaries and wages of $582,000, professional fees of $160,000, sales and marketing expenses of
$622,000 and general and administrative expenses of $478,000. The 200% increase in total operating expenses was due primarily to the increased costs of completing 9 additional technology transfers; increased commissions related to these 9 additional
technology transfers and additional new strategic alliances; an increase in professional fees due to an increased number of investments; and increased operation costs and employees related to a newly acquired website, which due to the purchase date
of July 1, 2005, were not included in the financial information for the three months ended June 30, 2005.

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. The 54% increase in salaries and wages reflects increases in salary, the addition of employees relating to a newly acquired
website, additional accounting personnel and a bonus in the amount of $100,000 to the chief executive officer. The 590% increase in acquisition of technology rights was due to completing 10 technology transfer transactions with an average cost of
$452,000 in the three months ended June 30, 2006, as compared to 1 transaction with a cost of $655,000 for the three months ended June 30, 2005. The 50% increase in sales and marketing expenses was due to a significant increase in the
commissions paid as a result of the increased number and value of technology transfers and paid on an increased number of strategic alliance agreements. The 89% increase in professional fees relates to an increase in legal and accounting fees
related to recent registration statements filings and an increase in the number of valuations due to an increase in the number of portfolio companies.

The
following tables provide certain information relating to the acquisition of technology rights expenses we incurred in connection with our technology transfers during the quarters ended June 30, 2006 and 2005, respectively:



|           |  |                                                    |  |                                                  |  |                         |          
|---------- |  | -------------------------------------------------- |  | ------------------------------------------------ |  | ----------------------- | ---------
|Date       |  | Name of Company Acquiring the Newly Formed Company |  | Newly Formed Company                             |  | DollarAmount ofExpenses
|04/03/2006 |  | Trio Industries Group, Inc.                        |  | Natural Adhesive Technologies, Inc.              |  | $                       | 555,000  
|04/04/2006 |  | Advanced Refractive Technologies, Inc.             |  | Advanced Glaucoma Technologies, Inc.             |  |                         | 399,999  
|04/05/2006 |  | UBA Technology, Inc.                               |  | Intellitouch Technologies, Inc.                  |  |                         | 502,000  
|05/01/2006 |  | Industrial Biotechnology Corporation               |  | Bio-Repellant Technologies, Inc.                 |  |                         | 375,000  
|05/12/2006 |  | Kwikpower International Plc                        |  | Hydrocarbon Synthesis Technologies, Inc.         |  |                         | 407,500  
|05/12/2006 |  | Kwikpower International Plc                        |  | Advanced BioEnergy Technologies, Inc.            |  |                         | 380,000  
|06/01/2006 |  | Trio Industries Group, Inc.                        |  | Advanced Powder Coating Technologies, Inc.       |  |                         | 550,000  
|06/12/2006 |  | Kwikpower International Plc                        |  | Advanced Biofuel Technologies, Inc.              |  |                         | 375,000  
|06/13/2006 |  | Xethanol Corporation                               |  | Advanced Biomass Gasification Technologies, Inc. |  |                         | 450,000  
|06/20/2006 |  | Klegg Electronics, Inc.                            |  | Smart Speaker Technologies, Inc.                 |  |                         | 528,628  
|           |  |                                                    |  |                                                  |  |                         |          
|           |  |                                                    |  |                                                  |  | $                       | 4,523,127
|           |  |                                                    |  |                                                  |  |                         |          
|           |  |                                                    | 
|Date       |  | Name of Company Acquiring the Newly Formed Company |  | Newly Formed Company                             |  | DollarAmount ofExpenses
|06/30/2005 |  | Manakoa Services Corporation                       |  | Vigilant Network Technologies, Inc.              |  | $                       | 655,122  
|           |  |                                                    |  |                                                  |  |                         |          



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Net Realized Gains (Losses) Net realized gains on investments, net of income tax effect, amounted to $1.8
million for the three months ended June 30, 2006 and were related to sales as follows:



|                                              |  |                 |  |                      |           |  
|--------------------------------------------- |  | --------------- |  | -------------------- | --------- | -
|Company Name                                  |  | Number ofShares |  | Realized Gain (Loss) |          
|Sequiam Corp.                                 |  | 85,000          |  | $                    | 2,069     |  
|INYX, Inc.                                    |  | 29,999          |  |                      | 29,733    |  
|Circle Group Holdings, Inc.                   |  | 458,900         |  |                      | 196,040   |  
|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 Corp.                                |  | 273,410         |  |                      | 1,583,771 |  
|eFoodsafety.com, Inc.                         |  | 61,224          |  |                      | (3,380    | )
|HydroFlo, Inc. (1)                            |  | 400,000         |  |                      | (6,964    | )
|                                              |  |                 |  |                      |           |  
|Total                                         |  |                 |  | $                    | 1,829,711 |  
|                                              |  |                 |  |                      |           |  

| | 
| | 

| | (1) | The Company elected to abandon its 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.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net realized gains on investments, net of income tax effect, amounted to $115,916 for the three months ended June 30,
2005 and were related to sales as follows:



|                            |  |                  |  |                      |         |  
|--------------------------- |  | ---------------- |  | -------------------- | ------- | -
|Company Name                |  | Number of Shares |  | Realized Gain (Loss) |        
|Circle Group Holdings, Inc. |  | 670,068          |  |                      | 240,843 |  
|E Med Future, Inc.          |  | 220,334          |  |                      | (44,244 | )
|Telkonet, Inc.              |  | 20,668           |  |                      | 37,317  |  
|Magic Media Networks, Inc.  |  | 130,000          |  |                      | (15,861 | )
|eFoodSafety.com, Inc.       |  | 61,224           |  |                      | (2,355  | )
|Full Circle Registry, Inc.  |  | 200,000          |  |                      | (99,784 | )
|                            |  |                  |  |                      |         |  
|Total                       |  |                  |  | $                    | 115,916 |  
|                            |  |                  |  |                      |         |  

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.

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 June 30, 2006 approximately 86% 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.

The net unrealized depreciation of investments, net of taxes, was $537,000 for the three months ended June 30, 2006, compared to net unrealized depreciation, net of taxes, of $887,000 for the three months ended June 30, 2005. The net
unrealized gains (losses) consisted of fluctuations in fair value resulting from the Board of Directors valuation of our assets for the quarters ended June 30, 2006 and 2005. During the three months ended June 30, 2006, there was a significant
decline in fair value of KP Renewables of approximately $1.1 million, Trio Industries Group, Inc. of approximately $2.2 million and UBA Technology Corp. of approximately $1.2 million. These declines were offset by significant gains in Fuel FX
International, Inc. of approximately $1.9 million, Industrial Biotechnology Corp. of approximately $1.2 million and UTEK Real Estate Holdings, Inc. of approximately $821,000. The Companys other investments experienced a total net increase in
their fair value of approximately $100,000. The Companys investments can decrease due to factors that are specific to these investments (inability to obtain additional capital, inability to execute their business model, termination of their
technology licenses, etc.) or to general marketplace factors.

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.

Six months ended June 30, 2006 compared to the six months ended June 30, 2005.

Income from operations. Income from operations (revenue) increased to $34.9 million for the six months ended June 30, 2006 from $5.1 million for the six months ended June 30, 2005.
Approximately 94% and 72% of our income from operations was received in the form of equity securities for the six months ended June 30, 2006 and 2005, respectively. The increase in income from operations was a result of completing 16 technology
transfers with a greater average value than the 4 transactions completed for the six months ended June 30, 2005; additional revenue generated by our newly acquired website of approximately $600,000, which due to the purchase date of
July 1, 2005, was not included in the financial information for the six months ended June 30, 2005; and an increase in investment income of $313,000 as a result of the increase in cash and short term investments.

In the six months ended June 30, 2006, we completed 16 technology transfers, which generated $31.8 million and had acquisition of technology rights costs of $7.1
million, as compared to 4 technology transfers, which generated $3.2 million and had acquisition of technology rights costs of $1.2 million for the six months ended June 30, 2005. The average revenue associated with technology transfers
increased 150% to $2.0 million in 2006, as compared to $795,000 in 2005. The increase in the Companys technology transfers is primarily a result of an increase in the overall demand for the Companys 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.

Consulting fees and other services increased to $2.5 million in the six months ended June 30, 2006 from $1.7 million in the six months ended June 30, 2005. In the six months ended June 30, 2006, the Company entered into 23
strategic alliance agreements, as compared to 21 agreements during the six months ended June 30, 2005. The increase in the Companys strategic alliances is a result of its growing customer base. In the six months ended June 30, 2006,
we rendered services in connection with strategic



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alliance agreements that generated $858,000 in revenue, as compared to strategic alliance agreements that generated
$595,000 in revenue for the six months ended June 30, 2005. Other consulting income for the six months ended June 30, 2006 included income of $803,000 from our subsidiaries UTEK-Europe, Ltd., UTEK-EKMS, Inc., and UTEKip, Ltd., as
compared to $890,000 for the six months ended June 30, 2005. Our Information Services Division comprised the balance of consulting fee income for 2006. Our newly acquired website Knowledge Express, part of the Companys
information services division was purchased in July 2005; therefore, there is no related financial information included in the six months ended June 30, 2005.

Of the total consulting and other income received during the six months ended June 30, 2006, 35% was paid in the form of equity securities in companies and the balance was paid in cash. Of such income received during the six months
ended June 30, 2005, 37% was paid in the form of equity securities and the balance was paid in cash.

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

Expenses.Total operating expenses for the six months ended June 30, 2006 were $13.5 million, consisting of salaries and wages of $1.6 million,
professional fees of $583,000, sales and marketing expenses of $1.7 million, acquisition of technology rights expenses of $7.1 and general and administrative expenses of $2.4 million. These expenses compared to the $4.8 million reported for the six
months ended June 30, 2005, consisting of salaries and wages of $1.0 million, professional fees of $344,000, sales and marketing expenses of $1.1 million, acquisition of technology rights expenses of $1.2 million and general and administrative
expenses of $1.0 million. The 184% increase in total operating expenses was due to an increased number of employees related to the expansion of the business; increased acquisition costs related to the completion of 12 additional technology
transfers; increased commissions related to those 12 additional technology transfers; an increase in professional fees due to an increased number of investments; and increased operation costs and employees related to the newly acquired website of
approximately $700,000, which due to the purchase date of July 1, 2005, were not included in the financial information for the six months ended June 30, 2005.

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. The 56% increase in salaries and wages reflects pay
increases and an additional $397,000 in salaries from the addition of employees relating to our newly acquired website, additional accounting personnel and a bonus of $100,000 to our chief executive officer. The 483% increase in acquisition of
technology rights expenses was due to completing 16 technology transfer transactions in the six months ended June 30, 2006, as compared to 4 transactions for the six months ended June 30, 2005. The 54% increase in sales and marketing
expenses was due to increased commissions related to 16 sales of technology rights and additional travel, commissions and related costs due to the increased number of strategic alliances. The 70% increase in professional fees is largely due an
increase in accounting and legal fees related to registration statement filings, as well as additional valuation costs as a result of the increased number of our portfolio companies. The 136% increase in general and administrative costs is largely
due to the cost of royalties paid related to our newly acquired website, which due to the purchase date of July 1, 2005, was not included in the financial information for the six months ended June 30, 2005; a gift of 5.1 million
common shares of HydroFlo, Inc. valued at $663,000; and the write-down of goodwill due to impairment in one of our subsidiaries totaling $235,000.

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 six months ended June 30, 2006 and 2005, respectively:



|           |  |                                                    |  |                                                  |  |                         |          
|---------- |  | -------------------------------------------------- |  | ------------------------------------------------ |  | ----------------------- | ---------
|Date       |  | Name of Company Acquiring the Newly Formed Company |  | Newly Formed Company                             |  | DollarAmount ofExpenses
|01/20/2006 |  | Fuel FX International, Inc.                        |  | Emissions Detection Technologies, Inc.           |  | $                       | 300,000  
|01/27/2006 |  | Broadcast International, Inc.                      |  | Video Processing Technologies, Inc.              |  |                         | 625,000  
|01/30/2006 |  | WebSky, Inc.                                       |  | Strategic Wireless Solutions, Inc                |  |                         | 265,000  
|03/06/2006 |  | Trio Industries Group, Inc.                        |  | Ultra Fine Coating Systems, Inc.                 |  |                         | 534,000  
|03/15/2006 |  | American Soil Technologies, Inc.                   |  | Advanced Fertilizer Technologies, Inc.           |  |                         | 500,000  
|03/16/2006 |  | Advanced Refractive Technologies, Inc.             |  | Ocular Theraputics, Inc.                         |  |                         | 400,000  
|04/03/2006 |  | Trio Industries Group, Inc.                        |  | Natural Adhesive Technologies, Inc.              |  |                         | 555,000  
|04/04/2006 |  | Advanced Refractive Technologies, Inc.             |  | Advanced Glaucoma Technologies, Inc.             |  |                         | 399,999  
|04/05/2006 |  | UBA Technology, Inc.                               |  | Intellitouch Technologies, Inc.                  |  |                         | 502,000  
|05/01/2006 |  | Industrial Biotechnology Corporation               |  | Bio-Repellant Technologies, Inc.                 |  |                         | 375,000  
|05/12/2006 |  | Kwikpower International Plc                        |  | Hydrocarbon Synthesis Technologies, Inc.         |  |                         | 407,500  
|05/12/2006 |  | Kwikpower International Plc                        |  | Advanced BioEnergy Technologies, Inc.            |  |                         | 380,000  
|06/01/2006 |  | Trio Industries Group, Inc.                        |  | Advanced Powder Coating Technologies, Inc.       |  |                         | 550,000  
|06/12/2006 |  | Kwikpower International Plc                        |  | Advanced Biofuel Technologies, Inc.              |  |                         | 375,000  
|06/13/2006 |  | Xethanol Corporation                               |  | Advanced Biomass Gasification Technologies, Inc. |  |                         | 450,000  
|06/20/2006 |  | Klegg Electronics, Inc.                            |  | Smart Speaker Technologies, Inc.                 |  |                         | 528,628  
|           |  |                                                    |  |                                                  |  |                         |          
|           |  |                                                    |  |                                                  |  | $                       | 7,147,127
|           |  |                                                    |  |                                                  |  |                         |          



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|           |  |                                                    |  |                                           |  |                         |          
|---------- |  | -------------------------------------------------- |  | ----------------------------------------- |  | ----------------------- | ---------
|Date       |  | Name of Company Acquiring the Newly Formed Company |  | Newly Formed Company                      |  | DollarAmount ofExpenses
|01/10/2005 |  | Xethanol Corporation                               |  | Superior Separation Technologies, Inc.    |  | $                       | 110,000  
|02/22/2005 |  | Health Sciences Group, Inc.                        |  | Open Cell Biotechnologies, Inc.           |  |                         | 265,000  
|03/31/2005 |  | Swiss Medica, Inc.                                 |  | Anti-Depression Biohealth Solutions, Inc. |  |                         | 196,673  
|06/30/2005 |  | Manakoa Services Corporation                       |  | Vigilant Network Technologies, Inc.       |  |                         | 655,122  
|           |  |                                                    |  |                                           |  |                         |          
|           |  |                                                    |  |                                           |  | $                       | 1,226,795
|           |  |                                                    |  |                                           |  |                         |          

Net Realized Gains (Losses) Net realized gains on investments, net of income tax effect, amounted to
$2.2 million for the six months ended June 30, 2006 and were related to sales as follows:



|                                              |  |                 |  |                      |           |  
|--------------------------------------------- |  | --------------- |  | -------------------- | --------- | -
|Company Name                                  |  | Number ofShares |  | Realized Gain (Loss) |          
|Sequiam Corp.                                 |  | 645,000         |  | $                    | 3,015     |  
|INYX, Inc.                                    |  | 29,999          |  |                      | 29,733    |  
|Swiss Medica, Inc.                            |  | 300,000         |  |                      | (3,661    | )
|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 Corp.                                |  | 424,172         |  |                      | 1,822,725 |  
|eFoodSafety.com, Inc.                         |  | 61,224          |  |                      | (3,380    | )
|HydroFlo, Inc. (1)                            |  | 5,538,162       |  |                      | (38,162   | )
|Genethera, Inc.                               |  | 14,796          |  |                      | (21,583   | )
|Magic Media Networks, Inc.                    |  | 30,000          |  |                      | (103      | )
|                                              |  |                 |  |                      |           |  
|Total                                         |  |                 |  | $                    | 2,212,297 |  
|                                              |  |                 |  |                      |           |  

---

|(1) | The Company elected to abandon its 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net realized gains on investments, net of income tax effect, amounted to $141,049 for the six months ended June 30, 2005
and were related to sales as follows:



|                            |  |                 |  |                      |         |  
|--------------------------- |  | --------------- |  | -------------------- | ------- | -
|Company Name                |  | Number ofShares |  | Realized Gain (Loss) |        
|Circle Group Holdings, Inc. |  | 715,068         |  | $                    | 273,012 |  
|E Med Future, Inc.          |  | 238,834         |  |                      | (51,280 | )
|Telkonet, Inc.              |  | 20,668          |  |                      | 37,317  |  
|Magic Media Networks, Inc.  |  | 130,000         |  |                      | (15,861 | )
|eFoodSafety.com, Inc.       |  | 61,224          |  |                      | (2,355  | )
|Full Circle Registry, Inc.  |  | 200,000         |  |                      | (99,784 | )
|                            |  |                 |  |                      |         |  
|Total                       |  |                 |  | $                    | 141,049 |  
|                            |  |                 |  |                      |         |  

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.

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 June 30, 2006 approximately 86% 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



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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.

The net unrealized
appreciation of investments, net of taxes, was $1.0 million for the six months ended June 30, 2006, compared to net unrealized depreciation, net of taxes, of $4.0 million for the six months ended June 30, 2005. The net unrealized gains
(losses) consisted of fluctuations in fair value resulting from the Board of Directors valuation of our assets for the quarters ended June 30, 2006 and 2005. During the six months ended June 30, 2006, there was a significant decline
in fair value of KP Renewables of approximately $700,000, Trio Industries Group, Inc. of approximately $700,000 and UBA Technology Corp. of approximately $1.2 million. These declines were offset by significant gains in Xethanol Corporation of
approximately $1.2 million and Fuel FX International, Inc. of approximately $1.9 million. The Companys other investments experienced a total net increase in their fair value of approximately $500,000. The Companys investments can
decrease due to factors that are specific to these investments (inability to obtain additional capital, inability to execute their business model, termination of their technology licenses, etc.) or to general marketplace factors.

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 61% to $71.4 million at June 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 16 technology transfers valued at $31.8 million during the six months ended June 30, 2006.

Our primary source of liquidity and capital for the six months ended June 30, 2006 was from the completion of a registered direct placement of shares
of our common stock which, net of offering costs, was $9 million, as well as $6.1 million in cash generated from the sale of shares in our portfolio companies.

During the six months ended June 30, 2006, we loaned to Ybor City Group, Inc., a wholly owned subsidiary of UTEK Real Estate Holdings, Inc., one of our portfolio companies, $870,000 for real estate improvements to our corporate offices
located in Tampa, Florida. We also invested $1,000,000 in cash and issued 82,919 shares of our common stock with a market value of $1,000,000 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 for equity securities rather than cash. In
the six months ended June 30, 2006, 94% of our income from operations was paid in the form of equity securities compared to 72% of our income from operations for the six months ended June 30, 2005. Our goal is to monetize the equity stakes
we receive in consideration for technology transfers and our consulting services.

At June 30, 2006, we had cash and cash equivalents of $5.7 million.
We also had investments in U.S. Treasuries and certificates of deposit (CDs) of $14.7 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 June 30, 2006. 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.

Recent Developments

Subsequent to June 30, 2006, we completed 3 technology transfers in which we received unregistered shares of stock in certain entities that acquired certain of our
newly formed company. 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.



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Critical Accounting Policies and Estimates

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

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.

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.

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. 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.



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Stock Compensation

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.

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 $141,000, $88,000, $0.01 and $0.01 lower, respectively, for the three months ended June 30, 2006 and $222,000, $138,000 and $0.02 and $0.02 lower, respectively, for the six months ended June 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 operating results and per share
information had the Company accounted for stock-based compensation in accordance with SFAS 123(R) for the three and six month periods ended June 30, 2005 would be immaterial. 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 assumptions as our option grants are primarily basic with similar characteristics. The expected term of options
granted has been derived based upon the Companys 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 the Companys 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 Companys 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, the Companys principal executive officer and principal financial officer conducted an
evaluation of the effectiveness of the design and operations of its disclosure controls and procedures, (as 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 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 Companys most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial
reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Although the Company may from time to time be involved in litigation and claims arising out of
its operations in the normal course of its business, as of June 30, 2006, the Company was not a party to any material pending legal proceedings.



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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.
| | - |  | ---------------------------------------------------------------------------------------------------------------

Our investment portfolio is highly concentrated and, as a result, our financial results are largely dependent upon the performance of certain significant investments.

Our investment portfolio is highly concentrated and, as a result, our financial results are largely dependent upon the performance of certain
significant investments. As a result, if our investment in one or more of these companies fails to perform as expected, our financial results could be negatively affected.

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

At June 30, 2006 and December 31, 2005, investments amounting to $61.6 million or 86% 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 June 30, 2006, $61.6 million or 71% 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 June 30, 2006, approximately 2%
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;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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.

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 Six Months Ended June 30, 2006 and 2005 contained in our consolidated financial statements included in this Form 10Q. 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 June 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

On June 23, 2006, we held our Annual Meeting of
Stockholders. The following matters were submitted to the stockholders for consideration:



| | 1. | To elect nine (9) of our directors of the Company who will serve for one (1) year, or until their successors are elected and qualified; and
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | To ratify the selection of Pender Newkirk & Company LLP to serve as our registered independent public accounting firm for the Company for the year ending December 31,
2006.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

The results of the shares voted with regard to each of these matters are as follows:



| | 1. | Election of Directors
| | -- | ---------------------



|                               |  |           |  |         
|------------------------------ |  | --------- |  | --------
|Director                       |  | For       |  | Withheld
|Clifford M. Gross, Ph.D.       |  | 6,603,914 |  | 6,643   
|Sam Reiber, J.D.               |  | 6,605,344 |  | 5,213   
|Kwabena Gyimah-Brempong, Ph.D. |  | 6,590,669 |  | 19,888  
|Holly Callen Hamilton          |  | 6,604,894 |  | 5,663   
|Keith Witter, J.D.             |  | 6,605,314 |  | 5,243   
|Stuart Brooks, M.D.            |  | 6,591,144 |  | 19,413  
|John J. Micek, J.D.            |  | 6,605,494 |  | 5,063   
|Francis Maude                  |  | 6,605,494 |  | 5,063   
|Arthur Chapnik                 |  | 6,590,694 |  | 19,593  



| | 2. | Ratification of the selection of Pender Newkirk & Company LLP
| | -- | -------------------------------------------------------------



|          |  |          |  |        
|--------- |  | -------- |  | -------
|For       |  | Withheld |  | Abstain
|6,604,064 |  | 4,663    |  | 1,830  

Item 5. Other Information

Not Applicable

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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##### Table of Contents

SIGNATURES

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



|                     |  |                                     
|-------------------- |  | ------------------------------------
|                     |  | UTEK CORPORATION                    
|                     |  | (Registrant)                        
|                     | 
|Date: August 4, 2006 |  | /s/ Clifford M. Gross               
|                     |  | Clifford M. Gross, Ph.D.            
|                     |  | Chairman and Chief Executive Officer
|                     | 
|Date: August 4, 2006 |  | /s/ Carole R. Wright                
|                     |  | Carole R. Wright, CPA               
|                     |  | Chief Financial Officer             



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