Innovaro 10Q 2008 Q2 Quarterly report

Innovaro (INNI) 10-Q2008 Q2 Quarterly report

Content analysis

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(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, 2008

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

Commission File Number 814-00203

UTEK CORPORATION

(Exact name of registrant as specified in its charter)


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

2109 Palm Avenue

Tampa, FL 33605

(Address of principal executive offices)

(813) 754-4330

(Registrant’s telephone number)

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

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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 6, 2008, there were 10,182,131 shares outstanding of registrant’s common stock, $0.01 par value.

UTEK CORPORATION

FORM 10-Q TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION		3
ITEM 1.	Financial Statements	3
Consolidated Statements of Assets and Liabilities as of June 30, 2008 (unaudited) and December 31, 2007		3
Consolidated Statements of Operations — For the Three and Six Months Ended June 30, 2008 and 2007 (unaudited)		4
Consolidated Statements of Cash Flows — For the Six Months Ended June 30, 2008 and 2007 (unaudited)		5
Consolidated Statements of Changes in Net Assets — For the Six Months Ended June 30, 2008 and 2007 (unaudited)		7
Financial Highlights For the Six Months Ended June 30, 2008 and 2007 (unaudited)		8
Schedule of Investments as of June 30, 2008 (unaudited) and December 31, 2007		9
Notes to Consolidated Financial Statements (unaudited)		19
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risks	41
ITEM 4.	Controls and Procedures	41

PART II. OTHER INFORMATION		42
ITEM 1.	Legal Proceedings	42
ITEM 1A.	Risk Factors	42
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
ITEM 3.	Defaults Upon Senior Securities	42
ITEM 4.	Submission of Matters to a Vote of Security Holders	42
ITEM 5.	Other Information	43
ITEM 6.	Exhibits	43
Signatures		44
Exhibits

Page 2 of 44

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements

UTEK Corporation

Consolidated Statements of Assets and Liabilities


	June 30, 2008 (Unaudited)			December 31, 2007
ASSETS
Investments:
Non-affiliate investments (cost: 2008 - $37,830,621; 2007 - $31,588,337)	$	8,781,200		$	6,705,850
Affiliate investments (cost: 2008 - $31,367,964; 2007 - $43,779,616)		3,255,400			14,429,000
Controlled investments (cost: 2008 - $18,021,197; 2007 - $17,231,458)		5,036,000			7,768,561
U.S. Treasuries and certificates of deposit (cost: 2008 - $4,032,432; 2007 - $1,498,346)		4,032,432			1,498,346

Total investments		21,105,032			30,401,757
Cash and cash equivalents		3,509,467			5,254,576
Accounts receivable, net of allowance for bad debt (2008 - $137,000; 2007 - $36,000)		3,102,591			358,338
Prepaid expenses and other assets		531,785			378,248
Fixed assets, net		503,465			476,578
Goodwill		6,760,389			2,821,064
Intangible assets, net		7,177,923			123,812
Deferred tax asset		7,891,524			5,406,704

TOTAL ASSETS		50,582,176			45,221,077

LIABILITIES
Accrued expenses		3,299,733			790,693
Deferred revenue		1,341,261			755,836
Contingent liability		306,418			—

TOTAL LIABILITIES		4,947,412			1,546,529

NET ASSETS	$	45,634,764		$	43,674,548

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, 29,000,000 shares authorized; 10,445,218 and 9,011,276 shares issued; 9,836,274 and 9,011,276 shares outstanding at June 30, 2008 and December 31, 2007, respectively	$	98,364		$	90,114
Additional paid-in capital		63,525,219			53,148,643
Accumulated income:
Accumulated net operating income		32,578,819			33,498,108
Net realized loss on investments, net of income taxes		(6,989,472	)		(3,512,598	)
Net unrealized depreciation of investments, net of deferred income taxes		(43,750,800	)		(39,703,173	)
Foreign currency translation adjustment		172,634			153,454

Net assets	$	45,634,764		$	43,674,548

Net asset value per share	$	4.64		$	4.85

See accompanying notes

Page 3 of 44

UTEK Corporation

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended June 30						Six Months Ended June 30
	2008			2007			2008			2007
Income from operations:
Sale of technology rights	$	1,222,300		$	5,213,410		$	3,934,680		$	11,914,750
Consulting and other services		3,672,310			1,022,048			4,541,049			2,068,765
Investment income, net		35,008			152,991			119,455			352,705

		4,929,618			6,388,449			8,595,184			14,336,220

Expenses:
Acquisition of technology rights		296,000			1,030,000			1,480,000			2,333,279
Salaries and wages		1,159,144			804,966			2,365,038			1,774,307
Professional fees		250,067			292,161			558,262			614,108
Sales and marketing		2,818,815			458,299			3,466,847			1,090,278
General and administrative		1,164,159			607,744			1,989,353			1,439,553
Goodwill impairment		—			—			—			33,030

		5,688,185			3,193,170			9,859,500			7,284,555

(Loss) income before income taxes		(758,567	)		3,195,279			(1,264,316	)		7,051,665
Provision for income tax (benefit) expense		(217,677	)		1,259,448			(345,028	)		2,882,443

Net (loss) income from operations		(540,890	)		1,935,831			(919,288	)		4,169,222

Net realized and unrealized gains (losses):
Net realized loss on investments, net of income tax benefit of ($2,021,635) and ($2,097,720) for the three and six months ended June 30, 2008, respectively, and ($24,524) and ($686,764) for the three and six months ended June 30, 2007, respectively		(3,350,772	)		(40,648	)		(3,476,874	)		(1,138,280	)
Change in unrealized appreciation (depreciation) of investments, net of deferred tax expense (benefit) of $303,567 and ($2,442,074) for the three and six months ended June 30, 2008, respectively, and ($3,306,225) and ($4,236,765) for the three and six months ended June 30, 2007, respectively		503,149			(5,479,917	)		(4,047,627	)		(7,022,245	)

Net decrease in net assets from operations	$	(3,388,513	)	$	(3,584,734	)	$	(8,443,789	)	$	(3,991,303	)

Net decrease in net assets from operations per share:
Basic	$	(0.35	)	$	(0.40	)	$	(0.90	)	$	(0.45	)
Diluted	$	(0.35	)	$	(0.40	)	$	(0.90	)	$	(0.45	)
Weighted average shares:
Basic		9,608,668			8,997,538			9,385,813			8,968,152
Diluted		9,608,668			8,997,538			9,385,813			8,968,152

See accompanying notes

Page 4 of 44

UTEK Corporation

Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30
	2008			2007
Operating Activities:
Net decrease in net assets from operations	$	(8,443,789	)	$	(3,991,303	)
Adjustments to reconcile net decrease in net assets from operations to net cash flows from operating activities:
Change in net unrealized depreciation of investments		6,489,701			11,259,011
Depreciation and amortization		270,894			109,468
Goodwill impairment		—			33,030
Loss on sale of investments		5,574,594			1,825,044
Loss on disposal of fixed assets		13,363			14,360
Bad debt expense		17,742			110,011
Stock-based compensation		358,439			275,598
Deferred income taxes		(4,884,820	)		(2,041,086	)
Investment securities received in connection with the sale of technology rights		(3,809,680	)		(11,714,750	)
Consulting and other services rendered in exchange for investment securities		(45,269	)		(757,269	)
Changes in operating assets and liabilities:
Accounts receivable		(263,142	)		41,940
Prepaid expenses and other assets		(98,003	)		53,998
Deferred revenue		(270,778	)		(124,769	)
Accrued expenses		1,350,971			25,113

Net cash flows from operating activities		(3,739,777	)		(4,881,604	)

Investing Activities:
Net proceeds from sale (purchases) of short-term investments		(2,534,086	)		2,494,479
Proceeds received on sale of equity investments		1,698,435			821,276
Net repayment from (investment in) UTEK Real Estate Holdings, Inc.		1,965,261			(702,560	)
Cash received in connection with Strategos acquisition		678,980			—
Purchases of fixed assets		(22,896	)		(32,394	)

Net cash flows from investing activities		1,785,694			2,580,801

Financing Activities:
Distributions to stockholders		—			(179,032	)
Proceeds from exercise of stock options		189,794			523,091

Net cash flows from financing activities		189,794			344,059

Foreign currency translation adjustment		19,180			(3,026	)

Decrease in cash and cash equivalents		(1,745,109	)		(1,959,770	)
Cash and cash equivalents at beginning of year		5,254,576			9,685,111

Cash and cash equivalents at end of period	$	3,509,467		$	7,725,341

See accompanying notes

Page 5 of 44

UTEK Corporation

Consolidated Statements of Cash Flows (continued)

(Unaudited)


	Six Months Ended June 30
	2008		2007
Supplemental Disclosures of Non-Cash Investing Activities

The Company issued 153,967 shares of common stock to purchase Pharmalicensing Limited. In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired	$	2,534,197
Fair value of common stock issued		2,150,000

Liabilities assumed	$	384,197

The Company issued 502,970 shares of common stock to purchase Strategos. In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired	$	9,339,383
Fair value of common stock issued		6,040,669
Less: contingent liability incurred		1,952,340

Liabilities assumed	$	1,346,374

The Company issued 137,046 shares of common stock in connection with the Strategos earnout contingency as of June 30, 2008	$	1,645,923

Investment securities received for unearned services	$	87,500	$	280,463

See accompanying notes

Page 6 of 44

UTEK Corporation

Consolidated Statements of Changes in Net Assets

(Unaudited)


	Six Months Ended June 30
	2008			2007
Changes in net assets from operations:
Net income (loss) from operations	$	(919,288	)	$	4,169,222
Net realized loss on sale of investments, net of related income taxes		(3,476,874	)		(1,138,280	)
Change in net unrealized depreciation of investments, net of related deferred taxes		(4,047,627	)		(7,022,245	)

Net decrease in net assets from operations		(8,443,789	)		(3,991,303	)

Distributions to Stockholders:
From net income from operations (1)		—			—

Capital stock transactions:
Proceeds from the exercise of stock options		189,794			523,091
Stock-based compensation		358,439			275,598
Acquisition of Pharmalicensing Ltd.		2,150,000			—
Acquisition of Strategos		6,040,669			—
Strategos earnout		1,645,923			—

Net increase in net assets from stock transactions		10,384,825			798,689

Foreign currency translation adjustment		19,180			(3,026	)

Net increase (decrease) in net assets		1,960,216			(3,195,640	)

Net assets at beginning of year		43,674,548			50,981,162

Net assets at end of period	$	45,634,764		$	47,785,522

(1)	Distributions to stockholders as noted in the Consolidated Statement of Cash Flows for the six months ended June 30, 2007 was included in net income from operations for a prior period; therefore, it is not reflected as a distribution to stockholders for purposes of this schedule.

See accompanying notes

Page 7 of 44

UTEK Corporation

Financial Highlights

(Unaudited)


	Six Months Ended June 30
	2008			2007
PER SHARE INFORMATION

Net asset value, beginning of period	$	4.85		$	5.71
Net income (loss) from operations (1)		(0.10	)		0.46
Net change in realized losses and unrealized depreciation on investments, (after taxes) (2)		(1.22	)		(0.96	)
Foreign currency translation adjustment (1)		0.00			(0.00	)
Net increase from stock transactions (1)		1.11			0.09
Distributions to stockholders from net income from operations		—			—

Net asset value, end of period	$	4.64		$	5.30

Per share market value, end of period	$	10.00		$	14.30

Investment return, based on market price at end of period		(24	)%		26	%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period	$	45,634,764		$	47,785,522

Ratio of expenses to average net assets		22	%		15	%
Ratio of net income from operations to average net assets		(2	)%		8	%
Diluted weighted average number of shares outstanding during the period		9,385,813			8,968,152

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

(2)

Calculated as a balancing amount necessary to reconcile the change in net assets value per share with the other per share information presented. This amount may not agree with the aggregate gains and losses for the period because the difference in the net asset value at the beginning and end of period inherently does not equal the per share changes of the line items disclosed.

(3)	Distributions to stockholders as noted in the Consolidated Statement of Cash Flows for the three months ended June 30, 2007 was accrued at December 31, 2006; therefore, it is not reflected as a distribution to stockholders for purposes of this schedule.

See accompanying notes

Page 8 of 44

UTEK Corporation

Consolidated Schedule of Investments

June 30, 2008

(Unaudited)


Shares	Dates of Acquisition	Non-Affiliate Investments (1)	Original Cost Basis		Value		Percentage of Net Assets
		Advanced Medical Isotope Corporation (8) Medical isotope processes
95,000	9/06	Preferred Stock	$	1,803,417	$	1,750,400	3.8	%
600,000	5/06	Common Stock		63,000		331,200	0.7
560,003	1/07	MiMedx Group, Inc. (MiMedx, Inc.) Connective tissue technology		—		1,803,200	4.0
148,000	11/06–1/07	Cyberlux Corporation (7) LED lighting solutions Series C Preferred Stock		2,181,640		1,457,100	3.2
25,931,484	1/07	Common Stock		502,558		308,600	0.7
(6)	4/07	Oxygen Biotherapeutics, Inc.(Synthetic Blood Intn’l, Inc) Biotechnology products		120,000		946,000	2.1
92,000	3/08	Platina Energy Group Inc. Oil and gas exploration and production Series F Convertible Preferred Stock		794,880		861,100	1.9
100,000	4/06	Advanced Refractive Technologies, Inc. Ophthalmic technologies Series D Preferred Stock		1,996,176		280,000	0.6
97,000	3/06	Series C Preferred Stock		2,066,063		271,600	0.6
97,000	12/05	Series B Preferred Stock		1,032,675		141,100	0.3
4,000,000	5/06	Common Stock		76,368		500	<0.1
371,020	6/08	CSMG Technologies, Inc. Environmental and medical technologies		347,300		347,300	0.8
208,333	1/07-12/07	Ecosphere Technologies, Inc. Defense, homeland security and global ship repair		83,300		93,000	0.2
60,000	12/05	Metamorphix Global, Inc.(privately held) (9) Design and manufacture of countertops		120,000		54,000	0.1
40,000	7/06	Bacterin International, Inc.(privately held) Bioactive coatings for medical devices		120,000		40,000	0.1
171,432	10/06-9/07	GammaCan International, Inc. Anti-cancer immunotherapy		83,016		35,800	0.1
109,091	7/06	Turbine Truck Engines, Inc. Heavy-duty highway truck engines		72,000		17,600	<0.1
6,706	5/06-6/06	Codima, Inc.(KKS Venture Management/ Rheologics) Study of blood viscosity		86,100		16,100	<0.1
1,200,000	10/06	Laserlock Technologies, Inc. Security solutions for the gaming industry		24,100		10,800	<0.1
1,250,010	5/06	In Veritas Medical Diagnostics, Inc. Medical devices designs and testing		74,400		7,500	<0.1
9,748	4/06-3/07	Xethanol Corporation(9) Bioethanol and derivative products		88,836		4,300	<0.1
2,971	12/05-8/06	Industrial Biotechnology Corporation Provider of renewable resources		3,455,105		2,600	<0.1
1,740,000	5/06-11/06	TenthGate International, Inc. Healthcare related products and services		40,000		1,000	<0.1
16,667	9/05-4/06	Quest Minerals & Mining Corporation Coal and mineral mining		69,044		300	<0.1
387,097	6/06	Tradequest International, Inc. Provider of voice over internet protocol		76,092		100	<0.1

Page 9 of 44


660,000	6/05	BP International, Inc. Shade structures		78,852		—	0.0
1,886	9/05-6/08	Applied Wellness Corporation (New Life Scientific, Inc.) Pharmaceutical biotechnologies		81,816		—	0.0
232,211	5/05	EFuel EFN Corp. (Preservation Sciences, Inc.) Internet sites host		—		—	0.0
140,000	3/05	AdAl Group, Inc. (5) Aluminum extruded products manufacturer		72,912		—	0.0
6	5/06-6/06	EFT BioTech Holdings, Inc. (HumWare Media Corp.) Media advertising		14,236		—	0.0
2,525,740	2/06-6/06	UBA Technology, Inc. Software development Common Stock		1,652,899		—	0.0
95,000	4/06	Series A Convertible Preferred Stock		1,619,849		—	0.0
7,787,565	6/05-6/06	Trio Industries Group, Inc. Protective powder coating		12,330,401		—	0.0
		KP Renewables Plc (Kwikpower International Plc) (5) Renewable energy
	5/06	Convertible Debenture, due 5/10/07		4,433,403		—	0.0
	9/05	Convertible Debenture, due 9/30/06		1,884,920		—	0.0
2,500	3/05	Common Stock		94,500		—	0.0
261,234	7/04-7/05	eLinear, Inc. (5) Telecommunication security provider		190,763		—	0.0

		Total Investments in Non-Affiliates	$	37,830,621	$	8,781,200	19.2	%


		Affiliate Investments (2)
49,500,000	7/07	MachineTalker, Inc. Intelligent wireless security networks	$	993,000	$	779,600	1.7	%
19,130,302	12/06–6/07	Material Technologies, Inc. Metal fatigue detection Common Stock		4,529,836		244,900	0.5
47,500	1/07	Series E Convertible Preferred Stock		694,640		463,100	1.0
2,040,000	4/06–7/06	CytoDyn, Inc. Development stage biotechnology company Common Stock		3,640,772		204,000	0.4
100,000	1/07	Series A Preferred Stock		845,000		260,000	0.6
6,679,688	6/07	American Soil Technologies, Inc. Fertilizer innovation		1,571,691		327,300	07
3,373,107	7/06–9/07	Avalon Oil and Gas, Inc. Oil and gas producers		2,448,681		307,000	0.7
412,000	9/07	NeoStem, Inc. Stem cell banking services		761,440		305,900	0.7
6,000,000	7/07	Pathway One Plc(5) Sales and development licenses		852,300		144,000	0.3
1,426,754	9/07	USTelematics, Inc.(10) Broadband telecommunication for moving vehicles		—		99,900	0.2
153,417,714	12/06-4/07	Cargo Connection Logistics Holdings, Inc. World trade logistics		959,972		53,700	0.1
15,150,717	4/05-6/08	Emission & Power Solutions, Inc. (Fuel FX International, Inc.) (privately held) Reductional environmental emissions		4,080,142		45,500	0.1
4,426,136	7/06	DME Interactive Holdings, Inc. Multi-media entertainment		752,443		17,700	<0.1
7,079,500	5/06–8/06	NetFabric Holdings, Inc. Information technology services		601,598		2,800	<0.1

Page 10 of 44


95,000	1/07	Manakoa Services Corporation (8) Compliance analysis and monitoring Series B Preferred Stock		2,280,000		—	0.0
7,799,515	8/04–4/07	Common Stock		2,122,641		—	0.0
33,730,000	4/05-1/06	WebSky, Inc. Broadband wireless		897,750		—	0.0
4,221,165	4/01-12/02	Stealth MediaLabs, Inc. (10) Software products		1,708,000		—	0.0
5,346	7/06–9/06	NutriPure Beverages, Inc. (Liberty Diversified Holdings, Inc.) Printing and packaging Common Stock		1,245,258		—	0.0
63,981	2/07	Series B Preferred Stock		382,800		—	0.0

		Total Investments in Affiliates	$	31,367,964	$	3,255,400	7.1	%


		Control Investments (3)
1,000	11/99-11/06	UTEK Real Estate Holdings, Inc. (privately held) Real estate development	$	4,131,574	$	3,240,000	7.1	%
16,119,672	9/05–9/07	World Energy Solutions, Inc. Energy saving technologies Common Stock		4,715,949		820,900	1.8
100,000	6/08	Series B Preferred Stock		875,000		875,000	1.9
210,000,000	1/08	RIM Semiconductor Company Data transmission technology		1,792,500		85,100	0.2
15,009,402	3/06-5/07	Klegg Electronics, Inc. Manufacturer/distributor for retail electronic products		6,506,174		15,000	<0.1

		Total Investments in Control Investments	$	18,021,197	$	5,036,000	11.0	%


		U.S. Treasuries and Certificates of Deposit (4)
		Certificates of Deposit:
100,000	4/08	Doral Bank CD, maturity 7/18/08, interest rate @ 3.15%	$	99,975	$	99,975	0.2	%
100,000	4/08	Indymac Bank CD, maturity 7/24/08, interest rate @ 3.30%		99,972		99,972	0.2
100,000	4/08	Washington Mutual Bank CD, maturity 7/24/08, interest rate @ 3.05%		99,958		99,958	0.2
100,000	4/08	Enerbank USA CD, maturity 8/4/08, interest rate @ 3.05%		99,940		99,940	0.2
100,000	5/08	Temecula VY Bank CD, maturity 8/14/08, interest rate @ 2.75%		99,882		99,882	0.2
100,000	4/08	Franklin Bank CD, maturity 8/25/08, interest rate @ 3.25%		99,923		99,923	0.2
100,000	2/08	Colonial Bank CD, maturity 8/27/08, interest rate @ 3.35%		99,932		99,932	0.2
100,000	2/08	Capital One Bank CD, maturity 8/28/08, interest rate @ 3.35%		99,931		99,931	0.2
100,000	2/08	Sunfirst Bank CD, maturity 8/28/08, interest rate @ 3.35%		99,939		99,939	0.2
100,000	2/08	Coastal Community CD, maturity 8/29/08, interest rate @ 3.35%		99,930		99,930	0.2
100,000	2/08	First Business Bank CD, maturity 8/29/08, interest rate @ 3.35%		99,930		99,930	0.2
100,000	4/08	First Choice Cmnty Bank CD, maturity 8/29/08, interest rate @ 3.10%		99,898		99,898	0.2
100,000	2/08	Mercantile Bank CD, maturity 8/29/08, interest rate @ 3.40%		99,938		99,938	0.2
100,000	5/08	Marion Cnty Svgs Bank CD, maturity 9/9/08, interest rate @ 2.85%		99,828		99,828	0.2
100,000	6/08	Bank Baroda CD, maturity 9/9/08, interest rate @ 2.90%		94,804		94,804	0.2
100,000	5/08	GMAC Bank CD, maturity 9/15/08, interest rate @ 2.85%		99,813		99,813	0.2

Page 11 of 44


100,000	5/08	Washington Mutual Bank CD, maturity 9/15/08, interest rate @ 2.75%		99,793		99,793	0.2
100,000	6/08	First Mariner Bank CD, maturity 9/19/08, interest rate @ 2.90%		94,825		94,825	0.2
100,000	6/08	Issaquah Cmnty Bank Wash CD, maturity 9/25/08, interest rate @ 2.90%		94,817		94,817	0.2
100,000	5/08	Sovereign Bank CD, maturity 10/14/08, interest rate @ 3.00%		99,790		99,790	0.2
100,000	5/08	Home Svgs Bank of America CD, maturity 10/15/08, interest rate @ 2.95%		99,774		99,774	0.2
100,000	6/08	FirstBank P R Santurce CD, maturity 10/20/08, interest rate @ 3.00%		94,789		94,789	0.2
100,000	6/08	Fidelity Bank CD, maturity 10/30/08, interest rate @ 3.00%		94,767		94,767	0.2
100,000	6/08	Pacific Comm Bank CD, maturity 10/30/08, interest rate @ 3.05%		94,782		94,782	0.2
100,000	5/08	Beal Bank SSB CD, maturity 11/12/08, interest rate @ 2.90%		99,687		99,687	0.2
100,000	5/08	GE Money Bank CD, maturity 11/13/08, interest rate @ 3.00%		100,000		100,000	0.2
100,000	5/08	New South Fed Svgs Bank CD, maturity 11/14/08, interest rate @ 2.95%		99,701		99,701	0.2
100,000	5/08	Standard Bank & Trust Co CD, maturity 11/14/08, interest rate @ 3.00%		99,719		99,719	0.2
100,000	5/08	Crescent Bank CD, maturity 11/17/08, interest rate @ 3.00%		99,713		99,713	0.2
100,000	5/08	Merchants Bank CD, maturity 11/17/08, interest rate @ 2.85%		99,657		99,657	0.2
100,000	6/08	EuroBank Hato CD, maturity 11/18/08, interest rate @ 3.00%		94,729		94,729	0.2
100,000	6/08	First Chicago Bank & Trust CD, maturity 11/18/08, interest rate @ 3.00%		94,735		94,735	0.2
100,000	5/08	Bank Union CD, maturity 11/21/08, interest rate @ 3.00%		99,715		99,715	0.2
100,000	5/08	Signature Bank of Arkansas CD, maturity 11/21/08, interest rate @ 3.00%		99,715		99,715	0.2
100,000	5/08	GE Capital Finl Inc CD, maturity 12/4/08, interest rate @ 3.00%		95,000		95,000	0.2
100,000	5/08	First Cmnty Bank CD, maturity 12/8/08, interest rate @ 3.00%		94,689		94,689	0.2
100,000	6/08	AmTrust Bank CD, maturity 12/12/08, interest rate @ 3.05%		94,703		94,703	0.2
100,000	6/08	State Bank India CD, maturity 12/12/08, interest rate @ 3.10%		94,724		94,724	0.2
100,000	5/08	First State Bank of Blakely CD, maturity 12/16/08, interest rate @ 3.05%		99,686		99,686	0.2
100,000	5/08	Liberty Bank Inc CD, maturity 12/16/08, interest rate @ 3.00%		99,663		99,663	0.2
100,000	5/08	Nevada Sec Bank CD, maturity 12/22/08, interest rate @ 3.05%		99,666		99,666	0.2

		Total Certificates of Deposit	$	4,032,432	$	4,032,432	8.8	%

		Total Investments in U.S. Treasuries and CDs	$	4,032,432	$	4,032,432	8.8	%

		TOTAL INVESTMENTS	$	91,252,214	$	21,105,032	46.2	%

		Cash and other assets, less liabilities			$	24,529,732	53.8	%

		Net assets at June 30, 2008			$	45,634,764	100.0	%

Page 12 of 44

Notes to Schedule of Investments:

•

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

•

The above investments, with the exception of the U.S. Treasuries and certificates of deposits, are non-income producing. Equity investments that have not paid dividends within the last twelve months are considered non-income producing.

•

The value of all securities for which there is no readily available market value is determined in good faith by the Board of Directors. In making its determination, the Board of Directors has considered valuation appraisals provided by an independent valuation service provider. (See Note 3 to the Notes to the Consolidated Financial Statements.)

•

As of June 30, 2008, 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 or where the Company holds one or more seats on such company’s board of directors.

(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., 22^nd Street of Ybor City, Inc. and Ybor City Group, Inc. UREHI holds 150 equity interests of the total equity interests outstanding of Rosbon LLC and all of the outstanding shares of capital stock of ABM of Tampa Bay, Inc., 22^nd Street 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 warrants to purchase 1,500,000 shares of Oxygen Therapeutics, Inc., formerly Synthetic Blood International, Inc., common stock.

(7)	During the period ended June 30, 2008, the Company reclassified this investment from Affiliate investments to Non-affiliate investments based on the criteria in notes (1) and (2).

(8)	Advanced Medical Isotope Corporation and Manakoa Services Company are related through common management.

(9)	Xethanol Corporation and Metamorphix Global are related though common management.

(10)	Stealth MediaLabs, Inc. and USTelematics, Inc. are related through common management.

See accompanying notes

Page 13 of 44

UTEK Corporation

Consolidated Schedule of Investments

December 31, 2007


Shares	Dates of Acquisition	Non-Affiliate Investments (1)	Original Cost Basis		Value		Percentage of Net Assets
		Advanced Medical Isotope Corporation (12) Medical isotope processes
95,000	9/06	Preferred Stock	$	1,803,417	$	1,750,000	4.0	%
600,000	5/06	Common Stock		63,000		324,000	0.7
478,562	1/06	Broadcast International, Inc. Telecommunications		579,060		1,682,100	3.9
100,000	4/06	Advanced Refractive Technologies, Inc. Ophthalmic technologies Series D Preferred Stock		1,996,176		560,000	1.3
97,000	3/06	Series C Preferred Stock		2,066,063		543,200	1.2
97,000	12/05	Series B Preferred Stock		1,032,675		282,300	0.6
4,000,000	5/06	Common Stock		76,368		400	<0.1
560,000	1/07	MiMedx, Inc. (privately held) Connective tissue technology		—		840,000	1.9
(7)	4/07	Synthetic Blood International, Inc. Biotechnology products		120,000		233,700	0.5
40,000	7/06	Bacterin International, Inc.(privately held) Bioactive coatings for medical devices		120,000		120,000	0.3
60,000	12/05	Metamorphix Global, Inc.(privately held) (13) Design and manufacture of countertops		120,000		90,000	0.2
171,432	10/06-9/07	GammaCan International, Inc. Anti-cancer immunotherapy		83,016		65,100	0.1
264,333	1/07	Ecosphere Technologies, Inc. Defense, homeland security and global ship repair		97,300		47,600	0.1
109,091	7/06	Turbine Truck Engines, Inc. Heavy-duty highway truck engines		72,000		41,500	0.1
269,230	8/06	Protocall Technologies, Inc. On-demand software and entertainment		11,577		31,500	0.1
697,860	8/06-11/06	Magnitude Information Systems, Inc. Computer ergonomics		25,920		27,900	0.1
2,560,000	8/04-11/06	TenthGate, Inc. (8) Healthcare related products and services		40,000		24,200	0.1
180,000	5/06	U.S. Starcom, Inc. Communications services and products		17,181		12,000	<0.1
9,748	4/06-3/07	Xethanol Corporation(13) Bioethanol and derivative products		88,836		5,850	<0.1
825,852	5/06-7/06	MM2 Group, Inc. Financial consulting for nutraceuticals		32,685		5,800	<0.1
1,200,000	10/06	Laserlock Technologies, Inc. Security solutions for the gaming industry		24,100		5,100	<0.1
808,529	12/04	SolarBrook Water and Power Corp. (HydroFlo, Inc.) Treatment and purification of water		125,861		3,900	<0.1
660,000	6/05	BP International, Inc. Shade structures		78,852		3,400	<0.1
1,250,010	5/06	In Veritas Medical Diagnostics, Inc. Medical devices designs and testing		74,400		2,700	<0.1
2,011,765	5/06-6/06	KKS Venture Management, Inc (Rheologics, Inc.) Study of blood viscosity		86,100		1,000	<0.1
66,667	9/05-4/06	Quest Minerals & Mining Corporation Coal and mineral mining		69,044		800	<0.1

Page 14 of 44


85,714	9/05	New Life Scientific, Inc. Pharmaceutical biotechnologies		81,816		600	<0.1
384,000	7/06	aeroTelesis, Inc. Satellite and wireless bandwidth utilization		33,394		600	<0.1
387,097	6/06	Tradequest International, Inc. Provider of voice over internet protocol		76,092		400	<0.1
122,449	1/06	5G Wireless Communications, Inc. Broadband wireless		78,851		200	<0.1
232,211	5/05	Preservation Sciences, Inc. Green technologies and development		—		—	0.0
140,000	3/05	AdAl Group, Inc. (5) Aluminum extruded products manufacturer		72,912		—	0.0
37,500	6/05	Modern Technology Corporation Technology development and acquisition company		82,152		—	0.0
6	5/06-6/06	EFT BioTech Holdings, Inc. (HumWare Media Corp.) Media advertising		14,236		—	0.0
2,482,521	2/06-6/06	UBA Technology, Inc. Software development Common Stock		1,691,419		—	0.0
95,000	4/06	Series A Convertible Preferred Stock		1,619,849		—	0.0
7,787,565	6/05-6/06	Trio Industries Group, Inc. Protective powder coating		12,330,401		—	0.0
		KP Renewables Plc (Kwikpower International Plc) (5) Renewable energy
	5/06	Convertible Debenture, due 5/10/07		4,433,401		—	0.0
	9/05	Convertible Debenture, due 9/30/06		1,884,920		—	0.0
2,500	3/05	Common Stock		94,500		—	0.0
261,234	7/04-7/05	eLinear, Inc. (5) Telecommunication security provider		190,763		—	0.0

		Total Investments in Non-Affiliates	$	31,588,337	$	6,705,850	15.4	%


		Affiliate Investments (2)
20,550,304	9/04–6/07	Material Technologies, Inc. (9) Metal fatigue detection Common Stock	$	4,907,329	$	4,521,100	10.4	%
47,500	1/07	Series E Convertible Preferred Stock		694,640		648,400	1.5
148,000	11/06–1/07	Cyberlux Corporation (9) LED lighting solutions Series C Preferred Stock		2,181,640		1,781,000	4.1
27,981,484	6/06–1/07	Common Stock		537,920		559,600	1.3
100,000	1/06	Emission & Power Solutions, Inc. (Fuel FX International, Inc.) (privately held) Reductional environmental emissions Series B Preferred Stock		2,100,000		840,000	1.9
9,900,717	4/05–4/06	Common Stock		1,980,142		752,500	1.7
3,620,307	5/06–9/07	Avalon Oil and Gas, Inc. Oil and gas producers		2,854,089		868,900	2.0
95,000	1/07	Manakoa Services Corporation(12) Compliance analysis and monitoring Series B Preferred Stock		2,280,000		760,000	1.7
7,799,515	8/04–4/07	Common Stock		2,122,641		58,500	0.1
6,000,000	7/07	Pathway One Plc(5) (9) Sales and development licenses		852,300		719,500	1.6
49,500,000	7/07	MachineTalker, Inc. (9) Intelligent wireless security networks		993,000		668,300	1.5

Page 15 of 44


1,426,754	9/07	USTelematics, Inc. (14) Broadband telecommunication for moving vehicles		—		510,100	1.2
412,000	9/07	NeoStem, Inc. (9) Stem cell banking services		761,440		441,700	1.0
2,040,000	4/06–7/06	CytoDyn, Inc. Development stage biotechnology company Common Stock		3,640,772		118,300	0.3
100,000	1/07	Series A Preferred Stock		845,000		260,000	0.6
6,909,390	9/05–6/07	American Soil Technologies, Inc. (9) Fertilizer innovation		1,622,606		314,400	0.7
4,426,136	7/06	vidShadow.com, Inc. (DME Interactive Holdings, Inc.) Multi-media entertainment		752,443		199,200	0.5
164,495,817	8/06-4/07	Cargo Connection Logistics Holdings, Inc. World trade logistics		1,026,031		172,700	0.4
7,145,000	5/06–8/06	NetFabric Holdings, Inc. Information technology services		607,034		142,900	0.3
461,222,608	5/05-9/05	GS Energy Corporation (INSEQ Corp.) Waste minimization		2,434,783		89,900	0.2
5,462	8/05-8/06	Industrial Biotechnology Corporation (10) Manufactures and markets flavors and fragrances		6,351,998		2,000	<0.1
33,730,000	4/05-1/06	WebSky, Inc. Broadband wireless		897,750		—	0.0
4,221,165	4/01-12/02	Stealth MediaLabs, Inc. (14) Software products		1,708,000		—	0.0
5,346	7/06–9/06	Liberty Diversified Holdings, Inc. Printing and packaging Common Stock		1,245,258		—	0.0
63,981	2/07	Series B Preferred Stock		382,800		—	0.0

		Total Investments in Affiliates	$	43,779,616	$	14,429,000	33.0	%


		Control Investments (3)
1,000	11/99-11/06	UTEK Real Estate Holdings, Inc. (privately held) Real estate development	$	4,131,574	$	3,472,000	7.9	%
16,119,672	9/05–9/07	World Energy Solutions, Inc.(11) Energy saving technologies Common Stock		4,628,449		2,031,100	4.7
(6)	1/06-9/07	UTEK Real Estate Holdings, Inc. (privately held) (Demand note, interest rate @ 5%)		1,965,261		1,965,261	4.5
15,009,402	3/06-5/07	Klegg Electronics, Inc. Manufacturer/distributor for retail electronic products		6,506,174		300,200	0.7

		Total Investments in Control Investments	$	17,231,458	$	7,768,561	17.8	%


		U.S. Treasuries and Certificates of Deposit (4)
		U.S. Treasuries:
500,000	11/07	United States Treasury Bill, maturity 2/07/08, interest rate @ 3.06%	$	498,550	$	498,550	1.1	%

		Total U.S. Treasuries	$	498,550	$	498,550	1.1	%

		Certificates of Deposit:
100,000	8/07	State Bank India CD, maturity 2/22/08, interest rate @ 5.15%	$	99,983	$	99,983	0.2	%
100,000	8/07	Indymac Bank FSB CD, maturity 2/25/08, interest rate @ 5.2%		100,004		100,004	0.2

Page 16 of 44


100,000	8/07	First Nat’l Bank Arizona CD, maturity 2/27/08, interest rate @ 5.15%		99,982		99,982	0.2
100,000	8/07	Charter Bank West CD, maturity 2/29/08, interest rate @ 5.1%		99,975		99,975	0.2
100,000	8/07	Discover Bank CD, maturity 2/29/08, interest rate @ 5.15%		99,982		99,982	0.2
100,000	8/07	Lehman Coml Bank CD, maturity 2/29/08, interest rate @ 5.15%		99,982		99,982	0.2
100,000	8/07	Sterling Savings Bank CD, maturity 3/24/08, interest rate @ 5.1%		99,966		99,966	0.2
100,000	8/07	Capmark Bank CD, maturity 5/22/08, interest rate @ 5.15%		99,986		99,986	0.2
100,000	8/07	Firstcity Bank CD, maturity 5/22/08, interest rate @ 5.1%		99,967		99,967	0.2
100,000	8/07	Provident Bank CD, maturity 5/27/08, interest rate @ 5.1%		99,969		99,969	0.2

		Total Certificates of Deposit	$	999,796	$	999,796	2.3	%

		Total Investments in U.S. Treasuries and CDs	$	1,498,346	$	1,498,346	3.4	%

		TOTAL INVESTMENTS	$	94,097,757	$	30,401,757	69.6	%

		Cash and other assets, less liabilities				13,272,791	30.4	%

		Net assets at December 31, 2007			$	43,674,548	100.0	%

Notes to Schedule of Investments:

•

The above investments, with the exception of the U.S. Treasuries and certificates of deposits and a demand note issued by UTEK Real Estate Holdings, Inc., are non-income producing. Equity investments that have not paid dividends within the last twelve months are considered non-income producing.

•

As of December 31, 2007, 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 or where the Company holds one or more seats on such company’s board of directors.

(3)

(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.

Page 17 of 44

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

(6)	Investment consists of a loan receivable with subsidiaries of UTEK Real Estate Holdings, Inc.

(7)	Investment consists of warrants to purchase 1,500,000 shares of Synthetic Blood International, Inc. common stock.

(8)	During the period ended December 31, 2007, the Company reclassified this investment from Affiliate investments to Non-affiliate investments based on the criteria in notes (1) and (2).

(9)	During the period ended December 31, 2007, the Company reclassified this investment from Non-affiliate investments to Affiliate investments based on the criteria in notes (1) and (2).

(10)	During the period ended December 31, 2007, the Company reclassified this investment from Control investments to Affiliate investments based on the criteria in notes (2) and (3).

(11)	During the period ended December 31, 2007, the Company reclassified this investment from Affiliate investments to Control investments based on the criteria in notes (2) and (3).

(11)	Advanced Medical Isotope Corporation and Manakoa Services Company are related through common management.

(12)	Xethanol Corporation and Metamorphix Global are related though common management.

(13)	Stealth MediaLabs, Inc. and USTelematics, Inc. are related through common management.

See accompanying notes

Page 18 of 44

UTEK Corporation

Notes to Consolidated Financial Statements

Three and Six Months Ended June 30, 2008 and 2007

(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, 2008 and 2007 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 consolidated financial statements not misleading at such dates and for those periods. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and, therefore, do not include all information and notes 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, 2007. Operating results for the three and six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the entire year.

The Company

The Company provides innovation services. The Company’s services enable companies to acquire externally developed technologies from universities and research laboratories worldwide to augment their internal research and development efforts. In addition, UTEK provides services to help companies develop innovation strategies and create value from their intellectual property. One component of a comprehensive innovation program is technology transfer which refers to the process by which new technologies, developed in universities, government research facilities, or similar research settings, are licensed to companies for potential commercial development and use. The Company’s goal is to provide its clients an opportunity to acquire and commercialize innovative technologies primarily developed by universities, medical centers, federal research laboratories and select corporations.

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 strategic objective is to increase net assets by providing innovation services and by effectuating technology transfer transactions with companies pursuant to which we receive securities or cash as compensation for the sale of technology rights.

Innovation and Strategic Consulting

The Company provides strategic innovation consulting services to larger clients to help them become more efficient innovators. The process involves our clients working with a handful of seasoned and experienced professionals capable of unlocking an organization’s capacity for strategy and innovation.

Technology Acquisition Alliance

The Company’s technology acquisition alliance agreements are designed to help our customers enhance their new product pipeline through the acquisition of proprietary technologies primarily from universities, medical centers, corporations and federal research laboratories. The Company may receive cash or unregistered shares of common stock from companies as payment for the services we provide. Technology transfers are completed according to the terms set forth in these agreements with our client 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, corporation or federal research laboratory and then sell this newly formed company to our client for securities or cash. It is our plan that the shares we receive in these exchanges will, in the course of our business, be sold for cash or other assets. A benefit of effectuating technology transfers through our innovation process is that such transactions do not result in a current 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 innovation process without the prior agreement of our client to subsequently acquire such new technology from us.

Page 19 of 44

Patent Analytic Services

UTEK Intellectual Capital Consulting, a division of the Company, uses a team of on-call scientists and industry experts to provide technical and business knowledge to help our clients identify, assess, protect and leverage their intellectual property assets (“IP”). This division helps clients identify the strengths and weaknesses of corporate IP and competitors’ IP. This division also identifies gaps in competitors’ IP portfolios that reveal opportunities to pursue for our clients.

Online Exchanges and Databases

UTEK Information Services is a division that operates a group of subscription-based websites.Pharma Transfer provides a source of research and business development opportunities for the international pharmaceutical market encompassing all areas of pipeline development, from early-stage discovery, through pre-clinical and clinical trials, to registered products that are all available for co-development or licensing.TechEx is an online searchable database for life science discoveries.Knowledge Express is a searchable database of valuable information for licensing professionals, which provides our clients with comprehensive coverage of licensing agreements, corporate profiles, clinical trials, deals, drug pipelines, drug sales, licensable technologies, patents and royalty rates.Pharmalicensing is a biopharmaceutical innovation resource designed for professionals involved with partnering, licensing and business development worldwide. Pharmalicensing affords clients the ability to in-license and out-license intellectual property and also provides partnering services, business development reports, industry news and a jobs source for candidates and employers.TekScout enables companies to outsource unfinished research and development (“R&D”) projects to scientists from around the world. TekScout provides a platform for companies to supplement internal R&D and resources to accelerate product development.

Principles of Consolidation

UTEK Corporation commenced operations in 1997, 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), UTEKip, Ltd. (Israel) and Carmi, Inc. All intercompany transactions and balances are eliminated in consolidation.

Portfolio investments are held for the purpose of deriving investment income and future capital gains. The financial results of the Company’s portfolio companies are not consolidated in the Company’s financial statements.

Business Combinations

We determine and allocate the purchase price of an acquired company to the tangible and intangible assets acquired and liabilities assumed as of the business combination date in accordance with Financial Accounting Standards Board (FASB) Statement No. 141,Business Combinations. The purchase price allocation process requires us to use significant estimates and assumptions, including fair value estimates, as of the business combination date.

While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business combination date, our estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the purchase price allocation period, which is generally one year from the business combination date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, there are contingencies based on earnings included in some of our purchase agreements. The earnout is recorded as it is earned over the contingency period, which is generally one to three years from the business combination date. With the exception of unresolved income tax matters or the earnout of contingent consideration, subsequent to the purchase price allocation period any adjustment to assets acquired or liabilities assumed is included in our operating results in the period in which the adjustment is determined.

Goodwill Impairment

As a result of the Company’s annual impairment analysis, the Company determined that there was an impairment of the goodwill related to the Pharma Transfer acquisition in the first quarter of 2007. The Company recorded a partial impairment of the goodwill for the United States segment in 2007. This resulted in a write-down of approximately $33,000, $21,000 after tax, which is an operating expense in the consolidated statements of operations for the six months ended June 30, 2007. There were no impairments to goodwill during the six months ended June 30, 2008.

Page 20 of 44

Revenue Recognition

Sale of Technology Rights

The Company recognizes revenue from the sale of technology rights upon the exchange of the securities of our newly formed companies for securities in the portfolio company that acquires such newly formed company and the technology held by such newly formed company. The Company records revenue based on the fair value of the consideration received. In most cases, the consideration received for the rights is unregistered shares of common or preferred stock of the portfolio company.

Consulting and Other Services

The Company recognizes strategic consulting revenues in accordance with Statement of Position 81-1,Accounting for Performance of Construction-Type and Certain Production-Type Contracts. Accordingly, revenues on fixed fee contracts are recognized under the percentage-of-completion methods of accounting, whereby contract revenues are recognized on a pro rata basis based upon costs incurred to date compared to total estimated contract costs. In cases where losses are estimated to be incurred upon completion of contracts, the full provision for such losses is charged to operations when they become known. In addition, some of the Company’s contracts provide for substantial contingent fees if future performance milestones are successfully met. Contingent fees are recorded based on the Company’s estimate of the likelihood of reaching future performance milestones.

Technology acquisition alliance services are performed pursuant to service agreements in which UTEK provides consulting services by identifying and evaluating technology acquisition opportunities in exchange for unregistered shares of the portfolio company or cash. These agreements are typically cancelable with thirty days notice.

Revenue from technology acquisition 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 technology acquisition alliance agreements in which the stock is received ratably over the agreement, revenue is recognized as earned. The common stock received as payment is recorded as an investment at fair value. The Company does not currently have any technology acquisition alliance agreement for which payment has been received in stock.

Revenue from the sale of subscriptions to the Company’s websites generally is received in the form of cash and initially is deferred and subsequently recognized ratably over the term of the subscription, which is typically one year.

Earnings per Share (EPS)

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

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


	Three Months Ended		Six Months Ended
	2008	2007	2008	2007
Weighted-average outstanding shares of common stock	9,608,668	8,997,538	9,385,813	8,968,152
Dilutive effect of stock options	—	—	—	—

Common stock and common stock equivalents	9,608,668	8,997,538	9,385,813	8,968,152

Shares excluded from calculation of diluted EPS (1)	760,150	552,025	760,150	552,025

(1)	These shares attributable to outstanding stock options were excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive. These shares would have been anti-dilutive because there was a net decrease in net assets from operations during the period.

Financial Instruments and Concentrations of Credit Risk

The Company’s financial instruments consist of investments, U.S. Treasuries and certificates of deposit, cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. The fair value of trade accounts receivable and payable and certain accrued expenses approximate their carrying amounts in the financial statements due to the short maturity of such instruments. The fair value of U.S. Treasuries and certificates of deposit is recorded based upon their market value. The fair value of all other investments is determined by the Board of Directors as further discussed in Note 3.

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Financial instruments with significant credit risk include investments and cash and cash equivalents. The Company invests its cash and cash equivalents and its U.S. Treasuries and certificates of deposit with high credit quality financial institutions. Certain cash and cash equivalents were in excess of FDIC insurance limits at June 30, 2008. The Company has not experienced any losses on such accounts.

The Company had three major customers during each of the three and six months ended 2008, two major customers during the three months ended June 30, 2007 and three major customers during the six months ended June 30, 2007. Major customers, those generating greater than 10% of total income from operations, accounted for approximately 51% and 82% of the Company’s sales during the three months ended June 30, 2008 and 2007, respectively. Major customers accounted for approximately 42% and 60% of the Company’s sales during the six months ended June 30, 2008 and 2007, respectively. Major customers accounted for approximately 53% of accounts receivable at June 30, 2008.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that could affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The most significant estimates relate to the fair value of the investments and the purchase price allocation process for business combinations. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157,Fair Value Measurementsas it relates to financial assets and liabilities recognized or disclosed on a recurring basis. The effective date of this Statement for non-financial assets and liabilities that are not recognized or disclosed on a recurring basis has been delayed to fiscal years beginning after November 15, 2008. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The adoption of the effective portion of SFAS No. 157 expanded the Company’s disclosures regarding the fair value measurements of its investments.

Effective January 1, 2008, the Company adopted SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115. SFAS No. 159 expands the use of fair value measurement by permitting entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The Company’s most significant financial instruments are its investments, which are currently carried at fair value. The Company did not elect the fair value option under SFAS No. 159 for any other of its financial assets or liabilities.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 requires additional disclosures related to the use of derivative instruments, the accounting for derivatives and the financial statement impact of derivatives. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. The adoption of SFAS No. 161 will not impact the Company’s consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3,Determination of the Useful Life of Intangible Assets. FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142,Goodwill and Other Intangible Assets. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited. The Company is currently evaluating the impact of the pending adoption of FSP FAS 142-3 on our consolidated financial statements.

2. Stock-Based Compensation

The Company had two stock-based equity compensation plans at June 30, 2008. See Note 8 of our consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2007. In June 2008, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Employee Stock Option Plan to increase the number of shares of common stock authorized for issuance under the Plan by 600,000 options.

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% stockholder, 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 to seven years from the date of grant. During the three and six months ended June 30, 2008, respectively, we granted 197,000 and 224,000 options to purchase shares of

Page 22 of 44

common stock. During the three and six months ended June 30, 2007, respectively, we granted 48,000 and 182,000 options to purchase shares of common stock. At June 30, 2008, there were 2,300,000 shares authorized for issuance and the Company had 910,063 shares available for future stock option grants under existing plans.

The Company accounts for stock option grants in accordance with the provisions of SFAS No. 123(R),Share-Based Payment. Under the modified prospective approach of SFAS 123(R), compensation cost recognized during the six months ended June 30, 2008 and 2007 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R).

The Company recorded approximately $186,000 and $171,000 for the three months ended June 31, 2008 and 2007, respectively, and $358,000 and $278,000 for the six months ended June 31, 2008 and 2007, respectively, in compensation expense related to share-based payments pursuant to SFAS 123(R). Stock-based compensation expense is included in salaries and wages in the accompanying consolidated statements of operations.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date of grant. The assumptions employed in the calculation of the fair value of stock-based compensation expense for the three and six months ended June 30, 2008 and 2007 were determined as follows:

•

Expected dividend yield — based on the Company’s historical dividend yield.

•

Expected volatility — based on the Company’s historical market price at consistent points in a period equal to the expected life of the options.

•

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

•

Expected life of options — 2008: based on the Company’s historical life of options exercised; 2007: calculated using the simplified method as prescribed in Staff Accounting Bulletin No. 107, where the expected life is equal to the sum of the vesting period and the contractual term divided by two.

The weighted-average input assumptions used and resulting fair values were as follows during the six months ended June 30, 2008 and 2007.


	2008			2007
Expected dividend yield		0	%		0.25	%
Expected volatility		34.95	%		37.51	%
Risk-free interest rate		2.59	%		4.49	%
Expected life		4.00 years			3.78 years
Weighted-average grant date fair value	$	3.28		$	4.58

Net cash proceeds from the exercise of stock options were approximately $190,000 and $523,000 for the six months ended June 30, 2008 and 2007, respectively. At June 30, 2008, there was approximately $2,025,000 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted-average period of 3.2 years.

The following table represents stock option activity as of and for the six months ended June 30, 2008:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Options Outstanding – January 1, 2008	652,025		$	14.08	3.25 years	$	451,000
Granted	224,000			10.54
Exercised	(31,015	)		6.12		$	129,000
Forfeited/expired/cancelled	(84,860	)		12.74

Options Outstanding – June 30, 2008	760,150		$	13.51	3.58 years	$	—

Outstanding Exercisable – June 30, 2008	240,114		$	15.00	2.22 years	$	—

The total grant date fair value of options vested during the six months ended June 30, 2008 and 2007 was $220,000 and $117,000, respectively.

Page 23 of 44

3. Investments

Pursuant to the requirements of the 1940 Act, our Board of Directors is responsible for determining, in good faith, the fair value of our securities and assets for which market quotations are not readily available. In making its determination, the Board of Directors has utilized valuation appraisals provided by an independent valuation service provider for each equity stake in our portfolio. With respect to equity securities in privately–owned companies, each investment is valued using industry valuation benchmarks, and then the value is assigned a discount reflecting the illiquid nature of the investment, as well as our minority, non-control position. When an external event such as a purchase transaction, public offering, or subsequent equity sale occurs, the pricing indicated by the external event is used to corroborate our private equity valuation. Equity securities in public companies that carry certain restrictions on resale are generally valued at a discount from the market value of the securities as quoted on the national securities exchange or the OTC Bulletin Board.

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

Without a readily available market value, the value of our portfolio of securities may differ significantly from the values that would be placed on the portfolio if there existed a ready market for such securities, and the differences could be material. Substantially all of the Company’s investments owned at June 30, 2008 and December 31, 2007 are stated at fair value as determined by the Board of Directors, in the absence of readily available fair values. The Company uses the first-in, first-out (FIFO) method of accounting for sales of its investments.

Shares of stock received by portfolio companies in exchange for both strategic alliance services and technology transfer transactions are recorded at fair value on the day that the transactions are executed. The fair value of such shares is recorded as revenue in our statements of operations and as the cost of such shares in our statements of assets and liabilities. The certificates are received subsequent to the transaction date.

The Company values substantially all of its investments at fair value as determined in good faith by the Board of Directors in accordance with the Company’s valuation policy and the provisions of the Investment Company Act of 1940 and SFAS No. 157. SFAS No. 157 establishes a fair value hierarchy that encourages and is based on the use of observable inputs, but allows for unobservable inputs when observable inputs do not exist. Inputs are classified into one of three categories:

•

Level 1—Quoted prices (unadjusted) in active markets for identical assets

•

Level 2—Inputs other than quoted prices that are observable to the market participant for the asset or quoted prices in a market that is not active

•

Level 3—Unobservable inputs

When there are multiple inputs for determining the fair value of an investment, the Company classifies the investment in total based on the lowest level input that is significant to the fair value measurement.

Assets measured at fair value on a recurring basis by level within the fair value hierarchy at June 30, 2008, were as follows:


			Fair Value Measurements at Reporting Date Using
Description	Fair Value at 6/30/08		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments	$	21,105,032	$	—	$	21,105,032	$	—

In May 2008, the Company received repayment of its entire loan receivable held with certain subsidiaries of UTEK Real Estate Holdings, Inc. This loan receivable was previously included in the Company’s investment portfolio at December 31, 2007. This repayment resulted in additional cash inflows of $2 million during the second quarter of 2008.

Page 24 of 44

Technology Transfers:

All of our technology transfers are generally completed as set forth in our technology acquisition alliance service agreements with our clients. During the six months ended June 30, 2008, the Company completed the following 6 technology transfers:


Date	Name of Company Acquiring the Newly Formed Company	Newly Formed Company	Consideration – Unregistered Shares or Cash*			Price per Share (1)
January 28	RIM Semiconductor Company	Broadband Distance Systems, Inc.		60,000,000		$	0.015
February 25	Artilium Plc		$	125,000 cash	(2)
March 24	RIM Semiconductor Company	Multi-Carrier Communications, Inc.		150,000,000			0.006
March 31	Platina Energy Group Inc.	Enhanced Oil Recovery Technologies, Inc.		92,000 preferred	(3)		8.640
June 10	World Energy Solutions, Inc.	Advanced Alternative Energy, Inc.		100,000 preferred	(4)		8.7500
June 26	CSMG Technologies, Inc.	Carbon Capture Technologies, Inc.		371,020			.936

*	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)	Represents a technology transfer assistance fee we received for assisting Artilium Plc with an acquisition.

(3)	Preferred F shares convertible into common shares based on a value of $1,324,800.

(4)	Preferred B shares convertible into common shares based on a value of $3,500,000.

During the six months ended June 30, 2007, the Company completed the following 11 technology transfers:


Date	Name of Company Acquiring the Newly Formed Company	Newly Formed Company	Consideration – Unregistered Shares or Cash*			Price per Share (1)
January 4	Manakoa Services Corporation	Infinite Identification Technologies, Inc.		95,000 preferred	(2)	$	24.000
January 11	Cyberlux Corporation	Hybrid Lighting Technologies, Inc.		50,000 preferred 26,500,000 common	(3)		11.530 0.020
January 30	CytoDyn, Inc.	Advanced Genetic Technologies, Inc.		100,000 preferred	(4)		8.450
January 31	Material Technologies, Inc.	Stress Analysis Technologies, Inc.		47,500 preferred	(5)		14.620
February 12	Liberty Diversified Holdings, Inc.	Sero Tonin Solutions, Inc.		63,981 preferred	(6)		6.000
March 12	Metamorphix Global, Inc.	Flex Crete Technologies, Inc.	$	200,000 cash			—
March 12	Klegg Electronics, Inc.	Tempo Control Technologies, Inc.		10,901,250			0.040
March 28	Avalon Oil & Gas, Inc.	Leak Location Technologies, Inc.		34,875,000			0.020
April 30	Material Technologies, Inc.	Damage Assessment Technologies, Inc.		7,125,000			0.215
May 30	Klegg Electronics, Inc.	Klegg Network Storage Technologies, Inc.		8,550,000			0.255
June 28	Material Technologies, Inc.	Non-Destructive Assessment Technologies, Inc.		6,412,500			0.240

*	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 A shares convertible into common shares based on a value of $3.8 million.

(3)	Preferred C shares convertible into common shares based on a value of $768,500.

(4)	Preferred A shares convertible into common shares based on a value of $1.3 million.

(5)	Preferred E shares convertible into common shares based on a value of $926,250.

(6)	Preferred D shares convertible into common shares based on a value of $638,000.

4. Acquisitions

Strategos, Inc.

On April 17, 2008, UTEK purchased all of the shares of Carmi, Inc., a 100% owned subsidiary of Strategos, Inc., wherein Carmi, Inc. became a division of UTEK. Carmi, Inc. is the U.S. operating unit of Strategos, Inc. and is referred to as “Strategos” throughout this 10-Q. We acquired Strategos primarily to expand our strategic innovation consulting services. We have included the financial results of Strategos from the date of acquisition in our consolidated financial statements as of June 30, 2008.

Page 25 of 44

Preliminary Purchase Price

Strategos was acquired for potentially 1,248,960 shares of UTEK unregistered common stock valued at $15 million as of such date. Under the terms of the acquisition agreement, Strategos stockholders were entitled to 502,970 shares of UTEK unregistered common stock valued at approximately $6,041,000 as of the acquisition date. In addition, Strategos stockholders are eligible to receive an additional 745,990 shares of UTEK unregistered common stock, which are being held in escrow, pursuant to meeting specific revenue targets for 2008 and 2009 (“contingency shares”). The Company recorded a contingent liability of approximately $1,952,000 with respect to the contingency shares, which reflected the amount of the fair value of the assets acquired in excess of the cost. When the contingency is resolved and the consideration is issued or becomes issuable, any excess of the fair value of the contingent consideration issued or issuable over the amount that was recognized as if it was a liability will be recognized as an additional cost of the acquisition. As of June 30, 2008, 137,046 contingency shares, with a value of approximately $1,646,000, were issued and earned and were recognized as an additional cost of the acquisition. This also resulted in a reduction of the contingent liability, the balance of which approximated $306,000 as of June 30, 2008.

Preliminary Purchase Price Allocation

Pursuant to our business combinations accounting policy, the total purchase price for Strategos was allocated to the net tangible assets and intangible assets acquired based upon their estimated fair values as of April 17, 2008, as set forth below. The excess of the net tangible assets and intangible assets acquired over the purchase price resulted in a contingent liability. The preliminary allocation of the purchase price was based upon the preliminary purchase price, which is subject to change based on the earnout of the contingency shares through December 2009. Our preliminary purchase price allocation as of June 30, 2008 is as follows:


Cash and cash equivalents	$	678,980
Accounts receivable		2,189,305
Other tangible assets		91,098
Intangible assets		6,380,000
Goodwill		2,400,000
Accounts payable and other liabilities		(1,262,512	)
Deferred revenues		(83,861	)
Contingent liability		(306,418	)
Deferred tax liability		(2,400,000	)

Total preliminary purchase price allocation	$	7,686,592

Intangible Assets

The following table sets forth the preliminary components of intangible assets associated with the Strategos acquisition:


	Preliminary Fair Value		Useful Life
	Preliminary Fair Value		Useful Life
Trade names/Trademarks/Websites	$	1,620,000	Indefinite
Proprietary processes/know-how		1,970,000	6 years
DiscoverySpace software platform		120,000	8 years
Non-compete agreements		240,000	4 years
Customer list		2,430,000	7 years

Total intangible assets	$	6,380,000

Other 2008 Acquisitions

On December 20, 2007, the Company entered into a Stock Purchase Agreement with Partnering Intelligence Limited and Bridgehead International Limited to acquire Pharmalicensing Limited (“Pharmalicensing”). The transaction closed and became effective on January 3, 2008, at which time the Company issued 153,967 shares of unregistered UTEK common stock, valued at $2,150,000, to Partnering Intelligence in consideration for all of the shares of Pharmalicensing owned by Partnering Intelligence. The value of the shares was based on the average ten-day closing price prior to execution of the stock purchase agreement. The shares acquired represent 100% of the issued and outstanding shares of Pharmalicensing. The Company acquired the shares of Pharmalicensing through its subsidiary UTEK Europe, Ltd. Transfer of the 153,967 shares of UTEK common stock is restricted for twelve months following the completion of the transaction.

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A summary of the Pharmalicensing acquisition is as follows:


Fair value of UTEK stock issued	$	2,150,000
Tangible assets acquired		149,168
Intangible assets acquired		858,386
Goodwill acquired		1,526,643
Accounts payable and other liabilities assumed		(384,197	)

Unaudited Pro Forma Financial Information

The unaudited financial information in the table below summarizes the combined results of operations of Strategos and Pharmalicensing acquired during fiscal 2008, on a pro forma basis, as though the companies had been combined as of the beginning of fiscal 2007. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of each of the periods presented. The pro forma financial information for all periods presented also includes the business combination accounting effects on the historical companies’ operating results including the depreciation and amortization expenses from acquired fixed assets and intangible assets, respectively, and related tax effects as though the companies had been combined as of the beginning of fiscal 2007.

The unaudited pro forma financial information for the six months ended June 30, 2008 combines the historical results of UTEK for the six months ended June 30, 2008 and the historical results of Strategos and Pharmalicensing for the six months ended June 30, 2008, and the pro forma adjustments discussed above. The unaudited pro forma financial information for the six months ended June 30, 2007 combines the historical results of UTEK for the six months ended June 30, 2007 and the historical results of Strategos and Pharmalicensing for the six months ended June 30, 2007, and the pro forma adjustments discussed above.


	Six Months Ended June 30,
	2008			2007
Total income from operations	$	11,426,501		$	20,013,858
Net decrease in net assets from operations	$	(8,267,282	)	$	(5,853,085	)
Basic net loss per share	$	(0.88	)	$	(0.65	)
Diluted net loss per share	$	(0.88	)	$	(0.65	)

5. Intangible Assets and Goodwill

The changes in intangible assets for the six months ended June 30, 2008 were as follows:


	Balances Dec 31, 2007			Additions			Balances June 30, 2008			Weighted Average Useful life
Trade names/trademarks/websites	$	293,095		$	2,083,726		$	2,376,821		(1	)
Proprietary processes/know-how		—			1,970,000			1,970,000		6 years
Software platform		—			120,000			120,000		8 years
Non-compete agreements		—			240,000			240,000		4 years
Customer list		80,000			2,824,660			2,904,660		7 years

		373,095			7,238,386			7,611,481
Currency exchange		—			7,600			7,600

Less: Accumulated amortization		(249,283	)		(191,875	)		(441,158	)

	$	123,812		$	7,054,111		$	7,177,923

(1)	The weighted average useful life for $756,821 of the trade names/trademarks/websites is 6 years and the remaining $1,620,000 has a weighted average useful life that is indefinite. Indefinite lived intangible assets are not amortized for GAAP purposes.

Page 27 of 44

Total amortization expense related to our intangible assets was approximately $192,000 and $36,000 for the six months ended 2008 and 2007, respectively. The estimated aggregate amortization expense related to our intangible assets is as follows:


For the twelve months ending June 30,
2009	$	999,068
2010		921,057
2011		882,540
2012		870,040
2013		822,540
Thereafter		1,055,078

Total	$	5,550,323

The changes in the carrying amount of goodwill, which is generally not deductible for tax purposes, by reporting unit for the six months ended June 30, 2008 were as follows:


	Balances Dec 31, 2007		Additions		Balances June 30, 2008
Knowledge Express purchase	$	1,437,000	$	—	$	1,437,000
Pharma-Transfer purchase		372,000		—		372,000
EKMS purchase		426,869		—		426,869
UTEK-Europe purchase		562,501		—		562,501
Pharmalicensing purchase		—		1,526,643		1,526,643
Strategos purchase		—		2,400,000		2,400,000

		2,798,370		3,926,643		6,725,013
Currency exchange		22,694		12,682		35,376

	$	2,821,064	$	3,939,325	$	6,760,389

6. Stockholders’ Equity

Transactions in common stock for the six months ended June 30, 2008, were as follows:


Common Stock	Shares Issued	Shares Outstanding	Par Value		Paid-In Capital
Balance at December 31, 2007	9,011,276	9,011,276	$	90,114	$	53,148,643
Employee stock options exercised	31,015	31,015		310		189,485
Share-based compensation expense	—	—		—		358,439
Acquisition of Pharmalicensing	153,967	153,967		1,540		2,148,460
Acquisition of Strategos	1,248,960	502,970		5,030		6,035,640
Strategos earnout accrual	—	137,046		1,370		1,644,552

Balance at June 30, 2008	10,445,218	9,836,274	$	98,364	$	63,525,219

See Note 2 for further information on share-based compensation expense and employee stock options exercised. See Note 4 for further information on acquisitions and the earnout accrual.

7. Commitments and Contingencies

Employment Agreements:

On March 10, 2008, UTEK Corporation entered into a one year employment agreement, effective January 1, 2008, with its Chief Executive Officer, Clifford M. Gross, Ph.D. Under the terms of the employment agreement, Dr. Gross will receive a base salary of $550,000 per year and for each annual period thereafter. In addition to his base salary, Dr. Gross will be entitled to:

•

A reasonable automobile allowance to cover the cost of leasing, insuring and maintaining a vehicle for the duration of the employment agreement and

•

Participate in UTEK’s executive officer health insurance program. UTEK will pay all of the premiums related to Dr. Gross’ participation in such program.

Page 28 of 44

The employment agreement provides that if (i) Dr. Gross is terminated or requested or forced to resign during the term of the employment agreement, (ii) the employment agreement is not renewed at the end of its term by either party or (iii) UTEK terminates Dr. Gross’s employment for cause or in any way that is a breach of the employment agreement, then Dr. Gross shall receive a severance payment equal to the number of years Dr. Gross has worked for us times $100,000 per year, “grossed-up” to cover any tax liability on such severance payment. In addition, all stock options held by Dr. Gross accelerate and become immediately vested, and we will be obligated to file a registration statement with the SEC to register any of our unregistered securities held by Dr. Gross.

The employment agreement also provides that in the event of a “change of control,” Dr. Gross will be entitled to receive a one-time bonus equal to twice his annual salary, “grossed-up” to cover any tax liability on such bonus. In addition, all stock options held by Dr. Gross accelerate and become immediately vested upon a change of control, and we will be obligated to file a registration statement with the SEC to register any of our unregistered securities held by Dr. Gross. A “change of control” occurs, as defined in the employment agreement, when: (i) a person or group becomes the beneficial owner of more than 30% of our outstanding securities; (ii) at any time that the board nominated slate of directors is not elected; (iii) we consummate a merger in which we are not the surviving entity; or (iv) substantially all of our assets are sold or our stockholders approve our dissolution or liquidation.

The employment agreement obligates us to nominate Dr. Gross to serve as a member of our Board of Directors during the term of the employment agreement.

In consideration of the benefits provided under the employment agreement, Dr. Gross has agreed to protect UTEK’s confidential or secret information and, during the period of employment and one year thereafter, to not compete with UTEK.

Strategos Bonus Plan:

In connection with the acquisition of Strategos, the Company implemented the Strategos Bonus Plan for qualifying Strategos division employees. The award pool is determined from eligible earnings and aggregate revenues and is limited to the extent required to permit Strategos to maintain sufficient operating cash. Awards are to be paid out by December 15^th of each year and are accrued on a quarterly basis. Approximately 85% to 90% of Strategos net income will be paid out in connection with this bonus plan. The Company accrued $2,077,000 in connection with the Bonus Plan as of June 30, 2008.

Other:

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.

In May 2008, we obtained a $1,000,000 line of credit with the Bank of Tampa. The advances on the line of credit accrue interest (payable monthly) at prime (5.00% as of June 30, 2008). The principal and any unpaid interest are due upon demand. This line is collateralized with commercial real estate owned by UTEK Real Estate Holdings, Inc. There are no borrowings on this line at June 30, 2008.

8. Segment Reporting

The Company’s principal area of activity is providing technology transfer services and supporting innovation consulting 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 our wholly owned subsidiary UTEKip, Ltd., and the United States segment includes UTEK Corporation. UTEKip was dissolved in the second quarter of 2008 and all operations of that segment are currently being serviced by the U.S. segment.

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


	United Kingdom		Israel		United States		Total
Long-lived assets June 30, 2008	$	2,969,209	$	-0-	$	11,472,568	$	14,441,777
Total assets June 30, 2008		3,200,042		-0-		47,382,134		50,582,176
Long-lived assets December 31, 2007		589,406		13,621		2,818,427		3,421,454
Total assets December 31, 2007		681,140		39,317		44,500,620		45,221,077

Page 29 of 44


	For the Three Months Ended June 30, 2008
	United Kingdom			Israel			United States			Total
Revenues	$	238,390		$	(3,665	)	$	4,694,893		$	4,929,618
Income (loss) before income taxes		(60,813	)		750,918	(1)		(1,448,672	)		(758,567	)
Depreciation and amortization		46,103			2,082			147,168			195,353

	For the Three Months Ended June 30, 2007
	United Kingdom			Israel			United States			Total
Revenues	$	22,603		$	48,674		$	6,317,172		$	6,388,449
Income (loss) before income taxes		(21,693	)		(13,657	)		3,230,629			3,195,279
Depreciation and amortization		415			1,520			52,391			54,326

	For the Six Months Ended June 30, 2008
	United Kingdom			Israel			United States			Total
Revenues	$	482,876		$	8,638		$	8,103,670		$	8,595,184
Income (loss) before income taxes		(96,061	)		634,433	(1)		(1,802,688	)		(1,264,316	)
Depreciation and amortization		72,288			2,750			195,856			270,894

	For the Six Months Ended June 30, 2007
	United Kingdom			Israel			United States			Total
Revenues	$	112,251		$	88,843		$	14,135,126		$	14,336,220
Income (loss) before income taxes		(74,364	)		(54,118	)		7,180,147	(2)		7,051,665
Depreciation and amortization		821			3,105			105,542			109,468

(1)	During the three and six months ended June 30, 2008, we dissolved UTEKip, which resulted in a gain for the Israel segment and an offsetting loss for the U.S. segment of approximately $753,000. We dissolved UTEKip with the transfer of operations to the U.S. segment.

(2)	During the six months ended June 30, 2007, the United States segment recorded goodwill impairment for Pharma Transfer of $33,030, which is included in that segment’s loss for the period.

The Company has recently changed the way it classifies and records its revenues and certain expenses to provide additional information for management. This change was as a result of the Company’s new products and services from the addition of TekScout and the acquisitions of Pharmalicensing and Strategos. Consequently, the Company has new product segments for which certain information can be reported. These new product segments include: technology transfer business; Innovation consulting comprised of the Strategos business; subscription services comprised of the Company’s information services business; and all other consulting services comprised of Intellectual Capital Consulting, technology alliance services, and the TekScout business. The administrative and other column represents miscellaneous and other income items and general and administrative type expenses that are not allocated amongst the different businesses. Management does not analyze assets or long-lived assets for decision making purposes as it relates to the segments below. Accordingly, information is not available for long-lived assets or total assets.

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


	For the Three Months Ended June 30, 2008
	Tech Transfers		Innovation Consulting		Subscription Services			All Other Consulting			Administrative and Other			Total
Income from operations (revenue)	$	1,222,300	$	2,760,909	$	537,104		$	369,273		$	40,032		$	4,929,618
Net income (loss) from operations		654,776		275,963		(86,717	)		(115,612	)		(1,269,300	)		(540,890	)


	For the Six Months Ended June 30, 2008
	Tech Transfers		Innovation Consulting		Subscription Services			All Other Consulting			Administrative and Other			Total
Income from operations (revenue)	$	3,934,680	$	2,760,909	$	1,065,146		$	709,349		$	125,100		$	8,595,184
Net income (loss) from operations		1,868,066		275,963		(95,006	)		(388,378	)		(2,579,933	)		(919,288	)

9. Related Party Transactions

During the six months ended June 30, 2008 and 2007, we loaned funds for operations and real estate improvements of approximately $0 and $703,000, respectively, to certain subsidiaries of UTEK Real Estate Holdings, Inc., one of UTEK’s portfolio companies. The entire outstanding loan balance of approximately $2 million was repaid to the Company in May 2008. In addition, we paid rent of approximately $127,000 and $119,000 to Ybor City Group, Inc., a subsidiary of UTEK Real Estate Holdings, Inc., during the six months ended June 30, 2008 and 2007, respectively.

10. Subsequent Events

On July 3, 2008, pursuant to a stock purchase agreement the Company purchased 100% of Innovaro Limited (“Innovaro”), a company incorporated in the United Kingdom and Wales. Innovaro was acquired for potentially 691,714 shares of UTEK Corporation unregistered common stock valued at $7.4 million as of such date. The number of shares is based on the average ten-day closing price prior to execution of the stock purchase agreement. Under the terms of the agreement, Innovaro stockholders received one half, or 345,857, of the UTEK shares worth $3.7 million at closing. Transfer of the 345,857 UTEK unregistered shares is restricted for at least 12 months following the close of the transaction. The remaining UTEK shares are held in escrow, to be released in three installments, 12, 24 and 36 months after closing. Delivery of the escrowed shares to Innovaro is dependent on the achievement of specific revenue targets for 2008, 2009 and 2010. If such targets are not met, a portion of the escrowed shares will be returned to UTEK. The cost of these contingent shares will be accounted for as an additional element of the purchase price when and if the shares are earned.

The Company disclosed herein all information regarding this acquisition that was practicable as of the date of this filing given the time constraints.

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ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements regarding the plans and objectives of management for future operations. These forward-looking statements may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that the projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.

Overview

Recent Developments

In 2008, the Company continued to enhance its ability to provide a comprehensive innovation consulting service for clients. To enhance our ability to provide these services, the Company has acquired three companies since January 2008 and has launched the TekScout division. We believe that collectively, these efforts have increased the Company’s ability to service its clients. In subsequent periods it is our intention to pursue additional strategic acquisitions to further enhance our innovation capabilities, the number of clients we can service and our geographic representation.

In January 2008, the Company acquired Pharmalicensing.com, a biopharmaceutical open innovation resource designed for professionals involved with partnering, licensing, and business development worldwide. In April 2008, the Company acquired the operating division of Strategos, Inc., a strategic innovation consulting firm that provides consulting services, primarily to large companies. In July 2008, the Company acquired Innovaro Limited, a European innovation consulting and insight firm.

Executive Summary

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. Substantially all of our investments are 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.

Our total assets were $50.6 million and our net assets were $45.6 million at June 30, 2008, compared to $45.2 million and $43.7 million at December 31, 2007, respectively. Net asset value per share was $4.64 at June 30, 2008 and $4.85 at December 31, 2007. At June 30, 2008, we had no long-term debt outstanding, $3.5 million in cash and cash equivalents and investments in U.S. treasuries and certificates of deposit of $4.0 million.

Income from operations for the six months ended June 30, 2008 totaled approximately $8.6 million, as compared to $14.3 million for the six months ended June 30, 2007. Net income (loss) from operations for the six months ended June 30, 2008 totaled approximately ($919,000) as compared to $4.2 million for the same period of 2007. Net realized losses on investments, net of deferred tax effect, totaled approximately ($3.5 million) for the six months ended June 30, 2008 as compared to ($1.1 million) for the same period of 2007. In this regard, we received gross proceeds of $1.7 million for the six months ended June 30, 2008 and $821,000 for the same period of 2007 in connection with the sale of the securities we received in connection with our technology acquisition alliance agreements and technology transfers. Net change in unrealized depreciation of investments, net of deferred tax benefit, was ($4.0 million) for the six months ended June 30, 2008 as compared to ($7.0 million) for the same period of 2007.

Technology Transfers and Technology Acquisition Alliances

For the six months ended June 30, 2008, we had a slight increase in the number and diversity of active technology acquisition alliance clients, but due to the longer time required to close technology transfers with our expanding client base of larger client companies, the number of completed technology transfers decreased:

•

As of June 30, 2008, we had 58 active technology acquisition alliance agreements as compared to 56 active technology acquisition alliances at June 30, 2007; and

Page 31 of 44

•

During the six months ended June 30, 2008, we completed 6 technology transfers valued at approximately $3.9 million as compared to 11 technology transfers valued at approximately $11.9 million in the same period of 2007.

Portfolio Activity

The following is a list of significant changes in our portfolio during the six months ended June 30, 2008:

•

The sale of some or all of our shares in Broadcast International, Inc., Material Technologies, Inc., Cyberlux Corporation, Avalon Oil and Gas, Inc., American Soil Technologies, Inc. and various other portfolio companies for approximately $1.7 million, which resulted in realized losses of $3.5 million (net of income tax effect);

•

The completion of 6 technology transfers for stock valued at approximately $3.8 million and $125,000 in cash; and

•

Net unrealized depreciation of $4.0 million (net of income tax effect) in the fair value of our investments.

Our most significant portfolio investments at June 30, 2008 were in UTEK Real Estate Holdings, Inc., Advanced Medical Isotope Corporation, World Energy Solutions, Inc., MiMedx Group, Inc. and Cyberlux Corporation. These five investments totaled $10.6 million in fair value and represented 50% of our investments and 23% of net assets at June 30, 2008.

Our capital investments made in our newly formed companies during the six months ended June 30, 2008 totaled $1.5 million. Of the total capital invested in our newly formed companies during the six months ended June 30, 2008, $280,000 was expended on license and consulting fees and $1.2 million was to assist our clients in commercializing their new technology. All of these items are reflected in the accompanying consolidated statement of operations as acquisition of technology rights.

The net unrealized depreciation for the six months ended June 30, 2008 was primarily due to a reduction in value of the following investments in our portfolio: Material Technologies, Inc., Emission & Power Solutions, Inc., Manakoa Services Corp., Pathway One PLC, RIM Semiconductor Company and World Energy Solutions, Inc.; partially offset by the appreciation of MiMedx Group, Inc., Oxygen Biotherapeutic, Inc., EcoSystem Corporation (GS Energy Corporation) and Industrial Biotechnology Corporation.

While these unrealized losses were significant, failures among small cap companies are not unexpected and may occur in the future. The current portfolio is comprised of 51 holdings. Many of these positions are in small capitalization companies, which over time may have high failure rates due to a variety of factors. For clients that fail, UTEK may lose the entire amount of its capital spent acquiring and transferring the technology to them.

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.

Results of Operations

Income from Operations (Revenue)


	Three months ended June 30,				Percentage Change		Six months ended June 30,				Percentage Change
(in thousands, except percentages)	2008		2007				2008		2007
Sale of Technology Rights	$	1,222	$	5,213	(77	)%	$	3,935	$	11,915	(67	)%
Consulting and Other Services		3,673		1,022	259	%		4,541		2,069	120	%
Other Income, net		35		153	(77	)%		119		352	(66	)%

Income from Operations	$	4,930	$	6,388	(23	)%	$	8,595	$	14,336	(40	)%

Sale of Technology Rights

Sale of technology rights revenue for the three months ended June 30, 2008 decreased as a result of our having completed two technology transfers during the three months ended June 30, 2008 as compared to three during the three months ended June 30, 2007. Sale of technology rights revenue decreased for the six months ended June 30, 2008 as a result of having completed six technology transfers in 2008 versus eleven in 2007. In addition, the average revenue per technology transfer decreased 65% and 39%, respectively, for the three and six months ended June 30, 2008 versus 2007. Overall equity market conditions have generally forced micro-capitalization stock prices down, making it more difficult for some of our clients to issue stock with sufficient value in exchange for these technologies. To mitigate risk, the Company is pursuing technology transfers on a more selective basis.

Page 32 of 44

Consulting and Other Services


	Three Months Ended June 30,
(in thousands)	2008		2007
Innovation consulting	$	2,761	$	—	New acquisition
UTEK existing		256		471	Change in TAA pricing structure
ICC intellectual capital consulting		116		243	Management changes
Subscriptions (IS)		540		308	Purchase of Pharmalicensing

Total		3,673		1,022


	Six Months Ended June 30,
(in thousands)	2008		2007
Innovation consulting	$	2,761	$	—	New acquisition
UTEK existing		566		1,001	Change in TAA pricing structure
ICC intellectual capital consulting		146		441	Management changes
Subscriptions (IS)		1,068		627	Purchase of Pharmalicensing

Total		4,541		2,069

As a result of our focus on innovation consulting services, our consulting and other services revenue was $3.7 million for the three months ended June 30, 2008 versus $1.0 million for the three months ended June 30, 2007. Similarly, our consulting and other services revenue was $4.5 million for the six months ended June 30, 2008 versus $2.1 million for the six months ended June 30, 2007. The increase is attributable to the acquisition of Strategos. In subsequent periods it is our intention to pursue additional strategic acquisitions which will continue to increase the consulting and other services revenue and enhance our ability to better service the innovation needs of our clients.

Investment Income, net

Investment income decreased in 2008 compared to 2007 due to lower cash and cash equivalent balances and lower interest rates. Interest income is expected to continue to decline as a result of these factors.

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

Expenses:

Acquisition of Technology Rights


	Three months ended June 30,						Percentage Change		Six months ended June 30,						Percentage Change
(In thousands, except percentages)	2008			2007					2008			2007
Acquisition of technology rights	$	296		$	1,030		(71	)%	$	1,480		$	2,333		(37	)%
As a percent of sale of technology rights		24	%		20	%	4	ppt		38	%		20	%	18	Ppt

*	The abbreviation “ppt” denotes percentage points.

Acquisition of technology rights costs consist of the direct costs associated with our technology transfers, which include cash to further accelerate commercialization efforts, license fees to acquire new technologies, consulting fees with the inventor of the technologies, and sponsored research fees with the university or research facility transferring the technologies. The acquisition of technology rights costs as a percentage of sale of technology rights revenue increased by 4 and 18 percentage points, respectively for the three and six months ended June 30, 2008 versus 2007. Overall equity market conditions have had a significant impact on our revenue to cost ratio. Stock prices for our micro-capitalization clients have decreased, making it more difficult for some of our clients to issue stock with sufficient value in exchange for technologies. Consequently, the costs we have incurred on technology transfers have been a higher percentage of the related revenue earned.

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Acquisition of technology rights costs are directly related to sale of technology rights revenue. In an effort to curb costs associated with technology transfers, as a result of cash constraints, our plan is to focus for the remainder of 2008 on technology transfers for cash remuneration and equity transfers which do not require significant amounts of upfront cash costs.

The following tables provide certain information relating to the acquisition of technology rights expenses we incurred in connection with our technology transfers during the three and six months ended June 30, 2008:


Date	Name of Company Acquiring the Newly Formed Company	Newly Formed Company	Dollar Amount of Expenses
June 26	CSMG Technologies, Inc.	Carbon Capture Technologies, Inc.	$	60,000
June 10	World Energy Solutions, Inc.	Advanced Alternative Energy, Inc.		236,000

		Total for three months ended June 30, 2008		296,000

March 31	Platina Energy Group Inc.	Enhanced Oil Recovery Technologies, Inc.		360,500
March 24	RIM Semiconductor Company	Multi-Carrier Communications, Inc.		383,500
January 28	RIM Semiconductor Company	Broadband Distance Systems, Inc.		440,000

		Total for six months ended June 30, 2008	$	1,480,000


Date	Name of Company Acquiring the Newly Formed Company	Newly Formed Company	Dollar Amount of Expenses
June 28	Material Technologies, Inc.	Non-Destructive Assessment Technologies, Inc.	$	280,000
May 30	Klegg Electronics, Inc.	Klegg Network Storage Technologies, Inc.		450,000
April 30	Material Technologies, Inc.	Damage Assessment Technologies, Inc.		300,000

		Total for three months ended June 30, 2007		1,030,000

March 28	Avalon Oil & Gas, Inc.	Leak Location Technologies, Inc.		155,000
March 12	Klegg Electronics, Inc.	Tempo Control Technologies, Inc.		135,388
March 12	Metamorphix Global, Inc.	Flex Crete Technologies, Inc.		52,884
February 12	Liberty Diversified Holdings, Inc.	Sero Tonin Solutions, Inc.		70,052
January 31	Material Technologies, Inc.	Stress Analysis Technologies, Inc.		130,000
January 30	CytoDyn, Inc.	Advanced Genetic Technologies, Inc.		167,500
January 11	Cyberlux Corporation	Hybrid Lighting Technologies, Inc.		192,455
January 4	Manakoa Services Corporation	Infinite Identification Technologies, Inc.		400,000

		Total for six months ended June 30, 2007	$	2,333,279

Salaries and Wages


	Three months ended June 30,						Percentage Change		Six months ended June 30,						Percentage Change
(In thousands, except percentages)	2008			2007					2008			2007
Salaries and wages	$	1,159		$	805		44	%	$	2,365		$	1,774		33	%
As a percent of revenue		24	%		13	%	11	ppt		28	%		12	%	16	Ppt

Salaries and wages include non-sales employees and officer salaries and related benefits including bonuses and stock-based compensation. Salaries and wages increased $354,000 during the three months ended June 30, 2008 primarily due to the addition of Pharmalicensing employees to the payroll as a result of the completion of the acquisition and increased CEO salary taken in the form of a bonus and additional salaries related to our newTekScout online exchange.

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Salaries and wages increased $591,000 during the six months ended June 30, 2008 primarily due to the addition of Pharmalicensing employees to the payroll as a result of the completion of the acquisition, additional salaries related to our newTekScout online exchange, increased officer salaries and an increase in stock-based compensation expense resulting from additional option grants.

We expect salaries and wages to continue to increase significantly during the remainder of 2008 as a result of acquisitions, an increase in officer salaries, and the creation of the new online exchange.

Professional Fees


	Three months ended June 30,						Percentage Change		Six months ended June 30,						Percentage Change
(In thousands, except percentages)	2008			2007					2008			2007
Professional fees	$	250		$	292		(14	)%	$	558		$	614		(9	)%
As a percent of revenue		5	%		5	%	-0	-ppt		6	%		4	%	2	Ppt

Professional fees include accounting fees, legal fees and valuation expenses for our investments. The decrease in professional fees for the three and six months ended June 30, 2008 relates to a decrease in accounting and legal fees, partially offset by modest increases in valuation expenses fees.

Sales and Marketing


	Three months ended June 30,						Percentage Change		Six months ended June 30,						Percentage Change
(In thousands, except percentages)	2008			2007					2008			2007
Sales and marketing	$	2,819		$	458		515	%	$	3,467		$	1,090		218	%
As a percent of revenue		57	%		7	%	50	ppt		40	%		8	%	32	Ppt

Sales and marketing expenses include advertising, marketing, salaries and commissions paid to sales personnel and innovation consultants, commissions paid to outside service providers, travel and other costs of sales and selling expenses. Sales and marketing increased $2.4 million for each of the three and six months ended June 30, 2008, respectively. The increase was primarily a result of the Strategos consulting costs to fulfill their consulting contracts. Also, the business development and technology licensing sales divisions each added sales managers in 2008. This increase was offset by a slight decrease in commissions earned due to the decrease in revenue for the quarter and six months ended June 30, 2008.

We expect sales and marketing costs to continue to increase significantly during the remainder of 2008 as a result of acquisitions and the creation of new sales management positions to strengthen the senior management team and enhance the potential for Company development.

General and Administrative


	Three months ended June 30,						Percentage Change		Six months ended June 30,						Percentage Change
(In thousands, except percentages)	2008			2007					2008			2007
General and administrative	$	1,164		$	608		92	%	$	1,989		$	1,440		38	%
As a percent of revenue		24	%		10	%	14	ppt		23	%		10	%	13	Ppt

General and administrative costs increased $556,000 and $549,000 for the three and six months ended June 30, 2008, respectively. The following cost increases were primarily related to the Strategos acquisition: the amortization of the intangible assets acquired, employee costs including benefits and taxes and rent. Other expenses items also increased insignificantly as a result of the acquisition.

We expect to have an increase in general and administrative expenses for the year ended December 31, 2008 as a result of planned growth for the Company, including acquisitions.

Page 35 of 44

Goodwill Impairment

Management conducts an annual impairment analysis at the end of each year. In connection with the 2006 impairment analysis, we determined there was an impairment of the goodwill related to the Pharma Transfer, Ltd. acquisition due to a decrease in the annual revenue. We subsequently recorded a partial impairment of the goodwill in the first quarter of 2007. These write-downs resulted in an impairment charge of approximately $33,030 for the United States segment during 2007. There were no impairment charges during the first two quarters of 2008.

Net Realized Gains (Losses) on Investments


	Three months ended June 30,						Percentage Change		Six months ended June 30,						Percentage Change
(In thousands, except percentages)	2008			2007					2008			2007
Realized gains/ (losses)	$	(3,351	)	$	(41	)	8143	%	$	(3,477	)	$	(1,138	)	205	%

Net realized losses on investments, net of income tax effect, amounted to $3,350,772 for the three months ended June 30, 2008 and were related to sales as follows:


Company Name	Number of Shares	Realized Gain (Loss)
aeroTelesis, Inc.	384,000		(20,512	)
American Soil Technologies, Inc.	169,702		(19,472	)
Avalon Oil and Gas, Inc.	157,500		(148,628	)
Broadcast International, Inc.	36,700		51,658
Cargo Connection Logistics Holdings, Inc.	11,078,103		(35,934	)
Cyberlux Corporation	719,000		796
Ecosphere Technologies Inc	56,000		(1,809	)
EcoSystem Corporation	872,502		(1,515,229	)
Industrial Biotechnology Corporation	1,991		(1,442,993	)
Material Technologies, Inc.	1,051,002		(174,925	)
Magnitude Information Systems, Inc	697,860		(8,971	)
MM2 Group Inc.	825,852		(19,914	)
Net Fabric Corporation	65,500		(3,100	)
Protocall Technologies, Inc.	269,230		(5,068	)
Tenth Gate International, Inc.	810,000		749
US Starcom Inc.	180,000		(7,420	)

Total		$	(3,350,772	)

Net realized losses on investments, net of income tax effect, amounted to $40,648 for the three months ended June 30, 2007 and were related to sales as follows:


Company Name	Number of Shares	Realized Gain (Loss)
American Soil Technologies, Inc.	84,284	$	110
Shumate Industries, Inc.	16,085		10,337
Swiss Medica, Inc.	100,000		(11,252	)
Broadcast International, Inc.	70,500		(20,557	)
Rival Technologies, Inc.	41,500		7,398
Power3 Medical Products, Inc.	36,033		(26,684	)

Total		$	(40,648	)

Page 36 of 44

Net realized losses on investments, net of income tax effect, amounted to $3,476,874 for the six months ended June 30, 2008 and were related to sales as follows:


Company Name	Number of Shares	Realized Gain (Loss)
5G Wireless Communications, Inc.	122,379	$	(49,160	)
aeroTelesis, Inc.	384,000		(20,512	)
American Soil Technologies, Inc.	229,702		(25,169	)
Avalon Oil and Gas, Inc.	247,200		(235,050	)
Broadcast International, Inc.	478,562		479,441
Cargo Connection Logistics Holdings, Inc.	11,078,103		(35,934	)
Cyberlux Corporation	2,050,000		3,440
Ecosphere Technologies Inc	56,000		(1,809	)
EcoSystem Corporation	922,446		(1,513,603	)
Industrial Biotechnology Corporation	2,491		(1,805,369	)
Magnitude Information Systems, Inc.	697,860		(102,291	)
Material Technologies, Inc.	1,420,002		(8,971	)
MM2 Group Inc.	825,852		(19,914	)
Modern Technology Corporation	37,500		(51,193	)
Net Fabric Corporation	65,500		(3,100	)
Protocall Technologies, Inc.	269,230		(5,068	)
SolarBrook Water and Power Corp.	808,529		(75,956	)
Tenth Gate International, Inc.	820,000		764
US Starcom Inc.	180,000		(7,420	)

Total		$	(3,476,874	)

Net realized losses on investments, net of income tax effect, amounted to $1,138,280 for the six months ended June 30, 2007 and were related to sales as follows:


Company Name	Number of Shares	Realized Gain (Loss)
Advanced Refractive Technologies, Inc.	1,533,333	$	(46,064	)
American Soil Technologies, Inc.	87,555		114
Shumate Industries, Inc.	171,432		127,234
Health Sciences Group, Inc.	2,242,000		(619,815	)
Swiss Medica, Inc.	950,000		(104,828	)
Xethanol Corporation	136,838		(378,935	)
Broadcast International, Inc.	80,500		(24,624	)
Rival Technologies, Inc.	41,500		7,398
Power3 Medical Products, Inc.	36,033		(26,684	)
Manakoa Services Corporation	578,958		(72,076	)

Total		$	(1,138,280	)

Net realized gains and losses can vary substantially due to a variety of factors and may not be indicative of future performance. As a result of the uncertainty surrounding the future values of our investments, we are unable to make any projections or estimates regarding realized gains or losses expected in 2008.

Net Change in Unrealized Appreciation or Depreciation on Investments

We estimate the value of each investment in our portfolio on a quarterly basis and changes in value result in unrealized appreciation or depreciation being recognized. 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.

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Because of the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments determined in good faith by the Board of Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.


	Three months ended June 30,					Percentage Change		Six months ended June 30,						Percentage Change
(In thousands, except percentages)	2008		2007					2008			2007
Unrealized appreciation/ (depreciation)	$	503	$	(5,480	)	(109	)%	$	(4,048	)	$	(7,022	)	(42	)%

Overall equity market conditions and a decrease in the economy have resulted in significant decreases in market prices for some of our portfolio companies. This has resulted in significant unrealized depreciation on many of our investments during the current period. The unrealized gain for the three months ended June 30, 2008 is primarily the result of realizing $2.9 million of unrealized losses through sales of our Ecosystem Corporation and Industrial Biotechnology Corporation investments.

Net change in unrealized appreciation on investments, net of income tax effect, amounted to $503,149 for the three months ended June 30, 2008 and was related to our investments as follows:


Company Name	Net unrealized Appreciation (Depreciation)
Emission & Power Solutions, Inc.		(716,506	)
RIM Semiconductor Company		(628,003	)
World Energy Solutions, Inc.		(447,442	)
Advanced Refractive Technologies, Inc.		(432,411	)
Industrial Biotechnology Corporation		1,443,691
EcoSystem Corporation (GS Energy Corporation)		1,500,611
MiMedx Group, Inc.		537,879
All other investments		(754,670	)

	$	503,149

Net change in unrealized depreciation on investments, net of income tax effect, amounted to $5,479,917 for the three months ended June 30, 2007 and was related to our investments as follows:


Company Name	Net Unrealized Appreciation (Depreciation)
DME Interactive Holdings, Inc.	$	(777,629	)
Klegg Electronics, Inc.		(1,276,932	)
Manakoa Services Company		(608,884	)
Advanced Refractive Technologies, Inc.		(430,664	)
Avalon Oil & Gas, Inc.		(420,810	)
Industrial Biotechnology Corporation		(424,054	)
American Soil Technologies, Inc.		(379,159	)
Cyberlux Corporation		(251,663	)
All other investments		(910,122	)

	$	(5,479,917	)

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Net change in unrealized depreciation on investments, net of income tax effect, amounted to $4,047,627 for the six months ended June 30, 2008 and was related to our investments as follows:


Company Name	Net Unrealized Appreciation (Depreciation)
Advanced Refractive Technologies, Inc.	$	(432,037	)
Broadcast International, Inc.		(687,966	)
Cyberlux Corporation		(336,510	)
Emission & Power Solutions, Inc.		(964,863	)
Industrial Biotechnology Corporation		1,807,165
EcoSystem Corporation (GS Energy Corporation)		1,462,503
MiMedx Group, Inc.		600,748
Material Technologies, Inc.		(2,547,195	)
Manakoa Services Corporation		(510,498	)
Pathway One Plc		(358,940	)
RIM Semiconductor Company		(1,064,905	)
Oxygen Biotherapeutics, Inc.		444,261
World Energy Solutions		(809,375	)
All other investments		(650,015	)

	$	(4,047,627	)

Net change in unrealized depreciation on investments, net of income tax effect, amounted to $7,022,245 for the six months ended June 30, 2007 and was related to our investments as follows:


Company Name	Net unrealized Appreciation (Depreciation)
Avalon Oil & Gas, Inc.	$	(434,064	)
Cyberlux Corporation		(483,992	)
DME Interactive Holdings, Inc.		(838,627	)
Klegg Electronics, Inc.		(2,202,784	)
Industrial Biotechnology Corporation		(1,224,323	)
Fuel FX International, Inc.		(766,589	)
UBA Technology, Inc.		(446,070	)
Manakoa Services Corporation		(754,769	)
Health Sciences Group, Inc.		585,168
All other investments		(456,195	)

	$	(7,022,245	)

Liquidity and Capital Resources

At June 30, 2008, we had cash and cash equivalents of $3.5 million. We also had investments in U.S. Treasuries and certificates of deposit (CDs) of $4.0 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 have financed substantially all of our operations since inception through the issuance of equity securities and, to a lesser extent, sales of investments, cash received in connection with the provision of technology acquisition alliance and other consulting services and the use of funds from our investments in U.S. Treasuries and certificates of deposit. Our primary sources of liquidity and capital for the six months ended June 30, 2008 were $4.5 million received in connection with consulting operations, $2.0 million received from the repayment of our loan receivable from UTEK Real Estate Holdings, Inc., $1.7 million in proceeds generated from the sale of shares of our portfolio companies and $190,000 in proceeds from the exercise of stock options.

Our income from operations consists primarily of the sale of technology rights and consulting income from technology acquisition alliances in exchange for equity securities rather than cash. In the six months ended June 30, 2008, 46% of our income from operations was paid in the form of equity securities. Of the $8.6 million in income from operations in the six months ended June 30, 2008, $4.6 million was received in the form of cash. During the six months ended June 30, 2008, we used approximately $1.5 million to fund our technology transfer transactions and approximately $8.4 million for operating expenses. Looking forward to the rest of 2008, we expect that our cash generating operations and operating expenses will both increase as a result of our acquisitions. We expect our cash outflow for technology transfer transactions will be scaled to available cash.

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In April 2008, we acquired $679,000 in cash in connection with the Strategos acquisition. This cash was invested in certificates of deposit.

In May 2008, the Company received repayment of its entire loan receivable held with certain subsidiaries of UTEK Real Estate Holdings, Inc. This loan receivable was previously included in the Company’s investment portfolio at March 31, 2008 and December 31, 2007. This repayment resulted in additional cash inflows of $2 million during the second quarter of 2008, which were invested in certificates of deposit.

In May 2008, we obtained a $1,000,000 line of credit with the Bank of Tampa. The advances on the line of credit accrue interest (payable monthly) at prime (5.25% as of March 31, 2008). The principal and any unpaid interest are due upon demand. This line is collateralized with commercial real estate owned by UTEK Real Estate Holdings, Inc. At June 30, 2008, we had no long-term debt outstanding.

We currently intend to fund our capital expenditures, as well as liquidity needs, with existing cash and cash equivalent balances, our investments in U.S. treasuries and certificates of deposit and borrowings, repayment of loans receivable, as well as with cash generated by operations and the sales of our investments. We believe that these sources will be sufficient to meet working capital needs, capital requirements, and current commitments for at least the next twelve months. However, our capital requirements will depend on many factors, the most important factor is our sales of technology rights. In addition, the sale of our investments is dependent on market price, which is unpredictable. We may need to scale the number of sales of technology rights to available cash resources in the near term. In addition, we may seek to raise additional funds through public or private debt or equity financing for long-term liquidity. Additional funds may not be available on favorable terms to us, if at all.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Critical accounting estimates 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. We consider the following accounting policies and related estimates to be critical:

Valuation Methodology

Currently, we primarily receive cash in connection with our technology acquisition alliance agreements and illiquid securities in connection with our technology transfers. Historically, we primarily received illiquid securities in connection with both our technology acquisition alliance agreements and technology transfers. The securities received are generally subject to restrictions on resale and generally are thinly traded or have no established market.

We estimate 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 record unrealized depreciation on investments when we believe that an investment has become impaired, including where realization of an equity security is doubtful. We 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. Upon the sale of our investments, the values that are ultimately realized may be different from the presently determined fair values of such securities. This difference could be material.

We adopted SFAS 157 on a prospective basis in the first quarter of 2008. SFAS 157 requires us to assume that the portfolio investment is to be sold in the principal market to market participants, or in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with the Statement, we have considered our principal market, or the market in which we exit our portfolio investments with the greatest volume and level of activity.

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

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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.

The fair value of our investments at June 30, 2008 and June 30, 2007 was estimated by our Board of Directors. At June 30, 2008 and June 30, 2007, we received valuation assistance from our independent valuation firm, Klaris, Thomson & Schroeder, Inc., on our entire portfolio of investments for which market quotations were not available.

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

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

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

Stock-Based Compensation

We account for stock option grants in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R),Share-Based Payment. Under the modified prospective approach of SFAS 123(R), compensation cost recognized during the six months ended June 30, 2008 and 2007 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R).

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 is based upon our historical term of options exercised. Historical data was used to estimate option exercises and employee terminations. Estimated volatility is based upon our historical market price at consistent points in a period equal to the expected life of the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and the dividend yield is based on the historical dividend yield.

Recently Issued Accounting Pronouncements

In March 2008, the Financial Accounting Standards Board issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 requires additional disclosures related to the use of derivative instruments, the accounting for derivatives and the financial statement impact of derivatives. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. The adoption of SFAS No. 161 will not have an impact on the Company’s consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3,Determination of the Useful Life of Intangible Assets.FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142,Goodwill and Other Intangible Assets.FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited. The Company is currently evaluating the impact of the pending adoption of FSP FAS 142-3 on our consolidated financial statements.

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, 2007.

ITEM 4.

Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, our principal executive officer and principal financial officer conducted an evaluation of the effectiveness of the design and operations of the Company’s 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

Page 41 of 44

officer and principal financial officer concluded that our disclosure controls and procedures were effective such that the information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and such that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal 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 most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

Legal Proceedings

Although we may from time to time be involved in litigation and claims arising out of our operations in the normal course of our business, as of June 30, 2008, we were not a party to any material pending legal proceedings.

ITEM 1A.

Risk Factors

There have been no material changes to the risk factors previously disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2007.

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 26, 2008, we held our Annual Meeting of Stockholders. The following matters were submitted to the stockholders for consideration:

To elect eight (8) of our directors of the Company who will serve for one (1) year, or until their successors are elected and qualified;

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, 2008;

To approve an amendment to the Company’s Amended and Restated Employee Stock Option Plan to increase the number of shares of common stock authorized for issuance under the Plan; and

To approve a proposal to authorize the Company to issue warrants, options or rights to subscribe to, convert to, or purchase shares of The Company’s common stock in one or more offerings.

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

Election of Directors:


Director	For	Withheld
Clifford M. Gross, Ph.D.	8,506,125	28,404
Sam Reiber, J.D.	8,506,170	28,359
Kwabena Gyimah-Brempong, Ph.D.	8,506,070	28,459
Holly Callen Hamilton	8,489,437	45,092
Keith Witter, J.D.	8,505,525	29,004
John J. Micek, J.D.	8,382,283	152,246
Francis Maude	8,437,535	96,994
Arthur Chapnik	8,489,382	45,147

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Ratification of the selection of Pender Newkirk & Company LLP:


For	Against	Abstain
8,489,927	34,610	9,992

Approval to amend the Company’s Amended and Restated Employee Stock Option Plan to increase the number of shares of common stock authorized for issuance under the Plan:


For	Against	Abstain	Broker Non-Votes
3,314,257	488,524	166,829	4,597,440

Approval to authorize the Company to issue warrants, options or rights to subscribe to, convert to, or purchase shares of The Company’s common stock in one or more offerings:


For	Against	Abstain	Broker Non-Votes
3,800,020	131,661	37,929	4,597,440

All matters submitted to the stockholders for a vote were approved by the stockholders.

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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SIGNATURES

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


		UTEK CORPORATION
		(Registrant)

Date: August 8^th, 2008		/s/ Clifford M. Gross
		Clifford M. Gross, Ph.D.
		Chairman and Chief Executive Officer

Date: August 8^th, 2008		/s/ Carole R. Wright
		Carole R. Wright, CPA
		Chief Financial Officer

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Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Avg

Large accelerated filer

Accelerated filer

Non-accelerated filer

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Smaller reporting company