Recently in UTEK Corp. Category

Two more companies that recently announced technology deals with UTEK Corp. have been identified as vehicles for securities fraud, this time in a federal criminal case in New Jersey.

The case involves a stock manipulation scheme that began in the 1990s and cost investors more than $15 million. Eight defendants have pleaded guilty and a ninth was found guilty by a jury.

A plea agreement signed by one of the defendants says that prosecutors would not initiate further charges regarding his admitted participation in securities and wire frauds involving the shares of some 30 additional companies.

The companies include Avalon Oil and Gas Inc., which last month completed its third technology transfer with UTEK, and ChampionLyte Holdings Inc., now called Cargo Connection Logistics Holdings Inc. It did a technology deal with UTEK in December.

The court filing did not allege any wrongdoing by Avalon (OTCBB: AOGN) or Cargo Connection (OTCBB: CRGO).

But Sharesleuth.com found the document in the course of its own investigation into Avalon, Cargo Connection and other companies with ties to a common network of executives, directors, consultants and promoters.

A closer look at that network revealed at least three people who did prison time in connection with previous fraud schemes and three others who either settled civil fraud charges with the Securities and Exchange Commission or were found guilty by a jury.

The network also included several more people who previously were suspended or barred by the National Association of Securities Dealers for violating brokerage industry rules.

Companies linked to the network have done numerous deals with Cornell Capital Partners LP, one of the top hedge funds providing PIPE (Private Investment in Public Equity) financing to penny stock companies.

The top company in UTEK Corp.’s securities portfolio has encountered a series of setbacks in its attempt to commercialize a powder-coating technology for kitchen cabinets, bathroom vanities and other wood products.

Trio Industries Group Inc. (Pink Sheets: TRIG) has been evicted from its offices in Dallas. Its phone and fax numbers have been disconnected and it no longer has control of the 650,000-square-foot building that it hoped to convert to a wood products plant.

UTEK (AMEX: UTK) is a Florida-based company that licenses technology from government and university labs and transfers it to other companies, usually in exchange for stock in the recipients.

UTEK has done five such deals with Trio and has received 7.79 million shares of Trio stock. UTEK valued that stake at $11.6 million on Sept. 30, making the shares the biggest single holding in a stock portfolio it valued at $55.7 million.

Sharesleuth.com published an investigative report on UTEK in October that raised questions about UTEK’s business model, the true worth of its securities portfolio, and some of the companies whose shares make up that portfolio.

UTEK Corp.’s latest quarterly report lists the value of its stake in Fuel FX International Inc. at $7.05 million. Some may question that number, given that there is no public market for Fuel FX’s shares, that its Web site lists no sales outlets or pricing information, and that its corporate headquarters is its chief executive’s house.

The Florida-based technology transfer company (AMEX: UTK) valued its stock in Advanced Refractive Technologies Inc. at $4.8 million. That company has no revenue, reported just $286 in cash at the end of its most recent quarter and was in default on its debt, which is secured by the company’s assets.

A Sharesleuth.com investigation suggests that the stated values of the stock that UTEK received through its technology deals with numerous small companies should be examined closely.  If so, the company’s financial results also should be scrutinized, because the shares are its chief source of revenue, and the value assigned to them is a major determinant of its earnings.

UTEK’s own share price has risen as the pace of its deal-making has accelerated. Its stock closed at $19.01 on Wednesday, up 38 percent for the year.

UTEK reported $21.6 million in revenue from the sale of technology rights in the three months that ended June 30, versus $1.5 million in the same quarter last year. It said net income from operations was $9.77 million, up from $28,713 a year earlier. Much of the additional revenue comes from companies whose stock is listed on the Pink Sheets or Over-the-Counter market. The shares of some of those companies trade in small amounts, when they trade at all.

Sharesleuth’s findings also raise questions about the level of due diligence that UTEK performed when approving technology transfers and alliances. Our analysis of the roughly 45 companies that have licensed technology through UTEK turned up no fewer than seven whose executives or large shareholders had previously been charged with violations by the Securities and Exchange Commission, the National Association of Securities Dealers, state regulators or other entities

The SEC recently brought fraud cases against two more of UTEK’s technology partners, HydroFlo Inc. (Pink Sheets: HYRF) and WebSky Inc. (Pink Sheets: WKYN). The SEC said HydroFlo and WebSky were involved in “pump and dump’’ schemes fueled by false announcements about lucrative deals.

An executive behind four other companies that did technology transfers with UTEK in its early years also wound up facing an SEC fraud suit. The case involved a fifth company that had retained UTEK to identify potential license acquisitions.

Still another person who has been chief executive of two more UTEK technology partners was targeted last year in an SEC investigation. A court filing said the SEC was probing whether a group of attorneys, accountants, securities transfer agents, consultants and others were working together to manipulate the share prices of small public companies through misleading fax blasts and spam e-mails(  )

UTEK declined to comment on Sharesleuth’s findings. The company never responded to messages left by telephone and e-mail.