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Item 1A. Risk Factors

2010-03-22 compared with 2009-03-10 · 223 added, 399 removed, 67 unchanged (90% of the section changed)

Investing in our

common stock involves a high degree of risk.

As a result, there can be no assurance that we will achieve our strategic objective.

Investing in our common stock involves a high degree of risk.

As a result, there can be no assurance that we will achieve our business objectives.

You should consider carefully the risks described below.

In addition to the risk factors described below, other factors

that could cause actual results to differ materially include:

In addition to the risk factors

described below, other factors that could cause actual results to differ materially include:

Changes in the economy;

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Other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings.

Our business, financial condition and results of operations may be materially impacted by economic conditions and related fluctuations in customer demand for

innovation consulting, technology licensing, patent analysis and other consulting services.

The market for our consulting services

tends to fluctuate with economic cycles.

During economic cycles in which many companies are experiencing financial difficulties or uncertainty, clients and potential clients may cancel or delay spending on technology, intellectual property and other

business initiatives.

In particular, current uncertainty in global economic conditions may cause companies to cancel or delay consulting initiatives for which they have engaged us.

Further, if the rate of project cancellations or delays

significantly increases, our business, financial condition and results of operations could be materially and adversely impacted.

The current economic

conditions could adversely impair our portfolio companies financial positions and operating results, which could, in turn, harm our financial position and operating results.

Many of our portfolio companies are susceptible to economic slowdowns or recessions.

An economic slowdown or recession, including the current one and

any future slowdowns or recessions, may affect the ability of our portfolio companies to successfully execute their business strategies and commercialize any technology that we have transferred to them.

In addition, the end markets for certain

of our portfolio companies products and services may experience negative economic trends.

We can provide no assurance that the performance of certain of our portfolio companies will not be negatively impacted by these economic or other

These conditions could lead to losses of value in our portfolio and a decrease in our revenues, net income and assets.

It is important to

our future success that we expand the breadth and depth of our service offerings to stay abreast of the competition and to enhance our potential for growth of revenues and profits.

The Company is primarily a service business.

It is important to our future success to expand the breadth and depth of our service offerings to stay

abreast of the competition and to enhance our potential for growth of revenues and profits.

Expansion of our service categories and service offerings in this manner will require significant additional expenditures and could strain our management,

financial and operational resources.

Our business, financial condition and results of operations may be materially impacted by economic

conditions and related fluctuations in customer demand for innovation consulting, technology licensing, patent analysis and other consulting services.

The market for our consulting services tends to fluctuate with economic cycles.

During economic cycles in which many companies are experiencing financial difficulties or uncertainty, clients and potential

clients may cancel or delay spending on technology, intellectual property and other business initiatives.

In particular, current uncertainty in global economic conditions may cause companies to cancel or delay consulting initiatives for which they

have engaged us.

Further, if the rate of project cancellations or delays significantly increases, our business, financial condition and results of operations could be materially and adversely impacted.

It is important to our future success that we expand the breadth and depth of our service offerings to stay abreast of the competition and to enhance our

potential for growth of revenues and profits.

We are primarily a service business.

It is important to our future success

to expand the breadth and depth of our service offerings to stay abreast of the competition and to enhance our potential for growth of revenues and profits.

Expansion of our service categories and service offerings in this manner will require

significant additional expenditures and could strain our management, financial and operational resources.

For example, we are currently seeking to build up our intellectual property analysis service business.

We cannot be certain that we will be able to do so in a cost-effective or timely manner or that we will be

able to offer certain services in demand by our clients, or to do so in a quality manner.

Furthermore, any new service offering that is not favorably received by the Companys clients could damage our reputation.

The lack of market acceptance

of new services or our inability to generate satisfactory revenues from expanded service offerings to offset their costs could harm our business.

If we do not successfully expand our operations, our revenues may fall below expectations.

successfully expand our operations on an ongoing basis to accommodate increases in demand, we will not be able to fulfill our clients needs in a timely manner, which would harm our business.

We cannot be certain that we will be

able to do so in a cost-effective or timely manner or that we will be able to offer certain services in demand by our clients, or to do so in a quality manner.

Furthermore, any new service offering that is not favorably received by our clients could

damage our reputation.

The lack of market acceptance of new services or our inability to generate satisfactory revenues from expanded service offerings to offset their costs could harm our business.

If we do not successfully expand our operations,

our revenues may fall below expectations.

If we do not successfully expand our operations on an ongoing basis to accommodate increases in demand, we will not be able to fulfill our clients needs in a timely manner, which would harm our

Our growth strategy is partially dependent on completing additional acquisitions of innovation services companies.

As part of our strategy for growth, we have made and may continue to make acquisitions of innovation services companies.

may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully.

In this regard, acquisitions involve numerous risks, including difficulties in the integration of the operations,

technologies, services and products of the acquired companies and the diversion of managements attention from other business concerns.

Although our management will endeavor to evaluate the risks inherent in any particular transaction, there

can be no assurance that we will properly ascertain all such risks.

In addition, prior acquisitions have resulted, and future acquisitions could result, in the incurrence of substantial additional indebtedness and other expenses.

Future acquisitions

may also result in potentially dilutive issuances of equity securities.

There can be no assurance that difficulties encountered with acquisitions will not have a material adverse effect on our business, financial condition and results of operations.

We may not be able to sell the securities we receive in connection with our technology acquisition alliance agreements and technology transfers for an

amount equal to the revenue we previously recognized in connection with such transactions.

We recognize revenue in connection with our

technology acquisition alliances and technology transfers in an amount equal to the fair value of the securities we receive in connection with such transactions.

With respect to our technology acquisition alliance agreements, we recognize such

revenue as earned in accordance with the contractual terms of each technology acquisition alliance agreement.

With respect to our technology transfers, we recognize such revenue upon the consummation of each technology transfer.

securities we receive in connection with such transactions are subject to legal restrictions on resale and are mainly issued by thinly traded public companies or private companies, our ability to sell such securities may be limited.

facts as well as the subjective judgments and estimates inherent in fair value accounting, we may not be able to sell the securities we receive in connection with our technology acquisition alliances and technology transfers for an amount equal to

the revenue we previously recognized in connection with such transactions.

As part of our strategy for growth, we have made and may continue to make acquisitions of complementary innovation

services companies.

However, we may not be able to identify suitable acquisition candidates, complete acquisitions, or integrate acquisitions successfully.

In this regard, acquisitions involve numerous risks, including difficulties in the

integration of the operations, technologies, services and products of the acquired companies and the diversion of managements attention from other business concerns.

Although our management will endeavor to evaluate the risks inherent in any

particular transaction, there can be no assurance that we will properly ascertain all such risks.

In addition, prior acquisitions have resulted, and future acquisitions could result, in the incurrence of substantial additional indebtedness and other

Future acquisitions may also result in potentially dilutive issuances of equity securities.

There can be no assurance that difficulties encountered with acquisitions will not have a material adverse effect on our business, financial

condition and results of operations.

Our quarterly and annual results fluctuate significantly.

Our quarterly and annual operating results fluctuate significantly due to a number of factors.

These factors include the small number and range of values

of the transactions that are completed each quarter, fluctuations in the amount of consulting services we provide, fluctuations in the values of our investments, the timing of the recognition of unrealized gains and losses, the degree to which we

encounter competition in our markets, the volatility of the stock market and its impact on our unrealized gains and losses, as well as other general economic conditions.

As a result of these factors, quarterly and annual results are not necessarily

indicative of our performance in future quarters and years.

Our investment portfolio is highly concentrated in a limited number of portfolio companies

and, as a result, our financial results are largely dependent upon the performance of these companies.

Our investment portfolio is

highly concentrated in a limited number of portfolio companies and, as a result, our financial results are largely dependent upon the performance of these companies.

If one or more of these companies fails to perform as expected, our financial

results could be negatively affected.

Our portfolio companies are development stage companies dependent upon the successful commercialization of new

technologies.

Each of our portfolio companies is subject to a high degree of risk, and we may not be able to sell securities we receive in connection with our technology acquisition alliances or technology transfers.

We enter into technology acquisition alliance and technology transfer agreements with, among others, development stage companies that our management

believes can benefit from our expertise in technology

Development stage companies are subject to all of the risks associated with new businesses.

In addition, our portfolio companies are also subject

to the risks associated with research and development of new technologies.

These risks include the risk that new technologies cannot be identified, developed or commercialized, may not work, or may become obsolete.

Our portfolio companies must

successfully acquire licenses to new technologies, and in some cases, further develop new technologies.

We cannot assure you that any of our portfolio companies will be successful.

Our portfolio companies will be competing with larger, established

companies with greater access to, and resources for, further development of these new technologies.

We may not be able to sell the securities we receive in connection with our technology acquisition alliances or technology transfers if our portfolio

companies are not successful.

Our portfolio companies depend upon the research and development activities of universities, medical research centers and

federal research laboratories, over which neither our portfolio companies nor we have any control.

Our portfolio companies depend upon

the research activities of universities, university incubators, medical research centers, corporate research laboratories and federal research laboratories.

Neither we, nor our portfolio companies, have any control over the research activities of

these institutions and entities.

As neither we nor our portfolio companies provide supervision of any of these institutions or entities, and we cannot ensure that the research will be done properly and that the results, which we may license, will be

reproducible.

In addition, we have no control over what types of technologies are presented to us by these institutions or entities for evaluation and commercial development.

Further, the licenses to technologies that our portfolio companies obtain

may be non-exclusive.

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

Neither our portfolio companies nor we have any control over the pace of technology development.

There is a significant risk that a portfolio company

could acquire the rights to a technology that is currently, or is subsequently made, obsolete by other technological developments.

If this were to occur, we may be unable to sell or otherwise dispose of the securities we received in connection with

our technology acquisition alliances and technology transfer transactions with such companies.

The patents on the technologies that our portfolio

companies license may infringe upon the rights of others and patent applications that have been submitted may not be granted.

our portfolio companies rely upon patents to protect the technologies that they license.

If the patents on technologies that they license are found to infringe upon the rights of others, or are held to be invalid, then the licenses to such

technologies will have little or no value to our portfolio companies.

In addition, if a patent to a technology licensed by a portfolio company is found to infringe upon the rights of others, the portfolio company may be liable for monetary damages.

Our portfolio companies are dependent upon the universities, medical centers, corporate research laboratories or government research facilities to file, secure and protect patents on licensed technologies.

In the event that a patent is challenged or

violated, our portfolio companies may not have the financial resources to defend the patent either in the preliminary stages of litigation or in court.

In addition, if our portfolio companies acquire licenses to technologies with patents pending, we

cannot assure you that such patents will be granted.

If any such events were to occur, we may be unable to sell or otherwise dispose of the securities we received in connection with our technology acquisition alliances and technology transfers with

such companies.

Technologies that have been developed with funding from the U.S.

government may have limits on their use, which could affect the value

of the technology to a portfolio company.

Technologies developed with funds provided by the U.S.

government have restrictions regarding

where they may be sold and have limits on exclusivity.

A portfolio company that acquires a technology developed with

federal funding may be limited as to where it can sell the technology.

The technology may only be allowed to be sold or manufactured within the U.S.

addition, the U.S.

government has the right to use technologies that it has funded regardless of whether the technology has been licensed to a third party.

Such regulations may limit the marketability of a technology and therefore reduce the value

of the technology to our portfolio companies.

The securities we hold in our portfolio companies are subject to restriction on resale and we may not be

able to sell the securities we hold for amounts equal to their recorded value, if at all.

Our portfolio companies are mainly thinly

traded public companies or private companies, and we acquire securities in our portfolio companies in private transactions.

As a result, substantially all of the securities we hold in our portfolio companies are subject to legal restrictions on

Furthermore, our ability to sell the securities in our portfolio may be limited by, and subject to, the lack of or limited nature of a trading market for such securities.

Therefore, we cannot assure you that we will be able to sell our

portfolio company securities for amounts equal to the values that we have ascribed to them at the time we desire to sell.

We are dependent on sales

transactions structured as tax-free exchanges to sell the new companies we form to acquire new technologies.

A change in the Internal Revenue Code or a negative interpretation of the Internal Revenue Code affecting tax-free exchanges could have a

significant negative impact on our business and financial results.

To effectuate a technology transfer, we typically create a newly

formed company to acquire a new technology from a university, medical center, corporate research laboratory or federal research laboratory and then exchange the securities of such newly formed company for securities in the company that acquires such

newly formed company and the technology held by such newly formed company.

We anticipate that some of such transactions will be structured as tax-free exchanges under Section 368 of the Internal Revenue Code.

A benefit of structuring our

technology transfers as tax-free exchanges under Section 368 is that such transactions do not result in a current taxable event for us for income tax purposes.

If Section 368 were to be amended so that we were no longer able to structure

our technology transfers as tax-free exchanges or the Internal Revenue Service took a negative position regarding our tax treatment of our technology transfers as tax-free exchanges, we may not be able to effectuate these type of technology

transfers on commercially reasonable terms without suffering adverse tax consequences.

In such event, we may be required to significantly alter the use of these type of technology transfers, which could have a significant negative impact on our

business and operating results.

These factors include fluctuations in the

amount of consulting services we provide, the degree to which we encounter competition in our markets, and general economic conditions.

As a result of these factors, quarterly and annual results are not necessarily indicative of our performance in

future quarters and years.

The agreements we have with universities, medical research centers, corporate research laboratories and federal

research laboratories do not guarantee that such entities will grant licenses to us or other companies.

The agreements that we have

entered into with universities, medical research centers, corporate research laboratories and federal research laboratories provide us with the ability to evaluate the commercial potential for technologies at an early stage of development.

agreements, however, do not provide us with any guarantee that following our evaluation, the university, medical research center, corporate research laboratories or federal research laboratory will grant a license to us or other companies.

result, we may expend time and resources evaluating a technology and not be able to secure a license to such technology.

We are dependent upon and have

little or no control over the efforts of portfolio companies to successfully commercialize the acquired technologies or to retain the licenses to such technologies.

We receive common stock from our clients based upon the mutually agreed upon values of the new companies we form to acquire new technologies, their licensed technology and the portfolio companies.

We then intend to

sell the securities that we acquire at some time in the future.

Therefore, our ability to profit from an investment is ultimately dependent upon the price we receive for the shares of the portfolio company.

In most cases, the value of the portfolio

companies will be dependent upon successfully commercializing the technologies they acquire.

We do not have control over the portfolio companies.

These portfolio companies may

face intense competition, including competition from companies with greater financial resources, more extensive research and development, manufacturing,

marketing and service capabilities and a greater number of qualified and experienced managerial and technical personnel.

They may need additional financing which they are unable to secure and which we are unable or unwilling to provide, or they may

be subject to adverse developments unrelated to the technologies they acquire.

They may lose the rights granted to them for the technology for failure to comply with the license agreement.

We cannot assure you that any of the portfolio companies

will be successful or that we will be able to sell the securities we receive at a profit or for sufficient amounts to even recover our cash outlay in connection with our technology acquisition alliances and technology transfers or that our portfolio

companies will not take actions that could be detrimental to us.

Our investments in our portfolio companies may be concentrated in one or more

industries, and if these industries should decline or fail to develop as expected, our cash outlay in connection with our technology acquisition alliances and technology transfers will be lost.

Our investments in our portfolio companies may be concentrated in one or more industries.

This concentration will mean that our investments will be

particularly dependent on the development and performance of those industries.

Accordingly, our investments may not benefit from any advantages that might be obtained with greater diversification of the industries in which our portfolio companies

If those industries should decline or fail to develop as expected, our investments in our portfolio companies in those industries will be subject to loss.

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

At December 31, 2008 and December 31, 2007, investments amounting to $12.1 million, or 26% of our total assets, and $28.9 million, or 64% of our

total assets, respectively, have been valued at fair value as determined by our Board of Directors.

Pursuant to the requirements of the 1940 Act, our Board of Directors is responsible for determining in good faith the fair value of our investments

for which market quotations are not readily available.

Because there is typically no readily available market value for the investments in our portfolio, our Board of Directors determines in good faith the fair value of these investments pursuant to

a valuation policy and a consistently applied valuation process.

There is no single standard for determining fair value in good faith.

As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of

each portfolio investment while employing a consistently applied valuation process for the types of investments we hold.

If we were required to sell any such investments, there is no assurance that the fair value, as determined by the Board of

Directors, would be obtained.

If we were unable to obtain fair value for such investments, there would be an adverse effect on our net asset value and on the price of our common stock.

We adjust quarterly the valuation of our portfolio to reflect the Board of Directors determination of the fair value of each investment in our

As a result, the value of our portfolio securities and earnings change significantly from quarter to quarter.

Any changes in fair value are recorded in our statements of operations as Change in net unrealized appreciation

(depreciation) of investments.

We are focusing our business on providing innovation services to our clients which is a new and uncertain trend in

our industry.

We are focused on providing innovation services to our clients.

While these services utilize our well established

technology transfer capabilities, they also incorporate additional products and services which in their entirety are as yet unproven in their ability to generate consistent significant revenue.

As a result, if our innovation services are not well

received by our clients or if industry changes its focus off of innovation, this may result in reduced revenue and profitability for us.

We do not invent

new technologies or products.

We depend on relationships with universities, corporations, government agencies, research institutions, inventors, and others to provide technology-based opportunities that

we can develop into profitable royalty-bearing licenses.

Failure to maintain these relationships or to develop new relationships could adversely affect our operating results and financial

If we are unable to forge new relationships or to maintain current relationships, we may be unable to identify new technology-based opportunities and enter into royalty-bearing licenses.

We also are dependent on our clients

abilities to develop new technologies, introduce new products, and adapt to changes in technology and economic needs.

cannot be certain that current or new relationships will provide the volume or quality of available new technologies necessary to sustain our business.

In some cases, universities and other sources of new technologies may compete against us as they

seek to develop and commercialize these technologies themselves, or through entities that they develop, finance and/or control.

In other cases, universities receive financing for basic research from companies in exchange for the exclusive right to

commercialize any resulting inventions.

These and other strategies may reduce the number of technology sources, potential clients, to whom we can market our services.

If we are unable to secure new sources of technology, it could have a material

adverse effect on our operating results and financial condition.

We are focusing our business on providing innovation services to our

clients which is a new and uncertain trend in our industry.

We are focused on providing innovation services to our

While these services utilize our well established technology transfer capabilities, they also incorporate additional products and services which in their entirety are as yet unproven in their ability to generate consistent significant

As a result, if our innovation services are not well received by our clients or if industry changes its focus off of innovation, this may result in reduced revenue and profitability for us.

The consulting services business is highly competitive, and we may not be able to compete effectively.

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Our innovation consulting services business involves the delivery of professional services and is highly labor-intensive.

Our success depends largely on

our general ability to attract, develop, motivate and retain highly skilled professionals.

The loss of a significant number of our professionals or the inability to attract, hire, develop, train and retain additional skilled personnel could have a

serious negative effect on us, including our ability to manage, staff and successfully complete our existing engagements and obtain new engagements.

Qualified professionals are constantly in demand, and we face significant competition for both

senior and junior professionals with the requisite credentials and experience.

Our principal competition for talent comes from other research and consulting firms, as well as from organizations seeking to staff their internal professional positions.

Our success depends largely on our general ability to attract, develop, motivate and retain highly skilled professionals.

The loss of a significant number of our professionals or the inability to attract, hire, develop, train and retain additional

skilled personnel could have a serious negative effect on us, including our ability to manage, staff and successfully complete our existing engagements and obtain new engagements.

Qualified professionals are constantly in demand, and we face

significant competition for both senior and junior professionals with the requisite credentials and experience.

Our principal competition for talent comes from other research and consulting firms, as well as from organizations seeking to staff their

internal professional positions.

Many of these competitors may be able to offer significantly greater compensation and benefits or more attractive lifestyle choices, career paths or geographic locations than we do.

Therefore, we may not be successful in attracting and retaining the

skilled consultants we require to conduct and expand our operations successfully.

Increasing competition for these revenue-generating professionals may also significantly increase our labor costs, which could negatively affect our operating results.

The profitability of our fixed-fee engagements with clients may not meet our expectations if we underestimate the cost of these engagements.

When making proposals for fixed-fee engagements, we estimate the costs and timing for completing the engagements.

These estimates

reflect our best judgment regarding the efficiencies of our methodologies and consultants as we plan to deploy them on engagements.

Any increased or unexpected costs or unanticipated delays in connection with the performance of fixed-fee

engagements, including delays caused by factors outside our control, could make these contracts less profitable or unprofitable, which could negatively affect our operating results.

A significant portion of our revenues is derived from a limited number of clients, which may cause our operating results to be unpredictable.

As an innovation services firm, we have derived, and expect to continue to derive, a significant portion of our revenues from a limited number of clients.

Therefore, we may not be

in attracting and retaining the skilled consultants we require to conduct and expand our operations successfully.

Increasing competition for these revenue-generating professionals may also

significantly increase our labor costs, which could negatively affect our operating results.

The profitability of our fixed-fee

engagements with clients may not meet our expectations if we underestimate the cost of these engagements.

proposals for fixed-fee engagements, we estimate the costs and timing for completing the engagements.

These estimates reflect our best judgment regarding the efficiencies of our methodologies and consultants as we plan to deploy them on engagements.

Any increased or unexpected costs or unanticipated delays in connection with the performance of fixed-fee engagements, including delays caused by factors outside our control, could make these contracts less profitable or unprofitable, which could

negatively affect our operating results.

A significant portion of our revenue is derived from a limited number of clients, which may cause

our operating results to be unpredictable.

As an innovation services firm, we have derived, and expect to continue to

derive, a significant portion of our revenue from a limited number of clients.

Our clients typically retain us on an engagement-by-engagement basis, rather than under fixed-term contracts;

the volume of work performed for any particular client is likely to vary from year to year and a major client in one fiscal period may not

require or decide not to use our services in any subsequent fiscal period.

the volume of work performed for any particular client is

likely to vary from year to year and a major client in one fiscal period may not require or decide not to use our services in any subsequent fiscal period.

Moreover, a large portion of our new engagements comes from existing clients.

Accordingly, the failure to obtain new large engagements or multiple engagements from existing

or new clients could have a material adverse effect on the amount of revenues we generate.

In addition, if we fail to collect a large trade receivable or group of receivables, we could be subject to significant financial exposure.

Our ability to maintain and attract new business depends upon our reputation, the professional reputation of our

revenue-generating employees and the quality of our services.

As an innovation services firm, our ability to secure new engagements

depends heavily upon our reputation and the individual reputations of our professionals.

Any factor that diminishes our reputation or that of our employees, including not meeting client expectations or misconduct by our employees, could make it

substantially more difficult for us to attract new engagements and clients.

Similarly, because we obtain many of our new engagements from former or current clients or from referrals by those clients or by law firms that we have worked with in the

past, any client that questions the quality of our work or that of our consultants could impair our ability to secure additional new engagements and clients.

We depend on non-recurring consulting engagements and our failure to secure new engagements could lead to a decrease in our revenues.

Innovation consulting segment revenues constituted approximately 55% of our total revenues for 2008.

the failure to obtain new large engagements or multiple engagements from existing or new clients could have a material adverse effect on the amount of revenues we generate.

In addition, if we fail to collect a large trade receivable or group of

receivables, we could be subject to significant financial exposure.

Our ability to maintain and attract new business depends upon our

reputation, the professional reputation of our revenue-generating employees and the quality of our services.

innovation services firm, our ability to secure new engagements depends heavily upon our corporate brand and reputation and the individual reputations of our professionals.

Any factor that diminishes our reputation or that of our employees,

including not meeting client expectations, misconduct by our employees, or dissemination of inappropriate information from outside sources, could make it substantially more difficult for us to attract new engagements and clients.

Similarly, because

we obtain many of our new engagements from former or current clients or from referrals by those clients or by law firms that we have worked with in the past, any client that questions the quality of our work or that of our consultants could impair

our ability to secure additional new engagements and clients.

We depend on non-recurring consulting engagements and our failure to secure

new engagements could lead to a decrease in our revenues.

Innovation consulting segment revenues constituted approximately

70% of our total revenues for 2009.

These consulting engagements typically are project-based and non-recurring.

Our ability to replace consulting

engagements is subject to numerous factors, including the following:

Our ability to replace consulting engagements is subject to numerous factors, including the following:

Delivering consistent, high-quality consulting services to our clients;

Tailoring our consulting services to the changing needs of our clients;

Our ability to match skills and competencies of our consulting staff to the skills required for the fulfillment of existing or potential innovation consulting

Any material decline in our ability to replace consulting arrangements could have an adverse impact on our

revenues and our financial condition.

Our ability to match skills and competencies of our consulting staff to the skills required for the fulfillment of existing or potential innovation

consulting engagements.

Any material decline in our ability to replace consulting arrangements could have

an adverse impact on our revenues and our financial condition.

The absence of long-term contracts with our clients reduces the predictability of our revenue.

Our clients are generally able to reduce or cancel their use of our professional services without penalty and, in some circumstances, with little notice.

Our clients are generally able to reduce or cancel their use of our professional services without penalty and, in some

circumstances, with little notice.

As a result, we believe that the number of clients or the number and size of our existing projects are not reliable indicators or measures of future revenue.

We will need to continuously acquire new clients and/or new projects to meet our expenses.

When a client defers, modifies or cancels a project, there is no assurance that we will be able to rapidly redeploy our professionals to other projects in order to minimize the underutilization of employees and the resulting adverse impact on

operating results.

We may not be able to replace cancelled or reduced contracts with new business while at the same time our expenses are generally longer term in nature with the result that our revenue and profits may decline.

We will need to continuously acquire new clients and/or

new projects to meet our expenses.

resulting adverse impact on operating results.

We may not be able to replace cancelled or reduced contracts with new business while at the same time our expenses are generally longer term in nature with the result that our revenue and profits may

Our revenue growth depends on our ability to understand the technology requirements of our customers in the context of their

If we fail to understand their technology needs or markets, we limit our ability to meet those needs and to generate revenue.

We believe that by focusing on the technology needs of our customers, we are better positioned to generate revenues by providing technology solutions to them.

The market demands of our customers drive our

The better we understand their markets and requirements, the better we are able to identify and obtain effective technology solutions for our customers.

We rely on our professional staff and contract business development consultants to

understand our customers technical, commercial, and market requirements and constraints, and to identify and obtain effective technology solutions for them.

Additional hiring and business acquisitions could disrupt our operations, increase our costs or otherwise harm our business.

Our business strategy is dependent in part upon our ability to grow by hiring individuals or groups of individuals and by acquiring complementary

Our business strategy is dependent in part upon our ability to grow by hiring individuals or groups of individuals and by acquiring

complementary businesses.

However, we may be unable to identify, hire, acquire or successfully integrate new employees and acquired businesses without substantial expense, delay or other operational or financial obstacles.

Competition for future hiring and

acquisition opportunities in our markets could increase the compensation we offer to potential employees or the prices we pay for businesses we wish to acquire.

In addition, we may be unable to achieve the financial, operational and other benefits

we anticipate from any hiring or acquisition, including those we have completed so far.

Competition for future

hiring and acquisition opportunities in our markets could increase the compensation we offer to potential employees or the prices we pay for businesses we wish to acquire.

In addition, we may be unable to achieve the financial, operational and other

benefits we anticipate from any hiring or acquisition, including those we have completed so far.

Hiring additional employees or acquiring businesses could also involve a number of additional risks, including:

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The adverse short-term effects on reported operating results from the amortization or write-off of acquired goodwill and other intangible assets;

The potential impairment of existing relationships with our clients, such as client satisfaction or performance problems, whether as a result of integration or

management difficulties or otherwise;

The potential impairment of existing relationships with our clients, such as client satisfaction or performance problems, whether as a result of

integration or management difficulties or otherwise;

The creation of conflicts of interest that require us to decline or resign from engagements that we otherwise could have accepted;

The potential need to raise significant amounts of capital to finance a transaction or the potential issuance of equity securities that could be dilutive to our

existing stockholders;

The potential need to raise significant amounts of capital to finance a transaction or the potential issuance of equity securities that could be

dilutive to our existing stockholders;

Increased costs to improve, coordinate or integrate managerial, operational, financial and administrative systems;

The usage of contingent earnouts based on the future performance of our business acquisitions may deter the acquired company from fully integrating into our

existing business;

A decision not to fully integrate an acquired business may lead to the perception of inequalities if different groups of employees are eligible for different

benefits and incentives or are subject to different policies and programs.

If we fail to successfully address these

risks, our ability to compete may be impaired.

The failure to integrate or negotiate successfully any future acquisitions could harm our business and

operating results.

If we acquire businesses in the future and are unable to integrate successfully these businesses, it could harm our

business and operating results.

The usage of contingent earnouts based on the future performance of our business acquisitions may deter the acquired company from fully integrating

into our existing business;

A decision not to fully integrate an acquired business may lead to the perception of inequalities if different groups of employees are eligible for

different benefits and incentives or are subject to different policies and programs.

If we fail to successfully address these risks, our ability to compete may be impaired.

The failure to integrate or negotiate successfully any future acquisitions could harm our business and operating results.

If we acquire businesses in the future and are unable to integrate successfully these businesses, it could harm our business and operating

In order to remain competitive or to expand our business, we may find it necessary or desirable to acquire other businesses, products or technologies.

We may be unable to identify appropriate acquisition candidates.

If we identify an appropriate acquisition candidate, we may not be able to negotiate the terms of the acquisition successfully, finance the acquisition or integrate the acquired businesses, products or technologies into our existing business and

Further, completing a potential acquisition and integrating an acquired business may strain our resources and require significant management time.

In addition, we may revalue or write-down the value of goodwill and other intangible

assets in connection with future acquisitions, which would negatively affect our operating results.

Additional equity or debt financing may not be

available to our portfolio companies, which could result in our losing our cash outlay in connection with our technology acquisition alliances and technology transfers with the portfolio company if the portfolio company fails.

We expect that many of our portfolio companies will require additional equity or debt financing to ensure their continued viability.

The amount of

additional financing needed will depend upon the maturity and objectives of the particular portfolio company.

The availability of financing is generally a function of conditions that are beyond the control of our portfolio companies.

assure that our portfolio companies will be able to predict accurately the future financing requirements necessary for their success or that additional financing will be available to our portfolio companies from any source.

If additional equity or

debt financing is not available, some of our portfolio companies may be forced to cease operations, which could adversely affect our success and result in the loss of a substantial portion or all of our cash outlay in connection with our technology

acquisition alliances and technology transfers with the portfolio company.

Changes in the laws or regulations that govern us could have a material

impact on our operations.

Any change in the laws or regulations that govern our business could have a material impact on us or on our

If we identify an

appropriate acquisition candidate, we may not be able to negotiate the terms of the acquisition successfully, finance the acquisition or integrate the acquired businesses, products or technologies into our existing business and operations.

completing a potential acquisition and integrating an acquired business may strain our resources and require significant management time.

In addition, we may revalue or write-down the value of goodwill and other intangible assets in connection with

future acquisitions, which would negatively affect our operating results.

Changes in the laws or regulations that govern us could have a

material impact on our operations.

Any change in the laws or regulations that govern our business could have a material

impact on us or on our operations.

Laws and regulations may be changed from time to time, and the interpretations of the relevant laws and regulations also are subject to change.

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

We have operations in the United Kingdom and make investments in foreign companies.

As of December 31, 2008, approximately 14% of our assets were

comprised of assets in foreign operations and investments in foreign companies.

Certain risks are inherent in foreign operations,

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

have operations in the United Kingdom and may seek to expand our operations in other countries.

Certain risks are inherent in

foreign operations, including:

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

foreign clients may have longer payment cycles than clients in the U.S.;

tax rates in certain foreign countries may exceed those in the U.S.

and foreign earnings may be subject to withholding requirements, exchange controls or other

restrictions;

foreign clients may have longer payment cycles than clients in the US;

tax rates in certain foreign countries may exceed those in the US and foreign earnings may be subject to withholding requirements, exchange controls or

other restrictions;

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

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required compliance with a variety of foreign laws and regulations.

Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S.

These risks include changes in foreign exchange rates, exchange control regulations,

political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and

issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.

As we continue to expand our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other risks.

We cannot assure you that these and other factors will not

have a material adverse effect on our international operations or our business as a whole.

Our common stock may not continue to trade at a premium to

our net asset value.

Our common stock continues to trade in excess of our net asset value.

See Note 17 Selected Per Share Data

and Ratios to our consolidated financial statements included in this Form 10-K.

There can be no assurance, however, that our common stock will continue to trade at a premium to our net asset value.

The possibility that our common stock will

trade at premiums that are unsustainable over the long term is separate and distinct from the risk that our net asset value will decrease.

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

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

Such downward pressure could in turn encourage

short sales or similar trading with respect to shares of our common stock, which could in itself, place further downward pressure on the market price for shares of our common stock.

We may issue shares of our common stock in conjunction with the acquisition of other businesses, which may put downward pressure on the market price for shares of our common stock and create additional dilution of

the current shares outstanding.

Consistent with our current strategy, we may seek to acquire other businesses through the issuances of

common stock and or cash.

If common stock is used in these transactions, it would create additional dilution of

the current shares outstanding.

Investing in foreign companies, including innovation services firms, may expose us to additional risks not typically associated with

investing in US companies.

These risks include changes in foreign exchange rates, exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is

generally the case in the US, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards

and greater price volatility.

As we continue to expand our business globally, our success will depend, in part, on our

ability to anticipate and effectively manage these and other risks.

We cannot assure you that these and other factors will not have a material adverse effect on our international operations or our business as a whole.

We may issue shares of our common stock and warrants at a discount to the market price for such shares,

which may put downward pressure on the market price for shares of our common stock.

If we issue shares of our common stock

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

Such downward pressure could in turn encourage short sales or similar trading with respect to shares of our common

stock, which could in itself, place further downward pressure on the market price for shares of our common stock.

We may issue shares of

our common stock and warrants in conjunction with the acquisition of other businesses, which may put downward pressure on the market price for shares of our common stock and create additional dilution of the current shares outstanding.

Consistent with our current strategy, we may seek to acquire other businesses through the issuances of common stock and or

If common stock is used in these transactions, it would create additional dilution of the current shares outstanding.

Further, such issuances may result in downward pressure on our share price as a result of these additional shares being

Also, there is the potential that the market may not respond favorably to potential new acquisitions, which could also negatively affect our share price.

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

Gross, Ph.D., our

Chairman, beneficially owns approximately 18% of our common stock as of December 31, 2008.

Therefore, Dr.

Gross may be able to exert influence over our management and policies.

Gross may acquire additional equity in our company in

The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of the

sale of our company and might ultimately affect the market price of our common stock.

The recent departure of our chief executive officer could have an

adverse effect on our business, financial condition and results of operations.

Following the conclusion of his employment agreement, on

March 1, 2009, Clifford M.

Gross, Ph.D, our then Chief Executive Officer, retired from such position.

In addition, Dr.

Gross, who is also the Chairman of our Board of Directors, will not stand for re-election as a member of our Board of

Directors at our 2009 annual meeting of stockholders.

Over the years, we have been dependent upon Dr.

Gross key contacts with universities, medical research centers and federal research laboratories to maintain our access to new

technologies and our relationships with companies in the private sector in order to effectuate the sale of technology rights.

No assurances can be made that the retirement of Dr.

Gross will not have an adverse effect on our business, financial

condition and results of operations.

Future sales of our common stock in the public market could lower our stock price.

Gross, Ph.D., the Chairman of our Board of Directors, beneficially owns approximately 18% of our shares of common stock as of

December 31, 2008.

Gross is free to sell those shares by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933, subject to certain limitations.

pursuant to Rule 144, after satisfying a six month holding period:

(i) affiliated stockholders may, under certain circumstances, sell within any three month period a number of securities which does not exceed the greater of 1% of the then

outstanding shares of common stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale and (ii) non-affiliated stockholders may sell without such limitations, provided we are current in our public

reporting obligations.

Rule 144 also permits the sale of securities by non-affiliates that have satisfied a one year holding period without any limitation or restriction.

Any substantial sale of our common stock pursuant to Rule 144 may have a

material adverse effect on the market price of our securities.

In addition, Dr.

Gross has registration rights which require us to

We cannot predict the effect, if any, that future sales of shares of our common stock, or the availability of such shares for sale, would have on the market price prevailing from time to time.

Gross of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect prevailing market prices for our common stock.

Such a reduction in the market price of our

common stock could impair our ability to raise additional capital through future public offerings of our equity securities.

We may need additional

capital in the future and it may not be available on acceptable terms.

We have historically relied on equity financing and, to a lesser

extent, cash flow from operations including the sale of our investments and debt financing to fund our operations, capital expenditures and expansion.

However, we may require additional capital in the future to fund our operations or respond to

competitive pressures or strategic opportunities.

We cannot assure that additional financing will be available on terms

favorable to us, or at all.

We may need additional capital in the future and it may not be available on acceptable terms.

We have historically relied on equity financing and, to a lesser extent, cash flow from operations including the sale of our investments and debt financing to fund our operations, capital expenditures and

However, we may require additional capital in the future to fund our operations or respond to competitive pressures or strategic opportunities.

We cannot assure that additional financing will be available on terms favorable to us, or at

In addition, the terms of available financing may place limits on our financial and operating flexibility.

If we are unable to

obtain sufficient capital in the future, we may:

If we are unable to obtain sufficient capital in the future, we may:

be forced to reduce our operations;

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not be able to develop new services or otherwise respond to changing business conditions or competitive pressures.

Regulations governing our operation as a business development company will affect our ability to and the way in which we raise additional capital.

We may require additional capital in the future to fund our operations or respond to competitive pressures or strategic opportunities.

We may acquire

additional capital from the following sources:

Senior Securities and Other Indebtedness.

We may issue debt securities or preferred

stock and/or borrow money from banks or other financial institutions, which we refer to collectively as senior securities, up to the maximum amount permitted by the 1940 Act.

If we issue senior securities, including debt or preferred stock, we will

be exposed to additional risks, including the following:

Under the provisions of the 1940 Act, we will be permitted, as a BDC, to issue senior securities only in amounts such that our asset coverage, as defined in the

1940 Act, equals at least 200% after each issuance of senior securities.

If the value of our assets declines, we may be unable to satisfy this test.

If that happens, we will be prohibited from incurring additional debt until we satisfy this test;

It is likely that any senior securities or other indebtedness we issue will be governed by an indenture or other instrument containing covenants restricting our

operating flexibility;

We, and indirectly, our stockholders will bear the cost of issuing and servicing such securities and other indebtedness;

Preferred stock or any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of

our common stock, including separate voting rights and could delay or prevent a transaction or a change in control to the detriment of the holders of our common stock.

Additional Common Stock.

We are not generally able to issue and sell our common stock at a price below our net asset value per share.

however, sell our common stock, warrants, options or rights to acquire our common stock, at a price below our net asset value of the common stock if our Board of Directors determines that such sale is in our best interests and that of our

stockholders, and our stockholders approve such sale.

In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board of Directors, closely approximates the market

value of such securities (less any distributing commission or discount).

We may also make rights offerings to our stockholders at prices per share less than the net asset value per share, subject to applicable requirements of the 1940 Act.

raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders at that time would decrease and they may experience dilution.

can offer no assurance that we will be able to issue and sell additional equity securities in the future, on favorable terms or at all.

stock price may be volatile.

The trading price of our common stock has fluctuated significantly and may continue to fluctuate

substantially, depending on many factors, many of which are beyond our control and may not be directly related to operating performance.

Our common stock price may be volatile.

The trading price of our common stock has fluctuated significantly and may continue to fluctuate substantially, depending on many factors, many of which are beyond our control and may not be directly

related to operating performance.

These factors include the following:

price and volume fluctuations in the overall stock market from time to time;

significant volatility in the market price and trading volume of securities of BDCs or technology transfer companies;

changes in regulatory policies, accounting or tax guidelines with respect to BDCs or technology transfer companies;

significant volatility in the market price and trading volume of securities of innovation services firms and technology transfer companies;

changes in regulatory policies, accounting or tax guidelines with respect to innovation services firms and technology transfer companies;

actual or anticipated changes in our sales or earnings or fluctuations in our operating results;

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the consummation of mergers or acquisitions of related businesses.

As a publicly held company, we have significantly higher administrative costs.

The Sarbanes-Oxley Act of 2002, as well as new rules implemented by the SEC and new listing requirements adopted by the American Stock Exchange in response to the Sarbanes-Oxley Act of 2002, has required changes in corporate governance

practices, internal control policies and audit control practices of public companies.

These new rules, regulations, and requirements have increase our legal, audit, financial, compliance and administrative costs, and have made certain other

activities more time consuming and costly.

The additional costs are expected to continue.

These rules and regulations may make it more difficult and more expensive for us to obtain directors and officers liability insurance in the future, and could

make it more difficult for us to attract and retain qualified members for our Board of Directors, particularly to serve on our audit committee.

We may experience outages and disruptions in connection with our online licensing services if we fail to maintain an adequate operations infrastructure.

We have spent and expect to continue to spend substantial amounts to maintain equipment and to upgrade our technology and network infrastructure relating to our online licensing services.

inefficiencies or operational failures could diminish the quality of our services, and client experience, resulting in damage to our reputation and loss of current and potential users, and subscribers, harming our operating results and financial

The agreements relating to our indebtedness may restrict our current and future operations.

Our debt agreements contain, and any future agreements may include, a number of restrictive covenants that impose significant operating and

financial restrictions on, among other things, our ability to:

incur additional debt, including guarantees;

sell or otherwise dispose of assets;

make investments, loans or advances;

make some acquisitions;

engage in mergers or consolidations;

make capital expenditures;

pay dividends.

Any future debt could contain financial and other covenants more restrictive than those that are currently applicable.

failure to comply with the agreements relating to our outstanding indebtedness, including as a result of events beyond our control, could result in an event of default that could materially and adversely affect our operating results and our

financial condition.

If there were an event of default under any of the agreements relating to our outstanding

indebtedness the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately.

We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our

outstanding debt instrument, either upon maturity or if accelerated upon an event of default.

Further, if we were unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such

debt could proceed against the collateral securing that indebtedness.

In addition, any event of default or declaration or acceleration under one debt instrument could also result in an event of

default under one or more of our other debt instruments.

We may not be able to generate sufficient cash flow to meet our debt service

Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt

obligations will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside our control.

If we do not generate sufficient cash flow from operations to

satisfy our debt obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital.

We cannot assure you

that any refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, or that additional financing could be obtained on acceptable terms, if at all, or

would be permitted under the terms of our various debt agreements then in effect.

Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms, would have an adverse

effect on our business, financial condition and results of operations, as well as on our ability to satisfy our debt obligations.

Unresolved Staff Comments

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors