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Item 1A. Risk Factors

2011-03-30 compared with 2010-03-22 · 214 added, 232 removed, 58 unchanged (88% of the section changed)

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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:

Changes in the economy;

Changes in the market for technology transfer and innovation services;

Risks associated with possible disruption in our operations due to terrorism;

Future regulatory actions and conditions in our operating areas;

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.

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.

RISKS RELATED TO ECONOMIC CONDITIONS

Current challenging economic conditions may adversely affect our business.

Challenging economic conditions related to the protracted worldwide economic downturn that began in 2008 may affect our sales and renewals

of our products and services, and could negatively affect our revenues and our ability to maintain or grow our business.

Instability in the financial markets associated with the economic downturn has resulted in a tightening of credit markets, which

could impair the ability of our customers to obtain credit to finance purchases of our products or impair our ability to obtain credit to finance our business.

Our client base is diverse and each client or potential client faces a unique set of

These risks include, for example, the availability of public funds and the possibility of state and local budget cuts, or lower revenues, any of which could lead to a reduction in overall spending, including information technology spending,

by our current and potential clients and a corresponding decline in demand for our products and services.

A prolonged economic downturn may result in a reduction in overall demand for our products and services, which could cause a decline in both

new sales and renewals of our existing products and difficulty in establishing a market for our new products and services.

In addition, we have experienced some lengthening of payment cycles and, depending on the future economic climate, may see a

continuation of this trend.

Furthermore, our accounts receivable may increase and the relative aging of our receivables may deteriorate if our clients delay or are unable to make their payments due to the tightening of credit markets and the lack of

available funding.

RISKS RELATED TO OUR PRODUCTS AND SERVICES

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

The consulting services business in which we operate includes a large number of participants and is intensely competitive.

We face competition from business operations and financial consulting firms,

general management consulting firms, the consulting practices of major accounting firms, technical and economic advisory firms, regional and specialty consulting firms and the internal professional resources of organizations.

In addition, because

there are relatively low barriers to entry, we expect to continue to face additional competition from new entrants into the business operations and financial consulting industries.

Many of our competitors have a greater national and international

presence, as well as have significantly greater personnel, financial, technical and marketing resources.

In addition, these competitors may generate greater revenues and have greater name recognition than we do.

Our ability to compete also depends

in part on the ability of our competitors to hire, retain and motivate skilled professionals, the price at which others offer comparable services and our competitors responsiveness to their clients.

If we are unable to compete successfully

with our existing competitors or with any new competitors, it 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.

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.

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 pay

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 and because our expenses are generally longer term in nature, our revenue and profits may decline.

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.

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 developing an innovation software platform to create a new revenue stream.

We cannot be certain that we will be

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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 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 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.

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.

The innovation consulting services business in which we operate includes a large number of participants and is intensely competitive.

competition from other business operations and financial consulting firms, general management consulting firms, the consulting practices of major accounting firms, technical and economic advisory firms, regional and specialty consulting firms and

the internal professional resources of organizations.

In addition, because there are relatively low barriers to entry, we expect to continue to face additional competition from new entrants into the business operations and financial consulting

Many of our competitors have a greater national and international presence, as well as have significantly greater personnel, financial, technical and marketing resources.

In addition, these competitors may generate greater revenues and

have greater name recognition than we do.

Our ability to compete also depends in part on the ability of our competitors to hire, retain and motivate skilled professionals, the price at which others offer comparable services and our competitors

responsiveness to their clients.

If we are unable to compete successfully with our existing competitors or with any new competitors, it could negatively affect our operating results.

Our inability to hire and retain talented people in an industry where there is great competition for talent could have a serious negative effect on our services and results of operations.

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.

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

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.

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.

However, any 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 condition.

A significant portion of

our revenue is derived from a limited number of clients, which may cause our operating results to be unpredictable.

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

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

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:

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 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.

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.

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 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.

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

The diversion of managements time, attention and resources from managing the Company;

The failure to retain key acquired personnel;

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 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;

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

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

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.

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 successful technology development.

believe that it will be necessary for us to continue to incur significant research and development expenditures in order for us to remain competitive.

While we believe our research and development expenditures will improve our product lines, because

of the uncertainty of software development projects and risks posed by the current economic downturn, these expenditures will not necessarily result in successful product introductions or sustained revenue levels.

Uncertainties affecting the success

of software development project introductions include technical difficulties, delays in the introductions of new products, market conditions, competitive products, and customer acceptance of and demand for new products and the operating systems they

We also face certain challenges in integrating third-party technology embedded in our products.

These challenges include the technological challenges of integration, which may result in development delays, and uncertainty regarding the

economic terms of our relationship with our third-party technology providers, which may result in delays of the commercial release of new products.

In addition, if we are required to adopt cost-conservation measures, we may be compelled to reduce

the amounts of our investment in research and development activities, which could adversely affect our ability to maintain the competitiveness of our existing products, our ability to develop new products, and our future research and development

capabilities.

Failure to continue to timely develop technologies and products necessary for us to remain competitive is likely to have a material and adverse effect on our business.

RISKS RELATED TO BUSINESS OPERATIONS

Our quarterly and annual results fluctuate

significantly.

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

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.

We have grown, and may continue to grow, through acquisitions and

strategic investments, which could involve substantial risks.

We have made and may continue to make acquisitions of or

significant investments in, businesses that offer complementary products and services.

The risks involved in each acquisition or investment include the possibility of paying more than the value we derive from the acquisition, dilution of the

interests of our current stockholders or decreased working capital, increased indebtedness, the assumption of undisclosed liabilities and unknown and unforeseen risks, the ability to retain key personnel of the acquired company, the inability to

integrate the business of the acquired company, the time to train the sales force to market and sell the products of

the acquired business, the potential disruption of our ongoing business and the distraction of management from our business.

The realization of any of these risks could adversely affect our

Additionally, we face competition in identifying acquisition targets and consummating acquisitions.

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.

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 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.

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.

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.

Our inability to hire and retain talented people in an industry where there is great competition for talent could have a serious negative effect on our services and results of operations.

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

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 failure to renew our employment contracts with certain with key consulting professionals could have a

serious negative effect on our financial condition and results of operations.

Our strategic services revenue in recent

years has largely been dependent on the efforts of certain key consulting professionals, including Peter Skarzynski, the managing director of our Strategos Services division, whose employment contracts with us expire in April 2011.

If we are not

successful in retaining these consulting professionals or timely hiring similarly qualified and skilled consulting professionals to replacement them, then we may not be able to maintain the level of strategic services revenue we have generated in

recent years and our financial condition and results of operations will likely be negatively impacted.

We have a history of operating

losses and may not achieve profitability on an annual basis in the future.

For the years ended December 31, 2010 and

December 31, 2009, we recorded net losses of $19.1 million and $15.3 million, respectively.

As of December 31, 2010, our accumulated deficit was $71.8 million.

We expect to continue to make significant expenditures related to the continued

development of our business, including our innovation management software platform.

We may therefore sustain significant operating losses and negative cash flows in the future.

We will have to maintain significant increased revenue and product gross

margins to achieve profitability on an annual basis.

We may need additional capital, which may not be available on acceptable terms, if at all, and any

additional financing may be on terms adverse to your interests.

We may need additional cash to fund our operations.

capital needs will depend on numerous factors, including market conditions and our profitability.

We cannot be certain that we will be able to obtain additional financing on favorable terms, if at all.

If additional financing is not available when

required or is not available on acceptable terms, we may be unable to fund our innovation software business, successfully promote our brand name, develop or enhance our services, take advantage of business opportunities, or respond to competitive

pressures or unanticipated requirements, any of which could seriously harm our business and reduce the value of your investment.

If we are able to raise additional funds, if and when needed, by issuing additional equity securities, you may

experience significant dilution of your ownership interest and holders of these new securities may have rights senior to yours as a holder of our common stock.

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.

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

Certain risks are inherent in

foreign operations, including:

We 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;

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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.

We may incur additional impairments to goodwill and intangible assets.

We are required to test goodwill and intangible assets for impairment annually or if a triggering event occurs in accordance with the provisions of ASC Topic 350 IntangiblesGoodwill and

Such impairment could be caused by internal factors as well as external factors beyond our control.

Significant negative industry or economic trends, including the lack of recovery in the

market price of our common stock, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth in the areas in which we generate revenues could lead to an impairment charge for any of our intangible

assets or goodwill.

If, in any period, our stock price decreases to the point where the fair value of the Company, as determined by our market capitalization, is less than our book value, this too could indicate a potential impairment and we may be

required to record an impairment charge in our statement of operations in that period which would cause an increase in our net loss.

Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance.

We operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results.

Additionally, if a significant decline in our stock price and/or market capitalization result in

impairment to our goodwill, we may be required to record a charge to earnings in our financial statements during a period in which such impairment is determined to exist, which may negatively impact our results of operations.

RISKS RELATED TO OUR COMMON STOCK AND DEBT FINANCING ARRANGEMENTS

The continued listing of our common stock on the NYSE Amex is subject to compliance with continued listing requirements.

While we have not received any notice of intent to delist our common stock, if

our common stock were delisted, the ability of investors in our common stock to make transactions in such stock would be limited.

Our common stock is listed on the NYSE Amex.

The continued listing of our common stock on the NYSE Amex requires us to meet continued listing requirements set forth in the NYSE Amexs Company Guide.

These requirements include both quantitative and qualitative standards.

While we have not received any notice of intent to delist our common stock, investors should be aware that if the NYSE Amex were to delist our common stock from trading on its

exchange, this would limit investors ability to make transactions in our common stock.

We may issue shares of our common stock and

warrants to purchase 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 or warrants to purchase shares of our common

stock with an exercise price below 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.

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

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

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:

be forced to reduce our operations;

not be able to expand or acquire complementary businesses;

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

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.

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:

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

actual or anticipated changes in the value of our investments;

changes in financial reporting requirements;

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departures of key personnel;

changes to the market or shareholders acceptance of our unique technology transfer business;

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:

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;

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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.

Our 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 obligations.

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

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