**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**Form
      10-QSB**





þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
                the quarterly period ended December 31,
                2007





OR


o TRANSITION
      REPORT UNDER SECTION 13
      OR 15(d) OF THE EXCHANGE ACT





For
                the transition period from ______ to
                ________





Commission
      File No. 001-33495





**COLLEXIS
      HOLDINGS, INC.**


( Exact
      name of small business issuer as specified in its charter)





**Nevada**
            
            **20-0987069**(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                Number)





**1201
      Main Street, Suite 980**


**Columbia,
      SC 29201**


(Address
      of principal executive offices)





**(803)
      727-1113**


(Issuer’s
      telephone number)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days.


x Yes   
       o No





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). o Yes    
      x No





The
      number of outstanding shares of the registrant’s common stock on February 12,
      2008 was 74,145,074.





Transitional
      Small Business Disclosure Format (Check one):   o Yes    
      x No








**COLLEXIS
      HOLDINGS, INC.**


**Form 10-QSB**


**For
      the Quarter Ended December 31, 2007**








**Table
                of Contents****Part
                I - Financial Information**
            Page
                No.Item
                1
            Financial
                Statements
            4Item
                2
            Management’s
                Discussion and Analysis or Plan of Operation
            18Risk
                Factors
            26Item
                3A(T)
            Controls
                and Procedures
            29**Part
                II - Other Information**Item
                1
            Legal
                Proceedings
            30Item
                2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            30Item
                3
            Defaults
                Upon Senior Securities
            30Item
                4
            Submission
                of Matters to a Vote of Security Holders
            30Item
                5
            Other
                Information
            30Item
                6
            Exhibits
            30Signatures
            
            32Ex-31
              Section
              302 Certification of CEO and CFOEx-32
                Section 906 Certification of CEO and CFO




2


**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





This
      report contains forward-looking statements that involve a number of risks and
      uncertainties. Although our forward-looking statements reflect the good faith
      judgment of our management, these statements can be based only on facts and
      factors of which we are currently aware. Consequently, forward-looking
      statements are inherently subject to risks and uncertainties. Actual results
      and
      outcomes may differ materially from results and outcomes discussed in the
      forward-looking statements.





Forward-looking
      statements can be identified by the use of forward-looking words such as “may,”
“will,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,”
“could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative
      of these terms or other similar expressions. These statements include, but
      are
      not limited to, statements under the caption “Management’s Discussion and
      Analysis or Plan of Operation” as well as other sections in this report. Such
      forward-looking statements are based on our management’s current plans and
      expectations and are subject to risks, uncertainties and changes in plans that
      could cause actual results to differ materially from those anticipated in the
      forward-looking statements. You should be aware that, as a result of any of
      these factors materializing, the trading price of our common stock could
      decline, and you could lose all or part of the value of your shares of our
      common stock. These factors include, but are not limited to, the
      following:





·
            the
                availability and adequacy of capital to pay the deferred payment
                obligations we owe and to support and grow our
                business;


·
            our
                ability to integrate our European operations successfully after our
                recent
                acquisition of SyynX Solutions GmbH;


·
            our
                ability to integrate our recent acquisition of
                Lawriter;


·
            our
                ability to enhance the products and services of Lawriter’s
                Casemaker®online legal research service;


·
            our
                ability to increase participation in and generate revenues from our
                new
                BioMedExperts social networking
                website;


·
            competition
                in our industry;


·
            changes
                in our business and growth strategy, capital improvements or development
                plans;


·
            whether
                our research and development efforts will produce software products
                that
                will be attractive to our customers and profitable to us;


·
            currency
                exchange rates; and


·
            other
                factors discussed under (a) the section of Item 2 below entitled
“Risk
                Factors” and (b) the section entitled “Risk Factors” in our transition
                report on Form 10-KSB, as amended, filed with the SEC or discussed
                elsewhere in this report.





The
      cautionary statements made in this report are intended to apply to all related
      forward-looking statements wherever they may appear in this report.





We
      urge
      you not to place undue reliance on these forward-looking statements, which
      speak
      only as of the date of this report. We undertake no obligation to publicly
      update any forward looking-statements, whether as a result of new information,
      future events or otherwise.


3


**PART
      I - FINANCIAL INFORMATION**





**ITEM
                1.**
            **FINANCIAL
                STATEMENTS**





Our
      unaudited consolidated financial statements included in this report on Form
      10-QSB are as follows:





Consolidated
      Balance Sheet as of December 31, 2007


Consolidated
      Statements of Operations for the three and six months ended December 31, 2007
      and 2006


Consolidated
      Statements of Comprehensive Loss for the three and six months ended December
      31,
      2007 and 2006


Consolidated
      Statements of Cash Flows for the six months ended December 31, 2007 and
      2006


Notes
      to
      Consolidated Financial Statements





4




**Collexis
      Holdings, Inc. and Subsidiaries**


**Consolidated
      Balance Sheet**


**(Unaudited)**





**December
                31,****2007****ASSETS**Currents
                assetsCash
                and cash equivalents
            
            $
            1,078,631Accounts
                receivable, net of allowance for doubtful accounts of
                $2,651
            
            
            1,533,635Prepaid
                expenses and other current assets
            
            
            424,677Total
                current assets
            
            
            3,036,943Property
                and equipment, at cost, net of accumulated depreciation of
                $507,665
            
            
            408,188Intangibles,
                net of accumulated amortization of $212,393
            
            
            5,054,056Goodwill
            
            
            3,904,433Other
                assets
            
            
            111,005Total
                Assets
            
            $
            12,514,625**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilitiesAccounts
                payable trade
            
            $
            841,756Accrued
                expenses
            
            
            1,093,072Deferred
                revenue
            
            
            710,821Deferred
                tax liability, net
            
            
            11,645Current
                portion of deferred purchase price
            
            
            2,047,082Total
                current liabilities
            
            
            4,704,376Non-current
                liabilitiesDeferred
                tax liability
            
            
            1,595,396Deferred
                purchase price
            
            
            3,041,020Total
                non-current liabilities
            
            
            4,636,416Total
                liabilities
            
            
            9,340,792Stockholders’
                equityCommon
                stock, par value $0.001; authorized 100,000,000 shares;
                70,045,089****sharesissued
                and outstanding as of December 31, 2007
            
            
            70,045Additional
                paid-in capital
            
            
            21,101,591Accumulated
                other comprehensive income
            
            
            256,066Accumulated
                deficit
            
            
            (18,253,869
            )3,173,833Total
                Liabilities and Stockholders’ Equity
            
            $
            12,514,625






The
      accompanying notes are an integral part of these consolidated financial
      statements.


5





**Collexis
      Holdings, Inc. and Subsidiaries**


**Consolidated
      Statements of Operations**


**(Unaudited)**





**Three
                Months Ended December 31,**
            
            **Six
                Months Ended December 31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**RevenueLicense
                Revenue
            
            $
            234,906
            
            $
            18,665
            
            $
            278,371
            
            $
            45,877Service
                Revenue
            
            
            589,680
            
            
            441,472
            
            
            658,569
            
            
            652,743Maintenance
                & Support Revenue
            
            
            95,225
            
            
            76,901
            
            
            276,550
            
            
            166,559Hardware
                & Hosting Revenue
            
            
            37,604
            
            
            5,007
            
            
            50,687
            
            
            8,759Total
                Revenue
            
            
            957,415
            
            
            542,045
            
            
            1,264,177
            
            
            873,938Cost
                of RevenueCost
                of License Revenue
            
            
            33,986
            
            
            929
            
            
            42,975
            
            
            929Cost
                of Service Revenue
            
            
            263,206
            
            
            232,614
            
            
            338,373
            
            
            300,884Cost
                of Maintenance & Support Revenue
            
            
            75,051
            
            
            180,023
            
            
            209,802
            
            
            310,083Cost
                of Hardware & Hosting Revenue
            
            
            29,287
            
            
            5,365
            
            
            37,219
            
            
            11,827Total
                Cost of Revenue
            
            
            401,530
            
            
            418,931
            
            
            628,369
            
            
            623,723Gross
                Profit
            
            
            555,885
            
            
            123,114
            
            
            635,808
            
            
            250,215Operating
                expensesGeneral
                and administrative
            
            
            2,119,747
            
            
            1,317,819
            
            
            3,246,456
            
            
            2,172,275Sales
                and marketing
            
            
            799,692
            
            
            93,256
            
            
            1,407,904
            
            
            179,110Research
                and Development
            
            
            511,143
            
            
            199,921
            
            
            778,521
            
            
            399,842Total
                operating expenses
            
            
            3,430,582
            
            
            1,610,996
            
            
            5,432,881
            
            
            2,751,227Operating
                loss
            
            
            (2,874,697
            )
            
            (1,487,882
            )
            
            (4,797,073
            )
            
            (2,501,012
            )Other
                income
            
            
            166
            
            
            27,374
            
            
            162
            
            
            30,228Loss
                before interest expense
            
            
            (2,874,531
            )
            
            (1,460,508
            )
            
            (4,796,911
            )
            
            (2,470,784
            )Interest
                expense
            
            
            (104,582
            )
            
            -
            
            
            (95,041
            )
            
            -Loss
                before income tax benefit
            
            
            (2,979,113
            )
            
            (1,460,508
            )
            
            (4,891,952
            )
            
            (2,470,784
            )Tax
                benefit
            
            
            135,550
            
            
            -
            
            
            132,072
            
            
            41,635NET
                LOSS
            
            $
            (2,843,563
            )
            $
            (1,460,508
            )
            $
            (4,759,880
            )
            $
            (2,429,149
            )Basic
                and diluted common shares outstanding
            
            
            65,976,003
            
            
            13,270,037
            
            
            63,949,494
            
            
            13,270,037Basic
                and diluted net loss per share
            
            $
            (0.04
            )
            $
            (0.11
            )
            $
            (0.07
            )
            $
            (0.18
            )






The
      accompanying notes are an integral part of these consolidated financial
      statements.


**Certain
      prior period amounts have been reclassified to conform to current period
      presentation.**


6





**Collexis
      Holdings, Inc. and Subsidiaries**


**Consolidated
      Statements of Comprehensive Loss**


**(Unaudited)**





**Three
                Months Ended**
              **December
                31,**
            
            **Six
                Months Ended**
              **December
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Net
                loss
            
            $
            (2,843,563
            )
            $
            (1,460,508
            )
            $
            (4,759,880
            )
            $
            (2,429,149
            )Foreign
                currency translation adjustment
            
            
            221,112
            
            
            (83,688
            )
            
            229,981
            
            
            (280,918
            )Comprehensive
                loss
            
            $
            (2,622,451
            )
            $
            (1,544,196
            )
            $
            (4,529,899
            )
            $
            (2,710,067
            )






The
      accompanying notes are an integral part of these consolidated financial
      statements.


7





**Collexis
      Holdings, Inc. and Subsidiaries**


**Consolidated
      Statements of Cash Flows**


**(Unaudited)**





**Six
                Months Ended December 31,****2007**
            
            **2006**Cash
                flows from operating activities:Net
                loss
            
            $
            (4,759,880
            )
            $
            (2,429,149
            )Adjustments
                to reconcile net loss to net cash used in operating
                activitiesDepreciation
                and amortization
            
            
            256,201
            
            
            12,659Compensation
                paid through issuance of stock options
            
            
            393,230
            
            
            117,772Loss
                on disposition of assets
            
            
            15,086
            
            
            -Changes
                in operating assets and liabilities, net of acquired
                items:Accounts
                receivable
            
            
            (477,128
            )
            
            41,511Prepaid
                expenses
            
            
            (227,880
            )
            
            (250,379
            )Other
                receivables
            
            
            79,125
            
            
            (53,873
            )Other
                assets & deferred charges
            
            
            -
            
            
            (658,650
            )Deferred
                tax liability, net
            
            
            (66,557
            )
            
            -Accounts
                payable
            
            
            394,118
            
            
            218,123Accrued
                expenses
            
            
            184,382
            
            
            329,188Deferred
                revenue
            
            
            457,608
            
            
            111,989Net
                cash used in operating activities
            
            
            (3,751,695
            )
            
            (2,560,809
            )Cash
                flows from investing activitiesAdditions
                to equipment
            
            
            (180,544
            )
            
            (70,098
            )Acquisition
                of intangible
            
            
            (831
            )
            
            -Acquisition
                of SyynX, net of cash acquired
            
            
            96,719
            
            
            -Net
                cash used in investing activities
            
            
            (84,656
            )
            
            (70,098
            )Cash
                flows from financing activitiesRepayment
                of loan from stockholder
            
            
            (650,000
            )
            
            -Partial
                payment on deferred obligation
            
            
            (2,106,331
            )
            
            -Fees
                paid to raise capital
            
            
            (151,298
            )
            
            -Cash
                received on subscribed stock
            
            
            7,669,293
            
            
            3,264,241Net
                cash provided by financing activities
            
            
            4,761,664
            
            
            3,264,241Net
                increase in cash and cash equivalents
            
            
            925,313
            
            
            633,334Effect
                of exchange rate changes on cash and cash equivalents
            
            
            (33,943
            )
            
            (110,086
            )Cash
                and cash equivalents at beginning of period
            
            
            187,261
            
            
            598,922Cash
                and cash equivalents at end of period
            
            $
            1,078,631
            
            $
            1,122,170Supplemental
                disclosures of cash flow information:Cash
                paid during the period forInterest
            
            $
            39,616
            
            $
            30,228Income
                taxes
            
            $
            -
            
            $
            -Non
                cash financing and investing activity:Deferred
                obligation on acquisition of SyynX
            
            $
            8,001,532
            
            $
            -Credit
                for option to acquire SyynX paid
            
            $
            (736,450
            )
            $
            -






The
      accompanying notes are an integral part of these consolidated financial
      statements.





8


**Collexis
        Holdings, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**


**NOTE
              1.**
            **DESCRIPTION
                OF BUSINESS AND BASIS OF
                PRESENTATION**





Collexis
      Holdings, Inc., sometimes referred to as Collexis (and “we,” “us,” or “our”) in
      these Notes, is a global software development company headquartered
      in Columbia, South Carolina with major operations in Cincinnati, Ohio,
      Geldermalsen, the Netherlands and Cologne, Germany .
      Collexis develops software that supports the knowledge intensive market-building
      tools to search and mine large sets of information. The Collexis Engine 6.0
      software enables discovery through identification, ordering and aggregation
      of
      ideas and concepts. Using public as well as proprietary thesauri of industry
      specific language, Collexis can create “fingerprints” of texts - such as
      articles, web pages, books and internal and external databases – that can be
      used in turn to find the most relevant information for a researcher or business
      professional. Collexis operates several subsidiaries that support its core
      technology sales in the government, enterprise, and life science sectors.
      Collexis recently acquired an industry-dedicated subsidiary – Lawriter
–
which
      provides online legal research services to lawyers in the United States through
      state bar associations. Collexis now offers the world’s first pre-populated
      professional social network for life science researchers, www.biomedexperts.com.





Technology
      Holdings, Inc., which subsequently changed its name to Collexis Holdings, Inc.,
      filed a Current Report on Form 8-K with the U.S. Securities and Exchange
      Commission (“SEC”) on February 14, 2007 to report the reverse merger whereby
      Collexis B.V., an operating company, became a wholly owned subsidiary of
      Technology Holdings, Inc., a reporting shell company. Collexis B.V., which
      was
      the acquirer in the merger for accounting purposes, had a calendar fiscal year.
      Technology Holdings, Inc., which was the acquiree in the merger for accounting
      purposes, has a fiscal year that ends on June 30. Because we adopted the
      July-June fiscal year of Technology Holdings, Inc., the consolidated financial
      statements in this report are for the second quarter of our fiscal
      year.





We
      have
      prepared the unaudited consolidated interim financial statements included in
      this report in accordance with accounting principles generally accepted in
      the
      United States and pursuant to the rules and regulations of the SEC, including
      Form 10-QSB and Regulation S-B. The financial information contained in this
      report is unaudited; however, in the opinion of management, we have included
      all
      adjustments necessary for a fair presentation of such financial information.
      All
      such adjustments are of a normal recurring nature. The results of operations
      for
      the six months ended December 31, 2007 are not necessarily indicative of the
      results expected for the full year ending June 30, 2008.





**NOTE
              2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES**





*Principles
      of Consolidation*





The
      consolidated financial statements include the accounts of Collexis Holdings,
      Inc. and its wholly-owned subsidiaries, Collexis B.V., Collexis, Inc. and SyynX
      Solutions GmbH, for all periods presented. All significant intercompany accounts
      and transactions have been eliminated in consolidation.





*Fiscal
      Year End*





The
      company’s fiscal year end for financial reporting is June 30. The company’s
      fiscal year end for income tax reporting is December 31.




9


**Collexis
        Holdings, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**


*Fair
      Value of Financial Instruments*





Statement
      of Financial Accounting Standards (“SFAS”) No. 107, “Disclosure About Fair Value
      of Financial Instruments,” requires the company to disclose, when reasonably
      attainable, the fair market values of its assets and liabilities that are deemed
      to be financial instruments. The carrying amounts and estimated fair values
      of
      the company’s financial instruments approximate their fair value due to their
      short-term nature.





*Use
      of Estimates*





The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States requires management to make
      estimates and assumptions that affect the reported amounts of assets,
      liabilities, revenues and expenses and related disclosure of contingent assets
      and liabilities. Significant estimates include: the valuation of shares issued
      for services or in connection with acquisitions; the valuation of fixed assets
      and intangibles and their estimated useful lives; and contingencies. The company
      evaluates its estimates on an ongoing basis. Actual results could differ from
      those estimates under different assumptions or conditions.





*Revenue
      Recognition*





We
      recognize revenue in accordance with Statement of Position 97-2, “Software
      Revenue Recognition” (“SOP 97-2”), and Statement of Position 98-9, “Modification
      of SOP 97-2, Software Revenue Recognition, With Respect to Certain
      Transactions.” We recognize revenue from non-cancelable software licenses when
      the license agreement has been signed, delivery has occurred, the fee is fixed
      or determinable and collectibility is probable. We recognize license revenue
      from resellers when an end user has placed an order with the reseller and the
      above revenue recognition criteria have been met with respect to the reseller.
      In multiple element arrangements, we defer the vendor-specific objective
      evidence of fair value (“VSOE”) related to the undelivered elements and
      recognizes revenue on the delivered elements using the percentage-of-completion
      method.





The
      most
      commonly deferred elements are initial maintenance and consulting services.
      We
      recognize initial maintenance on a straight-line basis over the initial
      maintenance term. We determine VSOE of maintenance by using a consistent
      percentage of maintenance fee to license fee based on renewal rates. We
      recognize maintenance fees in subsequent years on a straight-line basis over
      the
      life of the applicable agreement. Maintenance contracts entitle the customer
      to
      hot-line support and all unspecified product upgrades released during the term
      of the maintenance contract. Upgrades include any and all unspecified patches
      or
      releases related to a licensed software product. Maintenance does not include
      implementation services to install these upgrades. We determine VSOE of services
      by using an average consulting rate per hour for consulting services sold
      separately, multiplied by the estimate of hours required to complete the
      consulting engagement.





Delivery
      of software generally occurs when the product (on CDs) is delivered to a common
      carrier. Occasionally, delivery occurs through electronic means whereby the
      company makes the software available to the customer through the company’s
      secure FTP (File Transfer Protocol) site. We do not offer any customers or
      resellers a right of return.





For
      software license, services and maintenance revenue, we assess whether the fee
      is
      fixed and determinable, we have performed the services and whether or not
      collection is probable. We assess whether the fee is fixed and determinable
      based on the payment terms associated with the transaction.




10





**Collexis
      Holdings, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**




If
      a
      significant portion of a fee is due after the company’s normal payment terms,
      which are 30 to 90 days from invoice date, the fee is not considered fixed
      and
      determinable. In these cases, we recognize revenue as the fees become
      due.





We
      assess
      assuredness of collection based on a number of factors, including past
      transaction history with the customer and the credit-worthiness of the customer.
      We do not ask customers for collateral. If we determine that collection of
      a fee
      is not probable, we defer the fee and recognize the revenue when collection
      becomes probable, which is generally when we receive payment.





Our
      arrangements do not generally include acceptance clauses. If an arrangement
      includes an acceptance provision, however, acceptance occurs upon the earliest
      of receipt of a written customer acceptance or expiration of the acceptance
      period.





We
      bill
      the majority of our training and consulting services based on hourly rates.
      We
      generally recognize revenue as we perform these services. However, when an
      arrangement with a customer is based on a fixed fee or requires significant
      work
      either to alter the underlying software or to build additional complex
      interfaces to enable the software to perform as the customer requests, we
      recognize the related revenue using the percentage of completion method of
      accounting. The percentage of completion method of accounting applies to our
      custom programming services, which are generally contracted on a fixed fee
      basis. We charge anticipated losses, if any, to operations in the period that
      we
      determine such losses are probable.





We
      recognize revenues from transaction fees associated with subscription
      arrangements, which are billable on a per transaction basis, based on the actual
      number of transactions processed during the period.





In
      accordance with Emerging Issues Task Force (“EITF”) Issue No. 01-14, “Income
      Statement Characterization of Reimbursement Received for ‘Out of Pocket’
Expenses Incurred,” we classify reimbursements received for out-of-pocket
      expenses as revenue.





*Foreign
      Currency Risk*





We
      have
      conducted significant sales activity through our subsidiaries based in
      Geldermalsen, the Netherlands and Cologne, Germany. The majority of the sales
      activity has occurred in the Netherlands and Germany. We have experienced
      foreign exchange gains and losses to date without engaging in any hedging
      activities.





Our
      foreign operations’ functional currency is the applicable local currency
      (primarily, the Euro). Assets and liabilities for these foreign operations
      are
      translated at the exchange rate in effect at the balance sheet date, and income
      and expenses are translated at average exchange rates prevailing during the
      period. Translation gains or losses are reflected in the statement of
      operations.





Under
      the
      terms of a share purchase agreement, we are required to make payments to the
      selling shareholders and managing directors of SyynX Solutions GmbH in three
      installments through October 2010 (see Note 3 below). Because these payment
      obligations are denominated in Euros, we face foreign exchange gains or losses
      that may have a significant impact on our statement of operations and cash
      requirements in future periods.




11


**Collexis
        Holdings, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**
  *Cash
        and Cash Equivalents, and Marketable Securities*





We
      invest
      our excess cash in money market funds. All highly liquid investments with stated
      maturities of three months or less from date of purchase are classified as
      cash
      equivalents; all highly liquid investments with stated maturities of greater
      than three months are classified as marketable securities.





*Amortization
      of Intangible Assets*





Intangible
      assets are carried at cost less accumulated amortization. We amortize the
      intangible assets with finite lives using the straight-line method over the
      estimated economic lives of the assets, which is 5 years.





*Loss
      per Common Share*





Loss
      per
      share is computed based on weighted average number of common shares outstanding
      and excludes any potential dilution. Diluted loss per share reflects the
      potential dilution that could occur if securities or other contracts to issue
      common stock were exercised or converted into common stock or resulted in the
      issuance of common stock, which would then share in the earnings of the company.





We
      had
      19,237,630 options outstanding at December 31, 2007 and 13,181,120 options
      outstanding at December 31, 2006 that could potentially dilute basic earnings
      per share in the future, but we excluded those options from the computation
      of
      diluted loss per share because their effect would have been
      anti-dilutive **.**





*Recently
      Issued Accounting Standards*





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes -
      an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting
      for uncertainty in income taxes recognized in an enterprise’s financial
      statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” It
      prescribes that a company should use a more-likely-than-not recognition
      threshold based on the technical merits of the income tax position taken. Income
      tax positions that meet the more-likely-than-not recognition threshold should
      be
      measured to determine the tax benefit to be recognized in the financial
      statements. FIN 48 is effective in fiscal years beginning after December 15,
      2006. The adoption of FIN 48 had no material impact on our consolidated results
      of operations and financial condition.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
      clarifies that fair value is the amount that would be exchanged to sell an
      asset
      or transfer a liability in an orderly transaction between market participants.
      Further, the standard establishes a framework for measuring fair value in
      generally accepted accounting principles and expands certain disclosures about
      fair value investments. SFAS No. 157 is effective for fiscal years beginning
      after November 15, 2007. We do not expect the adoption of SFAS No. 157 to have
      a
      material effect on our consolidated financial position, results of operations
      or
      cash flows.





In
      December 2006, the FASB issued Staff Position (FSP) EITF 00-19-2, “Accounting
      for Registration Payment Arrangements.” This FSP specifies that the contingent
      obligation to make future payments or otherwise transfer consideration under
      a
      registration payment arrangement, whether issued as a separate agreement or
      included as a provision of a financial instrument or other agreement, should
      be
      separately recognized and measured in accordance with SFAS No. 5, “Accounting
      for Contingencies.” The




12




**Collexis
        Holdings, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**


guidance
      is effective for fiscal years beginning after December 15, 2006. We have adopted
      the guidance but do not expect it to have a significant impact on the
      determination or reporting of our financial results.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to
      choose to measure many financial instruments and certain other items at fair
      value. SFAS No. 159 is effective for fiscal years beginning after November
      15,
      2007. We do not expect the adoption of SFAS No. 159 to have a material effect
      on
      our consolidated financial position, results of operations or cash
      flows.





In
      September 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS No. 141R”), which is a revision of FASB SFAS No. 141,
“Business Combinations.” This Statement establishes principles and requirements
      for how an acquirer: recognizes and measures in its financial statements the
      identifiable assets acquired, the liabilities assumed and any non-controlling
      interest in the acquiree; recognizes and measures the goodwill acquired in
      the
      business combination or a gain from a bargain purchase; and determines what
      information to disclose to enable users of the financial statements to evaluate
      the nature and financial effects of the business combination. We will be
      required to comply with the provisions of SFAS No. 141R for acquisitions that
      occur on or after September 1, 2009.





*Income
      Taxes*





Income
      taxes are accounted for under the asset and liability method. The asset and
      liability method requires that deferred tax assets be reduced by a valuation
      allowance if, based on the weight of available evidence, it is more likely
      than
      not that some portion or all of such assets will not be realized. Deferred
      tax
      assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities, and their respective tax bases and operating
      loss and tax credit carry-forwards. Deferred tax assets and liabilities are
      measured using enacted tax rates expected to apply to taxable income in the
      years in which those temporary differences are expected to be recovered or
      settled. The effect on deferred tax assets and liabilities of a change in tax
      rates is recognized in operations in the period that includes the enactment
      date.





**NOTE
              3.**
            **ACQUISITION
                OF SYYNX SOLUTIONS**





On
      October 19, 2007, we entered into a Share Purchase Agreement with the
      shareholders and managing directors of SyynX Solutions GmbH (“SyynX”), for an
      aggregate cash consideration of €5,923,267, or approximately $8,488,343 at then
      current exchange rates. We are required to make these payments in installments
      over three years as follows (due to rounding of the payments to be made to
      several sellers, the reflection of a credit as noted below, and changes in
      the
      exchange rate as of December 31, 2007, the amounts below do not equal the gross
      amounts above):





Payment
                Date
            
            Payment
                Amount
              in
                Euros
            
            Scheduled
                Payments in
              US
                Dollars at
              12-31-07
                Exchange Rates
            
            Remaining
                Payments
              in
                US Dollars at
              12-31-07
                Exchange RatesDecember
                31, 2007*
            
            €
            1,500,000
            
            $
            2,145,975
            
            $
            -October
                1, 2008
            
            
            1,485,149
            
            
            2,187,476
            
            
            2,187,476October
                1, 2009
            
            
            1,224,918
            
            
            1,804,182
            
            
            1,804,182October
                1, 2010
            
            
            1,212,871
            
            
            1,786,438
            
            
            1,786,438€
            5,422,938
            
            $
            7,924,071
            
            $
            5,778,096




13


**Collexis
        Holdings, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**


*
            The
                payment amount on December 31, 2007, which we made as scheduled,
                reflected
                a €500,000 reduction in light of the termination of Collexis’ right to
                receive reimbursement of the €500,000 option payment previously made by
                Collexis B.V.





We
      are
      required to pay interest at the rate of 1% per annum on the deferred portion
      of
      the purchase price beginning January 14, 2008. Although we do not have an
      obligation to pay interest until such time, we have recorded an imputed interest
      expense on the balance due, calculated from the date of purchase through the
      end
      of the period presented in this report. We have based this calculation on an
      implied interest rate of prime + 2%, or 8% per annum. Considering other
      companies of our size and experience, we believe this market rate is
      appropriate. On December 28, 2007, we made the first payment of
      $2,145,975.





The
      total
      of remaining payments, $5,778,096, represents the actual payment amounts due
      on
      their respective due dates, calculated at December 31, 2007 exchange rates.
      The
      calculation of deferred purchase price on our financial statements at December
      31, 2007, $5,088,102, reflects the present value of these payments discounted
      at
      the implied interest rate of 8%. The difference of $689,994 represents the
      value
      of imputed interest.





The
      operating results of SyynX are included with ours beginning October 19, 2007.
      The following pro forma information reflects the impact on our statements of
      operations had the acquisition occurred on July 1, 2007 and 2006,
      respectively:





**Collexis
      Holdings, Inc.**


**Consolidated
      summary pro forma data**





Three
                months ended December 31,
            
            Six
                months ended December 31,2007
            
            2006
            
            2007
            
            2006Revenue
                - as reported
            
            $
            957,415
            
            $
            542,045
            
            $
            1,264,177
            
            $
            873,938Revenue
                - pro forma
            
            $
            992,502
            
            $
            577,132
            
            $
            1,469,295
            
            $
            1,079,053Net
                loss - as reported
            
            $
            (2,843,563
            )
            $
            (1,460,508
            )
            $
            (4,759,880
            )
            $
            (2,429,149
            )Net
                loss - pro forma
            
            $
            (2,894,759
            )
            $
            (1,511,704
            )
            $
            (5,109,058
            )
            $
            (2,778,330
            )Net
                loss per share - as reported
            
            $
            (0.04
            )
            $
            (0.11
            )
            $
            (0.07
            )
            $
            (0.18
            )Net
                loss per share - pro forma
            
            $
            (0.04
            )
            $
            (0.11
            )
            $
            (0.08
            )
            $
            (0.21
            )





The
      transaction is accounted for in accordance with SFAS No. 141, “Business
      Combinations.” The preliminary purchase price allocation, as of the purchase
      date, is as follows:





**Purchase
                Price:**Deferred
                purchase price
            
            $
            7,029,308Exercise
                of option
            
            
            712,550Direct
                costs of acquisition
            
            
            48,929Less
                SyynX cash on hand
            
            
            (154,036
            )Total
                purchase price
            
            $
            7,636,751




14


**Collexis
        Holdings, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**
  **Value
                    assigned to assets and liabilities:**Assets:


Accounts
                receivable
            
            
            461,756Prepaid
                and other assets
            
            
            59,652Deferred
                tax assets
            
            
            48,005Property
                and equipment
            
            
            71,435Trade
                name (estimated useful life of five years)
            
            
            1,090,000Acquired
                technology (estimated useful life of five years)
            
            
            4,004,733Goodwill/unidentified
                intangibles
            
            
            3,777,723Liabilities:Accounts
                payable
            
            
            (21,183
            )Income
                taxes payable
            
            
            (127,876
            )Deferred
                tax liability
            
            
            (1,608,479
            )Other
                liabilities
            
            
            (119,015
            )Total
                net assets
            
            $
            7,636,751





We
      continue to evaluate and value the identifiable intangible assets and
      acquisition costs of SyynX. Thus, this preliminary allocation is subject to
      refinement, as permitted for a period of 12 months from the date of acquisition.





In
      connection with the transactions contemplated by the SyynX share purchase
      agreement, we granted to each of the three managing directors of SyynX as a
      condition to their employment agreements an option to purchase 1,000,000 shares
      of our common stock at an exercise price of $0.75 per share. We granted options
      to purchase a total of 3,000,000 shares. The options have a term of eight years.
      The options vested or will vest as follows: options to purchase 16,666 shares
      vested on October 19, 2007; options to purchase 16,666 shares vested or will
      vest each month through August 19, 2012, and options to purchase the final
      16,706 shares will vest on September 19, 2012.





**NOTE
              4.**
            **INTANGIBLE
                ASSETS AND GOODWILL**





As
      a
      result of our acquisition of SyynX, we recorded intangible assets and goodwill.
      The amortizable intangible assets include trade name and acquired technology,
      recorded at fair value with estimated useful lives of 5 years. Goodwill reflects
      the excess of the purchase price over the net assets acquired in the
      transaction. Goodwill is not amortized but tested for impairment annually under
      the rules prescribed by SFAS No. 144, “Accounting for the Impairment or Disposal
      of Long-Lived Assets.” We will test for impairment at the conclusion of our
      fiscal year in June 2008.





**NOTE
              5.**
            **SUBSEQUENT
                EVENTS**





*License
      and Publishing Agreement with VersusLaw*





On
      January 18, 2008, we entered into a licensing and publishing agreement with
      VersusLaw, Inc., under which we acquired a non-exclusive, transferable license
      to use VersusLaw’s legal-related collection of judicial opinions. In exchange
      for the rights granted to us under the agreement, we paid to VersusLaw a
      licensing fee of $1,385,000, which was composed of: $100,000 in cash; a secured
      promissory note for $650,000; and 846,666 shares of our common stock with an
      agreed value of $0.75 per share, or $635,000. The principal of the note is
      due
      on February 18, 2008. If the note is not paid by that date, the outstanding
      principal will begin to accrue interest at a default rate of 18% per annum.
      The
      note is secured by our accounts receivables. We sold the shares of our common
      stock to VersusLaw under an exemption from registration contained in Section
      4(2) of the Securities Act of 1933.




15


**Collexis
        Holdings, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**


The
      agreement gives us the non-exclusive right to advertise and distribute copies
      of
      the data to end users, and to permit our customers to download, print and
      electronically copy the data. The term of the license granted to Collexis is
      perpetual, without payment of any additional licensing fees.





*Acquisition
      of Lawriter LLC, Owner of Casemaker* *®* *Legal Online Research Service*





On
      February 1, 2008, we acquired  Lawriter
      LLC (“Lawriter”),
      an Ohio limited liability company that provides online legal research services
      to a consortium of bar associations under the name Casemaker ® .
      We
      purchased all of the limited liability company interests in Lawriter from
      OSBA.COM LLC, an Ohio limited liability company (“OSBA”), and the Institute of
      Legal Publishing, Inc., an Ohio corporation f/k/a Lawriter Corporation
      (“Lawcorp”), for an aggregate consideration of $9,000,000, or $4,500,000 to each
      of the sellers, plus an Earnout, if any.





Under
      the
      terms of the purchase agreement, at the closing:





·
            we
                made a cash payment of $1,125,000 to
                OSBA;


·
            we
                made a cash payment of $500,000 to Lawcorp;
                and


·
            we
                issued 666,666 unregistered shares of our common stock at an agreed-upon
                value of $0.75 per share, or $500,000, to Lawcorp in a private offering.





We
      also
      agreed to pay Lawcorp $500,000 on or before February 8, 2008, which obligation
      we have mutually agreed to extend until February 27, 2008. In addition, we
      agreed to pay a total of $1,255,000 to OSBA and $3,000,000 to Lawcorp, with
      the
      remaining balance to each seller to be paid in four equal installments,
      respectively, as listed in the following table.





Seller
            
            Payment
                Date
            
            Payment
                AmountOSBA
            
            
            May
                1, 2008
            
            $
            313,750August
                1, 2008
            
            
            313,750November
                1, 2008
            
            
            313,750February
                1, 2009
            
            
            313,750$
            1,255,000Lawcorp
            
            
            February
                1, 2009
            
            $
            750,000February
                1, 2010
            
            
            750,000February
                1, 2011
            
            
            750,000February
                1, 2012
            
            
            750,000$
            3,000,000





With
      respect to the remaining $2,120,000 consideration due to OSBA, the Agreement
      provides that we may either:





(a)
            credit
                against the balance of that consideration the monthly fee that would
                otherwise be payable by the Ohio State Bar Association to Lawriter
                for the
                60 months following the closing (which is estimated to equal a credit
                of
                approximately $424,000 per twelve month period or $2,120,000 in total)
                or




16


**Collexis
        Holdings, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**


(b)
            pay
                all or any portion of the balance directly to OSBA on a monthly basis
                for
                the 60 months following the closing, in which case the Ohio State
                Bar
                Association would resume making payments to Lawriter in the ordinary
                course of business.





Under
      the
      terms of the Agreement, we also agreed to pay the Earnout, if any, on a pro
      rata
      basis to OSBA and Lawcorp within 20 days following the end of each calendar
      quarterly period within the Earnout period. The Earnout period:





·
            begins
                on the earlier occurrence of (a) the first day of that calendar month
                on
                which the aggregate Net Sales derived from the products and services
                that
                we acquired under the terms of the Agreement, including intellectual
                property rights related to the Casemaker database and software and
                Collexis-related technology and enhancements that we intend to offer
                to
                our customers and clients (collectively, “Legal Research Services”), have
                been at least $2,750,000 for each of the previous three consecutive
                calendar months following the closing or (b) the first day of the
                18th
                month following the closing; and


·
            ends
                on the last day of the 60th calendar month
                thereafter.





The
      term
“Net Sales” means gross revenues derived from Legal Research Services less
      returns, discounts, allowances, sales taxes and bad debt reserves, as determined
      in accordance with U.S. generally accepted accounting principles. The term
      “Earnout” means a lump sum cash payment equal to the product of (x) the Earnout
      percentage of 3.75%, or 3.9% in certain circumstances, multiplied by (y) Net
      Sales derived from Legal Research Services during each calendar quarterly period
      within the Earnout period, reduced by any payment we may be required to make
      to
      the consortium of bar associations under the terms of their respective license
      agreements with Lawriter. The aggregate of any or all Earnout payments, however,
      cannot exceed $15,000,000.





*Sale
      of Common Stock in Private Offering*





On
      February 1, 2008, we closed the sale of 2,453,333 shares of common stock at
      $0.75 per share to a single investor in a private offering under the exemption
      from registration contained in Section 4(2) of the Securities Act of 1933.
      We
      received gross proceeds from the offering of approximately $1,840,000. No
      placement fees were payable in connection with this offering. We used the
      proceeds to pay the cash consideration in the Lawriter acquisition described
      above and for working capital.





17


**ITEM
                2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION**





**Overview**





*Summary
      of Our Business* .
      Collexis is a global software development company headquartered in Columbia,
      South Carolina with operations in Geldermalsen, the Netherlands, Cologne,
      Germany and Cincinnati, Ohio. We recently acquired Lawriter, the
      leading legal online research provider to the small and medium law firm market.
      We now offer the world’s first pre-populated professional social network for
      life science researchers, www.biomedexperts.com. We develop software that
      supports the knowledge intensive market-building tools to search and mine large
      sets of information. Our Collexis Engine 6.0 software enables discovery through
      identification, ordering and aggregation of ideas and concepts. We generate
      our
      revenues primarily from licensing our software revenue, providing services
      to
      the users of our software, maintaining and supporting our software, selling
      related hardware and hosting software on an application service provider basis.
      Please see “Critical Accounting Policies” in this Item 2 below for an
      explanation of our critical accounting policies and estimates.





*Acquisition
      of SyynX* .
      On
      October 19, 2007, we acquired our long-time software development partner, SyynX
      Solutions GmbH (“SyynX”), a privately-held software company based in Cologne,
      Germany. We agreed to purchase all of the capital stock of SyynX for an
      aggregate cash consideration of €5,923,267, or approximately $8,488,343 at then
      current exchange rates. We
      paid
      SyynX approximately $852,000 in the 12 months ended June 30, 2007 for
      development, customer support, and related services. Our
      consolidated financial results reflect the financial results of SyynX beginning
      on October 19, 2007.





*Licensing
      and Publishing Agreement with VersusLaw, Inc.* On
      January 18, 2008, we entered into a licensing and publishing agreement with
      VersusLaw, Inc., under which we acquired a non-exclusive, transferable license
      to use VersusLaw’s legal-related collection of judicial opinions. In exchange
      for the rights granted to us under the agreement, we paid to VersusLaw a
      licensing fee of $1,385,000, which was composed of: $100,000 in cash; a secured
      promissory note for $650,000; and 846,666 shares of our common stock with an
      agreed value of $0.75 per share, or $635,000. The principal of the note is
      due
      on February 18, 2008.





*Acquisition
      of Lawriter LLC.* On
      February 1, 2008, we acquired Lawriter LLC (“Lawriter”), an Ohio limited
      liability company that provides online legal research services to a consortium
      of bar associations under the name Casemaker ® .
      We
      purchased all of the limited liability company interests in Lawriter for an
      aggregate consideration of $9,000,000, or $4,500,000 to each of the sellers,
      plus an Earnout, if any.





For
      more
      information about our acquisitions of SyynX and Lawriter and our license
      agreement with VersusLaw, please see Notes 3 and 5 to the consolidated unaudited
      financial statements included in Part I, Item 1, in this quarterly
      report.





*Need
      for Additional Capital* .
      We had
      cash and cash equivalents of approximately $1,079,000 as of December 31, 2007
      and approximately $932,000 as of February 13, 2008. For the six months ended
      December 31, 2007, we used a total of approximately $3,752,000 in cash in
      connection with operating activities. We anticipate continuing losses as we
      build out our platforms and develop the sales force to market our products.
      In
      addition, we must make payments totaling approximately $4,850,000, plus
      interest, in the next 12 months under the terms of the transactions described
      above. Accordingly, we will need substantial additional capital for these
      purposes as well as to pursue our growth plans, and we can give no assurance
      that we will be able to raise the additional capital we need on commercially
      acceptable terms or at all.




18




**Results
      of Operations**





**Three
      Months Ended December 31, 2007 Compared to Three Months Ended December 31,
      2006**





*Total
      Revenues* .
      Total
      revenues increased approximately $415,000, or 76.6 %, to approximately $957,000
      for the three months ended December 31, 2007 compared to approximately $542,000
      for the three months ended December 31, 2006. This increase was due primarily
      to
      an increase in license revenues generated as a result of increased efforts
      in
      the university and research markets, as well as additional service revenues
      from
      SyynX.





*License
      Revenue* .
      License
      revenue increased approximately $216,000 to approximately $235,000 for the
      three
      months ended December 31, 2007 as compared to approximately $19,000 for the
      three months ended December 31, 2006. This increase is primarily due to sales
      of
      new licenses and subscriptions in the university and research markets.





*Service
      Revenue* .
      Service
      revenue increased approximately $149,000, or 33.8%, to approximately $590,000
      for the three months ended December 31, 2007 versus approximately $441,000
      for
      the three months ended December 31, 2006. This increase is due to an increase
      in
      services revenues from SyynX, partially offset by a minor decrease in services
      revenues from add-on profiles and libraries sold to other clients.





*Maintenance
      & Support Revenue* .
      Maintenance and support revenue increased approximately $18,000, or 23.4%,
      to
      approximately $95,000 for the three months ended December 31, 2007 as compared
      to approximately $77,000 for the three months ended December 31, 2006. This
      increase is due to an increase in the number and value of maintenance contracts
      sold to new licensees.





*Hardware
      & Hosting Revenue* .
      Hardware and hosting revenue increased approximately $33,000, to $38,000 for
      the
      three months ended December 31, 2007 as compared to approximately $5,000 for
      the
      three months ended December 31, 2006. This increase is due primarily to an
      increase in revenues from SyynX, as well as an increase in hosting contracts
      sold in the period.





*Cost
      of License Revenue* .
      Cost of
      license revenue was approximately $34,000 for the three months ended December
      31, 2007 as compared to approximately $1,000 for the three months ended December
      31, 2006. Cost of license revenue is primarily comprised of third party fees
      charged on some product sales.





*Cost
      of Service Revenue* .
      Cost of
      service revenue increased approximately $30,000, or 12.9%, to approximately
      $263,000 for the three months ended December 31, 2007 versus approximately
      $233,000 for the three months ended December 31, 2006. This increase was due
      to
      an increase in costs associated with SyynX, partially offset by an overall
      decrease in personnel costs associated with a reduction of our professional
      services staff.





*Cost
      of Maintenance & Support Revenue* .
      Cost of
      maintenance and support revenue decreased approximately $105,000, or 58.3%,
      to
      approximately $75,000 for the three months ended December 31, 2007 versus
      approximately $180,000 for the three months ended December 31, 2006. This
      decrease is due primarily to an decrease in costs associated with support
      personnel, partially offset by severance expense associated with staff
      reductions during the period.





*Cost
      of Hardware & Hosting Revenue* .
      Cost of
      hardware and hosting revenue was approximately $29,000 for the three months
      ended December 31, 2007, compared to approximately $5,000 for the
      three




19




months
      ended December 31, 2006. This increase is primarily due to an increase in costs
      related to SyynX.





*General
      & Administrative Costs* .
      General
      and administrative costs increased to approximately $2.1 million for the three
      months ended December 31, 2007, compared to approximately $1.3 million for
      the
      three months ended December 31, 2006, an increase of $800,000, or 61.5%. This
      increase is due to the cumulative effect of the following costs:





·
            an
                approximately $232,000 increase in depreciation and amortization
                expense,
                including $208,000 in amortization of intangibles related to the
                SyynX
                acquisition;


·
            an
                approximately $192,000 increase in cash compensation for personnel
                we
                hired to expand our global headquarters in Columbia, South
                Carolina;


·
            an
                approximately $160,000 increase in professional costs related to
                our being
                a public company in the 2007 period;


·
            $120,000
                in professional and other expenses related to our SyynX acquisition;


·
            an
                approximately $27,000 increase in stock option costs;
                and


·
            $10,000
                in compensation costs for the additional SyynX personnel
                post-acquisition.





*Sales
      & Marketing* .
      Sales
      and marketing costs increased substantially to approximately $800,000 for the
      three months ended December 31, 2007 as compared to approximately $93,000 for
      the three months ended December 31, 2006, an increase of $707,000. This increase
      is due primarily to the salary and travel costs associated with the enhanced
      efforts of our expanded sales and marketing team, which grew via organic changes
      and via the SyynX acquisition from four full-time employees as of December
      31,
      2006 to 11 full-time employees and a Chief Marketing Officer as of December
      31,
      2007. The increase in sales and marketing costs in the period also reflects
      higher expenses we incurred in expanding our global marketing efforts, slightly
      offset by a reduction in sales and marketing staff.





*Research
      & Development* .
      Research and development costs increased to approximately $511,000 for the
      three
      months ended December 31, 2007, compared to approximately $200,000 for the
      three
      months ended December 31, 2006, an increase of $311,000, or 155.5%. This
      increase is due to increases in salary, travel and related personnel costs
      associated with the expansion of our operations and the continued efforts to
      develop our Collexis 6.0 engine, as well as an increase in costs related to
      SyynX.





*Total
      Expenses and Net Loss* .
      As a
      result of the above factors, as well as an increase in net interest expense
      to
      approximately $105,000 primarily related to our SyynX deferred consideration
      obligations, total expenses increased to approximately $3.9 million for the
      three months ended December 31, 2007 compared to approximately $2.0 million
      for
      the three months ended December 31, 2006. Our net loss increased to
      approximately $2.8 million for the three months ended December 31, 2007 versus
      a
      net loss of approximately $1.5 million for the three months ended December
      31,
      2006.





**Six
      Months Ended December 31, 2007 Compared to Six Months Ended December 31,
      2006**





*Total
      Revenues* .
      Total
      revenues increased approximately $386,000, or 44.2%, to approximately $1.26
      million for the six months ended December 31, 2007 compared to approximately
      $874,000 for the six months ended December 31, 2006. This increase was due
      primarily to an increase in license and maintenance revenues generated as a
      result of expansion of efforts in the university and research markets, as well
      as additional service revenues from SyynX.





*License
      Revenue* .
      License
      revenue increased approximately $232,000 to approximately $278,000 for the
      six
      months ended December 31, 2007 compared to approximately $46,000 for the six
      months




20




ended
      December 31, 2006. This increase is primarily due to sales of new licenses
      and
      subscriptions in the university and research markets.





*Service
      Revenue* .
      Service
      revenue increased approximately $6,000 to approximately $659,000 for the six
      months ended December 31, 2007 versus approximately $653,000 for the six months
      ended December 31, 2006. This slight increase is due to an increase in services
      revenues related to SyynX, partially offset by a decrease in services revenues
      generated via delivery of add-on profiles and libraries sold to other
      clients.





*Maintenance
      & Support Revenue* .
      Maintenance and support revenue increased approximately $110,000, or 66.0%,
      to
      approximately $277,000 for the six months ended December 31, 2007 as compared
      to
      approximately $167,000 for the six months ended December 31, 2006. This increase
      is due to an increase in the number and value of maintenance contracts sold
      to
      new licensees.





*Hardware
      & Hosting Revenue* .
      Hardware and hosting revenue was approximately $51,000 for the six months ended
      December 31, 2007 as compared to approximately $9,000 for the six months ended
      December 31, 2006. This increase is due primarily to an increase in revenues
      related to SyynX, as well as an increase in hosting contracts sold in the
      period.





*Cost
      of License Revenue* .
      Cost of
      license revenue was approximately $43,000 for the six months ended December
      31,
      2007 as compared to approximately $1,000 for the six months ended December
      31,
      2006. Cost of license revenue is primarily comprised of third party fees charged
      on some of our product sales.





*Cost
      of Service Revenue* .
      Cost of
      service revenue increased approximately $37,000, or 12.3%, to approximately
      $338,000 for the six months ended December 31, 2007 compared to approximately
      $301,000 for the six months ended December 31, 2006. This increase was due
      to an
      increase in costs related to SyynX, partially offset by an overall decrease
      in
      personnel costs associated with a reduction of our professional services
      staff.





*Cost
      of Maintenance & Support Revenue* .
      Cost of
      maintenance and support revenue decreased approximately $100,000, or 32.3%,
      to
      approximately $210,000 for the six months ended December 31, 2007 versus
      approximately $310,000 for the six months ended December 31, 2006. This decrease
      is due primarily to a decrease in costs associated with support personnel,
      partially offset by severance expense associated with staff reductions during
      the period.





*Cost
      of Hardware & Hosting Revenue* .
      Cost of
      hardware and hosting revenue was approximately $37,000 for the six months ended
      December 31, 2007, compared to approximately $12,000 for the six months ended
      December 31, 2006. This increase is primarily due to an increase in costs
      related to SyynX.





*General
      & Administrative Costs* .
      General
      and administrative costs increased to approximately $3.2 million for the six
      months ended December 31, 2007, compared to approximately $2.2 million for
      the
      six months ended December 31, 2006, an increase of $1.0 million, or 45.5%.
      This
      increase is due primarily to the cumulative effect of the following
      costs:





·
            an
                approximately $238,000 increase in depreciation and amortization
                expense,
                including $203,000 in amortization of intangibles related to the
                SyynX
                acquisition;


·
            an
                approximately $222,000 increase in cash compensation for personnel
                we
                hired to expand our global headquarters in Columbia, South
                Carolina;




21




·
            an
                approximately $213,000 increase in professional costs related to
                our being
                a public company in the 2007 period;


·
            $90,000
                in professional and other expenses related to our SyynX
                acquisition;


·
            $66,000
                in professional costs related to the Lawriter acquisition and the
                VersusLaw transaction;


·
            an
                approximately $55,000 increase in stock option costs;
                and


·
            $10,000
                in compensation costs for the additional SyynX personnel
                post-acquisition.





*Sales
      & Marketing* .
      Sales
      and marketing costs increased to approximately $1.4 million for the six months
      ended December 31, 2007 as compared to approximately $179,000 for the six months
      ended December 31, 2006, an increase of $1.2 million. This increase is due
      primarily to the salary and travel costs associated with the enhanced efforts
      of
      our expanded sales and marketing team, which grew via organic changes and via
      the SyynX acquisition from four full-time employees as of December 31, 2006
      to
      11 full-time employees and a Chief Marketing Officer as of December 31, 2007.
      The increase in sales and marketing costs in the period also reflects higher
      expenses we incurred in expanding our global marketing efforts, slightly offset
      by a reduction in sales and marketing staff.





*Research
      & Development* .
      Research and development costs increased to approximately $779,000 for the
      six
      months ended December 31, 2007, compared to approximately $400,000 for the
      six
      months ended December 31, 2006, an increase of $379,000, or 94.0%. This increase
      is due to increases in salary, travel and related personnel costs associated
      with the expansion of our operations and the continued efforts to develop our
      Collexis 6.0 engine, as well as an increase in costs related to
      SyynX.





*Total
      Expenses and Net Loss* .
      As a
      result of the above factors, as well as an increase in net interest expense
      to
      approximately $95,000 primarily related to our SyynX deferred purchase payment
      obligations, total expenses increased to approximately $6.2 million for the
      six
      months ended December 31, 2007 compared to approximately $3.4 million for the
      six months ended December 31, 2006. Our net loss increased to approximately
      $4.8
      million for the six months ended December 31, 2007 versus a net loss of
      approximately $2.4 million for the six months ended December 31,
      2006.





**Liquidity
      and Capital Resources**





As
      of
      December 31, 2007, we had cash and cash equivalents of approximately $1,079,000.
      Our working capital deficit as of December 31, 2007 was approximately
      $1,667,000, versus working capital of approximately $430,000 at December 31,
      2006, representing a decrease in working capital of approximately $2,097,000.
      As
      of June 30, 2007, we had working capital deficit of approximately $550,000,
      representing an increase in working capital deficit of approximately $1,117,000
      during the six months ended December 31, 2007. As of December 31, 2007, we
      had
      no outstanding indebtedness for borrowed money but owed approximately $5,778,000
      in deferred payment obligations related to our acquisition of SyynX.





During
      the six months ended December 31, 2007, we used net cash of approximately
      $3,752,000 for operating activities, primarily for developing our Collexis
      6.0
      engine, building out our worldwide headquarters and adding to our sales and
      marketing staff. We used additional cash of approximately $85,000 for investing
      activities, primarily for the acquisition of SyynX and the purchase of capital
      assets related to the continued expansion of our facilities. During the six
      months ended December 31, 2007, net cash provided by financing activities was
      approximately $4,762,000. We received net cash proceeds of approximately
      $7,518,000 from sales of our common stock in private offerings, we used cash
      of
      $650,000 to repay a series of loans obtained in June 2007 from a stockholder,
      and we used cash of approximately




22




$2,106,000
      to make the first scheduled payment on our deferred obligation to the selling
      shareholders of SyynX.





As
      of
      February 13, 2008, we had cash and cash equivalents of approximately $932,000.
      This amount reflects the closing on February 1, 2008 in which we sold 2,453,333
      shares of common stock at a price of $0.75 per share, or $1,840,000 in total.
      We
      believe our current balance of cash, cash equivalents and short-term
      investments, combined with any funds generated from our operations, will be
      sufficient to meet our working capital and capital expenditure requirements
      for
      approximately three months based upon our estimates of funds required to operate
      our business during that period. With our present negative cash flows from
      operating activities and our current level of cash, we will require additional
      working capital:





·
            to
                make payments totaling approximately $4,850,000, plus interest, in
                the
                next 12 months under the terms of the SyynX, Lawriter and VersusLaw
                transactions described above;


·
            to
                fund our operations, including sales and
                marketing;


·
            to
                continue to research, develop and enhance our products,
                particularly:





§
            the
                Casemaker online legal research service we recently acquired via
                our
                acquisition of Lawriter LLC;


§
            our
                BioMedExperts social networking website; and


§
            ourother
                high-definition search and discovery
                software;





·
            to
                respond to competitive pressures and/or perceived opportunities,
                such as
                investment, acquisition and international expansion activities;
                and


·
            to
                comply with our reporting obligations as a public company.





As
      a
      result, we must seek additional capital to meet these needs ,
      but we
      can provide no assurances in that regard. W e
      can
      give no assurance that we will be able to raise the additional capital we need
      on commercially acceptable terms or at all. Please see “Risk Factors”
below.





**Off-Balance
      Sheet Arrangements**





We
      have
      not entered into any transactions with unconsolidated entities in which we
      have
      financial guarantees, subordinated retained interests, derivative instruments
      or
      other contingent arrangements that expose us to material continuing risks,
      contingent liabilities or any other obligations under a variable interest in
      an
      unconsolidated entity that provides us with financing, liquidity, market risk
      or
      credit risk support.





**Critical
      Accounting Policies**





Management
      has based this discussion and analysis of financial condition and results of
      operations on our consolidated financial statements. The preparation of these
      consolidated financial statements in accordance with generally accepting
      accounting principles in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities, the
      disclosure of contingent assets and liabilities at the dates of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting periods. Management evaluates its critical accounting policies and
      estimates on a periodic basis.





A
      “critical accounting policy” is one that is both important to the understanding
      of the company’s financial condition and results of operations and requires
      management’s most difficult, subjective or




23




complex
      judgments, often as a result of the need to make estimates about the effect
      of
      matters that are inherently uncertain. Management believes the following
      accounting policies fit this definition:





*Revenue
      Recognition* .
      We
      recognize revenue in accordance with Statement of Position 97-2, “Software
      Revenue Recognition” (“SOP 97-2”), and Statement of Position 98-9, “Modification
      of SOP 97-2, Software Revenue Recognition, With Respect to Certain
      Transactions.” We recognize revenue from non-cancelable software licenses when
      the license agreement has been signed, delivery has occurred, the fee is fixed
      or determinable and collectibility is probable. We recognize license revenue
      from resellers when an end user has placed an order with the reseller and the
      reseller has met above revenue recognition criteria. In multiple element
      arrangements, we defer the vendor-specific objective evidence of fair value
      (“VSOE”) related to the undelivered elements and recognize revenue on the
      delivered elements using the percentage-of-completion method.





The
      most
      commonly deferred elements are initial maintenance and consulting services.
      We
      recognize initial maintenance on a straight-line basis over the initial
      maintenance term. We determine the VSOE of maintenance by using a consistent
      percentage of maintenance fee to license fee based on renewal rates. We
      recognize maintenance fees in subsequent years on a straight-line basis over
      the
      life of the applicable agreement. Maintenance contracts entitle the customer
      to
      hot-line support and all unspecified product upgrades released during the term
      of the maintenance contract. Upgrades include any and all unspecified patches
      or
      releases related to a licensed software product. Maintenance does not include
      implementation services to install these upgrades. We determine the VSOE of
      services by using an average consulting rate per hour for consulting services
      sold separately multiplied by the estimate of hours required to complete the
      consulting engagement.





Delivery
      of software generally occurs when the product (on CDs) is delivered to a common
      carrier. Occasionally, delivery occurs through electronic means in which we
      make
      the software available through our secure FTP (File Transfer Protocol) site
      or
      via a website-based download. We do not offer any customers or resellers a
      right
      of return.





For
      software license, services and maintenance revenue, we assess whether the fee
      is
      fixed and determinable and whether or not collection is probable. We assess
      whether the fee is fixed and determinable based on the payment terms associated
      with the transaction. If a significant portion of a fee is due after our normal
      payment terms, which are 30 to 90 days from invoice date, the fee is considered
      not fixed and determinable. In these cases, we recognize revenue as the fees
      become due.





We
      assess
      assuredness of collection based on a number of factors, including past
      transaction history with the customer and the credit-worthiness of the customer.
      We do not request collateral from customers. If we determine that collection
      of
      a fee is not probable, we defer the fee and recognize revenue when collection
      becomes probable, which is generally upon receipt of cash.





Our
      arrangements do not generally include acceptance clauses. If an arrangement
      includes an acceptance provision, however, acceptance occurs upon the earlier
      of
      receipt of a written customer acceptance or expiration of the acceptance
      period.





We
      bill
      the majority of our training and consulting services based on hourly rates.
      We
      generally recognize revenue as we perform these services. When we have an
      arrangement that is based on a fixed fee or requires significant work either
      to
      alter the underlying software or to build additional complex interfaces so
      that
      the software performs as the customer requests, however, we recognize the
      related revenue using the percentage of completion method of accounting. This
      method applies to our custom programming services, which are generally
      contracted on a fixed fee basis. We charge anticipated losses, if any, to
      operations in the period that we determine those losses to be
      probable.




24




We
      recognize revenues from transaction fees associated with subscription
      arrangements, which are billable on a per transaction basis and included in
      services revenue on the Consolidated Statements of Operations, based on the
      actual number of transactions processed during the period.





In
      accordance with EITF Issue No. 01-14, “Income Statement Characterization of
      Reimbursement Received for ‘Out of Pocket’ Expenses Incurred,” we classify
      reimbursements received for out-of-pocket expenses incurred as services revenue
      in the Consolidated Statements of Operations.





*Development
      Costs* .
      Our
      policy is to charge the costs of software development to the year in which
      these
      costs occurred. We establish technological feasibility and completion of the
      existing Engine. Generally, costs related to projects that reach technological
      feasibility upon completion of a working model are not capitalized, because
      the
      period between establishment of the working model and general availability
      is of
      short duration. The nature of our current development for software products
      is
      generally such that we can measure technological feasibility most effectively
      using the working model method, in which the time between establishment of
      a
      working model and general availability is short, which results in no costs
      that
      qualify for capitalization.





*Allowance
      for Doubtful Accounts* .
      We
      evaluate the collectibility of accounts receivable based on a combination of
      factors. When we are aware of circumstances that may impair a specific
      customer’s ability to meet its financial obligations, we record a specific
      allowance against amounts due, thereby reducing the net receivable to the amount
      our management believes is probable of collection. For all other customers,
      we
      recognize allowances for doubtful accounts based on the length of time the
      receivables are outstanding, the current business environment and historical
      experience.





*Income
      Taxes* .
      We
      account for income taxes under the asset and liability method. The asset and
      liability method requires that deferred tax assets be reduced by a valuation
      allowance if, based on the weight of available evidence, it is more likely
      than
      not that some portion or all of such assets will not be realized. We recognize
      deferred tax assets and liabilities for the future tax consequences attributable
      to differences between the financial statement carrying amounts of existing
      assets and liabilities, and their respective tax bases and operating loss and
      tax credit carry-forwards. We measure deferred tax assets and liabilities using
      enacted tax rates we expect to apply to taxable income in the years in which
      we
      expect those temporary differences to be recovered or settled. We recognize
      the
      effect on deferred tax assets and liabilities of a change in tax rates in
      operations in the period that includes the enactment date.





**Recent
      Accounting Pronouncements**





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes -
      an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting
      for uncertainty in income taxes recognized in an enterprise’s financial
      statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” It
      prescribes that a company should use a more-likely-than-not recognition
      threshold based on the technical merits of the income tax position taken. Income
      tax positions that meet the more-likely-than-not recognition threshold should
      be
      measured to determine the tax benefit to be recognized in the financial
      statements. FIN 48 is effective in fiscal years beginning after December 15,
      2006. The adoption of FIN 48 had no material impact on our consolidated results
      of operations and financial condition.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
      clarifies that fair value is the amount that would be exchanged to sell an
      asset
      or transfer a liability in an orderly transaction between market participants.
      Further, the standard establishes a framework for measuring fair value in
      generally accepted accounting principles and expands certain disclosures about
      fair value




25




investments.
      SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.
      We
      do not expect the adoption of SFAS No. 157 to have a material effect on our
      consolidated financial position, results of operations or cash
      flows.





In
      December 2006, the FASB issued Staff Position (FSP) EITF 00-19-2, “Accounting
      for Registration Payment Arrangements.” This FSP specifies that the contingent
      obligation to make future payments or otherwise transfer consideration under
      a
      registration payment arrangement, whether issued as a separate agreement or
      included as a provision of a financial instrument or other agreement, should
      be
      separately recognized and measured in accordance with SFAS No. 5, “Accounting
      for Contingencies.” The guidance is effective for fiscal years beginning after
      December 15, 2006. We have adopted the guidance but do not expect it to have
      a
      significant impact on the determination or reporting of our financial
      results.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to
      choose to measure many financial instruments and certain other items at fair
      value. SFAS No. 159 is effective for fiscal years beginning after November
      15,
      2007. We do not expect the adoption of SFAS No. 159 to have a material effect
      on
      our consolidated financial position, results of operations or cash flows.





In
      September 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS No. 141R”), which is a revision of FASB SFAS No. 141,
“Business Combinations.” This Statement establishes principles and requirements
      for how an acquirer: recognizes and measures in its financial statements the
      identifiable assets acquired, the liabilities assumed and any non-controlling
      interest in the acquiree; recognizes and measures the goodwill acquired in
      the
      business combination or a gain from a bargain purchase; and determines what
      information to disclose to enable users of the financial statements to evaluate
      the nature and financial effects of the business combination. We will be
      required to comply with the provisions of SFAS 141R for acquisitions that occur
      on or after September 1, 2009.





**RISK
      FACTORS**





In
      addition to the other information set forth in this quarterly report, you should
      carefully consider the risk factors described below as well as the risk factors
      discussed in Part I, Item 1, “Description of Business - Risk Factors,” of our
      Transition Report on Form 10-KSB, as amended, for the six months ended June
      30,
      2007. These risk factors could materially affect our business, financial
      condition or future results. Additional risks and uncertainties not currently
      known to us or that we currently deem to be immaterial also may materially
      adversely affect our business, financial condition and/or operating
      results.





***We
      need additional capital, and it may not be available on acceptable terms, or
      at
      all. If we do not receive the additional capital we need, our financial
      condition and future prospects will suffer and our business could
      fail.***





As
      of
      February 13, 2008, we had cash and cash equivalents of approximately $932,000.
      We believe our current balance of cash, cash equivalents and short-term
      investments, combined with any funds generated from our operations, will be
      sufficient to meet our working capital and capital expenditure requirements
      for
      approximately three months based upon our estimates of funds required to operate
      our business during that period. During or after that time, however, we may
      need
      to raise additional funds for the following purposes:





·
            to
                make payments totaling approximately $4,850,000, plus interest, in
                the
                next 12 months under the terms of the SyynX, Lawriter and VersusLaw
                transactions described elsewhere in this
                report;




26




·
            to
                fund our operations, including sales and
                marketing;


·
            to
                continue to research, develop and enhance our products,
                particularly:





§
            the
                Casemaker online legal research service we recently acquired via
                our
                acquisition of Lawriter LLC;


§
            our
                BioMedExperts social networking website; and


§
            ourother
                high-definition search and discovery
                software;





·
            to
                respond to competitive pressures and/or perceived opportunities,
                such as
                investment, acquisition and international expansion activities;
                and


·
            to
                comply with our reporting obligations as a public company.





We
      cannot
      reassure our investors that if we need additional capital it will be available,
      and if so, on terms beneficial to us. Historically, we have obtained external
      financing primarily from sales of our common stock. To the extent we raise
      additional capital by issuing equity securities, our shareholders may experience
      substantial dilution. If we are unable to obtain additional capital, we may
      then
      attempt to preserve our available resources by various methods, including
      deferring the creation or satisfaction of commitments, reducing expenditures
      on
      our research and development programs or otherwise scaling back our operations.
      If we are unable to raise additional capital or defer costs, that inability
      would have a material adverse effect on our financial position, results of
      operations and prospects, and our business could fail.





***We
      have had a history of operating losses and will likely incur future losses.
      If
      our losses continue and we are unable to achieve profitability, our stock price
      will likely suffer.***





We
      have
      operated at a loss since our inception. For the six months ended December 31,
      2007, our net loss was approximately $4.8 million. We expect that our losses
      will continue for the foreseeable future. Accordingly, we cannot assure you
      that
      we will be able to achieve or maintain profitability in the future. If we do
      not
      achieve and sustain profitability, it will likely negatively affect the market
      price of the common stock and our financial condition.





***Our
      acquisitions could result in integration difficulties, unexpected expenses,
      diversion of management’s attention and other negative consequences.***





Our
      growth strategy is partly based on making acquisitions. We have recently
      acquired SyynX and Lawriter, as described elsewhere in this report. We plan
      to
      continue to acquire complementary businesses, products and services if we have
      the capital resources to do so. We must integrate the technology, products
      and
      services, operations, systems and personnel of acquired businesses, including
      our recent acquisitions, with our own and attempt to grow the acquired
      businesses as part of our company. The integration of other businesses is a
      complex process and places significant demands on our management, financial,
      technical and other resources. The successful integration of businesses we
      acquire is critical to our future success, and if we are unsuccessful in
      integrating these businesses, our financial and operating performance could
      suffer. The risks and challenges associated with acquisitions include:





·
            the
                inability to centralize and consolidate our financial, operational
                and
                administrative functions with those of the businesses we
                acquire;


·
            the
                diversion of our management’s attention from other business
                concerns;


·
            our
                inability to retain and motivate key employees of an acquired
                company;


·
            our
                entrance into markets in which we have little or no prior direct
                experience, such as Lawriter;




27




·
            litigation,
                indemnification claims and other unforeseen claims and liabilities
                that
                may arise from the acquisition or operation of acquired
                businesses;


·
            the
                costs necessary to complete integration exceeding our expectations
                or
                outweighing some of the intended benefits of the acquisitions we
                close;


·
            the
                inability to maintain the customer relationships of an acquired business;
                and


·
            the
                costs necessary to improve or replace the operating systems, products
                and
                services of acquired businesses exceeding our
                expectations.





We
      may be
      unable to integrate our acquisitions with our operations on schedule or at
      all.
      For example, we may be unable to enhance the service offerings of Lawriter
      as we
      intend. We cannot assure you that we will not incur large accounting charges
      or
      other expenses in connection with any of our acquisitions or that our
      acquisitions will result in cost savings or sufficient revenues or earnings
      to
      justify our investment in, or our expenses related to, these acquisitions.





***We
      are in extremely competitive markets, and if we fail to compete effectively
      or
      respond to rapid technological change, our revenues and market share will be
      adversely affected.***





Our
      business environment and the search and software industries in general are
      characterized by intense competition, rapid technological changes, changes
      in
      customer requirements and emerging new market segments. Our competitors include
      many companies that are larger and more established and have substantially
      more
      resources than we do, such as Google, Yahoo, FASTsearch, Autonomy and Convera.
      In our Lawriter online legal research business, we face strong competition
      from
      Reed LexisNexis ® and
      Westlaw ® .
      Current
      and potential competitors have established or may establish cooperative
      relationships among themselves or with third parties to increase the ability
      of
      their products to address the needs of the markets that we serve. Accordingly,
      new competitors or alliances among competitors may emerge and rapidly acquire
      significant market share. Increased competition may result in price reductions,
      reduced gross margins and loss of market share, any of which could have a
      material adverse effect on our business, financial condition or results of
      operations.





For
      our
      strategy to succeed and to remain competitive, we must leverage our core
      technology to develop new product offerings, update existing features and add
      new components to our current products such as support for new data types and
      taxonomies for specific vertical markets. These development efforts are
      expensive, and we plan to fund these developments with our existing capital
      resources, and other sources, such as equity issuances and borrowings that
      may
      be available to us. If these developments do not generate substantial revenues,
      or we are unable to access other sources of capital on acceptable terms, our
      business and results of operations will be adversely affected. We cannot assure
      you that we will successfully develop any new products, complete them on a
      timely basis or at all, achieve market acceptance or generate significant
      revenues with them.





***To
      the extent our revenues are paid in foreign currencies, and currency exchange
      rates become unfavorable, we may lose some of the economic value of the revenues
      in U.S. dollar terms.***





Conducting
      business in currencies other than U.S. dollars subjects us to fluctuations
      in
      currency exchange rates. If the currency exchange rates were to change
      unfavorably, the value of net receivables we receive in foreign currencies
      and
      later convert to U.S. dollars after the unfavorable change would be diminished.
      This could have a negative impact on our reported operating
      results.




28





**ITEM
              3A(T).**
            **CONTROLS
                AND PROCEDURES.**





Based
      on
      our management’s evaluation, with the participation of our Chief Executive
      Officer and Chief Financial Officer, Mr. William D. Kirkland, as of December
      31,
      2007, the end of the period covered by this report, our Chief Executive Officer
      and Chief Financial Officer concluded that our disclosure controls and
      procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
      of 1934, as amended, (the “Exchange Act”)) were ineffective to ensure that
      information required to be disclosed by us in reports that we file or submit
      under the Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in the rules and forms of the SEC and is accumulated
      and communicated to our management, including our Chief Executive Officer and
      Chief Financial Officer, as appropriate to allow timely decisions regarding
      required disclosure.





Our
      Chief
      Executive Officer and Chief Financial Officer reached the conclusion expressed
      in the preceding paragraph because we
      subsequently failed to file in a timely manner an amendment to our Current
      Report on Form 8-K dated October 19, 2007 related to our acquisition of SyynX
      Solutions GmbH. The due date for that amendment, which included certain required
      historical and pro forma financial information about SyynX, was Friday, January
      4, 2007. We filed the amendment on the evening of Monday, January 7,
      20 08,
      effective January 8, 2007. We
      believe that our failure to timely file with the SEC the amendment to the report
      described above resulted from an inadequacy in our disclosure controls and
      procedures. The foreign accounting firm we retained to perform the required
      accounting work was unable to complete the required financial statements in
      a
      timely manner. To remedy this problem in connection with our acquisitions in
      the
      future, particularly if the acquired business is overseas or the accounting
      work
      must be done over a holiday period, we plan to retain an accounting firm earlier
      in the process to provide ample time to complete any work that is required.
      In
      that regard, we note that we acquired Lawriter LLC, a material subsidiary,
      on
      February 1, 2008 and are filing today with the SEC the required financial
      statements related to that acquisition.





There
      have been no changes in our internal control over financial reporting identified
      in the evaluation that occurred during the second quarter of fiscal year 2008
      that have materially affected, or are reasonably likely to materially affect,
      our internal control over financial reporting.


29


**PART
      II - OTHER INFORMATION**





**ITEM
              1.**
            **LEGAL
                PROCEEDINGS**





We
      are
      not party to any material litigation at this time.





**ITEM
              2.**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS**





We
      have
      reported on Form 8-K all sales of unregistered securities that we made in the
      quarter ended December 31, 2007.





**ITEM
              3.**
            **DEFAULTS
                UPON SENIOR SECURITIES**





None.





**ITEM
              4.**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**





None.





**ITEM
              5.**
            **OTHER
                INFORMATION**





As
      permitted under SEC rules, we are including in this Item 5 information that
      we
      would otherwise include in Item 1.01 of a current report on Form
      8-K.





On
      February 1, 2008, we entered into an LLC Interests Purchase Agreement (the
      “Agreement”) with the members of Lawriter LLC (“Lawriter”), an Ohio limited
      liability company that provides online legal research services to a consortium
      of bar associations, including the Ohio State Bar Association. Under the
      Agreement, we purchased all of the limited liability company interests in
      Lawriter from OSBA.COM LLC, an Ohio limited liability company, and the Institute
      of Legal Publishing, Inc., an Ohio corporation f/k/a Lawriter Corporation
      (“Lawcorp”). Under the Agreement, we agreed to pay Lawcorp $500,000 on or before
      February 8, 2008. On that date, Lawcorp informally agreed to extend the date
      of
      payment until February 27, 2008, and on February 13, 2008, we entered into
      a
      letter agreement with Lawcorp to that effect. A copy of that letter agreement
      is
      attached as Exhibit 10.8 to this quarterly report.





**ITEM
              6.**
            **EXHIBITS**





**Exhibit**
              **No.**
            
            **Description**10.1
            
            Voting
                Trust Agreement by and among Margie Chassman, Collexis Holdings,
                Inc. and
                William D. Kirkland dated October 15, 2007 (incorporated by reference
                to
                Exhibit 10.1 to our Current Report on Form 8-K filed on October 16,
                2007).10.2
            
            Share
                Purchase Agreement dated October 19, 2007 by and among Collexis Holdings,
                Inc. and the shareholders and managing directors of SyynX Solutions
                GmbH
                (incorporated by reference to Exhibit 10.1 to our Current Report
                on Form
                8-K filed on October 25, 2007).10.3
            
            Licensing
                and Publishing Agreement by and between Collexis Holdings, Inc. and
                VersusLaw, Inc. (incorporated by reference to Exhibit 10.1 to our
                Current
                Report on Form 8-K filed on January 25, 2008).




30




**Exhibit**
              **No.**
            
            **Description**10.4
            
            Secured
                Promissory Note by Collexis Holdings, Inc. as maker to VersusLaw,
                Inc. as
                payee (incorporated by reference to Exhibit 10.2 to our Current Report
                on
                Form 8-K filed on January 25, 2008).10.5
            
            LLC
                Interests Purchase Agreement dated February 1, 2008 by and among
                Collexis
                Holdings, Inc., Lawriter, Inc., Lawriter LLC, OSBA.COM LLC, and the
                Institute of Legal Publishing, Inc. and other ancillary parties(incorporated
                by reference to Exhibit 10.1 to our Current Report on Form 8-K filed
                on
                February 4, 2008).10.6
            
            Security
                Agreement dated February 1, 2008 by Lawriter LLC in favor of Institute
                of
                Legal Publishing, Inc.(incorporated
                by reference to Exhibit 10.2 to our Current Report on Form 8-K filed
                on
                February 4, 2008).10.7
            
            Three
                Party Escrow Agreement dated February 1, 2008 by and among Collexis
                Holdings, Inc., OSBA.COM LLC and Escrow Associates, LLC(incorporated
                by reference to Exhibit 10.3 to our Current Report on Form 8-K filed
                on
                February 4, 2008).10.8
            
            Letter
                Agreement dated February 13, 2008 between Collexis Holdings, Inc.
                and the
                Institute of Legal Publishing, Inc. related to LLC Interests Purchase
                Agreement dated February 1, 2008 by and among Collexis Holdings,
                Inc.,
                Lawriter, Inc., Lawriter LLC, OSBA.COM LLC, andthe
                Institute of Legal Publishing, Inc.and
                other ancillary parties.31
            
            Certifications
                of William D. Kirkland pursuant to Section 302 of the Sarbanes-Oxley
                Act
                of 2002.32
            
            Certification
                of William D. Kirkland pursuant to Section 906 of the Sarbanes-Oxley
                Act
                of 2002. This exhibit is not “filed” for purposes of Section 18 of the
                Securities Exchange Act of 1934 but is instead furnished as provided
                by
                applicable rules of the SEC.


31





**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.








Date:
      February 14, 2007




**COLLEXIS
                  HOLDINGS, INC.**By:
              /s/
              William
                  D. KirklandWilliam
                  D. Kirkland
                Chief
                  Financial Officer
                (The
                  registrant’s Principal Financial and Accounting Officer, who is duly
                  authorized to sign this
                  report)




32