**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**






**FORM
      10-Q**






**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**For
      the quarterly period ended September 30, 2008.**




**OR**




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




**For
      the transition period from** **** **to** **** **.**




**Commission
      File Number: 001-33495**







**COLLEXIS
      HOLDINGS, INC.**


**(Exact
      name of registrant as specified in its charter)**






**Nevada**
            
            **26-3128407****(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            
            **(I.R.S.
                Employer**
              **Identification
                No.)**






**1201
                Main Street, Suite 980, Columbia, SC**
            
            **29201****(Address
                of principal executive offices)**
            
            **(Zip
                Code)**





**(803)
      727-1113**


**(Registrant’s
      telephone number, including area code)**




**N/A**


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




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for the past 90 days.    Yes x No  ̈





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




Large accelerated filer ̈
            
            Accelerated filer ̈
            
            Non-accelerated filer ̈
            
            Smaller reporting companyx





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes  ̈ No x





As
      of
      November 13, 2008, there were 114,386,782 shares of the issuer’s common
      stock outstanding.




1




**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




This
      Quarterly Report on Form 10-Q for the three months ended September 30, 2008,
      contains forward-looking statements that involve a number of risks
      and uncertainties. Such forward-looking statements are made pursuant to the
      “safe-harbor” provisions of the Private Securities Litigation
      Reform Act of 1995. 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 captions “Risk Factors,” “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations” and
“Description of Business,” 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;


·
            changes
                in economic conditions in the U.S. and in other countries in which
                we
                currently do business;


·
            currency
                exchange rates;


·
            failure
                to integrate new products and newly acquired companies and the diversion
                of management resources relating toacquisitions,
                and the negative effect on our earnings relating to the amortization
                or
                potential write-down of acquired assetsor
                goodwill;


·
            fluctuations
                in operating results and earnings, including timing of cash flows
                and
                company performance;


·
            market
                acceptance of new products or the failure of new products to operate
                as
                anticipated;


·
            actions
                taken or not taken by others, including competitors, as well as
                legislative, regulatory, judicial and other governmental
                authorities;


·
            competition
                in our industry;


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


·
            disputes
                regarding our intellectual property;
                and


·
            other
                factors discussed under the section entitled “Risk Factors” or elsewhere
                in this report.




These
      and
      additional factors are set forth in Part II, Item 1A. of this report. You should
      carefully review these risks and additional risks described in other documents
      we file from time to time with the Securities and Exchange Commission (“SEC”),
      including our annual r eport
      on
      Form 10-K filed on October 14, 2008. The cautionary statements made in this
      report are intended to be applicable 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.




2




**COLLEXIS
      HOLDINGS, INC. and Subsidiaries**




**Quarterly
      Report on Form 10-Q**




**TABLE
      OF CONTENTS**






**Item**
            
            
            
            **Page****PART
                I - FINANCIAL INFORMATION****1.**
            
            **Financial
                Statements (Unaudited)**Consolidated
                Balance Sheets as of September 30, 2008 and June 30, 2008
            
            5Consolidated
                Statements of Operations for the three months ended September 30,
                2008 and
                September 30, 2007
            
            6Consolidated
                Statements of Comprehensive Loss for the three months ended September
                30,
                2008 and September 30, 2007
            
            7Consolidated
                Statements of Cash Flows for the three months ended September 30,
                2008 and
                September 30, 2007
            
            8Notes
                to Consolidated Financial Statements
            
            9**2.**
            
            **Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations**
            
            16**3.**
            
            **Quantitative
                and Qualitative Disclosures About Market Risk**
            
            19**4T.**
            
            **Controls
                and Procedures**
            
            19**PART
                II - OTHER INFORMATION****1.**
            
            **Legal
                Proceedings**
            
            20**1A.**
            
            **Risk
                Factors**
            
            20**2.**
            
            **Unregistered
                Sales of Equity Securities and Use of Proceeds**
            
            23**3.**
            
            **Defaults
                Upon Senior Securities**
            
            23**4.**
            
            **Submission
                of Matters to a Vote of Security Holders**
            
            23**5.**
            
            **Other
                Information**
            
            23**6.**
            
            **Exhibits**
            
            23




3




**PART
      I - FINANCIAL INFORMATION**






**ITEM 1.**
            **FINANCIAL
                STATEMENTS (UNAUDITED)**




4




**COLLEXIS
      HOLDINGS, INC. and Subsidiaries**




**CONSOLIDATED
      BALANCE SHEETS**




**As
                  of September 30,**
              
              **As
                  of June 30,****2008**
              
              **2008****ASSETS**
              
              **(Unaudited)**
              
              **(Note)**Currents
                  assetsCash
                  and cash equivalents
              
              $
              315,921
              
              $
              1,476,234Accounts
                  receivable, net of allowance for doubtful accounts of $
                  276,645and
                  $ 302,492
              
              
              830,795
              
              
              1,193,678Prepaid
                  expenses and other current assets
              
              
              208,162
              
              
              225,973Total
                  current assets
              
              
              1,354,878
              
              
              2,895,885Property
                  and equipment, at cost, net of accumulated depreciation of $
                  669,163and
                  $ 671,293
              
              
              517,541
              
              
              540,485Intangibles,
                  net of accumulated amortization of $1,327,870 and $998,584
              
              
              6,913,507
              
              
              7,726,426Trade
                  Name
              
              
              1,090,494
              
              
              1,090,494Goodwill
              
              
              9,245,386
              
              
              9,616,603Security
                  deposit - rent
              
              
              21,477
              
              
              23,482Total
                  assets
              
              $
              19,143,283
              
              $
              21,893,375**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  liabilitiesAccounts
                  payable trade
              
              $
              959,421
              
              $
              1,152,230Accrued
                  taxes and expenses
              
              
              1,057,915
              
              
              1,299,416Deferred
                  revenue
              
              
              667,391
              
              
              762,566Other
                  liabilities and deferred charges
              
              
              -
              
              
              21,299Deferred
                  tax liability, net
              
              
              18,123
              
              
              22,706Current
                  portion of deferred purchase price
              
              
              3,434,070
              
              
              3,803,507Total
                  current liabilities
              
              
              6,136,920
              
              
              7,061,724Non-current
                  liabilitiesDeferred
                  tax liability
              
              
              1,320,446
              
              
              1,532,977Deferred
                  purchase price
              
              
              6,693,132
              
              
              6,991,696Total
                  non-current liabilities
              
              
              8,013,578
              
              
              8,524,673Total
                  liabilities
              
              
              14,150,498
              
              
              15,586,397Stockholders'
                  equityCommon
                  stock, par value $0.001, authorized 277,713,000 shares;
                  112,633,449shares
                  issued and outstanding as of September 30, 2008; authorized
                  277,713,000shares;
                  109,743,727 issued and oustanding as of June 30, 2008
              
              
              112,633
              
              
              109,744Additional
                  paid-in capital
              
              
              31,578,300
              
              
              30,314,289Accumulated
                  other comprehensive income (loss)
              
              
              (278,825
              )
              
              636,693Accumulated
                  deficit
              
              
              (26,419,323
              )
              
              (24,753,748
              )Total
                  stockholders' equity
              
              
              4,992,785
              
              
              6,306,978Total
                  liabilities and stockholders' equity
              
              $
              19,143,283
              
              $
              21,893,375
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
  Note:
          Derived from audited consolidated financial statements as of June 30,
          2008.
  5


**COLLEXIS
      HOLDINGS, INC. and Subsidiaries**




**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




**(Unaudited)**




**Three
                  Months Ended September 30,****2008**
              
              **2007**RevenueLicense
                  Revenue
              
              $
              118,170
              
              $
              43,631Service
                  Revenue
              
              
              342,090
              
              
              157,699Maintenance
                  & Support Revenue
              
              
              213,551
              
              
              101,752Hardware
                  & Hosting Revenue
              
              
              25,005
              
              
              13,634Database
                  subscription revenue
              
              
              745,082
              
              
              -Total
                  revenue
              
              
              1,443,898
              
              
              316,716Cost
                  of RevenueCost
                  of License Revenue
              
              
              156
              
              
              9,603Cost
                  of Service Revenue
              
              
              316,813
              
              
              80,117Cost
                  of Maintenance & Support Revenue
              
              
              17,088
              
              
              137,538Cost
                  of Hardware & Hosting Revenue
              
              
              35,353
              
              
              8,454Cost
                  of subscription revenue
              
              
              158,102
              
              
              -Total
                  cost of revenue
              
              
              527,512
              
              
              235,712Gross
                  profit
              
              
              916,386
              
              
              81,004Operating
                  expensesGeneral
                  & Administrative
              
              
              2,297,101
              
              
              1,027,032Sales
                  & Marketing
              
              
              801,576
              
              
              610,703Research
                  & Development
              
              
              193,663
              
              
              302,798Total
                  operating expenses
              
              
              3,292,340
              
              
              1,940,533Loss
                  before other income and income tax
              
              
              (2,375,954
              )
              
              (1,859,529
              )Other
                  income
              
              
              688,239
              
              
              9,408Loss
                  before interest income (expense)
              
              
              (1,687,715
              )
              
              (1,850,121
              )Interest
                  income (expense)
              
              
              (65,649
              )
              
              -Loss
                  before income tax benefit
              
              
              (1,753,364
              )
              
              (1,850,121
              )Tax
                  benefit
              
              
              87,789NET
                  LOSS
              
              $
              (1,665,575
              )
              $
              (1,850,121
              )Basic
                  and diluted common shares outstanding
              
              
              110,209,373
              
              
              61,922,690Basic
                  and diluted net loss per share
              
              $
              (0.02
              )
              $
              (0.03
              )


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




6




**COLLEXIS
      HOLDINGS, INC. and Subsidiaries**




**CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE LOSS**




**(Unaudited)**




**Three
                  Months Ended September 30,****2008**
              
              **2007**Net
                  loss
              
              $
              (1,665,575
              )
              $
              (1,850,121
              )Foreign
                  currency translation adjustment
              
              
              (915,518
              )
              
              34,952Comprehensive
                  loss
              
              $
              (2,581,093
              )
              $
              (1,815,169
              )


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





7




**COLLEXIS
      HOLDINGS, INC. and Subsidiaries**




**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**




**(Unaudited)**




**Three**
              
              **Three****Months
                  Ended**
              
              **Months
                  Ended****September
                  30,**
              
              **September
                  30,****2008**
              
              **2007**Cash
                  flows from operating activitiesNet
                  loss
              
              $
              (1,665,575
              )
              $
              (1,850,121
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activitiesDepreciation
                  and amortization
              
              
              206,444
              
              
              18,324Stock
                  option compensation expense
              
              
              211,627
              
              
              146,362Foreign
                  exchange gain
              
              
              (686,137
              )
              
              -Gain
                  on sale of assets
              
              
              -
              
              
              (4,123
              )Allowance
                  for bad debts
              
              
              (25,847
              )
              
              (99,981
              )Deferred
                  taxes
              
              
              (87,789
              )
              
              -Accounts
                  Receivable
              
              
              388,730
              
              
              248,711Prepaid
                  expenses
              
              
              17,811
              
              
              (116,958
              )Other
                  receivables
              
              
              -
              
              
              10,498Other
                  assets & deferred charges
              
              
              2,005
              
              
              -Accounts
                  payable
              
              
              (192,809
              )
              
              280,212Accrued
                  expenses
              
              
              (241,501
              )
              
              (284,807
              )Deferred
                  revenue
              
              
              (90,888
              )
              
              150,165Net
                  cash (used in) operating activities
              
              
              (2,163,929
              )
              
              (1,501,718
              )Cash
                  flows from investing activitiesPurchases
                  of property and equipment
              
              
              (10,175
              )
              
              (63,906
              )Net
                  cash (used in) investing activities
              
              
              (10,175
              )
              
              (63,906
              )Cash
                  flows from financing activitiesLoan
                  from shareholder
              
              
              -
              
              
              (650,000
              )Fees
                  paid to raise capital
              
              
              -
              
              
              (151,298
              )Partial
                  payment on def. purchase obligation - Lawriter
              
              
              (313,750
              )
              
              -Proceeds
                  on stock issuance
              
              
              1,267,000
              
              
              -Cash
                  received on stock subscriptions
              
              
              -
              
              
              2,806,386Net
                  cash provided by financing activities
              
              
              953,250
              
              
              2,005,088Net
                  increase (decrease) in cash and cash equivalents
              
              
              (1,220,854
              )
              
              439,464Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              60,541
              
              
              (26,795
              )Cash
                  and cash equivalents at beginning of period
              
              
              1,476,234
              
              
              187,261Cash
                  and cash equivalents at end of period
              
              $
              315,921
              
              $
              599,930Supplemental
                  disclosures of cash flow information:Cash
                  paid during the period forInterest
              
              $
              -
              
              $
              279Income
                  taxes
              
              $
              -
              
              $
              -




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 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




*Organizational
      Matters*





The
      company was formed when, on February 13, 2007, Collexis Holdings, Inc., a
      Delaware corporation, merged with and into Technology Holdings, Inc., a Nevada
      corporation. As the surviving company, Technology Holdings, Inc. changed its
      name to Collexis Holdings, Inc. Immediately before the merger, Collexis
      Holdings, Inc. had acquired through a share exchange approximately 99.5% of
      the
      outstanding capital stock of Collexis B.V. On June 27, 2008, we acquired the
      remaining 0.5% of Collexis B.V. stock we did not previously own in exchange
      for
      183,333 shares of our common stock. Before the merger, Technology Holdings,
      Inc.
      was a development stage company with no operations. Collexis B.V. was founded
      in
      1999 in the Netherlands and through these transactions became the operating
      subsidiary of Collexis Holdings, Inc. and acquirer for accounting
      purposes.





On
      October 19, 2007, we acquired our long-time software development partner, SyynX
      WebSolutions GmbH, a privately-held software company based in Cologne, Germany.
      Additionally, on February 1, 2008, we acquired Lawriter, LLC, an Ohio based
      company that provides online legal research services to bar associations under
      the name Casemaker® via monthly database subscription fees. To further expand
      our offerings to legal industry clients, on January 18, 2008, we entered into
      a
      licensing and publishing agreement with VersusLaw, Inc., under which we acquired
      a perpetual, non-exclusive, transferable license to use VersusLaw’s
      legal-related collection of judicial opinions.





*Description
      of Business*





Collexis
      Holdings, Inc., sometimes referred to as “Collexis,” the “Company,” “we,” “us,”
or “our” in this report, is a global software development company headquartered
      in Columbia, South Carolina with operations in Cincinnati, Ohio, Geldermalsen,
      the Netherlands and Cologne, Germany. We develop software that supports the
      knowledge intensive market, building tools to search and mine large sets of
      information. Our software enables search, aggregation, navigation and discovery
      of information. Using public as well as proprietary thesauri of industry
      specific language, we 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.
      We
      generate our revenues primarily from licensing our software, 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.





We
      operate several subsidiaries that support our core technology sales in the
      government, enterprise and life science sectors. We recently acquired an
      industry-dedicated subsidiary, Lawriter LLC, that provides online legal research
      services to lawyers in the United States primarily through state bar
      associations. In addition, we now offer the world’s first pre-populated
      professional social network for life science researchers,
      www.biomedexperts.com.





Our
      technology is based on the principle of fingerprinting or the semantic profiling
      of a document. The Collexis software can create a fingerprint for any piece
      of
      text containing relevant information. This process makes use of a structure
      of
      professional terminology in a particular field, including thesaurus, taxonomies
      or ontologies. A thesaurus contains selected words, terms and concepts and
      their
      semantic relationships in a hierarchical structure also reflecting synonyms
      and
      homonyms. The profiled fingerprint of a document is the starting point for
      industry applications that we use in our primary markets. The document
      fingerprint depends not only on the capabilities of the resulting application,
      but also on the underlying functionality and scalability of the system
      architecture to perform in industries as diverse as the legal, life sciences,
      and defense/government markets.




*Basis
      of Presentation*





The
      accompanying consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States for interim
      financial reporting and in accordance with Article 8 of Regulation S-X. The
      results of operations of Collexis Holdings, Inc. and its wholly-owned
      subsidiaries Collexis B.V. and Collexis, Inc. are included for all periods
      presented. The results of SyynX Solutions, GmbH are included from October 19,
      2007 and the results of Lawriter, LLC are included from February 1, 2008, their
      respective acquisition dates. SyynX and Lawriter results are not included in
      the
      results reported for the three months ended September 30, 2007.




9


**COLLEXIS
        HOLDINGS, INC. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**


*Principles
      of Consolidation*





The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiaries. 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 has recently been changed to June
      30 to
      correspond with its financial reporting period.





*Revenue
      Recognition*





The
      Company recognizes 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.” The Company recognizes revenue from non-cancelable software
      licenses when the license agreement has been signed, delivery has occurred,
      the
      fee is fixed or determinable and collectability is probable. The Company
      recognizes 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, the Company defers
      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.
      The
      Company recognizes initial maintenance on a straight-line basis over the initial
      maintenance term. The Company determines VSOE of maintenance by using a
      consistent percentage of maintenance fees to license fee based on renewal rates.
      The Company recognizes maintenance fees in subsequent years on a straight-line
      basis over the life of the applicable agreement. The Company determines 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.




For
      software license, services and maintenance revenue, the Company assesses whether
      the fee is fixed and determinable, the Company has performed the services and
      whether or not collection is probable. The Company assesses 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 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, the Company recognizes
      revenue as the fees become due.





The
      Company bills the majority of its training and consulting services based on
      hourly rates. The Company generally recognizes revenue as it performs 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, the Company recognizes the related revenue using the percentage of
      completion method of accounting.





The
      Company recognizes 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. The Company’s Lawriter
      subsidiary, invoices its subscription customers in advance of the month for
      which the subscription services are being provided. Recognition of revenue
      associated with such billing is recognized by Lawriter in the month the services
      are actually provided.




*Foreign
      Currency Risk*





The
      Company has conducted significant sales activity through its subsidiaries in
      the
      Netherlands and Germany. The Company has experienced foreign exchange gains
      and
      losses to date without engaging in any hedging activities.





The
      Company’s 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
      statements of operations.




10




**COLLEXIS
        HOLDINGS, INC. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**


*Loss
      per Common Share*





Loss
      per
      share (“EPS”) is computed based on a weighted average number of common shares
      outstanding and excludes any potential dilution. Diluted EPS 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.
      During the periods presented, the Company had 17,988,276 and 17,151,120 options,
      warrants and restricted stock outstanding as of September 30, 2008 and 2007
      respectively, that could potentially dilute basic earnings per share in the
      future. These instruments were excluded from the computation of diluted earnings
      per share, because their effect would have been anti-dilutive.




*Impairment
      or Disposal of Long-Lived Assets*





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company
      monitors events or changes in circumstances that may indicate carrying amounts
      of its long-lived assets may not be recoverable. When such events or changes
      in
      circumstances are present, the Company assesses the recoverability of its assets
      by determining whether the carrying amount of its assets will be recovered
      through undiscounted, expected future cash flows. If the Company determines
      that
      the carrying values of specific long-lived assets are not recoverable, the
      Company will record a charge to operations to reduce the carrying value of
      those
      assets to their fair values. The Company considers various valuation factors,
      principally discounted cash flows, to assess the fair values of long-lived
      assets.





*Goodwill
      and Intangible Assets*





Goodwill
      represents the excess of the cost of an acquisition over the fair value of
      net
      assets acquired. In accordance with SFAS No. 142, “Goodwill and Other Intangible
      Assets”, goodwill is reviewed for impairment utilizing a two-step process. The
      first step of the impairment test requires the identification of the reporting
      units, and comparison of the fair value of each of these reporting units to
      the
      respective carrying value. The fair value of the reporting units is determined
      based on valuation techniques using the best information that is available,
      such
      as discounted cash flow projections. If the carrying value is less than the
      fair
      value, no impairment exists and the second step is not performed. If the
      carrying value is higher than the fair value, there is an indication that
      impairment may exist and the second step must be performed to compute the amount
      of the impairment. In the second step, the impairment is computed by comparing
      the implied fair value of reporting unit goodwill with the carrying amount
      of
      that goodwill. SFAS No. 142 requires goodwill to be tested for impairment
      annually at the same time every year, and when an event occurs or circumstances
      change such that it is reasonably possible that an impairment may exist. The
      annual impairment tests are performed in the fourth quarter of each
      year.




Because
      of the proximity of the acquisitions (Note 3) to the quarter end, management
      does not believe there is any impairment to its Goodwill or Intangible Assets
      at
      September 30, 2008.





Other
      intangible assets, which include customer lists, trademarks, and other
      identifiable intangible assets, are amortized on a straight-line basis over
      estimated useful lives of three to 10 years.





*Stock-Based
      Compensation*





On
      January 1, 2006, Collexis adopted SFAS No. 123R, “Share-Based Payment,” which
      replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes
      Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued
      to Employees.” SFAS No. 123R requires the cost of employee services received in
      exchange for equity instruments awarded or liabilities incurred to be recognized
      in the financial statements. Under this method, compensation cost beginning
      January 1, 2006 includes the portion vesting in the period for (1) all
      share-based payments granted prior to, but not vested as of December 31, 2005,
      based on the grant date fair value estimated in accordance with the original
      provisions of SFAS No. 123, and (2) all share-based payments granted subsequent
      to December 31, 2005, based on the grant date fair value estimated using the
      Black-Scholes option pricing model.





The
      Company began using the modified prospective transition method when it adopted
      SFAS 123R as of January 1, 2006. The Company anticipates it will grant
      additional employee stock options and/or non-vested stock units in the future.
      The fair value of these grants is not included in the amount above, as the
      impact of these grants cannot be predicted at this time because it will depend
      on the number of share-based payments granted and the then current fair
      values.




11




**COLLEXIS
        HOLDINGS, INC. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**


*Recent
      accounting pronouncements*





Please
      see the Company’s annual report on Form 10-K filed on October 14, 2008 for a
      discussion of the impact of recent accounting pronouncements on the Company.





**NOTE
      2. GOING CONCERN AND LIQUIDITY**





As
      noted
      in our annual report on Form 10-K filed on October 14, 2008, we incurred a
      net
      loss of $11.3 million for the year ended June 30, 2008, current liabilities
      exceeded current assets by $4.2 million and we reported an accumulated
      deficit of $24.8 million. As a result, the report of our Independent
      Registered Public Accounting Firm on our Consolidated Financial Statements
      for
      such period included an explanatory paragraph that expressed substantial doubt
      about our ability to continue as a going concern. For the three months ended
      September 30, 2008 we incurred a net loss of $1.7 million and reported an
      accumulated deficit of $26.4 million as of September 30, 2008, compared to
      a net
      loss of $1.9 million as of the three months ended September 30, 2007 and a
      reported accumulated deficit of $15.3 million as of September 30, 2007.





For
      the
      three months ended September 30, 2008, net cash used in operations was $2.2
      million. Our primary use of operating funds related to developing the Collexis
      Engine and other products and increasing our sales and marketing presence.
      Our
      working capital deficit was $4.8 million as of September 30, 2008 compared
      to a
      deficit of $4.2 million as of June 30, 2008.





Our
      financing activities during the three months ended September 30, 2008 reflected
      a deferred payment associated with the Lawriter acquisition of approximately
      $314,000 and cash raised from stock sales of approximately $1,267,000. Net
      cash
      used in investing activities was approximately $10,000 for the three months
      ended September 30, 2008.




As
      of
      November 13, 2008, we had cash and cash equivalents of approximately $254,000.
      We believe our current cash balance together with any funds generated from
      our
      operations will be sufficient to meet our working capital needs for the next
      two
      weeks.





Our
      principal cash requirements are for working capital and to make deferred
      payments relating to the SyynX and Lawriter acquisitions. The deferred payments
      due on these acquisitions over the next three months are approximately $3.3
      million. See discussion under Note 3 “Acquisitions.”





In
      order
      to alleviate our working capital deficiency, provide capital for deferred
      acquisition payments and address our continued financing concerns, management
      intends to take affirmative steps towards:





·
            building
                on the momentum established in the market with our profiling and
                dashboard
                products and cultivating our strategic alliances to increase our
                market
                presence;




·
            developing
                new products to address the demands in our core and legal markets;
                and




·
            identifying
                sources of capital that will be sufficient to fund our operations
                until
                such time as we are cash flow positive.





To
      guide
      us in how to progress towards the above goals, we have retained an independent
      consulting firm to objectively evaluate our markets and growth potential, assist
      us with long range strategic planning, assist us in identifying capital and
      other resource needs and the deployment of such resources to maximize our
      product development and commercialization potential. However, there can be
      no
      assurance that this process will be successful.




In
      order
      to meet our short-term working capital needs, we are currently conducting a
      private placement of our common stock for up to $4.0 million. As of the date
      of
      this report, we have accepted subscriptions for $1.5 million from a private
      investor who has orally agreed to finance our working capital needs through
      the
      purchase of shares of our common stock, up to the amount of this private
      placement, on an as needed basis until this offering is fully subscribed. The
      investor is not contractually obligated to purchase additional shares of our
      common stock, therefore, there can be no assurance that we will receive
      additional funding through the private placement of our common stock and failure
      to achieve such funding will result in a significant negative impact to our
      business and our operating results.




12




**COLLEXIS
        HOLDINGS, INC. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**


The
      accompanying consolidated financial statements do not include any adjustments
      that might be necessary if the Company is unable to continue as a going
      concern.





**NOTE
      3. ACQUISITIONS**





*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 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
      Earn-out (as defined below), if any.





The
      remaining cash balance due to each seller to be paid in equal installments,
      are
      listed in the following table.




**Seller**
            
            **Payment
                Date**
            
            **Payment**
              **Amount**OSBA
            
            
            
            
            $November
                1, 2008
            
            
            313,750February
                1, 2009
            
            
            313,750$
            627,500Lawcorp
            
            
            February
                1, 2009
            
            $
            750,000February
                1, 2010
            
            
            750,000February
                1, 2011
            
            
            750,000February
                1, 2012
            
            
            750,000$
            3,000,000




The
      $4,500,000 due the OSBA was to be paid as follows: $1,125,000 was paid at
      closing, the remaining cash due is payable in four equal installments of
      $313,750, noted above, of which two remain to be paid. With respect to the
      remaining $2,120,000 consideration due to OSBA, the purchase 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(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 purchase, we also agreed to pay the Earn-out , if any, on a pro
      rata basis to OSBA and Lawcorp within 20 days following the end of each calendar
      quarterly period within the Earn-out period. The Earn-out 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
      “Earn-out” means a lump sum cash payment equal to the product of (x) the
      Earn-out 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 Earn-out 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
      Earn-out payments, however, cannot exceed $15,000,000.




13




**COLLEXIS
        HOLDINGS, INC. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**


The
      total
      of remaining payments, $5,468,248, represents the actual payment amounts due
      on
      their respective due dates. The calculation of deferred purchase price on our
      consolidated balance sheet at September 30, 2008, $4,768,957, reflects the
      present value of these payments discounted at the implied interest rate of
      8%.
      The difference of $699,291 represents the value of imputed
      interest.





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




**Purchase
                Price:**Deferred
                purchase price (net of imputed interest of $947,272)
            
            $
            5,927,728Cash
            
            
            1,625,000Common
                shares issued
            
            
            500,0008,052,728Direct
                costs of acquisition
            
            
            232,707Total
                purchase price
            
            $
            8,285,435**Values
                assigned to assets and liabilities:**Cash
            
            $
            65,377Accounts
                receivable
            
            
            247,676Property
                and equipment
            
            
            104,216Acquired
                technology (estimated useful life of seven years)
            
            
            1,170,000Trade
                name (estimated useful life indefinite)
            
            
            1,090,000Customer
                contracts (estimated useful life of ten years)
            
            
            726,000Goodwill
            
            
            5,275,330Accounts
                payable and accrued expenses
            
            
            (97,005
            )Deferred
                revenue
            
            
            (256,084
            )Accrued
                restructuring charges
            
            
            (40,075
            )Total
                purchase price assigned
            
            $
            8,285,435





The
      Company continues to evaluate and value the identifiable intangible assets
      and
      acquisition costs of Lawriter. Thus, this preliminary allocation is subject
      to
      refinement, including an increase in purchase price for the reasonably estimable
      value of the Earn-out, as permitted for a period of 12 months from the date
      of
      acquisition.





*SyynX
      Solutions GmbH*





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. The table below reflects the remaining installment
      payments to be made.




**Payment Date**
            
            **Payment**
              **Amount in**
              **Euros**
            
            **Remaining**
              **Payments in**
              **US Dollars at**
              **9-30-08**
              **Exchange**
              **Rates**October
                1, 2008
            
            €
            1,485,149
            
            $
            2,145,892October
                1, 2009
            
            
            1,224,918
            
            
            1,769,884October
                1, 2010
            
            
            1,212,871
            
            
            1,752,477€
            3,922,938
            
            $
            5,668,253




14




**COLLEXIS
        HOLDINGS, INC. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**


The
      total of remaining payments, $5,668,253, represents the actual payment amounts
      due on their respective due dates, calculated at September 30, 2008 exchange
      rates. The calculation of deferred purchase price on our consolidated balance
      sheet at September 30, 2008, $5,358,245, reflects the present value of these
      payments discounted at the implied interest rate of 8%. The difference of
      $310,008 represents the value of imputed interest. According to the terms of
      the
      purchase agreement, we have until December 31, 2008 to make the October 1,
      2008
      payment to the sellers of SyynX. The unpaid balance is subject to interest
      at an
      annual rate of 8% accruing from October 1, 2008 until paid.




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




**Purchase
                Price:**Deferred
                purchase price (net of imputed interest of $790,941)
            
            $
            7,029,308Exercise
                of option
            
            
            712,5507,741,858Direct
                costs of acquisition
            
            
            189,878Write
                off of SyynX receivable from Collexis Holdings, Inc.
            
            
            (200,587
            )Total
                purchase price
            
            $
            7,731,149**Values
                assigned to assets and liabilities:**Cash
            
            $
            154,036Accounts
                receivable
            
            
            320,820Deferred
                tax assets
            
            
            48,005Property
                and equipment
            
            
            71,435Trade
                name (estimated useful life of five years)
            
            
            1,090,000Acquired
                technology (estimated useful life of seven years)
            
            
            4,004,733Goodwill
            
            
            3,918,673Accounts
                payable and accrued expenses
            
            
            (21,183
            )Income
                taxes payable
            
            
            (127,876
            )Deferred
                tax liability
            
            
            (1,608,479
            )Other
                liabilities
            
            
            (119,015
            )Total
                purchase price assigned
            
            $
            7,731,149





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. 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. Additionally,
      on February 15, 2008, we granted seven former SyynX employees and one consultant
      the option to purchase a total of 275,000 shares of our common stock at an
      exercise price of $0.75 per share, under a proportionally identical vesting
      schedule and as called for under the agreement.





*Combined
                consolidated pro forma financial information*




The
      operating results of SyynX and Lawriter are included with ours beginning October
      19, 2007 and February 1, 2008 respectively. The following pro forma information
      reflects the impact on our statement of operations had these acquisitions
      occurred on July 1, 2007.




Three
                  Months EndedSeptember
                  30, 2008
              
              
              September
                  30, 2007Revenue
                  as reported
              
              $
              1,443,898
              
              $
              316,716Revenue
                  pro-forma
              
              $
              1,443,898
              
              $
              1,324,903Net
                  Loss as reported
              
              $
              (1,665,575
              )
              $
              (1,850,121
              )Net
                  Loss pro forma
              
              $
              (1,665,575
              )
              $
              (1,775,785
              )Net
                  Loss per share as reported
              
              $
              (0.02
              )
              $
              (0.03
              )Net
                  Loss per share pro forma
              
              $
              (0.02
              )
              $
              (0.03
              )




15




**ITEM 2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**




**Overview**




Collexis
      Holdings, Inc., sometimes referred to as “Collexis,” “we,” “us,” or “our” in
      this report, is a global software company headquartered in Columbia, South
      Carolina with major operations in Cincinnati, Ohio, Geldermalsen, the
      Netherlands and Cologne, Germany. We develop software that supports the
      knowledge intensive market, building tools to search and mine large sets of
      information. Our software enables search, aggregation, navigation and discovery
      of information. Using public as well as proprietary thesauri of industry
      specific language, we 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, analyst or business
      professional. We generate our revenues primarily from licensing our software
      and
      content, 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.




We
      operate several subsidiaries that support our core technology sales in the
      government, enterprise and life science markets. In October 2007, we
      acquired SyynX Solutions GmbH, this expanded our application solutions in health
      sciences. In February 2008, we acquired an industry-dedicated subsidiary,
      Lawriter LLC, that provides online legal research services to lawyers in the
      United States primarily through state bar associations. In addition, we now
      offer the world’s first pre-populated professional social network for life
      science researchers, www.biomedexperts.com.





**Results
      of Operations**





***Three
      Months Ended September 30, 2008 compared to Three Months Ended September 30,
      2007***





*Total
      Revenues.* Total
      revenues increased approximately $1,127,000, or 355%, to approximately
      $1,444,000 for the three months ended
      September 30, 2008 as compared to approximately $317,000 for the three months
      ended September 30, 2007. Of this increase, approximately $297,000, or 93%,
      was
      due to the expansion of efforts in the university and research markets resulting
      in increases in license revenue, service revenue, and maintenance and support
      revenue. The remaining increase was due primarily to the revenue contribution
      by
      our acquisitions of Lawriter and SyynX of approximately $745,000 and $89,000,
      respectively.





*License
      Revenue.* License
      revenue increased approximately $75,000, or 171%, to approximately $118,000
      for
      the three months ended
      September 30, 2008 as compared to approximately $44,000 in the three months
      ended September 30, 2007. This increase is primarily due to sales of
      new licenses and subscriptions in the government, university and research
      markets.





*Service
      Revenue.* Service
      revenue increased approximately $184,000, or 117%, to approximately $342,000
      for
      the three months  ended
      September 30, 2008 versus approximately $158,000 for the three months ended
      September 30, 2007. This increase arises from sales efforts to deliver
      services to new clients, and to existing clients who seek to add profiles and
      libraries to new and existing subscription applications. Additionally, the
      SyynX
      acquisition contributed approximately $70,000 to such growth.





*Maintenance
      & Support Revenue.* Maintenance
      and support revenue increased approximately $112,000, or 110%, to approximately $214,000
      for the three months ended September 30, 2008 compared to approximately $102,000
      for the three months ended September 30, 2007. This increase
      is due primarily to sales of maintenance contracts to new and existing license
      customers.





*Hardware
      & Hosting Revenue.* Hardware
      and hosting revenue increased approximately $11,000, or 83%, to approximately $25,000
      for the three months ended September 30, 2008 versus approximately $14,000
      for
      the three months ended September 30, 2007. This increase is due
      primarily to the SyynX acquisition, which provided approximately $19,000 of
      increased hosting activities.





*Database
      Subscription Revenue.* Database
      subscription revenue was approximately $745,000 for the three months ended
      September 30, 2008.
      This was a new revenue line for us as a result of our acquisition of Lawriter,
      LLC on February 1, 2008. Therefore, no revenue for this service line existed
      for
      the three months ended September 30, 2007.




16




*Cost
      of License Revenue.* Cost
      of
      license revenue was approximately $150 for the three months ended September
      30,
      2008 as compared  to
      approximately $9,600 for the three months ended September 30, 2007, a decrease
      of approximately $9,500, or 98%. This decrease was due to minimal support
      required for license sales.




*Cost
      of Service Revenue.* Cost
      of
      service revenue increased approximately $237,000, or 296%, to approximately
      $317,000 for the three
      months ended September 30, 2008 versus approximately $80,000 for the three
      months ended September 30, 2007. This was due primarily to an increase
      in service revenue and SyynX costs of approximately 232,000 to support our
      services contracts.





*Cost
      of Maintenance & Support Revenue.* Cost
      of
      maintenance and support revenue decreased approximately $130,000, or 88%,
      to  approximately
      $17,000 for the three months ended September 30, 2008 compared to approximately
      $138,000 for the three months ended September 30,
      2007. The decrease was due to the minimal support required to service our
      maintenance contracts.





*Cost
      of Hardware & Hosting Revenue.* Cost
      of
      hardware and hosting revenue was approximately $35,000 for the three
      months ended
      September 30, 2008 versus approximately $8,000 for the three months ended
      September 30, 2007, an increase of approximately $27,000, or 318%. This increase
      was a function of the SyynX acquisition which added approximately $73,000 of
      incremental costs.





*Cost
      of Subscription Revenue.* Cost
      of
      subscription revenue was approximately $158,000 for the three months ended
      September 30, 2008. This was
      a new expense for us due to the acquisition of Lawriter, LLC on February 1,
      2008. Therefore, no comparable cost for this expense line existed for the three
      months ended September 30, 2007.





*General
      & Administrative Expenses.* General
      and administrative expenses increased to approximately $2.3 million for the
      three months ended September 30, 2008 versus approximately $1.0 million for
      the
      three months ended September 30, 2007, an increase of $1.3 million, or 124%.
      This increase was due primarily to SyynX and Lawriter incremental general and
      administrative expenses of approximately $317,000 and $450,000 respectively;
      increased depreciation and amortization costs of approximately $188,000 associated
      with intangibles and other assets acquired from SyynX and Lawriter; increased
      insurance cost of approximately $51,000 primarily  due
      to
      directors and officers insurance costs; increased stock option expense of
      approximately $70,000 and the recognition of severance costs in the Quarter
      of
      approximately $252,000 associated with the reorganization of the Company’s
      Netherlands operations.





*Sales
      & Marketing.* Sales
      and
      marketing expenses increased to approximately $802,000 for the three months
      ended September 30, 2008
      compared to approximately $611,000 for the three months ended September 30,
      2007, an increase of approximately $191,000, or 31%. The SyynX and Lawriter
      acquisitions contributed approximately $174,000 and $103,000, respectively,
      to
      the increase offset by reduced travel costs of approximately $13,000 costs
      primarily in the Netherlands





*Research
      & Development.* Research
      and development costs decreased from approximately $303,000 for the three months
      ended September 30, 2007 to approximately $194,000 for the three months ended
      September 30, 2008, a decrease of approximately $109,000, or 36%. This decrease
      is due primarily to the demands of some client projects relating to services
      which took short term resources from traditional R&D
      initiatives.





*Total
      Expenses and Net Loss.* As
      a
      result of the above factors, total operating expenses increased to approximately
      $3.1 million for the three months ended September 30, 2008 compared to
      approximately $1.9 million for
      the
      three months ended September 30, 2007, an increase of approximately $1.2
      million, or 63%. The increased expenses were offset by the improvement in
      revenue and a favorable foreign exchange rate on the SyynX Euro denominated
      acquisition debt of approximately $500,000 and favorable foreign exchange on
      intercompany liabilities of approximately $184,000. For the for the three
      months ended September 30, 2008, the net loss of $1.7 million was slightly
      favorable when compared to the $1.9 million loss for the three months ended
      September 30, 2007.




**Liquidity
      and Capital Resources**





As
      noted
      in our annual report on Form 10-K filed on October 14, 2008, we incurred a
      net
      loss of $11.3 million for the year ended June 30, 2008, current liabilities
      exceeded current assets by $4.2 million and we reported an accumulated
      deficit of $24.8 million. As a result, the report of our Independent
      Registered Public Accounting Firm on our Consolidated Financial Statements
      for
      such period included an explanatory paragraph that expressed substantial doubt
      about our ability to continue as a going concern. For the three months ended
      September 30, 2008, we incurred a net loss of $1.7 million and as of September
      30, 2008, we reported an accumulated deficit of $26.4 million.




17




In
      the
      three months ended September 30, 2008, net cash used in operations was $2.2
      million. Our primary use of operating funds related to developing the Collexis
      Engine and other products and increasing our sales and marketing presence.
      Our
      working capital deficit was $4.8 million as of September 30, 2008 compared
      to a
      deficit of $4.2 million as of June 30, 2008.





Our
      financing activities during the three months ended September 30, 2008 reflected
      deferred payments associated with the Lawriter acquisition of approximately
      $314,000 and cash received on stock sales of approximately $1,267,000. Net
      cash
      used in investing activities was approximately $10,000 for the three months
      ended September 30, 2008.




As
      of
      November 13, 2008, we had cash and cash equivalents of approximately $254,000.
      We believe our current cash balance together with any funds generated from
      our
      operations will be sufficient to meet our working capital needs for the next
      two
      weeks.





Our
      principal cash requirements are for working capital and to make deferred
      payments relating to the SyynX and Lawriter acquisitions. The deferred payments
      due on these acquisitions over the next three months are approximately $3.3
      million. See discussion under Note 3 “Acquisitions.”





In
      order
      to alleviate our working capital deficiency, provide capital for deferred
      acquisition payments and address our continued financing concerns, management
      intends to take affirmative steps towards:




·
            building
                on the momentum established in the market with our profiling and
                dashboard
                products and cultivating our strategic alliances to increase our
                market
                presence;




·
            developing
                new products to address the demands in our core and legal markets;
                and




·
            identifying
                sources of capital that will be sufficient to fund our operations
                until
                such time as we are cash flow positive.





To
      guide
      us in how to progress towards the above goals, we have retained an independent
      consulting firm to objectively evaluate our markets and growth potential, assist
      us with long range strategic planning, assist us in identifying capital and
      other resource needs and the deployment of such resources to maximize our
      product development and commercialization potential. However, there can be
      no
      assurance that this process will be successful.





In
      order
      to meet our short-term working capital needs, we are currently conducting a
      private placement of our common stock for up to $4.0 million. As of the date
      of
      this report, we have accepted subscriptions for $1.5 million from a private
      investor who has orally agreed to finance our working capital needs through
      the
      purchase of shares of our common stock, up to the amount of this private
      placement, on an as needed basis until this offering is fully subscribed. The
      investor is not contractually obligated to purchase additional shares of our
      common stock. However, there can be no assurance that we will receive additional
      funding through the private placement of our common stock and failure to achieve
      such funding will result in a significant negative impact to our business and
      our operating results.




The
      accompanying consolidated financial statements do not include any adjustments
      that might be necessary if the Company is unable to continue as a going
      concern.





As
      of
      November 13, 2008, we had cash and cash equivalents of approximately $254,000.
      We believe our current cash balance together with any funds generated from
      our
      operations will be sufficient to meet our working capital needs for two weeks.
      With the full subscription of our private placement referred to above, combined
      with any funds generated from our operations, we believe we will have sufficient
      cash to fund our operations through January 31, 2008. However, this will not
      provide sufficient capital to pay our deferred purchase obligations of
      approximately $3.3 million due over the next three months.





We
      expect
      to raise additional capital through the sale of our common stock, mostly through
      private placements, but we can provide no assurances in that regard. With our
      present negative cash flows from operating activities and our current level
      of
      cash, we will require additional working capital to continue to grow our
      operations, develop our products, pursue acquisitions, comply with our reporting
      obligations as a public company and meet our deferred payment obligations.
      As a
      result, we may seek both debt and equity financings to satisfy these working
      capital needs. There can be no assurance that external financing will be
      available when needed, or if available, that it would be available on terms
      acceptable to our management.




18




**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**




For
      a
      summary of our significant accounting policies, please see Note 1 to the
      consolidated unaudited financial statements included in Part I, Item 1 in this
      report.




**Recent
      Accounting Pronouncements**




For
      a
      summary of recently issued accounting pronouncements, please see the Company’s
      annual report on Form 10-K filed on October 14, 2008.




**ITEM 3.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





Not
      applicable.




**ITEM 4T.**
            **CONTROLS
                AND PROCEDURES**





Our
      Chief
      Executive Officer and Chief Financial Officer have evaluated the effectiveness
      of our disclosure controls and procedures (as defined in
      Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) as of September
      30, 2008, and have concluded that, as of such date, our disclosure controls
      and
      procedures were ineffective to ensure that information required to be disclosed
      by us in reports that we file or submit under the Exchange Act is accumulated,
      recorded, processed, summarized for management and reported within the time
      periods specified in the rules and forms of the SEC.




Our
      Chief
      Executive Officer and Chief Financial Officer reached the conclusion expressed
      in the preceding paragraphs due to material weaknesses in internal control
      over
      financial reporting, as described below.




As
      previously stated in the Company’s annual report on Form 10-K filed October 14,
      2008, management and the Audit Committee retained RSM McGladrey to assist in
      an
      evaluation of our internal control weaknesses. RSM McGladrey has performed
      a
      review of our internal control over financial reporting as of June 30, 2008,
      based on criteria established in *Internal
      Control—Integrated Framework* issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission.




Based
      on
      the findings of RSM McGladrey and management’s assessment of the effectiveness
      of our internal control over financial reporting as of June 30, 2008, we
      identified the following deficiencies in our internal controls over financial
      reporting. Management does not believe any one deficiency would qualify as
      a
      material weakness but the combination of deficiencies may qualify as a
      significant deficiency.




*Deficiencies*




*Entity-Level
      Controls* .
      We did
      not maintain an effective control environment and certain entity-level controls
      included in the information and communications and monitoring components of
      internal control were not designed or operating effectively.




*Segregation
      of Duties* .
      We did
      not provide for adequate segregation of duties in our accounting and finance
      functions, specifically with respect to access to and control of our cash flow without
      any secondary review .




*Financial
      Reporting and Period Closings* .
      We did
      not maintain adequate policies and procedures to ensure that timely, accurate
      and reliable consolidated financial statements were prepared and reviewed.




*Remediation
      Efforts to Address Deficiencies in Internal Control Over Financial
      Reporting*




19




As
      a
      result of the findings from the study described above, management has taken,
      steps, effective as of the three month period ended September 30, 2008 to
      address these findings, including formalizing monthly closing procedures,
      utilizing monthly journal entry checklists and employing a monthly financial
      closing checklist. Management continues to implement the remedial
      recommendations identified in the RSM McGladrey study and expects to have such
      implementation complete by the end of the Company’s current fiscal year.




Management
      believes these changes implemented during the Company’s most recently completed
      fiscal quarter will favorably impact the Company’s internal control over
      financial reporting.




**PART
      II - OTHER INFORMATION**




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




Collexis
      and its wholly-owned subsidiary Lawriter LLC are defendants in a case commenced
      by JuriSearch Holdings LLC (“JuriSearch”), a vendor of content to Lawriter. The
      case was commenced on April 10, 2008, and asserts claims based on breach of
      contract, conversion, and replevin (an act to recover goods by somebody who
      claims to own them). JuriSearch alleges that it has been damaged in an amount
      exceeding $500,000 by Lawriter’s termination of the contract and asserted
      failure to return property belonging to JuriSearch. Lawriter believes that
      JuriSearch breached the contract by failing to provide accurate and timely
      data,
      as well as by communicating directly with Lawriter’s customers (the bar
      associations with whom Lawriter does business) concerning the contract in
      violation of the terms of the contract.




Collexis
      and Lawriter have successfully had the case moved from the Superior Court for
      Los Angeles County, California to the United States District Court for the
      Central District of California. In addition, Lawriter filed a case against
      JuriSearch on April 14, 2008 in the Court of Common Pleas of Hamilton County,
      Ohio. Lawriter’s case asserts claims against JuriSearch for defamation, tortuous
      interference with contracts, and breach of contract based on JuriSearch’s
      communications with Lawriter’s customers. We believe that JuriSearch’s claims
      are without merit and intend to defend the California lawsuit vigorously and
      prosecute the Ohio lawsuit vigorously.




**ITEM 1A.**
            **RISK
                FACTORS**




Various
      risks and uncertainties could affect the Company’s business. Any of the risks
      described below or elsewhere in this Quarterly Report on Form 10-Q or the
      Company’s other SEC filings could have a material impact on the Company’s
      business, financial condition or results of operations.





***Our
      auditors have substantial doubt as to our ability to continue as a going
      concern.***




Our
      independent registered public accounting firm issued its report dated October
      14, 2008 on our financial statements for the year ended June 30, 2008, which
      included an explanatory paragraph that expressed substantial doubt about
      Collexis’ ability to continue as a going concern. We have incurred substantial
      operating losses, net cash outflows from operations and we have a working
      capital deficiency. We anticipate that such conditions will continue in the
      foreseeable future. Because we have been issued an opinion by our auditors
      that
      includes an explanatory paragraph that substantial doubt exists as to whether
      we
      can continue as a going concern, it may be more difficult for us to attract
      investors. Our future is dependent upon our ability to obtain financing and
      upon
      future profitable operations from the development and commercialization of
      our
      products. We intend to seek additional funds through private placements of
      equity or the incurrence of debt. Our financial statements have been prepared
      on
      a going concern basis and do not include any adjustments relating to the
      recoverability and classification of recorded assets, or the amounts of and
      classification of liabilities that might be necessary in the event we cannot
      continue in existence.





***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
      November 13, 2008, we had cash and cash equivalents of approximately $254,000.
      We believe our current balance of cash and cash equivalents combined with any
      funds generated from our operations will be sufficient to meet our working
      capital and capital expenditure requirements for at least the next two weeks
      based upon our estimates of funds required to operate our business during that
      period.





In
      order
      to meet our short-term working capital needs, we are currently conducting a
      private placement of our common stock for up to $4.0 million. As of the date
      of
      this report, we have accepted subscriptions for $1.5 million from an investor
      who has orally agreed to finance our working capital needs through the purchase
      of shares of our common stock, up to the amount of this private placement,
      on an
      as needed basis until this offering is fully subscribed. The investor is not
      contractually obligated to purchase additional shares of our common stock.
      There
      can be no assurance that we will receive additional funding through the private
      placement of our common stock and failure to achieve such funding will result
      in
      a significant negative impact to our business and our operating results.




20




We
      will
      need to raise additional funds for the following purposes:





·
            to
                fund our operations, including sales, marketing and research and
                development programs;·
            to
                fund our deferred payments on
                acquisitions;


·
            to
                fund any growth we may experience;·
            to
                enhance and/or expand the range of products and services we
                offer;


·
            toincrease
                our promotional and marketing activities; and·
            to
                respond to competitive pressures and/or perceived opportunities,
                such as
                investment, acquisition and international expansion
                activities.





We
      cannot
      be sure additional capital will be available, and if it is, it will be on terms
      beneficial to us. Historically, we obtained external financing primarily from
      sales of our common stock. To the extent we raise additional capital by issuing
      equity securities, our stockholders 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, result of operations, prospects and
      our business could fail.





***We
      have 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 three months ended September
      30,
      2008, and the three months ended September 30, 2007, our net losses were
      approximately $1,666,000 and $1,850,000, respectively. These losses include
      expenditures associated with developing and selling software products, including
      our Collexis Engine. We expect that our losses will continue for the foreseeable
      future as we continue to invest in Collexis Engine enhancements and other
      programs. 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 have a material adverse effect on the market
      price
      of our common stock and our financial condition.





***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 existing 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.





***We
      have concluded that as of September 30, 2008, our internal control systems
      over
      disclosure controls and procedures and financial reporting were ineffective
      and
      may have significant deficiencies or material weaknesses.*** ***If
      we fail to meet our reporting obligations in a timely manner in the future
      due
      to ineffective internal control systems, our business could be
      harmed.***




21




We
      have
      evaluated our internal control systems over disclosure controls and procedures
      and financial reporting as required by Section 404 of the Sarbanes-Oxley Act
      for
      the three months ended September 30, 2008 and found them to be ineffective.
      If
      we identify significant deficiencies or material weaknesses in our internal
      controls over financial reporting that we cannot remediate in a timely manner,
      or if we are unable to receive a positive attestation from our independent
      registered public accounting firm with respect to our internal controls over
      financial reporting for the year ending June 30, 2010, then we could be subject
      to scrutiny by regulatory authorities, the trading price of our common stock
      could decline and our ability to obtain any necessary equity or debt financing
      could suffer. See discussion under Item 4T “Controls and
      Procedures”.





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





Our
      growth strategy is based in part on making acquisitions. We recently acquired
      SyynX and Lawriter. 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 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;·
            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.





***Our
      international operations are subject to risks that could harm our business,
      operating results and financial condition.***





We
      conducted significant sales activity through our subsidiaries based in the
      Netherlands and Germany. We have experienced foreign exchange gains and losses
      to date without engaging in any hedging activities. Our ability to manage
      our





business
      and conduct our operations internationally requires considerable management
      attention and resources and is subject to a number of risks, including the
      following:





·
            challenges
                caused by distance, language and cultural differences and by doing
                business with foreign agencies and governments;·
            difficulties
                in developing products and services in different languages and for
                different cultures;


·
            longer
                payment cycles in some countries;·
            credit
                risk and higher levels of payment
                fraud;


·
            currency
                exchange rate fluctuations;·
            foreign
                exchange controls that might prevent us from repatriating cash earned
                in
                countries outside the U.S.;


·
            import
                and export requirements that may prevent us from providing our products
                or
                services to a particular market and may increase our operating
                costs;·
            political
                and economic instability;·
            potentially
                adverse tax consequences; and


·
            higher
                costs associated with doing business
                internationally.




22




In
      addition, compliance with complex foreign and U.S. laws and regulations that
      apply to our international operations increase our cost of doing business in
      international jurisdictions and could expose us to fines and penalties. These
      laws and regulations include import and export requirements, U.S. laws such
      as
      the Foreign Corrupt Practices Act and local laws prohibiting corrupt payments
      to
      governmental officials. Any violations of such laws could include prohibitions
      on our ability to offer our products and services to one or more countries,
      and
      could also materially damage our reputation, our brand, our international
      expansion efforts, our business and our operating results.





***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.




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




On
      August
      18, 2008, the Company’s board approved a private offering of up to 9,000,000
      shares of our common stock at $0.45 per share for an aggregate offering of
      $4,050,000. Under this offering, the Company sold 2,222,222 shares and received
      proceeds of $1.0 million as of August 31, 2008. Due to the recent economic
      events, on November 3, 2008, the board amended the existing offering to
      10,000,000 shares of our common stock at $0.30 per share for an aggregate
      offering of $3,000,000. We have received $500,000 from a private investor under
      this amended offering and the investor has orally committed to the entire
      offering to acquire the stock as the cash is needed in the Company. There is
      no
      legal obligation for the investor to acquire our stock and there can be no
      assurances that such funding will take place.




We
      have
      used or will use the proceeds of these offerings to make installment payments
      required under the terms of our recent acquisition agreements and for working
      capital. This private placement was conducted in reliance on exemptions from
      registration contained in Section 4(2) of the Securities Act of 1933 and Rule
      506 of Regulation D promulgated thereunder. Each investor has agreed to hold
      the
      shares purchased in the offering for a minimum of one year. No placement fees
      were payable in connection with this offering.




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





None.




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





None.




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





None.




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




31.1
            Certification
                of the Chief Executive Officer pursuant to Rule 13a-14(a) of the
                Securities Exchange Act of 1934, as amended.31.2
            Certification
                of the Chief Financial Officer pursuant to Rule 13a-14(a) of the
                Securities Exchange Act of 1934, as amended.32.1
            Certification
                by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002Section 1350 Certifications.32.2
            Certification
                by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




23




**SIGNATURES**




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




**COLLEXIS
                HOLDINGS, INC.**Dated:November
                14, 2008
            By:
            /s/
                Mark MurphyMark
                MurphyChief
                Financial Officer




24