| ONVIA INC ITEM 1A RISK FACTORS In addition to other information in this Report, the following risk factors should be carefully considered in evaluating Onvia and its business because such factors may have a significant impact on our business, results of operations and financial condition and could cause our stock price to decline |
| As a result of the risk factors set forth below and elsewhere in this report, and the risks discussed in our other Securities and Exchange Commission filings, actual results could differ materially from historical results or those projected in any forward-looking statements |
| Risks related to our growth strategy We may not be able to meet our projected renewal rates |
| Our ability to continually enhance our products and services to provide relevant information to our clients, appropriately classify and distribute information, provide excellent client service, maintain competitive pricing and meet our clients’ expectations for source coverage and new content will significantly impact our clients’ satisfaction with our products and services and will impact their decision to renew |
| If we are unable to meet our clients’ expectations, our renewal rates and our projected growth and profitability will suffer |
| 9 ______________________________________________________________________ [37]Table of Contents The change in our sales methodology may not be successful and we may be required to increase our sales and marketing expenses in order to achieve our revenue goals |
| We have historically generated a significant portion of our marketing prospects and sales leads from our in-house database of vendors |
| Our new team of sales and marketing executives has implemented a new sales methodology that is intended to place much lower reliance on direct marketing to generate sales, and we have reallocated resources previously used in direct marketing efforts towards growth in our sales force |
| We have a limited history on which to evaluate this new sales methodology and if we are unable to increase sales as a result of this new methodology, we may be required to increase marketing expenses to generate additional sales |
| We may not achieve our projections for adoption of our products by targeted enterprise clients |
| We anticipate that a significant portion of our future revenue will be generated from sales to larger businesses |
| Our enterprise sales team targets larger companies that will purchase multiple licenses for daily lead notification, for redistribution to their employees or clients, or for remarketing their own products |
| We began selling to enterprise clients at the end of 2003, so we have a limited history from which to base our projections for adoption of our products by these clients |
| We may not achieve our projections for adoption of our Onvia Business Builder product by new and existing clients |
| As part of the strategic dlra5 million investment approved by our Board of Directors in the fourth quarter of 2004, we invested significant capital in the expansion of our database and development of our Onvia Business Builder research tool |
| We expect to see an increase in retention rates for our existing clients because of the added features in this new product and an increase in new customer acquisition as a result of the launch of this product |
| Adoption of this product by new and existing clients may not be consistent with our estimates |
| We may not be able to increase subscribership to our high value products |
| We expect that a significant portion of our future growth will come from increasing our annual contract value per client, and we expect this to be driven by increased adoption of our high value products |
| Subscribers to our high value products have higher annual contract value, higher renewal rates and provide greater lifetime value to the Company |
| We may lose clients as a result of the discontinuation of our low value county product |
| In the fourth quarter of 2005 we discontinued our low value county product due to a change to a more targeted sales methodology that is more focused on acquisition of high value products |
| We expect to offset the decrease in the number of clients as a result of this decision by increasing annual contract value and retention rates |
| County clients represented approximately 47prca of our total clients at December 31, 2005, but less than 5prca of revenue |
| We have seen early success in migrating these low value clients into our high value products, however, we may be unable to achieve desired upgrade rates or we may be unable to offset any decline in the number of clients with increases in annual contract value per client, new client acquisition, and client retention |
| We may fail to hire, train and retain sales associates who can effectively communicate the benefits of our products to our clients and client prospects, and they may be unable to achieve expected sales targets |
| We plan to reallocate direct marketing dollars to increase our acquisition sales force by approximately 48prca in 2006 |
| In order to achieve our projected revenue growth rates, our sales teams must be able to effectively communicate the benefits of our products to existing and potential clients |
| We expect to see increases in client retention rates and in new client acquisition revenue, and our sales goals are aggressive |
| If we are unable to retain our current sales associates and hire and train new sales associates with the appropriate skills, we may not be able to achieve our projected sales targets and revenue growth rates |
| 10 ______________________________________________________________________ [38]Table of Contents Our ability to grow our business depends in part on government agencies and businesses increasing their use of the Internet to conduct commerce |
| Our growth depends in part on increased use of the Internet by government agencies and businesses |
| If use of the Internet as a medium for government, consumer and business communications and commerce does not continue to increase, demand for our services and products will be limited |
| We may lose the right to use the content that we distribute, which we collect from governmental entities and other third parties |
| We do not own or create the content distributed to our vendors in the form of request for proposal and related information |
| We do not have an exclusive right to this content and we cannot ensure that these data sources will continue to be available in the future |
| Moreover, public disclosure laws, which require governmental entities to produce bid information directly to the members of the public, may negatively impact our business and reduce the value of our services to government entities |
| Governmental entities and other third parties could terminate their contracts to provide data or restrict the distribution of such data |
| The loss or the unavailability of our data sources in the future, or the loss of our right to distribute some of the data sources, would harm our business |
| If we cannot effectively satisfy our clients across all our industry verticals, we may decide to target fewer industries, and as a result, may lose clients |
| If we find that our retention and acquisition rates in any of our focused verticals are not meeting our expectations due to lack of bid-flow or for other reasons, we may choose to target fewer industry verticals to improve client satisfaction and retention in core verticals, and we may lose clients in our other non-core verticals |
| Focusing on these core verticals may not generate the expected level of increased retention and acquisition |
| Intense competition could impede our ability to gain market share and could harm our financial results |
| The B2G e-commerce markets are new, rapidly evolving and intensely competitive, and we expect competition to intensify in the future |
| Our business could be severely harmed if we are not able to compete successfully against current or future competitors |
| Although we believe that there may be opportunities for several providers of products and services similar to ours, a single provider may dominate the market |
| Our current and potential competitors include Internet-based and traditional companies such as BidNet (Govbids), TrueAdvantage, FedMarket, McGraw-Hill, Contractors Register, Input and other companies focused on providing services to government agencies and their vendors |
| Many of our current and potential competitors have longer operating histories, larger client bases and/or greater brand recognition in business and Internet markets and significantly greater financial, marketing and technical resources than we do |
| Our competitors may be more successful than we are in developing their technologies, adapting more aggressive pricing policies and establishing more comprehensive marketing and advertising campaigns |
| Our competitors may develop web sites that are more sophisticated than ours, with better online tools, or service and product offerings superior to ours |
| For these and other reasons, our competitors’ web sites may achieve greater acceptance than ours, limiting our ability to gain market share and client loyalty and to generate sufficient revenue to achieve profitability |
| We may be required to increase our source coverage due to competitive pressures, and we may be required to add additional resources to our research team to offset these competitive pressures |
| 11 ______________________________________________________________________ [39]Table of Contents Risks related to our new product strategy We may fail to introduce new products that are broadly accepted by our clients, and there may be delays in the introduction of these tools and products |
| We expect to introduce new products in 2006 that will complement our current suite of products |
| If client acceptance and adoption of these new products is below our expectations, our projected growth rates may not be achieved, and our financial results would be harmed |
| We expect to utilize internally developed technology and technology licensed from third parties for the development of new tools and content |
| If we are unable to develop or acquire the required technology on time, or at all, or if the launch of these new products is delayed for any other reason beyond their anticipated launch dates, our projected growth rates may not be achieved |
| We have invested significant capital into the development of new products, such as Onvia Business Builder, and if new products fail to meet expectations we may not achieve our anticipated return on these investments |
| Onvia Business Builder was launched in July 2005 and we have been pleased with the early adoption of this product |
| We expect to launch additional new products in 2006 and expect to see continued increases in adoption of Onvia Business Builder throughout 2006 and beyond |
| If adoption of Onvia Business Builder and other new product introductions is not consistent with our expectations, we will not see the expected return on these investments |
| Our clients may be dissatisfied with the accuracy, coverage and timeliness of our content and performance of our new products |
| We expect to see an increase in both new client acquisition and retention rates for our existing clients, as well as an improvement in annual contract value per client resulting in part from the introduction of new products offering more comprehensive and timely access to the information in our database |
| If our clients become dissatisfied with the performance, coverage or content of our new products, they may not renew at expected renewal rates and new client acquisition may be adversely impacted |
| We may improperly price our new product offerings for broad client acceptance |
| We plan to implement price increases to some of our existing products in 2006 and we will be required to develop new pricing strategies for planned new product launches in 2006 |
| If existing clients do not perceive that the pricing of our products is commensurate with the value they receive from the products, or if our sales staff is unable to convince potential new clients that our product pricing is proportionate to the value of the products, new client adoption and existing client retention would be adversely impacted |
| We may overestimate the value of sales intelligence to companies doing business with the government |
| We believe there is a large unmet market need for robust public-sector sales and marketing information |
| Our business model assumes that clients will pay us an annual fee for this information and that we will see increases in the annual value of these contracts in the near-term and in the long-term |
| If we have overestimated the value of this information, we will not achieve our forecasted revenue goals |
| Our competitors may develop similar technologies that are more broadly accepted in the marketplace |
| The functionality in Onvia Business Builder is robust, and we expect that if adoption of this tool is in line with our expectations that our competitors may introduce products with similar functionality |
| If our competitors introduce products with similar functionality or are able to more effectively market their products for broad customer acceptance, new client acquisition and existing client retention would be adversely impacted |
| If we are unable to enhance our functionality or increase our marketing efforts to offset challenges from our competitors, we may lose market share |
| 12 ______________________________________________________________________ [40]Table of Contents Risks related to our ability to eliminate or reduce our idle lease obligations Uncertainty in the commercial real estate market in Seattle, our open floor plan, the location of our offices and the remaining term on our lease may harm our chances of eliminating or reducing the monthly lease payments on our idle office space |
| We currently have approximately 47cmam000 square feet of idle office space in the Seattle area |
| We are aggressively pursuing options to reduce or eliminate the cash payments associated with this idle space |
| We hired a new real estate brokerage team in the first quarter of 2005 and we have seen increased interest in our building in the last 12 months |
| Some of the factors we believe have contributed to the difficulty in subleasing our idle space are: an open floor plan; limited amenities in close proximity to our building; and the short remaining term on our master lease |
| Our building has an open floor plan with no enclosed offices, which makes it difficult for some potential subtenants to visualize the space built-out with offices |
| Our office is located in the South Lake Union area of Seattle, which is under rapid development, but does not currently have extensive shopping and dining amenities nearby, which we believe has made it more difficult to attract potential subtenants to visit the space |
| Our lease on our corporate headquarters building expires in March 2010, so we are limited in the term we are able to offer potential subtenants |
| If potential subtenants require a longer term than we can offer, we would be required to involve our master landlord and sublease negotiations could be extended or stalled |
| We currently have approximately dlra6dtta5 million accrued for our contractual obligations and our estimate of operating costs on our idle and sublet lease space, and for broker’s fees and tenant incentives on our idle space |
| We anticipate that this accrual will cover our remaining contractual obligations, assuming that we will have the space sublet in periods ranging from the first quarter of 2007 through the second quarter of 2007 at estimated current market rates, which are below our contractually obligated rates, through the remainder of the lease obligations |
| If we are unable to eliminate or reduce the monthly lease payments on our idle office space, our business, operating results and financial condition would be adversely affected and our stock price could decline |
| Our estimates on the timing and terms of potential subleases on our idle leased office spaces may be inaccurate, which could have a negative impact on our future operating results and cash flows |
| In arriving at an estimated accrual for our remaining contractual obligations on our idle office space, management was required to estimate numerous factors, including timing, sublease rates and square footage |
| If our estimates are inaccurate for one or more of these factors we could be required to make an additional accrual, which would increase our operating expenses and adversely impact our results of operations |
| If our estimates are incorrect, we may not receive expected sublease income, which would adversely affect our cash flows from operations |
| Financial, economic and market risks We have a limited operating history, making it difficult to evaluate our business and future prospects |
| Onvia has been serving businesses since March 1997 and have been focusing on including government agencies in our network since April 2001 |
| We have a limited operating history upon which an investor may evaluate our business and prospects |
| Our potential for future profitability must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in early stages of development, particularly companies in new and rapidly evolving markets, such as e-marketplaces |
| We may not successfully address any of these risks |
| We have incurred negative cash flows from operations in each quarter since inception, and under our current operating plan we expect to continue to incur negative cash flows in the near term |
| To increase revenue, we will need to continue to attract new clients and improve retention of existing clients and expand our service offerings |
| We intend to increase headcount of our acquisition sales team by 13 ______________________________________________________________________ [41]Table of Contents approximately 48prca during 2006 to increase new client acquisition and to capitalize on interest in our new products |
| We intend to fund this increase primarily by reallocating money from direct marketing campaigns into new headcount; however, we expect that operating expenses in 2006 will be higher on an overall basis than in 2005 because of this increase in headcount compared to average headcount in 2004, but operating expenses should be relatively consistent on a quarterly basis with the fourth quarter of 2005 |
| As a result, we will need to generate significant revenue to cover this expected increase in operating expenses and to achieve profitability in the future |
| Our quarterly financial results are subject to fluctuations that may make it difficult to forecast our future performance |
| We have experienced some seasonal fluctuations in our business, reflecting a combination of seasonal trends for the services and products we offer, as well as seasonal trends in the buying habits of our target business clients and government agencies |
| We expect our revenue and operating results to continue to vary significantly from quarter to quarter, making it difficult to formulate meaningful comparisons of our results between quarters |
| Our limited operating history and evolving business model further contribute to the difficulty of making meaningful quarterly comparisons |
| A significant portion of our subscription revenue for a particular quarter is derived from transactions that are initiated in previous quarters, because revenue is recognized ratably over the subscription term |
| Our current and future levels of operating expenses and capital expenditures are based largely on our growth plans and estimates of future revenue |
| These expenditure levels are, to a large extent, fixed in the short term |
| We may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall, and any significant shortfall in revenue relative to planned expenditures could harm our business and results of operations |
| We may require significant additional capital in the future, which may not be available on suitable terms, or at all |
| The expansion and development of our business may require significant additional capital, which we may be unable to obtain on suitable terms, or at all |
| If we are unable to obtain adequate funding on suitable terms, or at all, we may have to delay, reduce or eliminate some or all of our advertising, marketing, engineering efforts, general operations or other initiatives |
| We may require substantial additional funds to expand our marketing activities, to continue to develop and upgrade our technology and to make corporate acquisitions |
| If we issue convertible debt or equity securities to raise additional funds, our existing stockholders will be diluted |
| Our stock price has fluctuated significantly in the past and could continue to fluctuate significantly in response to various factors, some of which are beyond our control |
| The market price of Onvia’s common stock has fluctuated significantly and could continue to fluctuate significantly in response to various factors, including: • actual or anticipated changes in governmental spending; • actual or anticipated variations in quarterly results of operations; • announcements of technological innovations or new products or services by Onvia or our competitors; • changes in financial estimates or recommendations by securities analysts; • conditions or trends in the Internet and online commerce industries; • changes in the market values of other Internet or online service companies; 14 ______________________________________________________________________ [42]Table of Contents • announcements of or expectations regarding significant acquisitions, strategic relationships, joint ventures, capital commitments, dividends, cash distributions or other corporate transactions; • additions or departures of key personnel; • sales, repurchases or splits of our common stock; • general market conditions; and • other events or factors, many of which are beyond our control |
| In addition, the stock market in general, and the NASDAQ National Market and the market for Internet and technology companies in particular, have experienced extreme price fluctuations that have often been unrelated or disproportionate to the operating performance of these companies |
| These broad market and industry conditions may materially and adversely affect our stock price, regardless of our operating performance |
| We have implemented anti-takeover provisions that may discourage takeover attempts and depress the market price of our stock |
| Provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, Onvia’s state of incorporation, can have the effect of making it difficult for a third party to acquire Onvia, even if doing so would be beneficial to our stockholders |
| These provisions include: • the classification of Onvia’s Board of Directors into three classes so that the directors serve staggered three-year terms, which may make it difficult for a potential acquirer to gain control of our Board; • authorizing the issuance of shares of undesignated preferred stock without a vote of stockholders; and • non-cumulative voting for the election of directors |
| In addition, in 2002, our Board of Directors adopted a Stockholders Rights Agreement, designed to protect stockholder interests in the event of an unsolicited takeover attempt by distributing one preferred stock purchase right for each outstanding share of common stock |
| The Rights Agreement may make it more difficult for a third party to acquire Onvia |
| Changes in accounting and reporting policies or practices may affect our financial results or presentation of results, which may affect our stock price |
| Changes in accounting and reporting policies or practices could increase our net loss, which increases may be independent of changes in our operations |
| These increases in reported net losses could cause our stock price to decline |
| For example, beginning January 1, 2006, we will be required to adopt the provisions of Statement of Financial Accounting Standards (SFAS) Nodtta 123R, Share-Based Payment, which requires us to record an operating expense charge associated with the calculated fair value of new and outstanding stock options and purchases under our employee stock purchase plan |
| We are continuing to assess the impact of SFAS Nodtta 123R, but we currently expect to incur approximately dlra1dtta3 million in operating expenses in 2006 associated with the unvested portion of existing stock options, planned new stock option grants and our employee stock purchase plan as a result of adoption of this Statement |
| If other changes in accounting and reporting policies or practices are made in the future, these changes may also impact our reported operating results and the price of our stock |
| Risks related to integrating future mergers, acquisitions or other corporate transactions We may fail to successfully evaluate, execute and integrate future mergers, acquisitions or other corporate transactions |
| Management is often exploring acquisition opportunities to increase stockholder value |
| There are significant challenges to implementing any corporate transaction |
| Integrating companies and technologies involves 15 ______________________________________________________________________ [43]Table of Contents significant challenges and is a complex process, and the anticipated benefits of any corporate transaction may not be achieved within the anticipated timeline, or at all |
| Some of the challenges involved in corporate transactions include: • properly evaluating the technology, personnel and clients; • retaining existing clients and strategic partners; • retaining and integrating management and other key employees; • coordinating research and development activities to enhance the introduction of new products, services and technologies; • addressing public perceptions of changes in our business focus; • combining service and product offerings quickly and effectively; • implementing consistent integrated internal controls; • transitioning the business systems to a common information technology system; • persuading employees of both businesses that the business cultures are compatible; • offering the services and products of both businesses to each other’s clients and business associates; • marketing the combined company; • blending the pricing models; • developing and maintaining uniform standards, controls, procedures and policies; • minimizing the potential disruption of both businesses and distraction of the Company’s management; • incorporating the acquired technology, products and services into existing product and service offerings; and • controlling expenses related to the implementation of the transaction |
| We may not succeed in overcoming these risks or any other problems encountered in connection with a merger, acquisition or other corporate transaction |
| The diversion of the attention of our management and any difficulties encountered in such a transaction could cause the disruption of, or a loss of momentum in, the activities of our business |
| If we do not successfully execute any future merger, acquisition or other corporate transaction, the market price of our common stock may decline and future operating results may suffer |
| In the event that our common stock does not maintain sufficient value, or potential acquisition candidates are unwilling to accept our common stock as consideration for the sale of their businesses, we may be required to use more cash, if available, in order to make acquisitions |
| If we do not have sufficient cash, our growth through acquisitions could be limited unless we are able to obtain capital through additional debt or equity financings |
| If a merger, acquisition or other corporate transaction does not meet the expectations of financial or industry analysts or Onvia’s investors, the market price of our common stock may decline |
| We may make incorrect assumptions about potential acquisitions, mergers or other corporate transactions, such as the ability to secure additional business from government clients and vendors selling to those clients as a result of any such transaction |
| Consequently, we may not achieve the forecasted benefits of the transaction, including improved financial results, to the extent anticipated by us or by financial or industry analysts |
| In addition, significant stockholders of Onvia following any corporate transaction may decide to dispose of their shares if the transaction fails to meet their expectations |
| In either event, the market price of our common stock may decline |
| 16 ______________________________________________________________________ [44]Table of Contents Operational risks Our current technology infrastructure and network software systems may be unable to accommodate our anticipated growth, and we may require a significant investment in these systems to accommodate performance and storage requirements of new and planned products |
| Our new Onvia Business Builder research tool and future product offerings will place additional demands on our network and on our database |
| We add thousands of records to our database each day, which has required us to expand the storage capacity of our database |
| As part of the dlra5 million strategic investment in new products approved by our Board of Directors at the end of 2004, we believe we addressed the immediate and near term database and storage requirements of our expanding database |
| However, if new content types or product introductions change current network and database requirements or if growth in our client base exceeds our expectations, we may be required to make significant investments to upgrade our systems to accommodate such changes, which could negatively impact our cash flows and results of operations |
| We may not be successful in our efforts to upgrade our systems, or if we do successfully upgrade our systems, we may not do so on time and within budget |
| Failure to achieve a stable technological platform in time to handle increasing network traffic may discourage potential clients from using our network |
| We may not be able to retain the services of our executive officers, directors, senior managers and other key employees, which would harm our business |
| Our business and operations are substantially dependent on the performance of our senior management, directors and key employees |
| The loss of any of these employees or directors would likely harm our business |
| Our network and software may be vulnerable to security breaches and similar threats that could result in our liability for damages and harm our business |
| Our network infrastructure is vulnerable to computer viruses, break-ins, network attacks and similar disruptive problems |
| This could result in Onvia’s liability for related damages, and our reputation could suffer, thus deterring existing and potential clients from transacting business with Onvia |
| Security problems caused by third parties could lead to interruptions and delays or to the cessation of service to our clients |
| Furthermore, inappropriate use of the network by third parties could also jeopardize the security of confidential information stored in our computer systems |
| We intend to continue to implement industry-standard security measures, but we cannot ensure that the measures we implement will not be circumvented |
| The costs and resources required to alleviate security problems may result in interruptions, delays or cessation of service to our clients |
| We may be unable to effectively combat unauthorized redistribution of our published information |
| In the past we have identified a number of entities that have utilized our published information for unauthorized redistribution |
| We have been and will continue to be aggressive about monitoring and combating such unauthorized use, and are considering technological avenues for blocking such users from our database |
| However, if we fail to effectively combat such unauthorized use, our business could be harmed |
| System failures could cause an interruption in the services of our network and impact our ability to compile information and deliver our product to our clients |
| Any system failure that causes an interruption in the service of our suite of products or a decrease in their responsiveness could result in reduced activity and reduced revenue |
| Further, prolonged or ongoing performance problems on our web sites or our application servers, which support bid creation and distribution, could damage our reputation and result in the permanent loss of clients |
| In the past, system interruptions have made our web sites and our application servers totally unavailable, slowed their response time or prevented us from making our service available to our clients, and these problems may occur again in the future |
| 17 ______________________________________________________________________ [45]Table of Contents All of our business application servers operate within secure data centers at our corporate headquarters in Seattle, Washington |
| Our experience and expertise in maintaining servers may not be adequate to prevent all possible interruptions and failures of our services |
| Our electrical power backup systems may not be sufficient to sustain business operations during a major interruption to public utility service |
| We may not have sufficient business interruption insurance to cover losses from major interruptions |
| We have deployed our disaster recovery site to a secure offsite facility with backup utility power and redundant Internet connectivity |
| Our current disaster recovery systems are designed to ensure that a portion of our Information Technology and Research department functions will be operational in the event of a local building disaster, so that delivery of our product will not be significantly interrupted |
| Our disaster recovery plan is not yet finalized to include automated failover of product distribution-related systems; requiring some manual intervention to complete the failover process |
| During 2006 and 2007, we will focus on expanding our disaster recovery system to cover additional operating functions within the Company |
| Clients and visitors to our web site depend on their own Internet service providers, online service providers and other web site operators for access to our web sites |
| These providers have experienced significant outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to Onvia’s systems |
| Our services and products depend upon the continued availability of licensed technology from third parties, and we may not be able to obtain those licenses on commercially reasonable terms, or at all |
| We license, and will continue to license, technology integral to our services and products from third parties |
| If we are unable to acquire or retain key third-party product licenses or integrate the related third-party products into our network services, our service and product development may be delayed |
| We also expect to require new licenses in the future as our business grows and technology evolves |
| We may not be able to obtain these licenses on commercially reasonable terms, or at all |
| Increased blocking of our emails could negatively impact client satisfaction with our products and could inhibit the effectiveness of our marketing efforts |
| Portions of our content are currently delivered in the form of an attached file via email |
| Some network administrators could flag and block emails from Onvia due to increased filtering of email attachments as a result of the threat of email borne viruses or unwanted “spam”, or for other reasons |
| We also conduct marketing campaigns to our customer base and occasionally these campaigns are done via email |
| Excessive filtering of our emails could negatively impact client satisfaction and could inhibit our marketing efforts |
| Regulatory, judicial or legislative risks Any settlement or claim awarded against Onvia in our ongoing litigation matters could negatively impact our operating results |
| Onvia is defending against the litigation matters as detailed in the legal |