acacia_form10q033108.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
|
SECURITIES
EXCHANGE ACT OF 1934
|
FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2008
Commission
File Number 0-26068
ACACIA RESEARCH
CORPORATION
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
95-4405754
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer
|
Incorporation
or Organization)
|
Identification
No.)
|
500 Newport Center
Drive, Newport Beach, CA
|
92660
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (949)
480-8300
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 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 filing requirements for the
past 90
days. Yes
þ 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 þ
|
Non-accelerated
filer ¨ (Do not check if
a smaller reporting company)
|
|
Smaller
reporting company ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the
Act). Yes ¨ No þ
As of May
6, 2008, 30,165,922 shares of Acacia Research-Acacia Technologies common stock
were issued and outstanding.
ACACIA
RESEARCH CORPORATION
Part
I. Financial Information
|
|
|
|
|
Item
1.
|
Financial
Statements
|
|
|
|
|
|
Consolidated Balance Sheets as of
March 31, 2008 and December
31, 2007 (Unaudited)
|
1
|
|
|
|
|
Consolidated Statements of
Operations and Comprehensive Income (Loss) for the Three
Months Ended March 31, 2008 and 2007 (Unaudited)
|
2
|
|
|
|
|
Consolidated Statements of Cash
Flows for the Three Months Ended March
31, 2008 and 2007 (Unaudited)
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3
|
|
|
|
|
Notes to Consolidated Financial
Statements (Unaudited)
|
4
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|
|
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Item
2.
|
Management’s Discussion and
Analysis of Financial Condition and Results
of Operations
|
11
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|
|
|
Item
3.
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Quantitative and Qualitative
Disclosures About Market Risk
|
18
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|
|
|
Item
4.
|
Controls and
Procedures
|
18
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|
|
|
|
|
|
|
|
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Part
II. Other Information
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|
|
|
|
Item
1.
|
Legal Proceedings
|
19
|
|
|
|
Item
1A.
|
Risk Factors
|
19
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|
|
|
Item
5.
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Other
Information
|
20 |
|
|
|
Item
6.
|
Exhibits
|
20
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|
|
|
|
|
|
Signatures
|
21
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|
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Exhibit
Index
|
22
|
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(In
thousands, except share and per share information)
(Unaudited)
|
March
31,
|
|
December
31,
|
|
|
2008
|
|
2007
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash
and cash equivalents
|
$ |
40,083 |
|
$ |
40,467 |
|
Short-term
investments
|
|
3,005 |
|
|
10,966 |
|
Accounts
receivable
|
|
4,273 |
|
|
1,409 |
|
Prepaid
expenses and other current assets
|
|
1,525 |
|
|
1,356 |
|
Total
current assets
|
|
48,886 |
|
|
54,198 |
|
|
|
|
|
|
|
|
Property
and equipment, net of accumulated depreciation
|
|
309 |
|
|
323 |
|
Patents,
net of accumulated amortization
|
|
16,530 |
|
|
16,307 |
|
Investments
- noncurrent
|
|
2,737 |
|
|
- |
|
Other
assets
|
|
223 |
|
|
223 |
|
|
|
|
|
|
|
|
|
$ |
68,685 |
|
$ |
71,051 |
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
$ |
3,354 |
|
$ |
3,462 |
|
Royalties
and contingent legal fees payable
|
|
2,564 |
|
|
2,343 |
|
Deferred
revenues
|
|
372 |
|
|
321 |
|
Total
current liabilities
|
|
6,290 |
|
|
6,126 |
|
|
|
|
|
|
|
|
Other
liabilities
|
|
141 |
|
|
121 |
|
Total
liabilities
|
|
6,431 |
|
|
6,247 |
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
|
|
|
|
Acacia
Research Corporation, par value $0.001 per share; 10,000,000 shares
authorized; no shares issued or outstanding
|
|
- |
|
|
- |
|
Common
stock
|
|
|
|
|
|
|
Acacia
Research - Acacia Technologies stock, par value $0.001 per share;
100,000,000
shares authorized; 30,165,922 and 30,102,482 shares issued and outstanding
as of March 31, 2008 and December 31, 2007,
respectively
|
|
30 |
|
|
30 |
|
Additional
paid-in capital
|
|
161,912 |
|
|
159,972 |
|
Accumulated
comprehensive income
|
|
(4 |
)
|
|
(3 |
) |
Accumulated
deficit
|
|
(99,684 |
)
|
|
(95,195 |
) |
Total
stockholders' equity
|
|
62,254 |
|
|
64,804 |
|
|
|
|
|
|
|
|
|
$ |
68,685 |
|
$ |
71,051 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In
thousands, except share and per share information)
(Unaudited)
|
|
For
the Three Months Ended
|
|
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
|
|
|
|
|
|
|
License
fee revenues
|
|
$ |
9,048 |
|
|
$ |
25,185 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Marketing,
general and administrative expenses (including non-cash stock compensation
expense of
$1,829 and $763 for the three months ended March 31, 2008 and 2007,
respectively)
|
|
|
6,626
|
|
|
|
4,328
|
|
Inventor
royalties and contingent legal fees expense - patents
|
|
|
4,731 |
|
|
|
14,122 |
|
Legal
expenses - patents
|
|
|
1,016 |
|
|
|
1,367 |
|
Amortization
of patents
|
|
|
1,335 |
|
|
|
1,316 |
|
Total
operating expenses
|
|
|
13,708 |
|
|
|
21,133 |
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
(4,660 |
) |
|
|
4,052 |
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
455 |
|
|
|
407 |
|
Loss
on investments
|
|
|
(263 |
) |
|
|
- |
|
Total
other income (expense)
|
|
|
192 |
|
|
|
407 |
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before income taxes
|
|
|
(4,468 |
) |
|
|
4,459 |
|
|
|
|
|
|
|
|
|
|
(Provision)
benefit for income taxes
|
|
|
(21 |
) |
|
|
(24 |
) |
Income
(loss) from continuing operations
|
|
|
(4,489 |
) |
|
|
4,435 |
|
|
|
|
|
|
|
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations - Split-off of CombiMatrix
Corporation
|
|
|
- |
|
|
|
(2,133 |
) |
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
(4,489 |
) |
|
|
2,302 |
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on short-term investments
|
|
|
(1 |
) |
|
|
(8 |
) |
Unrealized
gain from discontinued operations - Split-off of CombiMatrix
Corporation
|
|
|
- |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
$ |
(4,490 |
) |
|
$ |
2,303 |
|
|
|
|
|
|
|
|
|
|
Income
(loss) per common share:
|
|
|
|
|
|
|
|
|
Acacia
Research - Acacia Technologies stock:
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(4,489 |
) |
|
$ |
4,435 |
|
Basic
earnings (loss) per share
|
|
|
(0.15 |
) |
|
|
0.16 |
|
Diluted
earnings (loss) per share
|
|
|
(0.15 |
) |
|
|
0.14 |
|
|
|
|
|
|
|
|
|
|
Acacia
Research - CombiMatrix stock - Discontinued Operations - Split-off of
CombiMatrix Corporation:
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations - Split-off of CombiMatrix
Corporation
|
|
$ |
- |
|
|
$ |
(2,133 |
) |
Basic
and diluted loss per share
|
|
|
- |
|
|
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average shares:
|
|
|
|
|
|
|
|
|
Acacia
Research - Acacia Technologies stock:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
29,217,636 |
|
|
|
27,841,286 |
|
Diluted
|
|
|
29,217,636 |
|
|
|
30,969,991 |
|
Acacia
Research - CombiMatrix stock:
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
- |
|
|
|
52,516,220 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
|
|
For
the Three Months Ended
|
|
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(4,489 |
) |
|
$ |
2,302 |
|
Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating activities
from continuing operations:
|
|
|
|
|
|
|
|
|
Discontinued
operations - Split-off of CombiMatrix Corporation
|
|
|
- |
|
|
|
2,133 |
|
Depreciation
and amortization
|
|
|
1,368 |
|
|
|
1,344 |
|
Non-cash
stock compensation
|
|
|
1,829 |
|
|
|
763 |
|
Loss
on investments
|
|
|
263 |
|
|
|
- |
|
Other
|
|
|
- |
|
|
|
(10 |
) |
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(2,864 |
) |
|
|
(1,788 |
) |
Prepaid
expenses and other assets
|
|
|
(169 |
) |
|
|
(171 |
) |
Accounts
payable and accrued expenses
|
|
|
(90 |
) |
|
|
617 |
|
Royalties
and contingent legal fees payable
|
|
|
221 |
|
|
|
2,205 |
|
Deferred
revenues
|
|
|
51 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities from continuing
operations
|
|
|
(3,880 |
) |
|
|
7,435 |
|
Net
cash provided by (used in) operating activities from discontinued
operations
|
|
|
2 |
|
|
|
(3,945 |
) |
Net
cash provided by (used in) operating activities
|
|
|
(3,878 |
) |
|
|
3,490 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(19 |
) |
|
|
(51 |
) |
Purchase
of available-for-sale investments
|
|
|
(265 |
) |
|
|
(1,741 |
) |
Sale
of available-for-sale investments
|
|
|
5,225 |
|
|
|
1,234 |
|
Patent
acquisition costs
|
|
|
(1,558 |
) |
|
|
(110 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investing activities from continuing
operations
|
|
|
3,383 |
|
|
|
(668 |
) |
Net
cash provided by investing activities from discontinued
operations
|
|
|
- |
|
|
|
68 |
|
Net
cash provided by (used in) investing activities
|
|
|
3,383 |
|
|
|
(600 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from the exercise of stock options
|
|
|
111 |
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities from continuing
operations
|
|
|
111 |
|
|
|
750 |
|
Net
cash provided by financing activities from discontinued
operations
|
|
|
- |
|
|
|
332 |
|
Net
cash provided by financing activities
|
|
|
111 |
|
|
|
1,082 |
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
(384 |
) |
|
|
3,972 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning (including cash and cash equivalents
related to discontinued
|
|
|
|
|
|
|
|
|
operations
- split-off of CombiMatrix Corporation of $7,829 at December 31,
2006)
|
|
|
40,467 |
|
|
|
40,044 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, ending
|
|
|
40,083 |
|
|
|
44,016 |
|
|
|
|
|
|
|
|
|
|
Less:
Cash and cash equivalents of discontinued operations,
ending
|
|
|
- |
|
|
|
(4,117 |
) |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents of continuing operations, ending
|
|
$ |
40,083 |
|
|
$ |
39,899 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.
|
DESCRIPTION
OF BUSINESS AND BASIS OF
PRESENTATION
|
Description of
Business. Acacia Research Corporation is comprised of Acacia Research
Corporation, and its wholly owned operating subsidiaries. As used
herein, “we,” “us” and “our” refer to Acacia Research Corporation and/or its
wholly owned operating subsidiaries. All intellectual property
acquisition, development, licensing and enforcement activities are conducted
solely by certain of Acacia Research Corporation’s wholly owned operating
subsidiaries.
Acacia
Research Corporation’s operating subsidiaries acquire, develop, license and
enforce patented technologies. Our operating subsidiaries generate
license fee revenues and related cash flows from the granting of licenses for
the use of patented technologies that our operating subsidiaries own or
control. Our operating subsidiaries assist patent owners with the
prosecution and development of their patent portfolios, the protection of their
patented inventions from unauthorized use, the generation of licensing revenue
from users of their patented technologies and, if necessary, with the
enforcement against unauthorized users of their patented technologies.
Currently, on a consolidated basis, our operating subsidiaries own or control
the rights to 93 patent portfolios, which include U.S. patents and certain
foreign counterparts, covering technologies used in a wide variety of
industries.
CombiMatrix Group
Split-off Transaction and Related Discontinued Operations. In
January 2006, Acacia Research Corporation’s board of directors approved a plan
for its wholly owned subsidiary, CombiMatrix Corporation, the primary component
of Acacia Research Corporation’s CombiMatrix group, to become an independent
public company. On August 15, 2007 (the “Redemption Date”),
CombiMatrix Corporation was split-off from Acacia Research Corporation through
the redemption of all outstanding shares of Acacia Research-CombiMatrix common
stock in exchange for the distribution of new shares of CombiMatrix
Corporation common stock on a pro-rata basis on the Redemption Date (the
“Split-off Transaction”). Subsequent to the Redemption Date, Acacia Research
Corporation no longer owns any equity interests in CombiMatrix Corporation and
the two companies operate independently of each other.
As a result
of the Split-off Transaction, we have disposed of our investment in CombiMatrix
Corporation. Refer to Note 7 for information regarding presentation
of the results of operations and cash flows for the CombiMatrix group as
discontinued operations in the accompanying consolidated financial statements
for all historical periods presented, in accordance with guidance set forth in
SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”
(“SFAS No. 144”).
Capital
Structure. As a result of the Split-off Transaction, the
CombiMatrix group is no longer a business group of Acacia Research
Corporation. Pursuant to the Split-off Transaction, all outstanding
shares of Acacia Research-CombiMatrix common stock were redeemed, and hence, all
rights of holders of Acacia Research-CombiMatrix common stock ceased as of the
Redemption Date, except for the right, upon the surrender to the exchange agent
of shares of Acacia Research-CombiMatrix common stock, to receive new
shares of CombiMatrix Corporation stock. Subsequent to the
consummation of the Split-off Transaction, Acacia Research Corporation’s only
class of common stock outstanding is its Acacia Research-Acacia Technologies
common stock.
Prior to the
Split-off Transaction, Acacia Research Corporation had two classes of common
stock outstanding, its Acacia Research-Acacia Technologies common stock
(“AR-Acacia Technologies stock”) and its Acacia Research-CombiMatrix common
stock (“AR-CombiMatrix stock”). AR-Acacia Technologies stock was
intended to reflect separately the performance of Acacia Research Corporation’s
Acacia Technologies group. AR-CombiMatrix stock was intended to
reflect separately the performance of Acacia Research Corporation’s CombiMatrix
group. Although the AR-Acacia Technologies stock and the
AR-CombiMatrix stock were intended to reflect the performance of our different
business groups, they were both classes of common stock of Acacia Research
Corporation and were not stock issued by the respective groups.
Basis of
Presentation. The accompanying consolidated financial
statements include the accounts of Acacia Research Corporation and its wholly
owned subsidiaries. Intercompany transactions and balances have been
eliminated in consolidation. The cost method is used where we maintain ownership
interests of less than 20% and do not exercise significant influence over the
investee.
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, certain information and
footnotes required by accounting principles generally accepted in the United
States of America in annual financial statements have been omitted or condensed
in accordance with quarterly reporting requirements of the SEC. These
interim consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 2007, as reported by us in our Annual Report on Form 10-K. The
year-end consolidated balance sheet data was derived from audited financial
statements but does not include all disclosures required by accounting
principles generally accepted in the United States of America.
The
consolidated financial statements of Acacia Research Corporation include all
adjustments of a normal recurring nature which, in the opinion of management,
are necessary for a fair statement of our financial position as of March 31,
2008, and results of operations and cash flows for the interim periods
presented. The results of operations for the three months ended March
31, 2008 are not necessarily indicative of the results to be expected for the
entire year.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Use of
Estimates. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Concentrations. One licensee accounted for
28% of license fee revenues and three licensees individually accounted for 10%
of license fee revenues recognized during the three months ended March 31,
2008. Two licensees accounted for
39% and 25% of license fee revenues recognized during the three months ended
March 31, 2007. Two licensees individually represented approximately 22% and one
licensee represented 21% of accounts receivable at March 31, 2008. One licensee
represented approximately 89% of accounts receivable at December 31,
2007.
Stock-Based Compensation. The
compensation cost for all stock-based awards is measured at the grant date,
based on the fair value of the award, and is recognized as an expense in the
statement of operations, on a straight-line basis, over the employee’s requisite
service period (generally the vesting period of the equity award) which is
generally two to four years. The fair value of each option award is
estimated on the date of grant using a Black-Scholes option valuation
model. The fair value of restricted stock awards is determined by the
product of the number of shares granted and the grant date market price of the
underlying common stock. Stock-based
compensation expense is recorded only for those awards expected to vest using an
estimated forfeiture rate. Pre-vesting option forfeitures are
estimated at the time of grant and are reflected in stock-based compensation
expense recognized in the consolidated statement of operations.
Impairment of Marketable
Securities. We
review impairments associated with our investments in marketable securities in
accordance with Emerging Issues Task Force (“EITF”) 03-1 and FSP SFAS 115-1
and 124-1, “The Meaning of Other-Than-Temporary-Impairment and Its Application
to Certain Investments,” to determine the classification of any impairment as
“temporary” or “other-than-temporary.” For investments
classified as available-for-sale, unrealized losses that are other than
temporary are recognized in the consolidated statement of operations and
comprehensive income (loss) (hereinafter “consolidated statement of
operations”). An impairment is deemed other than temporary unless (a)
we have the ability and intent to hold an investment for a period of time
sufficient for recovery of its carrying amount and (b) positive evidence
indicating that the investment's carrying amount is recoverable within a
reasonable period of time outweighs any evidence to the contrary. All available
evidence, both positive and negative, is considered to determine whether, based
on the weight of that evidence, the carrying amount of the investment is
recoverable within a reasonable period of time. Refer to Note 8
for disclosures regarding investments in auction rate
securities.
Income
Taxes. Income taxes are accounted for using an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in Acacia Research Corporation’s consolidated financial statements or
consolidated tax returns. A valuation allowance is established to reduce
deferred tax assets if all, or some portion, of such assets will more than
likely not be realized. The tax provisions for the periods presented
relate primarily to state tax liabilities in jurisdictions where certain of our
operating subsidiaries file separate state tax returns.
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Earnings (Loss) Per Share.
Basic earnings per share for each class of common stock is computed by
dividing the income or loss allocated to each class of common stock by the
weighted-average number of outstanding shares of that class of common stock.
Diluted earnings per share is computed by dividing the income or loss allocated
to each class of common stock by the weighted-average number of outstanding
shares of that class of common stock, including the dilutive effect of common
stock equivalents. Potentially dilutive common stock equivalents primarily
consist of employee stock options, unvested restricted stock, restricted stock
unit grants and common stock purchase warrants (AR-CombiMatrix stock
only).
The
earnings or losses allocated to each class of common stock are determined by
Acacia Research Corporation’s board of directors. This determination is
generally based on the net income or loss amounts of the corresponding group
determined in accordance with accounting principles generally accepted in the
United States of America, consistently applied. We believe this
method of allocation to be systematic and reasonable.
As a
result of the Split-off Transaction, earnings or losses allocated to the
CombiMatrix group are presented as discontinued operations in the accompanying
consolidated financial statements. Subsequent to the Split-off Transaction,
Acacia Research Corporation’s only class of common stock outstanding is its
AR-Acacia Technologies stock.
The
following table presents the weighted-average number of common shares
outstanding used in basic and diluted loss per share:
|
|
For
the Three Months Ended
|
|
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Acacia Research -
Acacia Technologies stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average number of common shares outstanding
|
|
|
29,217,636 |
|
|
|
27,841,286 |
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive stock options and restricted stock awards
|
|
|
- |
|
|
|
3,128,705 |
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average number of common shares outstanding
|
|
|
29,217,636 |
|
|
|
30,969,991 |
|
|
|
|
|
|
|
|
|
|
Outstanding
stock options, nonvested restricted stock and restricted stock units
excluded from the computation of diluted loss per share because the effect
of inclusion would have been anti-dilutive
|
|
|
5,643,600 |
|
|
|
1,525,158 |
|
|
|
|
|
|
|
|
|
|
Acacia
Research - CombiMatrix stock - Discontinued Operations - Split-off of
CombiMatrix Corporation(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average number of common shares
outstanding
|
|
|
- |
|
|
|
52,516,220 |
|
|
|
|
|
|
|
|
|
|
Outstanding
stock options and warrants excluded from the computation of diluted loss
per share because the effect of inclusion would have been
anti-dilutive
|
|
|
- |
|
|
|
21,195,937 |
|
____________________
(1)
Reflects activity and amounts outstanding as of the Redemption
Date.
Acacia
Research Corporation’s only identifiable intangible assets at March 31, 2008 and
December 31, 2007, are patents and patent rights. Patent related
accumulated amortization totaled $18,635,000 and $17,300,000 as of March 31,
2008 and December 31, 2007, respectively.
Our
patents and patent rights have remaining estimated economic useful lives ranging
from one to seven years. The weighted average remaining estimated
economic useful life of our patents and patent rights is four
years. Annual aggregate amortization expense is estimated to be
$3,356,000 for the remainder of 2008, $4,059,000 in 2009, $3,868,000 in 2010,
$2,963,000 in
2011 and $953,000 in 2012. At March 31, 2008 and December 31, 2007,
all of our acquired intangible assets were subject to amortization.
For the
three months ended March 31, 2008 and 2007, we incurred patent acquisition costs
totaling $1,558,000 and $110,000 in connection with the acquisition of the
rights to additional patent portfolios. The patents and patent rights
acquired have estimated economic useful lives of approximately seven
years.
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
In
March 2008, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 161, Disclosures
about Derivative Instruments and Hedging Activities, an amendment of FASB
statement No. 133 (“SFAS 161”). SFAS 161 expands the disclosure
requirements in Statement 133 about an entity’s derivative instruments and
hedging activities. SFAS 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15,
2008. We do not expect the adoption of SFAS 161 to have a material
impact on our consolidated financial position, results of operations or cash
flows.
In
February 2008, the FASB issued FSP No. FAS 157-2, Effective Date of FASB
Statement No. 157, which delays the effective date of statement No. 157, “Fair
Value Measurements” (SFAS No. 157), by one year for nonfinancial assets and
nonfinancial liabilities that are recognized or disclosed at fair value in the
financial statements on a nonrecurring basis. Refer to Note 8 for
information regarding the implementation of SFAS No. 157. We do not
expect the adoption of FSP No. FAS 157-2 to have a material impact on our
consolidated financial position, results of operations or cash
flows.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations (“SFAS No. 141R”). SFAS 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill acquired. SFAS No.
141R also establishes disclosure requirements to enable the evaluation of the
nature and financial effects of business combinations. SFAS No. 141R is
effective for Acacia Research Corporation as of January 1, 2009. We do not
expect the adoption of SFAS No. 141R to have a material impact on our
consolidated financial position, results of operations or cash
flows.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51 (“SFAS No. 160”). SFAS No. 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parent’s ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. SFAS No. 160 is effective for Acacia Research
Corporation beginning January 1, 2009. We do not expect the adoption
of SFAS No. 160 to have a material impact on our consolidated financial
position, results of operations or cash flows.
6.
|
COMMITMENTS
AND CONTINGENCIES
|
Inventor
Royalties and Contingent Legal Expenses
In
connection with the acquisition of certain patents and patent rights, certain
operating subsidiaries of Acacia Research Corporation executed related
agreements which grant to the former owners of the respective patents or patent
rights, the right to receive inventor royalties based on future net license fee
revenues (as defined in the respective agreements) generated as a result of
licensing the respective patents or patent portfolios. Inventor
royalties paid pursuant to the agreements are expensed in the consolidated
statement of operations in the period that the related license fee revenues are
recognized. In
certain instances, pursuant to the terms of the underlying inventor agreements,
costs paid by us to acquire patents are recoverable from future net
revenues. Patent acquisition costs that are recoverable from future
net revenues are amortized over the estimated economic useful life of the
related patents, or as the prepaid royalties are earned by the inventor, as
appropriate, and the related expense is included in amortization expense in the
consolidated statement of operations. Any unamortized patent
acquisition costs recovered from net revenues are expensed in the period
recovered, and included in inventor royalties and contingent legal fees –
patents in the consolidated statement of operations.
In
connection with the licensing and enforcement activities of our operating
subsidiaries, they may retain the services of law firms that specialize in
intellectual property licensing and enforcement and patent law. These
law firms may be retained on a contingent fee basis in which the law firms are
paid on a scaled percentage of any negotiated license fees, settlements or
judgments awarded based on how and when the license fees, settlements or
judgments are obtained. In instances where there are no recoveries
from potential infringers (ie. license fees), no contingent legal fees are paid;
however, our operating subsidiaries may be liable for certain out of pocket
legal costs incurred pursuant to the underlying legal services
agreement. Legal fees advanced by contingent law firms that are
required to be paid in the event that no license recoveries are obtained are
expensed as incurred and included in liabilities in the consolidated balance
sheet.
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Patent
Enforcement and Other Litigation
Acacia
Research Corporation is subject to claims, counterclaims and legal actions that
arise in the ordinary course of business. Management believes that
the ultimate liability with respect to these claims and legal actions, if any,
will not have a material effect on our consolidated financial position, results
of operations or cash flows. Operating subsidiaries of Acacia
Research Corporation are often required to engage in litigation to enforce their
patents and patent rights.
Guarantees
and Indemnifications
Certain
of our operating subsidiaries have made guarantees and indemnities under which
they may be required to make payments to a guaranteed or indemnified party, in
relation to certain transactions, including revenue transactions in the ordinary
course of business. In connection with certain facility leases, Acacia Research
Corporation and certain of its operating subsidiaries have indemnified lessors
for certain claims arising from the facilities or the leases. Acacia
Research Corporation indemnifies its directors and officers to the maximum
extent permitted under the laws of the State of Delaware. However,
Acacia Research Corporation has a directors and officers insurance policy that
may reduce its exposure in certain circumstances and may enable it to recover a
portion of future amounts that may be payable, if any. The duration
of the guarantees and indemnities varies and, in many cases is indefinite but
subject to statute of limitations. The majority of guarantees
and indemnities do not provide any limitations of the maximum potential future
payments that we could be obligated to make. To date, we have made no
payments related to these guarantees and indemnities. We estimate the
fair value of our indemnification obligations to be insignificant based on this
history and have therefore, not recorded any liability for these guarantees and
indemnities in the accompanying consolidated balance sheets.
7.
|
DISCONTINUED
OPERATIONS - SPLIT-OFF OF COMBIMATRIX
CORPORATION
|
In
January 2006, Acacia Research Corporation’s board of directors approved a plan
for its wholly owned subsidiary, CombiMatrix Corporation, to become an
independent public company. On August 15, 2007 (the “Redemption
Date”), CombiMatrix Corporation was split-off from Acacia Research Corporation
through the redemption of all outstanding shares of AR-CombiMatrix stock in
exchange for the distribution of new shares of CombiMatrix Corporation common
stock on a pro-rata basis as of the Redemption Date (the “Split-off
Transaction”). Subsequent to the Redemption Date, Acacia Research
Corporation no longer owns any equity interests in CombiMatrix Corporation and
the two companies operate independently of each other.
As a
result of the Split-off Transaction, we have disposed of our investment in
CombiMatrix Corporation, the CombiMatrix group is no longer a business group of
Acacia Research Corporation, Acacia Research Corporation does not have any
continuing involvement in the operations of CombiMatrix Corporation and the
assets, liabilities, results of operations and cash flows of CombiMatrix
Corporation have been eliminated from the continuing operations of Acacia
Research Corporation. As a result, in accordance with guidance set
forth in SFAS No. 144, Acacia Research Corporation’s accompanying consolidated
statements of operations and statements of cash flows for all historical periods
presented reflect the results of operations and cash flows for CombiMatrix
Corporation as discontinued operations. CombiMatrix Corporation was
previously presented as a separate operating segment of Acacia Research
Corporation under SFAS No. 131, “Disclosures about Segments of an
Enterprise and Related Information.” The Split-off Transaction was
accounted for by Acacia Research Corporation at historical
cost. Accordingly, no gain or loss on disposal was recognized in the
accompanying consolidated statements of operations.
Revenues
and pretax loss included in discontinued operations for the three months ended
March 31, 2007 were $1,137,000 and ($2,133,000), respectively. Net loss
from discontinued operations related to CombiMatrix Corporation includes direct
costs incurred in connection with the Split-off Transaction, originally included
in Acacia Research Corporation corporate accounts, totaling $36,000 for the
three months ended March 31, 2007.
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8.
|
FAIR
VALUE MEASUREMENTS AND AUCTION RATE
SECURITIES
|
In
September 2006, the FASB issued statement No. 157, “Fair Value
Measurements” (SFAS No.
157). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in accordance with accounting principles generally accepted
in the United States, and expands disclosures about fair value measurements. We
have adopted the provisions of SFAS No. 157 effective January 1, 2008, for
financial instruments. Although the adoption of SFAS No. 157 did not materially
impact our financial condition, results of operations, or cash flows, SFAS No.
157 requires us to provide additional disclosures as part of our consolidated
financial statements.
SFAS No.
157 establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. These tiers include: Level 1, defined
as observable inputs such as quoted prices in active markets; Level 2, defined
as inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.
As of
March 31, 2008, we held investment grade auction rate securities with a par
value totaling $6,000,000. Our auction rate securities consist of high credit
quality securities issued by closed-end investment companies with portfolio
asset coverage of at least 200%, and auction rate investments backed by student
loans, issued under programs such as the Federal Family Education Loan Program,
substantially all of which carry credit ratings of AAA. Auction rate
securities are classified as available-for-sale securities and reflected at fair
value in accordance with the requirements of SFAS No.
157.
Historically,
our auction rate securities were recorded at cost, which approximated their fair
market value due to their variable interest rates, which typically reset every 7
to 35 days, despite the long-term nature of their stated contractual maturities.
The Dutch auction process that resets the applicable interest rate at
predetermined calendar intervals is intended to provide liquidity to the holder
of auction rate securities by matching buyers and sellers within a market
context enabling the holder to gain immediate liquidity by selling such
interests at par or rolling over their investment. If there is an imbalance
between buyers and sellers, the risk of a failed auction exists. Due
to recent liquidity issues in the global credit and capital markets, these
securities experienced several failed auctions since February
2008. In such case of a failure, the auction rate securities continue
to pay interest at the maximum rate in accordance with their terms; however, we
may not be able to access the par value of the invested funds until a future
auction of these investments is successful, the security is called by the
issuer, or a buyer is found outside of the auction process.
As a
result of the recent failed auctions, there are no reliable current observable
market prices available for these securities for purposes of establishing fair
market value as of March 31, 2008. As a result, the fair values of
these securities are estimated utilizing an analysis of certain unobservable
inputs and by reference to a discounted cash flow analysis as of March 31,
2008. These analyses considered, among other items, the underlying
structure of each security, the collateral underlying the security investments,
the creditworthiness of the counterparty, the present value of future principal
and contractual interest payments discounted at rates considered to be
reflective of current market conditions, consideration of the probabilities of
default, continued auction failure, or repurchase or redemption at par for each
period, and estimates of the time period over which liquidity related issues
will be resolved. Observable market data for instruments with similar
characteristics to our auction rate securities was also considered when
possible.
At March
31, 2008, the par value of auction rate securities collateralized by student
loan portfolios totaled $3,000,000. As a result of the liquidity
issues associated with the failed auctions, we estimate that the fair value of
these auction rate securities no longer approximates their par
value. Due to the estimate that the market for these student loan
collateralized instruments may take in excess of twelve months to fully recover,
we have classified these investments as noncurrent in the accompanying March 31,
2008 unaudited Consolidated Balance Sheet. In addition, as a result
of the analysis described above and the estimate that it will take in excess of
twelve months for the market for student loan collateralized instruments to
recover, we have recorded an other-than-temporary loss of $263,000 for our
student loan collateralized instruments, in the accompanying unaudited
statements of operations. The balance of our auction rate securities,
with a par value totaling $3,000,000, are issued by high credit quality
closed-end investment companies, for which the market has recently had a number
of successful auctions and or redemptions at par value. Management
believes that the fair value of our auction rate securities issued by closed-end
investment companies continue to approximate their par value as of March
31, 2008.
We will
continue to monitor and evaluate our investments in auction rate securities for
any further reduction in liquidity and potential impairment in future
periods. If it is determined that any future valuation adjustments
are other-than-temporary, we would record additional charges to
earnings as appropriate. Any future fluctuation in fair value related
to these instruments that are deemed to be temporary, would be recorded to
accumulated other comprehensive income.
ACACIA
RESEARCH CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Assets
measured at fair value on a recurring basis subject to the disclosure
requirements of SFAS No. 157 at March 31, 2008, were as follows (in
thousands):
Description
|
|
Balance
at
March
31,
2008
|
|
|
Quoted
Prices in Active Markets For Identical Assets
(Level
1)
|
|
|
Significant
Other Observable Inputs
(Level
2)
|
|
|
Significant
Unobservable Inputs
(Level
3)
|
|
Auction
rate securities
|
|
$ |
5,737 |
|
|
|
- |
|
|
|
- |
|
|
$ |
5,737 |
|
As a result
of the change in market conditions, during the first quarter of 2008, we changed
the valuation methodology for auction rate securities to include consideration
of the factors discussed above and reference to a discounted cash flow
analysis. Accordingly, these securities changed from Level 1 to Level
3 within SFAS No. 157’s hierarchy since the initial adoption of SFAS No. 157 at
January 1, 2008. The following table presents the assets measured at
fair value on a recurring basis using significant unobservable inputs (Level 3)
as defined in SFAS No. 157 at March 31, 2008 (in thousands):
Fair Value
Measurements Using Significant Unobservable Inputs (Level
3)
|
|
|
|
|
|
Auction rate
securities:
|
|
|
|
Balance
at December 31,
2007
|
|
$ |
- |
|
Transfers
to Level
3
|
|
|
6,000 |
|
Total
gains or (losses) (realized or unrealized):
|
|
|
|
|
Included
in
earnings
|
|
|
(263 |
) |
Included
in other comprehensive
income
|
|
|
- |
|
Purchases
and settlements
(net)
|
|
|
- |
|
Balance
at March 31,
2008
|
|
$ |
5,737 |
|
There
were no gains or (losses) for the period included in earnings attributable to
the change in unrealized gains or losses relating to assets still held at March
31, 2008.
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Cautionary
Statement
You
should read the following discussion and analysis in conjunction with the
consolidated financial statements and related notes thereto contained in Part I,
Item 1 of this report. The information contained in this Quarterly Report on
Form 10-Q is not a complete description of our business or the risks associated
with an investment in our common stock. We urge you to carefully review and
consider the various disclosures made by us in this report and in our other
reports filed with the Securities and Exchange Commission, or SEC, including our
Annual Report on Form 10-K for the year ended December 31, 2007, filed with the
SEC on March 14, 2008.
This
report contains forward-looking statements within the meaning of the “safe
harbor” provisions of the Private Securities Litigation Reform Act of 1995.
Reference is made in particular to the description of our plans and objectives
for future operations, assumptions underlying such plans and objectives, and
other forward-looking statements included in this report. Such statements may be
identified by the use of forward-looking terminology such as “may,” “will,”
“expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar
terms, variations of such terms or the negative of such terms. Such statements
are based on management’s current expectations and are subject to a number of
factors and uncertainties, which could cause actual results to differ materially
from those described in the forward-looking statements. Such statements address
future events and conditions concerning product development, capital
expenditures, earnings, litigation, regulatory matters, markets for products and
services, liquidity and capital resources and accounting matters. Actual results
in each case could differ materially from those anticipated in such statements
by reason of factors such as future economic conditions, changes in consumer
demand, legislative, regulatory and competitive developments in markets in which
we and our subsidiaries operate, results of litigation and other circumstances
affecting anticipated revenues and costs. We expressly disclaim any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in our
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based. Additional factors that
could cause such results to differ materially from those described in the
forward-looking statements are set forth in connection with the forward-looking
statements and in our “Risk Factors” incorporated by reference in Part II, Item
1A of this report.
General
As used
in this Form 10-Q, “we,” “us” and “our” refer to Acacia Research Corporation
and/or its wholly owned operating subsidiaries. All intellectual
property acquisition, development, licensing and enforcement activities are
conducted solely by certain of Acacia Research Corporation’s wholly owned
operating subsidiaries.
Acacia
Research Corporation, a Delaware corporation, was originally incorporated in
California in January 1993 and reincorporated in Delaware in December
1999.
The
following discussion is based primarily on our unaudited consolidated balance
sheet as of March 31, 2008, and on our unaudited consolidated statements of
operations for the period from January 1, 2008 to March 31, 2008. The discussion
compares the activities for the three months ended March 31, 2008, to the
activities for the three months ended March 31, 2007. This information should be
read in conjunction with the accompanying unaudited consolidated financial
statements and notes thereto. This information should also be read in
conjunction with the “Risk Factors” referred to in Part II, Item 1A of this
report.
Business
Acacia
Research Corporation’s operating subsidiaries acquire, develop, license and
enforce patented technologies. Our operating subsidiaries generate
license fee revenues and related cash flows from the granting of licenses for
the use of patented technologies that our operating subsidiaries own or
control. Our operating subsidiaries assist patent owners with the
prosecution and development of their patent portfolios, the protection of their
patented inventions from unauthorized use, the generation of licensing revenue
from users of their patented technologies and, if necessary, with the
enforcement against unauthorized users of their patented technologies.
Currently, on a consolidated basis, our operating subsidiaries own or control
the rights to 93 patent portfolios, which include U.S. patents and certain
foreign counterparts, covering technologies used in a wide variety of
industries.
Other
CombiMatrix Group Split-off
Transaction and Related Discontinued Operations. As discussed below under
the caption “Discontinued Operations – Split-off of CombiMatrix Corporation,”
the CombiMatrix group, which was previously presented as a separate reportable
segment, was split-off from Acacia Research Corporation (the “Split-off
Transaction”), effective August 15, 2007 (the “Redemption Date”). As
such, the results of operations for all historical periods for the CombiMatrix
group in the accompanying consolidated financial statements are presented as
part of Acacia Research Corporation’s results from discontinued operations in
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets,” or SFAS No. 144.
Overview
Our
operating activities during the three months ended March 31, 2008 and 2007, were
principally focused on the continued development, licensing and enforcement of
the patent portfolios owned or controlled by our operating subsidiaries,
including the continued pursuit of multiple ongoing technology licensing and
enforcement programs and the commencement of new technology licensing
and enforcement programs. In addition, we continued our focus on
business development, including the acquisition of several additional patent
portfolios by certain of our operating subsidiaries and the continued pursuit of
additional opportunities to partner with patent owners and provide our unique
intellectual property licensing, development and enforcement
services.
Revenues
included license fees from four new technology licensing and enforcement
programs during the three months ended March 31, 2008, including our Electronic
Message Advertising technology, Remote Management of Imaging Devices technology,
High Quality Image Processing technology, and Wireless
Traffic Information technology licensing programs. Revenues for the
three months ended March 31, 2008 also included fees from the licensing of our
DMT® technology, Pop-Up Internet
Advertising technology, Telematics technology, Rule Based Monitoring technology,
Portable Storage Devices with Links technology, Image Resolution Enhancement
technology, and Electronic Address List Management technology licensing
programs. On a consolidated basis, as of March 31, 2008, 32 of our
licensing programs had begun generating licensing revenues, up from 24 licensing
programs as of March 31, 2007.
Management
measures and assesses the performance and growth of the patent licensing and
enforcement business conducted by our operating subsidiaries based on
consolidated license fee revenues recognized across all of our technology
licensing and enforcement programs on a trailing twelve-month
basis. Trailing twelve-month revenues were $36.5 million as of March
31, 2008, $52.6 million as of December 31, 2007, $47.9 million as of September
30, 2007, $46.8 million as of June 30, 2007, $55.3 million as of March 31, 2007,
and $34.8 million at December 31, 2006.
Operating
expenses increased during the three months ended March 31, 2008, as compared to
the three months ended March 31, 2007, due primarily to the hiring of additional
patent licensing, business development and engineering personnel since the end
of the prior year quarter, an increase in business development and licensing
related patent research and consulting costs, and an increase
in corporate, general and administrative costs related to ongoing
operations. The increase in operating expenses is reflective of the
continued growth and expansion of our operating subsidiaries’ technology
licensing and enforcement businesses. Inventor
royalties expenses and contingent legal fee expenses decreased during the three
months ended March 31, 2008, as compared to the three months ended March 31,
2007, primarily due to the related fluctuations in license fee revenues, as
discussed above, and the impact of the varying economic terms related to
inventor agreements and contingent legal fee arrangements associated with the
revenue generating patent portfolios in each period.
During
the three months ended March 31, 2008, certain of our operating subsidiaries
continued to execute their business strategy in the area of patent portfolio
acquisitions, including the acquisition of, or the acquisition of the rights to,
five patent portfolios covering a variety of applications. Patent
rights acquired during the three months ended March 31, 2008 included the
following:
·
|
Surgical
Catheter. This patented technology generally relates to
surgical devices, such as percutaneously insertable catheters and
cannulas, that are used to access the circulatory system. These devices
can be used in cardiology and other surgical
procedures.
|
·
|
Vehicle Maintenance
Systems. This patented technology generally relates to vehicle
maintenance alerts. This technology may be used to alert a driver
that an oil change or other vehicle maintenance should be
performed.
|
·
|
Online Ad
Tracking. This patented technology generally relates to
tracking advertising usage on a network such as the Internet. For example,
this technology can be used to track click through rates of web site
advertising.
|
·
|
Videoconferencing. This
patented technology relates to videoconferencing systems and services
based on the Internet.
|
Refer to
“Liquidity and Capital Resources” below for information regarding the impact of
patent and patent rights acquisitions on the consolidated financial statements
for the periods presented.
As of
March 31, 2008, certain of our operating subsidiaries had several option
agreements with third-party patent portfolio owners regarding the potential
acquisition of additional patent portfolios. Future patent portfolio
acquisitions will continue to expand and diversify our revenue generating
opportunities and accelerate the execution of our business strategy, as we continue to
build our leadership position in patent licensing.
Critical
Accounting Estimates
Our
unaudited interim financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.
Preparation of these statements requires management to make judgments and
estimates. Some accounting policies have a significant impact on amounts
reported in these financial statements. A summary of significant accounting
policies and a description of accounting policies that are considered critical
may be found in our 2007 Annual Report on Form 10-K, filed on March 14, 2008, in
the Notes to the Consolidated Financial Statements and the Critical Accounting
Estimates section. In addition, refer to Note 2 to the consolidated
interim financial statements included in Part I, Item 1 of this
report.
Acacia
Research Corporation
Comparison
of the Results of Operations for the Three Months Ended March 31, 2008 and
2007
Net
Income (Loss) (In thousands)
|
|
For
the Three Months Ended
|
|
|
|
March
31,
2008
|
|
|
March
31,
2007
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$ |
(4,489 |
) |
|
$ |
4,435 |
|
Loss
from discontinued operations - Split-off of CombiMatrix Corporation and
other
|
|
|
- |
|
|
|
(2,133 |
) |
Net
income (loss)
|
|
$ |
(4,489 |
) |
|
$ |
2,302 |
|
The
changes in net income (loss) were primarily due to operating results and
activities as discussed below.
Revenues
(In thousands)
|
|
For
the Three Months Ended
|
|
|
|
March
31,
2008
|
|
|
March
31,
2007
|
|
|
|
|
|
|
|
|
License
fees
|
|
$ |
9,048 |
|
|
$ |
25,185 |
|
License Fees. Revenues for
the three months ended March 31, 2008 included license fees from 24 new
licensing agreements covering 12 of our technology licensing and enforcement
programs, as compared to 22 new licensing agreements covering 11 of our
technology licensing and enforcement programs in the same period in
2007. License fee revenues recognized by our operating
subsidiaries fluctuate from period to period primarily based on the following
factors:
·
|
the
dollar amount of agreements executed each period, which is primarily
driven by the nature and characteristics of the technology being licensed
and the magnitude of infringement associated with a specific
licensee;
|
·
|
the
specific terms and conditions of agreements executed each period and the
periods of infringement contemplated by the respective
payments;
|
·
|
fluctuations
in the total number of agreements
executed;
|
·
|
fluctuations
in the sales results or other royalty per unit activities of our licensees
that impact the calculation of license fees
due;
|
·
|
the
timing of the receipt of periodic license fee payments and/or reports from
licensees; and
|
·
|
fluctuations
in the net number of active licensees period to
period.
|
One licensee accounted for
28% and three licensees individually accounted for 10% of license fee revenues
recognized during the three months ended March 31, 2008, and two licensees accounted for
39% and 25% of license fee revenues recognized during the three months ended
March 31, 2007.
Costs
incurred in connection with our operating subsidiaries licensing and enforcement
activities, other than inventor royalties expense, contingent legal fees expense
and patent-related legal expenses, are included in marketing, general and
administrative expenses.
Operating
Expenses (In thousands)
|
|
For
the Three Months Ended
|
|
|
|
March
31,
2008
|
|
|
March
31,
2007
|
|
|
|
|
|
|
|
|
Marketing,
general and administrative expenses (including non-cash stock compensation
expense of $1,829 and $763 for the three months ended March 31, 2008 and
2007, respectively)
|
|
$ |
6,626 |
|
|
$ |
4,328 |
|
Inventor
royalties and contingent legal fees expense - patents
|
|
|
4,731 |
|
|
|
14,122 |
|
Legal
expenses - patents
|
|
|
1,016 |
|
|
|
1,367 |
|
Marketing, General and
Administrative Expenses. Marketing, general and administrative
expenses consist of employee compensation and related personnel costs, including
non-cash stock compensation expenses, office and facilities costs, legal
and accounting professional fees, public relations, marketing, stock
administration and other corporate costs, and patent related development,
commercialization, research, consulting and maintenance costs.
Excluding the impact of non-cash
stock compensation charges discussed below, the net increase was due primarily
to the addition of licensing, business development and engineering personnel
since the end of the prior year quarter, an increase in business development and
licensing related patent research and consulting costs and an increase in
corporate, general and administrative costs. The overall increase in
marketing, general and administrative expenses is reflective of the continued
growth and expansion of our operating subsidiaries’ intellectual property
acquisition, licensing and enforcement businesses and related ongoing
operations. The increase was partially offset by a decrease in
consulting expenses due to the expiration of the consulting agreement with the
former CEO of Global Patent Holdings, LLC in January 2007 and a decrease in
severance related costs.
Non-cash
stock compensation charges increased during the three months ended March 31,
2008, as compared to the three months ended March 31, 2007, due to the issuance
of new equity based incentive awards to new and existing employees since the end
of the prior year quarter. There was not a similar grant of equity
based incentive awards to existing employees during the period from April 1,
2006 to March 31, 2007. The fluctuation also reflects the increase in
the average fair value of equity based incentive awards expensed in each period,
which was approximately $10.77 and $5.40, for the three months ended March 31,
2008 and 2007, respectively. Non-cash stock compensation expense for
the three months ended March 31, 2007 also includes a credit of $170,000,
related to the reversal of certain non-cash stock compensation charges recorded
in previous periods due to the pre-vesting forfeiture of certain share-based
awards in connection with certain employee separations in March
2007.
A summary
of the main drivers of the change in marketing, general and administrative
expenses, including the impact of non-cash stock compensation charges, for the
periods presented, is as follows (in thousands):
|
|
For
the Three Months
|
|
|
|
Ended
March 31,
|
|
|
|
2008
vs. 2007
|
|
|
|
|
|
Increase
in personnel expenses
|
|
$ |
826 |
|
One-time
severance charge for employee separation
|
|
|
(360 |
) |
Decrease
in foreign taxes paid on licensing fees
|
|
|
(145 |
) |
Increase
in patent development / commercialization and other marketing, general and
administrative costs
|
|
|
985 |
|
Increase
in non-cash stock compensation expense
|
|
|
1,066 |
|
Decrease
in consulting expenses paid to former CEO of Global Patent Holdings,
LLC
|
|
|
(74 |
) |
Inventor Royalties and Contingent
Legal Fees Expense. Inventor royalties expense totaled $2.1
million and $5.5 million for the three months ended March 31, 2008 and 2007,
respectively, and contingent legal fees expense totaled $2.6 million and $8.6
million for the three months ended March 31, 2008 and 2007,
respectively. Inventor royalties expenses and contingent legal fees
expenses for the periods presented were incurred in connection with the
recognition of the related license fee revenues, summarized
above. The majority of the patent portfolios owned or controlled by
our operating subsidiaries are subject to patent and patent rights agreements
with inventors containing provisions granting to the original patent owner the
right to receive inventor royalties based on future net revenues, as defined in
the respective agreements, and may also be subject to contingent legal fee
arrangements with external law firms engaged on a contingent fee
basis. The economic terms of the inventor and contingent fee
arrangements, if any, vary across our patent portfolios. As such,
inventor royalties and contingent legal fee expenses fluctuate period to period
based on the amount of revenues recognized each period and the mix of specific
patent portfolios, with varying economic terms, generating revenues each
period. The decrease in inventor royalties expense and contingent
legal fees expense for the periods presented primarily reflects the decrease in
license fee revenues, as discussed above.
Legal Expense – Patents. Patent-related legal
expenses include patent-related prosecution and enforcement costs incurred by
outside law firms engaged on an hourly basis and the out-of-pocket expenses
incurred by law firms engaged on a contingent fee
basis. Patent-related legal expenses fluctuate from period to period
based on patent enforcement and prosecution activity associated with ongoing
licensing and enforcement programs and the timing of the commencement of new
licensing and enforcement programs in each period. We expect
patent-related legal expenses to continue to fluctuate quarter to quarter based
on the factors summarized above, in connection with our current and future
patent commercialization and enforcement programs.
Discontinued
Operations – Split-off of CombiMatrix Corporation
In
January 2006, Acacia Research Corporation’s board of directors approved a plan
for its wholly owned subsidiary, CombiMatrix Corporation, to become an
independent public company. On August 15, 2007 (the “Redemption
Date”), CombiMatrix Corporation was split-off from Acacia Research Corporation
through the redemption of all outstanding shares of AR-CombiMatrix common stock
in exchange for the distribution of new shares of CombiMatrix Corporation, on a
pro-rata basis, to the holders of AR-CombiMatrix stock as of the Redemption Date
(the “Split-off Transaction”). Subsequent to the Redemption Date,
Acacia Research Corporation no longer owns any equity interests in CombiMatrix
Corporation and the two companies operate independently of each
other.
As a
result of the Split-off Transaction, we have disposed of our investment in
CombiMatrix Corporation, and therefore, in accordance with guidance set forth in
SFAS No. 144, Acacia Research Corporation’s accompanying consolidated statements
of operations and statements of cash flows for all historical periods presented
reflect the results of operations and cash flows for CombiMatrix Corporation as
discontinued operations. CombiMatrix Corporation was previously
presented as a separate operating segment of Acacia Research Corporation under
SFAS No. 131, “Disclosures about Segments of an Enterprise and Related
Information.”
Refer to
Note 7 to the unaudited consolidated financial statements included elsewhere
herein for information regarding the accounting for the Split-off Transaction
and information regarding the revenues and pretax loss included in discontinued
operations for the historical periods presented.
Inflation
Inflation
has not had a significant impact on Acacia Research Corporation.
Liquidity
and Capital Resources
Acacia
Research Corporation’s consolidated cash and cash equivalents and investments
totaled $45.8 million at March 31, 2008, compared to $51.4 million at
December 31, 2007. Working capital at March 31, 2008 was $42.6 million,
compared to $48.1 million at December 31, 2007. The change in
working capital primarily reflects the impact of cash flows used in continuing
operating, investing and financing activities, as discussed below.
In
addition, the change in working capital also reflects the reclass of $3.0
million (par value) of auction rate securities collateralized by student loans
to noncurrent assets as of March 31, 2008, as discussed below.
The net
increase (decrease) in cash and cash equivalents related to continuing
operations for the periods presented was comprised of the following (in
thousands):
|
|
For
the Three Months Ended
|
|
|
|
March
31,
2008
|
|
|
March
31,
2007
|
|
Net
cash provided by (used in) continuing operations:
|
|
|
|
|
|
|
Operating
activities
|
|
$ |
(3,880 |
) |
|
$ |
7,435 |
|
Investing
activities
|
|
|
3,383 |
|
|
|
(668 |
) |
Financing
activities
|
|
|
111 |
|
|
|
50 |
|
Cash Flows from Continuing Operating
Activities. Cash receipts from licensees for the three months
ended March 31, 2008 decreased to $6.2 million, from $23.4 million in
the comparable 2007 period, due to the decrease in license fee revenues, as
discussed above. Cash outflows from operations for the three months
ended March 31, 2008 decreased to $10.1 million, as compared to
$16.0 million in the comparable 2007 period, due to the net decrease in
operating expenses, as discussed above, and the impact of the timing of payments
to inventors, attorneys and other vendors. Accounts receivable
increased to $4.3 million at March 31, 2008, compared to $1.4 million at
December 31, 2007.
Cash Flows from Continuing Investing
Activities. The change in net cash flows used in investing activities was
primarily due to net purchases and sales of available-for-sale investments in
connection with ongoing short-term cash management activities during the periods
presented. Net cash outflows from investing activities for the three
months ended March 31, 2008 also included patent related acquisition costs
totaling $1,558,000, as compared to $110,000 in the comparable 2007
period.
Cash Flows from Continuing Financing
Activities. Net cash flows provided by financing activities
during the three months ended March 31, 2008 included proceeds from the exercise
of AR-Acacia Technologies stock options totaling $111,000, as compared to
$750,000 for the comparable 2007 period.
Management
believes that the cash and cash equivalent balances, investments, anticipated
cash flow from operations and other external sources of available credit, will
be sufficient to meet Acacia Research Corporation and its subsidiaries’ cash
requirements through at least March 2009 and for the foreseeable
future. We may however encounter unforeseen difficulties that may
deplete our capital
resources more rapidly than anticipated, including those set forth in Acacia
Research Corporation’s Risk Factors on page 6 of our Annual Report on Form 10-K
for the year ended December 31, 2007, filed with the SEC on March 14,
2008. Any efforts to seek additional funding could be made through
equity, debt or other external financing; however there can be no assurance that
additional funding will be available on favorable terms, if at all. If we fail
to obtain additional funding when needed, we may not be able to execute our
business plans and our business may suffer.
Auction Rate
Securities. As of March 31, 2008, we held investment grade
auction rate securities with a par value totaling $6.0 million. Our auction rate
securities consist of high credit quality securities issued by closed-end
investment companies with portfolio asset coverage of at least 200%, and auction
rate investments backed by student loans, issued under programs such as the
Federal Family Education Loan Program, substantially all of which carry credit
ratings of AAA. Auction rate securities are classified as
available-for-sale securities and reflected at fair value in accordance with the
requirements of SFAS No. 157.
Historically,
our auction rate securities were recorded at cost, which approximated their fair
market value due to their variable interest rates, which typically reset every 7
to 35 days, despite the long-term nature of their stated contractual maturities.
The Dutch auction process that resets the applicable interest rate at
predetermined calendar intervals is intended to provide liquidity to the holder
of auction rate securities by matching buyers and sellers within a market
context enabling the holder to gain immediate liquidity by selling such
interests at par or rolling over their investment. If there is an imbalance
between buyers and sellers the risk of a failed auction exists. Due
to recent liquidity issues in the global credit and capital markets, these
securities experienced several failed auctions since February
2008. In such case of a failure, the auction rate securities continue
to pay interest, at the maximum rate, in accordance with their terms; however,
we may not be able to access the par value of the invested funds until a future
auction of these investments is successful, the security is called by the issuer
or a buyer is found outside of the auction process.
As a
result of the recent failed auctions, there are no reliable current observable
market prices available for these securities for purposes of establishing fair
market value as of March 31, 2008. As a result, the fair values of
these securities are estimated utilizing an analysis of certain unobservable
inputs and by reference to a discounted cash flow analysis as of March 31,
2008. These analyses considered, among other items, the underlying
structure of each security, the collateral underlying the security investments,
the creditworthiness of the counterparty, the present value of future principal
and contractual interest payments discounted at rates considered to be
reflective of current market conditions, consideration of the probabilities of
default, continued auction failure, or repurchase at par for each period and
estimates of the time period over which liquidity related issues will be
resolved. Observable market data for instruments with similar
characteristics to our auction rate securities was also considered when
possible.
At March
31, 2008, the par value of auction rate securities collateralized by student
loan portfolios totaled $3.0 million. As a result of the liquidity
issues associated with the failed auctions, we estimate that the fair value of
these auction rate securities no longer approximates their par
value. Due to the estimate that the market for these student loan
collateralized instruments may take in excess of twelve months to fully recover,
we have classified these investments as noncurrent in the accompanying March 31,
2008 unaudited Consolidated Balance Sheet. In addition, as a result
of the analysis described above and the estimate that it will take in excess of
twelve months for the market for student loan collateralized instruments to
recover, we have recorded an other-than-temporary loss of $263,000 for our
student loan collateralized instruments in the accompanying unaudited statements
of operations. The balance of our auction rate securities, with a par
value totaling $3.0 million, are issued by high credit quality closed-end
investment companies, for which the market has recently had a number of
successful auctions and or redemptions at par value. Management
believes that the fair value of our auction rate securities issued by closed-end
investment companies continue to approximate their par value as of March
31, 2008.
We will
continue to monitor and evaluate our investments in auction rate securities for
any further reduction in liquidity and potential impairment in future
periods. If it is determined that any future valuation adjustments
are other-than-temporary, we would record additional charges to
earnings as appropriate. Any future fluctuation in fair value related
to these instruments that are deemed to be temporary, would be recorded to
accumulated other comprehensive income.
Off-Balance
Sheet Arrangements
We have
not entered into off-balance sheet financing arrangements, other than operating
leases. We have no significant commitments for capital expenditures
in 2008. We have no committed lines of credit or other committed
funding or long-term debt. The following table lists our material
known future cash commitments as of March 31, 2008:
|
|
Payments
Due by Period (in thousands)
|
|
Contractual
Obligations
|
|
Total
|
|
|
Remaining
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
and
Thereafter
|
|
Operating
leases
|
|
$ |
3,563 |
|
|
$ |
581 |
|
|
$ |
903 |
|
|
$ |
939 |
|
|
$ |
977 |
|
|
$ |
163 |
|
|
$ |
- |
|
Total
contractual cash obligations
|
|
$ |
3,563 |
|
|
$ |
581 |
|
|
$ |
903 |
|
|
$ |
939 |
|
|
$ |
977 |
|
|
$ |
163 |
|
|
$ |
- |
|
FIN 48
Liability. As of March 31, 2008, the liability for uncertain
tax positions, associated primarily with state income taxes, was $115,000, of
which none is expected to be paid within one year. The liability for uncertain
tax positions is recorded in other long-term liabilities in the consolidated
balance sheet.
Recent
Accounting Pronouncements
Refer to
Note 2 and Note 8 to the Acacia Research Corporation consolidated financial
statements included in Part I, Item 1 of this report.
Item
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
The
primary objective of our investment activities is to preserve principal while
concurrently maximizing the income we receive from our investments without
significantly increasing risk. Some of the securities that we may invest in may
be subject to market risk. This means that a change in prevailing interest rates
may cause the principal amount of the investment to fluctuate. For example, if
we hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the current
value of the principal amount of our investment will decline. To minimize this
risk in the future, we intend to maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including commercial paper,
money market funds, high-grade corporate bonds, government and non-government
debt securities and certificates of deposit. In general, money market funds are
not subject to market risk because the interest paid on such funds fluctuates
with the prevailing interest rate. As of March 31, 2008, our investments were
comprised of money market funds and auction rate securities. A hypothetical 100
basis point increase in interest rates would not have a material impact on the
fair value of our available-for-sale securities as of March 31,
2008. Refer to Part II. Item 1A. “Risk Factors,” Part I. Item 2.
“Liquidity and Capital Resources,” and Note 8 to the Acacia Research Corporation
consolidated financial statements included in this report for additional
information.
Item
4.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
(a) Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934,
as amended. Based on this evaluation, our principal executive officer and our
principal financial officer concluded that, as of the end of the period covered
by this quarterly report, our disclosure
controls and procedures were effective to ensure that the information required
to be disclosed by us in the reports that we file or submit under the Securities
Exchange Act of 1934 is accumulated and communicated to management, including
our chief executive officer and chief financial officer, to allow timely
decisions regarding required disclosure, and that such information is recorded,
processed, summarized and reported within the time periods prescribed by the
SEC.
Changes
in Internal Controls
(b) There
were no changes in our internal control over financial reporting that occurred
during our last fiscal quarter (the quarter ended March 31, 2008) that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART
II--OTHER INFORMATION
Item
1.
|
LEGAL
PROCEEDINGS
|
Refer to
Note 6 to the Acacia Research Corporation consolidated financial statements,
contained in Part I, Item 1 of this report, and hereby incorporated by
reference.
An
investment in our stock involves a number of risks. Before making a decision to
purchase our securities, you should carefully consider all of the risks
described in this quarterly report and in our annual report on Form 10-K for the
year ended December 31, 2007, filed with the Securities and Exchange Commission
on March 14, 2008. If any of the risks included in this quarterly report or our
annual report actually occur, our business, financial condition and results of
operations could be materially adversely affected. If this were to occur, the
trading price of our securities could decline significantly and you may lose all
or part of your investment. You should carefully review the “Risk Factors” set
forth on pages 6 through 13 of our annual report on Form 10-K for the year ended
December 31, 2007, filed with the Securities and Exchange Commission on March
14, 2008 and hereby incorporated by reference. You should also carefully
consider the following updated risk factor previously included in the documents
incorporated by reference above.
OUR
INVESTMENTS IN AUCTION RATE SECURITIES ARE SUBJECT TO RISKS, INCLUDING THE
CONTINUED FAILURE OF FUTURE AUCTIONS, WHICH MAY CAUSE US TO INCUR LOSSES OR HAVE
REDUCED LIQUIDITY.
At March
31, 2008, our investments in marketable securities consist of auction rate
securities. Our auction rate securities are investment grade quality and were in
compliance with our investment policy when purchased. Historically,
our auction rate securities were recorded at cost, which approximated their fair
market value due to their variable interest rates, which typically reset every 7
to 35 days, despite the long-term nature of their stated contractual maturities.
The Dutch auction process that resets the applicable interest rate at
predetermined calendar intervals is intended to provide liquidity to the holder
of auction rate securities by matching buyers and sellers within a market
context enabling the holder to gain immediate liquidity by selling such
interests at par or rolling over their investment. If there is an imbalance
between buyers and sellers the risk of a failed auction exists. Due
to recent liquidity issues in the global credit and capital markets, these
securities experienced several failed auctions since February
2008. In such case of a failure, the auction rate securities continue
to pay interest, at the maximum rate, in accordance with their terms, however,
we may not be able to access the par value of the invested funds until a future
auction of these investments is successful, the security is called by the issuer
or a buyer is found outside of the auction process.
At March
31, 2008, the par value of auction rate securities collateralized by student
loan portfolios totaled $3.0 million. As a result of the liquidity
issues associated with the failed auctions, we estimate that the fair value of
these auction rate securities no longer approximates their par
value. Due to the estimate that the market for these student loan
collateralized instruments may take in excess of twelve months to fully recover,
we have classified these investments as noncurrent in the accompanying March 31,
2008 unaudited Consolidated Balance Sheet. In addition, as a result
of our analysis of the estimated fair value of our student loan collateralized
instruments, as described at Note 8 to the consolidated financial statements
included elsewhere herein, and the estimate that it will take in excess of
twelve months for the market for student loan collateralized instruments to
recover, we have recorded an other-than-temporary loss of $263,000 for our
student loan collateralized instruments in the accompanying unaudited statements
of operations. The balance of our auction rate securities, with a par
value totaling $3.0 million, are issued by high credit quality closed-end
investment companies, for which the market has recently had a number of
successful auctions and or redemptions at par value. Management
believes that the fair value of our auction rate securities issued by closed-end
investment companies continue to approximate their par value as of March
31, 2008.
Given the
deteriorating credit markets, and the increased incidence of failure within the
auction market since February 2008, there can be no assurance as to when we
would be able to liquidate a particular issue. Furthermore, if this
situation were to persist despite our ability to hold such investments until
maturity, we may be required to record an impairment charge in a future
period. The systemic failure of future auctions for auction rate
securities may result in a loss of liquidity, substantial impairment to our
investments, realization of substantial future losses, or a complete loss of the
investment in the long-term which may have a material adverse effect on our
business, results of operations, liquidity, and financial condition. Refer to
Note 8 to our Notes to Consolidated Financial Statements for additional
information about our investments in auction rate securities and the
implementation of SFAS No. 157, Fair Value Measurements.
Item
5. OTHER INFORMATION
Subsequent
to the Company’s first quarter 2008 earnings press release and 8-K filed with
the SEC on April 24, 2008, the Company completed its analysis of the estimated
fair value and balance sheet classification of its auction rate securities, and
recorded additional first quarter 2008 accrued expenses, with the following
impact on the preliminary net loss and loss per share previously announced (In
thousands):
|
|
|
|
Preliminary
net loss, initially reported
|
|
$ |
(3,949 |
) |
|
|
|
|
|
Loss
on investments(1)
|
|
|
(263 |
) |
Additional
accrued expenses
|
|
|
(277 |
) |
|
|
|
|
|
Adjusted
net loss, as reported on Form 10-Q
|
|
$ |
(4,489 |
) |
|
|
|
|
|
Preliminary
loss per share, as reported
|
|
$ |
(0.14 |
) |
Adjusted
loss per share, as reported on Form 10-Q
|
|
$ |
(0.15 |
) |
______________________
(1) Refer
to Note 8 to the consolidated financial statements included elsewhere
herein.
2.1
|
Agreement
and Plan of Reorganization by and among Acacia Research Corporation, Combi
Acquisition Corp. and CombiMatrix Corporation dated March 20, 2002
(1)
|
|
|
10.1
|
Employment
Agreement with Paul Ryan (2)
|
|
|
10.2
|
Employment
Agreement with Robert L. Harris (2)
|
|
|
10.3
|
Amended
Employment Agreement with Clayton J. Haynes (2)
|
|
|
10.4
|
Addendum
to Employment Agreement with Edward Treska (2)
|
|
|
31.1
|
Certifications
of the Chief Executive Officer provided pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
31.2
|
Certifications
of the Chief Financial Officer provided pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
32.1
|
Certifications
of the Chief Executive Officer provided pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
32.2
|
Certifications
of the Chief Financial Officer provided pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
___________________
(1)
|
Incorporated by reference to as Appendix A to the Proxy Statement/Prospectus
which formed part of Acacia Research Corporation’s
Registration Statement on Form S-4 (SEC File No. 333-87654) which became
effective on November 8,
2002.
|
(2)
|
Incorporated by reference to Acacia Research
Corporation’s Report on
Form 8-K filed with the SEC on March 31, 2008 (SEC File No.
000-026068).
|
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.
|
ACACIA
RESEARCH CORPORATION
|
|
|
|
|
|
|
By:
|
/s/ Paul
R. Ryan |
|
|
|
Paul
R. Ryan |
|
|
|
Chief
Executive Officer |
|
|
|
(Authorized
Signatory)
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Clayton
J. Haynes |
|
|
|
Clayton
J. Haynes
|
|
|
|
Chief
Financial Officer /Treasurer
|
|
|
|
(Principal
Financial Officer) |
|
EXHIBIT
INDEX
EXHIBIT
NUMBER
|
EXHIBIT
|
|
|
2.1
|
Agreement
and Plan of Reorganization by and among Acacia Research Corporation, Combi
Acquisition Corp. and CombiMatrix Corporation dated as of March 20, 2002
(1)
|
|
|
10.1
|
Employment
Agreement with Paul Ryan (2)
|
|
|
10.2
|
Employment
Agreement with Robert L. Harris (2)
|
|
|
10.3
|
Amended
Employment Agreement with Clayton J. Haynes (2)
|
|
|
10.4
|
Addendum
to Employment Agreement with Edward Treska (2)
|
|
|
31.1
|
Certifications
of the Chief Executive Officer provided pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
31.2
|
Certifications
of the Chief Financial Officer provided pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
32.1
|
Certifications
of the Chief Executive Officer provided pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
32.2
|
Certifications
of the Chief Financial Officer provided pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
____________
|
|
Incorporated
by reference as Appendix A to the Proxy Statement/Prospectus which formed
part of Acacia Research Corporation’s Registration Statement on Form S-4
(SEC File No. 333-87654) which became effective on November 8,
2002.
|
|
|
Incorporated by reference
to Acacia Research Corporation’s Report on Form 8-K filed with the SEC on
March 31, 2008 (SEC File No.
000-026068).
|
22