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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Acacia Research Technologies | NASDAQ:ACTG | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 5.155 | 4.83 | 5.20 | 0 | 12:22:54 |
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DELAWARE
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95-4405754
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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ACACIA RESEARCH CORPORATION
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Table Of Contents
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Part I.
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Financial Information
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Part II.
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Other Information
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Item 1A.
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Risk Factors
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Item 6.
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Signatures
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Exhibit Index
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June 30,
2017 |
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December 31,
2016 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
63,220
|
|
|
$
|
127,540
|
|
Restricted cash
|
—
|
|
|
11,512
|
|
||
Short-term investments
|
55,052
|
|
|
19,443
|
|
||
Accounts receivable
|
14,245
|
|
|
26,750
|
|
||
Prepaid expenses and other current assets
|
4,116
|
|
|
3,245
|
|
||
Total current assets
|
136,633
|
|
|
188,490
|
|
||
|
|
|
|
||||
Investment at fair value
(1)
|
49,817
|
|
|
—
|
|
||
Investment - equity method
(1)
|
2,400
|
|
|
—
|
|
||
Loan receivable and accrued interest
(1)
|
—
|
|
|
18,616
|
|
||
Investment in warrants and shares
(1)
|
—
|
|
|
1,960
|
|
||
Patents, net of accumulated amortization
|
75,233
|
|
|
86,319
|
|
||
Other assets
|
407
|
|
|
618
|
|
||
|
$
|
264,490
|
|
|
$
|
296,003
|
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
9,239
|
|
|
$
|
14,283
|
|
Royalties and contingent legal fees payable
|
9,427
|
|
|
13,908
|
|
||
Total current liabilities
|
18,666
|
|
|
28,191
|
|
||
Other liabilities
|
577
|
|
|
369
|
|
||
Total liabilities
|
19,243
|
|
|
28,560
|
|
||
Commitments and contingencies (Note 6)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
|
|
||
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; no shares issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 50,597,449 and 50,476,042 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively
|
51
|
|
|
50
|
|
||
Treasury stock, at cost, 1,729,408 shares as of June 30, 2017 and December 31, 2016
|
(34,640
|
)
|
|
(34,640
|
)
|
||
Additional paid-in capital
|
646,627
|
|
|
642,453
|
|
||
Accumulated comprehensive loss
|
(62
|
)
|
|
(76
|
)
|
||
Accumulated deficit
|
(368,280
|
)
|
|
(342,198
|
)
|
||
Total Acacia Research Corporation stockholders’ equity
|
243,696
|
|
|
265,589
|
|
||
Noncontrolling interests in operating subsidiaries
|
1,551
|
|
|
1,854
|
|
||
Total stockholders’ equity
|
245,247
|
|
|
267,443
|
|
||
|
$
|
264,490
|
|
|
$
|
296,003
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
16,457
|
|
|
$
|
41,351
|
|
|
$
|
25,311
|
|
|
$
|
66,072
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Inventor royalties
|
4,273
|
|
|
—
|
|
|
4,939
|
|
|
1,573
|
|
||||
Contingent legal fees
|
3,236
|
|
|
10,418
|
|
|
3,863
|
|
|
14,527
|
|
||||
Litigation and licensing expenses - patents
|
4,134
|
|
|
7,324
|
|
|
10,520
|
|
|
15,047
|
|
||||
Amortization of patents
|
5,571
|
|
|
10,759
|
|
|
11,086
|
|
|
21,519
|
|
||||
General and administrative expenses (including non-cash stock compensation expense of $1,487 and $3,615 for the three and six months ended June 30, 2017 and $1,475 and $3,210 for the three and six months ended June 30, 2016, respectively)
|
6,734
|
|
|
7,535
|
|
|
13,650
|
|
|
15,529
|
|
||||
Research, consulting and other expenses - business development
|
433
|
|
|
1,334
|
|
|
753
|
|
|
1,856
|
|
||||
Impairment of patent-related intangible assets
|
—
|
|
|
40,165
|
|
|
—
|
|
|
40,165
|
|
||||
Other
|
—
|
|
|
(1,242
|
)
|
|
—
|
|
|
500
|
|
||||
Total operating costs and expenses
|
24,381
|
|
|
76,293
|
|
|
44,811
|
|
|
110,716
|
|
||||
Operating loss
|
(7,924
|
)
|
|
(34,942
|
)
|
|
(19,500
|
)
|
|
(44,644
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Gain on conversion of loans and accrued interest
(1)
|
2,671
|
|
|
—
|
|
|
2,671
|
|
|
—
|
|
||||
Gain on exercise of Primary Warrant
(1)
|
4,616
|
|
|
—
|
|
|
4,616
|
|
|
—
|
|
||||
Change in fair value of investment, net
(1)
|
(12,698
|
)
|
|
—
|
|
|
(12,698
|
)
|
|
—
|
|
||||
Equity in earnings (losses) of investee
(1)
|
(14
|
)
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
||||
Interest income
|
580
|
|
|
10
|
|
|
1,298
|
|
|
19
|
|
||||
Other income (expense)
|
(17
|
)
|
|
(62
|
)
|
|
(39
|
)
|
|
(74
|
)
|
||||
Total other income (expense)
|
(4,862
|
)
|
|
(52
|
)
|
|
(4,166
|
)
|
|
(55
|
)
|
||||
Loss before provision for income taxes
|
(12,786
|
)
|
|
(34,994
|
)
|
|
(23,666
|
)
|
|
(44,699
|
)
|
||||
Provision for income taxes
|
(1,478
|
)
|
|
(5,927
|
)
|
|
(2,719
|
)
|
|
(6,119
|
)
|
||||
Loss including noncontrolling interests in operating subsidiaries
|
(14,264
|
)
|
|
(40,921
|
)
|
|
(26,385
|
)
|
|
(50,818
|
)
|
||||
Net loss attributable to noncontrolling interests in operating subsidiaries
|
12
|
|
|
348
|
|
|
303
|
|
|
280
|
|
||||
Loss attributable to Acacia Research Corporation
|
$
|
(14,252
|
)
|
|
$
|
(40,573
|
)
|
|
$
|
(26,082
|
)
|
|
$
|
(50,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted loss per common share
|
$
|
(0.28
|
)
|
|
$
|
(0.81
|
)
|
|
$
|
(0.52
|
)
|
|
$
|
(1.01
|
)
|
Weighted average number of shares outstanding - basic and diluted
|
50,499,248
|
|
|
50,015,869
|
|
|
50,416,611
|
|
|
49,970,709
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net loss including noncontrolling interests in operating subsidiaries
|
$
|
(14,264
|
)
|
|
$
|
(40,921
|
)
|
|
$
|
(26,385
|
)
|
|
$
|
(50,818
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized gain (loss) on short-term investments, net of tax of $0
|
(9
|
)
|
|
26
|
|
|
5
|
|
|
26
|
|
||||
Unrealized gain (loss) on foreign currency translation, net of tax of $0
|
(4
|
)
|
|
(48
|
)
|
|
9
|
|
|
(4
|
)
|
||||
Reclassification adjustment for losses included in net income (loss)
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
22
|
|
||||
Total other comprehensive loss
|
(14,277
|
)
|
|
(40,944
|
)
|
|
(26,371
|
)
|
|
(50,774
|
)
|
||||
Comprehensive loss attributable to noncontrolling interests
|
12
|
|
|
348
|
|
|
303
|
|
|
280
|
|
||||
Comprehensive loss attributable to Acacia Research Corporation
|
$
|
(14,265
|
)
|
|
$
|
(40,596
|
)
|
|
$
|
(26,068
|
)
|
|
$
|
(50,494
|
)
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss including noncontrolling interests in operating subsidiaries
|
$
|
(26,385
|
)
|
|
$
|
(50,818
|
)
|
Adjustments to reconcile net loss including noncontrolling interests in operating subsidiaries to net cash provided by operating activities:
|
|
|
|
|
|
||
Gain on conversion of loans and accrued interest
(1)
|
(2,671
|
)
|
|
—
|
|
||
Gain on exercise of Primary Warrant
(1)
|
(4,616
|
)
|
|
—
|
|
||
Change in fair value of investment, net
(1)
|
12,698
|
|
|
—
|
|
||
Depreciation and amortization
|
11,134
|
|
|
21,604
|
|
||
Non-cash stock compensation
|
3,615
|
|
|
3,210
|
|
||
Impairment of patent-related intangible assets
|
—
|
|
|
40,165
|
|
||
Other
|
(598
|
)
|
|
18
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
|||
Restricted cash
|
11,512
|
|
|
(3,311
|
)
|
||
Accounts receivable
|
12,505
|
|
|
29,175
|
|
||
Prepaid expenses and other assets
|
(1,474
|
)
|
|
654
|
|
||
Accounts payable and accrued expenses
|
(5,054
|
)
|
|
(5,880
|
)
|
||
Royalties and contingent legal fees payable
|
(4,481
|
)
|
|
2,976
|
|
||
Net cash provided by operating activities
|
6,185
|
|
|
37,793
|
|
||
|
|
|
|
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Investments in Investees
(1)
|
(31,514
|
)
|
|
—
|
|
||
Advances to Investee
(1)
|
(4,000
|
)
|
|
—
|
|
||
Purchases of available-for-sale investments
|
(331,412
|
)
|
|
(49,677
|
)
|
||
Maturities and sales of available-for-sale investments
|
295,807
|
|
|
17,462
|
|
||
Patent portfolio investment costs
|
—
|
|
|
(1,000
|
)
|
||
Purchases of property and equipment
|
—
|
|
|
(4
|
)
|
||
Net cash used in investing activities
|
(71,119
|
)
|
|
(33,219
|
)
|
||
|
|
|
|
|
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Repurchased restricted common stock
|
(35
|
)
|
|
(25
|
)
|
||
Proceeds from exercises of stock options
|
649
|
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
614
|
|
|
(25
|
)
|
||
|
|
|
|
|
|
||
Increase (decrease) in cash and cash equivalents
|
(64,320
|
)
|
|
4,549
|
|
||
Cash and cash equivalents, beginning
|
127,540
|
|
|
135,223
|
|
||
Cash and cash equivalents, ending
|
$
|
63,220
|
|
|
$
|
139,772
|
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
Noncash investing activities:
|
|
|
|
||||
Conversion of loan receivable (including accrued interest) from investee
|
$
|
23,061
|
|
|
$
|
—
|
|
|
●
|
Level 1 - Observable Inputs: Quoted prices in active markets for identical investments;
|
|
●
|
Level 2 - Pricing Models with Significant Observable Inputs: Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.; and
|
|
●
|
Level 3 - Unobservable Inputs: Significant unobservable inputs, including the entity’s own assumptions in determining the fair value of investments.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
Basic and Diluted (in thousands, except per share data)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator - Net loss attributable to common stockholders
|
|
$
|
(14,252
|
)
|
|
$
|
(40,573
|
)
|
|
$
|
(26,082
|
)
|
|
$
|
(50,538
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares used in computing net loss per share attributable to common stockholders
|
|
50,499,248
|
|
|
50,015,869
|
|
|
50,416,611
|
|
|
49,970,709
|
|
||||
Potentially dilutive options and restricted stock units
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted-average shares used in computing net loss per share attributable to common stockholders – diluted
|
|
50,499,248
|
|
|
50,015,869
|
|
|
50,416,611
|
|
|
49,970,709
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic and diluted net loss per common share
|
|
$
|
(0.28
|
)
|
|
$
|
(0.81
|
)
|
|
$
|
(0.52
|
)
|
|
$
|
(1.01
|
)
|
Anti-dilutive equity-based incentive awards excluded from the computation of diluted loss per share
|
|
4,598,443
|
|
|
880,974
|
|
|
4,598,443
|
|
|
2,214,674
|
|
||||
Maximum price of awards excluded from the computation of diluted loss per share
|
|
$
|
6.75
|
|
|
$
|
13.38
|
|
|
$
|
6.75
|
|
|
$
|
13.38
|
|
|
|
Three and Six Months Ended
June 30,
|
||
|
|
2017
|
||
Gain on conversion of loans and accrued interest
(1)
|
|
$
|
2,671
|
|
Gain on exercise of warrant
(2)
|
|
4,616
|
|
|
Change in fair value of investment, net
(3)
|
|
(12,698
|
)
|
|
Net unrealized loss on investment at fair value
|
|
$
|
(5,411
|
)
|
|
|
Three Months Ended
March 31,
|
||
|
|
2017
|
||
Revenues
|
|
$
|
3,108
|
|
Gross profit
|
|
2,912
|
|
|
Operating expenses
|
|
9,543
|
|
|
Other income (expense), net
|
|
786
|
|
|
Net Loss attributable to common stockholders
|
|
(6,920
|
)
|
|
|
|
|
||
Net loss per share attributable to common stockholders - basic and diluted
|
|
$
|
(3.09
|
)
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Current assets
|
|
$
|
24,514
|
|
|
$
|
21,367
|
|
Noncurrent assets
|
|
1,830
|
|
|
981
|
|
||
Total Assets
|
|
$
|
26,344
|
|
|
$
|
22,348
|
|
Current liabilities
|
|
$
|
51,339
|
|
|
$
|
44,501
|
|
Noncurrent liabilities
|
|
22
|
|
|
22
|
|
||
Total liabilities
|
|
51,361
|
|
|
44,523
|
|
||
Total liabilities, preferred stock and stockholders’ equity
|
|
$
|
26,344
|
|
|
$
|
22,348
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Revenues (in thousands)
|
$
|
16,457
|
|
|
$
|
41,351
|
|
|
$
|
25,311
|
|
|
$
|
66,072
|
|
New agreements executed
|
9
|
|
|
7
|
|
|
15
|
|
|
19
|
|
||||
Licensing and enforcement programs generating revenues
|
8
|
|
|
13
|
|
|
9
|
|
|
21
|
|
•
|
the dollar amount of agreements executed each period, which can be driven by the nature and characteristics of the technology or technologies being licensed and the magnitude of infringement associated with a specific licensee;
|
•
|
the specific terms and conditions of agreements executed each period including the nature and characteristics of rights granted, and the periods of infringement or term of use contemplated by the respective payments;
|
•
|
fluctuations in the total number of agreements executed each period;
|
•
|
the number of, timing, results and uncertainties associated with patent licensing negotiations, mediations, patent infringement actions, trial dates and other enforcement proceedings relating to our patent licensing and enforcement programs;
|
•
|
the relative maturity of licensing programs during the applicable periods;
|
•
|
other external factors, including the periodic status or results of ongoing negotiations, the status or results of ongoing litigations and appeals, actual or perceived shifts in the regulatory environment, impact of unrelated patent related judicial proceedings and other macroeconomic factors; and
|
•
|
historically, based on the merits and strength of our operating subsidiary’s patent infringement claims and other factors, many prospective licensees have elected to settle significant patent infringement cases and pay reasonable license fees for the use of our patented technology, as those patent infringement cases approached a court determined trial date.
|
•
|
Bone Wedge technology
|
|
•
|
Online Auction Guarantee technology
|
•
|
Cardiology and Vascular Device technology
|
|
•
|
Optical Networking technology
|
•
|
DisplayPort and MIPI DSI technology
|
|
•
|
Speech codes / wireless and wireline systems technology
|
•
|
Electronic Access Control technology
|
|
•
|
Super Resolutions Microscopy technology
|
•
|
Innovative Display technology
|
|
|
|
•
|
4G Wireless technology
|
|
•
|
Knee Replacement technology
|
•
|
Audio Communications Fraud Detection technology
|
|
•
|
Lighting Ballast technology
|
•
|
Bone Wedge technology
|
|
•
|
Online Auction Guarantee technology
|
•
|
Broadband Communications technology
|
|
•
|
Reflective and Radiant Barrier Insulation technology
|
•
|
Cardiology and Vascular Device technology
|
|
•
|
Shared Memory for Multimedia Processing technology
|
•
|
Diamond and Gemstone Grading technology
|
|
•
|
Speech codes / wireless and wireline systems technology
|
•
|
DisplayPort and MIPI DSI technology
|
|
•
|
Super Resolutions Microscopy technology
|
•
|
Electronic spreadsheet, data analysis and software development technology
|
|
•
|
Telematics technology
|
•
|
Gas Modulation Control Systems technology
|
|
•
|
Variable Data Printing technology
|
•
|
High Speed Circuit Interconnect and Display Control technology
|
|
•
|
Wireless Infrastructure and User Equipment technology
|
•
|
Interstitial and Pop-Up Internet Advertising technology
|
|
|
|
|
Three Months Ended
June 30, |
|
%
|
|
Six Months Ended
June 30, |
|
%
|
||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
$
|
16,457
|
|
|
$
|
41,351
|
|
|
(60
|
)%
|
|
$
|
25,311
|
|
|
$
|
66,072
|
|
|
(62
|
)%
|
Operating costs and expenses
|
24,381
|
|
|
76,293
|
|
|
(68
|
)%
|
|
44,811
|
|
|
110,716
|
|
|
(60
|
)%
|
||||
Operating loss
|
(7,924
|
)
|
|
(34,942
|
)
|
|
(77
|
)%
|
|
(19,500
|
)
|
|
(44,644
|
)
|
|
(56
|
)%
|
||||
Loss before provision for income taxes
|
(12,786
|
)
|
|
(34,994
|
)
|
|
(63
|
)%
|
|
(23,666
|
)
|
|
(44,699
|
)
|
|
(47
|
)%
|
||||
Provision for income taxes
|
(1,478
|
)
|
|
(5,927
|
)
|
|
(75
|
)%
|
|
(2,719
|
)
|
|
(6,119
|
)
|
|
(56
|
)%
|
||||
Net loss attributable to Acacia Research Corporation
|
(14,252
|
)
|
|
(40,573
|
)
|
|
(65
|
)%
|
|
(26,082
|
)
|
|
(50,538
|
)
|
|
(48
|
)%
|
•
|
Revenues decreased
$24.9 million
, or
60%
, to
$16.5 million
for the three months ended
June 30, 2017
, as compared to
$41.4 million
in the comparable prior year quarter,
due primarily to a decrease in average revenue per
agreement. Refer to “
Investments in Patent Portfolios”
below for additional information regarding the impact of portfolio acquisition trends on periodic revenues.
|
•
|
Loss before provision for income taxes was
$12.8 million
for the three months ended
June 30, 2017
, as compared to
$35.0 million
for the three months ended
June 30, 2016
. The change was due primarily to a
$24.9 million
decrease in revenue, partially offset by a net decrease in operating expenses, including the following:
|
•
|
Inventor royalties and contingent legal fees, on a combined basis, decreased
$2.9 million
, or
28%
, compared to the
60%
decrease in related revenues for the same periods, primarily due to no inventor royalty obligations on revenues recognized in the second quarter of 2016, as compared to the portfolios generating revenues in the second quarter of 2017.
|
•
|
Litigation and licensing expenses-patents decreased
$3.2 million
, or
44%
, to
$4.1 million
,
due primarily to a net decrease in litigation support and third-party technical consulting expenses associated with ongoing licensing and enforcement programs and a decrease in portfolio related enforcement activities.
|
•
|
Amortization expense decreased
$5.2 million
, or
48%
, to
$5.6 million
, due to a decrease in scheduled amortization resulting from various patent portfolio impairment charges previously recorded in the second and fourth quarters of 2016.
|
•
|
General and administrative expenses decreased
$801,000
, or
11%
, to
$6.7 million
,
due primarily to a net decrease in personnel costs in connection with headcount reductions in 2016 and 2017 and a decrease in variable performance based compensation costs, partially offset by an increase in employee severance costs.
|
•
|
Impairment of patent-related intangible asset charges decreased
$40.2 million
. Impairment charges for the three months ended
June 30, 2016
reflect the impact of reductions in expected estimated future net cash flows for certain patent portfolios and certain patent portfolios that management determined it would no longer allocate resources to in future periods.
|
•
|
Other operating income was
$1.2 million
for the three months ended June 30, 2016. Other operating income
|
•
|
Results for the three months ended June 30, 2017 also included a Veritone related net unrealized investment loss totaling
$5.4 million
, comprised of an unrealized gain on conversion of our Veritone loans to equity of
$2.7 million
, an unrealized gain on the exercise of our Primary Warrant of
$4.6 million
and an unrealized loss related to the application of the fair value method of accounting to our equity investment in Veritone as of June 30, 2017 of
$12.7 million
.
|
•
|
Revenues decreased
$40.8 million
, or
62%
, to
$25.3 million
for the
six months
ended
June 30, 2017
, as compared to
$66.1 million
in the comparable prior year quarter,
due primarily to a decrease in the number of agreements executed and a decrease in average revenue per
agreement. Refer to “
Investments in Patent Portfolios”
below for additional information regarding the impact of portfolio acquisition trends on periodic revenues.
|
•
|
Loss before provision for income taxes was
$23.7 million
for the
six months
ended
June 30, 2017
, as compared to
$44.7 million
for the
six months
ended
June 30, 2016
. The change was due primarily to the
$40.8 million
decrease in revenue, partially offset by a net decrease in operating expenses, including the following:
|
•
|
Inventor royalties and contingent legal fees, on a combined basis, decreased
$7.3 million
, or
45%
, compared to the
62%
decrease in related revenues for the same periods, primarily due to higher average inventor royalty rates for the portfolios generating revenues during the six months ended June 30, 2017, partially offset by lower average contingent legal fee rates for the portfolios generating revenues during the
six months
ended
June 30, 2017
.
|
•
|
Litigation and licensing expenses-patents decreased
$4.5 million
, or
30%
, to
$10.5 million
,
due primarily to a net decrease in litigation support and third-party technical consulting expenses associated with ongoing licensing and enforcement programs and a decrease in portfolio related enforcement activities.
|
•
|
Amortization expense decreased
$10.4 million
, or
48%
, to
$11.1 million
, due to a decrease in scheduled amortization resulting from various patent portfolio impairment charges previously recorded in the second and fourth quarters of 2016.
|
•
|
General and administrative expenses decreased
$1.9 million
, or
12%
, to
$13.7 million
,
due primarily to a net decrease in personnel costs in connection with head count reductions in 2016 and 2017 and a decrease in variable performance based compensation costs, partially offset by an increase in employee severance costs.
|
•
|
Impairment of patent-related intangible asset charges decreased
$40.2 million
. Impairment charges for the
six months
ended
June 30, 2016
reflect the impact of reductions in expected estimated future net cash flows for certain patent portfolios and certain patent portfolios that management determined it would no longer allocate resources to in future periods.
|
•
|
Other operating expenses for the
six months
ended
June 30, 2016
included settlement and contingency accruals totaling
$500,000
.
|
•
|
Results for the six months ended June 30, 2017 also included a Veritone related net unrealized investment loss totaling
$5.4 million
, comprised of an unrealized gain on conversion of our Veritone loans to equity of
$2.7 million
, an unrealized gain on the exercise of our Primary Warrant of
$4.6 million
and an unrealized loss related to the application of the fair value method of accounting to our equity investment in Veritone as of June 30, 2017 of
$12.7 million
.
|
•
|
Increases in patent-related legal expenses associated with patent infringement litigation, including, but not limited to, increases in costs billed by outside legal counsel for discovery, depositions, economic analyses, damages assessments, expert witnesses and other consultants, re-exam and i
nter partes review costs,
case-related audio/video presentations and other litigation support and administrative costs could increase our operating costs and decrease our profit generating opportunities;
|
•
|
Our patented technologies and enforcement actions are complex and, as a result, we may be required to appeal adverse decisions by trial courts in order to successfully enforce our patents. Moreover, such appeals may not be successful;
|
•
|
New legislation, regulations or rules related to enforcement actions, including any fee or cost shifting provisions, could significantly increase our operating costs and decrease our profit generating opportunities.
Increased focus on the growing number of patent-related lawsuits may result in legislative changes which increase our costs and related risks of asserting patent enforcement actions. For instance, the United States House of Representatives passed a bill that would require non-practicing entities that bring patent infringement lawsuits to pay legal costs of the defendants, if the lawsuits are unsuccessful and certain standards are not met;
|
•
|
Courts may rule that our subsidiaries have violated certain statutory, regulatory, federal, local or governing rules or standards by pursuing such enforcement actions, which may expose us and our operating subsidiaries to material liabilities, which could harm our operating results and our financial position; and
|
•
|
The complexity of negotiations and potential magnitude of exposure for potential infringers associated with higher quality patent portfolios may lead to increased intervals of time between the filing of litigation and potential revenue events (i.e. markman dates, trial dates), which may lead to increased legal expenses, consistent with the higher revenue potential of such portfolios.
|
|
|
Three Months Ended
June 30, |
|
Change
|
|
Six Months Ended
June 30, |
|
Change
|
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Revenues (in thousands, except percentage change values)
|
|
$
|
16,457
|
|
|
$
|
41,351
|
|
|
$
|
(24,894
|
)
|
|
(60
|
)%
|
|
$
|
25,311
|
|
|
$
|
66,072
|
|
|
$
|
(40,761
|
)
|
|
(62
|
)%
|
New agreements executed
|
|
9
|
|
|
7
|
|
|
|
|
|
|
15
|
|
|
19
|
|
|
|
|
|
||||||||||
Average revenue per agreement (in thousands)
|
|
$
|
1,829
|
|
|
$
|
5,907
|
|
|
|
|
|
|
$
|
1,687
|
|
|
$
|
3,477
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||
|
|
2017 vs. 2016
|
|
2017 vs. 2016
|
||||
|
|
|
||||||
Increase (decrease) in number of agreements executed
|
|
$
|
11,815
|
|
|
$
|
(13,910
|
)
|
Decrease in average revenue per agreement executed
|
|
(36,709
|
)
|
|
(26,851
|
)
|
||
Total change in revenues
|
|
$
|
(24,894
|
)
|
|
$
|
(40,761
|
)
|
|
|
Three Months Ended
June 30, |
|
Change
|
|
Six Months Ended
June 30, |
|
Change
|
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
|
(in thousands, except percentage change values)
|
||||||||||||||||||||||||||||
Loss before provision for income taxes
|
|
$
|
(12,786
|
)
|
|
$
|
(34,994
|
)
|
|
$
|
22,208
|
|
|
(63
|
)%
|
|
$
|
(23,666
|
)
|
|
$
|
(44,699
|
)
|
|
$
|
21,033
|
|
|
(47
|
)%
|
|
Three Months Ended
June 30, |
|
|
|
Six Months Ended
June 30, |
|
|
||||||
|
2017 vs. 2016
|
|
%
|
|
2017 vs. 2016
|
|
%
|
||||||
|
(in thousands, except percentage values)
|
||||||||||||
Decrease in revenues
|
$
|
(24,894
|
)
|
|
(112
|
)%
|
|
$
|
(40,761
|
)
|
|
(194
|
)%
|
Decrease in inventor royalties and contingent legal fees
|
2,909
|
|
|
13
|
%
|
|
7,298
|
|
|
35
|
%
|
||
Decrease in general and administrative expenses
|
801
|
|
|
4
|
%
|
|
1,879
|
|
|
9
|
%
|
||
Decrease in litigation and licensing expenses
|
3,190
|
|
|
14
|
%
|
|
4,527
|
|
|
22
|
%
|
||
Decrease in patent amortization expenses
|
5,188
|
|
|
23
|
%
|
|
10,433
|
|
|
50
|
%
|
||
Decrease in patent-related impairment charges
|
40,165
|
|
|
181
|
%
|
|
40,165
|
|
|
191
|
%
|
||
Increase in loss on fair value investment
|
(5,411
|
)
|
|
(24
|
)%
|
|
(5,411
|
)
|
|
(26
|
)%
|
||
Other
|
260
|
|
|
1
|
%
|
|
2,903
|
|
|
13
|
%
|
||
Total change in loss before provision for income taxes
|
$
|
22,208
|
|
|
100
|
%
|
|
$
|
21,033
|
|
|
100
|
%
|
|
|
Three Months Ended
June 30, |
|
Change
|
|
Six Months Ended
June 30, |
|
Change
|
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
|
(in thousands, except percentage change values)
|
||||||||||||||||||||||||||||
Inventor royalties
|
|
$
|
4,273
|
|
|
$
|
—
|
|
|
$
|
4,273
|
|
|
+100%
|
|
|
$
|
4,939
|
|
|
$
|
1,573
|
|
|
$
|
3,366
|
|
|
214
|
%
|
Contingent legal fees
|
|
$
|
3,236
|
|
|
$
|
10,418
|
|
|
$
|
(7,182
|
)
|
|
(69
|
)%
|
|
$
|
3,863
|
|
|
$
|
14,527
|
|
|
$
|
(10,664
|
)
|
|
(73
|
)%
|
|
|
Three Months Ended
June 30, |
|
%
|
|
Six Months Ended
June 30, |
|
%
|
||||||
|
|
2017 vs. 2016
|
|
|
2017 vs. 2016
|
|
||||||||
Inventor Royalties:
|
|
|
||||||||||||
Decrease in total revenues
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
(9,245
|
)
|
|
(275
|
)%
|
Decrease in inventor royalty rates
|
|
(4,273
|
)
|
|
100
|
%
|
|
(802
|
)
|
|
(24
|
)%
|
||
Decrease in revenues without inventor royalty obligations primarily due to upfront advance related preferred returns
|
|
—
|
|
|
—
|
%
|
|
13,413
|
|
|
399
|
%
|
||
Total change in inventor royalties expense
|
|
$
|
(4,273
|
)
|
|
100
|
%
|
|
$
|
3,366
|
|
|
100
|
%
|
Contingent Legal Fees:
|
|
|
|
|
|
|
|
|
||||||
Decrease in total revenues
|
|
$
|
(6,420
|
)
|
|
89
|
%
|
|
$
|
(9,309
|
)
|
|
87
|
%
|
Decrease in contingent legal fee rates
|
|
(908
|
)
|
|
13
|
%
|
|
(1,917
|
)
|
|
18
|
%
|
||
Decrease in revenues without contingent legal fee obligations
|
|
146
|
|
|
(2
|
)%
|
|
562
|
|
|
(5
|
)%
|
||
Total change in contingent legal fees expense
|
|
$
|
(7,182
|
)
|
|
100
|
%
|
|
$
|
(10,664
|
)
|
|
100
|
%
|
|
|
Three Months Ended
June 30, |
|
Change
|
|
Six Months Ended
June 30, |
|
Change
|
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
|
(in thousands, except percentage change values)
|
||||||||||||||||||||||||||||
Litigation and licensing expenses - patents
|
|
$
|
4,134
|
|
|
$
|
7,324
|
|
|
$
|
(3,190
|
)
|
|
(44
|
)%
|
|
$
|
10,520
|
|
|
$
|
15,047
|
|
|
$
|
(4,527
|
)
|
|
(30
|
)%
|
Amortization of patents
|
|
$
|
5,571
|
|
|
$
|
10,759
|
|
|
$
|
(5,188
|
)
|
|
(48
|
)%
|
|
$
|
11,086
|
|
|
$
|
21,519
|
|
|
$
|
(10,433
|
)
|
|
(48
|
)%
|
Impairment of patent-related intangible assets
|
|
$
|
—
|
|
|
$
|
40,165
|
|
|
$
|
(40,165
|
)
|
|
(100
|
)%
|
|
$
|
—
|
|
|
$
|
40,165
|
|
|
$
|
(40,165
|
)
|
|
(100
|
)%
|
|
Three Months Ended
June 30, |
|
Change
|
|
Six Months Ended
June 30, |
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
General and administrative expenses
|
$
|
5,247
|
|
|
$
|
6,060
|
|
|
$
|
(813
|
)
|
|
(13
|
)%
|
|
$
|
10,035
|
|
|
$
|
12,319
|
|
|
$
|
(2,284
|
)
|
|
(19
|
)%
|
Non-cash stock compensation expense
|
1,487
|
|
|
1,475
|
|
|
12
|
|
|
1
|
%
|
|
3,615
|
|
|
3,210
|
|
|
405
|
|
|
13
|
%
|
||||||
Total general and administrative expenses
|
$
|
6,734
|
|
|
$
|
7,535
|
|
|
$
|
(801
|
)
|
|
(11
|
)%
|
|
$
|
13,650
|
|
|
$
|
15,529
|
|
|
$
|
(1,879
|
)
|
|
(12
|
)%
|
|
Three Months Ended
June 30, |
|
|
|
Six Months Ended
June 30, |
|
|
||||||
|
2017 vs. 2016
|
|
%
|
|
2017 vs. 2016
|
|
%
|
||||||
|
|
|
|
||||||||||
Personnel cost reductions due to headcount reductions
|
$
|
(824
|
)
|
|
103
|
%
|
|
$
|
(1,535
|
)
|
|
82
|
%
|
Variable performance-based compensation costs
|
(841
|
)
|
|
105
|
%
|
|
(1,205
|
)
|
|
64
|
%
|
||
Corporate, general and administrative costs
|
121
|
|
|
(15
|
)%
|
|
(319
|
)
|
|
17
|
%
|
||
Non-cash stock compensation expense
|
12
|
|
|
(1
|
)%
|
|
405
|
|
|
(22
|
)%
|
||
Non-recurring employee severance costs
|
731
|
|
|
(92
|
)%
|
|
775
|
|
|
(41
|
)%
|
||
Total change in general and administrative expenses
|
$
|
(801
|
)
|
|
100
|
%
|
|
$
|
(1,879
|
)
|
|
100
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Provision for income taxes (in thousands)
|
$
|
(1,478
|
)
|
|
$
|
(5,927
|
)
|
|
$
|
(2,719
|
)
|
|
$
|
(6,119
|
)
|
Effective tax rate
|
12
|
%
|
|
17
|
%
|
|
11
|
%
|
|
14
|
%
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
|
|
|
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
6,185
|
|
|
$
|
37,793
|
|
Investing activities
|
(71,119
|
)
|
|
(33,219
|
)
|
||
Financing activities
|
614
|
|
|
(25
|
)
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
|
|
|
|
||||
Investments in Investees
|
$
|
(31,514
|
)
|
|
$
|
—
|
|
Advances to Investee
|
(4,000
|
)
|
|
—
|
|
||
Available-for-sale investments, net
|
(35,605
|
)
|
|
(32,215
|
)
|
||
Investments in patents/ patent rights
|
—
|
|
|
(1,000
|
)
|
||
Purchases of property and equipment
|
—
|
|
|
(4
|
)
|
||
Net cash used in investing activities
|
$
|
(71,119
|
)
|
|
$
|
(33,219
|
)
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
|
|
|
|
|
|
||
Repurchased restricted common stock
|
$
|
(35
|
)
|
|
$
|
(25
|
)
|
Proceeds from exercises of stock options
|
649
|
|
|
—
|
|
||
Net cash used in financing activities
|
$
|
614
|
|
|
$
|
(25
|
)
|
|
Payments Due by Period (In thousands)
|
||||||||||||||
Contractual Obligations
|
Total
|
|
Less than 1 year
|
|
1-3 years
|
|
3-5 years
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Operating leases, net of guaranteed sublease income
|
$
|
3,237
|
|
|
$
|
530
|
|
|
$
|
2,692
|
|
|
$
|
15
|
|
EXHIBIT
NUMBER
|
EXHIBIT
|
4.1
|
First Amended and Restated Tax Benefits Preservation Plan, dated as of April 28, 2017, by and between Acacia Research Corporation and Computershare Inc., as Rights Agent, which includes the form of Certificate of Designation of the Company’s Series A Cumulative Participating Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Terms as Exhibit C (incorporated by reference to the Registrant’s Current Report on Form 8-K, File No. 001-37721, filed with the SEC on May 4, 2017
|
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
32.1**
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
|
32.2**
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
|
101
|
Interactive Data Files Pursuant to Rule 405 of Regulation S-T
|
*
|
Filed herewith.
|
**
|
The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the Registrant’s filings under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in any such filing.
|
|
ACACIA RESEARCH CORPORATION
|
|
|
|
/
s/ Robert Stewart
|
|
By:
Robert Stewart
|
|
President
|
|
(Principal Executive Officer and Duly Authorized Signatory)
|
|
|
|
/s/ Clayton J. Haynes
|
|
By: Clayton J. Haynes
|
|
Chief Financial Officer and Treasurer
|
|
(Principal Financial and Accounting Officer)
|
EXHIBIT
NUMBER
|
EXHIBIT
|
4.1
|
First Amended and Restated Tax Benefits Preservation Plan, dated as of April 28, 2017, by and between Acacia Research Corporation and Computershare Inc., as Rights Agent, which includes the form of Certificate of Designation of the Company’s Series A Cumulative Participating Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Terms as Exhibit C (incorporated by reference to the Registrant’s Current Report on Form 8-K, File No. 001-37721, filed with the SEC on May 4, 2017
|
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
32.1**
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
|
32.2**
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
|
101
|
Interactive Data Files Pursuant to Rule 405 of Regulation S-T.
|
*
|
Filed herewith.
|
**
|
The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the Registrant’s filings under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in any such filing.
|
1 Year Acacia Research Technolo... Chart |
1 Month Acacia Research Technolo... Chart |
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