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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 | |
---|---|---|---|---|---|---|---|---|---|---|
0.11 | 2.24% | 5.02 | 4.92 | 5.33 | 5.06 | 4.95 | 4.98 | 178,660 | 23:05:52 |
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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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TItle of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock
|
ACTG
|
The Nasdaq Stock Market, LLC
|
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 1.
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||
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Item 6.
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Signatures
|
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Exhibit Index
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
73,285
|
|
|
$
|
128,809
|
|
Trading securities - debt
|
93,756
|
|
|
33,642
|
|
||
Trading securities - equity
|
831
|
|
|
3,012
|
|
||
Accounts receivable
|
23,964
|
|
|
32,884
|
|
||
Prepaid expenses and other current assets
|
3,686
|
|
|
3,125
|
|
||
Total current assets
|
195,522
|
|
|
201,472
|
|
||
|
|
|
|
||||
Investment at fair value (Note 5)
|
5,483
|
|
|
7,459
|
|
||
Other investments
(Note 5)
|
8,195
|
|
|
8,195
|
|
||
Patents, net of accumulated amortization
|
9,681
|
|
|
6,587
|
|
||
Other non-current assets
|
216
|
|
|
236
|
|
||
|
$
|
219,097
|
|
|
$
|
223,949
|
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
11,448
|
|
|
$
|
8,347
|
|
Accrued patent investment costs
|
3,750
|
|
|
—
|
|
||
Royalties and contingent legal fees payable
|
16,149
|
|
|
22,688
|
|
||
Total current liabilities
|
31,347
|
|
|
31,035
|
|
||
Other liabilities
|
916
|
|
|
1,674
|
|
||
Total liabilities
|
32,263
|
|
|
32,709
|
|
||
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; 49,656,067 and 49,639,319 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
|
50
|
|
|
50
|
|
||
Treasury stock, at cost, 2,919,828 shares as of March 31, 2019 and December 31, 2018
|
(39,272
|
)
|
|
(39,272
|
)
|
||
Additional paid-in capital
|
651,148
|
|
|
651,156
|
|
||
Accumulated deficit
|
(426,925
|
)
|
|
(422,541
|
)
|
||
Total Acacia Research Corporation stockholders’ equity
|
185,001
|
|
|
189,393
|
|
||
Noncontrolling interests
|
1,833
|
|
|
1,847
|
|
||
Total stockholders’ equity
|
186,834
|
|
|
191,240
|
|
||
|
$
|
219,097
|
|
|
$
|
223,949
|
|
|
|||||||
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Revenues
|
$
|
3,387
|
|
|
$
|
62,093
|
|
Portfolio operations:
|
|
|
|
|
|
||
Inventor royalties
|
1,353
|
|
|
21,744
|
|
||
Contingent legal fees
|
177
|
|
|
15,759
|
|
||
Patent acquisition expenses
|
—
|
|
|
4,000
|
|
||
Litigation and licensing expenses - patents
|
3,801
|
|
|
2,989
|
|
||
Amortization of patents
|
656
|
|
|
5,330
|
|
||
Other portfolio expenses
|
650
|
|
|
—
|
|
||
Total portfolio operations
|
6,637
|
|
|
49,822
|
|
||
Net portfolio income (loss)
|
(3,250
|
)
|
|
12,271
|
|
||
General and administrative expenses
(2)
|
3,695
|
|
|
3,301
|
|
||
Operating income (loss)
|
(6,945
|
)
|
|
8,970
|
|
||
Other income (expense):
|
|
|
|
||||
Change in fair value of investment, net
(1)
|
6,908
|
|
|
(41,097
|
)
|
||
Loss on sale of investment
(1)
|
(5,590
|
)
|
|
—
|
|
||
Interest income and other
|
1,543
|
|
|
207
|
|
||
Total other income (expense)
|
2,861
|
|
|
(40,890
|
)
|
||
Loss before provision for income taxes
|
(4,084
|
)
|
|
(31,920
|
)
|
||
Provision for income taxes
|
(314
|
)
|
|
(191
|
)
|
||
Net loss including noncontrolling interests in subsidiaries
|
(4,398
|
)
|
|
(32,111
|
)
|
||
Net loss attributable to noncontrolling interests in subsidiaries
|
14
|
|
|
73
|
|
||
Net loss attributable to Acacia Research Corporation
|
$
|
(4,384
|
)
|
|
$
|
(32,038
|
)
|
|
|
|
|
|
|
||
Net loss attributable to common stockholders - basic and diluted
|
$
|
(4,384
|
)
|
|
$
|
(32,038
|
)
|
Basic and diluted net loss per common share
|
$
|
(0.09
|
)
|
|
$
|
(0.63
|
)
|
Weighted average number of shares outstanding - basic and diluted
|
49,655,881
|
|
|
50,632,958
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
General and administrative expenses
|
$
|
3,703
|
|
|
$
|
4,325
|
|
Non-cash stock compensation expense - G&A
|
(8
|
)
|
|
704
|
|
||
Non-cash stock compensation expense - Profits Interests (Note 9)
|
—
|
|
|
(1,728
|
)
|
||
Total general and administrative expenses
|
$
|
3,695
|
|
|
$
|
3,301
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Net loss including noncontrolling interests
|
$
|
(4,398
|
)
|
|
$
|
(32,111
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
||
Unrealized gain on short-term investments, net of tax of $0
|
—
|
|
|
(20
|
)
|
||
Unrealized gain (loss) on foreign currency translation, net of tax of $0
|
—
|
|
|
(17
|
)
|
||
Total other comprehensive loss
|
(4,398
|
)
|
|
(32,148
|
)
|
||
Comprehensive loss attributable to noncontrolling interests
|
14
|
|
|
73
|
|
||
Comprehensive loss attributable to Acacia Research Corporation
|
$
|
(4,384
|
)
|
|
$
|
(32,075
|
)
|
|
|||||||||||||||||||||||||||||||
|
|
Common Shares
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional Paid-in Capital
|
|
Accumulated Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Noncontrolling Interests in Operating Subsidiaries
|
|
Total
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2017
|
|
50,639,926
|
|
|
$
|
51
|
|
|
$
|
(34,640
|
)
|
|
$
|
648,996
|
|
|
$
|
(88
|
)
|
|
$
|
(320,018
|
)
|
|
$
|
1,358
|
|
|
$
|
295,659
|
|
Net loss attributable to Acacia Research Corporation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32,038
|
)
|
|
—
|
|
|
(32,038
|
)
|
|||||||
Cumulative effect of new accounting principle
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,506
|
|
|
308
|
|
|
2,814
|
|
|||||||
Stock options exercised
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|||||||
Compensation expense for share-based awards, net of forfeitures
|
|
—
|
|
|
|
|
—
|
|
|
704
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
704
|
|
||||||||
Repurchase of restricted common stock
|
|
(2,044
|
)
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|||||||
Net income attributable to noncontrolling interests in subsidiaries
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73
|
)
|
|
(73
|
)
|
|||||||
Unrealized gain on foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|||||||
Unrealized loss on short-term investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|||||||
Balance at March 31, 2018
|
|
50,647,882
|
|
|
$
|
51
|
|
|
$
|
(34,640
|
)
|
|
$
|
649,724
|
|
|
$
|
(125
|
)
|
|
$
|
(349,550
|
)
|
|
$
|
1,593
|
|
|
$
|
267,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2018
|
|
49,639,319
|
|
|
$
|
50
|
|
|
$
|
(39,272
|
)
|
|
$
|
651,156
|
|
|
$
|
—
|
|
|
$
|
(422,541
|
)
|
|
$
|
1,847
|
|
|
$
|
191,240
|
|
Net loss attributable to Acacia Research Corporation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,384
|
)
|
|
—
|
|
|
(4,384
|
)
|
|||||||
Compensation expense for share-based awards, net of forfeitures
|
|
16,748
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|||||||
Net income attributable to noncontrolling interests in subsidiaries
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(14
|
)
|
|||||||
Balance at March 31, 2019
|
|
49,656,067
|
|
|
$
|
50
|
|
|
$
|
(39,272
|
)
|
|
$
|
651,148
|
|
|
$
|
—
|
|
|
$
|
(426,925
|
)
|
|
$
|
1,833
|
|
|
$
|
186,834
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss including noncontrolling interests in subsidiaries
|
$
|
(4,398
|
)
|
|
$
|
(32,111
|
)
|
Adjustments to reconcile net loss including noncontrolling interests in subsidiaries to net cash provided by operating activities:
|
|
|
|
|
|
||
Change in fair value of investment, net
(1)
|
(6,908
|
)
|
|
41,097
|
|
||
Loss on sale of investment
(1)
|
5,590
|
|
|
—
|
|
||
Depreciation and amortization
|
660
|
|
|
5,344
|
|
||
Non-cash stock compensation
|
(8
|
)
|
|
(1,024
|
)
|
||
Income from trading securities
|
(1,077
|
)
|
|
—
|
|
||
Purchases of trading securities
|
(60,193
|
)
|
|
—
|
|
||
Maturities and sales of trading securities
|
3,339
|
|
|
—
|
|
||
Other
|
—
|
|
|
(87
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
|
|||
Accounts receivable
|
8,920
|
|
|
(59
|
)
|
||
Prepaid expenses and other assets
|
(541
|
)
|
|
(863
|
)
|
||
Accounts payable and accrued expenses
|
2,343
|
|
|
1,065
|
|
||
Royalties and contingent legal fees payable
|
(6,539
|
)
|
|
36,608
|
|
||
Net cash provided by (used in) operating activities
|
(58,812
|
)
|
|
49,970
|
|
||
|
|
|
|
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Sale of investment
(1)
|
3,294
|
|
|
—
|
|
||
Investments in Investees
(1)
|
—
|
|
|
(7,000
|
)
|
||
Purchases of available-for-sale investments
|
—
|
|
|
(33,309
|
)
|
||
Maturities and sales of available-for-sale investments
|
—
|
|
|
4,000
|
|
||
Purchases of property and equipment
|
(6
|
)
|
|
—
|
|
||
Net cash provided by (used in) investing activities
|
3,288
|
|
|
(36,309
|
)
|
||
|
|
|
|
|
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Repurchased restricted common stock
|
—
|
|
|
(7
|
)
|
||
Proceeds from exercises of stock options
|
—
|
|
|
31
|
|
||
Net cash provided by financing activities
|
—
|
|
|
24
|
|
||
|
|
|
|
|
|
||
Increase (decrease) in cash and cash equivalents
|
(55,524
|
)
|
|
13,685
|
|
||
Cash and cash equivalents, beginning
|
128,809
|
|
|
136,604
|
|
||
Cash and cash equivalents, ending
|
$
|
73,285
|
|
|
$
|
150,289
|
|
|
|
|
|
||||
Supplemental schedule of noncash investing activities:
|
|
|
|
||||
Patent acquisition costs included in accrued patent acquisition costs
|
$
|
3,750
|
|
|
$
|
—
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Paid-up Revenue Agreements
|
$
|
—
|
|
|
$
|
60,063
|
|
Recurring Revenue Agreements
|
3,387
|
|
|
2,030
|
|
||
|
$
|
3,387
|
|
|
$
|
62,093
|
|
(i)
|
Level 1
-
Observable Inputs
: Quoted prices in active markets for identical investments;
|
(ii)
|
Level 2
-
Pricing Models with Significant Observable Inputs
: Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.; and
|
(iii)
|
Level 3
-
Unobservable Inputs
: Significant unobservable inputs, including the entity’s own assumptions in determining the fair value of investments.
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||
Assets as of March 31, 2019:
|
|
|
|
|
|
||||||
Trading securities - debt
|
$
|
—
|
|
|
$
|
93,756
|
|
|
$
|
—
|
|
Trading securities - equity
|
831
|
|
|
—
|
|
|
—
|
|
|||
Investment at fair value - warrants (Note 5)
|
—
|
|
|
1,367
|
|
|
—
|
|
|||
Investment at fair value - common stock (Note 5)
|
4,116
|
|
|
—
|
|
|
—
|
|
|||
Total recurring fair value measurements as of March 31, 2019
|
$
|
4,947
|
|
|
$
|
95,123
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Assets as of December 31, 2018:
|
|
|
|
|
|
||||||
Trading securities - debt
|
$
|
—
|
|
|
$
|
33,642
|
|
|
$
|
—
|
|
Trading securities - equity
|
3,012
|
|
|
—
|
|
|
—
|
|
|||
Investment at fair value - warrants (Note 5)
|
—
|
|
|
2,064
|
|
|
—
|
|
|||
Investment at fair value - common stock (Note 5)
|
5,395
|
|
|
—
|
|
|
—
|
|
|||
Total recurring fair value measurements as of December 31, 2018
|
$
|
8,407
|
|
|
$
|
35,706
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Liabilities as of March 31, 2019:
|
|
|
|
|
|
||||||
Profits interest units
|
$
|
—
|
|
|
$
|
591
|
|
|
$
|
—
|
|
Liabilities as of December 31, 2018:
|
|
|
|
|
|
||||||
Profits interest units
|
$
|
—
|
|
|
$
|
591
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
||||||||
Security Type
|
|
|
|
|
|
|
|
||||||||
March 31, 2019:
|
|
|
|
|
|
|
|
||||||||
Trading securities - debt
|
$
|
93,464
|
|
|
$
|
294
|
|
|
$
|
(2
|
)
|
|
$
|
93,756
|
|
Trading securities - equity
|
829
|
|
|
8
|
|
|
(6
|
)
|
|
831
|
|
||||
|
$
|
94,293
|
|
|
$
|
302
|
|
|
$
|
(8
|
)
|
|
$
|
94,587
|
|
December 31, 2018:
|
|
|
|
|
|
|
|
||||||||
Trading securities - debt
|
$
|
33,643
|
|
|
$
|
18
|
|
|
$
|
(19
|
)
|
|
$
|
33,642
|
|
Trading securities - equity
|
3,389
|
|
|
27
|
|
|
(404
|
)
|
|
3,012
|
|
||||
|
$
|
37,032
|
|
|
$
|
45
|
|
|
$
|
(423
|
)
|
|
$
|
36,654
|
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2019
|
|
2018
|
||||
Weighted-average shares used in computing net loss per share attributable to common stockholders - basic and diluted
|
|
49,655,881
|
|
|
50,632,958
|
|
||
Basic and diluted net loss per common share
|
|
$
|
(0.09
|
)
|
|
$
|
(0.63
|
)
|
Anti-dilutive equity-based incentive awards excluded from the computation of diluted loss per share
|
|
2,059,631
|
|
|
5,898,369
|
|
||
Maximum price of awards excluded from the computation of diluted loss per share
|
|
$
|
6.75
|
|
|
$
|
6.75
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Change in fair value of investment, warrants
|
|
(697
|
)
|
|
(7,647
|
)
|
||
Change in fair value of investment, common stock
|
|
7,605
|
|
|
(33,450
|
)
|
||
Loss on sale of investment, common stock
|
|
(5,590
|
)
|
|
—
|
|
||
Net realized and unrealized gain (loss) on investment at fair value
|
|
$
|
1,318
|
|
|
$
|
(41,097
|
)
|
|
Total Number of Shares Purchased
|
Average Price paid per Share
|
Approximate Dollar Value of
Shares that May Yet be
Purchased under the Program
|
Plan Expiration
|
|||||
|
|
|
|
|
|||||
May 1, 2018- May 30, 2018
|
1,190,420
|
|
$
|
3.89
|
|
$
|
15,366,000
|
|
February 28, 2019
|
Totals for 2018
|
1,190,420
|
|
$
|
3.89
|
|
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Revenues (in thousands)
|
$
|
3,387
|
|
|
$
|
62,093
|
|
New agreements executed
|
—
|
|
|
4
|
|
||
Licensing and enforcement programs generating revenues
|
3
|
|
|
4
|
|
||
New patent portfolios
|
2
|
|
|
—
|
|
•
|
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
|
•
|
fluctuations in overall patent portfolio related enforcement activities which are impacted by the portfolio intake challenges discussed above.
|
•
|
Bone Wedge technology
(1)(2)
|
|
•
|
Super Resolutions Microscopy technology
(1)(2)
|
•
|
Speech codes used in wireless and wireline systems technology
(1)(2)
|
|
•
|
Video Conferencing technology
(2)
|
|
Three Months Ended
March 31, |
|
%
|
|||||||
|
2019
|
|
2018
|
|
Change
|
|||||
|
|
|
|
|
|
|||||
Revenues
|
$
|
3,387
|
|
|
$
|
62,093
|
|
|
(95
|
)%
|
Operating costs and expenses
|
10,332
|
|
|
53,123
|
|
|
(81
|
)%
|
||
Operating loss
|
(6,945
|
)
|
|
8,970
|
|
|
(177
|
)%
|
||
Other income (expense), net
|
2,861
|
|
|
(40,890
|
)
|
|
(107
|
)%
|
||
Loss before provision for income taxes
|
(4,084
|
)
|
|
(31,920
|
)
|
|
(87
|
)%
|
||
Provision for income taxes
|
(314
|
)
|
|
(191
|
)
|
|
64
|
%
|
||
Net loss attributable to Acacia Research Corporation
|
(4,384
|
)
|
|
(32,038
|
)
|
|
(86
|
)%
|
•
|
Revenues decreased
$58.7 million
to
$3.4 million
for the three months ended
March 31, 2019
, as compared to
$62.1 million
in the comparable prior year quarter,
due primarily to
a
decrease in
the number of new agreements executed during the quarter. Refer to “
Investments in Patent Portfolios”
below for additional information regarding the impact of portfolio acquisition trends on current and future licensing and enforcement related revenues.
|
•
|
Loss before provision for income taxes was
$4.1 million
for the three months ended
March 31, 2019
, as compared to
$31.9 million
for the three months ended
March 31, 2018
. The net change was primarily comprised of the change in revenues described above, a
$6.9 million
unrealized gain
for the three months ended
March 31, 2019
as compared to a
$41.1 million
unrealized loss for the comparable prior year period on our equity investment in Veritone, and other changes in operating expenses as follows:
|
•
|
Inventor royalties and contingent legal fees, on a combined basis, decreased
$36.0 million
, primarily due to the decrease in related revenues for the periods.
|
•
|
Litigation and licensing expenses-patents increased
$812,000
, or
27%
, to
$3.8 million
,
due primarily to a net increase in litigation support and third-party technical consulting expenses associated with ongoing litigation.
|
•
|
Amortization expense decreased
$4.7 million
, or
88%
, due to a decrease in scheduled amortization resulting from patent portfolio impairment charges previously recorded in the second quarter of 2018.
|
•
|
General and administrative expenses, excluding non-cash stock compensation, decreased
$622,000
, or
14%
, to
$3.7 million
,
due primarily to an decrease in performance-based compensation costs.
|
•
|
Net non-cash stock compensation expense increased
$1.0 million
, or
99%
, due to the three months ended March 31, 2018 including a $1.7 million credit for the decrease in fair value of our Veritone related profits interest units, or Profits Interests, consistent with the decrease in the underlying Veritone stock price since December 31, 2017. In addition, the decrease was due to a decrease in expense for employees and board members that were terminated in 2018.
|
•
|
During the three months ended
March 31, 2019
, operating expenses included expenses for settlement and contingency accruals totaling
$650,000
.
|
•
|
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;
|
•
|
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; and
|
•
|
Fluctuations in overall patent portfolio related enforcement activities which are impacted by the portfolio intake challenges discussed above could harm our operating results and our financial position.
|
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Revenues (in thousands, except percentage change values)
|
|
$
|
3,387
|
|
|
$
|
62,093
|
|
|
$
|
(58,706
|
)
|
|
(95
|
)%
|
New agreements executed
|
|
—
|
|
|
4
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
|||
|
2019 vs. 2018
|
|
%
|
|||
|
(in thousands, except percentage values)
|
|||||
Decrease in revenues
|
$
|
(58,706
|
)
|
|
(211
|
)%
|
Decrease in inventor royalties, contingent legal fees and patent acquisition expenses
|
39,973
|
|
|
144
|
%
|
|
Decrease in general and administrative expenses, excluding non-cash stock compensation
|
622
|
|
|
2
|
%
|
|
Increase in non-cash stock compensation expenses
|
(1,016
|
)
|
|
(4
|
)%
|
|
Increase in litigation and licensing expenses
|
(812
|
)
|
|
(3
|
)%
|
|
Decrease in patent amortization expenses
|
4,674
|
|
|
17
|
%
|
|
Change in realized and unrealized gain (loss) on investment
|
42,415
|
|
|
152
|
%
|
|
Other
|
686
|
|
|
3
|
%
|
|
Total change in loss before provision for income taxes
|
$
|
27,836
|
|
|
100
|
%
|
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
(in thousands, except percentage change values)
|
|||||||||||||
Inventor royalties
|
|
$
|
1,353
|
|
|
$
|
21,744
|
|
|
$
|
(20,391
|
)
|
|
(94
|
)%
|
Contingent legal fees
|
|
$
|
177
|
|
|
$
|
15,759
|
|
|
$
|
(15,582
|
)
|
|
(99
|
)%
|
Patent acquisition expenses
|
|
$
|
—
|
|
|
$
|
4,000
|
|
|
$
|
(4,000
|
)
|
|
(100
|
)%
|
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|||||||||
General and administrative expenses
|
|
$
|
3,703
|
|
|
$
|
4,325
|
|
|
$
|
(622
|
)
|
|
(14
|
)%
|
Non-cash stock compensation expense - G&A
|
|
(8
|
)
|
|
704
|
|
|
(712
|
)
|
|
(101
|
)%
|
|||
Non-cash stock compensation expense - Profits Interests
|
|
$
|
—
|
|
|
$
|
(1,728
|
)
|
|
$
|
1,728
|
|
|
(100
|
)%
|
Total general and administrative expenses
|
|
$
|
3,695
|
|
|
$
|
3,301
|
|
|
$
|
394
|
|
|
12
|
%
|
|
Three Months Ended
March 31, |
|
|
|||
|
2019 vs. 2018
|
|
%
|
|||
|
|
|||||
Personnel costs and board fees
|
$
|
267
|
|
|
68
|
%
|
Variable performance-based compensation costs
|
(803
|
)
|
|
(204
|
)%
|
|
Corporate, general and administrative costs
|
(167
|
)
|
|
(42
|
)%
|
|
Non-cash stock compensation expense
|
1,016
|
|
|
258
|
%
|
|
Non-recurring employee severance costs
|
81
|
|
|
20
|
%
|
|
Total change in general and administrative expenses
|
$
|
394
|
|
|
100
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Provision for income taxes (in thousands)
|
$
|
(314
|
)
|
|
$
|
(191
|
)
|
Effective tax rate
|
8
|
%
|
|
1
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
(58,812
|
)
|
|
$
|
49,970
|
|
Investing activities
|
3,288
|
|
|
(36,309
|
)
|
||
Financing activities
|
—
|
|
|
24
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Sale of investment
(1)
|
$
|
3,294
|
|
|
$
|
—
|
|
Investments in Investees
|
—
|
|
|
(7,000
|
)
|
||
Net sale of short-term investments
|
—
|
|
|
(29,309
|
)
|
||
Purchases of property and equipment
|
(6
|
)
|
|
—
|
|
EXHIBIT
NUMBER
|
EXHIBIT
|
10.1
|
|
31.1#
|
|
31.2#
|
|
32.1**#
|
|
32.2**#
|
|
101#
|
#
|
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
|
|
ACACIA RESEARCH CORPORATION
|
|
|
|
/
s/
Marc Booth
|
|
By: Marc W. Booth
|
|
Chief Intellectual Property Officer
|
|
(Principal Executive Officer and Duly Authorized Signatory)
|
|
|
|
/s/ Li Yu
|
|
By: Li Yu
|
|
Corporate Controller
|
|
(Principal Financial Officer)
|
EXHIBIT
NUMBER
|
EXHIBIT
|
10.1
|
Separation Agreement and General Release of Claims, dated February 12, 2019, by and between Acacia Research Group, LLC and Kirsten Hoover (incorporated by reference to Acacia Research Corporation’s Current Report on Form 8-K filed on February 13, 2019 (File No. 001-37721)
|
31.1#
|
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
31.2#
|
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
32.1**#
|
Certification of Principal 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 Principal 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.
|
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