As Filed With the Securities and Exchange Commission on March 2, 2009
Registration No. 333-______________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 2005
REGISTRATION NO. 333-122452
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 2 to
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 --------------------
ACACIA RESEARCH CORPORATION
(Exact
(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 Number)
3670
(Primary Standard Industrial
Classification Code Number)
--------------------
ACACIA RESEARCH CORPORATION
| DELAWARE | 95-4405754 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
500 NEWPORT CENTER DRIVE
NEWPORT BEACH, CALIFORNIANewport Center Drive, 7th Floor
Newport Beach, California 92660
(949) 480-8300
(Address,
(Address, including zip code, and telephone number,number, including area code, of registrant'sregistrant’s principal executive offices)
--------------------
RAYMOND A. LEE, ESQ.
GREENBERG TRAURIG, LLP
650 TOWN CENTER DRIVE, SUITE 1700
COSTA MESA, CALIFORNIA 92626
(714) 708-6500
(Address,
Paul R. Ryan
Chief Executive Officer
500 Newport Center Drive, 7th Floor
Newport Beach, California 92660
(949) 480-8300
(Name, address, including zip code, and telephone number, including area code, of agent for service)
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable
Copies to:
Mark L. Skaist, Esq.
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
(949) 725-4000
Approximate Date Of Commencement Of Proposed Sale To The Public: When deemed appropriate after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [ ]
o
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. |X|
þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
o
If delivery of this prospectusForm is expecteda registration statement pursuant to be madeGeneral Instruction I.D. or a post-effective amendment that shall become effective upon filing with the commission pursuant to Rule 434, please462(e) under the Securities Act, check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THISo
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. o
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 o | Accelerated filerþ | Non-accelerated filer o | Smaller reporting company o | |||
CALCULATION OF REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED WITHOUT NOTICE. THE SELLING STOCKHOLDERS MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES, AND THE SELLING STOCKHOLDERS ARE NOT SOLICITING OFFERS TO
BUY THESE SECURITIES, IN ANY JURISDICTION WHERE THE OFFER OR SALE OF THESE
SECURITIES IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED ____________,
PROSPECTUS
3,938,832 SHARES
ACACIA RESEARCH CORPORATION
ACACIA RESEARCH-ACACIA TECHNOLOGIES COMMON STOCK
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This prospectus relatesFEE
Title of Each Class of Securities to be Registered(1) | Proposed Maximum Aggregate Offering Price(2) | Amount of Registration Fee(3) | ||||
| Common Stock, $0.001 par value | ||||||
| Warrants | ||||||
| Total | $55,786,321 | $2,192.40(4) | ||||
1) There are being registered hereunder such indeterminate number of shares of common stock and such indeterminate number of warrants to purchase common stock as shall have an aggregate initial offering price not to exceed $55,786,321. Any securities registered hereunder may be sold separately or as units with other securities registered hereunder. The securities registered also include such indeterminate number of shares of common stock as may be issued upon exercise of warrants. In addition, pursuant to Rule 416 under the Securities Act, the shares being registered hereunder include such indeterminate number of shares of common stock as may be issuable with respect to the resaleshares being registered hereunder as a result of up to 3,938,832 sharesstock splits, stock dividends or similar transactions.
(2) The proposed maximum aggregate offering price per class of Acacia
Research-Acacia Technologies common stock of Acacia Research Corporation, a
Delaware corporation, that the selling stockholders may offer from time to time.
The selling stockholders include those holders named in the table under the
section titled "selling stockholders" beginning on page 28 of this prospectus.
The shares of our Acacia Research-Acacia Technologies common stock being offered
by this prospectus were previously issued to the selling stockholders in
unregistered sales of the securities.
Wesecurity will not receive any of the proceeds from the sale of the shares of our
Acacia Research-Acacia Technologies common stock by the selling stockholders. We
will bear the cost of the registration of these shares.
Subject to the restrictions described in this prospectus, the selling
stockholders (directly, or through agents or dealers designated from time to
time) may sell the shares of our Acacia Research-Acacia Technologies common
stock being offered by this prospectusbe determined from time to time by the registrant in connection with the issuance by the registrant of the securities registered hereunder and is not specified as to each class of security pursuant to General Instruction II.D. of Form S-3 under the Securities Act.
(3) Calculated pursuant to Rule 457(o) under the Securities Act.
(4) Previously paid. The registrant, in accordance with Rule 414(d) under the Securities Act, previously paid a registration fee of $8,025 pursuant to a previously filed Registration Statement on termsForm S-3, File No. 333-133529, or the Prior Registration Statement, originally filed with the Securities and Exchange Commission on April 25, 2006 and subsequently declared effective. Of the $75,000,000 of the registrant’s securities registered pursuant to be
determined at the timePrior Registration Statement, only $19,213,679 of sale. The prices at which these stockholders may sellits securities were sold, resulting in an unused registration fee of $5,969.14. Pursuant to Rule 415(a)(6) under the sharesSecurities Act, the registrant hereby includes in this registration statement the $55,786,321 of securities remaining unsold under the Prior Registration Statement. Pursuant to Rule 415(a)(6), the filing fee of $2,192.40 that is associated with the unsold securities from the Prior Registration Statement is applied to the securities from the Prior Registration Statement that are included in this registration statement and no additional filing fee in respect of such unsold securities is due hereunder. In accordance with Rule 415(a)(6), the Prior Registration Statement will be determineddeemed terminated as of the effective date of this registration statement.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the securities act of 1933 or until the registration statement shall become effective on such date as the commission, acting pursuant to said section 8(a), may determine.
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EXPLANATORY NOTE
Acacia Research Corporation previously filed a Registration Statement on Form S-3 (File No. 333-133529), or the Prior Registration Statement, to register up to an aggregate dollar amount of $75,000,000 of its securities. The Prior Registration Statement was declared effective by the prevailing market price forSecurities and Exchange Commission on May 26, 2006, but the shares or
in negotiated transactions.
Our Acacia Research-Acacia Technologies common stock is quoted on the Nasdaq
National MarketPrior Registration Statement will only be effective until May 26, 2009 pursuant to Rule 415 under the symbol "ACTG." On April 29, 2005, the last reported
sale price of our Acacia Research-Acacia Technologies common stock as reported
on the Nasdaq National Market was $6.09 per share.
Our Acacia Research-Acacia Technologies common stockSecurities Act. This Registration Statement is intended to reflectrenew and replace the separate performancePrior Registration Statement and the Prior Registration Statement will be terminated upon the effectiveness of Acacia Technologies group, one of two divisions of
Acacia Research Corporation. The Acacia Technologies group is not a separate
legal entity. Holders of Acacia Research-Acacia Technologies common stock are
stockholders of Acacia Research Corporation. As a result, holders of Acacia
Research-Acacia Technologies common stock continuethis Registration Statement. Pursuant to be subject to allRule 457(p) under the Securities Act, fees paid under the Prior Registration Statement associated with unsold securities will offset the total dollar amount of the risks of an investment in Acacia Research Corporation and all of its businesses,
assets and liabilities.
INVESTING IN OUR ACACIA RESEARCH-ACACIA TECHNOLOGIES COMMON STOCK INVOLVES
SUBSTANTIAL RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 5 TO READ ABOUT FACTORS
YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR ACACIA RESEARCH-ACACIA
TECHNOLOGIES COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED WITHOUT NOTICE. THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES
UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES, AND THE SELLING STOCKHOLDERS ARE NOT SOLICITING OFFERS TO BUY
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE OF THESE SECURITIES
IS NOT PERMITTED.
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The datefiling fee associated with this Registration Statement. Upon effectiveness of this prospectusRegistration Statement, it is May 2, 2005
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intended that this Registration Statement will replace the Prior Registration Statement and any offering of unsold securities under the Prior Registration Statement will be terminated.
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The information in this preliminary prospectus is not complete and may be changed without notice. The selling stockholdersWe may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and the selling stockholderswe are not soliciting offers to buy these securities, in any jurisdiction where the offer or sale of these securities is not permitted.
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SUBJECT TO COMPLETION, DATED MARCH 2, 2009
PROSPECTUS
$55,786,321
ACACIA RESEARCH CORPORATION
COMMON STOCK
WARRANTS
By this prospectus, we may offer, from time to time:
| o | shares of our common stock; | |
| o | warrants to purchase shares of our common stock; or | |
| o | any combination of the foregoing. |
This prospectus provides a general description of the securities we may offer. Each time we sell securities, we will provide specific terms of the securities offered in a supplement to this prospectus. We may also authorize one or more free writing prospectuses to be provided to you in connection with these offerings. The prospectus supplement and any related free writing prospectus may also add, update or change information contained in this prospectus. You should read this prospectus, the applicable prospectus supplement and any related free writing prospectus, as well as any documents incorporated by reference, carefully before you decide to invest in any securities.
This prospectus may not be used to consummate sales of these securities unless it is accompanied by the applicable prospectus supplement
Our common stock is traded on The NASDAQ Global Market under the ticker symbol “ACTG.” On February 27, 2009, the last reported sale price of our common stock was $3.11 per share. The applicable prospectus supplement will contain information, where applicable, as to any other listing on The NASDAQ Global Market or any other securities market or other exchange of the securities, if any, covered by the prospectus supplement.
Investing in our securities involves substantial risks. You should review carefully the risks and uncertainties described under the heading “Risk Factors” beginning on page 12 and contained in the applicable prospectus supplement, any related free writing prospectus and under similar headings in the other documents that are incorporated by reference into this prospectus before investing in our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is March 2, 2009
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TABLE OF CONTENTS
Page
----
Prospectus Summary...........................................................1
Risk Factors.................................................................5
Cautionary Statement Concerning Forward-Looking Information.................27
| About this Prospectus | 6 |
| Prospectus Summary | 7 |
| Risk Factors | 12 |
| Cautionary Statement Concerning Forward-Looking Information | 23 |
| Use of Proceeds | 23 |
| Plan of Distribution | 23 |
| Description of Warrants | 25 |
| Experts | 27 |
| Legal Matters | 27 |
| Where You Can Find More Information | 27 |
| Incorporation of Certain Information By Reference | 27 |
| Disclosure of Commission Position on Indemnification for Securities Act Liability | 28 |
5
ABOUT THIS PROSPECTUS
This prospectus is part of Proceeds.............................................................28
Selling Stockholders........................................................28
Relationshipa registration statement that we filed with the Securities and Exchange Commission, or the SEC, using a “shelf” registration process. Under this shelf registration process, we may offer and sell any combination of Selling Stockholdersour common stock and warrants to purchase our common stock in one or more offerings for a total dollar amount of up to $55,786,321. This prospectus provides you with a general description of the Company.........................29
Plansecurities we may offer. Each time we offer to sell securities under this shelf registration, we will provide a prospectus supplement that will contain specific information about the terms of Distribution........................................................29
Experts.....................................................................31
Legal Matters...............................................................32
Wherethat offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to these offerings. The prospectus supplement and any related free writing prospectus that we may authorize to be provided to you may also add, update or change information contained in this prospectus or in any documents that we have incorporated by reference into this prospectus. It is important for you to consider the information contained in this prospectus, any applicable prospectus supplement and any related free writing prospectus, together with the information incorporated herein by reference as described under the heading “Where You Can Find More Information.........................................32
Material Changes............................................................32
IncorporationInformation” on page 27 of Certain Informationthis prospectus.
You should rely only on the information contained in this prospectus, including the content of all documents now or in the future incorporated by Reference...........................32
reference into the registration statement of which this prospectus forms a part, any applicable prospectus supplement and any related free writing prospectus that we may authorize to be provided to you. We have not authorized anyone to provide you with different information, and you must not rely upon any information not contained or incorporated by reference in this prospectus or the accompanying prospectus supplement. This prospectus and the accompanying supplement to this prospectus do not constitute an offer to sell or the solicitation of an offer to buy any securities other than the registered securities to which they relate, nor do this prospectus and the accompanying supplement to this prospectus constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. You should not assume that the information contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate on any date subsequent to the date set forth on the front of the document or that any information we have incorporated by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus, any applicable prospectus supplement or any related free writing prospectus is delivered or securities sold on a later date.
6
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR ACACIA RESEARCH-ACACIA TECHNOLOGIES COMMON
STOCK.SECURITIES. YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY "RISK
FACTORS" ANDINCLUDING THE RISKS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 12, THE INFORMATION INCORPORATED BY REFERENCE, INCLUDING OUR FINANCIAL STATEMENTS AND RELATED NOTES, INCORPORATED BY
REFERENCE ON PAGE 32 BELOW.
BUSINESS AND BASIS OF PRESENTATION
SEPARATE GROUP PRESENTATION AND CLASSES OF STOCK. Acacia Research
Corporation is comprised of two operating groups. On December 11, 2002, our
stockholders voted in favor of a recapitalization transaction, which became
effective on December 13, 2002, whereby we created two new classes of common
stock called Acacia Research-CombiMatrix common stock ("AR-COMBIMATRIX STOCK")
and Acacia Research-Acacia Technologies common stock ("AR-ACACIA TECHNOLOGIES
STOCK"), and divided our existing Acacia Research Corporation common stock into
shares of the two new classes of common stock. AR-CombiMatrix stock is intended
to reflect separately the performance of Acacia Research Corporation's
CombiMatrix group. AR-Acacia Technologies stock is intended to reflect
separately the performance of Acacia Research Corporation's Acacia Technologies
group. Although the AR-CombiMatrix stock and the AR-Acacia Technologies stock
are intended to reflect the performance of our different business groups, they
are both classes of common stock of Acacia Research Corporation and are not
stock issued by the respective groups.
AR-CombiMatrix stock and AR-Acacia Technologies stock are intended to
reflect the separate performance of the respective divisions of Acacia Research
Corporation. The CombiMatrix group and the Acacia Technologies group are not
separate legal entities. Holders of AR-CombiMatrix stock and AR-Acacia
Technologies stock are stockholders of Acacia Research Corporation. As a result,
holders of AR-CombiMatrix stock and AR-Acacia Technologies stock continue to be
subject to all of the risks of an investment in Acacia Research Corporation and
all of its businesses, assets and liabilities. The consolidated financial
statements incorporated by reference into this Prospectus include the accounts
of Acacia Research Corporation and its wholly owned and majority-owned
subsidiaries, including those in both the CombiMatrix group and the Acacia
Technologies group.
Financial effects arising from one group that affect Acacia Research
Corporation's results of operations or financial condition could, if
significant, affect the results of operations or financial condition of the
other group and the market price of the class of common stock relating to the
other group. Any division net losses of the Acacia Technologies group or of the
CombiMatrix group, and dividends or distributions on, or repurchases of,
AR-Acacia Technologies stock or AR-CombiMatrix stock, will reduce the assets of
Acacia Research Corporation legally available for payment of dividends on
AR-Acacia Technologies stock or AR-CombiMatrix stock. Acacia Research
Corporation's creditors are unaffected by the division of our business into two
operating groups or our division of our common stock into two classes. The
assets Acacia Research Corporation attributes to one of the groups could be
subject to the liabilities of the other group. Creditors of Acacia Research
Corporation may still make claims against all of our assets and earnings from
both operating groups. However, our business is conducted by our operating
subsidiaries, and each of our subsidiaries operates in only one of the two
groups. Creditors of one subsidiary may not make claims against the assets of
another subsidiary, absent a separate guaranty from the other subsidiary. None
of our subsidiaries currently guaranties the obligations of any other
subsidiary.
LIMITATIONS OF SEPARATE CLASSES OF COMMON STOCK. Although our two
classes of stock are intended to reflect the separate performances of the
respective groups, we cannot assure you that the market values of the two
classes will in fact reflect the performance of the respective groups as we
intend because holders do not have a separate and exclusive interest in the
respective groups. Holders of AR-Acacia Technologies stock are common
stockholders of Acacia Research Corporation and do not hold a direct or
exclusive interest in the Acacia Technologies group. As such, they are subject
to all risks associated with an investment in Acacia Research Corporation and
all of our businesses, assets and liabilities.
The performance of our respective groups is measured by the financial
results of our separate groups, as reflected in the separate financial
statements included in our periodic reports filed with the SEC and in this
prospectus by reference to our periodic reports. The financial statements of
Acacia Technologies group reflect the financial condition, results of
operations, and cash flows of the businesses included therein. The financial
statements of the Acacia Technologies group include the accounts or assets of
1
Acacia Research Corporation specifically attributed to the Acacia Technologies
group and were prepared using amounts included in Acacia Research Corporation's
consolidated financial statements. Financial effects arising from one group that
affect Acacia Research Corporation's results of operations or financial
condition could, if significant, affect the results of operations or financial
condition of the other group and the market price of the class of common stock
relating to the other group. Any division net losses of the CombiMatrix group or
the Acacia Technologies group and dividends or distributions on, or repurchases
of, AR-CombiMatrix stock or AR-Acacia Technologies stock or repurchases of
preferred stock of Acacia Research Corporation will reduce the assets of Acacia
Research Corporation legally available for payment of dividends on AR-Acacia
Technologies stock or AR-CombiMatrix stock.
VOTING RIGHTS OF AR-ACACIA TECHNOLOGIES COMMON STOCK. Holders of
AR-Acacia Technologies stock and AR-CombiMatrix stock vote together as a single
class (except in certain limited circumstances). Each share of AR-CombiMatrix
stock entitles the holder to one vote. Each share of AR-Acacia Technologies
stock entitles the holder, for any particular vote, to a number of votes equal
to the average market value of a share of AR-Acacia Technologies stock divided
by the average market value of a share of AR-CombiMatrix stock over a specified
20-trading day period ending on the 10th trading day prior to the record date
for determining the stockholders entitled to vote. Accordingly, the relative per
share voting rights of the AR-CombiMatrix stock and the AR-Acacia Technologies
stock will fluctuate depending on changes in the relative market values of
shares of such classes of common stock. The purpose of the floating voting power
is to link voting power to relative economic interests in Acacia Research
Corporation.
EXAMPLES OF THE CALCULATION OF THE NUMBER OF VOTES EACH SHARE OF
AR-ACACIA TECHNOLOGIES STOCK COULD BE ENTITLED ON ALL MATTERS ON WHICH HOLDERS
OF AR-COMBIMATRIX STOCK AND AR-ACACIA TECHNOLOGIES STOCK VOTE AS A SINGLE CLASS.
EXAMPLE #1: If the average market values for the 20-trading day
valuation period were $4 for the AR-Acacia Technologies stock and $6 for the
AR-CombiMatrix stock, each share of AR-CombiMatrix stock would have one vote and
each share of AR-Acacia Technologies stock would have 0.67 votes based on the
following calculation:
$4/$6 = 0.67 votes
Based on the assumptions in this example, and assuming 20 million
shares of AR-CombiMatrix stock and 20 million shares of AR-Acacia Technologies
stock were outstanding, the shares of AR-CombiMatrix stock would represent
approximately 60% of our total voting power and the shares of AR-Acacia
Technologies stock would represent approximately 40% of our total voting power.
EXAMPLE #2: If the average market values for the 20-trading day
valuation period were $5 for the AR-Acacia Technologies stock and $5 for the
AR-CombiMatrix stock, each share of AR-CombiMatrix stock would have one vote and
each share of AR-Acacia Technologies stock would have one (1) vote based on the
following calculation:
$5/$5 = 1.0 vote
Based on the assumptions in this example, and assuming 20 million
shares of AR-CombiMatrix stock and 20 million shares of AR-Acacia Technologies
stock were outstanding, the shares of AR-CombiMatrix stock would represent
approximately 50% of our total voting power and the shares of AR-Acacia
Technologies stock would represent approximately 50% of our total voting power.
EXAMPLE #3: If the average market values for the 20-trading day
valuation period were $6 for the AR-Acacia Technologies stock and $4 for the
AR-CombiMatrix stock, each share of AR-CombiMatrix stock would have one vote and
each share of AR-Acacia Technologies stock would have 1.50 votes based on the
following calculation:
$6/$4 = 1.50 votes
Based on the assumptions in this example, and assuming 20 million
shares of AR-CombiMatrix stock and 20 million shares of AR-Acacia Technologies
stock were outstanding, the shares of AR-CombiMatrix stock would represent
approximately 40% of our total voting power and the shares of AR-Acacia
Technologies stock would represent approximately 60% of our total voting power.
2
These examples, each of which is based on the assumption that the total
number of issued and outstanding shares of each class is 20,000,000, are
summarized in the table below:
IN THESE EXAMPLES WE HAVE PROVIDED A BETTER UNDERSTANDING OF THE
MECHANICS SURROUNDING THE CALCULATION OF VOTING POWER. IT SHOULD NOT BE ASSUMED
THAT THE EXAMPLES USED ARE IN ANY WAY INDICATIVE OF THE RESPECTIVE COMMON STOCK
TRADING OR ACTUAL RELATIVE VOTING POWER AS OF THE DATE OF THIS PROSPECTUS.
PLEASE SEE THE RISK FACTOR TITLED "THE HOLDERS OF AR-COMBIMATRIX STOCK AND THE HOLDERS OF AR-ACACIA TECHNOLOGIES STOCK WILL HAVE CERTAIN LIMITS ON THEIR
RESPECTIVE VOTING POWERS." ON PAGE 21 BELOW REGARDING THE CURRENT RELATIVE
VOTING POWER FOR OUR ANNUAL MEETING.
The holders of AR-CombiMatrix common stock and AR-Acacia Technologies
common stock do not have any rights to vote separately as a class on any matter
coming before stockholders of Acacia Research Corporation, except for certain
limited class voting rights provided under Delaware law. In addition to the
approval of the holders of a majority of the voting power of all shares of
common stock voting together as a single class, the approval of a majority of
the outstanding shares of the AR-CombiMatrix stock or the AR-Acacia Technologies
stock, voting as a separate class, would be required under Delaware law to
approve any amendment to the restated certificate of incorporation that would
change the par value of the shares of the class or alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely. As permitted by Delaware law, the restated certificate of
incorporation provides that an amendment to the restated certificate of
incorporation that increases or decreases the number of authorized shares of
AR-CombiMatrix stock or AR-Acacia Technologies stock will only require the
approval of the holders of a majority of the voting power of all shares of
common stock, voting together as a single class, and will not require the
approval of the holders of the class of common stock affected by such amendment,
voting as a separate class.
OUR BUSINESS. Our intellectual property licensing business, referred to
as the "Acacia Technologies group," acquires, enforces and licenses intellectual
property, and is comprised of the following subsidiaries: Acacia Media
Technologies Corporation, Acacia Internet Access Corporation, Soundview
Technologies, Incorporated, Soundbreak.com, Incorporated, Acacia Research
Investment Corporation, Acacia Technologies Services Corporation, Acacia Global
Acquisition Corporation, Acacia Capital Management Corporation, Acacia Patent
Acquisition Corporation, Acacia Media Technologies Corporation - Mexico, Acacia
Media Technologies Corporation - Europe, AV Technologies LLC, Broadcast
Innovation LLC, Data Innovation LLC, Financial Systems Innovation LLC,
Information Technology Innovation LLC, InternetAd LLC, IP Innovation LLC, KY
Data Systems LLC, New Medium LLC, TechSearch LLC, VData LLC, Spreadsheet
Automation Corporation, Computer Cache Coherency Corporation, Microprocessor
Enhancement Corporation. The revenue in our Acacia Technology group is derived
from license fees from our patent portfolios held by our various subsidiaries
that comprise the group. Our subsidiaries are often forced to bring civil
lawsuits to enforce our patents before receiving any such revenues. For example,
Acacia Media Technologies Corporation licenses and enforces our Digital Media
Technology patents and receives royalty payments from companies that utilize our
patented technology in products they sell and services they provide. It is also
engaged in litigation to enforce these patents, seeking royalties from companies
that are infringing upon these patents.
3
Our life sciences business, referred to as the "CombiMatrix group," is
comprised of the following subsidiaries: CombiMatrix Corporation, Advanced
Material Sciences, Inc., CombiMatrix International Holding Corporation and
CombiMatrix K.K. Our CombiMatrix group operates a life sciences technology
business with a proprietary system for rapid, cost competitive creation of DNA
and other compounds on a programmable semiconductor chip. This system is
comprised of a semiconductor chip with an array of microelectrodes, each of
which is capable of initiating and performing a synthetic chemical reaction that
allows for strands of DNA and other molecules to be assembled over each
microelectrode. We refer to this system as an array. The instruments we use to
manufacture these arrays can do so in a matter of days and at a price that the
CombiMatrix group believes is attractive to researchers who use tools such as
our arrays in conducting genetic research. This proprietary technology has
applications in the areas of genomics, proteomics, biosensors, drug discovery,
drug development, diagnostics, combinatorial chemistry, material sciences and
nanotechnology. We are exploring opportunities for use of our array system with
pharmaceutical and biotechnology companies in the Asian market.
We have sustained substantial losses since our inception resulting in
an accumulated deficit, as of December 31, 2004, of $188.2 million on a
consolidated basis. We are continuing to invest in acquisitions of additional
patent portfolios in our Acacia Technologies group and research and development
in our CombiMatrix group. As a result, it is more likely than not that we will
incur losses for the foreseeable future.
We are incorporated under the laws of the State of Delaware. Our
principal executive offices are located at 500 Newport Center Drive, Newport
Beach, California 92660, and our telephone number is (949) 480-8300. Our website
is located at www.acaciaresearch.com. Information contained on our website is
not incorporated by reference into this prospectus, and you should not consider
information on our website a part of this prospectus.
The group financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America, and
taken together, comprise all the accounts included in the corresponding
consolidated financial statements of Acacia Research Corporation. The financial
statements of the groups reflect the financial condition, results of operations,
and cash flows of the businesses included therein. The financial statements of
the groups include the accounts or assets of Acacia Research Corporation
specifically attributed to the groups and were prepared using amounts included
in Acacia Research Corporation's consolidated financial statements.
THE OFFERING
The selling stockholders may sell the shares of our AR-Acacia
Technologies stock subject to this prospectus from time to time and may also
decide not to sell all the shares they are allowed to sell under this
prospectus. The selling stockholders will act independently of our company in
making decisions with respect to the timing, manner and size of each sale.
Furthermore, the selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of shares or otherwise.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we are filing
with the Securities and Exchange Commission, or the "SEC," on behalf of the
selling stockholders, who are named in the table under the section titled
"Selling Stockholders" beginning on page 28 of this prospectus, utilizing a
"shelf" registration process. Under this shelf registration process, the selling
stockholders may, from time to time until this registration statement is
withdrawn from registration by us, sell the shares of our AR-Acacia Technologies
stock being offered under this prospectus in one or more offerings.
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This prospectus provides you with a general description of the
securities that the selling stockholders may offer. To the extent required, the
number of shares of our AR-Acacia Technologies stock to be sold, the purchase
price, the public offering price, the names of any agent or dealer and any
applicable commission or discount with respect to a particular offering by any
Selling Stockholder may be set forth in an accompanying prospectus supplement.
You should read both this prospectus and any prospectus supplement together with
the additional information described in the section titled "Incorporation of
Certain Information By Reference," beginning on page 32 below.
You should rely only on the information contained in this prospectus or
any related prospectus supplement, including the content of all documents now or
in the future incorporated by reference into the registration statement of which
this prospectus forms a part. We have not authorized, and the selling
stockholders may not authorize, anyone to provide you with different
information. We are not, and the selling stockholders are not, making an offer
of the shares of our AR-Acacia Technologies stock to be sold under this
prospectus in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information contained in this prospectus or any
related prospectus supplement is accurate as of any date other than the date on
the front cover of this prospectus or the related prospectus supplement, or that
the information contained in any document incorporated by reference is accurate
as of any date other than the date of the document incorporated by reference.
Other than as required under the federal securities laws, we undertake no
obligation to publicly update or revise such information, whether as a result of
new information, future events or any other reason. We are required to update
this prospectus and the registration statement with a post-effective amendment
to include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement, including this prospectus.
PRIOREXHIBITS TO MAKING A DECISION ABOUT INVESTING IN OUR AR-ACACIA TECHNOLOGIES STOCK,
YOU SHOULD CAREFULLY CONSIDER THE SPECIFIC RISKS CONTAINED IN THE SECTION TITLED
"RISK FACTORS" BELOW, AND ANY APPLICABLE PROSPECTUS SUPPLEMENT, TOGETHER WITH
ALL OF THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS AND ANY PROSPECTUS
SUPPLEMENT OR APPEARING IN THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
As used in this prospectus, “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 our wholly owned operating subsidiaries.
ABOUT ACACIA RESEARCH CORPORATION
BUSINESS
General
Our 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.
We are a leader in licensing patented technologies and have established a proven track record of licensing success with over 620 license agreements executed to date, across 48 of our technology license programs. Currently, on a consolidated basis, our operating subsidiaries own or control the rights to over 100 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, our board of directors approved a plan for our former wholly owned subsidiary, CombiMatrix Corporation, or CombiMatrix, the primary component of our life science business, known as the CombiMatrix group, to become an independent publicly-held company. On August 15, 2007, or the Redemption Date, CombiMatrix was split-off from us through the redemption of all outstanding shares of Acacia Research-CombiMatrix common stock in exchange for the distribution of new shares of CombiMatrix common stock, on a pro-rata basis, to the holders of Acacia Research-CombiMatrix common stock on the Redemption Date. We refer to this transaction as the Split-Off Transaction. Subsequent to the Redemption Date, we no longer own any equity interests in CombiMatrix and the CombiMatrix group is no longer one of our business groups.
Refer to Note 10A to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, for information regarding presentation of the assets, liabilities, results of operations and cash flows for the CombiMatrix Group as “Discontinued Operations,” for all periods presented, in accordance with guidance set forth in Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”
Capital Structure. Pursuant to the terms of the Split-Off Transaction, all outstanding shares of Acacia Research-CombiMatrix common stock were redeemed, and 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 common stock. As a result of, and immediately following, the consummation of the Split-Off Transaction, our only class of common stock outstanding was our Acacia Research-Acacia Technologies common stock.
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On May 20, 2008, our stockholders approved an amendment and restatement of our Certificate of Incorporation to eliminate all references to Acacia Research-CombiMatrix common stock and all provisions relating to the rights and obligations of the Acacia Research-CombiMatrix common stock. In addition, the amendment and restatement changed the name of the “Acacia Research-Acacia Technologies common stock” to “common stock,” and our common stock is the only class of common stock authorized and issuable.
Other
We were originally incorporated in California in January 1993 and reincorporated in Delaware in December 1999. Our website address is www.acaciaresearch.com. We make our filings with the Securities and Exchange Commission, or the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, available free of charge on our website as soon as reasonably practicable after we file these reports. In addition, we post the following information on our website:
| · | our corporate code of conduct, our code of conduct for our board of directors and our fraud policy; and |
| · | charters for our audit committee, nominating and corporate governance committee, disclosure committee and compensation committee. |
The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.
BUSINESS OVERVIEW
Intellectual Property Licensing Business
Our 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 over 100 patent portfolios, which include U.S. patents and certain foreign counterparts, covering technologies used in a wide variety of industries. Refer to “Patented Technologies” below for a partial summary of patent portfolios owned or controlled by certain of our operating subsidiaries. We are a leader in patent licensing and our operating subsidiaries have established a proven track record of licensing success with more than 620 license agreements executed to date. To date, on a consolidated basis, we have generated revenues from 48 of our technology licensing and enforcement programs. Our professional staff includes in-house patent attorneys, licensing executives, engineers and business development executives.
Our partners are primarily individual inventors and small companies who have limited resources and/or expertise to effectively address the unauthorized use of their patented technologies, and also include large companies seeking to effectively and efficiently monetize their portfolio of patented technologies. In a typical partnering arrangement, our operating subsidiary will acquire a patent portfolio, or acquire rights to a patent portfolio, with our partner receiving an upfront payment for the purchase of the patent portfolio or patent portfolio rights, or receiving a percentage of our operating subsidiaries net recoveries from the licensing and enforcement of the patent portfolio, or a combination of the two.
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Business Model and Strategy
The business model associated with the licensing and enforcement activities conducted by our operating subsidiaries is summarized in the following diagram:
Licensing and Enforcement Business
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Our intellectual property acquisition, development, licensing and enforcement business strategy, conducted solely by our operating subsidiaries, includes the following key elements:
| · | Identify Emerging Growth Areas where Patented Technologies will Play a Vital Role |
The patent process breeds, encourages and sustains innovation and invention by granting a limited monopoly to the inventor in exchange for sharing the invention with the public. Certain technologies, including several of the technologies controlled by our operating subsidiaries, some of which are summarized below, become core technologies in the way products and services are manufactured, sold and delivered by companies across a wide array of industries. Our operating subsidiaries identify core, patented technologies that have been or are anticipated to be widely adopted by third parties in connection with the manufacture or sale of products and services.
| · | Contact and Form Alliances with Owners of Core, Patented Technologies |
Often individual inventors and small companies have limited resources and/or expertise and are unable to effectively address the unauthorized use of their patented technologies. Individual inventors and small companies may lack sufficient capital resources and may also lack in-house personnel with patent licensing expertise and/or experience, which may make it difficult to effectively out-license and/or enforce their patented technologies.
For years, many large companies have earned substantial revenue licensing patented technologies to third parties. Other companies that do not have internal licensing resources and expertise have continued to record the capitalized carrying value of their core and or non-essential intellectual property in their financial statements, without deriving income from their intellectual property or realizing the potential value of their intellectual property assets. Securities and financial reporting regulations require these companies to periodically evaluate and potentially reduce or write-off these intellectual property assets if they are unable to substantiate these reported carrying values.
Our operating subsidiaries seek to enter into business agreements with owners of intellectual property that do not have experience or expertise in the areas of intellectual property licensing and enforcement or that do not possess the in-house resources to devote to intellectual property licensing and enforcement activities.
| · | Effectively and Efficiently Evaluate Patented Technologies for Acquisition, Licensing and Enforcement |
Subtleties in the language of a patent, recorded interactions with the patent office, and the evaluation of prior art and literature can make a significant difference in the potential licensing and enforcement revenue derived from a patent or patent portfolio. Our specialists are trained and skilled in these areas. It is important to identify potential problem areas and determine whether potential problem areas can be overcome, prior to acquiring a patent portfolio or launching an effective licensing program. We have developed processes and procedures for identifying problem areas and evaluating the strength of a patent portfolio before the decision is made to allocate resources to an acquisition or an effective licensing and enforcement effort.
| · | Purchase or Acquire the Rights to Patented Technologies |
After evaluation, our operating subsidiaries may elect to purchase the patented technology, or become the exclusive licensing agent for the patented technology in all or in specific fields of use. In either case, the owner of the patent generally retains the rights to a portion of the net revenues generated from a patent’s licensing and enforcement program. Our operating subsidiaries generally control the licensing and enforcement process and utilize experienced in-house personnel to reduce outside costs and to ensure that the necessary capital and expertise is allocated and deployed in an efficient and cost effective manner.
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| · | Successfully License and Enforce Patents with Significant Royalty Potential |
As part of the patent evaluation process employed by our operating subsidiaries, significant consideration is also given to the identification of potential infringers, industries within which the potential infringers exist, longevity of the patented technology, and a variety of other factors that directly impact the magnitude and potential success of a licensing and enforcement program. Our specialists are trained in evaluating potentially infringing technologies and in presenting the claims of our patents and demonstrating how they apply to companies we believe are using our technologies in their products or services. These presentations can take place in a non-adversarial business setting, but can also occur through the litigation process, if necessary.
Patented Technologies
Currently, on a consolidated basis, our operating subsidiaries own or control the rights to over 100 patent portfolios, with patent expiration dates ranging from 2009 to 2028, and covering technologies used in a wide variety of industries, including the following:
| · | Aligned Wafer Bonding | · | Enhanced Internet Navigation | · | Peer To Peer Communications |
| · | Audio Communications Fraud Detection | · | Enterprise Content Management | · | Physical Access Control |
| · | Audio Storage and Retrieval System | · | Facilities Operation Management System | · | Picture Archiving & Communication Systems |
| · | Audio Video Enhancement & Synchronization | · | File Locking In Shared Storage Networks | · | Pointing Device |
| · | Authorized Spending Accounts | · | Flash Memory | · | Pop-Up Internet Advertising |
| · | Automated Notification of Tax Return Status | · | Fluid Flow Control And Monitoring | · | Portable Storage Devices With Links |
| · | Automated Tax Reporting | · | Hearing Aid ECS | · | Product Activation |
| · | Broadcast Data Retrieval | · | Heated Surgical Blades | · | Projector |
| · | Color Correction For Video Graphics Systems | · | High Quality Image Processing | · | Purifying Nucleic Acid |
| · | Compact Disk | · | High Resolution Optics | · | Radio Communication With Graphics |
| · | Compiler | · | Image Resolution Enhancement | · | Relational Database Access |
| · | Computer Graphics | · | Improved Lighting | · | Remote Management Of Imaging Devices |
| · | Computer Memory Cache Coherency | · | Improved Printing | · | Remote Video Camera |
| · | Computer Simulations | · | Interactive Content In A Cable Distribution System | · | Resource Scheduling |
| · | Continuous TV Viewer Measuring | · | Internet Radio Advertising | · | Rule Based Monitoring |
| · | Copy Protection | · | Interstitial Internet Advertising | · | Software License Management |
| · | Credit Card Fraud Protection | · | Laparoscopic Surgery | · | Spreadsheet Automation |
| · | Database Access | · | Laptop Connectivity | · | Storage Technology |
| · | Database Management | · | Lighting Ballast | · | Surgical Catheter |
| · | Database Retrieval | · | Location Based Services | · | Telematics |
| · | Data Encryption | · | Manufacturing Data Transfer | · | Television Data Display |
| · | Digital Newspaper Delivery | · | Medical Image Stabilization | · | Television Signal Scrambling |
| · | Digital Video Production | · | Medical Monitoring | · | Text Auto-Completion |
| · | DMT® | · | Micromirror Digital Display | · | Vehicle Anti-Theft Parking Systems |
| · | Document Generation | · | Microprocessor | · | Vehicle Maintenance |
| · | Document Retrieval Using Global Word Co-Occurrence Patterns | · | Microprocessor Enhancement | · | Vehicle Occupant Sensing |
| · | DRAM (Dynamic Random Access Memory) | · | Multi-Dimensional Database Compression | · | Videoconferencing |
| · | Dynamic Manufacturing Modeling | · | Network Remote Access | · | Virtual Computer Workspaces |
| · | Ecommerce Pricing | · | Online Ad Tracking | · | Virtual Server |
| · | Electronic Address List Management | · | Online Auction Guarantees | · | Wireless Data |
| · | Electronic Message Advertising | · | Online Promotion | · | Wireless Digital Messaging |
| · | Embedded Broadcast Data | · | Optical Switching | · | Workspace With Moving Viewpoint |
| · | Encrypted Media & Playback Devices | · | Parallel Processing With Shared Memory |
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Patent Enforcement Litigation
Our operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights. Certain of our operating subsidiaries are parties to ongoing patent enforcement related litigation, alleging infringement by third parties of certain of the patented technologies owned or controlled by our operating subsidiaries.
Competition
We expect to encounter increased competition in the area of patent acquisitions and enforcement. This includes an increase in the number of competitors seeking to acquire the same or similar patents and technologies that we may seek to acquire. Entities including Allied Security Trust, Altitude Capital Partners, Coller IP, Intellectual Ventures, Millennium Partners, Open Innovation Network, RPX Corporation and Rembrandt IP Management compete in acquiring rights to patents, and we expect more entities to enter the market.
We also compete with venture capital firms and various industry leaders for technology licensing opportunities. Many of these competitors may have more financial and human resources than our operating subsidiaries. As we become more successful, we may find more companies entering the market for similar technology opportunities, which may reduce our market share in one or more technology industries that we currently rely upon to generate future revenue.
Other companies may develop competing technologies that offer better or less expensive alternatives to our patented technologies that we may acquire and/or out-license. Many potential competitors may have significantly greater resources than the resources that our operating subsidiaries possess. Technological advances or entirely different approaches developed by one or more of our competitors could render certain of the technologies owned or controlled by our operating subsidiaries obsolete and/or uneconomical.
Employees
As of December 31, 2008, on a consolidated basis, we had 41 full-time employees. None of our subsidiaries are a party to any collective bargaining agreement. We consider our employee relations to be good.
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 prospectus. If any of the risks discussed in this prospectus 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. All intellectual property acquisition, development, licensing and enforcement activities are conducted solely by certain of our wholly owned operating subsidiaries.
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RISKS RELATED TO OUR AR-ACACIA TECHNOLOGIES STOCK INVOLVES A HIGH
DEGREE OF RISK. BEFORE INVESTING IN OUR AR-ACACIA TECHNOLOGIES STOCK, YOU SHOULD
CAREFULLY CONSIDER THE SPECIFIC RISKS DETAILED IN THIS "RISK FACTORS" SECTION
AND ANY APPLICABLE PROSPECTUS SUPPLEMENT, TOGETHER WITH ALL OF THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT. IF ANY
OF THESE RISKS OCCUR, OUR BUSINESS RESULTS OF OPERATIONS AND FINANCIAL
CONDITION COULD BE HARMED, THE PRICE OF OUR AR-ACACIA TECHNOLOGIES STOCK COULD
DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
GENERAL RISKS
WE HAVE A HISTORY OF LOSSES AND WILL PROBABLY INCUR ADDITIONAL LOSSES IN THE FUTURE.
We have sustained substantial losses since our inception resulting in
an accumulated deficit, as of December 31, 2004, of $188.2 million on a
consolidated basis.inception. We may never become profitable, or if we do, we may never be able to sustain profitability. As of December 31, 2008, our accumulated deficit was $109.0 million. As of December 31, 2008, we had approximately $51.5 million in cash and investments and working capital of $42.6 million. We expect to incur significant research and
development,legal, marketing, general and administrative and legal expenses. As a result, it is more likely than not that we will incur losses for the foreseeable future. However, we believe our current cash and investments on hand will be sufficient to finance anticipated capital and operating requirements for at least the next twelve months.
IF WE, OR OUR SUBSIDIARIES, ENCOUNTER UNFORESEEN DIFFICULTIES AND CANNOT OBTAIN ADDITIONAL FUNDING ON FAVORABLE TERMS, OUR BUSINESS MAY SUFFER.
Acacia Research Corporation's
Our consolidated cash and cash equivalents along with short-term investments totaled $52.4$51.5 million and $51.4 million at December 31, 2004.2008 and 2007, respectively. To date, the CombiMatrix group has relied primarily upon selling equity
securities, as well as payments from strategic partners, to generate the funds
needed to finance the implementation of the CombiMatrix group's business
strategies. To date, the Acacia Technologies group haswe have relied primarily upon selling of equity securities and payments from our V-chip technology licensees
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(primarily in 2001) and Digital Media Transmission ("DMT(R)") technology
licensees (2003 to current) to generate the funds needed to finance our operations and the operations of the Acacia Technologies group. See the risk factor entitled,
"Although we recognized significant revenue from the V-chip technology patent
held by the Acacia Technologies group, this patent expired in July 2003, and if
the group does not develop other recurring sources of revenue, its financial
condition will be adversely impacted" on page 9 of this prospectus.
our operating subsidiaries.
We cannot assure you that we will not encounter unforeseen difficulties, including the outside influences identified above,below, that may deplete our capital resources more rapidly than anticipated. As a result, we and or our subsidiary companies may be required to obtain additional financing through bank borrowings, debt or equity financings or otherwise, which would require us to make additional investments or face a dilution of our equity interests. Any efforts to seek additional funds could be made through equity, debt or other external financings. Nevertheless, we cannot assure that additional funding will be available on favorable terms, if at all. If we fail to obtain additional funding when needed for our subsidiary companies and ourselves, we may not be able to execute our business plans and our business may suffer.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, WE CANNOT ASSURE THAT OUR
OPERATIONS WILL BE PROFITABLE.
We commenced operations in 1993 and, accordingly, have a limited
operating history. In addition, certain of our subsidiary companies are in the
early stages of development and/or operations and have limited operating
histories. We also recently acquired eleven (11) new subsidiaries, and although
we conducted customary due diligence before completing the acquisition, we
cannot assure that our projections for profitability will be accurate because of
our limited history with these new companies. You should consider our prospects
in light of the risks, expenses and difficulties frequently encountered by
companies with such limited operating histories. Since we have a limited
operating history, we cannot assure you that our operations will be profitable
or that we will generate sufficient revenues to meet our expenditures and
support our activities.
We have sustained substantial losses since our inception resulting in
an accumulated deficit as of December 31, 2004, of $188.2 million on a
consolidated basis. If we continue to incur operating losses in future periods,
we may not have enough money to expand our business and our subsidiary
companies' businesses in the future.
FAILURE TO EFFECTIVELY MANAGE OUR GROWTH COULD PLACE STRAINS ON OUR MANAGERIAL, OPERATIONAL AND FINANCIAL RESOURCES AND COULD ADVERSELY AFFECT OUR BUSINESS AND OPERATING RESULTS.
Our growth has placed, and is expected to continue to place, a strain on our managerial, operational and financial resources. Further, as our subsidiary companies'companies’ businesses grow, we will be required to manage multiple relationships. Any further growth by us or our subsidiary companies or an increase in the number of our strategic relationships will increase this strain on our managerial, operational and financial resources. This strain may inhibit our ability to achieve the rapid execution necessary to successfully implement our business plan.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO EXPAND OUR ORGANIZATION TO MATCH THE GROWTH OF OUR SUBSIDIARIES.
As our operating subsidiaries grow, the administrative demands upon Acacia
Research Corporationus and on our operating subsidiaries, will grow, and our success will depend upon our ability to meet those demands. These demands include increased accounting, management, legal services, staff support, for our board of directors, and general office services. We may need to hire additional qualified personnel to meet these demands, the cost and quality of which is dependent in part upon market factors outside of our control. Further, we will need to effectively manage the training and growth of our staff to maintain an efficient and effective workforce, and our failure to do so could adversely affect our business and operating results.
THE AVAILABILITY OF SHARES FOR SALE IN THE FUTURE COULD REDUCE THE MARKET PRICE
OF
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OUR COMMON STOCK.
6
InREVENUES WILL BE UNPREDICTABLE, AND THIS MAY HARM OUR FINANCIAL CONDITION.
From January 2005 to present, certain of our operating subsidiaries have continued to execute our strategy in the future, we may issue securitiesarea of patent portfolio and patent portfolio rights acquisitions. Currently, on a consolidated basis, our operating subsidiaries own or control the rights to raise cash for acquisitions.over 100 patent portfolios, which include U.S. patents and certain foreign counterparts, covering technologies used in a wide variety of industries. These acquisitions continue to expand and diversify our revenue generating opportunities. We may also pay for interests in additional subsidiary companies by using a
combination ofbelieve that our cash and cash equivalent balances, anticipated cash flow from operations and other external sources of available credit, will be sufficient to meet our common stock or just our common stock. We may also
issue securities convertible into our common stock. Any of these events may
dilute your ownership interest in our companycash requirements through at least March 2010, and have an adverse impact onfor the priceforeseeable future. However, due to the nature of our common stock.
In addition, saleslicensing business and uncertainties regarding the amount and timing of a substantial amountthe receipt of license fees from potential infringers, stemming primarily from uncertainties regarding the outcome of enforcement actions, rates of adoption of our common stock inpatented technologies, the publicgrowth rates of our existing licensees and other factors, we cannot currently predict the amount and timing of the receipt of license fee revenues with a sufficient degree of precision.
As a result, our revenues may vary significantly from quarter to quarter, which could make our business difficult to manage and cause our quarterly results to be below market or the perception that these sales may occur, could reduceexpectations. If this happens, the market price of our common stock. Thisstock may decline significantly.
OUR OPERATING SUBSIDIARIES DEPEND UPON RELATIONSHIPS WITH OTHERS TO PROVIDE TECHNOLOGY-BASED OPPORTUNITIES THAT CAN DEVELOP INTO PROFITABLE ROYALTY-BEARING LICENSES, AND IF IT IS UNABLE TO MAINTAIN AND GENERATE NEW RELATIONSHIPS, THEN IT MAY NOT BE ABLE TO SUSTAIN EXISTING LEVELS OF REVENUE OR INCREASE REVENUE.
Neither we nor our operating subsidiaries invent new technologies or products but instead depend on the identification and acquisition of new patents and inventions through their relationships with inventors, universities, research institutions, and others. If our operating subsidiaries are unable to maintain those relationships and continue to grow new relationships, then they may not be able to identify new technology-based opportunities for growth and sustainable revenue.
We cannot be certain that current or new relationships will provide the volume or quality of technologies necessary to sustain our business. In some cases, universities and other technology sources may compete against us as they seek to develop and commercialize technologies. Universities may receive financing for basic research in exchange for the exclusive right to commercialize resulting inventions. These and other strategies may reduce the number of technology sources and potential clients to whom we can market our services. If we are unable to secure new sources of technology, it could have a material adverse effect on our operating results and financial condition.
THE SUCCESS OF OUR OPERATING SUBSIDIARIES DEPENDS IN PART UPON THEIR ABILITY TO RETAIN THE BEST LEGAL COUNSEL TO REPRESENT THEM IN PATENT ENFORCEMENT LITIGATION.
The success of our licensing business depends upon our operating subsidiaries’ ability to retain the best legal counsel to prosecute patent infringement litigation. As our operating subsidiaries’ patent enforcement actions increase, it will become more difficult to find the best legal counsel to handle all of our cases because many of the best law firms may have a conflict of interest that prevents its representation of our subsidiary companies.
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OUR OPERATING SUBSIDIARIES, IN CERTAIN CIRCUMSTANCES, RELY ON REPRESENTATIONS, WARRANTIES AND OPINIONS MADE BY THIRD PARTIES, THAT IF DETERMINED TO BE FALSE OR INACCURATE, MAY EXPOSE OUR OPERATING SUBSIDIARIES TO CERTAIN LIABILITIES THAT COULD BE MATERIAL.
From time to time, our operating subsidiaries may rely upon representations and warranties made by third parties from whom certain of our operating subsidiaries acquired patents or the exclusive rights to license and enforce patents. We also impairmay rely upon the opinions of purported experts. In certain instances, we may not have the opportunity to independently investigate and verify the facts upon which such representations, warranties, and opinions are made. By relying on these representations, warranties and opinions, our operating subsidiaries may be exposed to liabilities in connection with the licensing and enforcement of certain patents and patent rights. It is difficult to predict the extent and nature of such liabilities which, in some instances, may be material.
IN CONNECTION WITH PATENT ENFORCEMENT ACTIONS CONDUCTED BY CERTAIN OF OUR SUBSIDIARIES, A COURT MAY RULE THAT OUR SUBSIDIARIES HAVE VIOLATED CERTAIN STATUTORY, REGULATORY, FEDERAL, LOCAL OR GOVERNING RULES OR STANDARDS, WHICH MAY EXPOSE US AND OUR OPERATING SUBSIDIARIES TO MATERIAL LIABILITIES, WHICH COULD MATERIALLY HARM OUR OPERATING RESULTS AND OUR FINANCIAL POSITION.
In connection with any of our patent enforcement actions, it is possible that a defendant may request and/or a court may rule that we have violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against us or our operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material, and if required to be paid by us or our operating subsidiaries, could materially harm our operating results and our financial position.
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 December 31, 2008, our investments in marketable securities include certain 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 December 31, 2008, the par value of auction rate securities collateralized by student loan portfolios totaled $2.75 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 December 31, 2008 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 7 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ending December 31, 2008, we have recorded an other-than-temporary loss of $250,000 for our student loan collateralized instruments in the accompanying consolidated statements of operations for the year ended December 31, 2008.
15
At December 31, 2008, we also held auction rate securities with a par value totaling $975,000, issued by high credit quality closed-end investment companies. Despite the reduction in liquidity resulting from the failure of auctions for these securities since February 2008, the issuers of these auction rate securities have redeemed, at par, approximately 66% of the securities held by us since February 2008, and have indicated that they continue to evaluate ways to provide additional liquidity to their auction rate security holders. Additionally, these securities continue to be AAA rated and the underlying funds continue to meet certain specified asset coverage tests required by the rating agencies, as well as the 200% asset coverage test with respect to auction rate securities set forth in the Investment Company Act of 1940, as amended. However, due to the impact of the reduced liquidity associated with these securities as of December 31, 2008, we recorded an other-than-temporary loss on these auction rate securities of $236,000 in the accompanying consolidated statements of operations for the year ended December 31, 2008, and have classified our auction rate securities issued by closed-end investment companies as noncurrent assets in the accompanying December 31, 2008 consolidated balance sheet.
The capital and credit markets have been experiencing extreme volatility and disruption for more than 12 months. In recent weeks, the volatility and disruption have reached unprecedented levels. In several cases, the markets have exerted downward pressure on stock prices and credit capacity for certain issuers. Given the deteriorating credit markets, and the sustained 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 these market conditions were to persist despite our ability to raise
additional capital through the sale of our securities.
DELAWARE LAW AND OUR CHARTER DOCUMENTS CONTAIN PROVISIONS THAT COULD DISCOURAGE
OR PREVENT A POTENTIAL TAKEOVER OF ACACIA RESEARCH CORPORATION THAT MIGHT
OTHERWISE RESULT IN OUR STOCKHOLDERS RECEIVING A PREMIUM OVER THE MARKET PRICE
OF THEIR SHARES.
Provisions of Delaware law and our certificate of incorporation and
bylaws could make more difficult the acquisition of our company by means of a
tender offer, proxy contest or otherwise, and the removal of incumbent officers
and directors. These provisions include:
o Section 203 of the Delaware General Corporation Law, which
prohibits a merger with a 15%-or-greater stockholder,hold such as
a party that has completed a successful tender offer,investments until three years after that party became a 15%-or-greater
stockholder;
o amendment of our bylaws by the stockholders requires a
two-thirds approval of the outstanding shares;
o the authorization in our certificate of incorporation of
undesignated preferred stock, which could be issued without
stockholder approval in a manner designed to prevent or
discourage a takeover;
o provisions in our bylaws eliminating stockholders' rights to
call a special meeting of stockholders, which could make it
more difficult for stockholders to wage a proxy contest for
control of our board of directors or to vote to repeal any of
the anti-takeover provisions contained in our certificate of
incorporation and bylaws; and
o the division of our board of directors into three classes with
staggered terms for each class, which could make it more
difficult for an outsider to gain control of our board of
directors.
Such potential obstacles to a takeover could adversely affect the
ability of our stockholders to receive a premium price for their stock in the
event another company wants to acquire us.
WE MAY INCUR INCREASED COSTS AS A RESULT OF RECENTLY ENACTED AND PROPOSED
CHANGES IN LAWS AND REGULATIONS RELATING TO CORPORATE GOVERNANCE MATTERS
Recently enacted and proposed changes in the laws and regulations
affecting public companies, including the provisions of the Sarbanes-Oxley Act
of 2002 and rules adopted or proposed by the Securities and Exchange Commission
and by the American Stock Exchange, will result in increased costs to us as we
evaluate the implications of any new rules and respond to their requirements.
New rules could make it more difficult or more costly for us to obtain certain
types of insurance, including director and officer liability insurance, andmaturity, we may be forcedrequired to accept reduced policy limits and coveragerecord additional impairment charges 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 incur
substantially higher costs to obtaina complete loss of the same or similar coverage. The impact of
these events could also make it more difficult for us to attract and retain
qualified persons to serveinvestment in the long-term which may have a material adverse effect on our boardbusiness, results of directors,operations, liquidity, and financial condition. Refer to Note 7 to our board committees or as
executive officers. We cannot predict or estimateconsolidated financial statements, included in our Annual Report on Form 10-K for the amountfiscal year ended December 31, 2008, for additional information about our investments in auction rate securities and the implementation of the additional
costs we may incur or the timing of such costs to comply with any new rules and
regulations.
SFAS No. 157, “Fair Value Measurements.”
RISKS RELATINGRELATED TO THE ACACIA TECHNOLOGIES GROUP
The risk factors beginning on this page discuss risks relating to the
Acacia Technologies group. Because each holder of AR-Acacia Technologies stock,
is a holder of the common stock of one company, Acacia Research Corporation, the
risks associated with the CombiMatrix group could affect the AR-Acacia
Technologies stock. As such, we also urge you to read carefully the section
"Risks Relating to the CombiMatrix Group" below.
7
OUR INDUSTRY
BECAUSE OUR BUSINESS OPERATIONS ARE SUBJECT TO MANY UNCONTROLLABLE OUTSIDE INFLUENCES, WE MAY NOT SUCCEED.
Our Acacia Technologies group'slicensing and enforcement business operations are subject to numerous risks from outside influences, including the following:
o NEW LEGISLATION, REGULATIONS OR RULES RELATED TO OBTAINING
PATENTS OR ENFORCING PATENTS COULD SIGNIFICANTLY INCREASE
ACACIA TECHNOLOGIES GROUP'S OPERATING COSTS AND DECREASE ITS
REVENUE.
New legislation, regulations or rules related to obtaining patents or enforcing patents could significantly increase our operating costs and decrease our revenue.
Our Acacia Technology group acquiresoperating subsidiaries acquire patents with enforcement opportunities and isare spending a significant amount of resources to enforce those patents. If new legislation, regulations or rules are implemented either by Congress, the United StatesU.S. Patent and Trademark Office, or USPTO, or the courts that impact the patent application process, the patent enforcement process or the rights of patent holders, these changes could negatively affect our expenses and revenue. For example, new rules regarding the burden of proof in patent enforcement actions could significantly increase the cost of our enforcement actions, and new standards or limitations on liability for patent infringement could negatively impact our revenue derived from such enforcement actions. While
Trial judges and juries often find it difficult to understand complex patent enforcement litigation, and as a result, we are not aware that any such changes are likelymay need to occurappeal adverse decisions by lower courts in the foreseeable
future, we cannot assure you that such changes will not occur.
o TRIAL JUDGES AND JURIES OFTEN FIND IT DIFFICULT TO UNDERSTAND
COMPLEX PATENT ENFORCEMENT LITIGATION, AND AS A RESULT, WE MAY
NEED TO APPEAL ADVERSE DECISIONS BY LOWER COURTS IN ORDER TO
SUCCESSFULLY ENFORCE OUR PATENTS.
order to successfully enforce our patents.
It is difficult to predict the outcome of patent enforcement litigation at the trial level. It is often difficult for juries and trial judges to understand complex, patented technologies, and as a result, there is a higher rate of successful appeals in patent enforcement litigation than more standard business litigation. Such appeals are expensive and time consuming, resulting in increased costs and delayed revenue. Although we diligently pursue enforcement litigation, we cannot predict with significant reliability the decisions made by juries and trial courts.
o MORE PATENT APPLICATIONS ARE FILED EACH YEAR RESULTING IN
LONGER DELAYS IN GETTING PATENTS ISSUED BY THE UNITED STATES
PATENT AND TRADEMARK OFFICE.
Our Acacia Technology group holds
16
More patent applications are filed each year resulting in longer delays in getting patents issued by the USPTO.
Certain of our operating subsidiaries hold and continuescontinue to acquire pending patents. We have identified a trend of increasing patent applications each year, which we believe is resulting in longer delays in obtaining approval of pending patent applications. The application delays could cause delays in recognizing revenue from these patents and could cause us to miss opportunities to license patents before other competing technologies are developed or introduced into the market. See the subheading "COMPETITION IS INTENSE IN THE INDUSTRIES IN WHICH OUR
SUBSIDIARIES DO BUSINESS AND AS A RESULT, WE MAY NOT BE ABLE TO GROW OR MAINTAIN
OUR MARKET SHARE FOR OUR TECHNOLOGIES AND PATENTS," on page 9 “Competition is intense in the industries in which our subsidiaries do business and as a result, we may not be able to grow or maintain our market share for our technologies and patents,” below.
o FEDERAL COURTS ARE BECOMING MORE CROWDED, AND AS A RESULT,
PATENT ENFORCEMENT LITIGATION IS TAKING LONGER.
Federal courts are becoming more crowded, and as a result, patent enforcement litigation is taking longer.
Our patent enforcement actions are almost exclusively prosecuted in federal court. Federal trial courts that hear our patent enforcement actions also hear criminal cases. Criminal cases always take priority over our actions. As a result, it is difficult to predict the length of time it will take to complete an enforcement action. Moreover, we believe there is a trend in increasing numbers of civil lawsuits and criminal proceedings before federal judges, and as a result, we believe that the risk of delays in our patent enforcement actions will have a greater affect on our business in the future unless this trend changes.
o ANY REDUCTIONS IN THE FUNDING OF THE UNITED STATES PATENT AND
TRADEMARK OFFICE COULD HAVE AN ADVERSE IMPACT ON THE COST OF
PROCESSING PENDING PATENT APPLICATIONS AND THE VALUE OF THOSE
PENDING PATENT APPLICATIONS.
Any reductions in the funding of the USPTO could have an adverse impact on the cost of processing pending patent applications and the value of those pending patent applications.
The assets of Acacia Technologies group consistsour operating subsidiaries consist of patent portfolios, including pending patent applications before the U.S. Patent and Trademark
Office (USPTO).USPTO. The value of our patent portfolios is dependent upon the issuance of patents in a timely manner, and any reductions in the funding of the USPTO could negatively impact the value of our assets. Further, reductions in funding from Congress could result in higher patent application filing and maintenance fees charged by the USPTO, causing an unexpected increase in our expenses.
8
o COMPETITION IS INTENSE IN THE INDUSTRIES IN WHICH OUR
SUBSIDIARIES DO BUSINESS AND AS A RESULT, WE MAY NOT BE ABLE
TO GROW OR MAINTAIN OUR MARKET SHARE FOR OUR TECHNOLOGIES AND
PATENTS.
Our Acacia Technologies group expects
Competition is intense in the industries in which our subsidiaries do business and as a result, we may not be able to grow or maintain our market share for our technologies and patents.
We expect to encounter competition in the area of patent acquisition and enforcement as the number of companies entering this market is increasing. This includes competitors seeking to acquire the same or similar patents and technologies that we may seek to acquire. Companies such
as British Technology Group, Rembrandt Management Group, andEntities including Allied Security Trust, Altitude Capital Partners, Coller IP, Intellectual Ventures, LLC are alreadyMillennium Partners, Open Innovation Network, RPX Corporation and Rembrandt IP Management compete in the business of acquiring the rights to patents, for
the purpose of enforcement, and we expect more companiesentities to enter the market. As new technological advances occur, many of our patented technologies may become obsolete before they are completely monetized. If we are unable to replace obsolete technologies with more technologically advanced patented technologies, then this obsolescence could have a negative effect on our ability to generate future revenues.
o OUR PATENTED TECHNOLOGIES FACE UNCERTAIN MARKET VALUE.
Our Acacia Technologies group haslicensing business also competes with venture capital firms and various industry leaders for technology licensing opportunities. Many of these competitors may have more financial and human resources than our company. As we become more successful, we may find more companies entering the market for similar technology opportunities, which may reduce our market share in one or more technology industries that we currently rely upon to generate future revenue.
17
Our patented technologies face uncertain market value.
Our operating subsidiaries have acquired patents and technologies that are at early stages of adoption in the commercial and consumer markets. Demand for some of these technologies is untested and is subject to fluctuation based upon the rate at which our licensees will adopt our patents and technologies in their products and services. SeeRefer to the related risk factor beginning on page 11 of this prospectus.
o AS PATENT ENFORCEMENT LITIGATION BECOMES MORE PREVALENT, IT
MAY BECOME MORE DIFFICULT FOR US TO VOLUNTARILY LICENSE OUR
PATENTS.
below.
As patent enforcement litigation becomes more prevalent, it may become more difficult for us to voluntarily license our patents.
We believe that the more prevalent patent enforcement actions become, the more difficult it will be for us to voluntarily license our patents. As a result, we may need to increase the number of our patent enforcement actions to cause infringing companies to license the patent or pay damages for lost royalties. This may increase the risks associated with an investment in our company.
o THE FOREGOING OUTSIDE INFLUENCES MAY AFFECT OTHER RISK FACTORS
DESCRIBED IN THIS PROSPECTUS
The foregoing outside influences may affect other risk factors described in this prospectus.
Any one of the foregoing outside influences may cause our company to need additional financing to meet the challenges presented or to compensate for a loss in revenue, and we may not be able to obtain the needed financing. See the heading "If“If we, or our subsidiaries, encounter unforeseen difficulties and cannot obtain additional funding on favorable terms, our business may suffer"
beginning on page 5 of this prospectus.
THE ACACIA TECHNOLOGIES GROUP HAS INCURRED LOSSES IN THE PAST AND EXPECTS TO
INCUR ADDITIONAL LOSSES IN THE FUTURE.
The Acacia Technologies group has sustained substantial losses in the
past. We expect the Acacia Technologies group to incur significant legal,
marketing, general and administrative expenses. As a result, we expect the
Acacia Technologies group to incur losses for the foreseeable future.
ALTHOUGH WE RECOGNIZED SIGNIFICANT REVENUE FROM THE V-CHIP TECHNOLOGY PATENT
HELD BY THE ACACIA TECHNOLOGIES GROUP, THIS PATENT EXPIRED IN JULY 2003, AND IF
THE GROUP DOES NOT DEVELOP OTHER RECURRING SOURCES OF REVENUE, ITS FINANCIAL
CONDITION WILL BE ADVERSELY IMPACTED.
The Acacia Technologies group, and Acacia Research Corporation as a
whole, recognized $27.5 million in revenues from licensing the V-chip patent to
television manufacturers, including $1.5 million in previously deferred revenue
during the year ended December 31, 2004. The Acacia Technologies group's patent
on the V-chip technology expired in July 2003, and we do not expect to recognize
further revenue from this patent.
In 2003, the Acacia Technologies group began to commercially license
its DMT technology recognizing approximately $3.5 million in DMT license fee
revenues to date, and intends to acquire and license additional intellectual
property. During the year ended December 31, 2004, we recognized $2.8 million in
revenue from our Digital Media Transmission patents. Pursuant to assignment
9
agreements related to the purchase of Acacia Media Technologies, the former
patent portfolio owners are entitled to 15% of future net revenues, as defined
by each agreement, generated by the digital media transmission patents.
In July 2004, the Acacia Technologies group acquired U.S. Patent No.
6,226,677 from LodgeNet Entertainment Corporation, which covers technology and
methods for redirecting users to a login page when accessing the Internet, and
launched its licensing and enforcement program for this patent in the third
quarter of 2004. Acacia Global Acquisition Corporation's acquisition of the
assets of Global Patent Holdings, LLC in 2005, provides the Acacia Technologies
group with ownership of companies that control 27 patent portfolios, which
include 120 U.S. patents and certain foreign counterparts, and cover
technologies used in a wide variety of industries. The acquisitions expand and
diversify the Acacia Technologies group's revenue generating opportunities. The
Acacia Technologies group believes that its cash and cash equivalent balances,
including the proceeds from the February 2005 equity financing received
following the acquisition of the assets from Global Patent Holdings, anticipated
cash flow from operations and other external sources of available credit, will
be sufficient to meet its cash requirements through the next twelve months.
However, due to the nature of our licensing business and uncertainties regarding
the amount and timing of the receipt of license fees from potential infringers,
stemming primarily from uncertainties regarding the outcome of enforcement
actions, rates of adoption of our patented technologies, the growth rates of our
existing licensees and other factors, we cannot currently predict the amount and
timing of the receipt of license fee revenues with a sufficient degree of
precision.
THE ACACIA TECHNOLOGIES GROUP MAY FAIL TO MEET MARKET EXPECTATIONS BECAUSE OF
FLUCTUATIONS IN ITS QUARTERLY OPERATING RESULTS, WHICH COULD CAUSE THE PRICE OF
AR-ACACIA TECHNOLOGIES STOCK TO DECLINE.
The Acacia Technologies group's revenues and operating results have
fluctuated in the past and may continue to fluctuate significantly from quarter
to quarter in the future. It is possible that in future periods the Acacia
Technologies group's revenues could fall below the expectations of securities
analysts or investors, which could cause the market price of our AR-Acacia
Technologies stock to decline. The following are among the factors that could
cause the Acacia Technologies group's operating results to fluctuate
significantly from period to period:
o the performance of our third-party licensees;
o costs related to acquisitions, alliances, licenses and other
efforts to expand our operations;
o the timing of payments under the terms of any customer or
license agreements into which the Acacia Technologies group
may enter; and
o expenses related to, and the results of, patent filings and
other enforcement proceedings relating to intellectual
property rights, as more fully described on page 8.
THE ACACIA TECHNOLOGIES GROUP'S REVENUES WILL BE UNPREDICTABLE, AND THIS MAY
HARM ITS FINANCIAL CONDITION.
The amount and timing of revenues that the Acacia Technologies group
may realize from its business will be unpredictable because:
o whether the Acacia Technologies group generates revenues
depends, in part, on the success of its licensees;
o its cycle of obtaining licensees may be lengthy; and
o it cannot be sure as to the timing of receipt of payment.
As a result, the Acacia Technologies group's revenues may vary
significantly from quarter to quarter, which could make its business difficult
to manage and cause its quarterly results to be below market expectations. If
this happens, the price of our AR-Acacia Technologies stock may decline
significantly.
10
TECHNOLOGY COMPANY STOCK PRICES ARE ESPECIALLY VOLATILE, AND THIS VOLATILITY MAY
DEPRESS THE PRICE OF OUR AR-ACACIA TECHNOLOGIES STOCK.
The stock market has experienced significant price and volume
fluctuations, and the market prices of technology companies have been highly
volatile. We believe that various factors may cause the market price of our
AR-Acacia Technologies stock to fluctuate, perhaps substantially, including,
among others, the following:
o announcements of developments in our patent enforcement
actions
o developments or disputes concerning our patents;
o our or our competitors' technological innovations;
o developments in relationships with licensees;
o variations in our quarterly operating results;
o our failure to meet or exceed securities analysts'
expectations of our financial results; or
o a change in financial estimates or securities analysts'
recommendations;
o changes in management's or securities analysts' estimates of
our financial performance;
o changes in market valuations of similar companies;
o announcements by us or our competitors of significant
contracts, acquisitions, strategic partnerships, joint
ventures, capital commitments, new technologies, or patents;
and
o failure to complete significant transactions.
For example, the Nasdaq Computer Technology Index had a range of
$767.48 - $979.56 during the 52-weeks ended March 10, 2005. Over the same
period, our AR-Acacia Technologies stock fluctuated within a range of $2.77 -
$7.35. We believe fluctuations in our stock price during this period could have
been caused by court rulings in our patent enforcement actions. Court rulings in
patent enforcement actions are often difficult to understand, even when
favorable or neutral to the value of our patents, and we believe that investors
in the market may overreact, causing fluctuations in our stock prices that may
not accurately reflect the impact of court rulings on our business operations
and assets.
In the past, companies that have experienced volatility in the market
price of their stock have been the objects of securities class action
litigation. If our AR-Acacia Technologies stock was the object of securities
class action litigation, it could result in substantial costs and a diversion of
management's attention and resources, which could materially harm the business
and financial results of the Acacia Technologies group.
suffer
THE MARKETS SERVED BY THE ACACIA TECHNOLOGIES GROUPOUR OPERATING SUBSIDIARIES ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE, AND IF THE ACACIA TECHNOLOGIES GROUP ISOUR OPERATING SUBSIDIARIES ARE UNABLE TO DEVELOP AND ACQUIRE NEW TECHNOLOGIES AND PATENTS, ITS REVENUES COULD STOP GROWING OR COULD DECLINE.
The markets served by theour operating subsidiaries’ licensees of Acacia Technologies group frequently undergo transitions in which products rapidly incorporate new features and performance standards on an industry-wide basis. Products for communications applications, high-speed computing applications, as well as other applications covered by the Acacia Technologies group'sour operating subsidiaries’ intellectual property, are based on continually evolving industry standards. The Acacia Technologies
group'sOur ability to compete in the future will, however, depend on itsour ability to identify and ensure compliance with evolving industry standards. This will require our continued efforts and success of acquiring new patent portfolios with licensing and enforcement opportunities. However, we expect to have sufficient liquidity and capital resources for the foreseeable future in order 11
to maintain the level of acquisitions we believe we need to keep pace with these technological advances. However, outside influences may cause the need for greater liquidity and capital resources than expected, as described under the caption "Because“Because our business operations are subject to many uncontrollable outside influences, we may not succeed" beginningsucceed” above.
THE RECENT FINANCIAL CRISIS AND CURRENT UNCERTAINTY IN GLOBAL ECONOMIC CONDITIONS COULD NEGATIVELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS, AND FINANCIAL CONDITION
Our revenue-generating opportunities depend on page 8the use of this prospectus.
THE SUCCESS OF OUR ACACIA TECHNOLOGIES GROUP DEPENDS IN PART UPON OUR ABILITY TO
RETAIN THE BEST LEGAL COUNSEL TO REPRESENT US IN PATENT ENFORCEMENT LITIGATION.our patented technologies by existing and prospective licensees, the overall demand for the products and services of our licensees, and on the overall economic and financial health of our licensees. The recent financial crisis affecting the banking system and financial markets and the current uncertainty in global economic conditions have resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in the credit, equity and fixed income markets. If the current worldwide economic downturn continues, many of our licensees’ customers, which may rely on credit financing, may delay or reduce their purchases of our licensees’ products and services. In addition, the success of the Acacia Technologies group depends upon
our ability to retain the best legal counsel to prosecute patent infringement
litigation. As our patent enforcement actions increase, it will become more
difficult to find the best legal counsel to handle alluse or adoption of our cases because many
of the best law firms may have a conflict of interest that prevents its
representation ofpatented technologies is often based on current and forecasted demand for our company.
RISKS RELATING TO THE COMBIMATRIX GROUP
The risk factors beginning on this page discuss risks relating to the
CombiMatrix group. Because each holder of AR-Acacia Technologies stock is also a
holder of the common stock of one company, Acacia Research Corporation, the
risks associated with the CombiMatrix group could affect our AR-Acacia
Technologies stock. As such, we also urge you to read the following section
carefully.
BECAUSE OUR BUSINESS OPERATIONS ARE SUBJECT TO MANY UNCONTROLLABLE OUTSIDE
INFLUENCES, WE MAY NOT SUCCEED.
Our CombiMatrix group's business operations are subject to numerous
risks from outside influences, including the following:
o TECHNOLOGICAL ADVANCES MAY MAKE OUR COMBIMATRIX GROUP
SEMICONDUCTOR BASED ARRAY TECHNOLOGY OBSOLETE OR LESS
COMPETITIVE, AND AS A RESULT, OUR REVENUE AND THE VALUE OF OUR
ASSETS COULD BECOME OBSOLETE OR LESS COMPETITIVE.
Our CombiMatrix grouplicensees’ products and services are dependent uponin the marketplace and may require companies to make significant initial commitments of capital and other resources. If the negative conditions in the global credit markets delay or prevent our semiconductor based array technology. The semiconductor based array technology
is an advancement in conventional arrays that are used forlicensees’ and their customers’ access to credit, overall consumer spending on the same purpose.
Current array technologies have revolutionized drug discovery and development,
and we believe that our CombiMatrix group's array technology provides
characteristics, including flexibility, superior cost metrics, and performance,
which address certain needs of the life sciences market which are not addressed
by conventional arrays and offers the latest in technological advances in this
area. Our products and services are substantially dependent uponof our abilitylicensees may decrease and the adoption or use of our patented technologies may slow, respectively. Further, if the markets in which our licensees’ participate experience further economic downturns, as well as a slow recovery period, this could negatively impact our licensees’ long-term sales and revenue generation, margins and operating expenses, which could impact the magnitude of revenues generated or projected to offer the latest in semiconductor based array technology in the SNP genotyping,
gene expression profiling and proteomic markets. We believe technological
advances of conventional arrays and semiconductor based arrays are currently
being developedbe generated by our existing competitionlicensees, which could have a material impact on our business, license fee generating opportunities, operating results and potential new competitors infinancial condition.
18
In addition, we have significant patent related intangible assets recorded on our consolidated balance sheet. We will continue to evaluate the market, including Affymetrix, Inc., Agilent Technologies, Inc., Becton,
Dickinson and Company, Ciphergen Biosystems, Inc., Gene Logic Inc., Illumina,
Inc., Johnson & Johnson, Nanogen, Inc., Orchid Biosciences, Inc., Applera
Corporation, Roche Diagnostics GmbH and Sequenom, Inc. We also expect to face
additional competition from new market entrants and consolidationrecoverability of the carrying amount of our existing competitors. Many of the CombiMatrix group's competitors have existing
strategic relationships with major pharmaceutical and biotechnology companies,
greater commercial experience and substantially greater financial and personnel
resources than we do. We expect new competitors to emerge and the intensity of
competition to increase in the future. If these companies are able to offer
technological advances to conventional arrays or semiconductor based arrays, our
products may become less valuable or even obsolete. While we continue to invest
resources in research and development to enhance the technology of our products
and services, we cannot provide any assurance that our competitors or new
competitors will not enter the market with the same or similar technological
advances before we are able to do so.
o NEW ENVIRONMENTAL REGULATION MAY MATERIALLY INCREASE THE NET
LOSSES OF OUR COMBIMATRIX GROUP
The CombiMatrix group's operations involve the use, transportation,
storage and disposal of hazardous substances, and as a result it is subject to
environmental and health and safety laws and regulations. Any changes in these
laws and regulations could increase CombiMatrix's compliance costs, and as a
result, could materially increase the net losses of our CombiMatrix group.
12
o OUR TECHNOLOGIES FACE UNCERTAIN MARKET VALUE.
Our CombiMatrix group includes the following technologies and products
that were recently introduced into the market: CustomArray(TM), DNA Microarray,
CustomArray(TM), 12K DNA expression array andpatent related products,
Design-on-Demand(TM) Arrays, and NanoArrayTM technology. These technologies and
products have not gained widespread market acceptance, and we cannot provide any
assurance that the increase, if any, in market acceptance of these technologies
and products will meet or exceed our expectations.
Further, our CombiMatrix group is currently developing the following
technologies and products that have not yet been introduced into the market: (a)
Bench-Top DNA Microarray Synthesizer for CustomArray(TM) formatted arrays, (b)
microarray technology for the detection of biological threat agents, (b) drug
discovery and development using the CustomArray(TM) platform, and (c)
nanotechnology-based chemical sensors to be used for the detection of biological
agents in air and water. The level of market acceptance of these technologies
and products will have a significant impact upon our results of operations, and
we cannot provide any assurance that the increase, if any, in market acceptance
of these technologies and products will meet or exceed our expectations.
o THE FOREGOING OUTSIDE INFLUENCES MAY AFFECT OTHER RISK FACTORS
DESCRIBED IN THIS PROSPECTUS
Any one of the foregoing outside influences may cause our company to
need additional financing to meet the challenges presented or to compensate for
a loss in revenue,intangible assets on an ongoing basis, and we may not be able to obtain the needed financing. See
the heading "If we, orincur substantial impairment charges, which would adversely affect our subsidiaries, encounter unforeseen difficulties and
cannot obtain additional funding on favorable terms, our business may suffer"
beginning on page 5 of this prospectus. Further, any one of the foregoing
outside influences affecting the CombiMatrix group could make it less likely
that our CombiMatrix group will be able to gain acceptance of its array
technology by researchers in the pharmaceutical, biotechnology and academic
communities. See the heading "If the CombiMatrix group's new and unproven
technology is not used by researchers in the pharmaceutical, biotechnology and
academic communities, its business will suffer" beginning on page 16 of this
prospectus.
THE COMBIMATRIX GROUP HAS A HISTORY OF LOSSES AND EXPECTS TO INCUR ADDITIONAL
LOSSES IN THE FUTURE.
The CombiMatrix group has sustained substantial losses since its
inception. The CombiMatrix group may never become profitable, or if it does, it
may never be able to sustain profitability. We expect the CombiMatrix group to
incur significant research and development, marketing, general and
administrative expenses. As a result, we expect the CombiMatrix group to incur
losses for the foreseeable future.
THE COMBIMATRIX GROUP MUST ENTER INTO NEW STRATEGIC PARTNERSHIPS TO GENERATE
REVENUE CONSISTENT WITH ITS OPERATING HISTORY AS A RESULT OF THE COMPLETION OF
THE RELATIONSHIP WITH ROCHE DIAGNOSTICS GmbH
In March 2004, the CombiMatrix group completed all phases of its
research and development agreement with Roche. As a result of completing all of
its obligations under this agreement and in accordance with the CombiMatrix
group's revenue recognition policies for multiple-element arrangements, the
CombiMatrix group recognized all previously deferred Roche related contract
revenues totaling $17,302,000 during the first quarter of 2004. To date, the
CombiMatrix group has relied primarily upon selling equity securities, as well
as payments from strategic partners, to generate the funds needed to finance the
implementation of the CombiMatrix group's business strategies. The CombiMatrix
group has historically been substantially dependent on its arrangements with
Roche Diagnostics GmbH ("Roche"), and has relied upon payments by Roche and
other partners for a majority of its future revenues. The CombiMatrix group
intends to enter into additional strategic partnerships to develop and
commercialize future products. The CombiMatrix group is deploying unproven
technologies and continues to develop its commercial products.consolidated financial results. There can be no assurance that the outcome of such reviews in the future will not result in substantial impairment charges. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact our assumptions as to prices, costs, holding periods or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions we used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result.
RISKS RELATED TO OUR COMMON STOCK
THE AVAILABILITY OF SHARES FOR SALE IN THE FUTURE COULD REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
In the future, we may issue securities to raise cash for operations and or acquisitions. We may also pay for interests in additional subsidiary companies by using a combination of cash and our common stock or just our common stock. We may also issue securities convertible into our common stock. Any of these events may dilute stockholders ownership interest in our company and have an adverse impact on the price of our common stock.
In addition, sales of a substantial amount of our common stock in the public market, or the perception that these sales may occur, could reduce the market price of our common stock. This could also impair our ability to raise additional capital through the sale of our securities.
DELAWARE LAW AND OUR CHARTER DOCUMENTS CONTAIN PROVISIONS THAT COULD DISCOURAGE OR PREVENT A POTENTIAL TAKEOVER OF OUR COMPANY THAT MIGHT OTHERWISE RESULT IN OUR STOCKHOLDERS RECEIVING A PREMIUM OVER THE MARKET PRICE OF THEIR SHARES.
Provisions of Delaware law and our certificate of incorporation and bylaws could make the following more difficult: the acquisition of our company by means of a tender offer, proxy contest or otherwise, and the removal of incumbent officers and directors. These provisions include:
| · | Section 203 of the Delaware General Corporation Law, which prohibits a merger with a 15%-or-greater stockholder, such as a party that has completed a successful tender offer, until three years after that party became a 15%-or-greater stockholder; |
| · | amendment of our bylaws by the stockholders requires a two-thirds approval of the outstanding shares; |
| · | the authorization in our certificate of incorporation of undesignated preferred stock, which could be issued without stockholder approval in a manner designed to prevent or discourage a takeover; |
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| · | provisions in our bylaws eliminating stockholders’ rights to call a special meeting of stockholders, which could make it more difficult for stockholders to wage a proxy contest for control of our board of directors or to vote to repeal any of the anti-takeover provisions contained in our certificate of incorporation and bylaws; and |
| · | the division of our board of directors into three classes with staggered terms for each class, which could make it more difficult for an outsider to gain control of our board of directors. |
Such potential obstacles to a takeover could adversely affect the ability of our stockholders to receive a premium price for their stock in the event another company wants to acquire us.
AS A RESULT OF THE REDEMPTION OF ACACIA RESEARCH-COMBIMATRIX COMMON STOCK FOR THE COMMON STOCK OF COMBIMATRIX CORPORATION, WE MAY BE SUBJECT TO CERTAIN TAX LIABILITY UNDER THE INTERNAL REVENUE CODE.
Our distribution of the common stock of CombiMatrix groupin the Split-Off Transaction will be abletax-free to implement itsus if the distribution qualifies under Sections 368 and 355 of the Internal Revenue Code of 1986, as amended, or the Code. If the Split-Off Transaction fails to qualify under Section 355 of the Code, corporate tax would be payable by the consolidated group as of the date of the Split-Off Transaction, of which we are the common parent, based upon the difference between the aggregate fair market value of the assets of CombiMatrix’s business and the adjusted tax bases of such business to us prior to the redemption.
We received a private letter ruling from the Internal Revenue Service, or the IRS, to the effect that, among other things, the redemption would be tax free to us and the holders of Acacia Research-Acacia Technologies common stock and Acacia Research-CombiMatrix common stock under Sections 368 and 355 of the Code. The private letter ruling, while generally binding upon the IRS, was based upon factual representations and assumptions and commitments on our behalf with respect to future plans.
Failureoperations made in the ruling request. The IRS could modify or revoke the private letter ruling retroactively if the factual representations and assumptions in the request were materially incomplete or untrue, the facts upon which the private letter ruling was based were materially different from the facts at the time of the redemption, or if we do not comply with certain commitments made.
If the Split-Off Transaction fails to qualify under Section 355 of the Code, corporate tax, if any, would be payable by managementthe consolidated group of which we are the common parent, as described above. As such, the corporate level tax would be payable by us. CombiMatrix has agreed however, to achieve its plans wouldindemnify us for this and certain other tax liabilities if they result from actions taken by CombiMatrix. Notwithstanding CombiMatrix’s agreement to indemnify us, under the Code’s consolidated return regulations, each member of our consolidated group, including our company, will be severally liable for these tax liabilities. Further, we may be liable for additional taxes if we take certain actions within two years following the redemption, as more fully discussed in the immediately following risk factor. If we are found liable to the IRS for these liabilities, the resulting obligation could materially and adversely affect our financial condition, and we may be unable to recover on the indemnity from CombiMatrix.
FOLLOWING THE REDEMPTION OF ACACIA RESEARCH-COMBIMATRIX COMMON STOCK FOR THE COMMON STOCK OF COMBIMATRIX, WE MAY BE SUBJECT TO CERTAIN TAX LIABILITIES UNDER THE INTERNAL REVENUE CODE FOR ACTIONS TAKEN BY US OR COMBIMATRIX FOLLOWING THE REDEMPTION.
Even if the distribution qualifies under Section 368 and 355 of the Code, it will be taxable to us if Section 355(e) of the Code applies to the distribution. Section 355(e) will apply if 50% or more of our common stock or CombiMatrix’s common stock, by vote or value, is acquired by one or more persons, other than the holders of Acacia Research-CombiMatrix common stock who receive the common stock of CombiMatrix in the redemption, acting pursuant to a plan or a series of related transactions that includes the redemption. Any shares of our common stock, the Acacia Research-CombiMatrix stock or the common stock of CombiMatrix acquired directly or indirectly within two years before or after the redemption generally are presumed to be part of such a plan unless we can rebut that presumption. To prevent applicability of Section 355(e) or to otherwise prevent the distribution from failing to qualify under Section 355 of the Code, CombiMatrix has agreed that, until two years after the redemption, it will not take any of the following actions unless prior to taking such action, it has obtained, and provided to us, a written opinion of tax counsel or a ruling from the IRS to the effect that such action will not cause the redemption to be taxable to us, which we refer to in this prospectus collectively as Disqualifying Actions:
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| · | merge or consolidate with another corporation; |
| · | liquidate or partially liquidate; |
| · | sell or transfer all or substantially all of its assets; |
| · | redeem or repurchase its stock (except in certain limited circumstances); or |
| · | take any other action which could reasonably be expected to cause Section 355(e) to apply to the distribution. |
Further, if we take any Disqualifying Action, we may be subject to additional tax liability. Many of our competitors are not subject to similar restrictions and may issue their stock to complete acquisitions, expand their product offerings and speed the development of new technology. Therefore, these competitors may have a material adverse effectcompetitive advantage over us. Substantial uncertainty exists on the CombiMatrix group'sscope of Section 355(e), and Acacia Research Corporation's abilitywe may have undertaken, may contemplate undertaking or may otherwise undertake in the future transactions which may cause Section 355(e) to achieve
its intended business objectives.
13
THE COMBIMATRIX GROUPapply to the redemption notwithstanding our desire or intent to avoid application of Section 355(e). Accordingly, we cannot provide you any assurance that we will not be liable for taxes if Section 355(e) applies to the redemption.
WE MAY FAIL TO MEET MARKET EXPECTATIONS BECAUSE OF FLUCTUATIONS IN ITS QUARTERLY OPERATING RESULTS, WHICH COULD CAUSE ITSTHE PRICE OF OUR COMMON STOCK PRICE TO DECLINE.
The CombiMatrix group's
Our reported revenues and operating results have fluctuated in the past and may continue to fluctuate significantly from quarter to quarter in the future. It is possible that in future periods, the CombiMatrix group's
revenues could fall below the expectations of securities analysts or investors, which could cause the market price of our AR-CombiMatrixcommon stock to decline. The following are among the factors that could cause the CombiMatrix group'sour operating results to fluctuate significantly from period to period:
o its unpredictable revenue sources, as described below and in
our most recent annual report incorporated by reference on
page 32 below;
o the nature, pricing and timing of the CombiMatrix group's and
its competitors' products;
o changes in the CombiMatrix group's and its competitors'
research and development budgets;
o expenses related to, and the CombiMatrix group's ability to
comply with, governmental regulations of its products and
processes; and
o expenses related to, and the results of, patent filings and
other proceedings relating to intellectual property rights.
The CombiMatrix group anticipates significant fixed expenses due in
part to its need to continue to invest in product development. It may be unable
to adjust its expenditures if revenues in a particular period fail to meet its
expectations, which would harm its operating results for that period. As a
result of these fluctuations, the CombiMatrix group believes that
period-to-period comparisons of the CombiMatrix group's financial results will
not necessarily be meaningful, and you should not rely on these comparisons as
an indication of its future performance.
THE COMBIMATRIX GROUP'S REVENUES WILL BE UNPREDICTABLE, AND THIS MAY HARM ITS
FINANCIAL CONDITION.
The amount and timing of revenues that the CombiMatrix group may
realize from its business will be unpredictable because:
o whether products are commercialized and generate revenues
depends, in part, on the efforts and timing of its potential
customers;
o its sales cycles may be lengthy; and
o it cannot be sure as to the timing of receipt of payment for
its products.
As a result, the CombiMatrix group's revenues may vary significantly
from quarter to quarter, which could make its business difficult to manage and
cause its quarterly results to be below market expectations. If this happens,
the price of the CombiMatrix group's common stock may decline significantly.
| · | the dollar amount of agreements executed in 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 in 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; |
| · | fluctuations in the net number of active licensees period to period; |
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| · | costs related to acquisitions, alliances, licenses and other efforts to expand our operations; |
| · | the timing of payments under the terms of any customer or license agreements into which our operating subsidiaries may enter; and |
| · | expenses related to, and the timing and results of, patent filings and other enforcement proceedings relating to intellectual property rights, as more fully described in this section. |
TECHNOLOGY COMPANY STOCK PRICES ARE ESPECIALLY VOLATILE, AND THIS VOLATILITY MAY DEPRESS THE PRICE OF OUR AR-COMBIMATRIXCOMMON STOCK.
The stock market has experienced significant price and volume fluctuations, and the market prices of technology companies particularly
biotechnology companies, hashave been highly volatile. We believe that various factors may cause the market price of our AR-CombiMatrixcommon stock to fluctuate, perhaps substantially, including, among others, announcements of:
o its or its competitors' technological innovations;
14
o developments or disputes concerning patents or proprietary
rights;
o supply, manufacturing or distribution disruptionsthe following:
| · | announcements of developments in our patent enforcement actions; |
| · | developments or disputes concerning our patents; |
| · | our or our competitors’ technological innovations; |
| · | developments in relationships with licensees; |
| · | variations in our quarterly operating results; |
| · | our failure to meet or exceed securities analysts’ expectations of our financial results; |
| · | a change in financial estimates or securities analysts’ recommendations; |
| · | changes in management’s or securities analysts’ estimates of our financial performance; |
| · | changes in market valuations of similar companies; |
| · | announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, capital commitments, new technologies, or patents; and |
| · | failure to complete significant transactions. |
For example, the NASDAQ Computer Index had a range of $582.76 - $1,288.12 during the 52-weeks ended December 31, 2008 and the NASDAQ Composite Index had a range of $1,295.48 - $2,661.50 over the same period. Over the same period, our common stock fluctuated within a range of $1.87 - $9.30.
The financial crisis affecting the banking system and financial markets and the current uncertainty in global economic conditions, which began in late 2007 and continued throughout 2008, have resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in the credit, equity and fixed income markets. As noted above, our stock price, like many other stocks, has decreased substantially recently and if investors have concerns that our business, operating results and financial condition will be negatively impacted by a continuing worldwide economic downturn, our stock price could further decrease.
In addition, we believe that fluctuations in our stock price during applicable periods can also be impacted by court rulings and or other similar problems;
o proposed laws regulating participantsdevelopments in our patent enforcement actions. Court rulings in patent enforcement actions are often difficult to understand, even when favorable or neutral to the value of our patents and our overall business, and we believe that investors in the biotechnology
industry;
o developmentsmarket may overreact, causing fluctuations in relationships with collaborative partners or
customers;
o its failure to meet or exceed securities analysts'
expectationsour stock prices that may not accurately reflect the impact of its financial results; or
o a change in financial estimates or securities analysts'
recommendations.
court rulings on our business operations and assets.
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In the past, companies that have experienced volatility in the market price of their stock have been the objects of securities class action litigation. If our AR-CombiMatrixcommon stock was the object of securities class action litigation, it could result in substantial costs and a diversion of management'smanagement’s attention and resources, which could materially harm theour business and financial results of the CombiMatrix group.
THE COMBIMATRIX GROUP IS DEPLOYING NEW AND UNPROVEN TECHNOLOGIES WHICH MAKES
EVALUATION OF ITS BUSINESS AND PROSPECTS DIFFICULT, AND IT MAY BE FORCED TO
CEASE OPERATIONS IF IT DOES NOT DEVELOP COMMERCIALLY SUCCESSFUL PRODUCTS.
The CombiMatrix group has not proven its ability to commercialize
products on a large scale. In order to successfully commercialize products on a
large scale, it will have to make significant investments, including investments
in research and development and testing, to demonstrate their technical benefits
and cost-effectiveness. Problems frequently encountered in connection with the
commercialization of products using new and unproven technologies might limit
its ability to develop and commercialize its products. For example, the
CombiMatrix group's products may be found to be ineffective, unreliable or
otherwise unsatisfactory to potential customers. The CombiMatrix group may
experience unforeseen technical complications in the processes it uses to
develop, manufacture, customize or receive orders for its products. These
complications could materially delay or limit the use of products the
CombiMatrix group attempts to commercialize, substantially increase the
anticipated cost of its products or prevent it from implementing its processes
at appropriate quality and scale levels, thereby causing its business to suffer.
THE COMBIMATRIX GROUP MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, AND IF
ADDITIONAL CAPITAL IS NOT AVAILABLE ON ACCEPTABLE TERMS, THE COMBIMATRIX GROUP
MAY HAVE TO CURTAIL OR CEASE OPERATIONS.
The CombiMatrix group's future capital requirements will be substantial
and will depend on many factors including how quickly it commercializes its
products, the progress and scope of its collaborative and independent research
and development projects, the filing, prosecution, enforcement and defense of
patent claims and the need to obtain regulatory approval for certain products in
the United States or elsewhere. Changes may occur that would cause the
CombiMatrix group's available capital resources to be consumed significantly
sooner than it expects.
The CombiMatrix group may be unable to raise sufficient additional
capital on favorable terms or at all. If it fails to do so, it may have to
curtail or cease operations or enter into agreements requiring it to relinquish
rights to certain technologies, products or markets because it will not have the
capital necessary to exploit them.
IF THE COMBIMATRIX GROUP DOES NOT ENTER INTO SUCCESSFUL PARTNERSHIPS AND
COLLABORATIONS WITH OTHER COMPANIES, IT MAY NOT BE ABLE TO FULLY DEVELOP ITS
TECHNOLOGIES OR PRODUCTS, AND ITS BUSINESS WOULD BE HARMED.
Since the CombiMatrix group does not possess all of the resources
necessary to develop and commercialize products that may result from its
technologies on a mass scale, it will need either to grow its sales, marketing
and support group or make appropriate arrangements with strategic partners to
market, sell and support its products. The CombiMatrix group believes that it
will have to enter into additional strategic partnerships to develop and
commercialize future products. If it does not enter into adequate agreements, or
if its existing arrangements or future agreements are not successful, its
ability to develop and commercialize products will be impacted negatively, and
its revenues will be adversely affected.
15
Historically, the CombiMatrix group was substantially dependent on its
arrangement with Roche. The CombiMatrix group relied on payments by Roche to
fund the majority of its resources engaged in fulfilling its contractual
obligations to Roche. Roche's primary service to the CombiMatrix group is to
distribute its technology platform. If the CombiMatrix group were to lose its
relationship with Roche, the CombiMatrix group would continue to distribute its
technology platform itself or be required to establish a distribution agreement
with other partners. This could prove difficult, time-consuming and expensive,
and the CombiMatrix group may not be successful in achieving this objective.
THE COMBIMATRIX GROUP HAS LIMITED EXPERIENCE COMMERCIALLY MANUFACTURING,
MARKETING OR SELLING ANY OF ITS POTENTIAL PRODUCTS, AND UNLESS IT DEVELOPS THESE
CAPABILITIES, IT MAY NOT BE SUCCESSFUL.
Even if the CombiMatrix group is able to develop its products for
commercial release on a large-scale, it has limited experience in manufacturing
its products in the volumes that will be necessary for it to achieve commercial
sales and in marketing or selling its products to potential customers. We cannot
assure you that the CombiMatrix group will be able to commercially produce its
products on a timely basis, in sufficient quantities or on commercially
reasonable terms.
THE COMBIMATRIX GROUP FACES INTENSE COMPETITION AND WE CANNOT ASSURE YOU THAT IT
WILL BE SUCCESSFUL.
The CombiMatrix group expects to compete with companies that design,
manufacture and market instruments for analysis of genetic variation and
function and other applications using established sequential and parallel
testing technologies. The CombiMatrix group is also aware of other biotechnology
companies that have or are developing testing technologies for the SNP
genotyping, gene expression profiling and proteomic markets. The CombiMatrix
group anticipates that it will face increased competition in the future as new
companies enter the market with new technologies and its competitors improve
their current products.
The markets for the CombiMatrix group's products are characterized by
rapidly changing technology, evolving industry standards, changes in customer
needs, emerging competition and new product introductions. One or more of the
CombiMatrix group's competitors may offer technology superior to those of the
CombiMatrix group and render its technology obsolete or uneconomical. Many of
its competitors have greater financial and personnel resources and more
experience in marketing, sales and research and development than it has. Some of
its competitors currently offer arrays with greater density than it does and
have rights to intellectual property, such as genomic information or proprietary
technology, which provides them with a competitive advantage. If the CombiMatrix
group were not able to compete successfully, its business and financial
condition would be materially harmed.
IF THE COMBIMATRIX GROUP'S NEW AND UNPROVEN TECHNOLOGY IS NOT USED BY
RESEARCHERS IN THE PHARMACEUTICAL, BIOTECHNOLOGY AND ACADEMIC COMMUNITIES, ITS
BUSINESS WILL SUFFER.
The CombiMatrix group's products may not gain market acceptance. In
that event, it is unlikely that its business will succeed. Biotechnology and
pharmaceutical companies and academic research centers have historically
analyzed genetic variation and function using a variety of technologies, and
many of them have made significant capital investments in existing technologies.
Compared to existing technologies, the CombiMatrix group's technologies are new
and unproven. In order to be successful, its products must meet the commercial
requirements of the biotechnology, pharmaceutical and academic communities as
tools for the large-scale analysis of genetic variation and function. Market
acceptance will depend on many factors, including:
o the development of a market for its tools for the analysis of
genetic variation and function, the study of proteins and
other purposes;
o the benefits and cost-effectiveness of its products relative
to others available in the market;
16
o its ability to manufacture products in sufficient quantities
with acceptable quality and reliability and at an acceptable
cost;
o its ability to develop and market additional products and
enhancements to existing products that are responsive to the
changing needs of its customers;
o the willingness and ability of customers to adopt new
technologies requiring capital investments or the reluctance
of customers to change technologies in which they have made a
significant investment; and
o the willingness of customers to transmit test data and permit
the CombiMatrix group to transmit test results over the
Internet, which will be a necessary component of its product
and services packages unless customers purchase or license its
equipment for use in their own facilities.
IF THE MARKET FOR ANALYSIS OF GENOMIC INFORMATION DOES NOT DEVELOP OR IF GENOMIC
INFORMATION IS NOT AVAILABLE TO THE COMBIMATRIX GROUP'S POTENTIAL CUSTOMERS, ITS
BUSINESS WILL NOT SUCCEED.
The CombiMatrix group is designing its technology primarily for
applications in the biotechnology, pharmaceutical and academic communities. The
usefulness of the CombiMatrix group's technology depends in part upon the
availability of genomic data. The CombiMatrix group is initially focusing on
markets for analysis of genetic variation and function, namely gene expression
profiling. These markets are new and emerging, and they may not develop as the
CombiMatrix group anticipates, or at all. Also, researchers may not seek or be
able to convert raw genomic data into medically valuable information through the
analysis of genetic variation and function. If genomic data is not available for
use by the CombiMatrix group's customers or if its target markets do not emerge
in a timely manner, or at all, demand for its products will not develop as it
expects, and it may never become profitable.
THE COMBIMATRIX GROUP'S FUTURE SUCCESS DEPENDS ON THE CONTINUED SERVICE OF ITS
ENGINEERING, TECHNICAL AND KEY MANAGEMENT PERSONNEL AND ITS ABILITY TO IDENTIFY,
HIRE AND RETAIN ADDITIONAL ENGINEERING, TECHNICAL AND KEY MANAGEMENT PERSONNEL.
There is intense competition for qualified personnel in the CombiMatrix
group's industry, particularly for engineers and senior level management. Loss
of the services of, or failure to recruit, engineers or other technical and key
management personnel could be significantly detrimental to the group and could
adversely affect its business and operating results. The CombiMatrix group may
not be able to continue to attract and retain engineers or other qualified
personnel necessary for the development of its products and business or to
replace engineers or other qualified personnel who may leave the group in the
future. The CombiMatrix group's anticipated growth is expected to place
increased demands on its resources and likely will require the addition of new
management personnel.
THE EXPANSION OF THE COMBIMATRIX GROUP'S PRODUCT LINES MAY SUBJECT IT TO
REGULATION BY THE UNITED STATES FOOD AND DRUG ADMINISTRATION AND FOREIGN
REGULATORY AUTHORITIES, WHICH COULD PREVENT OR DELAY ITS INTRODUCTION OF NEW
PRODUCTS.
If the CombiMatrix group manufactures, markets or sells any products
for any regulated clinical or diagnostic applications, those products will be
subject to extensive governmental regulation as medical devices in the United
States by the FDA and in other countries by corresponding foreign regulatory
authorities. The process of obtaining and maintaining required regulatory
clearances and approvals is lengthy, expensive and uncertain. Products that
CombiMatrix Corporation manufactures, markets or sells for research purposes
only are not subject to governmental regulations as medical devices or as
analyte specific reagents to aid in disease diagnosis. We believe that the
CombiMatrix group's success will depend upon commercial sales of improved
versions of products, certain of which cannot be marketed in the United States
and other regulated markets unless and until the CombiMatrix group obtains
clearance or approval from the FDA and its foreign counterparts, as the case may
be. Delays or failures in receiving these approvals may limit our ability to
benefit from new CombiMatrix group products.
17
AS THE COMBIMATRIX GROUP'S OPERATIONS EXPAND, ITS COSTS TO COMPLY WITH
ENVIRONMENTAL LAWS AND REGULATIONS WILL INCREASE, AND FAILURE TO COMPLY WITH
THESE LAWS AND REGULATIONS COULD HARM ITS FINANCIAL RESULTS.
The CombiMatrix group's operations involve the use, transportation,
storage and disposal of hazardous substances, and as a result it is subject to
environmental and health and safety laws and regulations. As the CombiMatrix
group expands its operations, its use of hazardous substances will increase and
lead to additional and more stringent requirements. The cost to comply with
these and any future environmental and health and safety regulations could be
substantial. In addition, the CombiMatrix group's failure to comply with laws
and regulations, and any releases of hazardous substances into the environment
or at its disposal sites, could expose the CombiMatrix group to substantial
liability in the form of fines, penalties, remediation costs and other damages,
or could lead to a curtailment or shut down of its operations. These types of
events, if they occur, would adversely impact the group's financial results.
THE COMBIMATRIX GROUP'S BUSINESS DEPENDS ON ISSUED AND PENDING PATENTS, AND THE
LOSS OF ANY PATENTS OR THE GROUP'S FAILURE TO SECURE THE ISSUANCE OF PATENTS
COVERING ELEMENTS OF ITS BUSINESS PROCESSES WOULD MATERIALLY HARM ITS BUSINESS
AND FINANCIAL CONDITION.
The CombiMatrix group's success depends on its ability to protect and
exploit its intellectual property. The CombiMatrix group currently has four
patents issued in the United States, four patents issued in Europe and 59 patent
applications pending in the United States, Europe and elsewhere. The patents
covering the CombiMatrix group's core technology begin to expire January 5,
2018.
The patent application process before the United States Patent and
Trademark Office and other similar agencies in other countries is initially
confidential in nature. Patents that are filed outside the United States,
however, are published approximately eighteen months after filing. The
CombiMatrix group cannot determine in a timely manner whether patent
applications covering technology that competes with its technology have been
filed in the United States or other foreign countries or which, if any, will
ultimately issue or be granted as enforceable patents. Some of the CombiMatrix
group's patent applications may claim compositions, methods or uses that may
also be claimed in patent applications filed by others. In some or all of these
applications, a determination of priority of inventorship may need to be decided
in a proceeding before the United States Patent and Trademark Office or a
foreign regulatory body or a court. If the CombiMatrix group is unsuccessful in
these proceedings, it could be blocked from further developing, commercializing
or selling products. Regardless of the ultimate outcome, this process is
time-consuming and expensive.
ANY INABILITY TO ADEQUATELY PROTECT THE COMBIMATRIX GROUP'S PROPRIETARY
TECHNOLOGIES COULD MATERIALLY HARM THE COMBIMATRIX GROUP'S COMPETITIVE POSITION
AND FINANCIAL RESULTS.
If the CombiMatrix group does not protect its intellectual property
adequately, competitors may be able to use its technologies and erode any
competitive advantage that it may have. The laws of some foreign countries do
not protect proprietary rights to the same extent as the laws of the United
States, and many companies have encountered significant problems in protecting
their proprietary rights abroad. These problems can be caused by the absence of
rules and methods for defending intellectual property rights.
The patent positions of companies developing tools for the
biotechnology, pharmaceutical and academic communities, including the
CombiMatrix group's patent position, generally are uncertain and involve complex
legal and factual questions. The CombiMatrix group will be able to protect its
proprietary rights from unauthorized use by third parties only to the extent
that its proprietary technologies are covered by valid and enforceable patents
or are effectively maintained as trade secrets. The CombiMatrix group's existing
patents and any future issued or granted patents it obtains may not be
sufficiently broad in scope to prevent others from practicing its technologies
or from developing competing products. There also is a risk that others may
independently develop similar or alternative technologies or designs around the
CombiMatrix group's patented technologies. In addition, others may oppose or
invalidate its patents, or its patents may fail to provide it with any
competitive advantage. Enforcing the CombiMatrix group's intellectual property
rights may be difficult, costly and time-consuming and ultimately may not be
successful.
18
The CombiMatrix group also relies upon trade secret protection for its
confidential and proprietary information. While it has taken security measures
to protect its proprietary information, these measures may not provide adequate
protection for its trade secrets or other proprietary information. The
CombiMatrix group seeks to protect its proprietary information by entering into
confidentiality and invention disclosure and transfer agreements with employees,
collaborators and consultants. Nevertheless, employees, collaborators or
consultants may still disclose its proprietary information, and the CombiMatrix
group may not be able to meaningfully protect its trade secrets. In addition,
others may independently develop substantially equivalent proprietary
information or techniques or otherwise gain access to its trade secrets.
ANY LITIGATION TO PROTECT THE COMBIMATRIX GROUP'S INTELLECTUAL PROPERTY, OR ANY
THIRD-PARTY CLAIMS OF INFRINGEMENT, COULD DIVERT SUBSTANTIAL TIME AND MONEY FROM
THE COMBIMATRIX GROUP'S BUSINESS AND COULD SHUT DOWN SOME OF ITS OPERATIONS.
The CombiMatrix group's commercial success depends in part on its
non-infringement of the patents or proprietary rights of third parties. Many
companies developing tools for the biotechnology and pharmaceutical industries
use litigation aggressively as a strategy to protect and expand the scope of
their intellectual property rights. Accordingly, third parties may assert that
the CombiMatrix group is employing their proprietary technology without
authorization. In addition, third parties may claim that use of the CombiMatrix
group's technologies infringes their current or future patents. The CombiMatrix
group could incur substantial costs and the attention of its management and
technical personnel could be diverted while defending ourselves against any of
these claims. The CombiMatrix group may incur the same liabilities in enforcing
its patents against others. The CombiMatrix group has not made any provision in
its financial plans for potential intellectual property related litigation, and
it may not be able to pursue litigation as aggressively as competitors with
substantially greater financial resources.
If parties making infringement claims against the CombiMatrix group are
successful, they may be able to obtain injunctive or other equitable relief,
which effectively could block the CombiMatrix group's ability to further
develop, commercialize and sell products, and could result in the award of
substantial damages against it. If the CombiMatrix group is unsuccessful in
protecting and expanding the scope of its intellectual property rights, its
competitors may be able to develop, commercialize and sell products that compete
with it using similar technologies or obtain patents that could effectively
block its ability to further develop, commercialize and sell its products. In
the event of a successful claim of infringement against the CombiMatrix group,
we may be required to pay substantial damages and either discontinue those
aspects of its business involving the technology upon which it infringed or
obtain one or more licenses from third parties. While the CombiMatrix group may
license additional technology in the future, it may not be able to obtain these
licenses at a reasonable cost, or at all. In that event, it could encounter
delays in product introductions while it attempts to develop alternative methods
or products, which may not be successful. Defense of any lawsuit or failure to
obtain any of these licenses could prevent it from commercializing available
products.
RISKS RELATING TO OUR CAPITAL STRUCTURE
HOLDERS OF BOTH CLASSES OF OUR STOCK ARE STOCKHOLDERS OF ONE COMPANY, AND THE
FINANCIAL PERFORMANCE OF ONE GROUP COULD AFFECT THE OTHER, THUS EXPOSING THE
HOLDERS OF EACH GROUP'S STOCK TO THE RISKS OF AN INVESTMENT IN THE ENTIRE
COMPANY.
Holders of AR-CombiMatrix stock and AR-Acacia Technologies stock are
stockholders of a single company. The CombiMatrix group and the Acacia
Technologies group are not separate legal entities. As a result, stockholders
will continue to be subject to all of the risks of an investment in Acacia
Research Corporation and all of our businesses, assets and liabilities. The
issuance of our AR-CombiMatrix stock and our AR-Acacia Technologies stock and
the allocation of assets and liabilities and stockholders' equity between the
CombiMatrix group and the Acacia Technologies group did not result in a
distribution or spin-off to stockholders of any of our assets or liabilities and
did not affect ownership of our assets or responsibility for our liabilities or
those of our subsidiaries. The assets we attribute to the Acacia Technologies
group could be subject to the liabilities of the CombiMatrix group, whether such
liabilities arise from lawsuits, contracts or indebtedness that we attribute to
the other group, including the $1,964,000 of accounts payable, accrued expenses
and other liabilities attributed to CombiMatrix group for the year ended
December 31, 2004. If we are unable to satisfy one group's liabilities out of
the assets we attribute to it, we may be required to satisfy those liabilities
with assets we have attributed to the other group. However, our business is
conducted by our operating subsidiaries. Creditors of one subsidiary may not
make claims against the assets of another subsidiary, absent a separate guaranty
from the other subsidiaries. None of our subsidiaries currently guaranty the
obligations of other subsidiaries.
19
Financial effects from one group that affect our consolidated results
of operations or financial condition could, if significant, affect the results
of operations or financial condition of the other group and the market price of
the common stock relating to the other group. In addition, net losses of either
group and dividends or distributions on, or repurchases of, either class of
common stock will reduce the funds we can pay as dividends on each class of
common stock under Delaware law. For these reasons, you should read our
consolidated financial information with the financial information we provide for
each group in our most recent Form 10-K and Form 10-Q incorporated by reference
at page 32 below.
THE MARKET PRICE OF EITHER CLASS OF OUR COMMON STOCK MAY NOT REFLECT THE
SEPARATE PERFORMANCE OF THE GROUP RELATED TO THAT CLASS OF COMMON STOCK.
The market price of our AR-CombiMatrix stock or AR-Acacia Technologies
stock may not reflect the separate performance of the business of the group
relating to that class of common stock. The market price of either class of
common stock could simply reflect the performance of Acacia Research Corporation
as a whole, or the market price of either class of common stock could move
independently of the performance of the business of either group. Investors may
discount the value of either class of common stock because it is part of a
common enterprise rather than a stand-alone company.
THE MARKET PRICE OF EITHER CLASS OF OUR COMMON STOCK MAY BE AFFECTED BY FACTORS
THAT DO NOT AFFECT TRADITIONAL COMMON STOCK.
o THE COMPLEX NATURE OF THE TERMS OF OUR AR-COMBIMATRIX STOCK
AND AR-ACACIA TECHNOLOGIES STOCK MAY ADVERSELY AFFECT THE
MARKET PRICE OF EITHER CLASS OF COMMON STOCK.
The complex nature of the terms of our two classes of common stock,
such as the convertibility of AR-CombiMatrix stock into AR-Acacia Technologies
stock, or vice versa, and the potential difficulties investors may have
understanding these terms, may adversely affect the market price of either class
of common stock.
o THE MARKET PRICE OF OUR AR-ACACIA TECHNOLOGIES STOCK MAY BE
ADVERSELY AFFECTED BY THE FACT THAT HOLDERS HAVE LIMITED LEGAL
INTERESTS IN THE GROUP RELATING TO THE CLASS OF COMMON STOCK.
For example, as described in greater detail in the subsequent risk
factors, holders of either class of common stock generally do not have separate
class voting rights with respect to significant matters affecting either group.
In addition, upon our liquidation or dissolution, holders of either class of
common stock will not have specific rights to the assets of the group relating
to the class of common stock held and will not be entitled to receive proceeds
that are proportional to the relative performance of that group. The voting
rights of the AR-Acacia Technologies stock fluctuates based upon the relative
market prices of the AR-CombiMatrix stock and the AR-Acacia Technologies stock,
as more fully discussed on page 2 under the caption, "VOTING RIGHTS OF AR-ACACIA
TECHNOLOGIES STOCK." If the record date for a stockholder meeting was March 14,
2005, holders of AR-Acacia Technologies common stock would have 1.665 votes per
share, and holders of CombiMatrix common stock would have one vote per share.
o THE MARKET PRICE OF OUR AR-ACACIA TECHNOLOGIES STOCK MAY BE
ADVERSELY AFFECTED BY EVENTS INVOLVING THE COMBIMATRIX GROUP
OR THE PERFORMANCE OF THE AR-COMBIMATRIX STOCK.
Events, such as earnings announcements or other developments concerning
one group that the market does not view favorably and which thus adversely
affect the market price of the class of common stock relating to that group, may
adversely affect the market price of the class of common stock relating to the
other group. Because both classes of common stock are common stock of Acacia
Research Corporation, an adverse market reaction to one class of common stock
may, by association, cause an adverse reaction to the other class of common
stock. This reaction may occur even if the triggering event was not material to
us as a whole.
THE HOLDERS OF AR-COMBIMATRIX STOCK AND THE HOLDERS OF AR-ACACIA TECHNOLOGIES
STOCK HAVE ONLY LIMITED SEPARATE STOCKHOLDER RIGHTS.
20
Holders of AR-CombiMatrix stock and AR-Acacia Technologies stock have
the rights customarily held by common stockholders. They also have these
specific rights related to their corresponding group:
o certain rights with regard to dividends and liquidation;
o requirements for a mandatory dividend, redemption or
conversion upon the disposition of all or substantially all of
the assets of their corresponding group; and
o a right to vote on matters as a separate voting class in the
limited circumstances provided under Delaware law, by stock
exchange rules or as determined by our board of directors
(such as an amendment of our certificate of incorporation that
changes the rights, privileges or preferences of the class of
stock held by such stockholders).
o we will not hold separate stockholder meetings for holders of
AR-CombiMatrix stock and AR-Acacia Technologies stock.
THE HOLDERS OF AR-COMBIMATRIX STOCK AND THE HOLDERS OF AR-ACACIA TECHNOLOGIES
STOCK WILL HAVE CERTAIN LIMITS ON THEIR RESPECTIVE VOTING POWERS.
o GROUP COMMON STOCK WITH A MAJORITY OF VOTING POWER CAN CONTROL
VOTING OUTCOMES.
The holders of AR-CombiMatrix stock and AR-Acacia Technologies stock
will vote together as a single class, except in limited circumstances. If a
separate vote on a matter by the holders of either our AR-CombiMatrix stock or
our AR-Acacia Technologies stock is not required under Delaware law or by stock
exchange rules, and if our board of directors does not require a separate vote,
either class of common stock that is entitled to more than the number of votes
required to approve such matter could control the outcome of such vote - even if
the matter involves a divergence or conflict of the interests between the
holders of our AR-CombiMatrix stock and our AR-Acacia Technologies stock. In
addition, if the holders of common stock having a majority of the voting power
of all shares of common stock outstanding approve a merger, the terms of which
did not require separate class voting under stock exchange rules, then the
merger could be consummated - even if the holders of a majority of either class
of common stock were to vote against the merger.
The next time we anticipate needing to determine the floating voting
power of our AR-Acacia Technologies stock will be at our next annual meeting. We
plan to hold our annual meeting of stockholders on May 10, 2005, and our record
date for voting purposes was March 14, 2005. As of March 14, 2005, 27,212,769
shares of AR-Acacia Technologies stock were issued and outstanding. As of March
14, 2005, 31,200,496 shares of AR-CombiMatrix stock were issued and outstanding.
For purposes of the annual meeting, each holder of AR-Acacia Technologies stock
will have 1.665 votes per share, and each holder of AR-CombiMatrix stock will
have one vote per share. Collectively, holders of AR-Acacia Technologies stock
will have a total of 45,309,260 potential votes, or approximately 62.50% of the
total available votes.
o GROUP COMMON STOCK WITH LESS THAN MAJORITY VOTING POWER CAN
BLOCK ACTION IF A CLASS VOTE IS REQUIRED.
If Delaware law, stock exchange rules or our board of directors
requires a separate vote on a matter by the holders of either our AR-CombiMatrix
stock or our AR-Acacia Technologies stock, such as a proposal to amend the terms
of one class of stock, those holders could prevent approval of the matter, even
if the holders of a majority of the total number of votes cast or entitled to be
cast, voting together as a class, were to vote in favor of it.
o HOLDERS OF ONLY ONE CLASS OF COMMON STOCK CANNOT ENSURE THAT
THEIR VOTING POWER WILL BE SUFFICIENT TO PROTECT THEIR
INTERESTS.
Since the relative voting power per share of AR-CombiMatrix stock and
AR-Acacia Technologies stock will fluctuate based on the market values of the
two classes of common stock, the relative voting power of a class of common
stock could decrease. As a result, holders of shares of only one of the two
classes of common stock cannot ensure that their voting power will be sufficient
to protect their interests.
21
OUR RESTATED CERTIFICATE OF INCORPORATION MAY BE AMENDED TO INCREASE OR DECREASE
THE AUTHORIZED SHARES OF EITHER CLASS OF COMMON STOCK WITHOUT THE APPROVAL OF
EACH CLASS VOTING SEPARATELY.
Our restated certificate of incorporation provides that an amendment to
our restated certificate to increase or decrease the number of authorized shares
of either class of common stock will require the approval of the holders of a
majority of the voting power of all shares of common stock, voting together as a
single class, and will not require the approval of each class of stock voting as
a separate class. Accordingly, if the holders of one class of common stock hold
a majority of the voting power of all shares of common stock, then that majority
could approve an amendment to our restated certificate to increase or decrease
the authorized shares of stock of either class without the approval of the
holders of the minority class of stock.
STOCKHOLDERS MAY NOT HAVE ANY REMEDIES FOR BREACH OF FIDUCIARY DUTIES IF ANY
ACTION BY OUR DIRECTORS OR OFFICERS HAS A DISADVANTAGEOUS EFFECT ON EITHER CLASS
OF COMMON STOCK.
Stockholders may not have any remedies if any action or decision of our
directors and officers has a disadvantageous effect on either class of common
stock compared to the other class of common stock. We are not aware of any legal
precedent under Delaware law involving the fiduciary duties of directors and
officers of corporations having two classes of common stock, or separate classes
or series of capital stock, the rights of which, like our AR-CombiMatrix stock
and AR-Acacia Technologies stock, are defined by reference to separate
businesses of the corporation.
Principles of Delaware law established in cases involving differing
treatment of two classes of capital stock or two groups of holders of the same
class of capital stock provide that a board of directors owes an equal duty to
all stockholders regardless of class or series. Under these principles of
Delaware law and the related principle known as the "business judgment rule,"
absent abuse of discretion, a good faith business decision made by a
disinterested and adequately informed board of directors, board of directors'
committee or officer with respect to any matter having different effects on
holders of AR-CombiMatrix stock and holders of AR-Acacia Technologies stock
would be a defense to any challenge to such determination made by or on behalf
of the holders of either class of common stock.
As of March 14, 2005, our officers and directors held the following
beneficial interest in our AR-Acacia Technologies stock and our AR-CombiMatrix
stock:
(1) The percentage of shares beneficially owned is based on 27,212,769
shares of AR - Acacia Technologies stock and 31,200,496 shares of AR -
CombiMatrix stock outstanding as of March 14, 2005. Beneficial
ownership is determined under rules and regulations of the Securities
22
and Exchange Commission ("SEC"). Shares of common stock subject to
options that are currently exercisable or exercisable within 60 days
after March 14, 2005, are deemed to be outstanding and beneficially
owned by the person holding such options for the purpose of computing
the number of shares beneficially owned and the percentage ownership of
such person, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. Except as
indicated in the footnotes to this table, and subject to applicable
community property laws, the Company believes that such persons have
sole voting and investment power with respect to all shares of the
Company's common stock shown as beneficially owned by them.
(2) The address for each of the Company's directors and executive officers
is the Company's principal offices, Acacia Research Corporation, 500
Newport Center Drive, Newport Beach, California 92660.
(3) Includes 7,000 shares of AR - Acacia Technologies Stock and 7,000
shares of AR - CombiMatrix stock held by Mr. Ryan's daughter, and
915,086 shares of AR - Acacia Technologies stock and 507,897 shares of
AR - CombiMatrix stock issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days of
March 14, 2005.
(4) Includes 85,244 shares of AR - Acacia Technologies Stock and 35,412
shares of AR - CombiMatrix stock held by Talkot Crossover Fund, L.E.
("Talkot") and 60,150 shares of AR - Acacia Technologies stock and
103,486 shares of AR - CombiMatrix stock issuable upon exercise of
options that are currently exercisable or will become exercisable
within 60 days of March 14, 2005. Mr. Akin serves as managing general
partner of Talkot.
(5) Includes 38,750 shares of AR - Acacia Technologies stock and 116,250
shares of AR - CombiMatrix stock issuable upon exercise of options that
are currently exercisable or will become exercisable within 60 days of
March 14, 2005.
(6) Includes 60,150 shares of AR - Acacia Technologies stock and 48,486
shares of AR - CombiMatrix stock issuable upon exercise of options that
are currently exercisable or will become exercisable within 60 days of
March 14, 2005.
(7) Includes 54,350 shares of AR - Acacia Technologies stock and 48,486
shares of AR - CombiMatrix stock issuable upon exercise of options that
are currently exercisable or will become exercisable within 60 days of
March 14, 2005.
(8) Includes 20,000 shares of AR - Acacia Technologies stock held by the
R&S Harris Trust, of which Mr. Harris is a Trustee and 898,667 shares
of AR - Acacia Technologies stock and 514,782 shares of AR -
CombiMatrix stock issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days of March 14,
2005. 22,000 AR - Acacia Technologies stock options and 12,280 AR -
CombiMatrix stock options will expire if not exercised by April 9,
2005.
(9) Includes 55,750 shares of AR - Acacia Technologies stock and 46,030
shares of AR - CombiMatrix stock issuable upon exercise of options that
are currently exercisable or will become exercisable within 60 days of
March 14, 2005.
(10) Includes 417,936 shares of AR - Acacia Technologies stock and 877,213
shares of AR - CombiMatrix stock issuable upon exercise of options that
are currently exercisable or will become exercisable within 60 days of
March 14, 2005.
(11) Includes 111,830 shares of AR - Acacia Technologies stock and 58,506
shares of AR - CombiMatrix stock issuable upon exercise of options that
are currently exercisable or will become exercisable within 60 days of
March 14, 2005.
(12) Includes 452,269 shares of AR - Acacia Technologies stock and 216,778
shares of AR - CombiMatrix stock issuable upon exercise of options that
are currently exercisable or will become exercisable within 60 days of
March 14, 2005.
(13) Includes 3,064,938 of AR - Acacia Technologies stock and 2,537,914
shares of AR - CombiMatrix stock issuable upon exercise of options that
are currently exercisable or will become exercisable within 60 days of
March 14, 2005.
NUMEROUS POTENTIAL CONFLICTS OF INTERESTS EXIST BETWEEN OUR AR-COMBIMATRIX STOCK
AND OUR AR-ACACIA TECHNOLOGIES STOCK WHICH MAY BE DIFFICULT TO RESOLVE BY OUR
BOARD OR WHICH MAY BE RESOLVED ADVERSELY TO ONE OF THE CLASSES.
The existence of separate classes of common stock could give rise to
occasions when the interests of the holders of AR-CombiMatrix stock and
AR-Acacia Technologies stock diverge or conflict. Examples include
determinations by our directors or officers to:
o pay or omit the payment of dividends on AR-CombiMatrix stock
or AR-Acacia Technologies stock;
23
o allocate consideration to be received by holders of each of
the classes of common stock in connection with a merger or
consolidation involving Acacia Research Corporation;
o convert one class of common stock into shares of the other;
o approve certain dispositions of the assets of either group;
o allocate the proceeds of future issuances of our stock either
to the Acacia Technologies group or the CombiMatrix group;
o allocate corporate opportunities between the groups;
o make other operational and financial decisions with respect to
one group that could be considered detrimental to the other
group; and
o Acacia Technology group may seek to license and enforce its
patented technologies against companies that have business
relationships or potential business relationships with
CombiMatrix group.
When making decisions with regard to matters that create potential
diverging or conflicting interests, our directors and officers will act in
accordance with their fiduciary duties, the terms of our restated certificate of
incorporation, and, to the extent applicable, our management and allocation
policies.
THE PERFORMANCE OF ONE GROUP OR THE DIVIDENDS PAID TO ONE GROUP MAY ADVERSELY
AFFECT THE DIVIDENDS AVAILABLE FOR THE OTHER GROUP.
Our board of directors currently has no intention to pay dividends on
our AR-CombiMatrix stock or our AR-Acacia Technologies stock. Determinations as
to future dividends on our AR-CombiMatrix stock and our AR-Acacia Technologies
stock will be based primarily on the financial condition, results of operations
and business requirements of the relevant group and Acacia Research Corporation
as a whole. Subject to the limitations referred to below, our board of directors
has the authority to declare and pay dividends on our AR-CombiMatrix stock and
our AR-Acacia Technologies stock in any amount and could, in its sole
discretion, declare and pay dividends exclusively on our AR-CombiMatrix stock,
exclusively on our AR-Acacia Technologies stock, or on both, in equal or unequal
amounts. Our board of directors will not be required to consider the amount of
dividends previously declared on each class, the respective voting or
liquidation rights of each class or any other factor.
The performance of one group may cause our board of directors to pay
more or less dividends on the common stock relating to the other group than if
that other group was a stand-alone company. In addition, Delaware law and our
restated certificate of incorporation impose limitations on the amount of
dividends which may be paid on each class of common stock.
PROCEEDS OF MERGERS OR CONSOLIDATIONS MAY BE ALLOCATED UNFAVORABLY.
Our restated certificate of incorporation does not contain any
provisions governing how consideration to be received by holders of common stock
in connection with a merger or consolidation involving Acacia Research
Corporation is to be allocated among holders of each class of common stock. Our
board of directors will determine the percentage of the consideration to be
allocated to holders of each class of common stock in any such transaction. Such
percentage may be materially more or less than that which might have been
allocated to such holders had our board of directors chosen a different method
of allocation.
HOLDERS OF EITHER CLASS OF COMMON STOCK MAY BE ADVERSELY AFFECTED BY A
CONVERSION OF GROUP COMMON STOCK.
Our board of directors could, in its sole discretion and without
stockholder approval, determine to convert shares of AR-Acacia Technologies
stock into shares of AR-CombiMatrix stock, or vice versa, at a time when either
or both classes of common stock may be considered to be overvalued or
undervalued. Any such conversion would dilute the interests in Acacia Research
Corporation of the holders of the class of common stock being issued in the
conversion. It could also give holders of shares of the class of common stock
converted a greater or lesser premium than any premium that might be paid by a
third-party buyer of all or substantially all of the assets of the group whose
stock is converted.
24
HOLDERS OF EITHER CLASS OF COMMON STOCK COULD BE ADVERSELY AFFECTED BY A
DISPOSITION OF THE ASSETS ATTRIBUTED TO THEIR RESPECTIVE GROUPS.
Our board of directors could, in its sole discretion and without
stockholder approval, determine to dispose of all or substantially all the
assets of a group. If a disposition of group assets occurs at a time when those
assets are considered undervalued, then holders of that group's stock would
receive less consideration than they could have received had the assets been
disposed of at a time when they had a higher value.
PROCEEDS OF FUTURE ISSUANCES OF OUR STOCK COULD BE ATTRIBUTED UNFAVORABLY.
We may in the future issue a new class of stock, such as a class of
preferred stock, or additional shares of AR-CombiMatrix stock or AR-Acacia
Technologies stock. Proceeds from any future issuance of any class of stock
would be attributed among the CombiMatrix group or the Acacia Technologies group
as determined by our board of directors. There is no requirement that the
proceeds from an issuance of AR-CombiMatrix stock or AR-Acacia Technologies
stock be attributed to the corresponding group. Such allocations might be
materially more or less for the respective groups than what might have been
attributed had our board of directors chosen a different allocation method.
Also, any designated preferred class may be designed to reflect the performance
of Acacia Research Corporation as a whole, rather than the performance of the
CombiMatrix group or the Acacia Technologies group.
ALLOCATION OF CORPORATE OPPORTUNITIES COULD FAVOR ONE GROUP OVER ANOTHER.
Our board of directors may be required to allocate corporate
opportunities between the groups. In some cases, our directors could determine
that a corporate opportunity, such as a business that we are acquiring, should
be shared by the groups. Any such decisions could favor one group at the expense
of the other.
OTHER OPERATIONAL AND FINANCIAL DECISIONS WHICH MAY FAVOR ONE GROUP OVER THE
OTHER.
Our board of directors or our senior officers will review other
operational and financial matters affecting the CombiMatrix group and the Acacia
Technologies group, including the allocation of financing resources and capital,
technology and know-how and corporate overhead, taxes, debt, interest and other
matters. Any decision of our board of directors or our senior officers in these
matters could favor one group at the expense of the other.
OUR BOARD OF DIRECTORS MAY CHANGE OUR MANAGEMENT AND ALLOCATION POLICIES WITHOUT
STOCKHOLDER APPROVAL TO THE DETRIMENT OF EITHER GROUP.
Our board of directors may modify or rescind our policies with respect
to the allocation of corporate overhead, taxes, debt, interest and other
matters, or may adopt additional policies, in its sole discretion without
stockholder approval. A decision to modify or rescind these policies, or adopt
additional policies could have different effects on holders of either class of
common stock or could result in a benefit or detriment to one class of
stockholders compared to the other class. Our board of directors will make any
such decision in accordance with its good faith business judgment that the
decision is in the best interests of Acacia Research Corporation and all of our
stockholders as a whole.
EITHER GROUP MAY FINANCE THE OTHER GROUP ON TERMS UNFAVORABLE TO ONE OF THE
GROUPS.
We may transfer cash and other property between groups to finance their
business activities. The group providing the financing will be subject to the
risks relating to the group receiving the financing. We will account for those
transfers generally as a short-term or long-term loan between groups or as a
repayment of a previous borrowing.
THERE ARE LIMITS ON THE CONSIDERATION WHICH MAY BE RECEIVED BY THE STOCKHOLDERS
IN THE EVENT OF THE DISPOSITION OF ASSETS OF A GROUP.
Our restated certificate of incorporation provides that if a
disposition of all or substantially all of the properties and assets of either
group occurs, we must, subject to certain exceptions:
25
o distribute through a dividend or redemption to holders of the
class of common stock relating to such group an amount equal
to the net proceeds of such disposition; or
o convert at a 10% premium such common stock into shares of the
class of common stock relating to the other group.
If the group subject to the disposition were a separate, independent
company and its shares were acquired by another person, certain costs of that
disposition, including corporate level taxes, might not be payable in connection
with that acquisition. As a result, stockholders of the separate, independent
company might receive a greater amount than the net proceeds that would be
received by holders of the class of common stock relating to that group if the
assets of such group were sold. In addition, we cannot assure you that the net
proceeds per share of the common stock relating to that group will be equal to
or more than the market value per share of such common stock prior to or after
announcement of a disposition.
The term "substantially all of the properties and assets" of a group is
subject to potentially conflicting interpretations. Resolution of such a dispute
could adversely impact the holders of either the class of common stock related
to the assets being disposed or the holders of the other class because the
consideration, if any, to be received by the holders of the class related to the
disposed assets may depend on whether the disposition involved "substantially
all" of the properties and assets of that class.
HOLDERS OF EITHER CLASS OF COMMON STOCK MAY BE ADVERSELY AFFECTED BY A
REDEMPTION OF THEIR COMMON STOCK.
We are entitled to redeem the outstanding common stock relating to a
group when all or substantially all of that group's assets are sold. We can
redeem the assets for cash, securities, a combination of cash and securities or
other property at fair value. A disposition-related redemption could occur when
the assets being disposed of are considered undervalued. If that were the case,
the holders of our common stock related to that group would receive less
consideration for their shares than they may deem reasonable.
We can also redeem on a pro rata basis all of the outstanding shares of
a group's common stock for shares of the common stock of one or more of our
wholly owned subsidiaries. If this were to occur, the holders of the redeemed
class of common stock would no longer have stockholder voting rights in Acacia
Research Corporation or any other benefits to be derived from holding a class of
stock in Acacia Research Corporation. In addition, if the outstanding shares of
a class of our common stock are redeemed for shares that are not publicly
traded, the holders of such redeemed stock will no longer be able to publicly
trade their shares and accordingly their investment will be substantially less
liquid.
OUR CAPITAL STRUCTURE AND THE VARIABLE VOTE PER SHARE COULD ENABLE A POTENTIAL
ACQUIRER TO TAKE CONTROL OF OUR COMPANY THROUGH THE ACQUISITION OF ONLY ONE OF
THE CLASSES OF OUR COMMON STOCK.
A potential acquirer could acquire control of Acacia Research
Corporation by acquiring shares of common stock having a majority of the voting
power of all shares of common stock outstanding. Such a majority could be
obtained by acquiring a sufficient number of shares of both classes of common
stock or, if one class of common stock has a majority of such voting power, only
shares of that class. Currently, our AR-Acacia Technologies stock has a majority
of the voting power. As a result, currently, it might be possible for an
acquirer to obtain control of Acacia Research Corporation by purchasing only
shares of AR-Acacia Technologies stock.
DECISIONS BY DIRECTORS AND OFFICERS THAT AFFECT DIFFERENTLY ONE CLASS OF OUR
COMMON STOCK COMPARED TO THE OTHER COULD ADVERSELY AFFECT THE MARKET VALUE OF
EITHER OR BOTH OF THE CLASSES OF OUR COMMON STOCK.
The relative voting power per share of our AR-CombiMatrix stock and our
AR-Acacia Technologies stock and the number of shares of one class of common
stock issuable upon the conversion of the other class of common stock will vary
depending upon the relative market values of our AR-CombiMatrix stock and our
AR-Acacia Technologies stock. The market value of either or both classes of
common stock could be affected by market reaction to decisions by our board of
directors or our management that investors perceive to affect differently one
class of common stock compared to the other. These decisions could involve
changes to our management and allocation policies, allocations of corporate
opportunities and financing resources between groups, and changes in dividend
policies.
26
INVESTORS MAY NOT VALUE OUR AR-COMBIMATRIX STOCK AND OUR AR-ACACIA TECHNOLOGIES
STOCK BASED ON GROUP FINANCIAL INFORMATION AND POLICIES.
We cannot assure you that investors will value our AR-CombiMatrix stock
and our AR-Acacia Technologies stock based on the reported financial results and
prospects of the separate groups or the dividend policies established by our
board of directors with respect to those groups. Holders of AR-CombiMatrix stock
and AR-Acacia Technologies stock will continue to be common stockholders of
Acacia Research Corporation subject to all the risks associated with an
investment in Acacia Research Corporation as a whole. Additionally, the separate
stockholder rights related to each group are limited and relate to events that
may never occur, such as dividend and liquidation rights and the disposition of
all or substantially all of the assets of a group. Accordingly, investors may
discount the value of AR-CombiMatrix stock and AR-Acacia Technologies stock
because both groups are part of a common enterprise rather than a stand-alone
entity and each class of stock has limited separate stockholder rights.
HOLDERS OF AR-COMBIMATRIX STOCK AND AR-ACACIA TECHNOLOGIES STOCK MAY NOT RECEIVE
A PREMIUM FROM AN INVESTOR ACQUIRING CONTROL OF THEIR RESPECTIVE CLASSES OF
STOCK.
Control of AR-CombiMatrix stock or AR-Acacia Technologies stock may not
provide control of Acacia Research Corporation as a whole. Accordingly, unlike
many acquisition transactions, holders of AR-CombiMatrix stock and
AR-Technologies stock may not receive a controlling interest premium from an
investor acquiring control of their respective classes of stock.
THERE ARE CERTAIN PROVISIONS IN OUR TWO-CLASS CAPITAL STRUCTURE THAT COULD HAVE
ANTI-TAKEOVER EFFECTS.
The existence of the two classes of common stock could, under certain
circumstances, prevent stockholders from profiting from an increase in the
market value of their shares as a result of a change in control of Acacia
Research Corporation by delaying or preventing such change in control. The
existence of two classes of common stock could present complexities and could,
in certain circumstances, pose obstacles, financial and otherwise, to an
acquiring person. We could, in the sole discretion of our board of directors and
without stockholder approval, exercise the right to convert the shares of one
class of common stock into shares of the other at a 10% premium over their
respective average market values. This conversion could result in additional
dilution to persons seeking control of Acacia Research Corporation.
Our board of directors could issue shares of preferred stock or common
stock that could be used to create voting or other impediments to discourage
persons seeking to gain control of Acacia Research Corporation, and preferred
stock could also be privately placed with purchasers favorable to our board of
directors in opposing such action.
CAUTIONARY STATEMENT CONCERNINGREGARDING FORWARD-LOOKING INFORMATION
STATEMENTS
This prospectus contains "forward-looking statements"forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 with respect1995. Reference is made in particular to the financial condition, resultsdescription of operations, business strategies, operating
efficiencies or synergies, competitive positions, growth opportunities for
existing patents, technologies, products,our plans and objectives of management,
markets for stock of Acaciafuture operations, assumptions underlying such plans and objectives, and other matters. Statementsforward-looking statements included in this prospectus
thatprospectus. 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 not historical facts are hereby identified as "forward-looking
statements" for the purpose of the safe harbor provided by Section 21E of the
Exchange Actbased on management’s current expectations and Section 27A of the Securities Act. Such forward-looking
statements, including, without limitation, those relating to the future business
prospects, revenues and income of Acacia, wherever they occur, are necessarily
estimates reflecting the best judgment of the senior management of Acacia on the
date on which they were made, or if no date is stated, as of the date of this
prospectus. These forward-looking statements are subject to risks, uncertainties
and assumptions, including those described in the section entitled "Risk
Factors," beginning on page 5 that may affect the operations, performance,
development and results of our business. Because the factors discussed in this
prospectus could cause actual results or outcomes to differ materially from
those expressed in any forward-looking statements made by us or on our behalf,
you should not place undue reliance on any such forward-looking statements. New
factors emerge from time to time, and it is not possible for us to predict which
factors will arise. In addition, we cannot assess the impact of each factor on
our business or the extent to which any factor, or combinationa number of factors mayand uncertainties, which could cause actual results to differ materially from those containeddescribed 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, and other circumstances affecting anticipated revenues and costs, as more fully disclosed in our discussion of risk factors on page 12 of this prospectus. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements.
27
You should understandstatements 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 important factors discussed in the "Risk
Factors" section, could affect our future results and could cause thosesuch results to differ materially from those expresseddescribed in such forward-looking statements.
We undertake no obligation to publicly update or revise anythe forward-looking statements whether as a result of new information, future
events or any other reason. All subsequent forward-looking statements
attributable to Acacia or any person acting on our behalf are expressly
qualifiedset forth in their entirety by the cautionary statements contained or referred
to herein. In light of these risks, uncertainties and assumptions,connection with the forward-looking events discussed in this prospectus may not occur. We are
required to update this prospectus and the registration statement with a
post-effective amendment to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement, including
this prospectus.
statements.
USE OF PROCEEDS
All of our AR-Acacia Technologies stock being offered under this
prospectus is being sold by or for
We will retain broad discretion over the accountuse of the selling stockholders. We
will not receive anynet proceeds from the sale of our AR-Acacia Technologies stock
by or for the accountany of the selling stockholders.
SELLING STOCKHOLDERS
On December 15, 2004, we agreed to issue 3,938,832 shares of AR-Acacia
Technologies stock to Global Patent Holdings, LLC, as partial consideration for
the purchase of its subsidiary companies, holding an aggregate of 27 patent
portfolios, which includes 120 U.S. patents. The transaction closed on January
28, 2005. Global Patent Holdings, LLC, subsequently distributed the shares, pro
rata, to its members. We have agreed to register for resale by these members,
now stockholders in our company and who are listed below (the "selling
stockholders"), all of the shares of AR-Acacia Technologies stock we issued to
them.
The table below presents information regarding the selling stockholders
and the shares of our AR-Acacia Technologies stock that they may offer and sell
from time to timesecurities offered under this prospectus. Percentages of beneficial ownership are
based upon 27,214,852 shares of AR-Acacia Technologies stock issued and
outstanding as of March 28, 2005.
28
(1) This table is based upon information suppliedUnless otherwise indicated in any applicable prospectus supplement or in any free writing prospectus that we authorize to us bybe provided to you in connection with a specific offering, we intend to use the selling
stockholders.
(2) Assumes that the selling stockholders sell all of the shares available
for resale.
(3) 252,715 shares are owned by Bank of America, Trustee for the benefit of
the Anthony O. Brown IRA Rollover Plan, and are beneficially owned by
Anthony O. Brown.
(4) These shares are registered to Michael Vender, Trustee of the Michael
Vender Trust and are beneficially owned by Michael Vender.
(5) These shares are registered to Delaware Charter, as Trustee for the
benefit of Richard Taylor and are beneficially owned by Richard Taylor.
(6) These shares are registered to Thomas Harney, Trustee of the Thomas M.
Harney Revocable Trust U/D/T August 31, 1988, and are beneficially
owned by Thomas Harney.
(7) Keith Morton, David Snyder and Scott Turbin are members of KDS, LLC and
share voting and investment control over the shares held by KDS, LLC.
(8) These shares are registered to Lincoln Financial Group, Trustee for the
benefit of the Thomas Henrich Profit Sharing Plan and are beneficially
owned by Thomas Henrich.
(9) All the selling stockholders are members of Global Patent Holdings.
Anthony O. Brown, Richard A. Angell, and Scott D. Paseltiner are
affiliates of Global Patent Holdings LLC and control the voting and/ or
investment power over the shares held by Global Patent Holdings LLC.
Daniel B. Asher owns approximately 15% of the membership interest of
Global Patent Holdings and as a result, may be deemed an affiliate of
Global Patent Holdings.
RELATIONSHIP OF SELLING STOCKHOLDERS TO THE COMPANY
Anthony O. Brown, a Selling Stockholder, has the right to appoint a
director to any vacancy on our board of directors as further described in our
Form 8-K filed on February 1, 2005 and incorporated by reference on page 32
below. In addition, we have entered into an agreement with Mr. Brown for
consulting services for two years, at 1200 hours per year, ending on January 27,
2007, and for a non-compete agreement for four years, ending January 27, 2009.
In consideration thereof, we will pay Mr. Brown $2,000,000 in equal bi-weekly
installments over the next two years. The foregoing agreements were entered into
with Mr. Brown as part of our acquisition of assets from Global Patent Holdings,
LLC described above and further described in our Form 8-K filed on February 1,
2005 and incorporated by reference on page 32 below.
Other than as set forth above with respect to Mr. Brown, none of the
other selling stockholders listed above has held any position or office, or has
had any material relationship, with our company or any of its affiliates within
the past three years.
PLAN OF DISTRIBUTION
We are registering the shares of AR-Acacia Technologies stock on behalf
of the selling stockholders. A selling stockholder is a person named in the
section entitled "Selling Stockholders" and also includes any donee, pledgee,
transferee or other successor-in-interest selling shares received after the date
of this prospectus from a selling stockholder as a gift or other non-sale
related transfer.
We do not know of any plan of distribution for the resale of our
AR-Acacia Technologies stock by the selling stockholders. We will not receive
any of thenet proceeds from the sale by the selling stockholders of any of the resale shares.
29
We expect thatsecurities offered hereby for our operations and for general corporate purposes, including working capital for our businesses. Pending our use of the selling stockholders or transfereesnet proceeds as described above, we intend to invest the net proceeds in investment-grade, interest-bearing securities.
PLAN OF DISTRIBUTION
We may sell the resale sharessecurities to or through underwriters or dealers, through agents, or directly to one or more purchasers or through a combination of these methods. The applicable prospectus supplement (and any related free writing prospectus that we may authorize to be provided to you) will describe the terms of the offering of the securities, including, to the extent applicable:
| Ÿ | the name or names of any underwriters, if any, and if required, any dealers or agents; |
| Ÿ | the purchase price or other consideration to be paid in connection with the sale of the securities being offered and the proceeds we will receive from the sale; |
| Ÿ | any over-allotment options under which underwriters may purchase additional securities from us; |
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| Ÿ | any underwriting discounts or agency fees and other items constituting underwriters’ or agents’ compensation; |
| Ÿ | any public offering price; |
| Ÿ | any discounts or concessions allowed or reallowed or paid to dealers; and |
| Ÿ | any securities exchange or market on which the securities may be listed. |
We may distribute the securities from time to time in one or more transactions on Nasdaq or any
other exchange upon which our company may become listed, in privately negotiated
transactions, through put or call option transactions relating to the shares, or
a combination of such methods of sale, at fixed prices which may be changed, at:
| Ÿ | at fixed price or prices, which may be changed from time to time; |
| Ÿ | market prices prevailing at the time of sale; |
| Ÿ | prices related to such prevailing market prices; or |
| Ÿ | negotiated prices. |
Only underwriters named in the prospectus supplement are underwriters of the securities offered by the prospectus supplement.
If we utilize an underwriter in the sale of the securities being offered, we will execute an underwriting agreement with the underwriter at the time of sale. Any underwriters used in the sale will acquire the securities for their own account and may resell the securities from time to time in one or more transactions at prices related to such
prevailing market pricesa fixed public offering price or at negotiated prices.varying prices determined at the time of sale. The selling stockholdersobligations of the underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting agreement. We may selloffer the resale sharessecurities to the public through underwriting syndicates represented by managing underwriters or through broker-dealers, and such broker-dealers may
receive compensation fromby underwriters without a syndicate.
In connection with the selling stockholderssale of the securities, we, or the purchasers of the resale shares,securities for whom the underwriter may act as agent, may compensate the underwriter in the form of underwriting discounts or both.commissions. The selling stockholdersunderwriter may also enter into hedging transactions,
optionssell the securities to or other transactions with broker-dealers or other financial
institutions that requirethrough dealers, and the delivery to these broker-dealers or other
financial institutions of shares offered by this prospectus, which shares these
broker-dealer or other financial institutionunderwriter may resell pursuant to this
prospectus (as amended or supplemented to reflect such transaction). These
broker-dealers may receive compensationcompensate those dealers in the form of discounts, concessions or commissions. Subject to certain conditions, the underwriters will be obligated to purchase all of the securities offered by the prospectus supplement. We may change from time to time the public offering price and any discounts or concessions allowed or reallowed or paid to dealers.
We may directly solicit offers to purchase the securities. We may also designate agents to solicit offers to purchase the securities from time to time. We will name in a prospectus supplement any agent involved in the offer or sale of our securities and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
If we utilize a dealer in the sale of the securities being offered by this prospectus, we will sell the securities to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the time of resale.
We may authorize agents or underwriters to solicit offers by institutional investors to purchase securities from selling stockholders and/us at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts in the prospectus supplement.
Underwriters, dealers and agents participating in the distribution of the securities may be deemed to be underwriters within the meaning of the Securities Act of 1933, as amended, or the purchasersSecurities Act, and any discounts and commissions received by them and any profit realized by them on resale of shares for whom
these broker-dealersthe securities may act asbe deemed to be underwriting discounts and commissions. We may enter into agreements to indemnify underwriters, dealers and agents against civil liabilities, including liabilities under the Securities Act, or to whomcontribute to payments they sell as principal, or
both. For example, the selling stockholders may:
omay be required to make in respect thereof.
24
In addition, we may enter into derivative transactions with a broker-dealerthird parties (including the writing of options), or affiliate of a
broker-dealer or othersell securities not covered by this prospectus to third partyparties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with which
that other party will becomesuch a Selling Stockholder and engage
in short sales of securities undertransaction, the third parties may, pursuant to this prospectus in which
caseand the otherapplicable prospectus supplement, sell securities covered by this prospectus and the applicable prospectus supplement. If so, the third party may use securities borrowed from us or others to settle such sales and may use securities received from the
selling stockholdersus to close out any related short positions;
o sell short thepositions. We may also loan or pledge securities undercovered by this prospectus and use the securities held by itapplicable prospectus supplement to close out any short position;
o enter into options, forwards or other transactions that
require the selling stockholders to deliver, in a transaction
exempt from registration under the Securities Act, the
securities to a broker-dealer or an affiliate of a
broker-dealer or other third partyparties, who may then become a
Selling Stockholder and publicly resell or otherwise transfer
the securities under this prospectus; or
o loan or pledge the securities to a broker-dealer or an
affiliate of a broker-dealer or other third party who may then
become a Selling Stockholder and sell the loaned securities or, uponin an event of default in the case of a pledge, become a
Selling Stockholder and sell the pledged securities pursuant to this prospectus and the applicable prospectus supplement. The third party in such sale transactions will be an underwriter and will be identified in the applicable prospectus supplement.
All securities we offer, other than common stock, will be new issues of securities with no established trading market. Any underwriters may make a market in these securities, but will not be obligated to do so and may discontinue any market making at any time without notice. We cannot guarantee the liquidity of the trading markets for any securities.
Underwriters may engage in stabilizing and syndicate covering transactions in accordance with Rule 104 under this prospectus.
The selling stockholders have advised us that they havethe Exchange Act. Rule 104 permits stabilizing bids to purchase the securities being offered as long as the stabilizing bids do not entered
into any agreements, arrangements or understandings with any underwriter,
broker-dealer or agent regardingexceed a specified maximum. Underwriters may over-allot the sale of their securities.
The selling stockholders and any broker-dealers that actoffered securities in connection with the saleoffering, thus creating a short position in their account. Syndicate covering transactions involve purchases of sharesthe offered securities by underwriters in the open market after the distribution has been completed in order to cover syndicate short positions. Underwriters may also cover an over-allotment or short position by exercising their over-allotment option, if any. Stabilizing and syndicate covering transactions may cause the price of the offered securities to be higher than it would otherwise be in the absence of these transactions. These transactions, if commenced, may be "underwriters" within the meaning of Section
2(11) of the Securities Act, anddiscontinued at any commissions received by these
broker-dealers or any profittime.
Any underwriters who are qualified market makers on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act.
Because selling stockholdersThe NASDAQ Global Market may be "underwriters" within the meaning
of Section 2(11) of the Securities Act, the selling stockholders may be subject
to the prospectus delivery requirements of the Securities Act. Furthermore,
selling stockholders also may resell all or a portion of the sharesengage in openpassive market making transactions in reliance uponthe securities on The NASDAQ Global Market in accordance with Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of Rule 144. We have
informed the selling stockholders that the anti-manipulative provisions103 of Regulation M, promulgated underduring the Exchange Actbusiness day prior to the pricing of the offering, before the commencement of offers or sales of the securities. Passive market makers must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded.
In compliance with guidelines of the Financial Industry Regulatory Authority, or FINRA, the maximum consideration or discount to be received by any FINRA member or independent broker dealer may apply to their sales innot exceed 8% of the market.
In addition, if we are notified by a selling stockholder that a donee,
pledgee or transferee or other successor in interest intends to sell more than
500 shares, a supplementaggregate amount of the securities offered pursuant to this prospectus and any applicable prospectus supplement.
The underwriters, dealers and agents may engage in other transactions with us, or perform other services for us, in the ordinary course of their business. We will describe such relationships in the prospectus supplement naming the underwriter and the nature of any such relationship.
DESCRIPTION OF WARRANTS
The following description, together with the additional information we may include in any applicable prospectus supplements and free writing prospectuses, summarizes the material terms and provisions of the warrants that we may offer under this prospectus, which consist of warrants to purchase common stock. Warrants may be issued independently, together with any other securities offered by any prospectus supplement or through a dividend or other distribution to our stockholders and may be attached to or separate from the related securities. The following sets forth certain general terms and provisions of the warrants that may be offered under this prospectus. While the terms we have summarized below will apply generally to any warrants that we may offer under this prospectus, we will describe the particular terms of any series of warrants that we may offer in more detail in the applicable prospectus supplement and any applicable free writing prospectus. The terms of any warrants offered under a prospectus supplement may differ from the terms described below. However, no prospectus supplement will fundamentally change the terms that are set forth in this prospectus or offer a security that is not registered and described in this prospectus at the time of its effectiveness.
25
Warrants may be issued under a warrant agreement to be entered into between us and a warrant agent specified in the applicable prospectus supplement. The warrant agent will act solely as our agent in connection with the warrants of a particular series and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants. The applicable warrant agreement and form of warrant certificate will be filed.
Atfiled as exhibits to or incorporated by reference in the registration statement of which this prospectus is a part. Further terms of the warrants and the applicable warrant agreement will be set forth in the applicable prospectus supplement and any time a particular offer of resale shares is made,applicable free writing prospectus. We urge you to read the applicable prospectus supplement and any applicable free writing prospectus related to the extent
required, a supplementalparticular series of warrants that we sell under this prospectus, will be distributed which will set forthas well as the number of resale shares offeredcomplete warrant agreements and warrant certificates that contain the terms of the offering includingwarrants.
The applicable prospectus supplement will describe the name
or names of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the resale shares purchased from the selling stockholders, any
discounts, commission and other items constituting compensation from the selling
stockholders and any discounts, concessions or commissions allowed or paid to
dealers. We do not presently intend to use any forms of prospectus other than
print.
30
In order to comply with the securities laws of certain states, if
applicable, the resale shares may be sold in such jurisdictions only through
registered or licensed brokers or dealers.
The selling stockholders and any other persons participating in the
sale or distribution of the resale shares will be subject to the federal
securities laws and must comply with certain terms of the requirementswarrants in respect of the
Securities Act and the Exchange Act, including Rule 10b-5 and Regulation M under
the Exchange Act. These rules and regulations may limit the timing of purchases
and sales of shares of our AR-Acacia Technologies stock by the selling
stockholders or other persons. Under these rules and regulations, generally,
except as otherwise permitted thereby, selling stockholders and other persons
participating in the sale or distribution:
o may not engage in any stabilization activity in connection
with our AR-Acacia Technologies stock,
o must furnish each broker which offers resale shares covered by this prospectus withis being delivered, including, where applicable, the number of copies of this prospectus
and any supplement which are required by the broker, and
o may not bid for or purchase any of our AR-Acacia Technologies
stock or attempt to induce any person to purchase any of our
AR-Acacia Technologies stock other than as permitted under the
Exchange Act.
We will make copies of this prospectus available to the selling
stockholders, and we have informed the selling stockholders of the need for
delivery of a copy of this prospectus to each purchaser of the resale shares
prior to or at the time of any sale of the resale shares offered hereby.
We may suspend the effectiveness or use of, or trading under, the
registration statement if we determine that the sale of any securities pursuant
to the registration statement would:
o materially impede, delay or interfere with any material
pending or proposed financing, acquisition, corporate
reorganization or other similar transaction involving the
company for which we have authorized negotiations; materially
adversely impair the consummation of any pending or proposed
material offering or sale of any class of securities by the
company, or
o require disclosure of material nonpublic information that, if
disclosed at such time, would be materially harmful to the
interests of the company and our stockholders.
We will pay all costs and expenses associated with registering and
qualifying the resale shares being offered hereunder with the SEC and any state
securities agencies. The selling stockholders will bear their own legal fees and
costs and all commissions, discounts and expenses of underwriters or brokers, if
any, attributable to the sales of the shares.
We and the selling stockholders have agreed to indemnify each other
against certain liabilities that could arise from the registration and sale of
the shares.
following:
| Ÿ | the title of the warrants; |
| Ÿ | the aggregate number of the warrants offered; |
| Ÿ | the price or prices at which the warrants will be issued; |
| Ÿ | the designation, number and terms of the shares of our common stock purchasable upon exercise of the warrants; |
| Ÿ | the designation and terms of the other securities, if any, with which the warrants are issued and the number of the warrants issued with each security; |
| Ÿ | the date, if any, on and after which the warrants and the related common stock or other securities, if any, will be separately transferable; |
| Ÿ | the price at which each share of common stock purchasable upon exercise of the warrants may be purchased; |
| Ÿ | the date on which the right to exercise the warrants will commence and the date on which that right will expire; |
| Ÿ | the minimum or maximum amount of the warrants which may be exercised at any one time; |
| Ÿ | information with respect to book-entry procedures, if any; |
| Ÿ | a discussion of federal income tax considerations; and |
| Ÿ | any other terms of the warrants, including terms, procedures and limitations relating to the transferability, exchange and exercise of the warrants. |
26
EXPERTS
The financial statements of Acacia Research Corporation and management'smanagement’s assessment of the effectiveness of internal control over financial reporting (which is included in Management'sManagement’s Report on Internal Control over Financial Reporting) incorporated in this prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2008 have been so incorporated in reliance on the reports of Grant Thornton LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The financial statements of Acacia Research Corporation incorporated in this prospectus by reference to the Annual Report on Form 10-K of Acacia Research Corporation for the year ended December 31, 2004,2008 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The financial statements of Acacia Technologies group incorporated in
this prospectus by reference to the Annual Report on Form 10-K of Acacia
Research Corporation for the year ended December 31, 2004 have been so included
in reliance on the report (which contains an explanatory paragraph relating to
Acacia Technologies group being a division of Acacia Research Corporation as
described in Note 1 to the Acacia Technologies group financial statements) of
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting.
31
The financial statements of CombiMatrix group incorporated in this
prospectus by reference to the Annual Report on Form 10-K of Acacia Research
Corporation for the year ended December 31, 2004 have been so included in
reliance on the report (which contains an explanatory paragraph relating to
CombiMatrix group being a division of Acacia Research Corporation as described
in Note 1 to the CombiMatrix group financial statements) of
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
Certain legal matters in connection with this prospectus
The validity of the securities offered hereby will be passed upon for us by Greenberg Traurig, LLP. Greenberg Traurig, LLP and its attorneys
hold no shares of our AR-Acacia Technologies stock or other securities.
Stradling Yocca Carlson & Rauth, a Professional Corporation.
WHERE YOU CAN FIND MORE INFORMATION
We electronicallyare a reporting company and file annual, quarterly and current reports, proxy and information statements and other information with the SEC. We have filed with the SEC a registration statement on Form S-3 under the Securities Act with respect to the securities we are offering under this prospectus. This prospectus does not contain all of the information set forth in the registration statement and Exchange Commission. The publicthe exhibits to the registration statement. For further information with respect to us and the securities we are offering under this prospectus, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. You may read and copy any materials we file with the SECregistration statement, as well as our reports, proxy statements and other information, at the SEC'sSEC’s Public Reference Room at 450 Fifth100 F Street, N.W.N.E., Washington, D.C. 20549. The public may obtainYou can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information onabout the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.Room. The SEC also maintains an Internetinternet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.SEC, where our SEC filings are also available. The address of thatthe SEC’s web site is http:“http://www.sec.gov. Our Internet address is http://www.acaciaresearch.com.
MATERIAL CHANGES
The condensed consolidated pro forma financial statements that give
effect to the company's acquisition” We maintain a website at www.acaciares.com. Information contained in or accessible through our website does not constitute a part of certain subsidiary companies of Global
Patent Holdings, LLC as of December 31, 2004 and for the year then ended and the
audited financial statements of the businesses acquired from Global Patent
Holdings, LLC as of December 31, 2004 and for the year then ended, have been
included as an amendment to our Form 8-K filed with the SEC on April 11, 2005.
this prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents are specificallySEC allows us to “incorporate by reference” information that we file with it into this prospectus, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus. Information in this prospectus supersedes information incorporated by reference that we filed with the SEC prior to the date of this prospectus, while information that we file later with the SEC will automatically update and supersede the information in this prospectus. We incorporate by reference into this prospectus:
(1) Our Annual Report on Form 10-K for the year ended December 31,
2004, filed with the SEC on March 15, 2005;
(2) Our Proxy Statement on Form DEF 14A filed with the SEC on
April 1, 2005, for our annual meeting of stockholders to be
held on May 10, 2005;
(3) Our Current Report on Form 8-K/A filed with the SEC on April
11, 2005
(4) The description of the AR-Acacia Technologies stock included
in our registration statement on Form 8-A, filed withand prospectus the SEC
on December 19, 2002;documents listed below, and (5) All documents thatany future filings we filewill make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial registration statement but prior to effectiveness of the registration statement and after the date of this prospectus but prior to the termination of the offering.
offering of the securities covered by this prospectus (other than current reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K):
| 1. | our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the SEC on February 26, 2009; |
| 2. | our Current Reports on Form 8-K filed with the SEC on January 5, 2009 and February 19, 2009; and |
27
| 3. | the description of our common stock contained in the Registration Statement on Form 8-A as filed with the SEC on December 19, 2002, including any amendment or reports filed for the purpose of updating such description. |
We will provide each person, including any beneficial owner, to whom a prospectus is delivered, a copy of any or all of the information that has been incorporated by reference in this prospectus but not delivered with the prospectus.prospectus, including exhibits that are specifically incorporated by reference into such documents. We will provide this information upon written or oral request at no charge to the requester. The request for this information must be made to the following:
Investor Relations
Acacia Research Corporation
Attention: Investor Relations
500 Newport Center Drive, 7th Floor
Newport Beach, California 92660
Telephone: (949) 480-8300
32
======================================= =================================
YOU SHOULD RELY ONLY
DISCLOSURE OF COMMISSION POSITION ON THE INFORMATION 3,938,832 Shares
CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THE ACACIA
SELLING STOCKHOLDERS ARE OFFERING TO RESEARCH
SELL, AND SEEKING OFFERS TO BUY, SHARES CORPORATION
OF OUR AR-ACACIA TECHNOLOGIES STOCK ONLY
IN JURISDICTIONS WHERE OFFERS AND SALES
ARE PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS ACCURATE ONLY AS
OF THE DATE OF THIS PROSPECTUS, AR-ACACIA TECHNOLOGIES STOCK
REGARDLESS OF THE TIME OF DELIVERY OF
THIS PROSPECTUS OR OF ANY SALE OF OUR
AR-ACACIA TECHNOLOGIES STOCK.
----------------
--------------
TABLE OF CONTENTS
PROSPECTUS
PAGE --------------
----
Prospectus Summary.........................1
Risk Factors...............................5
Cautionary Statement Concerning
Forward-Looking Information...........27
UseINDEMNIFICATION FOR
SECURITIES ACT LIABILITY
Our officers and directors are required to exercise good faith and high integrity in the management of Proceeds...........................28
Selling Stockholders......................28
Relationshipour affairs. Our charter documents provide, however, that our officers and directors shall have no liability for losses or liabilities incurred, except as such losses or liabilities relate to a violation of Selling
Stockholdersthe duty of loyalty, a breach of good faith, intentional misconduct or knowing violation of law, approval of an improper dividend or stock repurchase or receipt of an improper benefit, in accordance with Delaware law, and they may be indemnified by us to the Company...........29
Planmaximum extent permitted by the Delaware General Corporation law.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Distribution......................29 ACACIA RESEARCH CORPORATION
Experts...................................31
Legal Matters.............................32 ------------------
Where You Can Find More Information.......32
Material Changes..........................32
Incorporationthe registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of Certain Information
by Reference..........................32
----------------
======================================= =================================
the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
28
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF OUR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. | $55,786,321 ACACIA RESEARCH CORPORATION  Common Stock Warrants |
TABLE OF CONTENTS | ||||
| Page | ||||
| About this Prospectus | 6 | |||
| Prospectus Summary | 7 | |||
| Risk Factors | 12 | |||
| Cautionary Statement Concerning Forward-Looking Information | 23 | ____________ | ||
| Use of Proceeds | 23 | |||
| Plan of Distribution | 23 | PROSPECTUS | ||
| Description of Warrants | 25 | |||
| Experts | 27 | ____________ | ||
| Legal Matters | 27 | |||
| Where You Can Find More Information | 27 | Acacia Research Corporation | ||
| Incorporation of Certain Information by Reference | 27 | |||
| Disclosure of Commission Position on Indemnification for Securities Act Liability | 28 | |||
____________ | ____________ | |||
29
PART II
Information Not Required in Prospectus
ITEM
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Other Expenses Of Issuance And Distribution
The following table sets forth the various costs and expenses, other than underwriting discounts and commissions, payable by the registrant in connection with the saleoffering of the AR-Acacia Technologies
stockour securities being registered. Any broker-dealer discounts and commissions will be
payable by the selling stockholders. Except for the SEC registration fee, all the amounts shown are estimates.
SEC registration fee.................................... $ 2,670.34
Legal fees and expenses................................. 150,000.00
Accounting fees and expenses............................ 15,000.00
Printing and related expenses........................... 1,000.00
Miscellaneous........................................... 250.00
-----------
Total................................................ $168,920.34
===========
ITEM
| Amount to be paid | ||||
| SEC registration fee | $ | 2,192 | ||
| Printing expenses | $ | 10,000 | ||
| Legal fees and expenses | $ | 17,500 | ||
| Miscellaneous | $ | 5,000 | ||
| Total | $ | 34,692 | ||
Item 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Indemnification Of Directors And Officers
Section 145 of the Delaware General Corporation Law, or DGCL, provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation - a derivative action), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceedings, had no reasonable cause to believe their conduct was unlawful.
A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such action, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation's certificate of incorporation, bylaws, disinterested director vote, stockholder vote, agreement or otherwise.
As permitted by Section 145 of the Delaware General Corporation Law, Article VII of Acacia'sour restated certificate of incorporation, as amended, provides:
"No
“No person shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, including without limitation for serving on a committee of the Board of Directors, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or hereafter may be amended. If the DGCL is amended after the date of the filing of this Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended. Any amendment, repeal or modification of this Article VII shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to such amendment, repeal or modification."
”
We have purchased insurance on behalf of any person who is or was a director, officer, employee or agent of our company, or is or was serving at the request of our company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not our company would have the power to indemnify him against such liability under the provisions of our company's restated certificate of incorporation.
II-1
ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Member Interest Purchase Agreement (1)
3.1 Restated Certificateincorporation, as amended.
Any underwriting agreements that we may enter into will likely provide for the indemnification of Incorporation (2)
3.2 Bylaws (3)
4.1 Restated Certificate of Incorporation included as Exhibit
3.1 to this Registration Statement
5.1 Opinion of Greenberg Traurig, LLP
10.1 Membership Interest Purchase Agreement (1)
10.2 Registration Rights Agreement (1)
10.3 Consulting Agreement (1)
10.4 Goodwill Purchase Agreement (1)
23.1 Consent of Greenberg Traurig, LLP (included in Exhibit 5.1
hereto)
23.2 Consent of Independent Registered Public Accounting Firm
regarding Acacia Research Corporation
23.3 Consent of Independent Registered Public Accounting Firm
regarding the Acacia Technologies group
23.4 Consent of Independent Registered Public Accounting Firm
regarding the CombiMatrix group
24.1 Resolutions authorizing signature of Chief Executive Officerus, our controlling persons, our directors and Chief Financial Officer by power of attorney
(included on page II-4)
- -----------
(1) Incorporated by reference to our Current Report on Form 8-K, filed on
February 1, 2005 (SEC File NO. 000-26068).
(2) Incorporated by reference from Appendix B to the Proxy
Statement/Prospectus which formed partcertain of our Registration Statement on
Form S-4 (SEC File No. 333-87654) which became effective on November 8,
2002.
(3) Incorporatedofficers by reference to our Quarterly Report on Form 10-Q filed on
August 10, 2001 (SEC File No. 000-26068).
ITEMthe underwriters against certain liabilities, including liabilities under the Securities Act.
II-1
Item 16. Exhibits
Exhibit Number | Description |
| 1.1 | Form of Underwriting Agreement, if any (1) |
| 4.1 | Form of Warrant Agreement (1) |
| 5.1 | Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation |
| 23.1 | Consent of Grant Thornton LLP |
| 23.2 | Consent of PricewaterhouseCoopers LLP |
| 23.3 | Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation (included in Exhibit 5.1 hereto) |
| 24.1 | Power of Attorney (included on signature page hereto) |
| (1) | To be filed as an exhibit to a Current Report on Form 8-K and incorporated herein by reference. |
Item 17. UNDERTAKINGSUndertakings.
a. The undersigned registrant hereby undertakes:
(1)
1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To
| (i) | to include any prospectus required by Section 10(a)(3) of the Securities Act; |
| (ii) | to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; |
| (iii) | to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; |
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the planSEC by the registrant pursuant to Section 13 or Section 15(d) of distribution not previously disclosedthe Exchange Act that are incorporated by reference in thethis registration statement, or any material changeis contained in a form of prospectus filed pursuant to such information inRule 424(b) that is part of the registration statement;
(2)
2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein,therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)thereof; and
3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4)
II-2
4. That, for the purpose of determining liability under the Securities Act to any purchaser:
| (i) | each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
| (ii) | each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date. |
5. That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
| (i) | any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| (ii) | any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| (iii) | the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
| (iv) | any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Sectionsection 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan'splan’s annual report pursuant to sectionSection 15(d) of the Exchange Act) that is incorporated by reference in the Registration
Statementregistration statement shall be deemed to be a new registration statement relating to the securities offered herein,therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(5)
(c) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference II-2
in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934;Act; and, where interim financial information required to be presented by Article 3 of Regulation S-X isare not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.
II-3
(d) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange CommissionSEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of ourits counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by usit is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-3
(e) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this amended registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newport Beach, State of California, on the 2nd27th day of May, 2005.
ACACIA RESEARCH CORPORATION
By: /s/ PAUL R. RYAN
------------------------------------February, 2009.
| ACACIA RESEARCH CORPORATION | ||
| By: | /s/ Paul R. Ryan | |
Paul R. Ryan, Chief Executive Officer & Chairman | ||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Paul R. Ryan Chairman and Chief Executive Officer
POWER OF ATTORNEY
Clayton J. Haynes, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Date | Signature | Title | ||
| February 27, 2009 | /s/ Paul R. Ryan | Chief Executive Officer | ||
| Paul R. Ryan | and Chairman of the Board of Directors | |||
February 27, 2009 | /s/ Clayton J. Haynes | Chief Financial Officer (Principal | ||
| Clayton J. Haynes | and Principal Accounting Officer) | |||
February 27, 2009 | /s/ Robert L. Harris | President and Director | ||
| Robert L. Harris | ||||
February 27, 2009 | /s/ William S. Anderson | Director | ||
| William S. Anderson | ||||
February 27, 2009 | /s/ Fred A. | Director | ||
| Fred A. deBoom | ||||
February 27, 2009 | /s/ Edward W. Frykman | Director | ||
| Edward W. Frykman | ||||
February 27, 2009 | /s/ G. Louis Graziadio, III | Director | ||
| G. Louis Graziadio, III |
II-5
EXHIBIT INDEX
Exhibit Number | Description |
| 1.1 | Form of Underwriting Agreement, if any (1) |
| 4.1 | Form of Warrant Agreement (1) |
| 5.1 | Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation |
| 23.1 | Consent of Grant Thornton LLP |
| 23.2 | Consent of PricewaterhouseCoopers LLP |
| 23.3 | Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation (included in Exhibit 5.1 hereto) |
| 24.1 | Power of Attorney (included on signature page hereto) |
| (1) | To be filed as an exhibit to a Current Report on Form 8-K and incorporated herein by reference. |