Cover
Cover - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 01, 2019 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2019 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 1-37721 | |
Entity Registrant Name | ACACIA RESEARCH CORP | |
Entity Central Index Key | 0000934549 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 50,132,871 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
State of Incorporation | DE | |
Entity Shell Company | false | |
Entity Ex transition period | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 63,487 | $ 128,809 |
Trading securities - debt | 90,482 | 33,642 |
Trading securities - equity | 10,934 | 3,012 |
Accounts receivable | 15,308 | 32,884 |
Prepaid expenses and other current assets | 3,289 | 3,125 |
Total current assets | 183,500 | 201,472 |
Investment at fair value (Note 5) | 9,070 | 7,459 |
Other investments (Note 5) | 0 | 8,195 |
Patents, net of accumulated amortization | 9,534 | 6,587 |
Other non-current assets | 1,658 | 236 |
Total assets | 203,762 | 223,949 |
Current liabilities: | ||
Accounts payable and accrued expenses | 9,461 | 8,347 |
Royalties and contingent legal fees payable | 10,518 | 22,688 |
Other current liabilities | 35 | 0 |
Total current liabilities | 20,014 | 31,035 |
Other liabilities | 2,131 | 1,674 |
Total liabilities | 22,145 | 32,709 |
Commitments and contingencies (Note 6) | ||
Stockholders' equity: | ||
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; no shares issued or outstanding | 0 | 0 |
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 50,132,871 and 49,639,319 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively | 50 | 50 |
Treasury stock, at cost, 2,919,828 shares as of June 30, 2019 and December 31, 2018 | (39,272) | (39,272) |
Additional paid-in capital | 651,688 | 651,156 |
Accumulated deficit | (432,682) | (422,541) |
Total Acacia Research Corporation stockholders' equity | 179,784 | 189,393 |
Noncontrolling interests | 1,833 | 1,847 |
Total stockholders' equity | 181,617 | 191,240 |
Total liabilities and stockholders' equity | $ 203,762 | $ 223,949 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 50,132,871 | 49,639,319 |
Common stock, shares outstanding | 50,132,871 | 49,639,319 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Revenues | $ 5,460 | $ 6,485 | $ 8,847 | $ 68,578 |
Portfolio operations: | ||||
Inventor royalties | 2,623 | 1,241 | 3,976 | 22,985 |
Contingent legal fees | 375 | 1,037 | 552 | 16,796 |
Patent acquisition expenses | 0 | 0 | 0 | 4,000 |
Litigation and licensing expenses - patents | 1,855 | 2,639 | 5,656 | 5,628 |
Amortization of patents | 818 | 5,278 | 1,474 | 10,608 |
Other portfolio expenses | 0 | 0 | 650 | 0 |
Total portfolio expenses | 5,671 | 10,195 | 12,308 | 60,017 |
Net portfolio income (loss) | (211) | (3,710) | (3,461) | 8,561 |
General and administrative expenses(1) | 3,810 | 6,916 | 7,505 | 10,217 |
Impairment of patent-related intangible assets | 0 | 28,210 | 0 | 28,210 |
Operating loss | (4,021) | (38,836) | (10,966) | (29,866) |
Other income (expense): | ||||
Change in fair value of investment, net (Note 5) | 6,980 | 11,347 | 13,888 | (29,750) |
Loss on sale of investment (Note 5) | (1,642) | 0 | (7,232) | 0 |
Impairment of other investment | (8,195) | (1,000) | (8,195) | (1,000) |
Interest income and other | 1,130 | 268 | 2,673 | 475 |
Total other income (expense) | (1,727) | 10,615 | 1,134 | (30,275) |
Loss before provision for income taxes | (5,748) | (28,221) | (9,832) | (60,141) |
Provision for income taxes | (9) | (285) | (323) | (476) |
Net loss including noncontrolling interests in subsidiaries | (5,757) | (28,506) | (10,155) | (60,617) |
Net loss attributable to noncontrolling interests in subsidiaries | 0 | 79 | 14 | 152 |
Net loss attributable to Acacia Research Corporation | (5,757) | (28,427) | (10,141) | (60,465) |
Net loss attributable to common stockholders - basic and diluted | $ (5,757) | $ (28,427) | $ (10,141) | $ (60,465) |
Basic and diluted net loss per common share | $ (0.12) | $ (0.57) | $ (0.20) | $ (1.20) |
Weighted average number of shares outstanding - basic and diluted | 49,696,016 | 50,061,812 | 49,676,059 | 50,345,808 |
General and administrative expenses | $ 3,349 | $ 5,710 | $ 7,052 | $ 10,035 |
Non-cash stock compensation expense - G&A | 461 | 521 | 453 | 1,225 |
Non-cash stock compensation expense - Profits Interests (Note 9) | 0 | 685 | 0 | (1,043) |
Total general and administrative expenses | $ 3,810 | $ 6,916 | $ 7,505 | $ 10,217 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss including noncontrolling interests | $ (5,757) | $ (28,506) | $ (10,155) | $ (60,617) |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on short-term investments, net of tax of $0 | 0 | 10 | 0 | (10) |
Unrealized gain (loss) on foreign currency translation, net of tax of $0 | 0 | (87) | 0 | (104) |
Total other comprehensive loss | (5,757) | (28,583) | (10,155) | (60,731) |
Comprehensive loss attributable to noncontrolling interests | 0 | 79 | 14 | 152 |
Comprehensive loss attributable to Acacia Research Corporation | $ (5,757) | $ (28,504) | $ (10,141) | $ (60,579) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Tax on unrealized gain on short-term investments | $ 0 | $ 0 | $ 0 | $ 0 |
Tax on unrealized gains on foreign currency translation | $ 0 | $ 0 | $ 0 | $ 0 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Comprehensive Income / Loss | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning balance, shares at Dec. 31, 2017 | 50,639,926 | ||||||
Beginning balance, value at Dec. 31, 2017 | $ 51 | $ (34,640) | $ 648,996 | $ (88) | $ (320,018) | $ 1,358 | $ 295,659 |
Net loss | (60,465) | (60,465) | |||||
Cumulative effect of new accounting principle | 2,506 | 308 | 2,814 | ||||
Stock options exercised, shares | 16,500 | ||||||
Stock options exercised, value | 51 | 51 | |||||
Compensation expense for share-based awards, net of forfeitures, shares | 31,102 | ||||||
Compensation expense for share-based awards, net of forfeitures, value | 1,225 | 1,225 | |||||
Repurchase of restricted common stock, shares | (1,192,464) | ||||||
Repurchase of restricted common stock, value | $ (2) | (4,632) | (7) | (4,641) | |||
Net income attributable to noncontrolling interests in subsidiaries | (152) | (152) | |||||
Unrealized gain on foreign currency translation | (104) | (104) | |||||
Unrealized loss on short-term investments | (10) | (10) | |||||
Ending balance, shares at Jun. 30, 2018 | 49,495,064 | ||||||
Ending balance, value at Jun. 30, 2018 | $ 49 | (39,272) | 650,265 | (202) | (377,977) | 1,513 | 234,376 |
Beginning balance, shares at Mar. 31, 2018 | 50,647,882 | ||||||
Beginning balance, value at Mar. 31, 2018 | $ 51 | (34,640) | 649,724 | (125) | (349,550) | 1,593 | 267,053 |
Net loss | (28,427) | (28,427) | |||||
Stock options exercised, shares | 6,500 | ||||||
Stock options exercised, value | 20 | 20 | |||||
Compensation expense for share-based awards, net of forfeitures, shares | 31,102 | ||||||
Compensation expense for share-based awards, net of forfeitures, value | 521 | 521 | |||||
Repurchase of restricted common stock, shares | (1,190,420) | ||||||
Repurchase of restricted common stock, value | $ (2) | (4,632) | (4,634) | ||||
Net income attributable to noncontrolling interests in subsidiaries | (79) | (79) | |||||
Unrealized gain on foreign currency translation | (87) | (87) | |||||
Unrealized loss on short-term investments | 10 | 10 | |||||
Ending balance, shares at Jun. 30, 2018 | 49,495,064 | ||||||
Ending balance, value at Jun. 30, 2018 | $ 49 | (39,272) | 650,265 | (202) | (377,977) | 1,513 | 234,376 |
Beginning balance, shares at Dec. 31, 2018 | 49,639,319 | ||||||
Beginning balance, value at Dec. 31, 2018 | $ 50 | (39,272) | 651,156 | 0 | (422,541) | 1,847 | 191,240 |
Net loss | (10,141) | (10,141) | |||||
Stock options exercised, shares | 25,136 | ||||||
Stock options exercised, value | 79 | 79 | |||||
Compensation expense for share-based awards, net of forfeitures, shares | 468,416 | ||||||
Compensation expense for share-based awards, net of forfeitures, value | 453 | 453 | |||||
Net income attributable to noncontrolling interests in subsidiaries | (14) | (14) | |||||
Ending balance, shares at Jun. 30, 2019 | 50,132,871 | ||||||
Ending balance, value at Jun. 30, 2019 | $ 50 | (39,272) | 651,688 | 0 | (432,682) | 1,833 | 181,617 |
Beginning balance, shares at Mar. 31, 2019 | 49,656,067 | ||||||
Beginning balance, value at Mar. 31, 2019 | $ 50 | (39,272) | 651,148 | 0 | (426,925) | 1,833 | 186,834 |
Net loss | (5,757) | (5,757) | |||||
Stock options exercised, shares | 25,136 | ||||||
Stock options exercised, value | 79 | 79 | |||||
Compensation expense for share-based awards, net of forfeitures, shares | 451,668 | ||||||
Compensation expense for share-based awards, net of forfeitures, value | 461 | 461 | |||||
Net income attributable to noncontrolling interests in subsidiaries | 0 | ||||||
Ending balance, shares at Jun. 30, 2019 | 50,132,871 | ||||||
Ending balance, value at Jun. 30, 2019 | $ 50 | $ (39,272) | $ 651,688 | $ 0 | $ (432,682) | $ 1,833 | $ 181,617 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities: | ||
Net loss including noncontrolling interests in subsidiaries | $ (10,155) | $ (60,617) |
Adjustments to reconcile net loss including noncontrolling interests in subsidiaries to net cash provided by (used in) operating activities: | ||
Change in fair value of investment, net (Note 5) | (13,888) | 29,750 |
Change in value of other investment | 8,195 | 1,000 |
Loss on sale of investment (Note 5) | 7,232 | 0 |
Depreciation and amortization | 1,482 | 10,627 |
Non-cash stock compensation | 453 | 182 |
Unrealized gain from trading securities | (1,004) | 0 |
Purchases of trading securities | (75,154) | 0 |
Maturities and sales of trading securities | 11,396 | 0 |
Impairment of patent-related intangible assets | 0 | 28,210 |
Other | 0 | (313) |
Changes in assets and liabilities: | ||
Accounts receivable | 17,576 | (934) |
Prepaid expenses and other assets | (1,595) | (571) |
Accounts payable and accrued expenses | 1,606 | 861 |
Royalties and contingent legal fees payable | (12,170) | 1,436 |
Net cash provided by (used in) operating activities | (66,026) | 9,631 |
Cash flows from investing activities: | ||
Patent acquisition costs | (4,420) | 0 |
Sale of investment (Note 5) | 5,045 | 0 |
Investments in Investees (Note 5) | 0 | (7,000) |
Purchases of available-for-sale investments | 0 | (49,895) |
Maturities and sales of available-for-sale investments | 0 | 15,400 |
Net cash provided by (used in) investing activities | 625 | (41,495) |
Cash flows from financing activities: | ||
Repurchase of common stock | 0 | (4,634) |
Repurchase of restricted common stock | 0 | (7) |
Proceeds from exercise of stock options | 79 | 51 |
Net cash provided by (used in) financing activities | 79 | (4,590) |
Decrease in cash and cash equivalents | (65,322) | (36,454) |
Cash and cash equivalents, beginning | 128,809 | 136,604 |
Cash and cash equivalents, ending | $ 63,487 | $ 100,150 |
1. Description of Business and
1. Description of Business and Basis of Presentation | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Basis of Presentation | 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business As used herein, “Acacia” and the “Company” refer to Acacia Research Corporation and/or its wholly and majority-owned and controlled operating subsidiaries, and/or where applicable, its management. Acacia’s operating subsidiaries invest in, license and enforce patented technologies. Acacia’s operating subsidiaries partner with inventors and patent owners, applying their legal and technology expertise to patent assets to unlock the financial value in their patented inventions. In recent years, Acacia has also invested in technology companies. Acacia leverages its experience, expertise, data and relationships developed as a leader in the intellectual property ("IP") industry to pursue these opportunities. In some cases, these opportunities will complement, and/or supplement Acacia’s primary licensing and enforcement business. Acacia’s operating subsidiaries generate revenues and related cash flows from the granting of IP rights (hereinafter “IP Rights”) for the use of patented technologies that its operating subsidiaries control or own. Acacia’s 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, where necessary, with the enforcement against unauthorized users of their patented technologies through the filing of patent infringement litigation. Acacia’s operating subsidiaries are principals in the licensing and enforcement effort, obtaining control of the rights in the patent portfolio, or control of the patent portfolio outright. Acacia’s operating subsidiaries own or control the rights to multiple patent portfolios, which include U.S. patents and certain foreign counterparts, covering technologies used in a wide variety of industries. Neither Acacia nor its operating subsidiaries invent new technologies or products; rather, Acacia depends upon the identification and investment in new patents, inventions and companies that own IP through its relationships with inventors, universities, research institutions, technology companies and others. If Acacia’s operating subsidiaries are unable to maintain those relationships and identify and grow new relationships, then they may not be able to identify new technology-based opportunities for sustainable revenue and/or revenue growth. During the six months ended June 30, 2019, Acacia obtained control of three new patent portfolios. During fiscal year 2018 Acacia did not obtain control of any new patent portfolios. During fiscal year 2017 Acacia obtained control of one new patent portfolio. In fiscal year 2016, Acacia obtained control of two new patent portfolios. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Acacia and its wholly and majority-owned and controlled subsidiaries. Material intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnotes required by U.S. GAAP in annual financial statements have been omitted or condensed in accordance with quarterly reporting requirements of the Securities and Exchange Commission (“SEC”). These interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2018, as reported by Acacia in its Annual Report on Form 10-K filed with the SEC on March 15, 2019, as amended by Amendment No. 1 to Form 10-K on Form 10-K/A, filed with the SEC on April 30, 2019, as well as in our other public filings with the SEC. The December 31, 2018 condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The condensed consolidated interim financial statements of Acacia include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of Acacia’s consolidated financial position as of June 30, 2019, and results of its operations and its cash flows for the interim periods presented. The consolidated results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the entire fiscal year. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Acacia believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, valuation of debt and equity instruments, stock-based compensation expense including the valuation of profits interests, impairment of patent-related intangible assets, impairment of other investment, the determination of the economic useful life of amortizable intangible assets, income taxes and valuation allowances against net deferred tax assets, require its most difficult, subjective or complex judgments. Reclassifications Certain reclassifications have been made to the prior fiscal year financial information to conform with the current fiscal year presentation. Such reclassifications had no impact on net income or cash flows. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Revenue is recognized upon transfer of control of promised bundled IP Rights and other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive in exchange for those IP Rights. Revenue contracts that provide promises to grant the right to use IP Rights as they exist at the point in time at which the IP Rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue is recognized at the point in time that the applicable performance obligations are satisfied and all other revenue recognition criteria have been met. For the periods presented, revenue contracts executed by the Company primarily provided for the payment of contractually determined, one-time, paid-up license fees in consideration for the grant of certain IP Rights for patented technologies owned or controlled by Acacia. Revenues also included license fees from sales-based revenue contracts, the majority of which were originally executed in prior periods, that provide for the payment of quarterly license fees based on quarterly sales of applicable product units by licensees (“Recurring Revenue Agreements”). Revenues may also include court ordered settlements or awards related to our patent portfolio. IP Rights granted included the following, as applicable: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The IP Rights granted were perpetual in nature, extending until the legal expiration date of the related patents. The individual IP Rights are not accounted for as separate performance obligations, as (i) the nature of the promise, within the context of the contract, is to transfer combined items to which the promised IP Rights are inputs and (ii) the Company's promise to transfer each individual IP right described above to the customer is not separately identifiable from other promises to transfer IP Rights in the contract. Since the promised IP Rights are not individually distinct, the Company combines each individual IP right in the contract into a bundle of IP rights that is distinct and accounts for all of the IP Rights promised in the contract as a single performance obligation. The IP Rights granted generally are “functional IP rights” that have significant standalone functionality. Acacia's subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights. Acacia’s operating subsidiaries have no further obligation with respect to the grant of IP Rights, including no express or implied obligation to maintain or upgrade the technology, or provide future support or services. The contracts provide for the grant (i.e., transfer of control) of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the contract. Licensees legally obtain control of the IP Rights upon execution of the contract. As such, the earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met. Revenue contracts generally provide for payment of contractual amounts within 30-90 days of execution of the contract, or the end of the quarter in which the sale or usage occurs for Recurring Revenue Agreements. Contractual payments made by licensees are generally non-refundable. For sales-based royalties, the Company includes in the transaction price some or all of an amount of estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Notwithstanding, revenue is recognized for a sales-based royalty promised in exchange for a license of IP Rights when the later of (i) the subsequent sale or usage occurs, or (ii) the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied. Estimates are generally based on historical levels of activity, if available. Revenues from contracts with significant financing components (either explicit or implicit) are recognized at an amount that reflects the price that a licensee would have paid if the licensee had paid cash for the IP Rights when they transfer to the licensee. In determining the transaction price, the Company adjusts the promised amount of consideration for the effects of the time value of money. As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the entity transfers promised IP Rights to a customer and when the customer pays for the IP Rights will be one year or less. In general, the Company is required to make certain judgments and estimates in connection with the accounting for revenue contracts with customers. Such areas may include identifying performance obligations in the contract, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct from other promised goods or services, evaluating whether a license transfers to a customer at a point in time or over time, allocating the transaction price to separate performance obligations, determining whether contracts contain a significant financing component, and estimating revenues recognized at a point in time for sales-based royalties. Revenues were comprised of the following for the periods presented: Three Months Ended Six Months Ended 2019 2018 2019 2018 (In thousands) Paid-up Revenue Agreements $ 4,864 $ 3,183 $ 4,864 $ 63,246 Recurring Revenue Agreements 596 3,302 3,983 5,332 $ 5,460 $ 6,485 $ 8,847 $ 68,578 Refer to “ Inventor Royalties and Contingent Legal Expenses Portfolio Operations Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs. These costs are included under the caption “Portfolio operations” in the accompanying condensed consolidated statements of operations. Cost of revenues for the six months ended June 30, 2018 included $4.0 million of costs to acquire certain patent rights related to revenues recognized in the period. Inventor Royalties and Contingent Legal Expenses Inventor royalties are expensed in the condensed consolidated statements of operations in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, upfront advances paid to patent owners by Acacia’s operating subsidiaries are recoverable from future net revenues. Patent costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the condensed consolidated statements of operations. Any unamortized upfront advances recovered from net revenues are expensed in the period recovered and included in amortization expense in the condensed consolidated statements of operations. Contingent legal fees are expensed in the condensed consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Inventor royalty and contingent legal agreements typically provide for payment by the Company of contractual amounts 30 days subsequent to the fiscal quarter end during which related license fee payments are received from licensees by the Company. Concentrations One licensee individually accounted for 89% of revenues recognized during the three months ended June 30, 2019, and two licensees accounted for 55% and 27% of revenues recognized during the six months ended June 30, 2019. Two licensees accounted for 48% and 42% of revenues recognized during the three months ended June 30, 2018 and one licensee accounted for 87% of revenues recognized during the six months ended June 30, 2018. The Company does not have any material foreign operations. For the three and six months ended June 30, 2019, 3% and 32%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions, based on the jurisdiction of the entity obligated to satisfy payment obligations pursuant to the applicable revenue arrangement. For the three and six months ended June 30, 2018, 43% and 6%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. Two licensees individually represented approximately 82% and 14% of accounts receivable at June 30, 2019. Four licensees individually represented approximately 38%, 36%, 12% and 11% of accounts receivable at December 31, 2018. Patents Patents include the cost of patents or patent rights (hereinafter, collectively “patents”) acquired from third-parties or obtained in connection with business combinations. Patent costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from ten to sixty months. Impairment of Long-lived Assets Acacia reviews long-lived assets and intangible assets for potential impairment annually (quarterly for patents) and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. In the event that management decides to no longer allocate resources to a patent portfolio, an impairment loss equal to the remaining carrying value of the asset is recorded. Refer to Note 4 for additional information. Fair value is generally estimated using the “Income Approach,” focusing on the estimated future net income-producing capability of the patent portfolios over their estimated remaining economic useful life. Estimates of future after-tax cash flows are converted to present value through “discounting,” including an estimated rate of return that accounts for both the time value of money and investment risk factors. Estimated cash inflows are typically based on estimates of reasonable royalty rates for the applicable technology, applied to estimated market data. Estimated cash outflows are based on existing contractual obligations, such as contingent legal fee and inventor royalty obligations, applied to estimated license fee revenues, in addition to other estimates of out-of-pocket expenses associated with a specific patent portfolio’s licensing and enforcement program. The analysis also contemplates consideration of current information about the patent portfolio including, status and stage of litigation, periodic results of the litigation process, strength of the patent portfolio, technology coverage and other pertinent information that could impact future net cash flows. Cash and Cash Equivalents Acacia considers all highly liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents. For the periods presented, Acacia’s cash equivalents are comprised of investments in AAA rated money market funds that invest in first-tier only securities, which primarily includes: domestic commercial paper, securities issued or guaranteed by the U.S. government or its agencies, U.S. bank obligations, and fully collateralized repurchase agreements. Acacia’s cash equivalents are measured at fair value using quoted prices that represent Level 1 inputs. Trading Securities- Debt Investments in debt securities are reported at fair value on a recurring basis, with related realized and unrealized gains and losses recorded in the condensed consolidated statement of operations in other income (expense). Realized and unrealized gains and losses are recorded based on the specific identification method. Interest is included in other income (expense). Trading Securities - Equity Investments in equity securities are reported at fair value on a recurring basis, with related realized and unrealized gains and losses in the value of such securities recorded in the condensed consolidated statement of operations in other income (expense). Dividend income is included in other income (expense). Short-term investments for the periods presented were comprised of the following: Cost Gross Gross Fair Value (In thousands) Security Type June 30, 2019: Trading securities - debt $ 90,061 $ 425 $ (4 ) $ 90,482 Trading securities - equity 10,977 99 (142 ) 10,934 $ 101,038 $ 524 $ (146 ) $ 101,416 December 31, 2018: Trading securities - debt $ 33,643 $ 18 $ (19 ) $ 33,642 Trading securities - equity 3,389 27 (404 ) 3,012 $ 37,032 $ 45 $ (423 ) $ 36,654 Fair Value Measurements U.S. GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows: (i) Level 1 – Observable Inputs (ii) Level 2 Pricing Models with Significant Observable Inputs (iii) Level 3 Unobservable Inputs Whenever possible, the Company is required to use observable market inputs (Level 1 – quoted market prices) when measuring fair value. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured. In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. Financial assets and liabilities measured at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 (In thousands) Assets as of June 30, 2019: Trading securities - debt $ – $ 90,482 $ – Trading securities - equity 10,934 – – Investment at fair value - warrants (Note 5) – 4,459 – Investment at fair value - common stock (Note 5) 4,611 – – Total recurring fair value measurements as of June 30, 2019 $ 15,545 $ 94,941 $ – Assets as of December 31, 2018: Trading securities - debt $ – $ 33,642 $ – Trading securities - equity 3,012 – – Investment at fair value - warrants (Note 5) – 2,064 – Investment at fair value - common stock (Note 5) 5,395 – – Total recurring fair value measurements as of December 31, 2018 $ 8,407 $ 35,706 $ – Investments at Fair Value On an individual investment basis, Acacia may elect to account for investments in companies where the Company has the ability to exercise significant influence over operating and financial policies of the investee, at fair value. If the fair value method is applied to an investment that would otherwise be accounted for under the equity method of accounting, it is applied to all of the financial interests in the same entity that are eligible items (i.e., common stock and warrants). Other Investments Equity investments in common stock and in-substance common stock without readily determinable fair values in companies over which the Company has the ability to exercise significant influence, are accounted for using the equity method of accounting. Acacia includes its proportionate share of earnings and/or losses of its equity method investees in equity in earnings (losses) of investees in the condensed consolidated statements of operations. Investments in preferred stock with substantive liquidation preferences are accounted for at cost, (subject to impairment considerations, as described below, if any), as adjusted for the impact of changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. In-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity's common stock. An investment in preferred stock with substantive liquidation preferences over common stock, is not substantially similar to common stock, and therefore is not considered in-substance common stock. A liquidation preference is substantive if the investment has a stated liquidation preference that is significant, from a fair value perspective, in relation to the purchase price of the investment. A liquidation preference in an investee that has sufficient subordinated equity from a fair value perspective is substantive because, in the event of liquidation, the investment will not participate in substantially all of the investee's losses, if any. The initial determination of whether an investment is substantially similar to common stock is made on the initial date of investment if the Company has the ability to exercise significant influence over the operating and financial policies of the investee. That determination is reconsidered if: (i) contractual terms of the investment are changed, (ii) there is a significant change in the capital structure of the investee, including the investee's receipt of additional subordinated financing, or (iii) the Company obtains an additional interest in an investment, resulting in the method of accounting for the cumulative interest being based on the characteristics of the investment at the date at which the Company obtains the additional interest. Refer to Note 5 for additional information. Stock-Based Compensation The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. The fair value of each option award is estimated on the date of grant using a Black-Scholes option-pricing model. Stock-based compensation expense for awards with service and/or performance conditions that affect vesting is recorded only for those awards expected to vest using an estimated forfeiture rate. The Company accounts for forfeitures of awards as they occur. Profits Interest Units (“Units”) are accounted for in accordance with Accounting Standards Codification (“ASC”) 718-10, “Compensation - Stock Compensation.” The vesting conditions do not meet the definition of service, market or performance conditions, as defined in ASC 718. As such, the Units are classified as liability awards. Liability classified awards are measured at fair value on the grant date and re-measured each reporting period at fair value until the award is settled. Compensation expense is adjusted each reporting period for changes in fair value prorated for the portion of the requisite service period rendered. Initially, compensation expense was recognized on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which was five years. Upon full vesting of the award, which occurred during the three months ended September 30, 2017, previously unrecognized compensation expense was immediately recognized in the period and will continue to be fully recognized for any changes in fair value, until the Units are settled. The Company has a purchase option to purchase the vested Units that are not otherwise forfeited after termination of continuous service. The exercise price of the purchase option is the fair market value of the Units on the date of termination of continuous service, or December 31, 2018. Non-cash stock compensation expense related to the Units is reflected in general and administrative expense in the accompanying condensed consolidated statements of operations. Treasury Stock Repurchases of the Company’s outstanding common stock are accounted for using the cost method. The applicable par value is deducted from the appropriate capital stock account on the formal or constructive retirement of treasury stock. Any excess of the cost of treasury stock over its par value is charged to additional paid-in capital, and reflected as Treasury Stock on the condensed consolidated balance sheets. Impairment of Investments Acacia reviews its investments quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In making this judgment, Acacia considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. If the cost of an investment exceeds its fair value, Acacia evaluates, among other factors, general market conditions and the duration and extent to which the fair value is less than cost. Acacia also considers specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in the condensed consolidated statements of operations and a new cost basis in the investment is established. Income Taxes Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s condensed consolidated financial statements or consolidated income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realization of such assets. The provision for income taxes for interim periods is determined using an estimate of Acacia’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, Acacia updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded. The Company’s effective tax rates were 0% and (3%) for the three and six months ended June 30, 2019, respectively and (1%) and (1%) for the three and six months ended June 30, 2018, respectively. Tax expense for the periods presented primarily reflects the impact of state taxes and foreign withholding taxes incurred on revenue agreements executed with third-party licensees domiciled in foreign jurisdictions. The Company has recorded a full valuation allowance against our net deferred tax assets as of June 30, 2019 and 2018. These assets primarily consist of foreign tax credits, capital loss carryforwards and net operating loss carryforwards. |
3. Loss per Share
3. Loss per Share | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Loss per Share | 3. LOSS PER SHARE The following table presents the weighted-average number of shares of common stock outstanding used in the calculation of basic and diluted net income (loss) per share: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Weighted-average shares used in computing net loss per share attributable to common stockholders - basic and diluted 49,696,016 50,061,812 49,676,059 50,345,808 Basic and diluted net loss per common share $ (0.12 ) $ (0.57 ) $ (0.20 ) $ (1.20 ) Anti-dilutive equity-based incentive awards excluded from the computation of diluted loss per share 1,766,191 4,793,037 1,766,191 4,851,737 Maximum price of awards excluded from the computation of diluted loss per share $ 6.75 $ 6.75 $ 6.75 $ 6.75 |
4. Patents
4. Patents | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Patents | 4. PATENTS Acacia’s only identifiable intangible assets at June 30, 2019 and December 31, 2018 are patents and patent rights. Patent-related accumulated amortization totaled $321,054,000 and $319,580,000 as of June 30, 2019 and December 31, 2018, respectively. Acacia’s patents have remaining estimated economic useful lives ranging from ten to sixty months. The weighted-average remaining estimated economic useful life of Acacia’s patents is approximately four years. The following table presents the scheduled annual aggregate amortization expense as of June 30, 2019: For the years ending December 31, (In thousands) Remainder of 2019 $ 1,720 2020 2,555 2021 1,695 2022 1,695 2023 1,620 Thereafter 249 $ 9,534 |
5. Investments
5. Investments | 6 Months Ended |
Jun. 30, 2019 | |
Schedule of Investments [Abstract] | |
Investments | 5. INVESTMENTS Investment at Fair Value Veritone Investment Agreement On August 15, 2016, Acacia entered into an Investment Agreement with Veritone, Inc. (“Veritone”) pursuant to which Acacia funded in an of , ’s warrants to purchase up to In addition, in August 2016, Veritone issued Acacia a five-year warrant to purchase up to $50 million worth of shares of Veritone’s common stock at an exercise price of $13.61 per share subject to certain adjustments. Upon the consummation of Veritone’s IPO, Acacia exercised its option to purchase an additional 2,150,335 shares of Veritone common stock, at an aggregate purchase price of $29.3 million. Acacia then received an additional warrant (the “10% Warrant”) Veritone Bridge Loan On March 14, 2017, Acacia entered into an additional secured convertible promissory note with Veritone pursuant to which Acacia funded $4.0 million which was converted into 445,440 shares of Veritone’s common stock at a conversion price of $13.61 per share in the IPO. Acacia also received a 10-year warrant to purchase up to 156,720 shares of Veritone common stock at an exercise price of $13.61 per share expiring in 2027. As a result of the foregoing transactions, Acacia received an aggregate total of 4,119,521 of Veritone shares of Veritone’s common stock and warrants to purchase up to 1,120,432 shares of in Veritone common stock. On October 5, 2018, a registration statement on Form S-3 registering all of Acacia’s shares of Veritone common stock was declared effective by the SEC. During the year ended December 31, 2018, Acacia sold 2,700,000 shares of Veritone common stock at prices ranging from $4.95 to $10.44 and recorded a realized loss of $19.1 million. During the three and six months ended June 30, 2019, Acacia sold 239,920 and 867,968 shares of Veritone common stock at prices ranging from $6.45 to $9.21 and from $4.77 to $9.21 for the three and six months ended June 30, 2019, respectively, and recorded a realized loss of $1.6 million and $7.2 million for the three and six months ended June 30, 2019, respectively. At June 30, 2019, the fair value of the 551,552 shares of Veritone common stock owned by Acacia totaled $4,611,000. At June 30, 2019, the fair value of the 1,120,432 common stock purchase warrants held by Acacia totaled $4,459,000. Changes in the fair value of Acacia’s investment in Veritone are recorded as unrealized gains or losses in the consolidated statements of operations. For the three and six months ended June 30, 2019 and 2018, the accompanying consolidated statements of operations reflected the following: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Change in fair value of investment, warrants $ 3,091 $ 2,865 $ 2,394 $ (4,782 ) Change in fair value of investment, common stock 3,889 8,482 11,494 (24,968 ) Loss on sale of investment, common stock (1,642 ) – (7,232 ) – Net realized and unrealized gain (loss) on investment at fair value $ 5,338 $ 11,347 $ 6,656 $ (29,750 ) Miso Robotics Investment In June 2017, Acacia made an investment in the Series A Preferred financing round for Miso Robotics, Inc. (“Miso Robotics”), an innovative leader in robotics and artificial intelligence solutions, totaling $2,250,000, acquiring a 22.6% ownership interest in Series A preferred stock of Miso Robotics, and one board seat. In February 2018, Acacia made an additional equity investment in the Series B Preferred financing round for Miso Robotics totaling $6,000,000, increasing its ownership interest (Series B preferred stock) in Miso Robotics to approximately 30%, and acquiring an additional board seat. As of February 2018, the preferred stock was not deemed to be in-substance common stock due to the substantive liquidation preference associated with the preferred stock. As such, as of February 2018, the cumulative investment in Miso Robotics is recorded at cost and assessed for any impairment at each balance sheet date. Prior to February 2018, the equity method of accounting was applied. Acacia reviews its investments quarterly for indicators of other-than-temporary impairment. In making this judgment, Acacia considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. As of June 30, 2019, Acacia recorded an impairment of $8.2 million for its investment in Miso Robotics based on analyses including, but not limited to, operating results and trends, recent events and changes in circumstances, which resulted in a determination that the carrying amount of the investment may not be recoverable and thus a full impairment was warranted. This determination requires significant judgment, and valuations of private companies are inherently more complex due to the lack of readily available market data. The future actual operational result of the investee may differ significantly from our current conclusion. Refer to Note 2 “ Impairment of Investments |
6. Commitments and Contingencie
6. Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 6. COMMITMENTS AND CONTINGENCIES Patent Enforcement Certain of Acacia’s operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights. In connection with any of Acacia’s operating subsidiaries’ patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has 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 Acacia or its operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material. Facility Leases The Company primarily leases office facilities under operating lease arrangements that will end in various years through July 2024. On June 7, 2019, we entered into a building lease agreement (the “New Lease”) with Jamboree Center 4 LLC (the “Landlord”). Pursuant to the New Lease, we will lease approximately 8,293 square feet of office space for our corporate headquarters in Irvine, California. The New Lease shall commence on August 1, 2019. The Landlord is obligated to provide a tenant improvement allowance of up to $65,000 for tenant improvements, as defined by the New Lease. The term of the New Lease will be 60 months from the commencement date. The Company has subleased a facility under another operating lease agreement (the “Old Lease”) that we ceased using in December 2018, and the sublease will go through the remaining term of the Old Lease, which ends on January 31, 2020. The total sublease income received was $195,000 for the three months ended June 30, 2019. The total sublease income received was $390,000 for the six months ended June 30, 2019. Operating lease costs, net of sublease income, were $114,000 and $256,000 for the three months ended June 30, 2019 and 2018, respectively. Operating lease costs, net of sublease income, were $205,000 and $502,000 for the six months ended June 30, 2019 and 2018, respectively. The aggregate basic rent payable under the New Lease and the Old Lease discussed above for the next five years is currently expected to be paid as follows: Fiscal year ending December 31, (In thousands) 2019 $ 824 2020 435 2021 334 2022 349 2023 364 Thereafter 218 $ 2,524 Effective January 1, 2019, the Company has adopted ASC 842, electing the practical expedient approaches and has recognized approximately $2.1 million of right-of-use assets and an increase of $2.5 million in lease-related liabilities as of June 30, 2019. The adoption of ASC 842 is expected to have no material impact on the Company's consolidated results of operations for the year ending December 31, 2019. Other Matters Acacia is subject to claims, counterclaims and legal actions that arise in the ordinary course of business. Management believes that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on Acacia’s condensed consolidated financial position, results of operations or cash flows. On June 17, 2015, Celltrace Communications Ltd. (“Celltrace”), filed a lawsuit against Acacia in U.S. District Court for the Southern District of New York, Case No. 1:15-cv-04746, alleging, among other things, significant damages for alleged breach of contract, unjust enrichment and fraud. Acacia disputes the allegations and does not believe that Celltrace is entitled to any damages. Acacia successfully moved to compel arbitration of the dispute, and the District Court stayed the litigation pending arbitration before the International Court of Arbitration for the International Chamber of Commerce (the “ICC”). Celltrace appealed the decision to the U.S. Court of Appeals for the Second Circuit, which denied the appeal. Celltrace filed its request for arbitration of the claims with the ICC on November 28, 2016. Acacia filed an answer denying all allegations of wrongdoing and asserting affirmative defenses. A tribunal was appointed to preside over the arbitration and conducted its first case management conference on June 26, 2017. The parties conducted discovery and submitted their cases in chief to the tribunal in a series of written submissions per the tribunal’s orders between January 2018 and December 2018. The tribunal held an evidentiary hearing with live witness testimony in New York City between February 4, 2019 and February 13, 2019. At the end of the hearing, the tribunal set a schedule for post-hearing briefing by the parties, which concluded in April 2019. Acacia continues to vigorously contest all allegations of wrongdoing. On May 15, 2019, the tribunal gave notice to the parties that it would render a final award by July 31, 2019. On July 22, 2019, the tribunal extended its deadline to render a final award to August 30, 2019. As of the date of this report, the tribunal has not yet issued a final award. In a separate case on December 6, 2017, the Federal Court of Canada allowed a counterclaim for invalidity of a patent asserted by Rapid Completions LLC and awarded costs payable by Rapid Completions LLC in an amount to be determined. For the six months ended June 30, 2019, settlement and loss contingency related operating expenses were $650,000. The Company had no settlement and loss contingency related operating expenses in the six months ended June 30, 2018. |
7. Stockholders' Equity
7. Stockholders' Equity | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Stockholders' Equity | 7. STOCKHOLDERS’ EQUITY Repurchases of Common Stock. In February 2018, Acacia’s Board of Directors authorized the repurchase of up to $20,000,000 of the Company’s outstanding common stock in open market purchases or private purchases, from time to time, in amounts and at prices to be determined by the Board of Directors at its discretion (the “Stock Repurchase Program”). In determining whether or not to repurchase any shares of Acacia’s common stock, Acacia’s Board of Directors consider such factors as the impact of the repurchase on Acacia’s cash position, as well as Acacia’s capital needs and whether there is a better alternative use of Acacia’s capital. Acacia has no obligation to repurchase any amount of its common stock under the Stock Repurchase Program. Repurchases to date were made in the open market in compliance with applicable SEC rules. The authorization to repurchase shares presented an opportunity to reduce the outstanding share count and enhance stockholder value. The repurchased shares are expected to be retired. Monthly stock repurchases for the periods presented, all of which were purchased as part of a publicly announced plan or program, were as follows: Total Number Average Approximate Dollar Plan Expiration Date May 1, 2018 - May 30, 2018 1,190,420 $3.89 $15,366,000 February 28, 2019 Totals for 2018 1,190,420 $3.89 Tax Benefits Preservation Plan On March 12, 2019, Acacia’s Board of Directors announced that it had unanimously approved the adoption of a Tax Benefits Preservation Plan (the “Plan”). The purpose of the Plan is to protect the Company’s ability to utilize potential tax assets, such as net operating loss carryforwards and tax credits to offset potential future taxable income. The Plan is designed to reduce the likelihood that the Company will experience an ownership change by discouraging (i) any person or group from acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock and (ii) any existing stockholders In connection with the adoption of the Plan, Acacia’s Board of Directors authorized and declared a dividend distribution of one right for each outstanding share of the Company’s common stock to stockholders |
8. Recent Accounting Pronouncem
8. Recent Accounting Pronouncements | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | 8. RECENT ACCOUNTING PRONOUNCEMENTS Recent Accounting Pronouncements - Recently Adopted. In February 2016, FASB issued ASU 2016-02, Leases, or ASC 842 which requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset. In July 2018, FASB issued ASU 2018-11, Leases, which provides an additional transition option for an entity to apply the provisions of ASC 842 by recognizing a cumulative effect adjustment at the effective date of adoption without adjusting the prior comparative periods presented. Further, in January 2019, FASB issued ASU 2019-01, Leases: Codification Improvements, which provides disclosure relief for the interim periods when adopting ASC 842. The primary impact of adopting ASC 842 for the Company was the recognition in the consolidated balance sheet of certain lease-related assets and liabilities for operating leases with terms longer than 12 months as of January 1, 2019. Such amounts were not previously accounted for in the Company's consolidated balance sheets. The Company has adopted ASC 842, electing the practical expedient approaches and has recognized approximately $2.1 million of right-of-use assets and an increase of $2.5 million in lease-related liabilities as of June 30, 2019. The adoption of ASC 842 is expected to have no material impact on the Company's consolidated results of operations for the year ending December 31, 2019. There have been no other material changes to the Company's significant accounting policies during the three and six months ended June 30, 2019. |
9. Fair Value Disclosures
9. Fair Value Disclosures | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value Disclosures | 9. FAIR VALUE DISCLOSURES Acacia holds the following types of financial instruments at June 30, 2019 and December 31, 2018. Trading securities - debt Debt securities includes corporate bonds with fair value that is determined by third party quotations from outside pricing services and/or computerized pricing models, which may be based on transactions, bids or estimates. Acacia classifies the fair value of corporate bonds within Level 2 of the valuation hierarchy. Trading securities – equity Equity securities includes investments in public companies’ common stock and are recorded at fair value based on the quoted market price of each share on the valuation date. The fair values of these securities are within Level 1 of the valuation hierarchy. Investments at fair value - common stock Acacia’s equity investment in Veritone common stock is recorded at fair value based on the quoted market price of Veritone’s common stock on the applicable valuation date. The fair values of these securities are within Level 1 of the valuation hierarchy. Investments at fair value - warrants. Warrants are recorded at fair value, as based on the Black-Scholes option-pricing model (Level 2). Profits interests At June 30, 2019 and December 31, 2018, the fair value of the Units was estimated at 40% of the December 31, 2018 fair value of the 10% Warrant, based on the Black-Scholes option-pricing model (Level 2). |
10. Subsequent Events
10. Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | 10. SUBSEQUENT EVENTS On August 5, 2019, Acacia’s Board of Directors approved a stock repurchase program, which authorized the purchase of up to $10.0 million of the Company's common stock through open market purchases, through block trades, through 10b5-1 plans, or by means of private purchases, from time to time, through July 31, 2020. |
2. Summary of Significant Acc_2
2. Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Revenue Recognition | Revenue Recognition Revenue is recognized upon transfer of control of promised bundled IP Rights and other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive in exchange for those IP Rights. Revenue contracts that provide promises to grant the right to use IP Rights as they exist at the point in time at which the IP Rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue is recognized at the point in time that the applicable performance obligations are satisfied and all other revenue recognition criteria have been met. For the periods presented, revenue contracts executed by the Company primarily provided for the payment of contractually determined, one-time, paid-up license fees in consideration for the grant of certain IP Rights for patented technologies owned or controlled by Acacia. Revenues also included license fees from sales-based revenue contracts, the majority of which were originally executed in prior periods, that provide for the payment of quarterly license fees based on quarterly sales of applicable product units by licensees (“Recurring Revenue Agreements”). Revenues may also include court ordered settlements or awards related to our patent portfolio. IP Rights granted included the following, as applicable: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The IP Rights granted were perpetual in nature, extending until the legal expiration date of the related patents. The individual IP Rights are not accounted for as separate performance obligations, as (i) the nature of the promise, within the context of the contract, is to transfer combined items to which the promised IP Rights are inputs and (ii) the Company's promise to transfer each individual IP right described above to the customer is not separately identifiable from other promises to transfer IP Rights in the contract. Since the promised IP Rights are not individually distinct, the Company combines each individual IP right in the contract into a bundle of IP rights that is distinct and accounts for all of the IP Rights promised in the contract as a single performance obligation. The IP Rights granted generally are “functional IP rights” that have significant standalone functionality. Acacia's subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights. Acacia’s operating subsidiaries have no further obligation with respect to the grant of IP Rights, including no express or implied obligation to maintain or upgrade the technology, or provide future support or services. The contracts provide for the grant (i.e., transfer of control) of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the contract. Licensees legally obtain control of the IP Rights upon execution of the contract. As such, the earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met. Revenue contracts generally provide for payment of contractual amounts within 30-90 days of execution of the contract, or the end of the quarter in which the sale or usage occurs for Recurring Revenue Agreements. Contractual payments made by licensees are generally non-refundable. For sales-based royalties, the Company includes in the transaction price some or all of an amount of estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Notwithstanding, revenue is recognized for a sales-based royalty promised in exchange for a license of IP Rights when the later of (i) the subsequent sale or usage occurs, or (ii) the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied. Estimates are generally based on historical levels of activity, if available. Revenues from contracts with significant financing components (either explicit or implicit) are recognized at an amount that reflects the price that a licensee would have paid if the licensee had paid cash for the IP Rights when they transfer to the licensee. In determining the transaction price, the Company adjusts the promised amount of consideration for the effects of the time value of money. As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the entity transfers promised IP Rights to a customer and when the customer pays for the IP Rights will be one year or less. In general, the Company is required to make certain judgments and estimates in connection with the accounting for revenue contracts with customers. Such areas may include identifying performance obligations in the contract, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct from other promised goods or services, evaluating whether a license transfers to a customer at a point in time or over time, allocating the transaction price to separate performance obligations, determining whether contracts contain a significant financing component, and estimating revenues recognized at a point in time for sales-based royalties. Revenues were comprised of the following for the periods presented: Three Months Ended Six Months Ended 2019 2018 2019 2018 (In thousands) Paid-up Revenue Agreements $ 4,864 $ 3,183 $ 4,864 $ 63,246 Recurring Revenue Agreements 596 3,302 3,983 5,332 $ 5,460 $ 6,485 $ 8,847 $ 68,578 Refer to “ Inventor Royalties and Contingent Legal Expenses |
Portfolio Operations | Portfolio Operations Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs. These costs are included under the caption “Portfolio operations” in the accompanying condensed consolidated statements of operations. Cost of revenues for the six months ended June 30, 2018 included $4.0 million of costs to acquire certain patent rights related to revenues recognized in the period. Inventor Royalties and Contingent Legal Expenses Inventor royalties are expensed in the condensed consolidated statements of operations in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, upfront advances paid to patent owners by Acacia’s operating subsidiaries are recoverable from future net revenues. Patent costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the condensed consolidated statements of operations. Any unamortized upfront advances recovered from net revenues are expensed in the period recovered and included in amortization expense in the condensed consolidated statements of operations. Contingent legal fees are expensed in the condensed consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Inventor royalty and contingent legal agreements typically provide for payment by the Company of contractual amounts 30 days subsequent to the fiscal quarter end during which related license fee payments are received from licensees by the Company. Concentrations One licensee individually accounted for 89% of revenues recognized during the three months ended June 30, 2019, and two licensees accounted for 55% and 27% of revenues recognized during the six months ended June 30, 2019. Two licensees accounted for 48% and 42% of revenues recognized during the three months ended June 30, 2018 and one licensee accounted for 87% of revenues recognized during the six months ended June 30, 2018. The Company does not have any material foreign operations. For the three and six months ended June 30, 2019, 3% and 32%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions, based on the jurisdiction of the entity obligated to satisfy payment obligations pursuant to the applicable revenue arrangement. For the three and six months ended June 30, 2018, 43% and 6%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. Two licensees individually represented approximately 82% and 14% of accounts receivable at June 30, 2019. Four licensees individually represented approximately 38%, 36%, 12% and 11% of accounts receivable at December 31, 2018. |
Patents | Patents Patents include the cost of patents or patent rights (hereinafter, collectively “patents”) acquired from third-parties or obtained in connection with business combinations. Patent costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from ten to sixty months. |
Impairment of Long-lived Assets | Impairment of Long-lived Assets Acacia reviews long-lived assets and intangible assets for potential impairment annually (quarterly for patents) and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. In the event that management decides to no longer allocate resources to a patent portfolio, an impairment loss equal to the remaining carrying value of the asset is recorded. Refer to Note 4 for additional information. Fair value is generally estimated using the “Income Approach,” focusing on the estimated future net income-producing capability of the patent portfolios over their estimated remaining economic useful life. Estimates of future after-tax cash flows are converted to present value through “discounting,” including an estimated rate of return that accounts for both the time value of money and investment risk factors. Estimated cash inflows are typically based on estimates of reasonable royalty rates for the applicable technology, applied to estimated market data. Estimated cash outflows are based on existing contractual obligations, such as contingent legal fee and inventor royalty obligations, applied to estimated license fee revenues, in addition to other estimates of out-of-pocket expenses associated with a specific patent portfolio’s licensing and enforcement program. The analysis also contemplates consideration of current information about the patent portfolio including, status and stage of litigation, periodic results of the litigation process, strength of the patent portfolio, technology coverage and other pertinent information that could impact future net cash flows. |
Cash and Cash Equivalents | Cash and Cash Equivalents Acacia considers all highly liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents. For the periods presented, Acacia’s cash equivalents are comprised of investments in AAA rated money market funds that invest in first-tier only securities, which primarily includes: domestic commercial paper, securities issued or guaranteed by the U.S. government or its agencies, U.S. bank obligations, and fully collateralized repurchase agreements. Acacia’s cash equivalents are measured at fair value using quoted prices that represent Level 1 inputs. |
Trading Securities- Debt | Trading Securities- Debt Investments in debt securities are reported at fair value on a recurring basis, with related realized and unrealized gains and losses recorded in the condensed consolidated statement of operations in other income (expense). Realized and unrealized gains and losses are recorded based on the specific identification method. Interest is included in other income (expense). |
Trading Securities - Equity | Trading Securities - Equity Investments in equity securities are reported at fair value on a recurring basis, with related realized and unrealized gains and losses in the value of such securities recorded in the condensed consolidated statement of operations in other income (expense). Dividend income is included in other income (expense). Short-term investments for the periods presented were comprised of the following: Cost Gross Gross Fair Value (In thousands) Security Type June 30, 2019: Trading securities - debt $ 90,061 $ 425 $ (4 ) $ 90,482 Trading securities - equity 10,977 99 (142 ) 10,934 $ 101,038 $ 524 $ (146 ) $ 101,416 December 31, 2018: Trading securities - debt $ 33,643 $ 18 $ (19 ) $ 33,642 Trading securities - equity 3,389 27 (404 ) 3,012 $ 37,032 $ 45 $ (423 ) $ 36,654 |
Fair Value Measurements | Fair Value Measurements U.S. GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows: (i) Level 1 – Observable Inputs (ii) Level 2 Pricing Models with Significant Observable Inputs (iii) Level 3 Unobservable Inputs Whenever possible, the Company is required to use observable market inputs (Level 1 – quoted market prices) when measuring fair value. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured. In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. Financial assets and liabilities measured at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 (In thousands) Assets as of June 30, 2019: Trading securities - debt $ – $ 90,482 $ – Trading securities - equity 10,934 – – Investment at fair value - warrants (Note 5) – 4,459 – Investment at fair value - common stock (Note 5) 4,611 – – Total recurring fair value measurements as of June 30, 2019 $ 15,545 $ 94,941 $ – Assets as of December 31, 2018: Trading securities - debt $ – $ 33,642 $ – Trading securities - equity 3,012 – – Investment at fair value - warrants (Note 5) – 2,064 – Investment at fair value - common stock (Note 5) 5,395 – – Total recurring fair value measurements as of December 31, 2018 $ 8,407 $ 35,706 $ – |
Investments at Fair Value | Investments at Fair Value On an individual investment basis, Acacia may elect to account for investments in companies where the Company has the ability to exercise significant influence over operating and financial policies of the investee, at fair value. If the fair value method is applied to an investment that would otherwise be accounted for under the equity method of accounting, it is applied to all of the financial interests in the same entity that are eligible items (i.e., common stock and warrants). |
Other Investments | Other Investments Equity investments in common stock and in-substance common stock without readily determinable fair values in companies over which the Company has the ability to exercise significant influence, are accounted for using the equity method of accounting. Acacia includes its proportionate share of earnings and/or losses of its equity method investees in equity in earnings (losses) of investees in the condensed consolidated statements of operations. Investments in preferred stock with substantive liquidation preferences are accounted for at cost, (subject to impairment considerations, as described below, if any), as adjusted for the impact of changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. In-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity's common stock. An investment in preferred stock with substantive liquidation preferences over common stock, is not substantially similar to common stock, and therefore is not considered in-substance common stock. A liquidation preference is substantive if the investment has a stated liquidation preference that is significant, from a fair value perspective, in relation to the purchase price of the investment. A liquidation preference in an investee that has sufficient subordinated equity from a fair value perspective is substantive because, in the event of liquidation, the investment will not participate in substantially all of the investee's losses, if any. The initial determination of whether an investment is substantially similar to common stock is made on the initial date of investment if the Company has the ability to exercise significant influence over the operating and financial policies of the investee. That determination is reconsidered if: (i) contractual terms of the investment are changed, (ii) there is a significant change in the capital structure of the investee, including the investee's receipt of additional subordinated financing, or (iii) the Company obtains an additional interest in an investment, resulting in the method of accounting for the cumulative interest being based on the characteristics of the investment at the date at which the Company obtains the additional interest. Refer to Note 5 for additional information. |
Stock-Based Compensation | Stock-Based Compensation The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. The fair value of each option award is estimated on the date of grant using a Black-Scholes option-pricing model. Stock-based compensation expense for awards with service and/or performance conditions that affect vesting is recorded only for those awards expected to vest using an estimated forfeiture rate. The Company accounts for forfeitures of awards as they occur. Profits Interest Units (“Units”) are accounted for in accordance with Accounting Standards Codification (“ASC”) 718-10, “Compensation - Stock Compensation.” The vesting conditions do not meet the definition of service, market or performance conditions, as defined in ASC 718. As such, the Units are classified as liability awards. Liability classified awards are measured at fair value on the grant date and re-measured each reporting period at fair value until the award is settled. Compensation expense is adjusted each reporting period for changes in fair value prorated for the portion of the requisite service period rendered. Initially, compensation expense was recognized on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which was five years. Upon full vesting of the award, which occurred during the three months ended September 30, 2017, previously unrecognized compensation expense was immediately recognized in the period and will continue to be fully recognized for any changes in fair value, until the Units are settled. The Company has a purchase option to purchase the vested Units that are not otherwise forfeited after termination of continuous service. The exercise price of the purchase option is the fair market value of the Units on the date of termination of continuous service, or December 31, 2018. Non-cash stock compensation expense related to the Units is reflected in general and administrative expense in the accompanying condensed consolidated statements of operations. |
Treasury Stock | Treasury Stock Repurchases of the Company’s outstanding common stock are accounted for using the cost method. The applicable par value is deducted from the appropriate capital stock account on the formal or constructive retirement of treasury stock. Any excess of the cost of treasury stock over its par value is charged to additional paid-in capital, and reflected as Treasury Stock on the condensed consolidated balance sheets. |
Impairment of Investments | Impairment of Investments Acacia reviews its investments quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In making this judgment, Acacia considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. If the cost of an investment exceeds its fair value, Acacia evaluates, among other factors, general market conditions and the duration and extent to which the fair value is less than cost. Acacia also considers specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in the condensed consolidated statements of operations and a new cost basis in the investment is established. |
Income Taxes | Income Taxes Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s condensed consolidated financial statements or consolidated income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realization of such assets. The provision for income taxes for interim periods is determined using an estimate of Acacia’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, Acacia updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded. The Company’s effective tax rates were 0% and (3%) for the three and six months ended June 30, 2019, respectively and (1%) and (1%) for the three and six months ended June 30, 2018, respectively. Tax expense for the periods presented primarily reflects the impact of state taxes and foreign withholding taxes incurred on revenue agreements executed with third-party licensees domiciled in foreign jurisdictions. The Company has recorded a full valuation allowance against our net deferred tax assets as of June 30, 2019 and 2018. These assets primarily consist of foreign tax credits, capital loss carryforwards and net operating loss carryforwards. |
2. Summary of Significant Acc_3
2. Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Disaggregation of revenue | Three Months Ended Six Months Ended 2019 2018 2019 2018 (In thousands) Paid-up Revenue Agreements $ 4,864 $ 3,183 $ 4,864 $ 63,246 Recurring Revenue Agreements 596 3,302 3,983 5,332 $ 5,460 $ 6,485 $ 8,847 $ 68,578 |
Schedule of short-term investments | Cost Gross Gross Fair Value (In thousands) Security Type June 30, 2019: Trading securities - debt $ 90,061 $ 425 $ (4 ) $ 90,482 Trading securities - equity 10,977 99 (142 ) 10,934 $ 101,038 $ 524 $ (146 ) $ 101,416 December 31, 2018: Trading securities - debt $ 33,643 $ 18 $ (19 ) $ 33,642 Trading securities - equity 3,389 27 (404 ) 3,012 $ 37,032 $ 45 $ (423 ) $ 36,654 |
Schedule of financial assets measured at fair value | Level 1 Level 2 Level 3 (In thousands) Assets as of June 30, 2019: Trading securities - debt $ – $ 90,482 $ – Trading securities - equity 10,934 – – Investment at fair value - warrants (Note 5) – 4,459 – Investment at fair value - common stock (Note 5) 4,611 – – Total recurring fair value measurements as of June 30, 2019 $ 15,545 $ 94,941 $ – Assets as of December 31, 2018: Trading securities - debt $ – $ 33,642 $ – Trading securities - equity 3,012 – – Investment at fair value - warrants (Note 5) – 2,064 – Investment at fair value - common stock (Note 5) 5,395 – – Total recurring fair value measurements as of December 31, 2018 $ 8,407 $ 35,706 $ – |
3. Loss per Share (Tables)
3. Loss per Share (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share | Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Weighted-average shares used in computing net loss per share attributable to common stockholders - basic and diluted 49,696,016 50,061,812 49,676,059 50,345,808 Basic and diluted net loss per common share $ (0.12 ) $ (0.57 ) $ (0.20 ) $ (1.20 ) Anti-dilutive equity-based incentive awards excluded from the computation of diluted loss per share 1,766,191 4,793,037 1,766,191 4,851,737 Maximum price of awards excluded from the computation of diluted loss per share $ 6.75 $ 6.75 $ 6.75 $ 6.75 |
4. Patents (Tables)
4. Patents (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of annual amortization expense | For the years ending December 31, (In thousands) Remainder of 2019 $ 1,720 2020 2,555 2021 1,695 2022 1,695 2023 1,620 Thereafter 249 $ 9,534 |
5. Investments (Tables)
5. Investments (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Schedule of Investments [Abstract] | |
Schedule of gains in invesments | Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Change in fair value of investment, warrants $ 3,091 $ 2,865 $ 2,394 $ (4,782 ) Change in fair value of investment, common stock 3,889 8,482 11,494 (24,968 ) Loss on sale of investment, common stock (1,642 ) – (7,232 ) – Net realized and unrealized gain (loss) on investment at fair value $ 5,338 $ 11,347 $ 6,656 $ (29,750 ) |
6. Commitments and Contingenc_2
6. Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of minimum operating lease payments | Fiscal year ending December 31, (In thousands) 2019 $ 824 2020 435 2021 334 2022 349 2023 364 Thereafter 218 $ 2,524 |
7. Stockholders' Equity (Tables
7. Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Schedule of repurchased shares | Total Number Average Approximate Dollar Plan Expiration Date May 1, 2018 - May 30, 2018 1,190,420 $3.89 $15,366,000 February 28, 2019 Totals for 2018 1,190,420 $3.89 |
1. Description of Business an_2
1. Description of Business and Basis of Presentation (Details Narrative) - Integer | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||||
Number of patent portfolios acquired | 3 | 0 | 1 | 2 |
2. Disaggregation of Revenue (D
2. Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues | $ 5,460 | $ 6,485 | $ 8,847 | $ 68,578 |
Paid-up Revenue Agreements [Member] | ||||
Revenues | 4,864 | 3,183 | 4,864 | 63,246 |
Recurring Revenue Agreements [Member] | ||||
Revenues | $ 596 | $ 3,302 | $ 3,983 | $ 5,332 |
2. Short-Term Investments (Deta
2. Short-Term Investments (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Cost | $ 101,038 | $ 37,032 |
Gross unrealized gain | 524 | 45 |
Gross unrealized loss | (146) | (423) |
Fair value | 101,416 | 36,654 |
Trading securities - Debt [Member] | ||
Cost | 90,061 | 33,643 |
Gross unrealized gain | 425 | 18 |
Gross unrealized loss | (4) | (19) |
Fair value | 90,482 | 33,642 |
Trading securities - Equity [Member] | ||
Cost | 10,977 | 3,389 |
Gross unrealized gain | 99 | 27 |
Gross unrealized loss | (142) | (404) |
Fair value | $ 10,934 | $ 3,012 |
2. Fair Value on a Recurring Ba
2. Fair Value on a Recurring Basis (Details) - Assets [Member] - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | $ 15,545 | $ 8,407 |
Fair Value, Inputs, Level 1 [Member] | Trading Securities - Debt [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | Trading Securities - Equity [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 10,934 | 3,012 |
Fair Value, Inputs, Level 1 [Member] | Investments - Warrants [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | Investments - Common Stock [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 4,611 | 5,395 |
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 94,941 | 35,706 |
Fair Value, Inputs, Level 2 [Member] | Trading Securities - Debt [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 90,482 | 33,642 |
Fair Value, Inputs, Level 2 [Member] | Trading Securities - Equity [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | Investments - Warrants [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 4,459 | 2,064 |
Fair Value, Inputs, Level 2 [Member] | Investments - Common Stock [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | Trading Securities - Debt [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | Trading Securities - Equity [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | Investments - Warrants [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | Investments - Common Stock [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | $ 0 | $ 0 |
2. Summary of Significant Acc_4
2. Summary of Significant Accounting Policies (Details Narrative) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Effective tax rates | 0.00% | (1.00%) | (3.00%) | (1.00%) | |
Sales Revenue Net [Member] | One Licensee [Member] | |||||
Concentration risk percentage | 89.00% | 48.00% | 55.00% | 87.00% | |
Sales Revenue Net [Member] | One Licensee [Member] | |||||
Concentration risk percentage | 42.00% | 27.00% | |||
Sales Revenue Net [Member] | Foreign Licensee [Member] | |||||
Concentration risk percentage | 3.00% | 43.00% | 32.00% | 6.00% | |
Accounts Receivable [Member] | One Licensee [Member] | |||||
Concentration risk percentage | 82.00% | 38.00% | |||
Accounts Receivable [Member] | One Licensee [Member] | |||||
Concentration risk percentage | 14.00% | 36.00% | |||
Accounts Receivable [Member] | One Licensee [Member] | |||||
Concentration risk percentage | 12.00% | ||||
Accounts Receivable [Member] | One Licensee [Member] | |||||
Concentration risk percentage | 11.00% |
3. Loss per Share (Details)
3. Loss per Share (Details) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Earnings Per Share [Abstract] | ||||
Weighted-average shares used in computing net loss per share attributable to common stockholders - basic and diluted | 49,696,016 | 50,061,812 | 49,676,059 | 50,345,808 |
Basic and diluted net loss per common share | $ (0.12) | $ (0.57) | $ (0.20) | $ (1.20) |
Anti-dilutive equity-based incentive awards excluded from the computation of diluted loss per share | 1,766,191 | 4,793,037 | 1,766,191 | 4,851,737 |
Maximum price of awards excluded from the computation of diluted loss per share | $ 6.75 | $ 6.75 | $ 6.75 | $ 6.75 |
4. Patents (Details)
4. Patents (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Future amortization remainder 2019 | $ 1,720 | |
2020 | 2,555 | |
2021 | 1,695 | |
2022 | 1,695 | |
2023 | 1,620 | |
Thereafter | 249 | |
Total future amortization | $ 9,534 | $ 6,587 |
4. Patents (Details Narrative)
4. Patents (Details Narrative) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Accumulated amortization | $ 321,054 | $ 319,580 |
Estimated useful lives | 4 years |
5. Investments (Details)
5. Investments (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Loss on sale of investment | $ (1,642) | $ 0 | $ (7,232) | $ 0 |
Net realized and unrealized gain (loss) on investment | 6,980 | 11,347 | 13,888 | (29,750) |
Investments - Warrants [Member] | ||||
Change in fair value of investment | 3,091 | 2,865 | 2,394 | (4,782) |
Investments - Common Stock [Member] | ||||
Change in fair value of investment | 3,889 | 8,482 | 11,494 | (24,968) |
Loss on sale of investment | $ (1,642) | $ 0 | $ (7,232) | $ 0 |
5. Investments (Details Narrati
5. Investments (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 2 Months Ended | 3 Months Ended | 5 Months Ended | 6 Months Ended | 7 Months Ended | 12 Months Ended | |||||
Feb. 28, 2018 | Mar. 14, 2017 | Jun. 30, 2019 | Jun. 30, 2018 | May 17, 2017 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Aug. 15, 2016 | Dec. 31, 2018 | Oct. 05, 2018 | |
Impairment of investment | $ 8,195 | $ 1,000 | $ 8,195 | $ 1,000 | |||||||
Miso Robotics [Member] | |||||||||||
Ownership percentage | 30.00% | 30.00% | 22.60% | ||||||||
Impairment of investment | $ 8,200 | ||||||||||
Miso Robotics [Member] | Series A Preferred Stock [Member] | |||||||||||
Payment to acquire investment | $ 2,250 | ||||||||||
Miso Robotics [Member] | Series B Preferred Stock [Member] | |||||||||||
Payment to acquire investment | $ 6,000 | ||||||||||
Veritone [Member] | |||||||||||
Investment owned, shares | 551,552 | 551,552 | 4,119,521 | ||||||||
Investment warrants | 1,120,432 | 1,120,432 | 1,120,432 | ||||||||
Investment shares sold | 239,920 | 867,968 | 2,700,000 | ||||||||
Loss from sale of investment | $ (1,600) | $ (7,200) | $ (19,100) | ||||||||
Veritone [Member] | Investments - Common Stock [Member] | |||||||||||
Investment owned, shares | 551,552 | 551,552 | |||||||||
Fair value of investment | $ 4,611 | $ 4,611 | |||||||||
Veritone [Member] | Investments - Warrants [Member] | |||||||||||
Investment warrants | 1,120,432 | 1,120,432 | |||||||||
Fair value of investment | $ 4,459 | $ 4,459 | |||||||||
Veritone [Member] | Investment Agreement [Member] | |||||||||||
Investment warrants | 809,400 | ||||||||||
Investment warrant exercise price | $ 13.61 | ||||||||||
Investment warrant expiration date | Dec. 31, 2022 | ||||||||||
Debt converted, shares received | 2,150,335 | ||||||||||
Veritone [Member] | Bridge Loan [Member] | |||||||||||
Investment owned, shares | 445,440 | ||||||||||
Investment warrants | 156,720 | ||||||||||
Investment warrant exercise price | $ 13.61 | ||||||||||
Investment warrant expiration date | Dec. 31, 2027 | ||||||||||
Veritone [Member] | Investment Agreement [Member] | |||||||||||
Investment owned, shares | 1,523,746 | ||||||||||
Investment warrants | 154,312 | ||||||||||
Investment warrant exercise price | $ 13.61 | ||||||||||
Investment warrant expiration date | Dec. 31, 2020 |
6. Commitments and Contingenc_3
6. Commitments and Contingencies (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum operating lease payment remainder 2019 | $ 824 |
2020 | 435 |
2021 | 334 |
2022 | 349 |
2023 | 364 |
Thereafter | 218 |
Total minimum operating lease payments | $ 2,524 |
6. Commitments and Contingenc_4
6. Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Operating lease expense | $ 114 | $ 256 | $ 205 | $ 502 |
Sublease income | 195 | 390 | ||
Right of use asset | 2,100 | 2,100 | ||
Operating lease liability | 2,500 | 2,500 | ||
Settlement and contingency related accrual | $ 650 | $ 650 |
7. Stockholders' Equity (Detail
7. Stockholders' Equity (Details) - Common Stock $ / shares in Units, $ in Thousands | 1 Months Ended |
May 30, 2018USD ($)$ / sharesshares | |
Number of shares repurchased | shares | 1,190,420 |
Average price paid per share | $ / shares | $ 3.89 |
Approximate value of shares that may yet be purchased | $ | $ 15,366 |
Plan expiration date | Feb. 28, 2019 |
7. Stockholders' Equity (Deta_2
7. Stockholders' Equity (Details Narrative) | May 30, 2018USD ($) |
Common Stock | |
Value of shares authorized for repurchase | $ 20,000,000 |