Registration No. 33-_________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
ACACIA RESEARCH CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-4405754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12 SOUTH RAYMOND AVENUE
PASADENA, CALIFORNIA 91105
(818) 449-6431
(Address, including zip code, and telephone number, including
area code, of Registrants' principal executive offices)
____________________
KATHRYN KING-VAN WIE, CHIEF OPERATING OFFICER
ACACIA RESEARCH CORPORATION
12 SOUTH RAYMOND AVENUE
PASADENA, CALIFORNIA 91105
(818) 449-6431
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
____________________
COPIES OF COMMUNICATIONS TO:
THOMAS J. LEARY, ESQ.
O'MELVENY & MYERS LLP
400 SOUTH HOPE STREET
LOS ANGELES, CALIFORNIA 90071-2899
(213) 669-6000
____________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: From time to time after the effective date of this
Registration Statement, subject to market conditions and certain
contractual restrictions on transfer.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. __
If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans,
check the following box. _X_
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. __
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. __
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. __
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------
Number of Proposed Proposed
Securities Maximum Maximum
Title of Each of Each Offering Aggregate Amount of
Class of Securities Class to be Price Per Offering Registration
to be Registered Registered Security(1)(2) Price(1) Fee(2)
- --------------------------------------------------------------------------
Common Stock, no
par value per share 826,400(3) $9.625 $7,954,100 $2,411.00
(1) Estimated solely for the purpose of calculating the
registration fee.
(2) Pursuant to Rule 457(c), the price of the Common Stock is
based upon the average of the high and low prices of the
Common Stock on the Nasdaq National Market on October 30,
1997.
(3) Such number includes a number of shares of Common Stock
initially issuable upon exercise of certain warrants and
options held by the Selling Securityholders and, pursuant to
Rule 416 under the Securities Act of 1933, as amended, such
indeterminate number of shares of Common Stock as may be
issued from time to time upon exercise of such warrants or
options by reason of adjustment of the number of shares of
Common Stock to be issued upon such exercises under certain
circumstances outlined in the Prospectus.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933, or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY. NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER , 1997
PROSPECTUS
ACACIA RESEARCH CORPORATION
826,400 Shares of
Common Stock
This Prospectus relates to the sale by the securityholders of
Acacia Research Corporation (the "Company") named herein (the
"Selling Securityholders") of up to an aggregate of 826,400 shares
(subject to adjustment in certain circumstances) of common stock,
no par value per share (the "Common Stock"), of the Company.
290,200 shares of the Common Stock covered by this Prospectus were
issued by the Company to certain of the Selling Securityholders in
a private placement completed by the Company in June 1997 (the
"1997 Private Placement") pursuant to an exemption from
registration contained in Regulation D promulgated under Section
4(2) of the Securities Act of 1933, as amended (the "Securities
Act"). An additional 290,200 shares (subject to adjustment in
certain circumstances) of the Common Stock covered by this
Prospectus are issuable upon the exercise of warrants issued to
certain of the Selling Securityholders in the 1997 Private
Placement. The remaining 246,000 shares (subject to adjustment in
certain circumstances) of Common Stock covered by this Prospectus
are issuable upon the exercise of options and other warrants to
purchase shares of Common Stock that have been issued by the
Company to certain of the Selling Securityholders. See "Selling
Securityholders" and "Plan of Distribution."
The shares of Common Stock offered by this Prospectus may be
sold from time to time by the Selling Securityholders in privately
negotiated transactions, in brokers' transactions, to market makers
or in block placements, at market prices prevailing at the time of
sale or at prices otherwise negotiated. See "Selling
Securityholders" and "Plan of Distribution." The Selling
Securityholders, and intermediaries through whom such securities
are sold, may be deemed underwriters within the meaning of the
Securities Act with respect to the securities offered, and any
profits realized or commissions received may be deemed underwriting
compensation. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities
under the Securities Act.
The Company will not receive any of the proceeds from the sale
of the shares of Common Stock being sold by the Selling
Securityholders pursuant to this Prospectus (although the Company
will receive proceeds from the exercise of certain warrants and
options by the Selling Securityholders). See "Selling
Securityholders." The Company has agreed to bear the expenses
incurred in connection with the registration of the shares offered
by this Prospectus. The Selling Securityholders will pay or assume
brokerage commissions or similar charges incurred in the sale of
the shares offered by this Prospectus.
The Company's Common Stock is traded on the Nasdaq National
Market under the symbol "ACRI." The closing sale price of the
Common Stock on October 31, 1997, as reported by Nasdaq, was $10.00
per share.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1997.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "Commission"), Washington, D.C., a Registration
Statement on Form S-3 under the Securities Act of 1933, as amended,
with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in such
Registration Statement and the exhibits thereto. For further
information with respect to the Company, reference is hereby made
to the Registration Statement and the exhibits thereto, which may
be inspected without charge at the public reference facilities
maintained at the principal office of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington D.C. 20549 and at the
Commission's regional offices at 7 World Trade Center, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained upon written request from the public
reference section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Electronic
registration statements made through the Electronic Data Gathering,
Analysis and Retrieval System are publicly available through the
Commission's Web site (http://www.sec.gov). Statements contained
in the Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and in
each instance reference is made to the copy of such contract or
other document filed (or incorporated by reference) as an exhibit
to the Registration Statement, each such statement being qualified
in all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and, in accordance therewith, files reports and other information
with the Commission. Such reports and other information filed by
the Company may be inspected and copied at the public reference
facilities maintained by the Commission at the addresses shown
above. Copies of such material can be obtained from the Public
Reference Section of the Commission at the address shown above at
prescribed rates or through the Commission's Web site. Reports and
other information concerning the Company may also be inspected at
the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company's Common Stock is traded on the Nasdaq National
Market under the symbol "ACRI." Certain information, reports and
proxy statements of the Company are also available for inspection
at the offices of the Nasdaq National Market Reports Section, 1735
K Street, Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company
with the Commission, as noted below, are incorporated by reference
into this Prospectus: (a) Annual Report on Form 10-K for the fiscal
year ended December 31, 1996; (b) Amendment to Annual Report on
Form 10-K/A for the fiscal year ended December 31, 1996;
(c) Amendment No. 2 to Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1996; (d) Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997; (e) Amendment to Quarterly Report
on Form 10-Q/A for the quarter ended March 31, 1997; (f) Amendment
No. 2 to Quarterly Report on Form 10-Q/A for the quarter ended
March 31, 1997; (g) Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997; (h) Current Report on Form 8-K filed April 29,
1997; (i) Current Report on Form 8-K filed July 21, 1997;
(j) Amendment to Current Report on Form 8-K filed July 21, 1997;
(k) Amendment No. 2 to Current Report on Form 8-K filed July 21,
1997; (l) the description of the Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the
Commission on or about May 11, 1995; and (m) Amendment No. 1 to
Form 8-A on Form 8-A/A filed June 5, 1995.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to
the termination of the offering of the securities covered by this
Prospectus, shall be deemed to be incorporated by reference herein
and to be a part hereof from the date of filing such documents.
Any statement contained herein or in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for the purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed to constitute a part of this Prospectus, except as so
modified or superseded. The Company hereby undertakes to provide
without charge to each person, including any beneficial owner, to
whom a copy of this Prospectus has been delivered, upon the written
or oral request of such person, a copy of any or all of the
documents referred to in "Incorporation of Certain Information by
Reference" which have been or may be incorporated in this
Prospectus by reference, other than exhibits to such documents.
Requests for such copies should be directed to the Secretary at
Acacia Research Corporation, 12 South Raymond Avenue, Pasadena,
California 91105.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference
to, and should be read in conjunction with, the more detailed
information appearing elsewhere in this Prospectus or incorporated
herein. Investors should also carefully consider the information
set forth under the heading "Risk Factors."
THE COMPANY
Acacia Research Corporation, a California corporation (the
"Company"), is a capital management company that provides
investment advisory services, and also provides management services
to and makes direct investments in emerging businesses. The
Company's operations are comprised of two lines of business: (i)
investment advisor to domestic and offshore private investment
funds; and (ii) investing in and developing start-up business
ventures. The Company is diversified and each business segment is
operated independently. See "Risk Factors - No Assurance of
Success."
As a registered investment advisor, the Company currently
manages two domestic private investment partnerships whose limited
partners are required to be "accredited investors," under
Regulation D promulgated under the Securities Act. The Company is
also the investment advisor to two offshore investment
corporations. Client funds are invested primarily in mid-cap to
large-cap U.S. equities. The Company may manage additional private
investment partnerships and offshore investment funds in the
future. See "Risk Factors - Risks Associated with the Money
Management Business; Profitability Uncertain."
The Company also participates in the formation of emerging or
start-up companies in various business fields by arranging for and
contributing capital and providing management assistance.
Potential ventures are evaluated based on the ability of the
business to become viable and reach a significant milestone with
the Company's initial investment. See "Risk Factors - Risks
Associated with the Emerging Companies."
The Company has significant economic interests in five
companies that it has formed and takes an active role in each
company's growth and advancement. The Company holds majority
interests in the following companies: (i) 51.4 percent of the
outstanding common stock of Soundview Technologies Incorporated, a
Delaware corporation ("Soundview Technologies"); (ii) 69.5 percent
of the outstanding common stock of MerkWerks Corporation, a
California corporation ("MerkWerks"); and (iii) 51.3 percent of the
outstanding common stock of CombiMatrix Corporation, a California
corporation ("CombiMatrix"). The Company holds minority interests
in the following companies: (i) a 30.02 percent membership
interest in Greenwich Information Technologies LLC, a Delaware
limited liability company ("Greenwich Information Technologies");
and (ii) 18.4 percent of the outstanding common stock of Whitewing
Labs, Inc., a Delaware corporation ("Whitewing") (with voting
control over 27.3 percent of the common stock in connection with
certain loans made by the Company secured by common stock of
whitewing). Soundview Technologies, Greenwich Information
Technologies, MerkWerks, CombiMatrix, and Whitewing are collective
referred to hereinafter as the "Affiliates." See "Risk Factors"
for risks associated with each individual Affiliate.
Soundview Technologies was formed in 1996 and owns
intellectual property related to the telecommunications field,
which includes audio and video blanking systems, also known as V-
chip technology. Soundview Technologies has developed a V-chip
retrofit device, the V Chip Converter (trademark), for use in
televisions already in existence that will be "deaf" to V-chip
signals. Soundview Technologies has begun to pursue business
opportunities with television manufacturers, chip manufacturers,
and television accessory companies about efficient and cost-
effective methods of commercializing its technology. Soundview
Technologies has incurred substantial losses and has not had any
revenues to date.
Greenwich Information Technologies was formed in 1996 and is
the exclusive marketing and licensing agent for several patents
relating to video-on-demand and audio-on-demand technology. To
date, Greenwich Information Technologies has incurred substantial
losses and has not had any revenues.
MerkWerks was formed in 1995 and is currently developing a
software utility product for use with CD-Recorder, or CD-R,
computer drives. The initial version of the product, CD
WonderWriter (trademark), will be for the Macintosh platform.
MerkWerks anticipates adapting this software for Microsoft
(registered)Windows (trademark) platform. To date, MerkWerks has
incurred substantial losses and has not had any revenues.
CombiMatrix was formed in 1995 and is engaged in a highly
specialized and focused research effort to create products which
would be used to streamline the drug-discovery process.
CombiMatrix is in a developmental stage, has incurred substantial
losses and has not generated any revenues to date.
Whitewing was formed in 1993 and develops and markets a line
of nutritional supplement products. Whitewing conducted an initial
public offering of its common stock in February 1996. Whitewing
stock and warrants trade on the Nasdaq Small Cap Market under the
symbols "WWLI" and "WWLI-W," respectively.
Development of emerging businesses is subject to all of the
problems, expenses, delays and risks inherent in the establishment
of a new business enterprise, many of which are beyond the
Company's ability to control, including uncertain market
conditions, product acceptance, cost and availability of capital,
and the absence of an operating history. Moreover, the Company
expects to encounter competition in the area of business
opportunities from other entities having similar business
objectives, such as venture capital funds. Many of these potential
competitors may possess greater financial, technical, human and
other resources than the Company. Accordingly, there can be no
assurance that the Company's plan of operations will be successful
or that the Company will be able to achieve or maintain profitable
operations. See "Risks Factors - No Assurance of Success" and
"Risks Associated with the Emerging Companies."
The Company has never paid any cash dividends on its Common
Stock and does not anticipate that it will pay dividends in the
foreseeable future. Instead, the Company intends to apply any
earnings to the development and expansion of its business.
The Company was incorporated in the State of California on
January 25, 1993, and conducted its initial public offering on June
15, 1995. The Company's Common Stock trades on the Nasdaq National
Market System ("Nasdaq") under the symbol "ACRI."
The Company maintains its executive offices at 12 South
Raymond Avenue, Pasadena, California 91105 and its telephone number
is (818) 449-6431.
RECENT DEVELOPMENTS
In April 1997, the Company appointed Price Waterhouse LLP as
its independent auditors for 1997, replacing its former auditors,
Finocchiaro & Co.
In May 1997, MerkWerks announced the completion of an alpha
version of its initial software product, CD-WonderWriter (trademark).
On June 3, 1997, CombiMatrix elected Dr. Paul Low, former
President of IBM's General Products Division and General Manager of
IBM, to the Board of Directors of CombiMatrix. During his tenure
at IBM, Dr. Low was also a member of IBM's Corporate Management
Board and had worldwide line responsibility for Technology
Products. Dr. Low holds a Ph.D from Stanford University and is
currently on the board of several companies, including Applied
Materials, Solectron Corp., and VLSI Technology. Dr. Low is the
third new board member to join CombiMatrix in recent months.
Earlier this year, Mark Edwards, Managing Director of Recombinant
Capital and former Manager of Business Development of Chiron
Corporation, and Rigdon Currie, former General Partner of Pacific
Ventures, were also elected to CombiMatrix's Board of Directors.
CombiMatrix also recently completed a private equity financing
raising approximately $250,000 at $2 per share. The Company owns
3,965,000 shares of CombiMatrix and continues to maintain a
majority ownership position.
In June 1997, the Company sold 290,200 units at a purchase
price of $5.00 per unit to 37 accredited investors (the "1997
Private Placement"). The Company's sale of these units was exempt
from registration, as a private placement, under Section 4(2) of
the Securities Act of 1933 and Regulation D promulgated thereunder.
Each unit consisted of one Common Stock purchase warrant and one
share of the Company's Common Stock. Each Common Stock purchase
warrant entitles its holder to purchase one share of the Company's
Common Stock at an exercise price of $7.50 per share, subject to
adjustment, and expires on June 8, 2000. Finders involved in this
transaction received finders fees at a rate of $0.50 per unit
placed and one finder warrant per ten units placed. Each finder
warrant may be exercised prior to June 8, 2000 for one share of the
Company's Common Stock at an exercise price of $5.50 per share,
subject to adjustment. The Company has the right to redeem all of
the warrants issued in the 1997 Private Placement on 30 days prior
written notice at a redemption price of $0.01 per warrant if the
closing bid price of the Company's Common Stock averages $10.00 or
above for 20 consecutive trading days after the Common Stock
reaches a closing bid price of at least $10.00 on the Nasdaq
national market system. If the Company elects to exercise its
redemption right, the holder of the warrant may either exercise the
warrant, in whole or in part, or tender the warrant to the Company
for redemption, in whole or in part. Within five business days
after the end of the 30-day period, the Company will mail a check
for the redemption price to the holder of the warrant should the
warrant remain outstanding, in whole or in part, as of the end of
the 30-day period, whether or not the holder has surrendered the
warrant for redemption. The warrant may not be exercised after the
end of any such 30-day period.
On July 6, 1997, the Company purchased from H. Lee Browne and
David Schmidt a total of 2,625,000 shares (the "Soundview Shares")
of common stock, $.001 par value per share, of Soundview, pursuant
to the terms of a Common Stock Purchase Agreement among the Company
and each of Messrs. Browne and Schmidt dated July 6, 1997. The
Soundview Shares represent 35% of the outstanding capital stock of
Soundview. As a result of the transaction, the Company now owns
approximately 51% of the outstanding common stock of Soundview.
The purchase price for the Soundview Shares consisted of a
total of 400,000 shares of Common Stock of the Company, $500,000 in
cash and the issuance of non-recourse promissory notes to each of
Messrs. Browne and Schmidt in the aggregate principal amount of
$900,000 (the "Notes"). A portion of the proceeds of the 1997
Private Placement was used to fund the cash component of the
transaction. The Notes are due and payable on November 1, 1997 and
bear interest at the rate of 6.07% per annum. The Notes are
secured by a pledge of 843,750 shares (in the aggregate) of
Soundview common stock pursuant to two Pledge Agreements between
the Company on the one hand, and each of Messrs. Browne and Schmidt
on the other, dated as of July 6, 1997 (the "Pledge Agreements").
Pursuant to the Common Stock Purchase Agreement, the Company
and each of Messrs. Browne and Schmidt entered into an Amended and
Restated Stockholders' Agreement to provide for elections of
directors and other matters relating to Soundview. In addition, as
part of the transaction, Soundview entered into five year
employment agreements with each of Messrs. Browne and Schmidt.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Reference is made in particular to
the description of the Company's plans and objectives for future
operations, assumptions underlying such plans and objectives and
other forward-looking statements included in this Prospectus. Such
statements may be identified by the use of forward-looking
terminology such as "may," "will," "expect," "believe," "estimate,"
"anticipate," "intend," "continue," or similar terms, variations of
such terms or the negative of such terms. Such statements are
based on management's current expectations and are subject to a
number of factors and uncertainties which could cause actual
results to differ materially from those described in the forward-
looking statements. The Company expressly disclaims any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based. Factors which could cause such results to differ materially
from those described in the forward-looking statements include
those set forth below.
RISK FACTORS
An investment in the shares of Common Stock offered hereby is
speculative, involves a high degree of risk and should only be made
by investors who can afford to lose their entire investment. This
Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially. (See
"Forward-Looking Statements.") Factors that could cause or
contribute to such differences include, but are not limited to,
those discussed below, as well as those discussed elsewhere in this
Prospectus or incorporated herein by reference. Prospective
purchasers, prior to making an investment, should carefully
consider the following risk factors, as well as the other
information set forth in this Prospectus, the exhibits hereto and
the documents incorporated by reference herein.
NO ASSURANCE OF SUCCESS:
The Company's operations are comprised of two lines of business:
(i) management of private investment funds; and (ii) investing in
start-up business ventures. The Company's business operations are
subject to numerous risks associated with managing investment funds
and establishing new business ventures. Continued implementation
of the plan of operations of the Company and each of the Company's
new business ventures will be subject to all of the problems,
expenses and uncertainties inherent in the establishment of new
business enterprises, many of which are subject to outside
influences over which the Company has no control, including
technological advances and product obsolescence, uncertain market
acceptance, increased levels of competition, increases in operating
costs including costs of supplies, personnel, and equipment, the
availability and cost of capital, reduced margins caused by
competitive pressures and changes in general economic conditions
and governmental regulation imposed under federal, state or local
laws. There can be no assurance that the Company's new business
ventures will be able to market any product on a commercial scale,
that these new business ventures will ever achieve or maintain
profitable operations or that they, or the Company, will be able to
remain in business.
RISKS ASSOCIATED WITH THE MONEY MANAGEMENT BUSINESS; PROFITABILITY
UNCERTAIN:
Although management of the Company has had extensive experience in
the investment industry, the Company itself is a recently formed
business entity and has a short history of operations and only
limited revenues. The Company currently manages two domestic
partnership funds and two offshore investment funds. The Company
invests a portion of its own funds in the domestic partnership
funds as a general partner. The Company does not invest Company
funds in the offshore investment funds. From its inception through
June 30, 1997, the Company has received approximately $370,000 in
aggregate performance and management fees from managing the four
investment funds. The Company is attempting to increase the assets
invested in the various funds it manages. There can be no
assurance as to the level of additional capital that the Company
will be able to raise for its investment funds.
The Company has formulated its plan of operations based on certain
assumptions regarding the potential monies that will be invested in
its funds under management and the anticipated performance of, and
profits that can be realized by, these funds. Although these
assumptions are based on the best estimates of management, there
can be no assurance that these assessments will prove to be
correct. Any future success of the Company will depend upon many
factors, including factors which may be beyond the control of the
Company or which cannot be predicted at this time. These factors
include the amount of assets under management in the Company's
investment funds, the performance of those funds, the overall
performance of the equity markets in the United States, the success
of the Company's stock selecting strategy and other factors. The
Company's income from managing the investment funds is comprised of
fixed management fees, as well as performance fees which are based
on the performance of each individual fund, as the Company receives
a percentage of the profit earned by each fund.
POTENTIAL FLUCTUATIONS IN THE FUTURE RESULTS OF OPERATION OF THE
COMPANY:
The Company's operating results may vary significantly from quarter
to quarter due to a variety of factors including the amount of
money invested in the private investment funds managed by the
Company, the performance of such investment funds, the results of
operations of the Affiliates, the nature and timing of investments
in new businesses by the Company and the timing of the sales of
securities of the Affiliates.
The Company also expects to incur significant start-up expenses in
pursuing and developing new business ventures. To date, the
Company has lacked a consistent source of recurring revenue and
most of its revenues have come from sales of securities of the
Affiliates.
POTENTIAL FLUCTUATIONS IN FUTURE RESULTS OF OPERATIONS OF THE
AFFILIATES:
To date, Whitewing has experienced substantial operating losses and
its operating results have varied significantly from quarter to
quarter due to a variety of factors. For further information
regarding the nature of and the fluctuations in Whitewing's
operating results, potential investors are directed to review
Whitewing's filings under the Exchange Act, available from the SEC.
CombiMatrix, MerkWerks, Greenwich Information Technologies and
Soundview Technologies have generated no revenues to date. The
Company anticipates that any results of operations of these
Affiliates are likely to vary significantly as a result of a number
of factors, including the timing of new product introductions by
each of these Affiliates, the novelty of the technology owned by
these Affiliates, the strength of each of these Affiliates'
intellectual property rights, each Affiliates ability to exploit
its technology, the volume and timing of orders received, product
line maturation, the impact of price competition, and each
Affiliate's ability to access distribution channels. Many of these
factors are beyond the control of the Affiliates. There can be no
assurance that any Affiliate will experience growth in the future
or be profitable on an operating basis in any future period.
RISKS ASSOCIATED WITH THE EMERGING COMPANIES:
Involvement in emerging companies is marked by a high degree of
risk, including difficulties in selecting ventures with viable
business plans and acceptable likelihoods of success and future
profitability. There is a high probability of loss associated with
investments in start-ups. Identifying and developing each new
business opportunity also requires the Company to dedicate
significant amounts of financial resources, management attention
and personnel, with no assurance in any individual case that these
expenditures will prove fruitful.
The Company generally invests in start-up ventures with no
operating histories, unproven technologies and products and, in
some cases, the need for identification and implementation of
experienced management. Because of the uncertainties and risks
associated with such start-up ventures, investors in the Company
should expect substantial losses associated with failed ventures.
In addition, markets for venture capital in the United States are
increasingly competitive. As a result, the Company faces potential
losses of business opportunities and possible deterioration of the
terms of available financings and equity investments in start-up
ventures. Furthermore, the Company may lack financial resources to
fully fund additional ventures in which it could participate and
the Company as well as its Affiliates may be dependent upon
external financing to provide sufficient capital.
UNCERTAINTY OF EMERGING COMPANIES; LACK OF MARKET ACCEPTANCE OF
PRODUCTS:
CombiMatrix. CombiMatrix was incorporated in October 1995 and
began operations in April 1996. CombiMatrix is developing
technologies involving combinatorial chemistry, which could
represent significant improvements over existing technologies in
the speed and cost-effectiveness of drug discovery. CombiMatrix is
a development stage company without any current products or
revenues. Its current activities relate almost exclusively to
research and development.
The Company's investment in CombiMatrix is subject to the risks
associated with new technologies, including the viability of the
technology, unknown market acceptance, difficulties in obtaining
financing, the strength of its intellectual property protection,
increasing competition, and the ability to convert technology into
revenues. In addition, because the technologies critical to the
success of this industry are in their infancy, no assurances can be
given that CombiMatrix will be able to successfully implement its
technologies. In the event its technologies prove to be
successful, CombiMatrix intends to pursue collaborations with
pharmaceutical companies, which may include the licensing of
CombiMatrix's screening libraries and possibly the licensing of
internally developed chemical compounds. No assurances can be
given that CombiMatrix, even if successful in developing its
technologies, would be able to successful implement the
collaborative efforts with pharmaceutical companies.
CombiMatrix intends to vigorously protect its intellectual property
rights. There can be no assurance, however, that CombiMatrix's
pending patent applications will issue or that a third party will
not violate, or attempt to invalidate, CombiMatrix's intellectual
property rights, possibly forcing CombiMatrix to expend substantial
legal fees. Successful challenges to certain of CombiMatrix's
patents, if issued, would materially adversely affect CombiMatrix's
business, operating results, financial condition and prospects.
There can be no assurance that certain aspects of CombiMatrix's
technology will not be reverse-engineered by third parties without
violating CombiMatrix's proprietary rights. CombiMatrix's existing
protections also may not preclude competitors from developing
products with features and prices similar to or better than those
of CombiMatrix.
Greenwich Information Technologies. Greenwich Information
Technologies was formed in June 1996 and is the exclusive marketing
and licensing agent for a number of domestic and international
patents and other intellectual property pertaining to information-
on-demand systems. Although Greenwich Information Technologies
believes that it has marketing and licensing rights to enforceable
patents, no assurances can be given that other companies will not
challenge the underlying patents to these rights or develop
competing technologies that do not infringe such patents.
Furthermore, whether or not competing products emerge, it is
uncertain whether and to what extent Greenwich Information
Technologies will be able to profitably market and license its
rights to the information-on-demand technology.
Soundview Technologies. Soundview Technologies was formed in March
1996 to commercialize patent rights of a method of video and audio
blanking technology, also known as V-chip technology, that screens
objectionable television programming and blocks it from the viewer.
Although Soundview Technologies believes that it owns an
enforceable patent on its technology, no assurances can be given
that other companies will not challenge Soundview Technologies'
patent rights or develop competing technologies that do not
infringe Soundview Technologies' patent. Additionally, whether or
not competing products emerge, it is uncertain whether and to what
extent Soundview Technologies will be able to profitably exploit
its technology.
MerkWerks. MerkWerks was formed in September 1995 as a software
development company, whose first product is expected to be software
for use with CD-recordable disk drives for Macintosh platforms.
MerkWerks is in the developmental stage and, to date, has not
completed the development of any products or generated any
revenues. No assurances can be given that MerkWerks will ever be
able to successfully market its products or that a market for such
products will develop.
The success of MerkWerks' software depends on its acceptance by
original equipment manufacturers (OEMs) that produce CD-recordable
disk drives. MerkWerks strategy is to convince these OEMs of the
utility of MerkWerks' software so that the OEMs will install such
software in the CD-recordable disk drives prior to their sale to
the end-user, which will generate license fees for MerkWerks and
generate market acceptance of MerkWerks' platform. No assurances
can be given that MerkWerks' software will gain the acceptance of
OEMs or ever be incorporated into CD-recordable disk drives.
MerkWerks' initial software release is expected to be designed for
use with the Macintosh platform. In addition, MerkWerks
anticipates adapting its software to the Windows platform.
However, it is uncertain whether MerkWerks will be successful in
adapting its software to the Windows platform, and, if successful,
whether a viable market will develop for this product.
UNCERTAIN REVENUES OF AFFILIATES:
CombiMatrix, MerkWerks, Greenwich Information Technologies and
Soundview Technologies have generated no revenues to date and have
had substantial losses. Although each of these companies is
developing products for marketing and commercial sale, either
through direct sales or licensing, no assurances can be given that
any of these companies will ever generate meaningful revenues or
will ever be profitable.
AFFILIATES' NEED FOR ADDITIONAL CAPITAL; SUBSEQUENT FINANCINGS:
To date, the Affiliates have primarily relied upon the sale of
equity securities, including sales to the Company, to generate the
funds needed to finance the implementation of their plans of
operations. The Affiliates may be required to obtain additional
financing through bank borrowings, debt or equity financings or
otherwise, or curtail such activities. No assurance can be given
that the Affiliates will continue to be able to obtain financing or
will obtain financing on favorable terms.
LACK OF MANAGEMENT; NEED FOR MARKETING AND SALES PERSONNEL:
CombiMatrix, MerkWerks, Greenwich Information Technologies and
Soundview Technologies have generated no revenues to date. There
can be no assurance these companies will be able to meet their
anticipated working capital needs for developing their products.
Failure to properly develop these products will prevent these
companies from generating meaningful product sales. Further
success in developing commercially viable products will create the
need for these companies to expand their management personnel.
Some of these companies will require the Company's assistance in
identifying and implementing experienced management teams and no
assurances can be given that these companies will be successful in
assembling qualified and effective management teams.
Additionally, unlike Greenwich Information Technologies and
Soundview Technologies, which intend to license their respective
technologies to third parties for commercial exploitation,
CombiMatrix and MerkWerks currently intend to develop, manufacture,
market and sell their respective products directly to customers.
Because CombiMatrix and MerkWerks have not completed the research
and development of their products, they have not hired marketing
and sales personnel or finalized strategic marketing plans. There
can be no assurance that CombiMatrix and MerkWerks will be able to
attract and retain qualified marketing and sales personnel or that
any marketing efforts undertaken by the companies will be
successful.
DEPENDENCE ON KEY PERSONNEL; NEED TO RETAIN PERSONNEL:
The Company's success will depend on its ability to attract, retain
and motivate the qualified personnel that will be essential to the
Company's current plans and future development. The competition
for such personnel is intense and there can be no assurance that
the Company will be successful in retaining its existing key
employees or in attracting and retaining the required additional
personnel. In particular, the success of the Company and each
Affiliate will also be greatly determined by the retention,
motivation and success of the individuals discussed in the
following paragraphs regarding the Company and its Affiliates:
The Company. The Company's success will depend to a significant
extent upon the continued services of Paul R. Ryan, the Company's
President and Chief Executive Officer, who also serves as a co-
general partner of the two domestic private investment partnerships
and as portfolio manager for the two offshore investment funds.
The Company does not maintain key person life insurance coverage
with respect to Mr. Ryan.
CombiMatrix. CombiMatrix's success will depend to a significant
extent upon the continued services of, CombiMatrix's Vice
President-Research and Development. The Company maintains key
person life insurance coverage with respect to this individual in
the amount of $1,000,000.
Greenwich Information Technologies. Greenwich Information
Technologies' success will depend to a significant extent upon the
continued services of H. Lee Browne, Greenwich Information
Technologies' President and Chief Executive Officer. Neither
Greenwich Information Technologies nor the Company maintains key
person life insurance coverage with respect to Mr. Browne.
Soundview Technologies. Soundview Technologies' success will
depend to a significant extent upon the continued services of H.
Lee Browne, Soundview Technologies' President and Chief Executive
Officer, and David Schmidt, Soundview Technologies' Vice President
and Director of Technology. Neither Soundview Technologies nor the
Company maintains key person life insurance coverage with respect
to Mr. Browne or Mr. Schmidt.
MerkWerks. MerkWerks' success will depend to a significant extent
upon the continued service of James Merkle, Jr., MerkWerks'
President. The Company currently maintains key person life
insurance coverage with respect to Mr. Merkle in the amount of
$1,000,000.
COMPETITION FACING THE COMPANY'S MONEY MANAGEMENT BUSINESS:
Competition in the investment markets and among providers of
investment management services is intense. Some of these competing
providers have greater financial, marketing and other resources, as
well as greater research capabilities than the Company. The
Company believes that its products and services are differentiated
from those of its competitors and well-suited for the investment
marketplace. However, there can be no assurance that the Company
will prove successful in its efforts to attract the desired amount
of funds for investment in the funds managed by the Company.
COMPETITION FACING THE AFFILIATES:
Whitewing. The markets for Whitewing's products are intensely
competitive. The nutritional supplements market is characterized
by frequent product introductions, short product life cycles, rapid
price declines and eroding profit margins and evolving customer
preferences. In each of its product lines, Whitewing competes and
is expected in the future to compete with a large number of
companies with significantly greater financial and other resources.
Many of Whitewing's current and potential competitors have
significantly greater name recognition, research capabilities and
financial and technical resources than Whitewing, and many have
longstanding positions and established brand names in their
markets.
CombiMatrix. The pharmaceutical and biotechnology industries are
subject to intense competition and rapid and significant
technological change. Many organizations are actively attempting
to identify and optimize compounds and build libraries for
potential pharmaceutical development. CombiMatrix will compete
directly with the research departments of pharmaceutical companies,
biotechnology companies, other combinatorial chemistry companies,
and research and academic institutions. Many of these competitors
have greater financial and other resources, and more experience in
research and development, than CombiMatrix. Historically,
pharmaceutical companies have maintained close control over their
research activities, including the synthesis, screening, and
optimization of chemical compounds. Many of these companies, which
represent the greatest potential market for CombiMatrix's services
and compounds, are developing combinatorial chemistry and other
methodologies to improve productivity. In addition, these
companies may already have large collections of compounds
previously synthesized or ordered from chemical supply catalogs or
other sources against which they may screen new targets. Other
sources of compounds include compounds extracted from natural
products, such as plants and microorganisms, and compounds created
using rational drug design. Academic institutions, governmental
agencies and other research organizations are also conducting
research in areas in which CombiMatrix is working, either on their
own or through collaborative efforts.
CombiMatrix anticipates that it will face increased competition in
the future as new companies enter the market and advanced
technologies become available. CombiMatrix's processes may be
rendered obsolete or uneconomical by technological advances or
entirely different approaches developed by one or more of
CombiMatrix's competitors. The existing approaches of
CombiMatrix's competitors or new approaches or technology developed
by CombiMatrix's competitors may be more effective than those
developed by CombiMatrix.
Greenwich Information Technologies. Although Greenwich Information
Technologies believes that it has marketing and licensing rights to
enforceable patents and other intellectual property relating to
video and audio on demand, no assurances can be given that other
companies will not develop competing technologies that offer better
or less expensive alternatives to those offered by Greenwich
Information Technologies. In the event a competing technology
emerges, Greenwich Information Technologies would expect
substantial competition. Potential competitors could have
significantly greater research capabilities and financial and
technical resources than Greenwich Information Technologies, and
some could have established brand names in the market for such
products.
Soundview Technologies. Soundview Technologies believes that its
V-chip technology is protected by enforceable patent rights.
However, no assurances can be given that other companies will not
develop competing technologies that offer better or less expensive
alternatives to those offered by Soundview Technologies. Many
potential competitors could have significantly greater research
capabilities and financial and technical resources than Soundview
Technologies, and some could have established brand names in the
market for television products.
MerkWerks. There are currently at least 25 CD-recordable disk
drive software packages on the market. MerkWerks' first product is
not yet complete or ready for sale. Thus, the acceptance of
MerkWerks' software in the market is unproven and speculative. The
markets for software products are intensely competitive and are
characterized by rapid changes in technological standards.
MerkWerks faces competition from large companies with substantial
technical, marketing and financial resources, allowing them to
aggressively develop, enhance and market competing products. These
advantages may allow competitors to dominate distribution channels
and to respond more quickly than MerkWerks to emerging technologies
or to changing customer requirements. Numerous actions by these
competitors, including price reductions and product giveaways,
increased promotion, the introduction of enhanced products and
product bundling could have a material adverse effect on MerkWerks
ability to develop and market its software products and on
MerkWerks business, financial condition and operating results.
PROPRIETARY TECHNOLOGY:
The success of the business of CombiMatrix, Greenwich Information
Technologies, Soundview Technologies, and MerkWerks relies, to
varying degrees, on proprietary technology and the protection and
exclusivity thereof. CombiMatrix, Greenwich Information
Technologies, and Soundview Technologies will depend largely on the
protection of enforceable patent rights. CombiMatrix currently has
an application on file with the United States Patent and Trademark
Office seeking a patent on its core technology, while Greenwich
Information Technologies and Soundview Technologies have patent or
rights to patents that have been issued as well as have additional
patents pending. MerkWerks intends to rely on a combination of
statutory and common law, copyright, trademark and trade secret
law, and licensing agreements to protect its software product. No
assurances can be given that pending patent applications will
issue, third parties will not violate, or attempt to invalidate the
Affiliates' intellectual property rights, or certain aspects of the
Affiliates' intellectual property will not be reversed-engineered
by third parties without violating the Affiliates' proprietary
rights.
In addition to the protection that may be afforded by patents and
the various laws protecting proprietary rights, the Affiliates
enter into confidentiality agreements with certain third parties
and to generally limits access to information relating to their
intellectual property. Despite these precautions, third parties
may be able to gain access to and use their intellectual property
to develop similar competing technologies and/or products. Any
substantial unauthorized use of the Affiliates patent and other
proprietary rights, could materially and adversely affect the
business and operational results of the Affiliates.
NEW PRODUCTS AND TECHNOLOGICAL CHANGES AFFECTING THE AFFILIATES:
The markets for each Affiliate's products are also marked by
extensive competition, rapidly changing technology, frequent
product improvements, and evolving industry standards. The success
of each Affiliate will depend on its ability to develop and market
new products or enhance existing ones to meet the evolving needs of
the market for such products. There can be no assurance that the
Affiliates' existing or future products will be successful or
profitable. In addition, there can be no assurance that products
or technologies developed by others will not render the Affiliates'
products noncompetitive or obsolete. There can be no assurance
that the Companies' capital requirement will not increase or that
the Company will have sufficient revenues, if any, after such time
to fund its basic operating requirements or to continue funding new
business ventures.
LIMITED OPERATING HISTORY:
The Company commenced operations in 1993 and, accordingly, has a
limited operating history. The Company's prospects must be
considered in light of the risks, expenses, and difficulties
frequently encountered by companies with such limited operating
histories. Since the Company has a limited operating history,
there can be no assurance that its operations will be profitable or
that it will generate sufficient revenues to meet its expenditures
and support its activities.
NEED FOR ADDITIONAL CAPITAL; SUBSEQUENT FINANCINGS:
To date, the Company has relied upon the sale of equity securities
to generate the funds needed to finance the implementation of its
plan of operations. The Company has in the past also relied on
gains from the sale of investment securities, including those of
Whitewing, CombiMatrix, Soundview Technologies, and MerkWerks, as
well as equity interests in Greenwich Information Technologies as
additional sources of revenue. There can be no assurance that the
Company's capital requirements will not increase or that the
Company will have sufficient revenues, if any, after such time to
fund its basic operating requirements or to continue funding new
business ventures. The Company may be required to obtain
additional financing through bank borrowings, debt or equity
financings or otherwise. No assurance can be given that such
financing may be obtained on terms favorable to the Company.
MINORITY POSITIONS IN CERTAIN AFFILIATES:
Whitewing. The Company currently owns 532,459 shares of the common
stock of Whitewing, representing 18.4% of the outstanding shares
and has voting control over 789,709 shares of common stock of
Whitewing, representing 27.3% of the outstanding shares. R. Bruce
Stewart, the Company's Chief Financial Officer, is Chairman of the
Board of Directors of Whitewing and Paul Ryan, the Company's
President and Chief Executive Officer, is also a member of the
Board of Directors of Whitewing, representing half of Whitewing's
Board of Directors. This minority position and board
representation results in the Company having influence at
Whitewing, but not the ability to control the decision-making at
Whitewing.
Greenwich Information Technologies. The Company currently
maintains a membership interest of 30.02% in Greenwich Information
Technologies. Although a senior member of Greenwich Information
Technologies, the Company does not hold a majority of the board of
three senior members. Similarly, the Company has no control over
the day to day operations of Greenwich Information Technologies,
which are directed by the chief executive officer, H. Lee Browne.
This minority position results in the inability of the Company to
control or direct the decision-making of Greenwich Information
Technologies in any meaningful way.
MANAGEMENT AND PERFORMANCE FEES:
The level of management and performance fee revenue received by the
Company will depend upon the amount of money invested in the funds
managed by the Company, which in turn will depend to a large extent
upon the performance of the funds managed by the Company. There
can be no assurance that the Company will prove successful in
raising any additional capital for the investment funds managed by
the Company.
INVESTMENT IN THE PARTNERSHIP:
As of June 30, 1997, the Company's had $504,389 invested in the two
domestic private partnership funds it manages, and may invest
additional amounts to acquire or increase its interests in these or
other funds. To the extent that the Company's funds are so
committed, they will be subject to all of the risks to be
encountered by all investors in such funds as a result of the
investment strategy adopted for the funds by the Company as a
general partner, including the risks associated with short sales,
hedging, option trading, trading on margin and other leverage
transactions. The investment strategy adopted by the domestic
funds managed by the Company, and any other funds it subsequently
invests, could result in substantial losses, and these losses could
have a material adverse impact on the operational results of the
Company. Conversely, if any partnership funds in which Company
funds are invested prove to be profitable, the partners thereof,
including the Company, will be credited with partnership net
income. The Company will thereby incur income tax liability, even
if it receives little or no cash distributions from such funds.
Since the stated intention of the funds managed by the Company is
to reinvest substantially all income and gain allocable to the
partners thereof, the Company does not anticipate receiving
distributions of cash from the funds to the partners, including the
Company, that could be used to pay any income tax on partnership
profits.
It is the present intention of the Company to limit its investment
in certain designated assets, including investments in domestic
partnership funds, to an amount not exceeding forty-five percent in
the aggregate, of the Company's total assets, to avoid
characterization of the Company as an investment company that would
be subject to regulation under the Investment Company Act of 1940.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
shares of Common Stock offered by the Selling Securityholders
pursuant to this Prospectus. The Company will receive proceeds
upon the exercise of warrants and options to purchase shares of
Common Stock held by certain of the Selling Securityholders. See
"Selling Securityholders."
SELLING SECURITYHOLDERS
The shares of Common Stock offered pursuant to this Prospectus
have been or will be issued to the Selling Securityholders (or
their assignees) directly by the Company. An aggregate of 290,200
of the shares of Common Stock offered pursuant to this Prospectus
were issued by the Company to certain of the Selling
Securityholders in the 1997 Private Placement. An additional
290,200 of the shares of Common Stock offered pursuant to this
Prospectus (subject to adjustment under certain circumstances)
represent shares issuable to certain of the Selling Securityholders
upon exercise of the warrants issued in the 1997 Private Placement
(the "1997 Warrants"). The 1997 Warrants may be redeemed by the
Company under certain circumstances. See "Recent Developments."
The remaining 246,000 shares of Common Stock offered pursuant to
this Prospectus (subject to adjustment) represent shares issuable
upon the exercise of certain options and other warrants held by
certain of the Selling Securityholders. The Company will not
receive any of the proceeds from sales of the shares of Common
Stock offered pursuant to this Prospectus, although the Company
will receive the exercise prices to be paid by the Selling
Securityholders upon exercise of the 1997 Warrants and the options
and other warrants held by such Selling Securityholders and
referenced in the footnotes to the table below.
The following table sets forth certain information with
respect to the ownership of shares of the Company's Common Stock by
the Selling Securityholders as of October 30, 1997 and the number
of shares which may be offered pursuant to this Prospectus for the
account of each of the Selling Securityholders or their transferees
from time to time. Except as described in the footnotes to the
table, to the best of the Company's knowledge, none of the Selling
Securityholders has had any position, office or other material
relationship with the Company or any of its affiliates.
NUMBER OF SHARES MAXIMUM NUMBER NUMBER OF SHARES PERCENT OF CLASS
BENEFICIALLY OWNED OF SHARES WHICH BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO MAY BE SOLD IN AFTER THE AFTER THE
SELLING SECURITYHOLDERS(*) OFFERING(1) THIS OFFERING(1) OFFERING(2) OFFERING(2)
Thomas B. Akin 40,000 40,000 0 0
All Points Management Trust 59,400 58,400 1,000 **
Dr. Brooke P. Anderson(3) 55,800 2,000 53,800 **
Gary W. & Patricia M. Boyett 25,000 20,000 5,000 **
H. Lee Browne(4) 210,000(5) 10,000(5) 200,000 **
Philip J. Chelsvig 10,000 10,000 0 0
Dr. M. Robert and Phyllis 265,489 80,000 185,489 **
Ching(6)
Corsair Capital Partners, L.P. 40,000 40,000 0 0
Cruttenden Roth, Inc.(7) ______ 100,000 ______ ______
Michael Cunniff ______ 12,000 ______ ______
Dennis R. Don 12,000 12,000 0 0
John D. Drake 140,000 40,000 100,000 **
Stanley and Irene Farmer 28,000 10,000 18,000 **
Gerald E. Finnell and 11,000 10,000 1,000 **
Katherine E. Finnell Living
Trust
Fred F. Finocchiaro(8) 41,000 41,000 0 0
Bernard Freeman Irrevocable 63,000 20,000 43,000 **
Trust
Norio Kotani 10,000 10,000 0 0
Ronald V. Krizek 11,000 10,000 1,000 **
David M. Lackey 91,500 14,000 77,500 **
Helen T. Lackey 7,500 5,000 2,500 **
Dr. Calvin Layland 12,000 4,000 8,000 **
Calvin C. Layland, D.P.M., 4,000 4,000 0 0
Inc. Profit Sharing Plan
Donald D. Montgomery(9) 12,200 12,000 200 **
Dominic Mortellaro 11,000 10,000 1,000 **
Barry Neville 11,500 4,000 7,500 **
Northlea Partners, Ltd. 22,000 20,000 2,000 **
Edward D. Pollock 13,650 10,000 3,650 **
John R. Queen 10,000 10,000 0 0
Gilbert Rivera 12,000 10,000 2,000 **
Paul R. Ryan(10) 131,000 104,000 27,000 **
David Schmidt(11) ______ 10,000 ______ ______
Frederick L. Simmons 10,000 10,000 0 0
Jens Spitta 3,350 2,000 1,350 **
Bruce Stewart(12) 17,100 4,000 13,100 **
Wendell Strahan 35,000 10,000 25,000 **
John Tartaglione 8,000 8,000 0 0
Bennett Tremaine 43,500 20,000 23,500 **
Hans Vanyperen 10,000 10,000 0 0
Charles E. Wert 10,000 10,000 0 0
Robert E. Witt Trust 11,000 10,000 1,000 **
------
TOTAL: 826,400 Shares
(*) Information with respect to the number of shares of Common
Stock owned by certain of the Selling Securityholders has not
yet been included in this Registration Statement. The Company
intends to amend this Registration Statement prior to
effectiveness to include the requisite information with
respect to such Selling Securityholders.
** Less than one percent of class.
(1) Assumes exercise of all 1997 Warrants, and all options and
other warrants beneficially owned by the Selling
Securityholder at the exercise price and for the maximum
number of shares permitted as of the date of this Prospectus.
Share figures include shares of Common Stock issued in the
1997 Private Placement and underlying the 1997 Warrants as
follows:
SHARES OF COMMON
STOCK ISSUED IN 1997 SHARES UNDERLYING
NAME OF THE SELLING SECURITYHOLDER PRIVATE PLACEMENT 1997 WARRANTS
Thomas B. Akin 20,000 20,000
All Points Management Trust 29,200 29,200
Dr. Brooke P. Anderson 1,000 1,000
Gary W. & Patricia M. Boyett 10,000 10,000
H. Lee Browne 0 0
Philip J. Chelsvig 5,000 5,000
Dr. M. Robert and Phyllis Ching 40,000 40,000
Corsair Capital Partners, L.P. 20,000 20,000
Cruttenden Roth, Inc. 0 0
Michael Cunniff 0 0
Dennis R. Don 6,000 6,000
John D. Drake 20,000 20,000
Stanley and Irene Farmer 5,000 5,000
Gerald E. Finnell and Katherine E. 5,000 5,000
Finnell Living Trust
Fred F. Finocchiaro 20,500 20,500
Bernard Freeman Irrevocable Trust 10,000 10,000
Norio Kotani 5,000 5,000
Ronald V. Krizek 5,000 5,000
David M. Lackey 5,000 5,000
Helen T. Lackey 2,500 2,500
Dr. Calvin Layland 2,000 2,000
Calvin C. Layland, D.P.M., Inc.
Profit Sharing Plan
Donald D. Montgomery 1,000 1,000
Dominic Mortellaro 5,000 5,000
Barry Neville 2,000 2,000
Northlea Partners, Ltd.
Edward D. Pollock 5,000 5,000
John R. Queen 5,000 5,000
Gilbert Rivera 5,000 5,000
Paul R. Ryan 2,000 2,000
David Schmidt 0 0
Frederick L. Simmons 5,000 5,000
Jens Spitta 1,000 1,000
Bruce Stewart 2,000 2,000
Wendell Strahan 5,000 5,000
John Tartaglione 4,000 4,000
Bennett Tremaine 10,000 10,000
Hans Vanyperen 5,000 5,000
Charles E. Wert 5,000 5,000
(2) Assumes that each Selling Securityholder will sell all of the
shares of Common Stock offered pursuant to this Prospectus,
but not any other shares of Common Stock beneficially owned by
such Securityholder.
(3) Dr. Anderson is a director of the Company and also serves as
its Vice President, Research and Development. Dr. Anderson is
also a director of MerkWerks and CombiMatrix.
(4) Mr. Browne is a director and the President and Chief Executive
Officer of each of Greenwich Information Technologies and
Soundview Technologies.
(5) Share ownership information is based on the information
contained in Mr. Browne's Schedule 13D filed with the
Securities and Exchange Commission (the "Commission") on
October 27, 1997. The remaining 200,000 shares beneficially
owned by Mr. Browne are the subject of a separate registration
statement filed with the Commission. See "Recent
Developments."
(6) Dr. Ching has provided consulting services to the Company.
(7) In June 1996, the Company entered into an agreement with
Cruttenden Roth, Incorporated ("CRI") under which CRI will
serve, for a period of up to two years, as a financial advisor
to the Company on matters pertaining to selected transactions
including, but not limited to, mergers and acquisitions,
purchases and sales of shares of minority and majority-owned
subsidiaries, general capital markets strategies, capital-
raising activities, and other services such as the Company and
CRI may mutually see fit. As compensation for these services,
CRI has agreed to accept, in lieu of cash compensation,
warrants to purchase 100,000 shares of the Company's Common
Stock at an exercise price of $6.00 per share. These warrants
expire in June 2002.
(8) Mr. Finocchiaro is a principal in the accounting firm of
Finocchiaro & Co., which served as independent auditors of the
Company until April 1997.
(9) Mr. Montgomery is an officer of CombiMatrix.
(10) Mr. Ryan is a director and serves as the President and Chief
Executive Officer of the Company. Mr. Ryan is also a party to
an agreement with the Company pursuant to which the Company
and Mr. Ryan have agreed to act as the general partners of
certain private investment funds and co-managers to other
investment funds. Under this agreement, the Company is
entitled to receive 75 percent, and Mr. Ryan is entitled to
receive 25 percent, of the performance and management fees
earned in respect of the investment advisory services provided
to co-managed investment funds, less certain expenses shared
with other parties. Pursuant to this agreement, Mr. Ryan
earned approximately $14,000 during fiscal year 1996.
(11) Mr. Schmidt is a director and serves as a Vice President of
Soundview Technologies. See "Recent Developments."
(12) Mr. Stewart is the Chairman of the Board of Directors and
serves as the Chief Financial Officer of the Company. Mr.
Stewart has previously served as Chief Executive Officer of
the Company.
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby may be sold by the
Selling Securityholders or by their respective pledgees, donees,
transferees or other successors in interest. Such sales may be
made at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices. The shares may
be sold by one or more of the following: (a) one or more block
trades in which a broker or dealer so engaged will attempt to sell
all or a portion of the shares held by the Selling Securityholders
as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchase by a broker
or dealer as principal and resale by such broker or dealer as
principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers; and (d)
privately negotiated transactions between the Selling
Securityholders and purchasers without a broker-dealer. The
Selling Securityholders may effect such transactions by selling
shares to or through broker-dealers, and such broker-dealers will
receive compensation in negotiated amounts in the form of
discounts, concessions, commissions or fees from the Selling
Securityholders and/or the purchasers of the shares for whom such
broker-dealers may act as agent or to whom they sell as principal,
or both (which compensation to a particular broker-dealer might be
in excess of customary commissions). Such brokers or dealers or
other participating brokers or dealers and the Selling
Securityholders may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, in connection with such
sales. Except for customary selling commissions in ordinary
brokerage transactions, any such underwriter or agent will be
identified, and any compensation paid to such persons will be
described, in a Prospectus Supplement. In addition, any securities
covered by this Prospectus that qualify for sale pursuant to Rule
144 might be sold under Rule 144 rather than pursuant to this
Prospectus.
LEGAL MATTERS
The validity of the shares of Common Stock intended to be sold
pursuant to this Prospectus will be passed upon for the Company by
O'Melveny & Myers LLP.
EXPERTS
The financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended
December 31, 1996 have been so included in reliance on the report
of Finocchiaro & Co., independent accountants, given on the
authority of said firm as experts in auditing and accounting. Fred
F. Finocchiaro, a principal of Finocchiaro & Co., beneficially owns
20,500 shares of the Company's Common Stock that were issued in the
1997 Private Placement, together with warrants to purchase an
additional 20,500 shares of Common Stock at $5.50 per share.
Mr. Finocchiaro is also one of the Selling Securityholders named in
this Prospectus.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SECURITYHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain
Documents by Reference. . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Forward-Looking Statements. . . . . . . . . . . . . . . . . . . . . . . 7
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Selling Securityholders . . . . . . . . . . . . . . . . . . . . . . . . 18
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ACACIA RESEARCH
CORPORATION
826,400 SHARES OF
COMMON STOCK
PROSPECTUS
November __, 1997
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the registration and sale of
the Selling Securityholder Securities are as follows:
SEC registration fee. . . . . . . . . . . . . . $ 2,411
Printing and engraving. . . . . . . . . . . . . *
Accounting fees and expenses. . . . . . . . . . . *
Legal fees and expenses . . . . . . . . . . . . . *
Blue Sky filing fees and expenses . . . . . . . . *
Miscellaneous expenses. . . . . . . . . . . . . . *
Total. . . . . . . . . . . . . . . . . . . . . *
____________________
* Information to be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Articles of Incorporation and Bylaws of the
Company, each as amended to date, require the Company to indemnify
its officers and directors to the fullest extent permitted by
Section 317 of the California General Corporation Law and
applicable law. Section 317 of the California General Corporation
Law makes provision for the indemnification of officers, directors
and other corporate agents in terms sufficiently broad to indemnify
such persons, under certain circumstances, for liabilities
(including reimbursement of expenses incurred) arising under the
Securities Act of 1933, as amended.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
*4.1 Form of Common Stock Warrant Agreement issued as part
of the 1997 Private Placement
4.2 Form of Specimen Certificate of Company's Common Stock(1)
*5.1 Opinion of O'Melveny & Myers LLP regarding legality of
securities being registered
23.1 Consent of Finocchiaro & Co.
*23.2 Consent of O'Melveny & Myers LLP (contained in Exhibit 5.1)
24.1 Power of Attorney (contained on signature page hereof)
____________
* To be filed by amendment
(1) Previously filed as an exhibit to the Company's
Registration Statement on Form SB-2, File No.
SB2-33-87368-L.A., and incorporated by reference.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
ar being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
and of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) above do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for purposes of determining any liability
under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d)
of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(5) That, for purposes of determining any liability
under the Securities Act of 1933, the information omitted from
the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the
time it was declared effective.
(6) That, for the purpose of determining any liability
under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(7) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the provisions described in Item 6 above, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-3 and has
duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of
Pasadena, State of California, on November 3, 1997.
ACACIA RESEARCH CORPORATION
By /s/ Paul R. Ryan
----------------------------------
Paul R. Ryan, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Paul R. Ryan and
Kathryn King-Van Wie, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective amendments)
to this registration statement (or any other registration statement
for the same offering that is to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933), and to file the
same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to
do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or either of
them or their or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Paul R. Ryan President, Chief Executive November 3, 1997
- ----------------------- Officer and Director (Principal
Paul R. Ryan Executive Officer)
/s/ R. Bruce Stewart Chief Financial Officer and November 3, 1997
- ----------------------- Chairman of the Board (Principal
R. Bruce Stewart Financial and Accounting Officer)
/s/ Brooke P. Anderson Vice President, Research and November 3, 1997
- ----------------------- Development and Director
Brooke P. Anderson
/s/ Fred A. de Boom Director November 3, 1997
- -----------------------
Fred A. de Boom
/s/ Edward W. Frykman Director November 3, 1997
- -----------------------
Edward W. Frykman