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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the Quarter Ended March 31, 1996 Commission File No. 0-26068
ACACIA RESEARCH CORPORATION
---------------------------
A California Corporation
IRS Employer Identification No. 95-4405754
12 S. Raymond Avenue, Pasadena, California 91105
Telephone (818) 449-6431
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
At March 31, 1996, 1,844,372 shares of common stock of the Registrant were
outstanding.
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Finocchiaro & Co.
Certified Public Accountants
150 East Colorado Boulevard, Suite 201
Pasadena, California 91105
Telephone (818)449-6300 Telecopier (818)449-6299
To the Stockholders and the Board of Directors
Acacia Research Corporation
The accompanying consolidated balance sheets of Acacia Research Corporation as
of March 31, 1996 and December 31, 1995, and the related consolidated
statements of operations, and cash flows for the three months ended March 31,
1996 and 1995 were not audited by us, and we do not express an opinion on them.
/s/ FINOCCHIARO & CO.
Pasadena, California
May 9, 1996
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ACACIA RESEARCH CORPORATION
BALANCE SHEETS
March 31, 1996 (unaudited) and December 31, 1995
March 31, 1996 December 31, 1995
-------------- -----------------
ASSETS
Current Assets
Cash and cash equivalents $ 873,375 $ 788,611
Notes receivable 1,489,751 1,846,000
Receivables from affiliates 330,664 176,885
Other receivables 46,794 74,994
Prepaid expenses 7,509 12,948
Deferred tax benefit 4,978 15,820
------------- --------------
Total current assets 2,753,071 2,915,258
Equipment, furniture, and fixtures 76,164 63,569
Other assets
Equity in unconsolidated subsidiaries, at equity 1,159,563 0
Partnership interests, at equity 974,389 821,023
Deferred tax benefit 1,002,594 659,721
Organization costs, net of accumulated amortization
of $2,330 and $2,045 3,357 3,641
------------- --------------
Total Assets $ 5,969,138 $ 4,463,212
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 113,845 $ 129,066
Deficit interest in unconsolidated subsidiary,
at equity 0 114,247
Income taxes payable 39,814 110,471
------------- --------------
Total current liabilities 153,659 353,784
Deferred tax liability 422,469 4,195
------------- --------------
Total other liabilities 576,128 357,979
Commitments and contingencies
Minority interest 4,911 10,796
Stockholders' equity
Common stock, no par value, 10,000,000 shares authorized,
1,844,372 shares in 1996 and 1,577,825 shares in 1995
issued and outstanding, 25,000 shares unissued in 1995
and 1994 4,339,714 3,934,877
Retained earnings 1,251,387 367,812
Less stock subscription receivable (203,002) (208,252)
------------- --------------
Total stockholders' equity 5,388,099 4,094,437
------------- --------------
Total Liabilities and Stockholders' Equity $ 5,969,138 $ 4,463,212
============= ==============
The accompanying notes are an integral part of these financial statements.
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ACACIA RESEARCH CORPORATION
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
------------------ ------------------
Revenues
Gains on sales of securities, net $ 552,366 $ 251,000
Unrealized gain attributable to issuance of 1,066,408 -
common stock by affiliate
Equity in earnings of investments 173,202 -
Management Fees 6,225 -
Interest Income 27,916 8,593
--------------- ---------------
Total revenues 1,826,117 259,593
Marketing, general, and administrative 425,781 260,547
--------------- ---------------
Income before minority interest and taxes 1,400,336 (954)
Minority interest in net loss of consolidated subsidiary (5,885) -
--------------- ---------------
Income before provision for income taxes 1,406,221 (954)
Provision for income taxes 522,722 800
--------------- ---------------
Net Income (Loss) $ 883,499 $ (1,754)
=============== ===============
Earnings (loss) per common share
Primary $0.34 ($0.00)
Fully diluted $0.33 ($0.00)
Weighted average shares outstanding
Primary 2,621,948 2,457,050
Fully diluted 2,665,035 2,457,050
The accompanying notes are an integral part of these financial statements.
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ACACIA RESEARCH CORPORATION
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
------------------ ------------------
Cash flows from operating activities:
Net income (loss) $ 883,499 $ (1,754)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,001 1,851
Deferred taxes 469,579 0
Undistributed (earnings) loss of affiliate (173,202) 0
Unrealized gain on trading securities 0 0
Minority interest in net loss (5,885) 0
Unrealized gain on issuance of common stock by affiliate (1,066,408) 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable,
prepaid expenses, and other assets 46,151 (5,684)
Increase (decrease) in accounts payable,
accrued expenses, payroll taxes payable,
and other liabilities (85,878) (2,843)
---------------- ----------------
Net cash provided (used) by operating activities 71,857 (8,430)
Cash flows from investing activities:
Purchase of equity investment (200,000) (250,000)
Payment received on advances to affiliate 114,247 0
Advances to affiliate (268,026) (10,368)
Payments received on notes receivable 356,249 0
Capitalized expenditures (16,313) 0
---------------- ----------------
Net cash provided (used) by investing activities (13,843) (260,368)
Cash flows from financing activities:
Compensation from stock options 0 10,000
Issuance costs 0 0
Proceeds from sale of common stock 26,750 0
---------------- ----------------
Net cash provided (used) by financing activities 26,750 10,000
---------------- ----------------
Increase (decrease) in cash and cash equivalents 84,764 (258,798)
Cash and cash equivalents, beginning 788,611 361,021
---------------- ----------------
Cash And Cash Equivalents, Ending $ 873,375 $ 102,223
================ ================
The accompanying notes are an integral part of these financial statements.
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ACACIA RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business- Acacia Research Corporation (the "Company") was
incorporated on January 25, 1993 under the state laws of California.
The Company provides traditional capital management services, and also
provides management services to and makes direct investments in new
emerging corporations. The Company has significant economic interests
in four companies that it has formed and takes an active role in each
company's growth and advancement. These companies are: Whitewing
Labs, Inc., MerkWerks Corporation, CombiMatrix Corporation, and
Soundview Technologies Incorporated. In addition, as a registered
investment advisor, the Company is a general partner in two private
investment partnerships, Acacia Capital Partners, L.P. and Acacia
Growth Fund, L.P., and is an investment advisor to an offshore
investment corporation, Acacia USA Fund. The Company is diversified,
and each business segment is operated independently.
Principles of consolidation - The accompanying consolidated financial
statements for three months ended March 31, 1996 include the accounts
of the Company and its 69% owned subsidiary, MerkWerks Corporation
("MerkWerks"), a business developed by the Company. All intercompany
transactions and balances have been eliminated in consolidation.
Investments in companies in which the Company maintains an ownership
interest of 20% to 50%, or exercises significant influence over
operating and financial policies are accounted for under the equity
method. The equity method is also used to account for the investment
in companies in which the Company's controlling interest is considered
to be temporary (See Note 6).
Cash and cash equivalents - The Company considers all highly liquid
investments with original maturities of ninety days or less when
purchased to be cash equivalents. The Company invests excess cash in
money market accounts.
Equipment, furniture, and fixtures - Equipment, furniture, and
fixtures are recorded at cost. Major additions and improvements are
capitalized. The cost and related accumulated depreciation of
property and equipment retired or sold is removed from the account and
any differences between the undepreciated amount and the proceeds from
the sale is charged or credited to income. Depreciation is computed
on a straight-line basis.
Organization costs - Organization costs are recorded at cost and are
amortized on a straight-line basis over a period of five years.
Net income (loss) per share - Earnings (loss) per share has been
computed based upon the weighted average number of shares actually
outstanding plus the shares that would be outstanding assuming
conversion of common stock options and warrants, which are considered
to be common stock equivalents. Common stock equivalents include
shares issuable upon the assumed exercise of stock options using the
treasury stock method. The weighted average number of shares
outstanding also includes all common stock, stock options and warrants
issued by the Company, and included in the registration statement, as
amended, that was filed with the SEC on June 5, 1995, which became
effective June 15, 1995. These shares have been included pursuant to
SEC rules as if they had been outstanding for all periods presented.
Restatement of prior periods - Financial statements for the period
ended March 31, 1995 have been restated to reflect the change in
accounting for the Company's investment in Whitewing Labs, Inc.
("Whitewing Labs") to the equity method. The Company's ownership
interest was reduced, through sales of the Company's holdings in the
investment and additional stock issued by Whitewing Labs during 1995,
from 100% of common equity to 38% while maintaining an overall voting
interest of 55% as of December 31, 1995. Whitewing Labs completed a
public offering of approximately 1,000,000 shares of common stock in
February of 1996 further reducing the Company's control of its
affiliate. As a result of these transactions, the Company has
restated the prior periods financial statements to reflect the
accounting for its investment in Whitewing Labs on the equity method
in accordance with generally accepted accounting principles. This
restatement reduced the earnings per common share for the three months
ended March 31, 1995 from $0.03 per share to $0.00 per share.
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ACACIA RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Presentation - For financial statement reporting purposes 1995 items
have been classified to conform with 1996 presentation.
2. EQUIPMENT, FURNITURE, AND FIXTURES
Equipment, furniture, and fixtures consist of the following at March
31, 1996 and December 31, 1995:
1996 1995
------------- --------------
Computer equipment $ 56,008 $ 45,730
Furniture and fixtures 40,295 34,260
------------ ------------
96,303 79,990
Accumulated depreciation (20,139) (16,421)
------------ ------------
Total Equipment, Furniture, and Fixtures $ 76,164 $ 63,569
============ ============
Depreciation expense for the three months ended March 31, 1996 and
1995 was $3,717 and 1,688, respectively.
3. COMMITMENTS AND CONTINGENCIES
Lease obligations - As of March 31, 1996, the furniture and fixtures
account included assets in the amount of $8,661 financed by capital
lease agreements which will expire in 1996 and 1999. Accumulated
depreciation includes $1,763 of amortization related to assets
financed by capital lease agreements. The amortization of assets
under capital lease has been included in depreciation expense.
The Company leases office facilities under operating leases through
December 1998, with options to renew the leases at a rate determined
by the Consumer Price Index at the time of renewal. The Company's
current minimum monthly lease payment is $2,168. Rent expense for the
three months ended March 31, 1996 and 1995 were approximately $8,200
and $5,300 respectively.
At March 31, 1996, the future minimum lease payments for capital and
operating leases equalled the following:
CAPITAL OPERATING
----------- -----------
1996 $ 2,357 $ 19,512
1997 2,358 26,016
1998 2,358 26,016
1999 1,965 -
---------- ---------
Totals 9,038 71,544
Less interest portion (2,359) -
---------- ---------
Minimum lease payments $ 6,679 $ 71,544
========== =========
4. STOCK OPTIONS AND WARRANTS
During 1993, the Company adopted a stock option plan ("the Plan")
which authorizes the granting of both options intended to qualify as
"incentive stock options" under the Internal Revenue Code of 1986
("Incentive Stock Options") and stock options which are not intended
to so qualify ("Nonstatutory Options") to officers, directors,
employees, consultants, and others expected to provide significant
services to the Company or its subsidiaries. The Plan, which covers
an aggregate of 1,000,000 shares, was approved by the Board of
Directors in October, 1993. The Company has reserved 1,000,000 shares
of common stock in connection with the Plan.
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ACACIA RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. STOCK OPTIONS AND WARRANTS (continued)
Under the terms of the Plan, options may be exercised upon terms
approved by the Board of Directors of the Company, and expire at a
maximum of ten years from the date of grant. Incentive Stock Options
are granted at prices equal to or greater than fair market value at
the date of grant. Nonstatutory Stock Options are generally granted
at prices equal to or greater than 85% of the fair market value at the
date of grant.
The following is a summary of common stock options:
WEIGHTED
SHARES PRICES AVERAGE
--------------------------------------------------
1996
Balance at January 1, 1996 890,725 $1.50-$2.00 $2.66
Options granted 11,775 $4.90-$5.75 $5.35
Options exercised (6,700) $2.00 $2.00
Options cancelled (10,000) $5.00 $5.00
------- ---------- ----
Balance at March 31, 1996 885,800 $1.50-$5.75 $2.67
======= ========== ====
Exercisable at March 31, 1996 770,300 $1.50-$5.50 $2.37
======= ========== ====
As of the March 31, 1996 all shares available for option under the
Plan had been granted, at December 31, 1995, there were 1,775 shares
reserved for grants of common stock options.
As of March 31, 1996 and December 31, 1995 the Company had 100,000
warrants outstanding. The warrants are exercisable at $2.00 per
share, and expire on January 1, 2000.
5. NOTES RECEIVABLE
As of March 31, 1996, the Company holds promissory notes from
individuals related to the sale of common stock owned by the Company
in Whitewing Labs, and MerkWerks, in the amount of $1,418,751, and
unsecured notes in the amount of $71,000. These notes generally bear
interest at 5% per annum and are generally secured by the common stock
sold and personally guaranteed by the holder. The value of the
collateral meets or exceeds the face amount of the secured notes as of
the date of this report. These notes mature in May of 1996. Accrued
interest receivable on notes receivable amounts to approximately
$30,423 as of March 31, 1996 and approximately $13,200 as of December
31, 1995. Subsequent to the balance sheet date the Company has
collected $40,000 on the notes receivable outstanding as of March 31,
1996.
The following is a summary of notes receivable at March 31, 1996:
Notes receivable due from affiliate, secured $ 450,001
Notes receivable, secured 968,750
Notes receivable, unsecured 71,000
-----------
Total Notes Receivable $ 1,489,751
===========
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ACACIA RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENTS, AT EQUITY
Investments carried at equity, and the Company's ownership in each
consist of the following at March 31, 1996 and December 31, 1995:
1996 1995
---- ----
Whitewing Labs 19% 38%
Acacia Capital Partners, L.P. 56% 60%
CombiMatrix Corporation 59% 0%
The investment in Whitewing Labs is reported using the equity method.
The Company maintains an ownership percentage of 19.4% as of March 31,
1996, and officers of the Company hold significant positions on the
Board of Directors of Whitewing Labs. The investment in Whitewing
Labs is carried on the financial statements at value of $1,073,561 on
March 31, 1996 and at $0 as of December 31, 1995. As of March 31,
1996 Whitewing Labs had total assets of approximately $5,850,000, and
net shareholders' equity of approximately $5,500,000. Whitewing Labs'
net sales for the three months ended March 31, 1996 were $996,028
compared to $571,325 for the previous three months ended March 31,
1995. The market value of the Company's investment in Whitewing Labs
is approximately $2,700,000 based upon the closing market price of $5
per share as of March 29, 1995. The Company has reported an
unrealized gain on the issuance of common stock by Whitewing Labs
during the quarter ended March 31, 1996. The gain included in these
financial statements is based upon the increase in the value of the
Company's ownership interest in the net equity of Whitewing Labs as a
result of the public offering in February of 1996. Common stock was
offered by Whitewing Labs at $5 per share which is in excess of the
Company's cost per share which resulted in a increase in the book
value of the Company's interest in Whitewing despite the reduction in
ownership to 19.4%.
The Company records its investment in Acacia Capital Partners, L.P. at
equity as its control is temporary, and in accordance with
authoritative pronouncements regarding investments in partnerships.
The Company's capital account with respect to Acacia Capital Partners,
L.P. is $874,389 at March 31, 1996 and was $821,023 on December 31,
1995, and the total net assets of the partnership are $1,563,912 and
$1,365,742 as of March 31, 1996 and December 31, 1995, respectively.
Acacia Capital Partners, L.P. is a California limited partnership that
invests primarily in large-cap U.S. equity securities.
In March of 1996, the Company acquired a majority interest in
CombiMatrix Corporation ("CombiMatrix"). The Company reports its
ownership interest in the Company on the equity method as its control
is considered to be temporary based upon planned offerings of common
stock by CombiMatrix. The Company carries its investment in
CombiMatrix at a cost of $86,002 as of March 31, 1996, and has also
made advances to the unconsolidated subsidiary of $106,110 through the
balance sheet date. For the period ended March 31, 1996, CombiMatrix
Corporation had total assets of $319,605, and net shareholders' equity
of $212,695. There have been no revenues earned by CombiMatrix in its
development stage.
In late March of 1996 the Company entered into an agreement with
Soundview Technologies, Inc. ("Soundview"). Under the terms of the
agreement the Company will receive up to 32% interest in the common
stock of Soundview in return for the Company's raising capital for and
offering management assistance to Soundview. The Company's balance
sheet as of March 31, 1996 reflects a $200,000 advance on capital
raised to Soundview.
7. PROVISION FOR INCOME TAXES
Provision for income taxes consists of the following:
FEDERAL STATE TOTAL
------------------------------
MARCH 31, 1996
Current $ 37,703 $15,440 $ 53,143
Deferred 371,051 98,528 469,579
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ACACIA RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. PROVISION FOR TAXES (continued)
FEDERAL STATE TOTAL
---------------------------------------------------
March 31, 1995
Current $ - $ 800 $ 800
Deferred - - -
The tax effects of temporary differences and carryforwards that give
rise to significant portions of deferred assets and liabilities
consist of the following:
1996 1995
---------------------------
DEFERRED TAX ASSETS:
Nonstatutory stock options $1,002,594 619,258
Tax basis of investments at equity - 40,463
State income tax deductions 4,978 15,820
---------------------------
Gross deferred tax assets $1,007,572 $ 675,541
===========================
DEFERRED TAX LIABILITIES:
Excess basis in investments at equity $ 418,273 $ -
Equipment, furniture & fixtures 4,196 4,195
--------------------------
Deferred tax liabilities $ 422,469 $ 4,195
==========================
The Company believes that all deferred tax assets as of March 31, 1996
and December 31, 1995 are more likely than not to be realizable.
8. COMMON STOCK SUBSCRIPTIONS
As of March 31, 1996, the Company has a $50,000 unsecured promissory
note receivable from an individual. The note was issued in connection
with the purchase of 25,000 shares of common stock which have not been
issued to the individual. The note bears interest at 4% per annum and
is due in May of 1996. Other receivables include approximately $4,400
of interest due on this note. The Company expects to receive full
payment from the individual, and no adjustment has been made to the
carrying value of this note.
The Company also has promissory notes in the amount of $153,002 in
connection with the purchase of 16,167 shares of common stock, and the
exercise of 27,500 common stock options. These notes bear interest at
5% per annum and are due in May of 1996. Interest receivable in the
amount of $2,900 has been accrued on these notes. Subsequent to the
balance sheet date the Company has collected $59,000 on the
outstanding stock subscriptions at March 31, 1996.
9. RECEIVABLES FROM AFFILIATES
Receivables from affiliates consist of a promissory note with a
balance of $114,247 at December 31, 1995 bearing interest at 8% per
annum. At December 31, 1995 other receivables included approximately
$43,000 of interest receivable on this note. All outstanding amounts
due on this note have been received during the period ended March 31,
1996. Also included in receivables from affiliates at March 31, 1996
and December 31, 1995 are advances for the benefit of CombiMatrix,
Soundview, and Whitewing Labs. Advances to these companies totalled
$330,664 and $62,638, at March 31, 1996 and December 31, 1995,
respectively.
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ACACIA RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for the periods ended March 31, 1996 and 1995 for interest
was $563 and $60. The Company paid cash for income taxes in the
amount of $123,000 in 1996.
11. CONCENTRATION OF CREDIT RISK
Notes receivable at March 31, 1996 subject the Company to
concentration of credit risk due to notes in the amount of $1,308,750
being due from two individuals. The risk is limited as these notes
are collateralized by common stock with a value of $1,223,753 and
personally guaranteed by the holders as of March 31, 1996.
The Company maintains its cash balances with financial and brokerage
institutions located in Southern California. As of March 31, 1996 the
Company maintained balances of $566,622 in excess of insured amounts
with these institutions.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is based primarily on the consolidated balance sheet
of the Company as of March 31, 1996, and on the operations of the Company for
the period from January 1, 1996 to March 31, 1996. The following discussion
compares the activities for the three months ended March 31, 1996 to the
activities for the three months ended March 31, 1995.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto. These financial
statements include all adjustments which are, in the opinion of management,
necessary to reflect the fair statement of the results for the interim periods
presented, and all such adjustments are of a normal recurring nature.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1996 AND 1995
REVENUES
The Company reported quarterly revenues of $1,826,117 in the quarter
ended March 31, 1996, an increase of $1,566,524, over revenues of
$259,593 for the period ended March 31, 1995.
Gains on Sales of Securities, Net. Net gains on sales of securities
increased from $251,000 for the three months ended March 31, 1995 to
$552,366 for the three months ended March 31, 1996, which represents
an increase of $301,366 or 120.1%. Such gain for the three months
ended March 31, 1996 is comprised primarily of gains on sales of
shares of CombiMatrix, and, to a lesser extent, of gains on sales of
shares of MerkWerks. The year earlier gain of $251,000 represented a
gain from sales of shares of Whitewing Labs. The Company is
prohibited from selling shares of Whitewing Labs without the consent
of Cohig & Associates, Inc., until February 9, 1997, pursuant to its
agreement with Cohig & Associates, Inc. relating to Whitewing Labs'
initial public offering. Furthermore, the timing and extent of any
sales of securities are subject to substantial fluctuation from
quarter to quarter.
Unrealized Gain on Issuance of Common Stock by Affiliate. In February
1996, shares of Whitewing Labs were sold in an initial public
offering. This initial public offering of shares reduced the
Company's ownership interest in Whitewing Labs from 38.3% to 19.4%.
As a result of this offering, under generally accepted accounting
principles, the Company reported an unrealized gain of $1,066,408,
representing an increase in the book value of the shares of Whitewing
Labs that the company retained following the initial public offering.
Management does not anticipate recognizing any similar gain in
relation to shares of Whitewing Labs; however, the Company does
anticipate future gains of this nature with respect to other
subsidiaries when they become publicly offered entities.
Equity in Earnings of Investments. The Company reported revenues
attributable to equity in earnings of investments of $173,202 for the
period ended March 31, 1996, compared to no such revenues for the
year-earlier period. Such revenues for the period ended March 31, 1996
are comprised of the gain on the Company's capital investment as a
partner of Acacia Capital Partners, L.P., the Company's accounting for
its investment in Whitewing Labs, and, to a lesser extent, the
Company's share of net losses of CombiMatrix.
Management Fees. For the three months ended March 31, 1996, most of
the management fee income earned was attributable to the management of
Acacia Capital Partners, L.P., which was formed in 1995. Acacia USA
Fund and Acacia Growth Fund, L.P. were not formed until January 1996
and April 1996, respectively. No management fees were earned during
the three months ended March 31, 1995.
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EXPENSES
Marketing, general and administrative expenses increased from $260,537
for the three months ended March 31, 1995 to $425,781 for the three
months ended March 31, 1996. This increase is primarily due to
increased costs of operating a public company including additional
accounting legal, printing and other professional costs which were not
incurred in 1995. However, marketing, general and administrative
expenses as a percent of total revenue decreased from 100.4% in the
period ended March 31, 1995 to 23.3% in the period ended March 31,
1996.
PROVISION FOR INCOME TAXES
For the three month period ended March 31, 1996, the Company recorded
an income tax provision of $522,722, as compared to an income tax
provision of $800 for the same period in fiscal 1995. This increase
is primarily due to the deferred tax liability associated with the
unrealized gain on the issuance of Whitewing stock, and increased net
income reported by the Company.
INFLATION
Inflation has not had a significant impact on the Company.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had cash and cash equivalents of
$873,375, working capital of $2,599,412, and a ratio of current assets
to current liabilities of 17.9 to 1. As of March 31, 1996 the Company
had no indebtedness.
For the first three months of fiscal 1996, the Company had $71,857 of
positive cash flow from operations as compared to a negative cash flow
of $8,430 from operations in the related period in fiscal 1995. The
Company anticipates that the collection of notes receivable will
provide a portion of cash flows in the second quarter in addition to
anticipated revenue generated from the Company's other activities.
The Company anticipates that revenues from operations will continue to
provide necessary funds for its operating expenses. The Company
anticipates that cash generated from operations, together with working
capital reserves, will be adequate to fund recurring capital
expenditures during fiscal 1996 and for the foreseeable future.
PART II - OTHER INFORMATION
There is no required reportable other information for the three months ended
March 31, 1996.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ACACIA RESEARCH CORPORATION
By: /s/ R. Bruce Stewart
--------------------
Date: May 14, 1996
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