Acacia Releases 1st Quarter Results

Gretchen Gallen
NEWPORT BEACH, Calif. — Acacia Research Corp., parent company of Acacia Technologies Group, announced its first quarter financial results Wednesday after the close of trading on Wall Street.

For the quarter ending March 31, Acacia reported revenues of $599,000 in licensing fees, up from $6,000 in the first quarter period of 2003. Acacia reported a net loss of $989,000 versus $1,494,000 in 2003.

While Acacia reported a decrease in general overhead and administrative costs, the patent holder reported that its patent-related legal expenses have nearly doubled to $602,000 since the same time last year.

Total assets for Acacia have maintained at around $39,477,000, compared to $39,978,000 at the end of 2003. Cash reserves were reported at $32,529,000, down from $33,201,000 in the same period.

Since November 2002, when Acacia first made itself known to the adult entertainment industry and other industries over its Digital Media Transmission (DMT) technology patents, Acacia has signed 120 license agreements with various companies, predominantly adult.

The conference call was run by Paul R. Ryan, chairman and CEO of Acacia and company President Robert "Chip" Harris, and included a question and answer period from investors.

"The goal of Acacia is to become the leading technology licensing company," said Ryan, adding that the rollout of Acacia's licensing program continues to gain momentum in a variety of business sectors. "We are very enthusiastic about new opportunities we are evaluating."

Ryan said that the litigation process with certain members of the adult industry continues and that the judge is beginning to hear testimony. Ryan added that no ruling is expected until summer.

Ryan said that Acacia is in continuing discussions with online learning institutions, sports networks, Internet companies, and corporate websites, in addition to digital cable television companies, which Ryan referred to as representing one of the most important licensing opportunities for his company in terms of recurring licensing fees.

According to Ryan, video-on-demand is expected to reach 85 percent of all cable households within the next five years and will generate billions in revenue.

Harris added that Acacia is currently looking at a broad spectrum of new technology patent portfolios and that they are currently in talks with "fairly large" companies regarding future acquisitions. Harris also said that Acacia is continuing to forge ahead into Europe, although at the moment only on a limited basis.

One investor used a baseball analogy to ask Ryan what "inning" the company was in during its negotiations with the digital cable industry. Ryan replied that they were somewhere in the middle of the game.

Ryan also said that while there is currently no active litigation with members of the cable industry, they are fully prepared to defend their patents as they continue to tap into the video-on-demand market sector.

"It's a process and it takes time," said Ryan. "A lot of companies have a different take on intellectual property, but litigation is part of our business model. Sometimes it's frustrating, but once they sign a deal, they are obliged to pay us recurring fees until 2011 or 2012."

Also announced during the conference call were consolidated revenues with partnering company CombiMatrix, a maker of biochip technology, which Acacia reported as being $18,215,000, a number that can mainly be attributed to contract revenue through CombiMatrix deals with the U.S. Defense Department and Roche Diagnostics.

On April 14, Acacia purchased $15 million of CombiMatrix's common stock in a registered direct offering. Under the terms of the transaction, Acacia stated that it would sell 3 million shares of its Acacia Research-CombiMatrix common stock at $5 per share to a select group of institutional investors.

The patent holder also added a top-level patent specialist to its staff recently. Edward Treska joined Acacia earlier this month as vice president of licensing. Treska was hired to focus on licensing existing and new patent portfolios acquired by Acacia.

Treska was formerly employed as director of patents and licensing for SRS Labs, Inc., a technology licensing company based in Santa Ana, Calif.