Written by

Brandon Shalton



Archive of the 4Q Earnings Call

(oh the irony of listening to the archive from Yahoo..)

Acacia 4Q Earnings Call: Where's the Beef?

Acacia Research (ACTG) concluded their 50 minute 4Q Earnings Conference Call leaving all those listening (shareholders and non-Acacia fans) wondering, "Where's the Beef?'

The proverbial equivalent battle of "tastes great" vs. "less filling" of the viability of the DMT patent didn't get any super sizing from this 4Q call.

The first half of the call was discussing Combimatrix, Acacia Technologies sister which was the bathroom break until the real no-show started. The only interesting part of the CMBX call was a question about the $50M shelf filing to potentially raise money for working capital (full PR at the bottom). It's interesting to note that Acacia has $33M in cash, but yet feels the need for up to $50M in cash.

From the 4Q Earnings Filing:

"The Acacia Technologies group continued to roll out its Digital Media Transmission technology licensing program and entered into 72 new licensing agreements in the fourth quarter, bringing total DMT licensing agreements to 115. Fourth quarter licensing revenues increased to $481,000, from $186,000 in the previous quarter, and do not include fourth quarter license fees due from a number of licensees, which will be recognized as revenues when received in the first quarter of 2004. All of our license agreements provide for recurring payments," commented Chairman and CEO, Paul Ryan.

More 4Q information presented at the end of this article.

There were many mentions of how companies were utilizing the DMT technology, from websites to cable companies. Noting the billions of dollars being spent on the use of digital audio and video.

An interesting point here... there is no technology that is the DMT Patent, it's merely ideas of a process for downloading audio/video.

How is it that companies have been creating technology (servers, software, codecs, etc) for delivery of audio/video and yet, have never heard of the DMT patent nor read it?

How were audio or video files being distributed on BBS systems years before the inventors filed their patent?

How can companies like Microsoft, Real, and Apple create audio/video delivery mechanisms without ever reading the blueprints for the DMT patent?

If the DMT patent is so ground breaking and "pioneering", why aren't the inventors gazillionaires?

Those answers and more are what we will find out from the conclusion of the current litigation.

Paul Ryan (CEO) or Chip Harris (President) said that Acacia filed a lawsuit against OnCommand after spending a lot of money in negotiations for licensing and not coming to an agreement.

They also filed 8 new lawsuits in December 2003 since the original 39 targets were reduced to 9. The 8 new defendants get rolled into the current 9, with the effect of just having one big party. No additional potential lawsuits were mentioned in other industries.

Acacia management was parading 24/7 University as being a licensee in the "e-learning" sector but failed to point out that the licensing was paid in peanuts or cashews, the exact details are not known.

Some early signers got a "most favored nation's provision" (as Ryan put it) for signing, which just translates into "sweetheart deals". So many were saying there were no sweetheart deals, they were right….. there were sweetheart "most favored nation's provision" deals.

Ryan made a comment that they know about all the prior art and have no concerns. Famous last words to be brought up at the conclusion of this patent absurdity case when the defendants are found to be not-infringing. He also added that there wouldn't be any result of the Markman Hearing until June (summer), which FightThePatent.com concurs.

The questions were few and sugar coated. There were no mentions about expanding operations in Europe as was reported in the 3Q call. There was no pressing of where additional revenue would come in.

The overall tone seemed to be nervous and cautious. Very little was said and probably due to the current litigation and potential SEC or FTC watching of Acacia for tactics that certainly raises many eyebrows.

The uneventful 4Q earnings did not trigger a spike in stock buying and for those shareholders thinking they were striking gold, should instead, be looking out for the cry from the Titanic of patent abuse cases, the crying out of "iceberg ahead".





Acacia Technologies Group (A Division of Acacia Research Corporation)

4Q Financial Results

DMT license fee revenues for the fourth quarter of 2003 were $481,000 versus zero in the comparable 2002 period. DMT license fee revenues for 2003 were $692,000 versus $43,000 in V-chip license fee
revenues in 2002. Since November 2002, the Acacia Technologies group has entered into 115 license agreements for its DMT technology.

Seventy-two (72) of these license agreements were executed in the fourth quarter of 2003. All of the Acacia Technologies group's DMT license agreements provide for recurring license fee payments to be made by the respective licensees over the term of the licenses.

The fourth quarter 2003 division net loss was $1,082,000 versus $831,000 in the comparable 2002 period. Included in the fourth quarter 2003 division net loss are non-cash patent amortization and
depreciation charges totaling $145,000 versus $243,000 in the comparable 2002 period.

The 2003 division net loss was $5,451,000 versus $12,754,000 in the comparable 2002 period. Included in the 2003 division net loss are non-cash patent amortization and depreciation charges totaling
$616,000 versus $1,800,000 in 2002. The 2003 and 2002 division net loss includes non-cash impairment charges totaling $207,000 and $2,748,000, respectively, related to a decline in fair value of a cost-method investment.

Marketing, general and administrative expenses decreased in the fourth quarter of 2003 and for the year ended December 31, 2003 as compared to the same periods in 2002, primarily due to a reduction in
professional fees related to Acacia Research Corporation's recapitalization and merger transactions completed in December 2002, a reduction in corporate legal expenses, and a reduction in overhead due
to reduced general and administrative personnel compared to the prior period. The decrease was partially offset by an increase in costs related to Acacia Technologies group's ongoing DMT patent
commercialization and enforcement efforts, including increased legal and engineering costs related to new patent claims and the identification of additional potential licensees of our DMT technology.

Financial Condition

Total assets for the Acacia Technologies group were $39,978,000 as of December 31, 2003 compared to $47,212,000 as of December 31, 2002.

Cash and cash equivalents and short-term investments totaled $33,201,000 as of December 31, 2003 compared to $39,792,000 as of December 31, 2002.



Acacia Research/Stock -2: Proceeds For Working Capital

WASHINGTON (Dow Jones)--Acacia Research Corp. (ARC.XX) filed to sell up to $50 million of stock and warrants from time to time under a shelf registration statement filed Tuesday with the Securities and Exchange Commission.

The offering may consist of Acacia Research-CombiMatrix (CBMX) shares, and Acacia Research-Acacia Technologies (ACTG) stock or warrants.

Details of the offering will be provided in a prospectus.

Acacia Research said it will use the net proceeds from the offering for working capital.

No underwriters were listed in the filing.

Acacia Research develops, acquires and licenses enabling technologies for the life sciences and media technologies sectors, which comprise the two business groups of Acacia Research.

-By Todd Goren; Dow Jones Newswires; 202-862-1351; todd.goren@dowjones.com


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