-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DcadfsS97nmhuxrHlYJ4oDGcyendz13HFNr9OJWKGcqkI/BsgHQ1sYszX6D7Z/TP 900Isgb3nN7osRwfFOwRMQ== 0001047469-98-025432.txt : 19980629 0001047469-98-025432.hdr.sgml : 19980629 ACCESSION NUMBER: 0001047469-98-025432 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980402 ITEM INFORMATION: FILED AS OF DATE: 19980626 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACACIA RESEARCH CORP CENTRAL INDEX KEY: 0000934549 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 954405754 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-26068 FILM NUMBER: 98654534 BUSINESS ADDRESS: STREET 1: 12 SOUTH RAYMOND AVENUE STREET 2: STE B CITY: PASADENA STATE: CA ZIP: 91105 BUSINESS PHONE: 8184496431 MAIL ADDRESS: STREET 1: 12 S RAYMOND AVENUE STREET 2: SUITE B CITY: PASADENA STATE: CA ZIP: 91105 8-K/A 1 FORM 8-K-A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 2 TO CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 2, 1998 ACACIA RESEARCH CORPORATION (Exact name of registrant as specified in its charter) California 0-26068 95-4405754 - ------------------------------------------------------------------------------- (State or other jurisdiction of (Commission File (Employer Identification No.) incorporation) Number) 12 Raymond Avenue, Pasadena, California 91105 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (626) 449-6431 - ------------------------------------------------------------------------------- Not applicable. - ------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) This Form 8-K/A, Amendment No. 2 is being filed for the purpose of correcting a typographical error to the "Report of Independent Accountants." Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial statements for Internet Software LLC for the periods from October 6, 1997 (inception) through March 31, 1998. Financial statements for the period October 6, 1997 (inception) through December 31, 1997 have been audited. (b) Pro forma financial information (unaudited). (c) Exhibits 2.1* Amended and Restated Operating Agreement of Internet Software LLC dated April 2, 1998 by and between H. Lee Browne, Michael Lloyd, Nicholas E. K. Heckett, and Acacia Research Corporation (certain portions omitted and filed separately with the Securities and Exchange Commission pursuant to an application for confidential treatment). * Previously filed as an exhibit to registrant's Form 8-K filed on April 17, 1998. 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 /s/ Paul R. Ryan - ---------------- By: Paul R. Ryan President and Chief Executive Officer DATED: June 25, 1998 Financial Statements INTERNET SOFTWARE LLC (A development stage enterprise) For the Periods from October 6, 1997 (inception) through March 31, 1998 Internet Software LLC (A development stage enterprise) Table of Contents Report of Independent Accountants 1 Financial Statements Balance Sheets 2 Statements of Operations 3 Statements of Members' Deficit 4 Statements of Cash Flows 5 Notes to Financial Statements 6
REPORT OF INDEPENDENT ACCOUNTANTS To the Members of Internet Software LLC (A development stage enterprise) In our opinion, the accompanying balance sheet and the related statements of operations, of members' deficit and of cash flows present fairly, in all material respects, the financial position of Internet Software LLC (a development stage enterprise) at December 31, 1997, and the results of its operations and its cash flows for the period from October 6, 1997 (inception) through December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP /s/ Price Waterhouse LLP Los Angeles, California June 5, 1998 INTERNET SOFTWARE LLC (A development stage enterprise) BALANCE SHEETS
(Unaudited) December 31, 1997 March 31, 1998 ----------------- -------------- ASSETS Current assets Cash and cash equivalents $ 25,549 $ 22,640 -------- -------- Total current assets 25,549 22,640 Equipment, furniture, and fixtures, net 8,899 8,439 Patents 15,041 32,760 -------- -------- $ 49,489 $ 63,839 -------- -------- -------- -------- LIABILITIES AND MEMBERS' DEFICIT Current liabilities Accounts payable and accrued expenses $ 63,068 $ 94,635 -------- -------- Total current liabilities 63,068 94,635 Note payable to Member 0 70,000 -------- -------- Total liabilities 63,068 164,635 -------- -------- Members' deficit (13,579) (100,796) -------- -------- $ 49,489 $ 63,839 -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2 INTERNET SOFTWARE LLC (A development stage enterprise) STATEMENTS OF OPERATIONS
(Unaudited) October 6, 1997 (inception) (Unaudited) October 6, 1997 (inception) through Three months ended through December 31, 1997 March 31, 1998 March 31, 1998 --------------------------- ------------------ --------------------------- Expenses Marketing, general, and administrative expenses $ 56,253 $ 64,945 $ 121,198 Research and development expenses 117,326 56,368 173,694 --------- --------- --------- Total expenses 173,579 121,313 294,892 --------- --------- --------- Net loss $173,579 $121,313 $294,892 --------- --------- --------- --------- --------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 3 INTERNET SOFTWARE LLC (A development stage enterprise) STATEMENTS OF MEMBERS' DEFICIT
Managing Non-Managing Members Member Total -------- ------------ ---------- 1997 Balance at October 6, 1997 (inception) $ 0 $ 0 $ 0 Contributions 10,000 150,000 160,000 Net loss (156,221) (17,358) (173,579) --------- -------- --------- Balance at December 31, 1997 (146,221) 132,642 (13,579) 1998 Contributions 39,096 0 39,096 Withdrawals (5,000) 0 (5,000) Net loss (109,182) (12,131) (121,313) --------- -------- --------- Balance at March 31, 1998 (Unaudited) $(221,307) $120,511 $(100,796) --------- -------- --------- --------- -------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 4 INTERNET SOFTWARE LLC (A development stage enterprise) STATEMENTS OF CASH FLOWS
(Unaudited) October 6, 1997 (inception) (Unaudited) October 6, 1997 (inception) through Three months ended through December 31, 1997 March 31, 1998 March 31, 1998 --------------------------- ------------------ --------------------------- Cash flows from operating activities: Net loss $(173,579) $(121,313) $(294,892) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 307 460 767 Increase in accounts payable 63,068 31,567 94,635 --------- --------- --------- Net cash used in operating activities (110,204) (89,286) (199,490) --------- --------- --------- Cash flows from investing activities: Increase in patents (15,041) (17,719) (32,760) Purchase of equipment, furniture and fixtures (9,206) 0 (9,206) --------- --------- --------- Net cash used in investing activities (24,247) (17,719) (41,966) --------- --------- --------- Cash flows from financing activities: Proceeds from note payable to Member 0 70,000 70,000 Withdrawal of capital by Member 0 (5,000) (5,000) Capital contributions from Members 160,000 39,096 199,096 --------- --------- --------- Net cash provided by financing activities 160,000 104,096 264,096 --------- --------- --------- Increase (decrease) in cash and cash equivalents 25,549 (2,909) 22,640 Cash and cash equivalents, beginning 0 25,549 0 --------- --------- --------- Cash and cash equivalents, ending $ 25,549 $ 22,640 $ 22,640 --------- --------- --------- --------- --------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 5 INTERNET SOFTWARE LLC (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS 1. DEVELOPMENT STAGE COMPANY Internet Software LLC (the "Company") (formerly known as Greenwich Technologies LLC), a Delaware Limited Liability Company, was formed on October 6, 1997 and expires on December 31, 2047. The Company maintains offices in the State of Connecticut. The Company has developed proprietary software products for use on the Internet. Two of the Company's managers founded the Company and participated in the creation of the Company's technologies, which have been under development for the past two years. The first product, scheduled for release in July 1998, will be targeted for broad-base usage by individuals and corporations. The Company has five patent applications pending as well as other intellectual property. There is no assurance that any or all of such technologies will be successful, and even if successful, that the development of such technologies can be commercialized. The Company is a development stage enterprise and has incurred losses since its inception. At December 31, 1997, the Company had members' deficit of $13,579 and losses during the development stage of $173,579. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS - The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. EQUIPMENT, FURNITURE AND FIXTURES - Equipment, furniture and fixtures are recorded at cost. Depreciation is computed on the straight-line basis over the estimated life of the assets, which is estimated to be approximately five years. PATENTS - Patents, once issued, are amortized on the straight-line method over their estimated remaining useful lives. RESEARCH AND DEVELOPMENT - Costs for research and development efforts are charged to operations when incurred. UNAUDITED INFORMATION - The information presented as of March 31, 1998 and for the period from October 6, 1997 (inception) through March 31, 1998 and from January 1, 1998 to March 31, 1998, has not been audited. In the opinion of management, the unaudited information includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results for the periods presented. The information disclosed in the notes to the financial statements as of such dates and for such periods are also unaudited. FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments include cash and cash equivalents and accounts payable. The carrying value of these financial instruments approximates fair value due to their short-term maturity. IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates the recoverability of long-lived assets by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. At the time such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. Based on these evaluations, there were no adjustments to the carrying value of long-lived assets for the periods ending March 31, 1998 and December 31, 1997. 6 INTERNET SOFTWARE LLC (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. INCOME TAXES - The Company intends to elect to file its federal and state income tax returns under the Limited Liability Company (LLC) provisions of the Internal Revenue Code and related state tax codes, allowing the Company partnership tax treatment. All Members are responsible for taxes, if any, on their proportionate share of taxable income. ORGANIZATION - Per the operating agreement, the business and affairs of the Company are managed by the Managing Members except for situations in which the approval of the Members is expressly required. Allocation of income and losses is allocated in accordance with the operating agreement and is proportionate to ownership interest. 3. EQUIPMENT, FURNITURE AND FIXTURES Equipment, furniture, and fixtures consist of the following at December 31, 1997: Computer equipment $ 8,556 Furniture and fixtures 650 -------- 9,206 Accumulated depreciation (307) -------- $8,899 -------- --------
4. COMMITMENTS AND CONTINGENCIES In December 1997, the Company entered into a licensing agreement to obtain and protect the Company's right to produce certain software products designed for use on the Internet. Such agreement contains a provision for minimum royalty payments over the terms of the licensing agreement of approximately $2,500 per annum, beginning in fiscal 1998 and continuing through approximately 2003. The Company paid $3,500 to enter the agreement and as of March 31, 1998, no royalty payments had been made. 5. NOTE PAYABLE TO MEMBER As of March 31, 1998, the Company had a note payable to a Member of the Company in connection with a loan, proceeds of which were to be used for working capital. The note bore interest at a rate of 10% per annum and was due June 5, 1998. As of April 2, 1998, the note, including accrued interest, was paid in full. 7 INTERNET SOFTWARE LLC (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS 6. SUBSEQUENT EVENT On April 2, 1998, Acacia Research Corporation purchased a 25% membership interest from the Company in exchange for $2,500,000 in cash. A Managing Member of the Company is an officer of a subsidiary of Acacia Research Corporation and is also a significant shareholder but not an officer or director of Acacia Research Corporation. Concurrent with this purchase, the Company's operating agreement was amended to provide for Senior Member status for all existing Members and Acacia Research Corporation. Senior Members will be entitled to, among other things, appoint Managers of the Company to manage the operations of the Company. 8 ACACIA RESEARCH CORPORATION Pro Forma Financial Information (Unaudited) The following pro forma financial information reflects the acquisition by Acacia Research Corporation ("Acacia Research") on April 2, 1998 of a 25% interest in Internet Software LLC. The purchase price for the 25% interest in Internet Software LLC consisted of $2,500,000 in cash. Acacia Research will account for its investment using the equity method. The unaudited pro forma balance sheet at March 31, 1998 gives effect to the investment in Internet Software LLC assuming the transaction was consummated as of March 31, 1998. The unaudited pro forma statements of operations for the period ended December 31, 1997 and the three months ended March 31, 1998 give effect to the acquisition of Internet Software LLC assuming the transaction was consummated as of the beginning of the periods presented. The unaudited pro forma statements of operations are not necessarily indicative of the operating results that would have been achieved had the acquisition been consummated as presented; and should not be construed as representative of future operating results. The pro forma financial information should also be read in conjunction with Acacia Research's consolidated financial statements and notes thereto set forth in its Annual Report on Form 10-K for the year ended December 31, 1997 and its quarterly report on Form 10-Q for the three months ended March 31, 1998. Acacia Research's investment in Internet Software LLC was made with proceeds of a private equity financing completed on March 29, 1998, which was primarily targeted for this acquisition. Acacia Research raised gross proceeds of $3.65 million in this private equity financing through the sale of 317,393 units, each unit consisting of one share of Acacia Research common stock and one three-year callable stock purchase warrant. ACACIA RESEARCH CORPORATION PRO FORMA BALANCE SHEET March 31, 1998 (Unaudited)
Pro Forma Historical Adjustmemts As Adjusted ------------ -------------- ------------- ASSETS Current assets Cash and cash equivalents $ 6,106,042 $ (2,500,000)(a) $ 3,606,042 Management fees and other receivables 52,856 52,856 Receivables from affiliates 27,084 27,084 Prepaid expenses 98,993 98,993 Income tax receivable 110,000 110,000 ----------- ------------ ----------- Total current assets 6,394,975 (2,500,000) 3,894,975 Equipment, furniture, and fixtures, net 235,943 235,943 Notes receivable, net 376,008 376,008 Investment in affiliates, at equity 1,552,305 2,500,000 (a) 4,052,305 Partnership interests, at equity 643,154 643,154 Patents, net of accumulated amortization 5,572,420 5,572,420 Goodwill, net of accumulated amortization 1,310,841 1,310,841 Organization costs, net of accumulated amortization 19,700 19,700 ----------- ------------ ----------- $16,105,346 $ 0 $16,105,346 ----------- ------------ ----------- ----------- ------------ ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 164,325 $ $ 164,325 Legal settlement payable 144,756 144,756 ----------- ------------ ----------- Total current liabilities 309,081 0 309,081 Notes payable, net of discount 1,162,000 1,162,000 ----------- ------------ ----------- Total liabilities 1,471,081 0 1,471,081 ----------- ------------ ----------- Minority interests 90,374 0 90,374 ----------- ------------ ----------- Stockholders' equity Common stock, no par value; 10,000,000 shares authorized; 3,965,580 shares issued and outstanding 17,957,774 17,957,774 Warrants to purchase commom stock 384,739 384,739 Accumulated deficit (3,703,322) (3,703,322) Note receivable secured by common stock (95,300) (95,300) ----------- ------------ ----------- Total stockholders' equity 14,543,891 0 14,543,891 ----------- ------------ ----------- $ 16,105,346 $ 0 $16,105,346 ----------- ------------ ----------- ----------- ------------ -----------
(a) To record Acacia Research's purchase of a 25% interest in Internet Software LLC in exchange for cash. ACACIA RESEARCH CORPORATION PRO FORMA STATEMENT OF OPERATIONS For the Three Months Ended March 31, 1998 (Unaudited)
Pro Forma Historical Adjustmemts As Adjusted ------------ -------------- ------------- Revenues Equity in earnings (losses) of affiliates $ 15,800 $ (155,553)(a) $ (139,753) Management fees 30,777 30,777 Interest income 16,189 16,189 ---------- ---------- ----------- Total revenues 62,766 (155,553) (92,787) ---------- ---------- ----------- Expenses Marketing, general, and administrative expenses 484,816 484,816 Research and development expenses 367,543 367,543 Amortization of patents and goodwill 383,284 383,284 Interest expense 604 604 ---------- ---------- ----------- Total expenses 1,236,247 0 1,236,247 ---------- ---------- ----------- Loss before income taxes and minority interests (1,173,481) (155,553) (1,329,034) Benefit for income taxes 0 0 0 ---------- ---------- ----------- Loss before minority interests (1,173,481) (155,553) (1,329,034) Minority interests (176,765) (176,765) ---------- ---------- ----------- Net loss $ (996,716) $ (155,553) $ (1,152,269) ---------- ---------- ----------- ---------- ---------- ----------- Loss per common share Basic ($0.30) ($0.35) Diluted ($0.30) ($0.35) Weighted average number of common and potential common shares outstanding used in computation of loss per share Basic 3,336,701 3,336,701 Diluted 3,336,701 3,336,701
(a) To record 25% equity in losses of Internet Software LLC; including amortization of the excess of investment over investor's share in the underlying net assets of investee over a five year period. ACACIA RESEARCH CORPORATION PRO FORMA STATEMENT OF OPERATIONS For the Year Ended December 31, 1997 (Unaudited)
Pro Forma Historical Adjustmemts As Adjusted ------------ -------------- ------------- Revenues Gain on sale of investments $ 49,475 $ $ 49,475 Equity in losses of affiliates (160,738) (165,970)(a) (326,708) Management fees 490,966 490,966 Interest income 52,075 52,075 ---------- ---------- --------- Total revenues 431,778 (165,970) 265,808 ---------- ---------- --------- Expenses Marketing, general, and administrative expenses 2,145,162 2,145,162 Research and development expenses 887,890 887,890 Amortization of patents and goodwill 459,147 459,147 Legal settlement expense 460,000 460,000 ---------- ---------- --------- Total expenses 3,952,199 0 3,952,199 ---------- ---------- --------- Loss before income taxes and minority interests (3,520,421) (165,970) (3,686,391) Benefit for income taxes (250,132) (250,132) ---------- ---------- --------- Loss before minority interests (3,270,289) (165,970) (3,436,259) Minority interests (410,910) (410,910) ---------- ---------- --------- Net loss $(2,859,379) $ (165,970) $ (3,025,349) ---------- ---------- --------- ---------- ---------- --------- Loss per common share Basic ($1.15) ($1.22) Diluted ($1.15) ($1.22) Weighted average number of common and potential common shares outstanding used in computation of loss per share Basic 2,481,143 2,481,143 Diluted 2,481,143 2,481,143
(a) To record 25% equity in losses of Internet Software LLC; including amortization of the excess of investment over investor's share in the underlying net assets of investee over a five year period. -----END PRIVACY-ENHANCED MESSAGE-----