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Registration No. 333-39415
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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
(626) 449-6431
(Address, including zip code, and telephone number,
including area code, of Registrants' principal executive offices)
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KATHRYN KING-VAN WIE, CHIEF OPERATING OFFICER
ACACIA RESEARCH CORPORATION
12 SOUTH RAYMOND AVENUE
PASADENA, CALIFORNIA 91105
(626) 449-6431
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES OF COMMUNICATIONS TO:
THOMAS J. LEARY, ESQ.
O'MELVENY & MYERS LLP
400 SOUTH HOPE STREET
LOS ANGELES, CALIFORNIA 90071-2899
(213) 669-6000
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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
<TABLE>
<CAPTION>
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NUMBER OF SECURITIES PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF OF EACH CLASS TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SECURITY(2) PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, no par value per share 826,400 $9.625(3) $7,954,100 $2,411.00(4)
51,870 $7.6875(5) $ 398,751 $ 121.00
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</TABLE>
(1) 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, an 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.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) 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.
(4) Previously paid.
(5) 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 November 24, 1997.
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.
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PROSPECTUS
ACACIA RESEARCH CORPORATION
878,270 Shares of
Common Stock
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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 878,270 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 297,870 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 November 24,
1997, as reported by Nasdaq, was $7.75 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 26, 1997.
<PAGE>
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 September 30, 1997; (h) Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997; (i) Current Report on Form 8-K filed April 29,
1997; (j) Current Report on Form 8-K filed July 21, 1997; (k) Amendment to
Current Report on Form 8-K filed July 21, 1997; (l) Amendment No. 2 to Current
Report on Form 8-K filed July 21, 1997; (m) 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 (n) 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
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<PAGE>
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.
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<PAGE>
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-TM-, 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.
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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-TM-, will be for the Macintosh platform.
MerkWerks anticipates adapting this software for Microsoft-Registered
Trademark-Windows-TM- 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 (626) 449-6431.
5
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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-TM-.
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.
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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
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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 Although management of the Company has had
MONEY MANAGEMENT extensive experience in the investment
BUSINESS; PROFITABILITY industry, the Company itself is a recently
UNCERTAIN: 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 Company's operating results may vary
THE FUTURE RESULTS OF significantly from quarter to quarter due to
OPERATION OF THE a variety of factors including the amount of
COMPANY: 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 To date, Whitewing has experienced substantial
operating losses and its
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FUTURE RESULTS OF operating results have varied significantly
OPERATIONS OF THE from quarter to quarter due to a variety of
AFFILIATES: 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 Involvement in emerging companies is marked by a
EMERGING COMPANIES: 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 COMBIMATRIX. CombiMatrix was incorporated in
COMPANIES; LACK OF October 1995 and began operations in April 1996.
MARKET ACCEPTANCE OF CombiMatrix is developing technologies involving
PRODUCTS: 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
9
<PAGE>
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.
10
<PAGE>
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 CombiMatrix, MerkWerks, Greenwich Information
AFFILIATES: 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 To date, the Affiliates have primarily relied upon
ADDITIONAL CAPITAL; the sale of equity securities, including sales to
SUBSEQUENT FINANCINGS: 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; CombiMatrix, MerkWerks, Greenwich Information
NEED FOR MARKETING AND Technologies and Soundview Technologies have
SALES PERSONNEL: 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.
11
<PAGE>
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 The Company's success will depend on its ability
PERSONNEL; NEED TO RETAIN to attract, retain and motivate the qualified
PERSONNEL: 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'
12
<PAGE>
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 Competition in the investment markets and among
COMPANY'S MONEY providers of investment management services is
MANAGEMENT BUSINESS: 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 WHITEWING. The markets for Whitewing's products
AFFILIATES: 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
13
<PAGE>
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
14
<PAGE>
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 The markets for each Affiliate's products are also
TECHNOLOGICAL CHANGES marked by extensive competition, rapidly changing
AFFECTING THE AFFILIATES: 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 To date, the Company has relied upon the sale of
CAPITAL; SUBSEQUENT equity securities to generate the funds needed to
FINANCINGS: 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
15
<PAGE>
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 WHITEWING. The Company currently owns 532,459
CERTAIN AFFILIATES: 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 The level of management and performance fee
PERFORMANCE FEES: 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 As of June 30, 1997, the Company's had $504,389
PARTNERSHIP: 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
16
<PAGE>
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."
17
<PAGE>
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 297,870 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. Such funds,
when received by the Company, will be used for general corporate purposes.
The following table sets forth certain information with respect to the
beneficial ownership of shares of the Company's Common Stock by the Selling
Securityholders as of November 17, 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.
<TABLE>
<CAPTION>
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)
- ------------------------------- ------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Thomas B. Akin 40,000 40,000 0 0
All Points Management Trust(3) 66,625(4) 58,400 8,225(4) *
Dr. Brooke P. Anderson(5) 200,800(6) 2,000 198,800(6) 4.97%
Gary W. & Patricia M. Boyett 25,000 20,000 5,000 *
H. Lee Browne(7) 210,000(8) 10,000(8) 200,000 5.29%
Philip J. Chelsvig 10,000 10,000 0 0
Dr. M. Robert and Phyllis
Ching(9) 331,014(10) 80,000 251,014(10) 6.52%
Corsair Capital Partners, L.P. 40,000 40,000 0 0
Cruttenden Roth, Inc.(11) 100,000(11) 100,000 0 0
Michael Cunniff(12) 36,000(13) 36,000 0 0
Dennis R. Don 12,000 12,000 0 0
John D. Drake 140,000 40,000 100,000 2.64%
Stanley and Irene Farmer 28,000 10,000 18,000 *
Gerald E. Finnell and
Katherine E. Finnell Living
Trust 11,000 10,000 1,000 *
Fred F. Finocchiaro(14) 46,500(15) 46,500(15) 0 0
First Global Securities(16) 4,000(16) 4,000(16) 0 0
Bernard Freeman Irrevocable
Trust 75,000(17) 20,000 55,000(17) 1.45%
Norio Kotani 10,000 10,000 0 0
Ronald V. Krizek 11,000 10,000 1,000 *
David M. Lackey(18) 104,270(19) 26,770(19) 77,500(19) 2.05%
Helen T. Lackey(20) 7,500 5,000 2,500 *
Dr. Calvin Layland 12,000 4,000 8,000 *
18
<PAGE>
<CAPTION>
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)
- ------------------------------- ------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Calvin C. Layland, D.P.M.,
Inc. Profit Sharing Plan 4,000 4,000 0 0
Donald D. Montgomery(21) 12,200(22) 12,000(22) 200 *
Dominic Mortellaro 11,000 10,000 1,000 *
Morgan Fuller(23) 1,000(23) 1,000(23) 0 0
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(24) 133,000(25) 104,000 29,000 *
David Schmidt(26) 210,000(27) 10,000(27) 200,000 5.29%
Frederick L. Simmons 10,000 10,000 0 0
Southcoast Financial(28) 500(28) 500(28) 0 0
Jens Spitta 3,350 2,000 1,350 *
R. Bruce Stewart(29) 232,100(30) 4,000 228,100(30) 5.60%
Robert B. Stewart(31) 5,050(32) 2,050(32) 3,000 *
Thomas Stewart(33) 6,050(34) 2,050(34) 4,000 *
Wendell Strahan 35,000 10,000 25,000 *
John Tartaglione 8,000 8,000 0 0
Bennett Tremaine 43,500 20,000 23,500 *
Henri Richard 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: 878,270 Shares
</TABLE>
- ---------------------
* 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:
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK ISSUED IN 1997 SHARES UNDERLYING
SELLING SECURITYHOLDER PRIVATE PLACEMENT 1997 WARRANTS
------------------------------------------- ----------------------- -------------------
<S> <C> <C>
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. Finnell
Living Trust 5,000 5,000
Fred F. Finocchiaro 20,500 20,500
19
<PAGE>
<CAPTION>
<S> <C> <C>
First Global Securities 0 0
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 2,000 2,000
Donald D. Montgomery 1,000 1,000
Dominic Mortellaro 5,000 5,000
Morgan Fuller 0 0
Barry Neville 2,000 2,000
Northlea Partners, Ltd. 10,000 10,000
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
Southcoast Financial 0 0
Jens Spitta 1,000 1,000
R. Bruce Stewart 2,000 2,000
Robert B. Stewart 0 0
Thomas Stewart 0 0
Wendell Strahan 5,000 5,000
John Tartaglione 4,000 4,000
Bennett Tremaine 10,000 10,000
Henri Richard Vanyperen 5,000 5,000
Charles E. Wert 5,000 5,000
Robert E. Witt Trust 5,000 5,000
</TABLE>
(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) All Points Management Trust provides consulting services to the Company.
(4) Includes 2,225 shares which are subject to options exercisable at a price
of $4.40 per share, expiring August 31, 1999.
(5) 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.
(6) Includes shares which are subject to options as follows: (a) 25,000
shares, at an exercise price of $6.10 per share, expiring March 10, 2001;
(b) 20,000 shares, at an exercise price of $2.00 per share, expiring March
21, 1999; and (c) 100,000 shares, at an exercise price of $1.50 per share,
expiring July 29, 1998.
(7) Mr. Browne is a director and the President and Chief Executive Officer of
each of Greenwich Information Technologies and Soundview Technologies.
(8) 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 share figure
includes 10,000 shares which are subject to options exercisable at a
price of $5.38 per share, expiring March 21, 2001. These options vest in
2,500 share increments over a four year period, and become fully vested
on March 21, 2000. 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."
(9) Dr. Ching has provided consulting services to the Company.
20
<PAGE>
(10) Includes shares which are subject to options as follows: (a) 20,000
shares, at an exercise price of $1.50 per share, expiring March 21, 1999;
(b) 30,000 shares, at an exercise price of $2.50 per share, expiring August
31, 1999; (c) 5,000 shares, at an exercise price of $5.25 per share,
expiring October 13, 2000; (d) 5,000 shares, at an exercise price of $5.25
per share, expiring October 13, 2000; (e) 1,775 shares, at an exercise
price of $5.50 per share, expiring January 29, 2001; and (f) 3,750 shares,
at an exercise price of $7.00 per share, expiring August 8, 2001.
(11) 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 vest in 50,000 share increments
over two years, and expire on June 29, 2002.
(12) Mr. Cunniff from time to time provides consulting services to the Company.
(13) Includes shares which are subject to options as follows: (a) 12,000
shares, exercisable at a price of $5.00 per share, becoming fully vested on
November 1, 1997 and expiring on December 2, 1999; and (b) 24,000 shares,
exercisable at a price of $7.00 per share, becoming fully vested on
November 1, 1998 and expiring on July 1, 2000.
(14) Mr. Finocchiaro is a principal in the accounting firm of Finocchiaro &
Co., which served as independent auditors of the Company until April
1997.
(15) Includes warrants to purchase 5,500 shares at a price of $5.50 per share,
expiring on June 8, 2000. These warrants were issued as "finders warrants"
in connection with the 1997 Private Placement. See "Recent Developments."
(16) First Global Securities acted as a finder in connection with the 1997
Private Placement and, in such capacity, received "finders warrants" to
purchase the 4,000 shares reflected in the table at a price of $5.50 per
share. These warrants expire on June 8, 2000. See "Recent Developments."
(17) Includes shares which are subject to options as follows: (a) 2,000 shares,
exercisable at a price of $2.50 per share, expiring March 29, 1999, in the
name of Benjamin Freeman; (b) 4,000 shares, exercisable at a price of $2.50
per share, expiring March 29, 1999, in the name of Gordon Freeman; (c)
2,000 shares, exercisable at a price of $2.50 per share, expiring March 29,
1999, in the name of Heidi Freeman; and (d) 4,000 shares, exercisable at a
price of $2.50 per share, expiring March 29, 1999, in the name of Marc
Freeman.
(18) Mr. Lackey provides consulting services to the Company. Mr. Lackey also
acted as a finder in connection with the 1997 Private Placement. See
"Recent Developments."
(19) The share figures include: (a) 12,770 shares which are subject to
"finders warrants" issued in connection with the 1997 Private Placement
(see "Recent Developments"); and (b) 4,000 shares which are subject to
options exercisable at a price of $7.00 per share, becoming fully
vested on January 1, 1998 and expiring on July 1, 2000.
(20) Ms. Lackey is the mother of Mr. David Lackey.
(21) Dr. Montgomery is an officer of CombiMatrix.
(22) Includes 10,000 shares which are subject to options exercisable at a price
of $6.10 per share, vesting in 2,500 share increments over four years
(becoming fully vested on March 10, 2000) and expiring on March 10, 2001.
(23) Morgan Fuller acted as a finder in connection with the 1997 Private
Placement and, in such capacity, received "finders warrants" to purchase
the 1,000 shares reflected in the table at a price of $5.50 per share.
These warrants expire on June 8, 2000. See "Recent Developments."
(24) 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.
21
<PAGE>
(25) Includes 100,000 shares which are subject to warrants, exercisable at a
price of $2.00 per share, expiring January 1, 2000. Also includes 25,000
shares which are subject to options, exercisable at a price of $6.10 per
share, expiring March 10, 2001.
(26) Mr. Schmidt is a director and serves as a Vice President of Soundview
Technologies. See "Recent Developments."
(27) Includes 10,000 shares which are subject to options exercisable at a price
of $5.38 per share, vesting in 2,500 share increments over a four year
period, becoming fully vested on March 21, 2000 and expiring on March 21,
2001.
(28) Southcoast Financial acted as a finder in connection with the 1997 Private
Placement and, in such capacity, received "finders warrants" to purchase
the 500 shares reflected in the table at a price of $5.50 per share. These
warrants expire on June 8, 2000. See "Recent Developments."
(29) Bruce Stewart is the Chairman of the Board of Directors and serves as the
Chief Financial Officer of the Company. Bruce Stewart has previously
served as Chief Executive Officer of the Company. He is the father of
Robert and Thomas Stewart.
(30) Includes shares which are subject to options as follows: (a) 150,000
shares, exercisable at a price of $1.50 per share, expiring July 29, 1998;
(b) 40,000 shares, exercisable at a price of $2.00 per share, expiring
March 21, 1999; and (c) 25,000 shares, exercisable at a price of $6.10 per
share, expiring March 10, 2001.
(31) Robert B. Stewart has served as the Director of Marketing for the Company
since August 18, 1997, and also acted as a finder in connection with the
1997 Private Placement prior to his employment by the Company. See "Recent
Developments." Robert B. Stewart is the son of Bruce Stewart and the
brother of Thomas Stewart.
(32) Includes "finder warrants" to purchase 2,050 shares at a price of $5.50 per
share which were issued in connection with the 1997 Private Placement.
These warrants expire on June 8, 2000. See "Recent Developments."
(33) Thomas Stewart acted as a finder in connection with the 1997 Private
Placement. See "Recent Developments." Thomas Stewart is the son of Bruce
Stewart and the brother of Robert Stewart.
(34) Includes "finder warrants" to purchase 2,050 shares at a price of $5.50 per
share which were issued in connection with the 1997 Private Placement.
These warrants expire on June 8, 2000. See "Recent Developments."
22
<PAGE>
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 and warrants to
purchase an additional 20,500 shares of Common Stock at $7.50 per share and
an additional 5,500 shares of Common Stock at $5.50 per share. The shares
and warrants beneficially owned by Mr. Finocchiaro were issued in the 1997
Private Placement. See "Recent Developments." Mr. Finocchiaro is one of the
Selling Securityholders named in this Prospectus.
23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACACIA RESEARCH
CORPORATION
878,270 SHARES OF
COMMON STOCK
------------------
PROSPECTUS
------------------
November 26, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 . . . . . . . . . . . . . . . . . $ 2,531
Printing and engraving . . . . . . . . . . . . . . . . 2,000
Accounting fees and expenses . . . . . . . . . . . . . 1,000
Legal fees and expenses. . . . . . . . . . . . . . . . 10,000
Miscellaneous expenses . . . . . . . . . . . . . . . . 5,000
------
Total. . . . . . . . . . . . . . . . . . . . . $ 20,531
------------
------------
- --------------------
* 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.
II-1
<PAGE>
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
- ------------------
* Previously filed.
(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.
II-2
<PAGE>
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.
II-3
<PAGE>
(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.
II-4
<PAGE>
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 Amendment No. 1 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pasadena, State of California, on
November 25, 1997.
ACACIA RESEARCH CORPORATION
By /s/ Paul R. Ryan
----------------------------------------------------
Paul R. Ryan, President and Chief Executive Officer
<PAGE>
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 Officer November 25, 1997
- --------------------- and Director (Principal Executive
Paul R. Ryan Officer)
* Chief Financial Officer and November 25, 1997
- --------------------- Chairman of the Board (Principal
R. Bruce Stewart Financial and Accounting Officer)
* Vice President, Research and November 25, 1997
- --------------------- Development and Director
Brooke P. Anderson
* Director November 25, 1997
- ---------------------
Fred A. de Boom
* Director November 25, 1997
- ---------------------
Edward W. Frykman
- -------------------------
* By: /s/ Paul R. Ryan
Paul R. Ryan
ATTORNEY-IN-FACT
<PAGE>
FORM OF COMMON STOCK PURCHASE WARRANT
THIS SECURITY AND ANY SHARES ISSUED UPON EXERCISE OF THIS SECURITY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS THE APPLICABLE SECURITY HAS BEEN REGISTERED UNDER THE ACT AND
SUCH LAWS OR (1) REGISTRATION UNDER SUCH LAWS IS NOT REQUIRED AND (2) AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY IS FURNISHED TO THE COMPANY TO THE EFFECT
THAT REGISTRATION UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
ACACIA RESEARCH CORPORATION
WARRANT TO PURCHASE COMMON STOCK
This certifies that, for value received, _________________ ________ ("the
Holder") is entitled to subscribe for and purchase up to [_________] shares
(subject to adjustment from time to time pursuant to the provisions of Section 5
hereof) of fully paid and nonassessable Common Stock of Acacia Research
Corporation, a California corporation (the "Company"), at the price specified in
Section 2 hereof, as such price may be adjusted from time to time pursuant to
Section 5 hereof (the "Warrant Price"), subject to the provisions and upon the
terms and conditions hereinafter set forth.
As used herein, the term "Common Stock" shall mean the Company's presently
authorized Common Stock, no par value, and any stock into or for which such
Common Stock may hereafter be converted or exchanged.
This Warrant is issued pursuant to that certain Subscription Agreement
between the Holder and the Company dated June ___, 1997.
1. TERM OF WARRANT; CALLABILITY BY COMPANY.
The purchase right represented by this Warrant is exercisable, in whole or
in part, at any time during a period beginning on the date hereof and ending
June 8, 2000. However, during the three-year period, the Company will have the
right to redeem all of the Warrants 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 this 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
1
<PAGE>
the end of the 30-day period, the Company will mail a check for the redemption
price to the Holder of this Warrant should this Warrant remain outstanding in
whole or in part as of the end of the 30-day period, whether or not the Holder
has surrendered this Warrant for redemption. This Warrant may not be exercised
after the end of such 30-day period.
2. WARRANT PRICE.
The Warrant Price is $7.50 per share, subject to adjustment from time to
time pursuant to the provisions of Section 5 hereof.
3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
Subject to Section 1 hereof, the purchase right represented by this Warrant
may be exercised by the Holder, in whole or in part, by the surrender of this
Warrant (with the notice of exercise form attached hereto as EXHIBIT 1 duly
executed) at the principal office of the Company and by the payment to the
Company, by cashier's check or wire transfer, of an amount equal to the then
applicable Warrant Price per share multiplied by the number of shares then being
purchased. The Company agrees that the shares so purchased shall be deemed to
be issued to the Holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the Holder within 15 days thereafter and, unless
this Warrant has been fully exercised or expired, a new Warrant representing the
portion of the shares, if any, with respect to which this Warrant shall not then
have been exercised, shall also be issued to the Holder within such 15 day
period.
4. STOCK FULLY PAID; RESERVATION OF SHARES.
All Common Stock which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.
The kind of securities purchasable upon the exercise of this Warrant, the
Warrant Price and the number of shares purchasable upon exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of the
following events:
2
<PAGE>
(a) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any consolidation or merger of the Company with
or into another corporation, other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant, the Company, or such successor, as the case may be, shall execute
a new Warrant, providing that the Holder of this Warrant shall have the right to
exercise such new Warrant and procure upon such exercise, in lieu of each share
of Common Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change, consolidation, or merger by a Holder of one share
of Common Stock. Such new Warrant shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 5. The provisions of this subparagraph (a) shall similarly apply
to successive reclassification, changes, consolidations and mergers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, or distribute dividends on its Common Stock payable in Common
Stock, the Warrant Price shall be proportionately decreased in the case of a
subdivision or increased in the case of a combination or dividend.
(c) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price pursuant to any of subparagraphs (a)-(c) of this Section 5, the
number of shares of Common Stock purchasable hereunder shall be adjusted, to the
nearest whole share, to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
6. NOTICE OF ADJUSTMENTS.
Whenever any Warrant Price shall be adjusted pursuant to Section 5 hereof,
the Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares then purchasable upon exercise of this Warrant, and shall cause copies of
such certificate to be mailed (by first
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class mail, postage prepaid) to the Holder of this Warrant at the address
specified in Section 10(c) hereof, or at such other address as may be provided
to the Company in writing by the Holder of this Warrant.
7. FRACTIONAL SHARES.
No fractional shares of Common Stock will be issued in conjunction with any
exercise hereunder, but in lieu of such fractional shares the Company shall make
a cash payment therefore on the basis of the Warrant Price then in effect.
8. COMPLIANCE WITH SECURITIES ACT.
The Holder of this Warrant, by acceptance hereof, agrees that this Warrant
and the shares of Common Stock to be issued on exercise hereof are being
acquired for investment and that it will not offer, sell or otherwise dispose of
this Warrant or any shares of Common Stock to be issued upon exercise hereof
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"). This Warrant and all shares of
Common Stock issued upon exercise of this Warrant (unless registered under the
Act) shall be stamped and imprinted with a legend substantially in the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER
THE ACT AND SUCH LAWS OR (1) REGISTRATION UNDER SUCH LAWS IS NOT REQUIRED
AND (2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS FURNISHED TO
THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED."
9. TRANSFER AND EXCHANGE OF WARRANT.
This Warrant is not transferrable or exchangeable without the consent
of the Company.
10. MISCELLANEOUS.
(a) NO RIGHTS AS SHAREHOLDER. The Holder of this Warrant shall not
be entitled to vote or receive dividends or be deemed the Holder of Common Stock
or any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock,
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change of par value or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
(b) REPLACEMENT. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of loss, theft or destruction, on delivery of an indemnity
agreement, or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, on surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu of this Warrant, a
new Warrant of like tenor.
(c) NOTICE. Any notice given to either party under this Warrant
shall be in writing, and any notice hereunder shall be deemed to have been given
upon the earlier of delivery thereof by hand delivery, by courier, or by
standard form of telecommunication or three (3) business days after the mailing
thereof in the U.S. mail if sent registered mail with postage prepaid, addressed
to the Company at its principal executive offices and to the Holder at its
address set forth in the Company's books and records or at such other address as
the Holder may have provided to the Company in writing.
(d) GOVERNING LAW. This Warrant shall be governed by and construed
under the laws of the State of California.
This Warrant is executed as of this _____ day of June, 1997.
ACACIA RESEARCH CORPORATION
By:
---------------------------------------
Name:
Title:
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EXHIBIT 1
NOTICE OF EXERCISE
TO: ACACIA RESEARCH CORPORATION
1. The undersigned hereby elects to purchase ___________ shares of Common
Stock of Acacia Research Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the Holder at the address specified below:
----------------------------------
(Name)
----------------------------------
----------------------------------
(Address)
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
[NAME OF HOLDER]
-----------------------------------
-----------------------------------
Signature
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<PAGE>
November
25th
1 9 9 7
003,863-999
(213) 669-6000
Acacia Research Corporation
12 South Raymond Avenue
Pasadena, California 91105
Re: Registration on Form S-3 of Common Stock, no par value, of Acacia
Research Corporation (the "Company"), Registration No. 333-39415
------------------------------------------------------------------
Ladies and Gentlemen:
At your request, we have examined the above-referenced Registration
Statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission in connection with the registration under
the Securities Act of 1933, as amended, of an aggregate of 878,270 shares of
Common Stock, no par value, of the Company (the "Common Stock") to be sold by
certain security holders of the Company. Of the 878,270 shares of Common
Stock covered by the Registration Statement, 290,200 shares are presently
issued and outstanding (collectively, the "Issued Shares") and 588,070 shares
are issuable upon the exercise of certain stock options and warrants held by
the selling securityholders (collectively, the "Issuable Shares").
We are familiar with the proceedings heretofore taken in connection
with the authorization of (a) the issuance of the Issued Shares, and (b) the
issuance of the Issuable Shares upon exercise of the applicable stock options
and warrants. Based upon such examination and upon such matters of fact and law
as we have deemed relevant, we are of the opinion that:
1. The Issued Shares are validly issued, fully paid and
non-assessable.
<PAGE>
Page 2 - Acacia Research Corporation - November 25, 1997
2. Upon exercise of the applicable stock options or warrants and
payment of the applicable exercise prices in accordance with their
respective terms, and upon the issuance and delivery of certificates
representing the Issuable Shares and the countersigning of such
certificates by a duly authorized signatory of the registrar and transfer
agent for the Company's Common Stock, the Issuable Shares will be validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement.
Respectfully submitted,
/s/ O'MELVENY & MYERS LLP
