<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 19, 1997 (July 6, 1997)
ACACIA RESEARCH CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)
California 0-26068 95-4405754
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File (Employer Identification
incorporation) Number) No.)
12 South Raymond Avenue, Pasadena, California, 91105
----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number including area code: (818)449-6431
---------------
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address if changed since last report)
This Form 8-K/A, Amendment No. 1 is being filed for the purpose of filing the
financial statements and pro forma financial information required by Item 7 with
respect to the Current Report on Form 8-K filed by the registrant on July 21,
1997 regarding the acquisition of Soundview Technologies Incorporated
("Soundview").
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial information for Soundview for the periods from March 26, 1996
(inception) through June 30, 1997. Financial statements for the period
March 26, 1996 (inception) through December 31, 1996 have been audited.
(b) Pro forma financial information (Unaudited).
(c) Exhibits
2.1* Common Stock Purchase Agreement dated July 6, 1997, among Acacia
Research Corporation, H. Lee Browne and David H. Schmidt.
2.2* Form of Non-Recourse Promissory Note of Acacia Research Corporation in
favor of each of H. Lee Browne and David H. Schmidt.
2.3* Form of Pledge Agreement between Acacia Research Corporation and each
of H. Lee Browne and David H. Schmidt.
2.4* Amended and Restated Stockholders' Agreement among Acacia Research
Corporation, Soundview Technologies Incorporated, H. Lee Browne and
David H. Schmidt dated July 6, 1997.
2.5* Form of Employment Agreement between Soundview Technologies
Incorporated and each of H. Lee Browne and David H. Schmidt.
* Previously filed as an exhibit to Registrant's Form 8-K filed on
July 21, 1997
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACACIA RESEARCH CORPORATION
/s/ PAUL R. RYAN
By: Paul R. Ryan
President and Chief Executive Officer
DATED: September 18, 1997
<PAGE>
Financial Statements
SOUNDVIEW TECHNOLOGIES INCORPORATED
(A development stage enterprise)
For the Periods from March 26, 1996 (inception) through June 30, 1997
<PAGE>
Soundview Technologies Incorporated
(A development stage enterprise)
Table Of Contents
Report of Independent Accountants .......................................1
Financial Statements
Balance Sheet ......................................................2
Statement of Operations ............................................3
Statement of Stockholders' Equity ...................................4
Statement of Cash Flows ............................................5
Notes to Financial Statements .......................................6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Soundview
Technologies Incorporated
(A development stage enterprise)
In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity, and of cash flows present fairly, in all
material respects, the financial position of Soundview Technologies Incorporated
(A development stage enterprise) at December 31, 1996, and the results of its
operations and its cash flows for the period from March 26, 1996 (inception)
through December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Los Angeles, California
September 16, 1997
<PAGE>
<TABLE>
<CAPTION>
SOUNDVIEW TECHNOLOGIES INCORPORATED
(A development stage enterprise)
BALANCE SHEET
December 31, 1996 June 30, 1997
----------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 665,764 $ 368,396
Prepaid expenses 1,934
---------------- -------------
Total current assets 667,698 368,396
Equipment, furniture and fixtures, net 7,249 7,014
Patent, net of accumulated amortization of $2,179 and $6,515, respectively 73,951 89,547
Organization costs, net of accumulated amortization
of $3,445 and $6,245, respectively 24,565 21,764
---------------- -------------
Total assets $ 773,463 $ 486,721
---------------- -------------
---------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 36,063 $ 19,557
---------------- -------------
Total current liabilities 36,063 19,557
---------------- -------------
Commitments and contingencies
Stockholders' equity
Common stock, $0.001 par value, 75,000,000 shares authorized,
7,500,000 shares issued and outstanding 7,500 7,500
Additional paid-in capital 2,412,750 2,412,750
Deficit accumulated during development stage (1,682,850) (1,953,086)
---------------- -------------
Total stockholders' equity 737,400 467,164
---------------- -------------
Total liabilities and stockholders' equity $ 773,463 $ 486,721
---------------- -------------
---------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
2
<PAGE>
SOUNDVIEW TECHNOLOGIES INCORPORATED
(A development stage enterprise)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Mar. 26, 1996 Mar. 26, 1996 Mar. 26, 1996
(inception) (inception) (inception)
through through Six months ended through
Dec. 31, 1996 Jun. 30, 1996 Jun. 30, 1997 Jun. 30, 1997
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest income $ 26,007 $ 7,167 $ 12,181 $ 38,188
------------- ------------- ------------- -------------
Total revenues 26,007 7,167 12,181 38,188
------------- ------------- ------------- -------------
Marketing, general & administrative expenses 1,548,311 1,456,623 149,582 1,697,893
Research and development expenses (including
$37,000 paid to a related party in the
period ending December 31, 1996) 160,546 80,806 132,835 293,381
------------- ------------- ------------- -------------
Total expenses 1,708,857 1,537,429 282,417 1,991,274
------------- ------------- ------------- -------------
Net loss $(1,682,850) $(1,530,262) $(270,236) $(1,953,086)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
SOUNDVIEW TECHNOLOGIES INCORPORATED
(A development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Deficit
--------------------------------------- Accumulated
Add'l Paid-in During Development
Shares Par Value Capital Stage Total
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1996
Stockholders' equity at March 26, 1996 0 $ 0 $ 0 $ 0 $ 0
Common stock issued for patent/royalty rights
contributed by stockholders 5,100,000 5,100 (5,100)
Common stock issued in private placement 1,000,000 1,000 999,000 1,000,000
Common stock issued for management services 1,400,000 1,400 1,398,600 1,400,000
Fair value of options granted for consulting services 20,250 20,250
Net loss (1,682,850) (1,682,850)
---------- ---------- ---------- ----------- -----------
Stockholders' equity at December 31, 1996 7,500,000 7,500 2,412,750 (1,682,850) 737,400
1997
Net loss (270,236) (270,236)
---------- ---------- ---------- ----------- -----------
Stockholders' equity at June 30, 1997 (unaudited) 7,500,000 $ 7,500 $2,412,750 $(1,953,086) $ 467,164
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANACIAL STATEMENTS
4
<PAGE>
SOUNDVIEW TECHNOLOGIES INCORPORATED
(A development stage enterprise)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Mar. 26, 1996 Mar. 26, 1996 Mar. 26, 1996
(inception) (inception) (inception)
through through Six months ended through
Dec. 31, 1996 Jun. 30, 1996 Jun. 30, 1997 Jun. 30, 1997
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,682,850) $(1,530,262) $(270,236) $(1,953,086)
Depreciation and amortization 6,189 1,335 7,928 14,117
Non-cash management services 1,400,000 1,400,000 1,400,000
Non-cash consulting services 20,250 20,250 20,250
Net change in assets and liabilities:
(Increase) decrease in prepaid expenses (1,934) 1,934
Increase (decrease) in accounts payable 36,063 58,743 (16,506) 19,557
----------- ----------- --------- -----------
Net cash used in operating activities (222,282) (49,934) (276,880) (499,162)
----------- ----------- --------- -----------
Cash flows from investing activities:
Development of patents (76,130) (47,675) (19,932) (96,062)
Organization costs (28,011) (22,111) (28,011)
Purchase of equipment, furniture and fixtures (7,813) (1,200) (556) (8,369)
----------- ----------- --------- -----------
Net cash used in investing activities (111,954) (70,986) (20,488) (132,442)
----------- ----------- --------- -----------
Cash flows from financing activities:
Issuance of common stock in private placement 1,000,000 1,000,000 1,000,000
----------- ----------- --------- -----------
Net cash provided by financing activities 1,000,000 1,000,000 1,000,000
----------- ----------- --------- -----------
Net increase (decrease) in cash and cash equivalents 665,764 879,080 (297,368) 368,396
Cash and cash equivalents at beginning of period 665,764
----------- ----------- --------- -----------
Cash and cash equivalents at end of period $ 665,764 879,080 $ 368,396 $ 368,396
----------- ----------- --------- -----------
----------- ----------- --------- -----------
Supplemental cash flow information:
Non-cash financing activities:
Shares of common stock issued for management services $ 1,400,000 $ 1,400,000 $ 1,400,000
----------- ----------- --------- -----------
----------- ----------- --------- -----------
Fair value of options granted to purchase shares of
common stock issued for consulting services $ 20,250 $ 20,250 $ 20,250
----------- ----------- --------- -----------
----------- ----------- --------- -----------
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
SOUNDVIEW TECHNOLOGIES INCORPORATED (A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
1. DEVELOPMENT STAGE COMPANY
Soundview Technologies Incorporated (the "Company") was incorporated on
March 26, 1996 under the laws of the State of Delaware, with offices in the
State of Connecticut. The Company is a development stage enterprise and
owns intellectual property related to the telecommunications field, which
includes audio and video blanking systems, also known as V-chip technology.
V-chip technology will allow viewers to block television programs that,
based on information provided by a common rating system, they believe to be
inappropriate. The Company 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. The Company will pursue business
opportunities with television manufacturers, chip manufacturers, and/or
television accessory companies about efficient and cost-effective methods
of commercializing its technology.
The Company is a development stage enterprise and has incurred losses since
its inception. At December 31, 1996, the Company had stockholders' equity
of $737,400 and a deficit accumulated during the development stage of
$1,682,850. Success of future operations is dependent upon, among other
things, approval of a television rating system by the Federal
Communications Commission and the Company's ability to successfully market
its technology, which may require the Company to obtain additional capital.
The Company expects to continue to incur losses for the foreseeable future
due to anticipated costs to be incurred in the development, manufacturing,
and marketing of its technology.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
instruments purchased with a maturity of three months or less to be cash
equivalents.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are recorded
at cost. Depreciation is computed on a straight-line basis over the
estimated life of the assets, which is estimated to be approximately five
years.
PATENTS AND TRADEMARKS - Patents and trademarks consist of payments made
for the purpose of obtaining patents and trademarks on certain intellectual
property rights. At December 31, 1996, the Company owned one issued patent
which will expire on November 18, 2002. The issued patent is amortized
over its estimated remaining useful life of approximately six years. The
Company also has several patent applications and trademark applications
pending approval; no amounts have been amortized with respect to these
costs.
ORGANIZATION COSTS - Organization costs consist of payments made in order
to form and organize the company and are amortized over their estimated
useful lives of five years.
INCOME TAXES - Temporary differences giving rise to deferred tax assets or
liabilities consist primarily of depreciation differences and net operating
loss and credit carryforwards. A valuation allowance has been set up for
the tax benefits from net operating loss and credit carryforwards due to
the uncertainty of their realization.
RESEARCH AND DEVELOPMENT - Costs for research and development efforts are
charged to operations when incurred.
UNAUDITED INTERIM INFORMATION - The information presented as of June 30,
1997, and for the interim periods ended June 30, 1997 and 1996 and the
period from March 26, 1996 (inception) through June 30, 1997 has not been
audited. In the opinion of management, the unaudited interim statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the results for the interim periods presented.
The information disclosed in the notes to the financial statements as of
such dates and for such periods are also unaudited.
6
<PAGE>
SOUNDVIEW TECHNOLOGIES INCORPORATED (A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments
include cash and cash equivalents and accounts payable. The carrying value
of these financial instruments approximates fair value due to their
short-term nature.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
3. EQUIPMENT, FURNITURE AND FIXTURES
Equipment, furniture and fixtures, net consist of the following at December
31, 1996:
Computer equipment $ 7,596
Furniture and fixtures 217
---------
7,813
Accumulated depreciation (564)
---------
$ 7,249
---------
---------
4. COMMITMENTS AND CONTINGENCIES
The Company leases office space at two locations in Connecticut on a
month-to-month basis at an aggregate of $2,300 per month. During the
period from March 26, 1996 (inception) through December 31, 1996, rental
expense was $20,700.
The Company has a consulting agreement with an individual, who is also the
co-inventor of the issued patent owned by the Company. Pursuant to this
agreement, the individual received an initial fee of $25,000 and is paid
$4,000 per quarter, plus pre-approved out-of-pocket expenses. This
agreement terminates on September 30, 1997. During the period from March
26, 1996 (inception) to December 31, 1996, $37,000 was paid under this
agreement and charged to research and development expenses in the
accompanying statement of operations.
5. STOCK OPTIONS
During 1996, the Company granted options to purchase 125,000 shares of the
Company's common stock at an exercise price of $0.50 for consulting
services to an individual who is a director of the Company. These options
vest on a quarterly basis over a five year period and expire on the third
anniversary of the date of each vested installment.
The Company accounts for these options under the fair value method and has
recorded a charge of $20,250 for the period from March 26, 1996 (inception)
to December 31, 1996 in the accompanying statement of operations. The fair
value of these options was estimated using the Black-Scholes options
pricing model with the following weighted average assumptions: dividend
yields of zero percent, expected volatility of 50%, risk-free interest
rates of 5.88% and expected life for each vested portion of three years
from the date of vesting. The weighted average fair value of options
granted during 1996 was $0.64. During 1996, the Company also agreed to
grant an option to purchase 250,000 shares upon satisfaction of certain
events to occur through the efforts of the consultant, with one such event
having a target completion date. Should all criteria be met, the option to
purchase 250,000 shares would be granted at an exercise price to be
determined and exercisable on the date of such satisfaction, expiring on
the third anniversary of such date.
7
<PAGE>
SOUNDVIEW TECHNOLOGIES INCORPORATED (A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
5. STOCK OPTIONS (continued)
The following is a summary of the Company's common stock options activity:
Shares Prices
-------------------------------------------------------
Balance at March 26, 1996 0 $ --
Options granted 125,000 $0.50
-------------------------------------------------------
Balance at December 31, 1996 125,000 $0.50
-------------------------------------------------------
-------------------------------------------------------
Exercisable at December 31, 1996 18,750 $0.50
-------------------------------------------------------
-------------------------------------------------------
Balance at June 30, 1997 125,000 $0.50
-------------------------------------------------------
-------------------------------------------------------
Exercisable at June 30, 1997 31,250 $0.50
-------------------------------------------------------
-------------------------------------------------------
In July 1997, the option to purchase the unvested portions of the 125,000
shares of common stock was cancelled in connection with a change in the
Company's business strategy. In April 1997, the conditional agreement
to grant an option to purchase 250,000 shares expired. Therefore, after
these adjustments, the Company has a balance of outstanding options to
purchase 31,250 shares of the Company's common stock at an exercise price
of $0.50 per share at August 31, 1997.
6. INCOME TAXES
The temporary differences and carryforwards that give rise to the Company's
net deferred tax assets at December 31, 1996 of $732,757 were subject to a
full valuation allowance because their realization is uncertain. The
primary components of the deferred tax assets consisted of net operating
losses and research and development credit carryforwards.
At December 31, 1996, the Company has federal and state net operating loss
carryforwards of $1,682,850, which will, if unused, expire in the years
2011, and 2001, respectively. At December 31, 1996, the Company also had
federal and state research and development credit carryforwards of $4,083
and $6,282, respectively, which will expire in the year 2011 for federal
purposes and is unlimited for state purposes.
Utilization of the net operating loss and the credit carryforwards may be
subject to an annual limitation if a change in the Company's ownership
should occur as defined in Section 382 of the Internal Revenue Code.
7. RELATED PARTY TRANSACTIONS
Acacia Research Corporation was paid $1,400,000 by the Company in 1996
through the issuance of 1,400,000 shares of the Company's common stock for
providing management and consulting services, including assisting the
Company in raising $1,000,000 through the sale of the Company's common
stock at $1.00 per share. As a result of this transaction, Acacia
Research Corporation became a significant shareholder of the Company.
Upon formation, the Company issued 5,100,000 shares of common stock to
certain shareholders in exchange for patent and future royalty rights. As
a result of these shareholders having a controlling interest, no value, in
addition to par value, was attributed to these shares.
8
<PAGE>
SOUNDVIEW TECHNOLOGIES INCORPORATED (A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
7. RELATED PARTY TRANSACTIONS (continued)
Two directors of the Company currently provide consulting services to the
Company. One of these individuals, who is also the co-inventor of the
issued patent owned by the Company, received an initial fee of $25,000 and
is paid $4,000 per quarter, plus pre-approved out-of-pocket expenses. This
agreement terminates on September 30, 1997. During the period from March
26, 1996 (inception) to December 31, 1996, $37,000 was paid under this
agreement and charged to research and development expenses in the
accompanying statement of operations. The second individual was granted
options as described in Note 5 and was paid $6,000 per quarter, plus
pre-approved out-of-pocket expenses during the period March 26, 1996
(inception) through December 31, 1996. This agreement was revised in April
1997 to provide for payments based on work performed on an "as needed"
basis at the rate indicated in the agreement. During the period from March
26, 1996 (inception) to December 31, 1996, $18,000 was paid under the
agreement and included in marketing, general and administrative expenses in
the accompanying statement of operations.
8. SUBSEQUENT EVENT
On July 6, 1997, Acacia Research Corporation purchased additional shares of
common stock of the Company from other stockholders. This purchase
increased Acacia Research Corporation's ownership interest in the Company's
common stock to a total of 51.4%.
9
<PAGE>
ACACIA RESEARCH CORPORATION
Pro Forma Financial Information
(Unaudited)
The following pro forma financial statements reflect the acquisition by
Acacia Research Corporation ("Acacia Research") on July 6, 1997 of 2,625,000
shares or 35 percent of the outstanding capital stock of Soundview
Technologies Incorporated ("Soundview") increasing Acacia Research's
interest in Soundview to 51.4 percent. The purchase price for the Soundview
Shares consisted of a total of 400,000 shares of common stock of Registrant,
$500,000 in cash and the issuance of non-recourse promissory notes in the
aggregate principal amount of $900,000. The acquisition has been accounted
for under the purchase method of accounting.
The unaudited pro forma combined balance sheet at June 30, 1997 gives effect
to the acquisition of Soundview assuming the transaction was consummated as
of June 30, 1997. The unaudited pro forma combined statements of operations
for the period ended December 31, 1996 and the six months ended June
30, 1997 give effect to the acquisition of Soundview assuming the transaction
was consummated as of the beginning of the periods presented.
The Company has not finalized its purchase price allocations. Accordingly,
the final consolidated amounts may differ from those set forth herein.
The unaudited pro forma combined statements of operations are not necessarily
indicative of the operating results that would have been achieved had the
acquisition been consummated as presented; and should not be construed as
representative of future operating results. The pro forma financial
statements should also be read in conjunction with Acacia Research's
consolidated financial statements and notes set forth in the Report on Form
10-K/A for the year ended December 31, 1996.
10
<PAGE>
ACACIA RESEARCH CORPORATION
Pro Forma Condensed Combined Balance Sheet
<TABLE>
<CAPTION>
June 30, 1997 Acacia Research
(Unaudited) Acacia Research Soundview Pro Forma and Soundview
June 30, 1997 June 30, 1997 Adjustments Combined
--------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,808,614 $ 368,396 $ (500,000)(a) $ 1,677,010
Distributions receivable 0 0 0 0
Notes receivable 799,500 0 0 799,500
Other receivables 192,277 0 0 192,277
Prepaid expenses 155,265 0 0 155,265
Deferred tax benefit 0 0 0 0
--------------- ------------- ----------- -------------
Total current assets 2,955,656 368,396 (500,000) 2,824,052
Equipment, furniture and fixtures 206,839 7,014 0 213,853
Other assets
Investments in unconsolidated subsidiaries, at equity 1,283,635 0 0 1,283,635
Investment in unconsolidated subsidiary, at cost 1,233,000 0 (1,233,000)(b) 0
Partnership interests, at equity 504,389 0 0 504,389
Deferred tax benefit 127,660 0 0 127,660
Patent, net of accumulated amortization 0 89,547 3,966,910 (a) 4,056,457
Goodwill 703,619 (a) 703,619
Organization costs, net of accumulated amortization 2,842 21,764 0 24,606
--------------- ------------- ----------- -------------
Total assets $ 6,314,021 $ 486,721 $ 2,937,530 $ 9,738,271
--------------- ------------- ----------- -------------
--------------- ------------- ----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 113,708 $ 19,557 $ 0 $ 133,265
Legal settlement payable 435,000 0 0 435,000
Note payable 375,000 0 900,000 (a) 1,275,000
--------------- ------------- ----------- -------------
Total current liabilities 923,708 19,557 900,000 1,843,265
Deferred tax liability 150,996 0 0 150,996
--------------- ------------- ----------- -------------
Total liabilities 1,074,704 19,557 900,000 1,994,261
--------------- ------------- ----------- -------------
Commitments and contingencies
Minority interest 410,360 0 0 410,360
--------------- ------------- ----------- -------------
Stockholders' equity
Common stock 5,528,087 7,500 2,817,500 (a) 8,353,087
Additional paid-in capital 0 2,412,750 (2,412,750)(b) 0
(Accumulated deficit) retained earnings (667,639) (1,953,086) 1,632,780 (b) (987,945)
Less stock subscription receivable (31,492) 0 0 (31,492)
--------------- ------------- ----------- -------------
Total stockholders' equity 4,828,957 467,164 2,037,530 7,333,650
--------------- ------------- ----------- -------------
Total liabilities and stockholders' equity $ 6,314,021 $ 486,721 $ 2,937,530 $ 9,738,271
--------------- ------------- ----------- -------------
--------------- ------------- ----------- -------------
</TABLE>
(a) To record purchase by Acacia Research of Soundview shares in exchange for
cash, notes payable and issuance of Acacia Research common stock.
(b) To eliminate investment in Soundview and related party accounts.
11
<PAGE>
ACACIA RESEARCH CORPORATION
Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Acacia Research
Pro Forma and Soundview
Acacia Research Soundview Adjustments Combined
--------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Revenues
Gains on sales of securities, net $ 50,000 $ 0 $ 0 $ 50,000
Gain on issuance of stock by equity investee 0 0 0 0
Losses in earnings of investees (98,993) 0 0 (98,993)
Management fees 340,547 0 0 340,547
Interest income 20,332 12,181 0 32,513
--------------- ------------- ----------- -------------
Total revenues 311,886 12,181 0 324,067
--------------- ------------- ----------- -------------
Marketing, general, and administrative expenses 1,229,678 149,582 467,053 (b) 1,846,313
Research and development expenses 0 132,835 0 132,835
Interest expense 0 0 27,315 (c) 27,315
Legal settlement expense 460,000 0 0 460,000
--------------- ------------- ----------- -------------
Total expenses 1,689,678 282,417 (494,368) 2,466,463
--------------- ------------- ----------- -------------
Loss before minority interest and taxes (1,377,792) (270,236) (494,368) (2,142,396)
Minority interest in net loss of consolidated subsidiary (113,626) 0 0 (113,626)
--------------- ------------- ----------- -------------
Income (loss) before provision for income taxes (1,264,166) (270,236) (494,368) (2,028,770)
Benefit for income taxes (167,767) 0 0 (167,767)
--------------- ------------- ----------- -------------
Net (loss) income $ (1,096,399) $ (270,236) $(494,368) $ (1,861,003)
--------------- ------------- ----------- -------------
--------------- ------------- ----------- -------------
Loss per common share
Primary ($0.53) ($0.76)
Fully diluted ($0.53) ($0.76)
Weighted average number of common and common
equivalent shares for computation of loss per share
Primary 2,063,862 2,463,862
Fully diluted 2,063,862 2,463,862
</TABLE>
(a) To eliminate management services fees paid by Soundview to Acacia Research.
(b) To record amortization expense relating to patents and goodwill.
(c) To record interest expense relating to notes payable issued in connection
with the purchase of Soundview common stock.
12
<PAGE>
ACACIA RESEARCH CORPORATION
Pro Forma Condensed Combined Statement of Operations
For the Period Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Acacia Research
Pro Forma and Soundview
Acacia Research Soundview Adjustments Combined
--------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues
Gains on sales of securities, net $ 876,499 $ 0 $ 0 $ 876,499
Gain on issuance of stock by equity investee 1,066,408 0 0 1,066,408
Losses in earnings of investments (175,689) 0 0 (175,689)
Management fees 1,458,078 0 (1,400,000)(a) 58,078
Interest income 113,049 26,007 0 139,056
-------------- -------------- -------------- --------------
Total revenues 3,338,345 26,007 (1,400,000) 1,964,352
-------------- -------------- -------------- --------------
Marketing, general, and administrative expenses 2,640,504 1,548,311 (699,421)(a)(b) 2,747,843
Research and development expenses 0 160,546 0 160,546
Interest expense 0 0 40,972 (c) 40,972
-------------- -------------- -------------- --------------
Total expenses 2,640,504 1,708,857 (658,449) 3,690,912
-------------- -------------- -------------- --------------
Income (loss) before minority interest and taxes 697,841 (1,682,850) (741,551) (1,726,560)
Minority interest in net loss of consolidated subsidiary (201,309) 0 0 (201,309)
-------------- -------------- -------------- --------------
Income (loss) before provision for income taxes 899,150 (1,682,850) (741,551) (1,525,251)
Provision for income taxes 606,141 0 0 606,141
-------------- -------------- -------------- --------------
Net income (loss) $ 293,009 $ (1,682,850) $ (741,551) $(2,131,392)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Earnings (loss) per common share
Primary $0.11 ($0.96)
Fully diluted $0.11 ($0.96)
Weighted average number of common and common
equivalent shares for computation of earnings (loss) per share
Primary 2,680,433 2,219,846
Fully diluted 2,680,433 2,219,846
</TABLE>
(a) To eliminate management services fees paid by Soundview to Acacia Research.
(b) To record amortization expense relating to patents and goodwill.
(c) To record interest expense relating to notes payable issued in connection
with the purchase of Soundview common stock.
13
