ACACIA RESEARCH CORP, S-3/A, 2000-02-07

ACACIA RESEARCH CORP
S-3/A, 2000-02-07
INVESTMENT ADVICE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 2000

REGISTRATION NO. 333-95373

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 1
TO
FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------

ACACIA RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)

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<S> <C>
DELAWARE 95-4405754
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or organization)
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55 SOUTH LAKE AVENUE, PASADENA, CALIFORNIA 91101
(626) 396-8300
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)
--------------------------

KATHRYN KING-VAN WIE, CHIEF OPERATING OFFICER
ACACIA RESEARCH CORPORATION
55 SOUTH LAKE AVENUE
PASADENA, CALIFORNIA 91101
(626) 396-8300
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
--------------------------

COPIES OF COMMUNICATIONS TO:
D. STEPHEN ANTION
O'Melveny & Myers LLP
1999 Avenue of the Stars
7th Floor
Los Angeles, California 90067-6035
(310) 553-6700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AT SUCH TIME OR TIMES ON AND AFTER THE DATE ON WHICH THIS REGISTRATION STATEMENT
BECOMES EFFECTIVE AS THE SELLING SECURITYHOLDERS MAY DETERMINE.
--------------------------

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, as amended (the "Securities Act") 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. / /
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF CLASS TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SECURITY(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value per share 2,345,116 $51.25(3) $120,187,195(3) $31,729.42(4)
</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, an indeterminate number of
shares of Common Stock as may be issued from time to time upon exercise of
such warrants and options by reason of adjustment of the number of shares of
Common Stock to be issued upon such exercises under certain circumstances
outlined.
(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 January 20, 2000.

(4) Previously paid.

------------------------------

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, 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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THE INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND
MAY BE CHANGED. THE SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES
PURSUANT TO THIS PROSPECTUS UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED FEBRUARY 7, 2000.

PROSPECTUS

ACACIA RESEARCH CORPORATION

2,345,116 SHARES OF

COMMON STOCK

----------------

Selling Securityholders who are identified in this prospectus may offer and
sell from time to time up to 2,345,116 shares of common stock of Acacia Research
Corporation by using this prospectus.

The offering price for the common stock may be the market price for our
common stock prevailing at the time of sale, a price related to the prevailing
market price, at negotiated prices or such other price as the Selling
Securityholders determine from time to time.

Acacia Research Corporation's common stock is traded on the Nasdaq National
Market under the ticker symbol "ACRI". On February 4, 2000, the closing sale
price of the common stock, as reported by Nasdaq, was $43.125 per share.

------------------------

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD ACQUIRE THESE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7 OF THIS PROSPECTUS.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is February ___, 2000.

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TABLE OF CONTENTS

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PAGE
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Forward-Looking Statements.................................. 2
The Company................................................. 3
Recent Developments......................................... 5
Risk Factors................................................ 7
Use of Proceeds............................................. 16
Selling Securityholders..................................... 16
Plan of Distribution........................................ 20
Legal Matters............................................... 20
Experts..................................................... 20
Available Information....................................... 21
Incorporation of Certain Documents by Reference............. 21
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FORWARD-LOOKING STATEMENTS

This prospectus and the documents it incorporates by reference contain
forward-looking statements. Forward-looking statements relate to future periods
and include descriptions of our plans, objectives, and underlying assumptions
for future operations, our market opportunities, our acquisition opportunities,
and our ability to compete.

Generally, "may," "will," "expect," "believe," "estimate," "anticipate,"
"intend," "continue" and similar words identify forward-looking statements.
Forward-looking statements are based on our current expectations and are subject
to risks and uncertainties that can cause actual results to differ materially.
For information on these risks and uncertainties, see the "Risk Factors."

We urge you to consider these factors carefully in evaluating the
forward-looking statements contained in this prospectus. Forward-looking
statements are made only as of the date of this prospectus. We do not intend,
and undertake no obligation, to update these forward-looking statements.

As used in this prospectus, "Company," "we," "us" and "our" refer to Acacia
Research Corporation and its affiliates.

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION ABOUT THIS OFFERING. IT
LIKELY DOES NOT INCLUDE ALL THE INFORMATION THAT IS IMPORTANT TO YOU AND SHOULD
BE READ IN CONJUNCTION WITH THE MORE DETAILED INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD ALSO
CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS."

THE COMPANY

We internally develop and operate majority-owned subsidiaries and also
acquire strategic positions in other entities. Through our consolidated
subsidiaries, we engage in a variety of technology-related businesses such as:
Internet business incubation, biochips, software development, Internet music and
e-commerce, and v-chip technology licensing. We provide business and technology
infrastructure services and ongoing operational support to assist early-stage
companies progress quickly. (See "Risk Factors--Risks Associated with the
Emerging Companies and No Assurance of Success.")

Our current majority-owned subsidiaries are:

- ACACIA LAUNCHPAD LLC ("Launchpad") which was formed in November 1999 to
incubate and accelerate the development of new Internet companies.
Launchpad will provide seed capital and an environment that enables ideas
to grow and get to market quickly. Once a company is past the incubation
stage, we can provide additional funding through direct investments and
capital secured from other strategic venture investors as well as ongoing
operational support. Launchpad is a newly formed entity and is in the
process of commencing operations. We own 100% of the membership interest
of Launchpad.

- COMBIMATRIX CORPORATION ("CombiMatrix") which was formed in October 1995
and is developing a proprietary method to synthesize DNA, peptides and
chemical libraries on an active semiconductor chip with electrochemically
generated reagents. CombiMatrix is a developmental stage company and, to
date, has incurred substantial losses and has not generated any
significant revenues. We own 50% of the outstanding common stock of
CombiMatrix.

- MERKWERKS CORPORATION ("MerkWerks") which was formed in September 1995 and
is currently developing a utility software product for use with
CD-Recordable, or CD-R, computer drives. To date, MerkWerks is in a
development stage, has incurred substantial losses and has not had any
revenues. We own 99.9% of the outstanding common stock of MerkWerks.

- SOUNDBREAK.COM INCORPORATED ("Soundbreak") which was formed in May 1999
and is preparing for the launch of its lifestyle Internet site that will
combine a 24-hour worldwide webcast highlighting new music hosted by
on-air DJs with rich graphics, a music merchandise store, a strong
community area that encourages participation and feedback, and other
features. Soundbreak has incurred substantial losses and has not had any
revenues to date. We own 73.6% of the common stock, on an as-converted
basis, of Soundbreak.

- SOUNDVIEW TECHNOLOGIES INCORPORATED ("Soundview Technologies") which was
formed in March 1996 and owns intellectual property related to the
telecommunications field, including audio and video blanking systems, also
known as "V-chip" technology. Soundview Technologies intends to license
its technology to television manufacturers. Soundview Technologies has
incurred losses and has not had any revenues to date. Soundview
Technologies has yet to enter into licensing agreements with any
television manufacturers. We own 66.7% of the outstanding common stock of
Soundview Technologies.

We also make investments in other businesses that we do not control. Our
current minority-owned affiliates are:

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- GREENWICH INFORMATION TECHNOLOGIES LLC ("Greenwich Information
Technologies") which was formed in June 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. We own 33.3% of the membership interest of Greenwich
Information Technologies.

- MEDIACONNEX COMMUNICATIONS, INC. ("Mediaconnex") which was formed in
November 1999 as a business-to-business e-commerce company focused on the
$90 billion advertising market. We acquired our interest in Mediaconnex in
December 1999. To date, Mediaconnex has incurred losses and has not
generated any revenues. We own 31% of the common stock equity of
Mediaconnex on an as-converted basis.

- SIGNATURE-MAIL.COM LLC ("Signature-mail") which was formed in October 1997
to develop an on-demand software service that allows users to personalize
their e-mail and computer documents with handwritten signatures,
greetings, and drawings. We acquired our interest in Signature-mail in
April 1998. To date, Signature-mail has incurred losses and has not
generated any meaningful revenues. We own 25% of the membership interest
of Signature-mail.

- THE EC COMPANY. ("EC Company") which was formed in 1997 and is a leader in
business-to-business Internet exchange transactions for mid-market
suppliers. We acquired our interest in EC Company in December 1999. To
date, Mediaconnex has incurred losses and has not generated any revenues.
We own a 7.6% interest in EC Company.

- WHITEWING LABS, INC. ("Whitewing") which 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 trades on the over-the-counter market under the symbol "WWLI" and
Whitewing warrants trade on the over-the-counter market under the symbol
"WWLI-W". We own 18.6% of the outstanding common stock of Whitewing.

Throughout this prospectus, Launchpad, CombiMatrix, MerkWerks, Soundbreak,
Soundview Technologies, Greenwich Information Technologies, Mediaconnex,
Signature-mail, EC Company, and Whitewing are collectively referred to as our
affiliates. See "Risk Factors" for risks associated with each individual
affiliate.

Developing emerging businesses contains all of the problems, expenses,
delays, and risks inherent in establishing a new business enterprise. We have no
control over many of these risks, including uncertain market conditions, product
acceptance, cost and availability of capital and the absence of an operating
history. We also expect to encounter competition in the area of business
opportunities from other entities having similar business objectives, such as
venture capital funds and business incubators. We may possess less financial,
technical, human and other resources than our potential competitors.
Accordingly, we cannot assure that our plan of operations will be successful or
that we will be able to achieve or maintain profitable operations. See "Risk
Factors--No Assurance of Success" and "Risks Associated with the Emerging
Companies."

We have never paid any cash dividends on our common stock and do not
anticipate that we will pay dividends in the foreseeable future. Instead, we
intend to apply any earnings to the development and expansion of our business.

Our predecessor company was initially incorporated in the State of
California on January 25, 1993, and conducted its initial public offering on
June 15, 1995. Subsequently, we were reincorporated in the State of Delaware on
December 28, 1999. Our common stock trades on the Nasdaq National Market under
the symbol "ACRI." The closing sale price of our common stock on February 4,
2000 as reported on the Nasdaq National Market was $43.125 per share.

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Our executive offices are located at 55 South Lake Avenue, Pasadena,
California 91101 and our telephone number is (626) 396-8300. Our website address
is www.acaciaresearch.com. Neither the information contained in our website nor
the websites linked to our website shall be deemed to be a part of this
Prospectus.

RECENT DEVELOPMENTS

COMBIMATRIX SUBORDINATED NOTE CONVERSION In October 1999, CombiMatrix
offered holders of three-year 6% unsecured subordinated promissory notes issued
in a private offering completed in March 1998 the opportunity to convert their
outstanding principal balance into CombiMatrix Common Stock. All noteholders,
ourselves included, converted as of December 1999. As a result of these
conversions, our equity ownership is 50%.

ADDITIONAL INVESTMENTS IN SOUNDBREAK. In September 1999, we purchased
10,000 shares of Soundbreak's Series A Convertible Preferred Stock for $1
million, which represented 100% of the outstanding preferred stock at September
30, 1999. Each share of this preferred stock has full voting rights and is
convertible at any time into 100 shares of Soundbreak's common stock.

In October 1999, Soundbreak completed a private equity financing raising
$6.5 million by selling 65,505 shares of its Series B Convertible Preferred
Stock. We purchased 10,000 shares of this preferred stock for $1 million. The
Series B Preferred Stock has no voting rights and each share is convertible into
40 shares of Soundbreak's common stock.

FORMATION OF LAUNCHPAD In November 1999, we announced the formation of
Launchpad. Its mission is to incubate and accelerate the development of new
Internet businesses. New companies can use our marketing, finance, strategic
planning, recruiting, and legal resources together with Launchpad's development
teams to develop Internet-related products and services.

CLOSURE OF ACACIA CAPITAL MANAGEMENT. On December 31, 1999, we closed our
Acacia Capital Management division. Acacia Capital Management was a general
partner in two private investment partnerships and was an investment advisor to
two offshore private investment corporations. Costs associated with exiting this
business were not material and we are currently in the process of distributing
funds pending completion of year-end audits.

NOTICE OF REDEMPTION OF WARRANTS. In October 1999, we gave a redemption
notice for common stock purchase warrants issued in our March 1998 and April
1998 private placements. As a result, all of these warrants were exercised prior
to the redemption time (November 19, 1999) and we received $10.5 million in
proceeds for the issuance of approximately 1.2 million shares of our common
stock

REINCORPORATION OF COMPANY IN DELAWARE. After receiving the approval of our
stockholders at a special meeting, on December 28, 1999, we changed our state of
incorporation from California to Delaware. As a result, all shares of our common
stock were converted into shares of the Delaware corporation. The stockholders
also approved an increase the number of our authorized shares of common stock
from 30 million to 60 million and authorized the issuance of up to 20 million
shares of preferred stock, whose rights, privileges, preferences, and powers
would be determined at a later date.

AMENDMENTS TO STOCK OPTION PLAN. At the special meeting, the stockholders
also ratified amendments to our 1996 Stock Option Plan, which, among other
changes, increased capacity under the plan from 1 million shares to 3 million
shares of our common stock.

PRIVATE PLACEMENT OF COMPANY'S COMMON STOCK AND COMMON STOCK PURCHASE
WARRANTS. In December 1999, we completed a private placement consisting of the
sale of units, each composed of one share of our common stock and one-half of a
common stock purchase warrant. We sold 974,771 units at an offering price of
$21.50 per unit. We raised approximately $21 million from this financing.

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INVESTMENT IN MEDIACONNEX. In December 1999, we purchased 1,636,364 shares
of Mediaconnex's Series A Preferred Stock for $2,250,000, which represents 74%
of the outstanding Series A Preferred Stock and 31% of all outstanding common
stock on an as-converted basis.

COMBIMATRIX'S AWARD OF FEDERAL CONTRACTS. CombiMatrix has been awarded
three contracts from the federal government to use CombiMatrix's proprietary
biochip technology. In July 1999, the Department of Energy granted CombiMatrix a
contract to develop microarrays of affinity probes for the analysis of gene
products which will aid researchers in the pharmaceutical industry to identify
new drug discovery targets. In July 1999 and January 2000, the Department of
Defense awarded CombiMatrix two contracts to develop Nanode Array Sensor
Microchips used to simultaneously detect numerous chemical and biological
warfare agents.

INVESTMENT IN EC COMPANY. In January 2000, we announced that that we
acquired a 7.6% interest in The EC Company for $3 million in a $17.3 million
Series B round financing.

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RISK FACTORS

INVESTMENT IN OUR COMMON STOCK IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD ONLY PURCHASE SHARES IF YOU CAN AFFORD TO LOSE YOUR ENTIRE
INVESTMENT. IN DECIDING WHETHER TO BUY OUR COMMON STOCK, YOU SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS, THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS AND THE OTHER INFORMATION WE HAVE INCORPORATED BY REFERENCE.

BECAUSE OUR BUSINESS OPERATIONS ARE SUBJECT TO MANY INHERENT AND UNCONTROLLABLE
RISKS, WE CANNOT ASSURE OUR SUCCESS.

We have significant economic interests in nine companies and take an active
role in each enterprise's growth and advancement. Our business operations are
therefore subject to numerous risks and all of the problems, expenses and
uncertainties inherent in the establishment of new business enterprises. Many of
these risks and problems are subject to outside influences over which we have no
control, including technological advances, uncertain market acceptance,
competition, increases in operating costs including costs of supplies,
personnel, equipment, the availability and cost of capital, changes in general
economic conditions and governmental regulation imposed under federal, state or
local laws. We cannot assure you that our business ventures will be able to
market any product on a commercial scale, that these business ventures will ever
achieve or maintain profitable operations or that they, or we, will be able to
remain in business.

INVESTING IN EMERGING COMPANIES CARRIES A HIGH DEGREE OF RISK.

Becoming involved in emerging companies is marked by a 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. We must also
dedicate significant amounts of financial resources, management attention and
personnel to identify and develop each new business opportunity, without any
assurance that these expenditures will prove fruitful.

We generally invest in start-up ventures with no operating histories,
unproven technologies and products and, in some cases, start-ups ventures
needing identification and implementation of experienced management. Because of
the uncertainties and risks associated with such start-up ventures, you should
expect substantial losses associated with failed ventures. In addition, markets
for venture capital in the United States are increasingly competitive. As a
result, business opportunities may be lost and the terms of available financing
and equity investments in start-ups may deteriorate. Also, we may be unable to
participate in additional ventures because we lack the financial resources
provide them with full funding. We, as well as our affiliates, may need to
depend on external financing to provide sufficient capital.

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY IN THE FUTURE.

Our operating results may vary significantly from quarter to quarter due to
a variety of factors, including:

- the operating results of our current and future affiliates;

- the nature and timing of our investments in new businesses;

- our decisions to acquire or divest interests in our current and future
affiliates may create changes in losses or income and amortization of
goodwill;

- changes in our methods of accounting for our current and future affiliates
may cause us to recognize gains or losses under applicable accounting
rules;

- the timing of the sales of securities of our current and future
affiliates; and

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- the cost of future acquisition could increase from intense competition
from other potential acquirers of technology-related companies or ideas.

We also expect to incur significant start-up expenses in pursuing and
developing new business ventures. To date, we have lacked a consistent source of
recurring revenue and most of our revenues have come from selling the securities
of our affiliates.

OUR FUTURE PLANS DEPEND GREATLY ON INCREASED USE OF THE INTERNET BY BUSINESS AND
INDIVIDUALS AND THUS OUR BUSINESS MAY SUFFER IF USE OF THE INTERNET FAILS TO
GROW IN THE FUTURE.

Our future plans depend greatly on increased use of the Internet for
providing services and conducting business. Commercial use of the Internet is
currently at an early stage of development and the future of the Internet is not
clear. Because a significant amount of our resources will be allocated to our
existing and future Internet companies, our business may suffer if commercial
use of the Internet fails to grow in the future.

IF THE U.S. OR OTHER GOVERNMENTS REGULATE THE INTERNET MORE CLOSELY, OUR
BUSINESS MAY BE HARMED.

Because of the Internet's popularity and increasing use, new laws and
regulations may be adopted. These laws and regulations may cover issues such as
privacy, pricing, content and taxation of Internet commerce. If the governments
enact any additional laws or regulations it may impede the growth of the
Internet and our Internet-related business and we could face additional
financial burdens.

OUR AFFILIATES' OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.

To date, Whitewing has experienced substantial operating losses and its
operating results have varied significantly from quarter to quarter due to a
variety of factors. For further information regarding the nature of and the
fluctuations in Whitewing's operating results, you should review Whitewing's
filings under the Securities Exchange Act, available from the Securities and
Exchange Commission.

CombiMatrix, Greenwich Information Technologies, Launchpad, Mediaconnex,
MerkWerks, Signature-mail, Soundbreak, and Soundview Technologies have generated
no meaningful revenues to date. We anticipate that these affiliates' operating
results are likely to vary significantly as a result of a number of factors, the
timing of new product introductions by each of these affiliates, the stage of
development of the business of each affiliate, the technical feasibility of the
companies' technologies and techniques, the novelty of the technology owned by
these affiliates, the level of product acceptance, the strength of each of these
affiliates' intellectual property rights, each affiliate's ability to exploit
and commercialize 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
affiliates' control. We cannot assure you any affiliate will experience growth
in the future or be profitable on an operating basis in any future period.

THE UNCERTAINTY OF EMERGING COMPANIES AND THE POTENTIAL LACK OF MARKET
ACCEPTANCE OF THEIR PRODUCTS DECREASES THE POSSIBILITY OF OUR SUCCESS.

COMBIMATRIX. CombiMatrix was incorporated in October 1995 and began
operations in April 1996. CombiMatrix is developing a proprietary method to
synthesize DNA, peptides and chemical libraries on an active semiconductor chip
with electrochemically generated reagents. Although CombiMatrix has been awarded
three federal contracts, CombiMatrix is a developmental stage company with very
modest current revenues. Its current activities relate almost exclusively to
research and development.

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Our investment in CombiMatrix is subject to the risks associated with new
technologies, including the viability of its technologies, unknown market
acceptance, difficulties in obtaining 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, we cannot assure you that
CombiMatrix will be able to successfully implement its technologies. If its
technologies are successful, CombiMatrix intends to pursue collaborations with
pharmaceutical companies, which may include screening drug companies' or
CombiMatrix's libraries and possibly licensing internally developed chemical
compounds. We cannot assure you that CombiMatrix, even if successful in
developing its technologies, would be able to successfully implement
collaborative efforts with pharmaceutical companies.

CombiMatrix intends to vigorously protect its intellectual property rights.
We cannot assure you, 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 CombiMatrix's patents,
if issued, would materially adversely affect CombiMatrix's business, operating
results, financial condition and prospects.

Other companies may be able to reverse-engineer CombiMatrix's technology
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. To date, Greenwich Information
Technologies has yet to license any of its patents or other intellectual
properties and has had a minimal level of operations. Although Greenwich
Information Technologies believes that it has marketing and licensing rights to
enforceable patents, we cannot assure you that other companies will not
challenge the underlying patents to these rights or develop competing
technologies that do not infringe upon their patents. Furthermore, whether or
not competing products emerge, it is uncertain if and to what extent Greenwich
Information Technologies will be able to profitably market and license its
rights to the information on-demand technology.

SIGNATURE-MAIL. Signature-mail was formed in October 1997 and has developed
software services for use on the Internet that personalize e-mail with
proprietary mass customization technologies. To date, Signature-mail has not
generated any revenues. We cannot assure you that Signature-mail will ever be
able to successfully market its products.

Signature-mail has five patent applications pending for unique features as
well as methods used for the automated mass customization of the production and
delivery of e-mail. To date, no patents have yet issued and we cannot assure you
that patents will be issued, that their validity will be upheld if challenged or
that they will have sufficiently broad scope to effectively limit competition
for its software product.

Our investment in Signature-mail is subject to the risks associated with new
technologies and software, including the viability of Signature-mail's
technologies, difficulties in obtaining financing, the ability to obtain
intellectual property protection, competition, and rapid technological change.

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 this technology, we caanot assure
you 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 if and to what extent Soundview Technologies will be able

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to profitably exploit its technology. The issued patent that Soundview
Technologies owns expires in July 2003.

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. We cannot assure you that MerkWerks will
ever be able to successfully develop or market its products. Merkwerks' product
is substantially behind schedule and Merkwerks has scaled back its operations to
conserve cash while continuing product development.

The success of MerkWerks' software depends whether it is accepted by
original equipment manufacturers (OEMs) that produce CD-Recordable disk drives.
We cannot assure you that MerkWerks' software, if and when completed, will gain
the acceptance of OEMs or ever be incorporated into CD-Recordable disk drives.

SOUNDBREAK. Soundbreak was formed in May 1999 and is preparing for the
launch of its lifestyle Internet site that will combine a 24-hour worldwide
webcast highlighting new music hosted by on-air DJs with rich graphics, a music
merchandise store, a strong community area that encourages participation and
feedback, and other features. Soundbreak is in the developmental stage and
because its site has not been launched publicly, the market acceptance for
Soundbreak is uncertain. In addition, the industry it is entering is a rapidly
changing and highly competitive environment. We cannot assure you that
Soundbreak will generate revenues or achieve profitability.

Soundbreak's success will be dependent on its ability to develop or obtain
sufficiently compelling content to attract and retain audience, its ability to
form partnerships for music and merchandise fulfillment and distribution, and
its ability to successfully market and establish its presence on the Internet.
In addition, Soundbreak will depend upon intellectual property rights and
licensed material and any intellectual property claims against Soundbreak can be
costly and could result in the loss of significant rights.

LAUNCHPAD. Launchpad was formed in November 1999 to incubate and accelerate
the development of new Internet companies. Launchpad will provide seed capital
and an environment that enables ideas to grow and get to market quickly. Using
our marketing, finance, strategic planning, recruiting, and legal resources
together with Launchpad's development teams, entrepreneurs can focus solely on
developing great products and services. Once a company is past the incubation
stage, we can provide additional funding through direct investments and capital
secured from other strategic venture investors. Launchpad's business model is
new and unproven and may not be able to develop successful Internet business.

MEDIACONNEX. Mediaconnex was formed in November 1999, and is developing
software that performs inventory and sales management functions for television
and cable broadcasters. The software can then broadcast the data over the
Internet to provide business to business Internet services between the
broadcasters and the buying community where sales, research and information
requests will occur. To date, Mediaconnex has not generated any revenues. We
cannot assure you that Mediaconnex will ever be able to successfully market its
services.

WE CANNOT ASSURE YOU THAT OUR AFFILIATES WILL BE ABLE TO OBTAIN NECESSARY
ADDITIONAL FINANCINGS.

To date, our affiliates have primarily relied upon selling equity
securities, including sales to and loans from us, to generate the funds they
needed to finance implementing their plans of operations. Our affiliates may be
required to obtain additional financing through bank borrowings, debt or equity
financings or otherwise, which would require us to make additional investments
or face a dilution of our equity interest.

10
<PAGE>
We cannot assure you that our affiliates will continue to be able to obtain
financing or obtain financing on favorable terms.

OUR SUCCESS DEPENDS ON OUR ABILITY TO RESPOND TO THE RAPID CHANGES IN TECHNOLOGY
AND DISTRIBUTION CHANNELS.

The markets for our affiliates' products and services are characterized by:

- rapidly changing technology;

- evolving industry standards;

- frequent new product and service introductions;

- shifting distribution channels; and

- changing customer demands

Our success will depend on our affiliates' ability to adapt to this rapidly
evolving marketplace. Our affiliates' may be unable to adequately adapt products
and services or to acquire new products and services that can compete
successfully. In addition, our affiliates' may be unable to establish and
maintain effective distribution channels.

BECAUSE WE AND OUR AFFILIATES ARE SUBJECT TO INTENSE COMPETITION IN THE INTERNET
MARKET, WE MAY BE UNSUCCESSFUL AND COMPETITION MAY DRIVE OUR POTENTIAL
REVENUES DOWN.

The market for technology and Internet products and services is highly
competitive. Moreover, the market for Internet products and services lacks
significant barriers to entry, enabling new businesses to enter this market
relatively easily. Competition in the market for Internet products and services
may intensify in the future. Numerous well-established companies and smaller
entrepreneurial companies are focusing significant resources on developing and
marketing products and services that will compete with our products and
services. In addition, many of our current and potential competitors have
greater financial, technical, operational, and marketing resources. We may not
be able to compete successfully against these competitors in selling our goods
and services. Competitive pressures may also force prices for Internet goods and
services down and these price reductions may reduce our potential revenues.

SELLING ASSETS OF, OR INVESTMENTS IN, THE COMPANIES THAT WE HAVE ACQUIRED AND
DEVELOPED PRESENTS RISKS.

An element of our business plan involves selling, in public or private
offerings, our affiliates and future subsidiary companies, or portions thereof,
that we have acquired and developed. Market and other conditions largely beyond
our control affect:

- our ability to engage in these sales;

- the timing of these sales; and

- the amount of proceeds from these sales.

OUR GROWTH PLACES STRAINS ON OUR MANAGERIAL, OPERATIONAL, AND FINANCIAL
RESOURCES.

Our growth has placed, and is expected to continue to place, a significant
strain on our managerial, operational and financial resources. Further, as the
number of our subsidiary companies and their respective businesses grow, we will
be required to manage multiple relationships. Any further growth by us or our
subsidiary companies, or an increase in the number of strategic relationships
will increase this strain on the Company's managerial, operational, and
financial resources. This strain may inhibit our ability to achieve the rapid
execution necessary to successfully implement our business plan. In addition,
our future success depends on our ability to expand our organization to match
the growth of our business and our subsidiary companies.

11
<PAGE>
IF OUR AFFILIATES ARE SUCCESSFUL, THEY WILL NEED QUALIFIED MARKETING AND SALES
PERSONNEL. WE CANNOT ASSURE YOU THAT OUR AFFILIATES WILL BE ABLE TO ASSEMBLE
AND RETAIN THE NECESSARY MANAGEMENT AND MARKETING TEAMS.

If CombiMatrix, Mediaconnex, MerkWerks, Greenwich Information Technologies,
Signature-mail, Soundbreak, and Soundview Technologies successfully develop
commercially viable products and services, they will need to expand their
management personnel. Some of these companies will require our assistance to
identify and implement experienced management teams, but we cannot assure you
that these companies will successfully assemble qualified and effective
management teams.

Additionally, unlike Greenwich Information Technologies and Soundview
Technologies, which intend to primarily license their respective technologies to
third parties for commercial exploitation, CombiMatrix and MerkWerks currently
intend to develop, manufacture, market, sell and license their respective
products and services 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. We
cannot assure you 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.

FOR OUR BUSINESS AND OUR AFFILIATES TO SUCCEED, WE MUST ATTRACT AND RETAIN
QUALIFIED PERSONNEL. BECAUSE OF INTENSE COMPETITION FOR THESE INDIVIDUALS, WE
MAY FACE DIFFICULTIES IN RETAINING, ATTRACTING AND MOTIVATING THESE
INDIVIDUALS.

Our success will depend on our ability to attract, retain and motivate the
qualified personnel that will be essential to our current plans and future
development. Competition for qualified personnel is intense and we cannot assure
you that we will successfully retain our existing key employees or attract and
retain any additional personnel we may require. In particular, the success of
our business and each of our affiliates will also be greatly determined our
ability to retain and motivate the individuals discussed in the following
paragraphs.

COMBIMATRIX. CombiMatrix's success will significantly depend upon the
continued services of CombiMatrix's Vice President-Research and Development. We
maintain 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 significantly depend upon the continued services of H. Lee Browne,
Greenwich Information Technologies' President and Chief Executive Officer.
Neither we nor Greenwich Information Technologies maintain key person life
insurance coverage for Mr. Browne.

OUR AFFILIATES FACE INTENSE COMPETITION AND WE CANNOT ASSURE YOU THAT THEY WILL
BE SUCCESSFUL.

WHITEWING. The markets for Whitewing's products 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 in the future may 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. If CombiMatrix's
technologies are successful, CombiMatrix will compete directly with the research

12
<PAGE>
departments of pharmaceutical companies, biotechnology companies, other
combinatorial chemistry companies, and research and academic institutions. In
addition to having existing strategic relationships with pharmaceutical
companies, 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 which they may screen
new targets against.

Other sources of compounds include compounds extracted from natural
products, such as plants and microorganisms, and compounds created using
rational drug design. CombiMatrix is joined by academic institutions,
governmental agencies and other research organizations in conducting research in
areas, 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 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.

SIGNATURE-MAIL. The software industry is highly competitive. Signature-mail
seeks to prevent competition through proprietary technology. Signature-mail has
five pending patent applications. However, no patents have been issued yet and
we cannot assure you that the patents will be issued, they will withstand
challenges to their validity or that they will have sufficiently broad scope to
effectively limit competition for its software product.

MERKWERKS. There are several 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 its business, financial condition and operating
results.

SOUNDBREAK. The market for the online promotion and distribution of music
and related merchandise is highly competitive and rapidly changing. The number
of Web sites competing for the attention and spending of consumers, advertisers
and users has increased, and we expect it to continue to increase because there
are few barriers to entry to Internet commerce. Soundbreak faces competitive
pressures from numerous actual and potential competitors. Competition is likely
to increase significantly as new companies enter the market and current
competitors expand their services. Certain companies have announced agreements
to work together to offer music over the Internet, and Soundbreak may face
increased competitive pressures as a result. Many of Soundbreak's current and
potential competitors in the Internet and music entertainment businesses may
have substantial competitive advantages relative to us, including: longer
operating histories; significantly greater financial, technical and marketing
resources; greater brand name recognition; existing customer bases; and more
popular content.

13
<PAGE>
These competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements and devote greater resources
to develop, promote and sell their products or services than Soundbreak can. Web
sites maintained by existing and potential competitors may be perceived by
consumers, artists, talent management companies and other music-related vendors
or advertisers as being superior to Soundbreak's web site.

MEDIACONNEX. The market for the sale of commercial inventory for television
and cable broadcasters is highly competitive and rapidly changing. In addition
to the long-standing traditional sales channels, there are a number of newly
created web-based sites competing for market acceptance among the broadcasters
and media buyers. Because Mediaconnex's software is not yet complete, acceptance
of its software and business model in the market is unproven and speculative.
Moreover, because there are few barriers to entry, competition is likely to
increase, including the probability of established competitors expanding their
current offering of services. Many of the current and potential competitors to
Mediaconnex may have substantial competitive advantages relative to Mediaconnex,
including longer operating histories as well as greater financial, technical or
marketing resources.

WE CANNOT ASSURE THAT WE WILL BE ABLE TO EFFECTIVELY PROTECT OUR AFFILIATES'
PROPRIETARY TECHNOLOGY.

The success of the business of CombiMatrix, Greenwich Information
Technologies, Signature-mail, Soundview Technologies, Mediaconnex and MerkWerks
relies, to varying degrees, on proprietary rights and their protection or
exclusivity. CombiMatrix, Greenwich Information Technologies, Signature-mail and
Soundview Technologies will depend largely on the protection of enforceable
patent rights. Mediaconnex, CombiMatrix and Signature-mail currently have
applications on file with the U.S. Patent and Trademark Office seeking patents
on their core technologies, while Greenwich Information Technologies and
Soundview Technologies have patents 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. We cannot assure
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 reverse-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 third parties and generally limit 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 their business and operational results.

BECAUSE EACH AFFILIATE'S SUCCESS GREATLY DEPENDS ON THEIR ABILITY TO DEVELOP AND
MARKET NEW PRODUCTS AND SERVICES, WE CANNOT ASSURE YOU THAT OUR AFFILIATES
WILL BE SUCCESSFUL IN THE FUTURE.

The markets for each affiliate's products are also marked by extensive
competition, rapidly changing technology, frequent product improvements, and
evolving industry standards. The success of each affiliate will depend on its
ability to develop and market new products and services or enhance existing ones
to meet the evolving needs of the market. We cannot assure you that our
affiliates' existing or future products and services will be successful or
profitable. In addition, we cannot assure you other developers' products,
services or technologies will not render our affiliates' products and services
noncompetitive or obsolete.

14
<PAGE>
WE MAY NEED TO SEEK ADDITIONAL FINANCING IN THE FUTURE, BUT CANNOT ASSURE YOU
THAT WE WILL BE ABLE TO OBTAIN NEEDED FINANCING ON FAVORABLE TERMS.

As of September 30, 1999, we had working capital of $12.4 million and
stockholders' equity of $16.7 million based on our consolidated financial
statements. However, a portion of these funds were held by our consolidated
subsidiaries and thus are restricted to use in the business of the particular
subsidiary.

We cannot assure you that we will not encounter unforeseen difficulties that
may deplete our capital resources more rapidly than anticipated. Any efforts to
seek additional funds could be made through equity, debt, or other external
financings, however, we cannot assure you that additional funding will be
available on favorable terms, if at all.

To date, we have relied upon the sale of equity securities to generate the
funds needed to finance the implementation of our plan of operations. In the
past, we have 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. To date we have not experienced any significant
liquidity event with respect to our affiliates' companies.

ALTHOUGH WE HOLD MINORITY POSITIONS IN CERTAIN AFFILIATES, WE DO NOT HAVE THE
ABILITY TO CONTROL THEIR DECISION MAKING OR DAY TO DAY OPERATIONS.

WHITEWING. We currently own 532,459 shares of Whitewing's common stock
(18.6% of the outstanding shares) and have voting control over 789,709 shares
Whitewing's common stock (27.4% of the outstanding shares). R. Bruce Stewart,
our Chief Financial Officer, is Chairman of the Board of Directors of Whitewing
and Paul Ryan, our 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 gives us influence
over, but not the ability to control, the decision-making at Whitewing.

GREENWICH INFORMATION TECHNOLOGIES. We currently maintain a membership
interest of 33.3% in Greenwich Information Technologies. Although we are a
senior member of Greenwich Information Technologies, we do not hold a majority
of the board of three senior members, and we have no control over their day to
day operations. The day to day operations are currently directed by the chief
executive officer, H. Lee Browne.

SIGNATURE-MAIL. We have a membership interest of 25% in Signature-mail.
Although we are a senior member of Signature-mail, we do not hold a majority of
the board of three senior members, and we have no control over their day to day
operations. The day to day operations are currently directed by the chief
executive officer, H. Lee Browne.

MEDIACONNEX. We currently own 74% of the outstanding Series A Preferred
Stock of Mediaconnex. The holders of the Series A Preferred Stock, voting
together as a class, have the right to designate two members to the Board of
Directors giving Acacia the right to control 40% of the Board of Directors. To
date, Paul Ryan, the CEO of Acacia and Peter Frank, the CFO of Acacia, have been
appointed to the Board of Directors. This minority position and board
representation will give Acacia influence over, but not the ability to control,
the decision-making at Mediaconnex. The day to day operations are currently
controlled by Sean Atkins, the President and member of the Board of Directors of
Mediaconnex.

EC COMPANY. We own a 7.6% interest in EC Company and have no board
representation, therefore giving us ability to control, the decision-making at
EC Company.

15
<PAGE>
USE OF PROCEEDS

We will not receive any proceeds from the sale of the shares of common stock
offered by the Selling Securityholders pursuant to this prospectus. We will
receive proceeds if Selling Securityholders exercise their warrants or options
to purchase shares of common stock. If all of the Selling Securityholders were
to exercise their warrants and options, we would receive gross proceeds of
$17,072,938. When and if we receive these funds, they will be used for general
corporate purposes.

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
our company. Of the shares of our common stock covered by this prospectus, we:

- issued 974,771 shares in a private placement completed in December 1999
pursuant to an exemption from registration contained in Regulation D
promulgated under Section 4(2) of the Securities Act;

- will issue up to 487,387 shares, subject to adjustment under certain
circumstances, upon exercise of warrants (which we may redeem under
certain circumstances) also included in the December 1999 private
placement;

- will issue up to 720,000 shares, subject to adjustment under certain
circumstances, upon exercise of options under our 1996 Executive Stock
Bonus Plan approved at our 1996 annual stockholders meeting;

- issued 60,107 shares in a private placement completed in June 1999 in
which we exchanged our shares for equity interests in MerkWerks; and

- will issue up to 102,851 shares, subject to adjustment under certain
circumstances, upon the exercise of options and warrants held by certain
selling securityholders.

The following table sets forth certain information with respect to the
beneficial ownership of shares of our common stock by the Selling
Securityholders as of January 20, 2000 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 our knowledge, none of the Selling
Securityholders has had any position, office or other material relationship with
our company or any of our affiliates.

16
<PAGE>

<TABLE>
<CAPTION>
MAXIMUM NUMBER OF PERCENT OF CLASS
NUMBER OF SHARES SHARES WHICH MAY NUMBER OF SHARES BENEFICIALLY OWNED
BENEFICIALLY OWNED BE SOLD IN THIS BENEFICIALLY OWNED AFTER THE OFFERING
SELLING SECURITYHOLDERS PRIOR TO OFFERING (1) OFFERING (1) AFTER THE OFFERING (2) (2)
- ----------------------- --------------------- ----------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Brooke P. Anderson (3).... 560,827 202,532 358,295 2.24
Dorothy L. Anderson Living
Trust................... 6,314 314 6,000 *
Ivano Angelastri (4)...... 8,500 8,500(4) 0 0
Milton Aronowitz Jr....... 37,188 1,688 35,500 *
The Balboa Fund........... 70,000 30,000 40,000 *
Bank Leumi le-Israel...... 450,000 450,000 0 0
Martin M. Berman.......... 6,969 169 6,800 *
The Paul E. Berning SERP
Trust................... 10,128 10,128 0 0
Richard C. Browne......... 7,500 7,500 0 0
Merrill & Rene Burt Rev
Trust................... 6,977 6,977 0 0
Hendrick Capelle.......... 7,500 7,500 0 0
Rene Carrel (5)........... 10,000 10,000(5) 0 0
M. Robert Ching Defined
Benefit Pension Plan
(6)..................... 786,050(7)(8) 187,500 598,550(7)(8) 3.75
Colgate Limited
Partnership............. 3,376 3,376 0 0
Michael Cunniff (9)....... 38,000 12,000 26,000 *
Alan Dietzak.............. 5,064 5,064 0 0
Irene Farmer.............. 75,064 5,064 70,000 *
Fontana Family Trust...... 17,442 17,442 0 0
Ken Foreman (10).......... 922 922(10) 0 0
Carl W. Fuller............ 25,000 15,000 10,000 *
Gorman Trust (11)......... 5,000 5,000(11) 0 0
Jack Hengst Money Purchase
Pension Plan............ 8,377 6,977 1,400 *
Hermes Partners, L.P...... 60,000 60,000 0 0
Roland Heuberger.......... 21,750 21,750 0 0
Kathryn King-Van Wie
(12).................... 208,584(13) 100,000 108,584(13) *
David Lackey (14)......... 140,500 12,500(14) 128,000 *
John Lackey (15).......... 83,890 63,890(15) 20,000 *
Roger Lewis............... 5,950 950 5,000 *
Liechtensteinische
Landesbank.............. 30,000 30,000 0 0
Gary Medearis (16)........ 785 785(16) 0 0
Robert & Elva Medearis.... 7,477 6,977 500 *
Mill Creek Fund........... 7,500 7,500 0 0
Don Montgomery (17)....... 24,400 20,000 4,400 *
Carl Martellaro (18)...... 301 301(18) 0 0
David W. Moyer............ 144,752 6,752 138,000 *
Wesley E. Mudge Separate
Prop Trust.............. 21,000 21,000 0 0
Roger Mulhaupt............ 81,450 81,450 0 0
Dewi Muljadi-White........ 1,736 1,736 0 0
Barry Neville............. 6,767 6,767 0 0
Newton Family Trust....... 9,192 9,192 0 0
Bates & Fran Reese
Trust................... 15,000 15,000 0 0
Refima AG................. 15,000 15,000 0 0
Reman Partners Ltd........ 225,000 225,000 0 0
RMT Risk Management &
Trading................. 22,500 22,500 0 0
</TABLE>

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<PAGE>

* Less than one percent of class

- --------------------------

(1) Assumes exercise of all common stock purchase warrants or options
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 our common stock issued in the
private placement as well as the underlying common stock purchase warrants
as follows:

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
ISSUED IN PRIVATE SHARES UNDERLYING
SELLING SECURITYHOLDERS PLACEMENT WARRANTS
- ----------------------- ---------------------- -----------------
<S> <C> <C>
The Balboa Fund............................................. 20,000 10,000
Bank Leumi le-Israel........................................ 300,000 150,000
Richard C. Browne........................................... 5,000 2,500
Merrill & Rene Burt Rev Trust............................... 4,651 2,326
Hendrick Capelle............................................ 5,000 2,500
M. Robert Ching Defined Benefit Pension Plan................ 125,000 62,500
Fontana Family Trust........................................ 11,628 5,814
Carl W. Fuller.............................................. 10,000 5,000
Jack Hengst Money Purchase Pension Plan..................... 4,651 2,326
Hermes Partners, L.P........................................ 40,000 20,000
Roland Heuberger............................................ 14,500 7,250
John Lackey (15)............................................ 20,000 10,000
Liechtensteinische Landesbank............................... 20,000 10,000
Robert & Elva Medearis...................................... 4,651 2,326
Mill Creek Fund............................................. 5,000 2,500
Wesley E. Mudge Separate Prop Trust......................... 14,000 7,000
Roger Mulhaupt.............................................. 54,300 27,150
Newton Family Trust......................................... 6,128 3,064
Bates & Fran Reese Trust.................................... 10,000 5,000
Refima AG................................................... 10,000 5,000
Reman Partners Ltd.......................................... 150,000 75,000
RMT Risk Management & Trading............................... 15,000 7,500
Ueli Schurch (19)........................................... 21,700 10,850
Thomas Stewart (21)......................................... 1,000 500
Bret Undem (22)............................................. 2,562 1,281
Beat Zanitti................................................ 40,000 20,000
Marc A. Zemp................................................ 60,000 30,000
</TABLE>

- --------------------------

(2) Assumes that each Selling Securityholder will sell all shares of common
stock offered pursuant to this prospectus, but not any other shares of
common stock beneficially owned by such securityholder.

(3) Dr. Anderson is a director and officer of CombiMatrix.

18
<PAGE>
(4) Mr. Angelastri acted as a finder in connection with the December 1999
Private Placement and in such capacity received "Finder Warrants" to
purchase 8,500 shares at an exercise price of $23.65 per share. These
warrants expire on December 9, 2002.

(5) Mr. Carrel acted as a finder in connection with the December 1999 Private
Placement and in such capacity received "Finder Warrants" to purchase 10,000
shares at an exercise price of $23.65 per share. These warrants expire on
December 9, 2002.

(6) Dr. Ching has provided consulting services to the Company.

(7) Includes shares beneficially owned by Dr. Ching issued in the names of M.
Robert Ching & Phyllis Ching Living Trust, M. Robert Ching M.D. Inc. Money
Purchase Pension Plan, M. Robert Ching M.D. Inc. Defined Benefit Plan and
Phyllis Ching.

(8) Includes shares which are subject to options as follows: (a) 10,000 shares,
at an exercise price of $2.625 per share, expiring October 13, 2000; (b)
10,000 shares, at an exercise price of $2.625 per share, expiring October
13, 2000; (c) 3,550 shares, at an exercise price of $2.75 per share,
expiring January 29, 2001; and (d) 15,000 shares at an exercise price of
$3.50 per share, expiring August 5, 2001.

(9) Mr. Cunniff provides consulting services to the Company.

(10) Mr. Foreman acted as a finder in connection with the December 1999 Private
Placement and in such capacity received "Finder Warrants" to purchase 922
shares at an exercise price of $23.65 per share. These warrants expire
December 9, 2002.

(11) The Gorman Trust received "Finder Warrants" to purchase 5,000 shares at an
exercise price of $23.65 per share in connection with the December 1999
Private Placement. These warrants expire on December 9, 2002.

(12) Ms. King is the Chief Operating Officer of the Company.

(13) Includes shares which are subject to options as follows: (a) 40,000 shares,
at an exercise price of $2.625 per share, expiring October 13, 2000; and (b)
50,000 shares, at an exercise price of $3.5625 per share, expiring March 10,
2001.

(14) Mr. David Lackey acted as a finder in connection with the December 1999
Private Placement and in such capacity received "Finder warrants" to
purchase 12,500 shares at an exercise price of $23.65 per share. These
warrants expire on December 9, 2002.

(15) Mr. John Lackey acted as a finder in connection with the December 1999
Private Placement and in such capacity received "Finder warrants" to
purchase 33,890 shares at an exercise price of $23.65 per share. These
warrants expire on December 9, 2002

(16) Mr. Medearis acted as a finder in connection with the December 1999 Private
Placement and in such capacity received "Finder Warrants" to purchase 785
shares at an exercise price of $23.65 per share. These warrants expire
December 9, 2002.

(17) Mr. Montgomery is a director and officer of CombiMatrix.

(18) Mr. Martellaro acted as a finder in connection with the December 1999
Private Placement and in such capacity received "Finder Warrants" to
purchase 301 shares at an exercise price of $23.65 per share. These warrants
expire December 9, 2002.

(19) Mr. Ryan is a director and President and Chief Executive Officer of the
Company.

(20) Includes 75,000 shares which are subject to options, at an exercise price
of $3.75 per share, expiring December 17, 2002.

(21) Mr. Schurch acted as a finder in connection with the December 1999 Private
Placement and in such capacity received "Finder warrants" to purchase 15,390
shares at an exercise price of $23.65 per share. These warrants expire on
December 9, 2002.

(22) Mr. R. Bruce Stewart is the Chairman of the Board of Directors of the
Company.

19
<PAGE>

(23) Mr. Thomas Stewart acted as a finder in connection with the December 1999
Private Placement and in such capacity received "Finder warrants" to
purchase 1,000 shares at an exercise price of $23.65 per share. These
warrants expire on December 9, 2002. Mr. Thomas Stewart is the son of R.
Bruce Stewart, the Chairman of the Board of Directors.

(24) Mr. Undem acted as a finder in connection with the December 1999 Private
Placement and in such capacity received "Finder warrants" to purchase 2,563
shares at an exercise price of $23.65 per share. These warrants expire on
December 9, 2002

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:

- 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;

- 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;

- ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and

- 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, 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 consolidated financial statements of the Company incorporated into this
prospectus by reference to the Annual Report on Form 10-K for the years ended
December 31, 1998 and December 31, 1997 have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting

The consolidated financial statements incorporated in this prospectus by
reference 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., participated in the private
placements by the Company in June 1997, November 1997, and April 1998.

20
<PAGE>
AVAILABLE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act with respect to the shares of
common stock offered by this prospectus. This prospectus does not contain all
the information set forth in the registration statement and the exhibits and
schedules thereto. For further information about us and the shares of common
stock, we refer you to the registration statement and to the exhibits and
schedules filed with it. Statements contained in this prospectus as to the
contents of any contract or other documents referred to are not necessarily
complete. We refer you to those copies of contracts or other documents that have
been filed as exhibits to the registration statement, and statements relating to
such documents are qualified in all aspects by such reference.

Anyone may inspect a copy of the registration statement without charge at
the Commission's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain copies of all or any portion of the registration
statement by writing to the Commission's Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549, and paying prescribed fees. You may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0300. In addition, the Commission maintains a Web site
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding companies such as Silicon that file
electronically with the Commission.

We are subject to the information requirements of the Securities Exchange
Act and therefore we file reports, proxy statements and other information with
the Commission. You can inspect and copy the reports, proxy statements and other
information that we file at the public reference facilities maintained by the
Commission at the Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. You can also obtain copies of such material from the
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also makes electronic filings
publicly available on its Web site. Reports, proxy and information statements
and other information about us may be inspected at the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.

Our common stock is traded on the Nasdaq National Market under the symbol
"ACRI." Certain information, reports and proxy statements of our company are
also available for inspection at the offices of the Nasdaq National Market
Reports Section, 1735 K Street, Washington, D.C. 20006.

INFORMATION INCORPORATED BY REFERENCE

The following documents, which we have filed with the Commission, are
incorporated by reference into this prospectus:

- our annual report on Form 10-K for the fiscal year ended December 31,
1998;

- our quarterly reports on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999;

- our current report on Form 8-K event date December 28, 1999; and

- the description of our common stock contained in Amendment No. 2 to our
registration statement on Form 8-A/A dated December 30, 1999.

All documents that we file with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
before the termination of the offering of the shares of common stock shall be
deemed incorporated by reference into this prospectus and to be a part of this
prospectus from the respective dates of filing such documents.

21
<PAGE>
We will provide without charge to each person to whom a copy of this
prospectus is delivered, upon such person's written or oral request, a copy of
any and all of the information incorporated by reference in this prospectus,
other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this prospectus
incorporates. Requests should be directed to the Secretary at Acacia Research
Corporation, 55 South Lake Avenue, Pasadena, California 91101, telephone number
(626) 396-8300.

Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed modified,
superseded or replaced for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any subsequently filed with
document that also is or is deemed to be incorporated by reference in this
prospectus modifies, supersedes or replaces such statement. Any statement so
modified, superseded or replaced shall not be deemed, except as so modified,
superseded or replaced, to constitute a part of this prospectus.

22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

You should rely only on the information incorporated by reference, provided
in this prospectus or any supplement or that we have referred you to. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus or any supplement is accurate
as of any date other than the date on the front of those documents. However, you
should realize that the affairs of the Company may have changed since the date
of this prospectus. This prospectus will not reflect such changes. You should
not consider this prospectus to be an offer or solicitation relating to the
securities in any jurisdiction in which such an offer or solicitation relating
to the securities is not authorized, if the person making the offer or
solicitation is not qualified to do so, or if it is unlawful for you to receive
such an offer or solicitation.

ACACIA RESEARCH
CORPORATION

2,345,116 SHARES OF
COMMON STOCK

---------------------

PROSPECTUS

---------------------

February , 2000

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses in connection with the registration of shares of the Selling
Securityholders will be borne by the Company and are estimated as follows:

<S> <C>
Commission registration fee................................. $31,729
Printing and engraving...................................... 2,000
Accounting fees and expenses................................ 2,000
Legal fees and expenses..................................... 10,000
Miscellaneous expenses...................................... 5,000

Total....................................................... $50,729
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation provides for the elimination of
personal monetary liability of directors to the fullest extent permissible under
Delaware law. Delaware law does not permit the elimination or limitation of
director monetary liability for: (i) breaches of the director's duty of loyalty
to the corporation or its stockholders; (ii) acts or omissions not in good faith
or involving intentional misconduct or knowing violations of law; (iii) the
payment of unlawful dividends or unlawful stock repurchases or redemptions or
(iv) transactions in which the director received an improper personal benefit.

The Company's Bylaws provide for the indemnification to fullest extent
permitted by applicable law of any person who was or is made or is threatened to
be made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of his or
her current or past service to the Company, against all liability and loss
suffered and expenses (including attorney' fees) reasonably incurred by such
person.

The Company plans to enter into agreements (the "Indemnification
Agreements") with each of the directors and executive officers of the Company
pursuant to which the Company has agreed to indemnify such director or executive
officer from claims, liabilities, damages, expenses, losses, costs, penalties or
amounts paid in settlement incurred by such director or executive officer in or
arising out of such person's capacity as a director or executive officer of the
Company or any other corporation of which such person is a director at the
request of the Company to the maximum extent provided by applicable law. In
addition, such director or executive officer will be entitled to an advance of
expenses to the maximum extent authorized or permitted by law.

To the extent that the Board of Directors or the stockholders of the Company
may in the future wish to limit or repeal the ability of the Company to provide
indemnification as set forth in the Certificate of Incorporation, such repeal or
limitation may not be effective as to directors and executive officers who are
parties to the Indemnification Agreements, because their rights to full
protection would be contractually assured by the Indemnification Agreements. It
is anticipated that similar contracts may be entered into, from time to time,
with future directors of the Company.

ITEM 16. EXHIBITS

See the attached Exhibit Index that follows the signature page.

II-1
<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-2
<PAGE>
ITEM 17. UNDERTAKINGS (CONTINUED)

(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-3
<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 of 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 the
4th day of February, 2000.

<TABLE>
<S> <C> <C>
ACACIA RESEARCH CORPORATION

By: *
-----------------------------------------
Paul R. Ryan
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

Director, President and
* Chief Executive Officer
------------------------------------------- (Principal Executive February 4, 2000
Paul R. Ryan Officer)

* Chief Financial Officer
------------------------------------------- (Principal Financial February 4, 2000
Peter Frank Officer)

*
------------------------------------------- Controller (Principal February 4, 2000
Mary Rose Colonna Accounting Officer)

*
------------------------------------------- Chairman of the Board February 4, 2000
R. Bruce Stewart

*
------------------------------------------- Director February 4, 2000
Thomas B. Akin

*
------------------------------------------- Director February 4, 2000
Fred A. de Boom

*
------------------------------------------- Director February 4, 2000
Edward W. Frykman
</TABLE>

<TABLE>
<S> <C>
*By: /s/ KATHRYN KING-VAN WIE
--------------------------------------
Kathryn King-Van Wie
ATTORNEY-IN-FACT
</TABLE>

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.1 Form of Common Stock Warrant Agreement issued as part of the
December 1999 private placement (3)

4.2 Form of Specimen Certificate of Company's Common Stock (1)

4.3 Form of Option Agreement constituting the 1996 Executive
Stock Bonus Plan (2)

4.4 Form of Option Award Agreement with Michael Conniff.

5.1 Opinion of Counsel re: legality of securities being
registered (3)

23.1 Consent of Independent Accountants (Finocchiaro & Co.)

23.2 Consent of Independent Accountants (PricewaterhouseCoopers
LLP)

23.3 Consent of Counsel (included in Exhibit 5.1) (3)

24.1 Powers of Attorney (3)
</TABLE>

- ------------------------

(1) Previously filed by Registrant with Amendment No. 2 on Form 8-A/A on
December 30, 1999 (SEC File No. 000-26068)

(2) Previously filed by Registrant as Appendix A to its Definitive Proxy
Statement on Schedule 14A on April 26, 1996 (SEC File No. 000-26068).

(3) Previously filed by Registrant with Registration Statement on Form S-3 on
January 25, 2000 (SEC File No. 333-95373) and incorporated by reference

II-5

<PAGE>

EXHIBIT 23.1

INDEPENDENT AUDITOR'S CONSENT

We hereby consent to the incorporation by reference in this Amendment
No. 1 to the Registration Statement of Acacia Research Corporation on Form
S-3(SEC File No.333-95373) of our report dated March 25, 1998 on our audits of
the consolidated financial statements of Acacia Research Corporation as of
December 31, 1996 and for the year ended December 31, 1996, incorporated by
reference into the Annual Report on Form 10-K of Acacia Research Corporation
for the fiscal year ended December 31, 1998. We also consent to the reference
to us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.

/s/ FINOCCHIARO & CO.
- -------------------------------

Finocchiaro & Co.

Pasadena, California
February 4, 2000

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in this Amendment
No.1 to the Registration Statement on Form S-3 (SEC File No.333-95373) of our
report dated March 26, 1999 relating to the financial statements and
financial statement schedules, which appears in Acacia Research Corporation's
Annual Report on Form 10-K for the year ended December 31, 1998. We also
consent to the reference to us under the heading "Experts" in such
Registration Statement.

/s/ PricewaterhouseCoopers LLP
- ----------------------------------

PricewaterhouseCoopers LLP

Los Angeles, California
February 4, 2000

<PAGE>

EXHIBIT 4.4

FORM OF

ACACIA RESEARCH CORPORATION

OPTION AWARD AGREEMENT

THIS AGREEMENT, dated and effective as of December 2, 1998,
between Acacia Research Corporation, a California corporation (the "Company"),
and Michael Cunniff (the "Recipient").

W I T N E S S E T H:

WHEREAS, pursuant to a resolution adopted by the Compensation Committee
of the Board of Directors of the Company (the "Board") in November 1998 (the
"Resolution"), the Company has granted to the Recipient, effective as of
December 2, 1998 (the "Award Date"), a nonqualified stock option to purchase all
or any part of 12,000 authorized but unissued or treasury shares of common
stock, no par value per share ("Common Stock"), of the Company upon the terms
and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:

GRANT OF OPTION. This Agreement evidences the Company's
grant to the Recipient of the right and option to purchase, on the terms and
conditions set forth herein, all or any part of an aggregate of 12,000 shares
of Common Stock at the price of $4.6875 per share (the "Option"), exercisable
from time to time, subject to the provisions of this Agreement, prior to the
close of business on the day before the thirty-six (36) month anniversary of
the Award Date (the "Expiration Date").

EXERCISABILITY OF OPTION. The Option shall vest in
installments for a number of shares (subject to adjustment pursuant to
Section 5 of this Agreement) as follows:

Date of Vesting Number of Shares (subject
of Option to adjustment) as to
Installment which Option vests

December 2, 1998 1,000

each monthly anniversary
thereafter, on the 1st of each
month for a period of 11 months
until November 2, 1999 1,000

To the extent the Recipient does not in any year purchase
all or any part of the shares to which the Recipient is entitled, the Recipient
has the right cumulatively thereafter to purchase any shares not so purchased
and such right shall continue until the Option terminates or expires. Fractional
share interests shall be disregarded, but may be cumulated. No fewer than 1,000
shares may be purchased at any one time, unless the number purchased is the
total number at the time available for purchase under the Option.

METHOD OF EXERCISE OF OPTION. The Option shall be
exercisable by the delivery to the Company of a written notice stating the
number of shares to be purchased pursuant to the Option and accompanied by
payment of the aggregate purchase price for the shares to be

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<PAGE>

purchased, which payment may be made in whole or in part by the delivery of
cash, electronic funds transfer or check;

EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. The Option
and all other rights hereunder, to the extent not exercised, shall terminate
and become null and void on a date three months following such date as the
Recipient ceases to be employed by the Company (or a subsidiary of the
Company) or dies, to the extent the Option was exercisable at the date of
such termination or death; provided, however, that in no event may the Option
be exercised by anyone under this Section or otherwise after the Expiration
Date.

ADJUSTMENTS. If the outstanding shares of Common Stock are
(i) increased, decreased, exchanged or converted as a result of a stock split
(including a split in the form of a stock dividend), reverse stock split, or the
like, or (ii) exchanged for or converted into cash, property or a different
number or kind of securities as a result of a reorganization, merger,
consolidation, recapitalization, restructuring, or reclassification, then,
subject to the terms of such transaction and the right of the Board to terminate
the Option pursuant to Section 6 of this Agreement, the Board shall make
equitable, appropriate and proportionate adjustments in the number and type of
shares that may be acquired pursuant to the Option, and such other terms as
necessarily are affected by such event.

TERMINATION OF OPTION UNDER CERTAIN EVENTS. The Board
retains the right to terminate the Option to the extent not previously exercised
upon an event or transaction in which the Company does not survive; provided,
that the Company shall have given to the Recipient at least five days notice of
any such termination of the Option, and the Recipient shall have had the right
prior to or simultaneously with the consummation of such event or other
transaction to exercise the Option as to all or any part of the shares of Common
Stock subject to this Agreement.

NON-TRANSFERABILITY OF OPTION. The Option and any other
rights of the Recipient under this Agreement are nontransferable by the
Recipient other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and the Option is
exercisable only by the Recipient (or such permitted transferee). The
designation of a beneficiary in the case of the Recipient's death consistent
with applicable law and the terms of this Agreement shall not constitute a
transfer.

TAX WITHHOLDING. Upon any exercise of the Option, the
Company shall have the right at its option to require the Recipient (or his or
her heirs, personal representative or beneficiary, as the case may be) to pay or
provide for payment of the amount of any taxes that the Company may be required
to withhold with respect to such transaction. In any case where a tax is
required to be withheld in connection with the delivery of shares of Common
Stock under this Agreement, the Recipient may elect to have the Company reduce
the number of shares to be delivered by (or otherwise reacquire) the appropriate
number of shares valued at their then fair market value, to satisfy such
withholding obligation.

COMPLIANCE WITH LAWS. This Agreement, the vesting of the
Option under this Agreement and the issuance and delivery of shares of Common
Stock and/or the payment of the purchase price under this Agreement are subject
to compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Agreement shall be subject to such restrictions and the person acquiring
such securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements.

GOVERNING LAW; SEVERABILITY. This Agreement shall be
governed by, and construed in accordance with the laws of the state of
California. If any provision shall be held by a

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<PAGE>

court of competent jurisdiction to be invalid and unenforceable, the
remaining provisions of this Agreement shall continue in effect.

NOTICES. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to the Company at its principal
office located at 12 South Raymond Avenue, Pasadena, California 91105, to the
attention of Kathryn King-Van Wie and to the Recipient at the address given
beneath the Recipient's signature hereto, or at such other address as either
party may hereafter designate in writing to the other.

IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed on its behalf by a duly authorized officer and the Recipient has
hereunto set his or her hand.

ACACIA RESEARCH CORPORATION

By:
------------------------

Title:
---------------------

RECIPIENT

---------------------------

Name:
----------------------

--------------------------
(Address)

--------------------------
(City, State, Zip)

-3-

<PAGE>

CONSENT OF SPOUSE

In consideration of the execution of the foregoing
Nonqualified Stock Option Agreement by Acacia Research Corporation and
Michael Cunniff ("Recipient"), I, ____________________________, the spouse
of Recipient, do hereby join with my spouse in executing the foregoing
Option Award Agreement and do hereby agree to be bound by all of the terms
and provisions thereof.

DATED: , 1998
----------------------- --------------------------

Signature of Spouse

--------------------------
(Print Name)

-4-