AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25,AUGUST 7, 2000
                                                     REGISTRATION NO. 333-
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

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                                   FORM S-3
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933

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                          ACACIA RESEARCH CORPORATION
            (Exact name of registrant as specified in its charter)(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                            
                   DELAWARE                                      95-4405754
        (State or other jurisdiction                          (I.R.S. Employer
      of Identification Number)
                incorporation or organization)                    Identification Number)
55 SOUTH LAKE AVENUE PASADENA, CALIFORNIA 91101 (626) 396-8300 (Address, including zip code, and telephone number, including area code, of registrants'Registrants' principal executive offices) -------------------------- KATHRYN KING-VAN WIE, CHIEF OPERATING OFFICER---------------- VICTORIA WHITE VICE PRESIDENT, LEGAL AFFAIRS 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'MelvenyJOHN A. LACO O'MELVENY & MyersMYERS LLP 1999 Avenue of the Stars 7th Floor Los Angeles, California 90067-6035 (310) 553-6700 --------------------------400 SOUTH HOPE STREET LOS ANGELES, CALIFORNIA 90071 (213) 430-6000 ---------------- 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. --------------------------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/[X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /[_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /[_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ------------------------ CALCULATION OF REGISTRATION FEE
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 Common Stock, $0.001 par value per share 2,345,116 $51.25(3) $120,187,195(3) $31,729.42
(1) Includes a number of shares of Common Stock initially issuable upon exercise of certain warrants[_] (Continued on next page) The information contained in this Preliminary Prospectus is not complete and options held by themay be changed. The Selling Securityholders and,may not sell these securities pursuant to Rule 416 underthis Prospectus until the Registration Statement filed with the Securities Act,and Exchange Commission is effective. This Prospectus is not an indeterminate number of shares of Common Stock as may be issued from timeoffer to time upon exercise of such warrantssell these securities and options by reason of adjustment ofit is not soliciting an offer to buy these securities in any state where 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 Stockoffer or sale is based upon the average of the high and low prices of the Common Stock on the Nasdaq National Market on January 20, 2000. ------------------------------ 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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.not permitted. SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED JANUARY 25,AUGUST 7, 2000. PROSPECTUS ACACIA RESEARCH CORPORATION 2,345,1162,263,833 SHARES OF COMMON STOCK ---------------- Selling Securityholders who are identified in this prospectus may offer and sell from time to time up to 2,345,1162,263,833 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"."ACRI." On January 20,August 4, 2000, the closing sale price of the common stock, as reported by Nasdaq, was $50.25$26.75 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 75 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 January ___,August , 2000. TABLE OF CONTENTS
PAGE ------------ The Company................................................................ 1 Recent Developments........................................................ 3 Risk Factors............................................................... 5 Forward-Looking Statements.................................. 2 The Company................................................. 3 Recent Developments......................................... 5 Risk Factors................................................ 7Statements................................................. 15 Use of Proceeds............................................. 16Proceeds............................................................ 15 Selling Securityholders.....................................Securityholders.................................................... 16
PAGE ---- Plan of Distribution........................................ 20Distribution....................................................... 18 Legal Matters............................................... 20 Experts..................................................... 20Matters.............................................................. 18 Experts.................................................................... 18 Available Information....................................... 21Information...................................................... 18 Incorporation of Certain Documents by Reference............. 21Reference............................ 19
FORWARD-LOOKING STATEMENTS This prospectusi SUMMARY You should read the following summary together with the more detailed information about our company 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,common stock being sold in this offering, including "Risk Factors" and our ability to compete. Generally, "may," "will," "expect," "believe," "estimate," "anticipate," "intend," "continue"consolidated financial statements 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 statementsrelated notes, 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 usedelsewhere in this prospectus "Company," "we," "us" and "our" refer toor incorporated by reference. THE COMPANY Acacia Research Corporation develops and its affiliates. 2 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 operateoperates majority-owned subsidiaries and also acquireacquires strategic positions in other entities.companies. Our mission is to build new businesses. We focus primarily on technology-related companies. Our strategy is to achieve majority-ownership of new companies by internally developing new business ideas and by partnering with entrepreneurs. We provide management expertise, incubation services and capital to our subsidiaries. We also acquire minority positions in other emerging companies that we have identified as having significant growth potential. We believe business development focus, reputation and network of contacts provide us significant access to investment opportunities. We provide our subsidiaries with numerous operational and management services, especially in early stages of their development. Our corporate staff provides hands-on assistance in the areas of marketing, strategic planning, business development, technology, accounting and finance, legal, human resources and recruiting services. We also support our subsidiaries by providing capital and securing and structuring external financing. Our centralized infrastructure of experienced professionals allows the management of our subsidiaries to focus on developing their core businesses. This provides our subsidiaries with significant time and cost savings. We believe the entrepreneurial energy and creativity of the managers of our partner companies are essential components of their success and consequently we plan to keep them as independent businesses with the opportunity to go public. The entrepreneurs and their teams retain or are granted equity ownership and incentives in their own companies. This strategy enables us to partner with highly motivated entrepreneurs who have the opportunity to reap the rewards of their efforts by participating in the value they create. 1 Through our consolidatedmajority-owned subsidiaries, we engage in a variety of technology-related businesses such as: Internet business incubation, biochips,the following businesses:
Ownership % as of June 30, 2000 on an Company Name Description of Business as converted basis ------------ ----------------------- ------------------- Acacia Launchpad LLC.................... An incubator that 100.0% provides seed capital, management support and an environment for the rapid development of start-up companies. CombiMatrix Corporation................. A biotech company with a 58.4% proprietary biochip array processor system for the rapid, cost- competitive synthesis of DNA, peptides and other chemical compounds on a software programmable semiconductor chip. This proprietary technology has significant applications in the areas of genomics, proteomics and diagnostics. MerkWerks Corporation................... A technology company 99.9% developing a utility software product for use with CD-Recordable computer drives. Soundbreak.com Incorporated............. An new media company 66.9% featuring 24 hour video streaming of music performances and live performances hosted by professional talent targeting a demographic of viewers under age 35 and including extensive viewer interaction formats. Soundview Technologies Incorporated..... A technology company 66.7% that owns intellectual property related to the telecommunications field, including audio and video blanking systems, also known as "V-chip." We also hold minority interests in the following businesses: Ownership % as of June 30, 2000 on an Company Name Description of Business as converted basis ------------ ----------------------- ------------------- The EC Company.......................... A provider of business- 4.5% to-business Internet exchange transactions for mid-market suppliers. Greenwich Information Technologies LLC.. A marketing and 33.3% licensing agent for several patents relating to video-on-demand and audio-on-demand technology. Mediaconnex Communications, Inc......... An Internet business-to- 31.0% business company developing technology that will enable buying and selling of broadcast media. Signature-mail.com llc.................. A provider of on-demand 25.0% 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: 3 - 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.
2 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 waswere initially incorporated in the State of California on January 25, 1993, and conducted itsour initial public offering on June 15, 1995. Subsequently, we wereWe 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 January 20,August 4, 2000 as reported on the Nasdaq National Market was $50.25$26.75 per share. 4 The transfer agent and registrar for our common stock is U.S. Stock Transfer Corporation. As used in this prospectus, "we," "us" and "our" refer to Acacia Research Corporation and its consolidated subsidiaries. Throughout this prospectus, Launchpad, CombiMatrix, The EC Company, Greenwich Information Technologies, Mediaconnex, MerkWerks, Signature-mail.com, Soundbreak.com and Soundview Technologies are collectively referred to as our partner companies; however, we do not act as an agent or legal representative for any of our partner companies and we do not have the types of liabilities for our partner companies that a general partner of a partnership would have. See "Risk Factors" for certain risks associated with individual partner companies. 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.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. 5 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 inout of a $17.3 million private placement of "non-voting" Series B round financing. 6Preferred Stock. The EC Company is a corporation engaged in business-to- business Internet exchange transactions for mid-market suppliers. In February 2000, we issued a 30-day redemption notice for common stock purchase warrants issued in a December 1999 private placement. As a result, all of the warrants were exercised prior to the redemption date and we received proceeds of approximately $14.8 million for the issuance of 578,238 shares of common stock. In March 2000, CombiMatrix completed a private equity financing raising gross proceeds of $17.5 million through the sale of 3.5 million shares of CombiMatrix common stock. Acacia invested $10 million in this private placement to acquire 2 million shares of CombiMatrix. As a result of the transaction, Acacia increased equity ownership in CombiMatrix from 50.0% to 51.8%. Warrants to purchase 31,050 shares of CombiMatrix's common stock were issued to finders with a per share exercise price of $5.50. Also in March 2000, Soundbreak.com completed a "non-voting" Series C Preferred private equity financing raising gross proceeds of $19 million through the sale of shares of 188,437 Series C Preferred Stock. Acacia invested $9 million in this private placement to acquire 90,000 shares of Preferred Stock. As a result of the transaction, our equity ownership in Soundbreak.com decreased from 73.6% to 66.9%. Warrants to purchase 40,838 shares of Soundbreak.com's common stock were issued to finders with a per share exercise price of $6.66. Also in June 2000, we contributed capital to three early stage companies that are being incubated in Launchpad. In July 2000, we increased our ownership of CombiMatrix from 51.8 percent to 61.4 percent by acquiring additional ownership positions from existing shareholders of CombiMatrix in exchange for 488,557 restricted shares of common stock. This purchase will be accounted for as a step acquisition. The purchase price will be allocated to the fair value of assets acquired and liabilities assumed including acquired in-process research and development. Any amount attributed to in-process research and development will be charged to expense in the third quarter of 2000. The allocation of the purchase price is expected to be completed in the third quarter of 2000. 3 In July 2000, we completed a private offering of 861,638 units at $27.50 per unit for gross proceeds of approximately $23.7 million. Each unit consisted of one share of common stock and one common stock purchase warrant entitling the holder to purchase one share of common stock at an exercise price of $33.00 per share, subject to adjustment, expiring in three years. The warrants are callable by Acacia Research once the closing bid price of the Company's common stock averages $39.60 or above for 20 consecutive trading days on the Nasdaq National Market System. An additional 11,000 units were purchased by a finder pursuant to a Finder Agreement between Acacia and the finder. Also in July 2000, Gerald D. Knudson, the chief executive officer of CombiMatrix, was appointed to our Board of Directors. Robert L. Harris II was named President of the company. In August 2000, CombiMatrix completed a private equity financing raising gross proceeds of $36 million through the sale of 4 million shares of CombiMatrix common stock. We invested $17.5 million in this private placement to acquire 1,944,445 shares. As a result of the transaction, Acacia's equity ownership in CombiMatrix decreased from 61.4 % to 58.6%. In August 2000, CombiMatrix was granted a United States patent for its biochip array processor system, which enables quick and economical turnaround of custom-designed microarrays for use in biological research. The patent covers CombiMatrix's core technology, which is a method for producing microarrays by synthesizing biological materials on a three-dimensional, active surface. Our current new business focus is to identify and develop opportunities in the life science sector that will be created by commercialization of our subsidiary CombiMatrix's new biochip technology and other new technologies emerging in that sector. 4 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.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, other information contained in this prospectus and information we have incorporated by reference. If any of the following risks actually occur, our business could be harmed, the trading price of our common stock could decline, and you may lose all or part of your investment. BECAUSE OUR BUSINESS OPERATIONS ARE SUBJECT TO MANY INHERENT AND UNCONTROLLABLE RISKS, WE CANNOT ASSURE OUR SUCCESS.MAY NOT SUCCEED. We have significant economic interests in nine companies and take an active role in each enterprise's growth and advancement.our partner companies. Our business operations are therefore subject to numerous risks, and all of the problems,challenges, expenses and uncertainties inherent in the establishment of new business enterprises. Many of these risks and problemschallenges are subject to outside influences over which we have no control, includingincluding: . our partner companies' products and services face uncertain market acceptance; . technological advances uncertain market acceptance, competition,may make our partner companies' products and services obsolete or less competitive; . competition; . increases in operating costs, including costs offor supplies, personnel, equipment,and equipment; . the availability and cost of capital, changes incapital; . general economic conditionsconditions; and . governmental regulation imposed under federal, state or local laws.that excessively restricts our partner companies' businesses. We cannot assure you that our business venturespartner companies will be able to market any product or service on a commercial scale, that these business venturesour partner companies 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 involvedInvesting in emerging companies is marked bycarries 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.emerging companies. 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 ofwithout experienced management. We may not be successful in developing these start-up ventures. Because of the uncertainties and risks associated with such start-up ventures, you should expect substantial losses associated with failed ventures. In addition, marketsthe market for venture capital in the United States areis increasingly competitive. As a result, we may lose business opportunities and may be lost and the terms of availableneed to accept financing and equity investments in start-ups may deteriorate.on less favorable terms. Also, we may be unable to participate in additional ventures because we lack the financial resources to provide them with full funding. We, as well as our affiliates,partner companies, may need to depend on external financing to provide sufficient capital. 5 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; -partner companies; . the nature and timing of our investments in new businesses; -partner companies; . our decisions to acquire or divest interests in our current and future affiliatessubsidiaries may create changes in losses or income and amortization of goodwill; -. changes in our methods of accounting for our current and future affiliatessubsidiaries may cause us to recognize gains or losses under applicable accounting rules; -. the timing of the sales of securities ofequity interests in our current and future affiliates;partner companies; . our ability to effectively manage our growth and 7 -the growth of our partner companies; and . the cost of future acquisitionacquisitions 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 mostrevenue. OUR PARTNER COMPANIES OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY. None of our partner companies have generated any significant revenues to date. We cannot assure that these companies will be able to meet their anticipated working capital needs to develop their products and services. If they fail to properly develop these products and services, they will be unable to generate meaningful product sales. We anticipate that these partner companies operating results are likely to vary significantly as a result of a number of factors, including: . the timing of new product introductions by each partner company; . the stage of development of the business of each partner company; . the technical feasibility of each partner company's technologies and techniques; . the novelty of the technology owned by these partner companies; . the level of product acceptance; . the strength of each partner company's intellectual property rights; . each partner company's ability to exploit and commercialize its technology; . the volume and timing of orders received and product line maturation; . the impact of price competition; and . each partner company's ability to access distribution channels. Many of these factors are beyond our partner company's control. We cannot provide any assurance that any partner company 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 DECREASE THE POSSIBILITY OF OUR SUCCESS. CombiMatrix. CombiMatrix is developing a proprietary biochip array processor system that integrates semiconductor technology with new developments in biotechnology and chemistry. Although CombiMatrix has been awarded three federal contracts, CombiMatrix is a developmental stage company without any significant current revenues. Its current activities relate almost exclusively to research and development. 6 In addition, because the technologies critical to the success of this industry are in their infancy, we cannot assure 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. The EC Company. The EC Company provides a hosted Internet transaction exchange that manages data standards and facilities trading relationships within and across communities to enable the exchange of business-to-business e- commerce transactions. To date, The EC Company is in the development stage and has created a minimal number of relationships with vendors and buyers for business-to-business e-commerce transactions. The EC Company's business model is new and unproven and we cannot give you any assurance that vendors and buyers will continue to use its services for Internet transactions. In addition, The EC Company faces significant competition in the business-to- business Internet market. Greenwich Information Technologies. Greenwich Information Technologies is the exclusive marketing and licensing agent for a number of domestic and international patents pertaining to information-on-demand systems. To date, Greenwich Information Technologies has yet to license any of its patents. 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. Launchpad. Launchpad was formed to incubate and accelerate the development of new companies. Launchpad will provide seed capital and an environment intended to promote growth of new companies and to enable them to get to the marketplace quickly. Launchpad's business model is new and unproven and may not be able to develop successful emerging companies. Mediaconnex. Mediaconnex develops software that performs inventory and sales management functions for television and cable broadcasters using the Internet. To date, Mediaconnex has not generated any revenues nor signed contracts with significant customers. We cannot provide assurance that Mediaconnex will ever be able to successfully market its services. MerkWerks. MerkWerks was formed as a software development company. Its first product is software for use with CD-Recordable disk drives for Macintosh platforms. MerkWerks is in the developmental stage and, to date, has not generated any revenues. We cannot provide assurance that MerkWerks will ever be able to successfully market its products. MerkWerks' success will depend on whether it is accepted by original equipment manufacturers (OEMs) that produce CD-Recordable disk drives. We cannot assure that MerkWerks' software will gain the acceptance of OEMs or ever be incorporated into CD-Recordable disk drives. Signature-mail.com. Signature-mail.com has developed software services for use on the Internet that personalize e-mail with proprietary mass customization technologies. To date, Signature-mail.com has not generated meaningful revenues. We cannot provide assurance that Signature-mail.com will ever be able to successfully market its products. Soundbreak.com. Soundbreak is a 24-hour worldwide web-cast site providing music programming, user participation and music-related e-commerce. Soundbreak is in the developmental stage and market acceptance for Soundbreak is uncertain. We cannot provide assurance that Soundbreak will generate revenues or achieve profitability. In addition, the industry it is entering is a rapidly changing and highly competitive environment. Soundbreak's success depends on its ability to develop or obtain sufficiently compelling content to attract and retain an 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. 7 Soundview Technologies. Soundview Technologies was formed 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. It is uncertain if and to what extent Soundview Technologies will be able to profitably exploit its technology. WE MAY NEED TO SEEK ADDITIONAL FINANCING IN THE FUTURE FOR OURSELVES OR OUR PARTNER COMPANIES, BUT CANNOT PROVIDE ASSURANCE THAT WE WILL BE ABLE TO OBTAIN NEEDED FINANCING ON FAVORABLE TERMS. As of March 31, 2000, we had working capital of $63.8 million and as of June 30, 2000 stockholders' equity of $52.3 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. To date, our partner companies have comeprimarily relied upon selling equity securities, including sales to and loans from sellingus, to generate the securitiesfunds they needed to finance implementing their plans of operations. Our partner companies 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 affiliates.equity interest. We cannot assure 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 that additional funding will be available on favorable terms, if at all. BECAUSE EACH PARTNER COMPANY'S SUCCESS GREATLY DEPENDS ON THEIR ABILITY TO DEVELOP AND MARKET NEW PRODUCTS AND SERVICES AND TO RESPOND TO THE RAPID CHANGES IN TECHNOLOGY AND DISTRIBUTION CHANNELS, WE CANNOT ASSURE THAT OUR PARTNER COMPANIES WILL BE SUCCESSFUL IN THE FUTURE. The markets for each partner company's products are marked by extensive competition, rapidly changing technology, frequent product and service improvements, and evolving industry standards. We cannot assure you that our partner company's existing or future products and services will be successful or profitable. We also cannot assure you that competitor's products, services or technologies will not render our partner companies' products and services noncompetitive or obsolete. Our success will depend on our partner companies' ability to adapt to this rapidly evolving marketplace and to develop and market new products and services or enhance existing ones to meet changing customer demands. Our partner companies may be unable to adequately adapt products and services or acquire new products and services that can compete successfully. In addition, our partner companies may be unable to establish and maintain effective distribution channels. OUR FUTURE PLANS DEPEND GREATLY ON INCREASED USE OF THE INTERNET BY BUSINESSBUSINESSES 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 U.S. or other governments enact any additional laws or regulations it may impede the growth of the Internet and our Internet-related businessbusinesses 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. 8 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 9 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 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 AFFILIATESPARTNER COMPANIES IN THE INTERNET MARKET ARE SUBJECT TO INTENSE COMPETITION, IN THE INTERNET MARKET, WE MAY BE UNSUCCESSFUL AND COMPETITION MAY DRIVEREDUCE OUR POTENTIAL REVENUES DOWN.REVENUES. 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. WeOur partner companies 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 PARTNER COMPANIES THAT WE HAVE ACQUIRED AND DEVELOPED PRESENTS RISKS. An element of our business plan involves selling, in public or private offerings, our affiliatespartner companies and future subsidiarypartner companies, or portions thereof, that we have acquired and developed. Market and other conditions largely beyond our control affect: -. our ability to engage ineffect these sales; -. the timing of these sales; and -. the amount of proceeds from these sales. As a result, we may not be able to sell some or any of these assets. In addition, even if we are able to sell, we may not be able to sell at favorable prices. 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 subsidiarypartner companies and their respective businesses grow, we will be required to manage multiple relationships. Any further growth by us or our subsidiarypartner companies or an increase in the number of our strategic relationships will increase this strain on the Company'sour 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 subsidiaries. IF OUR AFFILIATESBUSINESS AND OUR PARTNER COMPANIES ARE SUCCESSFUL, THEYTO SUCCEED, WE WILL NEED QUALIFIED MARKETINGTO ATTRACT AND SALESRETAIN QUALIFIED PERSONNEL. WE CANNOT ASSURE YOU THAT OUR AFFILIATESWE WILL BE ABLE TO ASSEMBLE AND RETAIN THE NECESSARY MANAGEMENT AND MARKETING TEAMS. If CombiMatrix, Mediaconnex, MerkWerks, Greenwich Information Technologies, Signature-mail, Soundbreak,We believe that our success will depend on continued employment by us and Soundview Technologiesour partner companies of senior management and key technical personnel. Our partner companies will need to attract, retain and motivate qualified management personnel to execute their current plans and to 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.services. 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,addition, CombiMatrix and MerkWerks currently intend to develop, market, sell and license their respective products and services directly to customers. Because CombiMatrix and MerkWerks have not completed research and development of their products, they have not hired marketing and sales personnel or finalized strategic marketing plans. We cannot assure you that either CombiMatrix or MerkWerks will be able to attract and retain qualified marketing and sales personnel or that any marketing efforts undertaken by them will be successful. 9 Each of our partner companies has key executives upon whom we significantly depend and the success of our business and each of our affiliates will also be greatly determinedthose partner companies depends on our ability to retain and motivate thethose individuals. We do not maintain key person life insurance on any of these individuals, discussed in the following paragraphs. COMBIMATRIX.except for CombiMatrix's success will significantly depend upon the continued services of CombiMatrix's Vice President-Research and Development. Wedevelopment, on whom 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 AFFILIATESPARTNER COMPANIES 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.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 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 technologicalMany of these competitors have greater financial and other resources, and more experience in research and development, than CombiMatrix. Technological advances or entirely different approaches developed by one or more of CombiMatrix's competitors.competitors could render CombiMatrix's processes obsolete or uneconomical. 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 industryEC Company. Competition for Internet products and services is highly competitive. Signature-mail seeksintense. The EC Company competes for a share of a customer's purchasing budget for services, materials and supplies with other online providers and traditional distribution channels. Several companies offer competitive solutions that compete with The EC Company. We expect that additional companies will offer competing solutions on a stand-alone or combined basis in the future. Furthermore, competitors may develop Internet products or services that are superior to, prevent competition through proprietary technology. Signature-mailor have greater market acceptance than, the solutions offered by The EC Company. Many competitors have greater brand recognition and greater financial, marketing and other resources than The EC Company. This may place The EC Company at a disadvantage in responding to their competitors pricing strategies, technological advances, advertising campaigns, strategic partnerships and other initiatives. Greenwich Information Technologies. Although we believe that Greenwich Information Technologies has five pending patent applications. However, nomarketing and licensing rights to enforceable patents have been issued yet and other intellectual property relating to video and audio on demand, we cannot assure you that other companies will not develop competing technologies that offer better or less expensive alternatives to those offered by Greenwich Information Technologies. In the patents will be issued, they will withstand challengesevent a competing technology emerges, Greenwich Information Technologies would expect substantial competition. Potential competitors could have significantly greater research capabilities and financial and technical resources than Greenwich Information Technologies, and some could have established brand names in the market for such products. Launchpad. There are a significant number of other Internet incubators, such as Internet Capital Group, Inc., CMGI, Inc., and idealab!, each competing for the same opportunities. In addition, Launchpad faces competition from other capital providers, including publicly-traded Internet companies, venture capital companies and large corporations. Many of these competitors have greater financial resources and brand name recognition than Launchpad. These competitors may limit Launchpad's opportunities. Mediaconnex. The market for the sale of commercial inventory for television and cable broadcasters is highly competitive and rapidly changing. In addition to their validity or that they will have sufficiently broad scope to effectively limit competitionthe long-standing traditional sales channels, there are a number of newly created Internet-based sites competing for market acceptance among the broadcasters and media buyers. Because Mediaconnex's software is not yet complete, acceptance of its software product. MERKWERKS.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. MerkWerks. There are several CD-recordablea number of 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 10 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.Signature-mail.com. The market for the online promotion and distribution of music and related merchandisesoftware industry is highly competitive. Signature- mail.com seeks to achieve a competitive advantage through proprietary technology. Signature-mail.com has ten pending patent applications. However, no patents have been issued yet and rapidly changing.we cannot be certain that any patents will be issued, that they will withstand challenges to their validity or that they will have sufficiently broad scope to effectively limit competition for Signature- mail.com's software product. Soundbreak.com. The number of Web siteswebsites 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 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 sitesSoundbreak.com. Websites 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 forwebsite. Soundview Technologies. We believe that Soundview Technologies' V-chip technology is protected by enforceable patent rights. However, no assurances can be given that other companies will not develop competing technologies that offer better or less expensive alternatives to those offered by Soundview Technologies. Many potential competitors, including television manufacturers, have significantly greater research capabilities and cable broadcasters is highly competitivefinancial 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 broadcasterstechnical resources than Soundview Technologies and media buyers. Because Mediaconnex's software is not yet complete, acceptance of its software and business modelmay have established brand names 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.market. WE CANNOT ASSURE THAT WE WILL BE ABLE TO EFFECTIVELY PROTECT OUR AFFILIATES'PARTNER COMPANIES' PROPRIETARY TECHNOLOGY. The success of the business of CombiMatrix, Greenwich Information Technologies, Signature-mail, Soundview Technologies, Mediaconnex and MerkWerksour partner companies relies, to varying degrees, on proprietary rights and their protection or exclusivity. Although reasonable efforts will be taken to protect their proprietary rights, the complexity of international trade secret, copyright, trademark and patent law, and common law, coupled with limited resources and the demands of quick delivery of products and services to market, create risk that these efforts will prove inadequate. For certain partner companies, such as Greenwich Information Technologies and Soundview Technologies, proprietary rights constitute the only significant assets of such company. CombiMatrix, Greenwich Information Technologies, Signature-mailSignature-mail.com and Soundview Technologies will depend largely on the protection of enforceable patent rights. Mediaconnex, CombiMatrix and Signature-mail currentlyThey have applications on file with the U.S. Patent and Trademark Office seeking patents on their core technologies while Greenwich Information Technologies and Soundview Technologiesand/or 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.issued. We cannot assure you that the pending patent applications will issue,be issued, that third 11 parties will not violate, or attempt to invalidate the affiliates'these intellectual property rights, or that certain aspects of the affiliates'their intellectual property will not be reverse-engineered by third parties without violating the affiliates' proprietarytheir patent rights. In additionMany of our partner companies also own licenses from third parties and it is possible that they could become subject to infringement actions based upon such licenses. Our partner companies generally obtain representations as to the protection thatorigin and ownership of such licensed content; however, this may be afforded by patents and the various laws protecting proprietary rights, the affiliatesnot adequately protect them. Our partner companies also enter into confidentiality agreements with third parties and generally limit access to information relating to their intellectual property.proprietary rights. Despite these precautions, third parties may be able to gain access to and use their intellectual propertyproprietary rights to develop similar competing technologies and/or products.products with similar or better features and prices. Any substantial unauthorized use of the affiliates patent and otherour partner companies' proprietary rights could materially and adversely affect their business and operational results. Any disputes involving our partner companies' proprietary rights, with or without merit, could subject our partner companies to costly litigation and the diversion of their technical and management personnel. On April 5, 2000, Soundview Technologies filed a patent and antitrust lawsuit against Sony Corporation of America, Philips Electronics North America Corporation, the Consumer Electronics Manufacturers Association, and the Consumer Electronics Association in the federal district court alleging that Sony and Philips television sets fitted with "V-chips" infringe Soundview Technologies' patent. However, no assurance can be given that Soundview Technologies will prevail in that action or that the television manufacturers will be required to pay royalties to Soundview Technologies. See "Business--Soundview Technologies" below. WE COULD BE SUBJECT TO INFRINGEMENT CLAIMS ON PROPRIETARY RIGHTS. From time to time, we may be subject to third party claims in the ordinary course of business, including claims of alleged infringement of proprietary rights by us and our partner companies. Any such claims may damage our business by: . subjecting us and our partner companies to significant liability for damages; . invalidating proprietary rights held by our partner companies; . being time-consuming and expensive to defend even if such claims are not meritorious; and . resulting in the diversion of management time and attention. BECAUSE EACH AFFILIATE'S SUCCESS GREATLY DEPENDS ON THEIR ABILITY TO DEVELOP AND MARKET NEW PRODUCTS AND SERVICES,WE HAVE A LIMITED OPERATING HISTORY, WE CANNOT ASSURE YOU THAT OUR AFFILIATESOPERATIONS WILL BE SUCCESSFUL IN THE FUTURE. The markets for each affiliate's productsPROFITABLE. We commenced operations in 1993 and, accordingly, have a limited operating history. In addition, many of our partner companies are also marked by extensive competition, rapidly changing technology, frequent product improvements,in the early stages of development 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 needshave limited operating histories. You should consider our prospects in light of the market. Werisks, expenses, and difficulties frequently encountered by companies with such limited operating histories. Since we have a limited operating history, we cannot assure you that our affiliates' existing or future products and servicesoperations will be successfulprofitable or profitable. In addition,that we cannot assure you other developers' products, services or technologies will not rendergenerate sufficient revenues to meet our affiliates' productsexpenditures and services noncompetitive or obsolete. 14 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,support our activities. During the fiscal year ended December 31, 1999, we had working capitalan operating loss of $12.4approximately $10.4 million and stockholders' equitya net loss of $16.7approximately $8.2 million. During the six months ended June 30, 2000, we had an operating loss of approximately $9.8 million based onand a net loss of approximately $16.8 million. If we continue to have operating losses, we may not have enough money to expand our consolidated financial statements. However, a portion of these funds were held bybusiness and our consolidated subsidiaries and thus are restricted to usepartner companies' businesses 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.future. 12 ALTHOUGH WE HOLD MINORITY POSITIONS IN CERTAIN AFFILIATES,SUBSIDIARIES, WE DO NOT HAVE THE ABILITY TO CONTROL THEIR DECISION MAKING OR DAY TO DAYDAY-TO-DAY OPERATIONS. WHITEWING.The EC Company. We currently own 532,459 shares of Whitewing's common stock (18.6% of the outstanding shares)a 4.5% interest in The EC Company and have voting control over 789,709 shares Whitewing's common stock (27.4%no board representation. Additional rounds of the outstanding shares). R. Bruce Stewart,equity financing may further dilute 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, butinterest in The EC Company. We do not have the ability to control the decision-making at Whitewing. GREENWICH INFORMATION TECHNOLOGIES.The EC Company. 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 toits 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.Mediaconnex. We currently own 74%73.77% 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 Boardboard of Directorsdirectors of Mediaconnex, giving Acaciaus the right to control 40% of the Board of Directors.board. To date, Paul Ryan, the CEO of Acaciaour Chief Executive Officer, and Peter Frank, the CFO of Acacia,Amit Kumar, Vice President, Life Sciences, have been appointed to the Boardboard of Directors.directors of Mediaconnex. This minority position and board representation will give Acaciagives us influence over, but not the ability to control, the decision-making at Mediaconnex. The day to day operationsSignature-mail.com. We have a membership interest of 25.0% in Signature- mail.com. Although we are currently controlled by Sean Atkins, the President anda senior member of Signature-mail.com, we do not hold a majority of the board of three senior members, and we have no control over its day-to-day operations. SOME OF OUR FACILITIES ARE LOCATED NEAR MAJOR EARTHQUAKE FAULT LINES. Our facilities and the facilities of a number of our partner companies, including CombiMatrix, The EC Company, Launchpad, Mediaconnex, MerkWerks, and Soundbreak.com, are located near major earthquake fault lines. We could be materially and adversely affected in the event of a major earthquake. We have not obtained and do not presently intend to obtain earthquake insurance or business interruption coverage. WE MAY INCUR SIGNIFICANT COSTS TO AVOID INVESTMENT COMPANY STATUS AND MAY SUFFER ADVERSE CONSEQUENCES IF DEEMED TO BE AN INVESTMENT COMPANY. We may incur significant costs to avoid investment company status and may suffer other adverse consequences if deemed to be an investment company under the Investment Company Act of 1940. Some of our equity investments may constitute investment securities under the Investment Company Act. A company may be deemed to be an investment company if it owns investment securities with a value exceeding 40% of its total assets, subject to certain exclusions. Investment companies are subject to registration under, and compliance with, the Investment Company Act unless a particular exclusion or regulatory safe harbor applies. If we are deemed an investment company, we would become subject to the requirements of the Investment Company Act. As a consequence, we would be prohibited from engaging in business or issuing its securities as it has in the past and might be subject to civil and criminal penalties for noncompliance. In addition, certain of our contracts might be voidable, and a court-appointed receiver could take control of us and liquidate our business. Although we believe our investment securities currently comprise less than 40% of its assets, fluctuations in the value of these securities or of our other assets may cause this limit to be exceeded. This would require us to attempt to reduce its investment securities as a percentage of its total assets. This reduction can be attempted in a number of ways, including the disposition of investment securities and the acquisition of non-investment security assets. If we sell investment securities, we may sell them sooner than we otherwise would. These sales may be at depressed prices and we may never realize anticipated benefits from, or may incur losses on, these investments. Some investments may not be sold due to contractual or legal restrictions or the inability to locate a suitable buyer. Moreover, we may incur tax liabilities when we sells assets. We may also be unable to 13 purchase additional investment securities that may be important to our operating strategy. If we decide to acquire non-investment security assets, we may not be able to identify and acquire suitable assets and businesses. THE AVAILABILITY OF SHARES FOR SALE IN THE FUTURE COULD REDUCE THE MARKET PRICE OF OUR COMMON STOCK. In the future, we may issue securities to raise cash for acquisitions, and we may also pay for interests in additional partner companies by using a combination of cash and our common stock, or just our common stock. We may also issue securities convertible into our common stock. Any of these events may dilute your ownership interest in us and have an adverse impact on the price of our common stock. In addition, sales of a substantial amount of our common stock in the public market, or the perception that these sales may occur, could reduce the market price of our common stock. This could also impair our ability to raise additional capital through the sale of our securities. THERE MAY BE VOLATILITY IN OUR STOCK PRICE. Our common stock, which is quoted on the Nasdaq National Market, has experienced significant price and volume fluctuations. These fluctuations are likely to continue in the future. The market price of our common stock may decline below the price of the stock sold in this offering. The market prices of the securities of technology and Internet-related companies have been especially volatile. DELAWARE LAW AND OUR CHARTER DOCUMENTS CONTAIN PROVISIONS THAT COULD DISCOURAGE OR PREVENT A POTENTIAL TAKEOVER OF OUR COMPANY THAT MIGHT OTHERWISE RESULT IN OUR STOCKHOLDERS RECEIVING A PREMIUM OVER THE MARKET PRICE OF THEIR SHARES. Provisions of Delaware law and our certificate of incorporation and bylaws could make more difficult the acquisition of our company by means of a tender offer, proxy contest or otherwise, and the removal of incumbent officers and directors. These provisions include: . Section 203 of the Delaware General Corporation Law, which prohibits a merger with a 15%-or-greater stockholder, such as a party that has completed a successful tender offer, until three years after that party became a 15%-or-greater stockholder; . amendment of our bylaws by the shareholders requires a two-thirds approval of the outstanding shares; . the authorization in the certificate of incorporation of undesignated preferred stock, which could be issued without stockholder approval in a manner designed to prevent or discourage a takeover; . provisions in our bylaws eliminating stockholders' rights to call a special meeting of stockholders, which could make it more difficult for stockholders to wage a proxy contest for control of our board or to vote to repeal any of the anti-takeover provisions contained in our certificate of incorporation and bylaws; and . the division of our Board of Directors into three classes with staggered terms for each class, which could make it more difficult for an outsider to gain control of Mediaconnex. EC COMPANY.our Board of Directors. 14 FORWARD-LOOKING STATEMENTS This prospectus and the documents it incorporates by reference contain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. In particular, these statements include the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report. These statements may be identified by the use of forward-looking terminology such as "may," "will," "expect," "believe," "estimate," "anticipate," "intend," "continue," or similar terms, variations of such terms or the negative of such terms. These statements are based on management's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. These statements address future events and conditions concerning product development, capital expenditures, earnings, litigation, regulatory matters, markets for products and services, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those anticipated in these statements by reason of the factors described under the caption "Risk Factors" and such other factors such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments in markets in which we and our subsidiaries operate, and other circumstances affecting anticipated revenues and costs. We own a 7.6% interestexpressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward- looking statements contained in EC Company and have no board representation, therefore giving us abilitythis prospectus to control, the decision-making at EC Company. 15 reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. 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.$28,951,036. When and if we receive these funds, they will be used for general corporate purposes. 15 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, 974,771861,638 shares were issued to certain Selling Securityholders in a private placement completed in December 1999July 2000 pursuant to an exemption from registration contained in Regulation D promulgated under Section 4(2) of the Securities Act. An additional 487,387861,638 shares of common stock (subject to adjustment under certain circumstances) covered by this prospectus are issuable upon the exercise of common stock purchase warrants issued to certain Selling Securityholders in that private placement. We may redeem theseAn additional 11,000 shares and 11,000 warrants under certain circumstances. A further 720,000were issued pursuant to a purchase by a finder in such Private Placement. Another 488,557 shares of common stock (subject to adjustment under certain circumstances) covered by this prospectus are issuable upon the exercise of options issued to certain Selling Securityholders under our 1996 Executive Stock Bonus Plan approved by the Stockholders at our 1996 annual meeting. Another 60,107 shares of common stock were issued to certain Selling Securityholders in connection with a private transaction where we exchanged our common stock forseries of separate transactions to acquire additional equity interestinterests in MerkWerks. The remaining 102,851CombiMatrix. Another 30,000 shares of common stock offeredwere issued pursuant to this Prospectus (subject to adjustment) represent shares issuable uponan option exercise of certain options and other warrants held by certain selling securityholders.M. Robert Ching. 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,August 3, 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
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) -Maximum Number of Number of Shares Percent of Class Number of Shares Shares Which May Beneficially Beneficially Beneficially Owned Be Sold in This Owned After the Owned After The Selling Securityholders Prior to Offering(1) Offering(1) Offering(2) Offering(2) ----------------------- ----------------------------------------- ----------------- ---------------------- ---------------------------------- ---------------- Brooke P. Anderson (3).... 560,827 202,532 358,295 2.24 Dorothy L. Anderson Living Trust................... 6,314 314 6,000All Points Management Trust.................. 125,000 81,250 43,750 * Ivano Angelastri (4)...... 8,500 8,500(4)Aries Domestic Fund, L.P.................... 46,058 46,058 0 0 Milton Aronowitz Jr....... 1,688 1,688Aries Domestic Fund II, L.P.................... 12,948 12,948 0 0 The Balboa Fund........... 70,000 30,000 40,000 * Bank Leumi le-Israel...... 450,000 450,000Aries Master Fund II.... 86,450 86,450 0 0 Martin M. Berman.......... 169 169Balboa Fund L.P......... 80,008 78,788 1,220 * Balboa Fund Ltd......... 40,000 40,000 0 0 The Paul E. Berning SERP Trust................... 10,128 10,128Douglas Benson & Zinita Benson................. 29,250 29,250 0 0 R. Carlton Browne....... 4,636 3,636 1,000 * 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)Browne....... 29,818 21,818 8,000 * Chelonia Fund L.P....... 19,697 19,697 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(3)..... 672,500(4)(5) 30,000(4)(5) 642,500 4.46% Philip Ching & Beverly Ching.................. 41,665 20,313 21,352 * Victor Ching............ 10,261 8,125 2,136 * C. Perry Chu............ 8,636 6,500 2,136 * Priscilla Chu........... 4,063 4,063 0 0 Michael Cunniff (9)....... 12,000 12,000Crescent International. Ltd.................... 36,000 36,000 0 0 Alan Dietzak.............. 5,064 5,064Dimensional Partners, L.P.................... 148,400 148,400 0 0 Irene Farmer.............. 75,064 5,064 70,000 * First Associated (10)..... 2,008 2,008(10)Dimensional Partners, Ltd.................... 381,600 381,600 0 0 Fontana Family Trust...... 17,442 17,442John Drake.............. 343,820 73,125 270,695 1.88% Fred Finocchiaro........ 307,000 32,500 274,500 1.90% Hermes Partners, L.P.... 115,000 100,000 15,000 * Kevin Kennelly.......... 91,413 39,813 51,600 * David Lackey............ 108,000 10,595 97,405 * Calvin Layland.......... 58,157(6) 23,157(6) 35,000 * Christopher Lenzo....... 62,500 32,500 30,000 * William Moon............ 9,825 8,125 1,700 * Pequot Scout Fund, L.P.................... 36,364 36,364 0 0 Carl W. Fuller............ 25,000 15,000 10,000Donald Richey........... 18,100 8,938 9,162 * Gorman Trust (11)......... 5,000 5,000(11) 0 0 Jack Hengst Money Purchase Pension Plan............ 8,577 6,977 1,600 * 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).......... 87,500 67,500(15) 20,000 * Roger Lewis............... 5,950 950 5,000 * Liechtensteinische Landesbank.............. 30,000 30,000 0 0 Robert & Elva Medearis.... 6,977 6,977 0 0 Mill Creek Fund........... 7,500 7,500 0 0 Don Montgomery (16)....... 24,400 20,000 4,400 * David W. Moyer............ 6,752 6,752 0 0 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 Paul Ryan (17)............ 494,000(18) 200,000 294,000(18) 1.84 John E. Saunders.......... 548 548Royal Bank of Canada.... 436,364 436,364 0 0
1716
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) -Maximum Number of Number of Shares Percent of Class Number of Shares Shares Which May Beneficially Beneficially Beneficially Owned Be Sold in This Owned After the Owned After the Selling Securityholders Prior to Offering(1) Offering(1) Offering(2) Offering(2) ----------------------- ----------------------------------------- ----------------- ---------------------- ---------------------------------- ---------------- Ueli Schurch (19)......... 44,330 44,330(19)Seneca Capital, L.P..... 126,728 126,728 0 0 R. Bruce Stewart (20)..... 560,000 200,000 360,000 2.25 Thomas Stewart (21)....... 7,500 2,500(21) 5,000 * William Tipton............ 11,764 11,764Seneca Capital International Ltd...... 236,910 236,910 0 0 Bret Undem (22)........... 6,406 6,406(22)Vertical Ventures LLC (7).................... 22,000 22,000 0 0 Beat Zanitti.............. 60,000 60,000West Bay Investments, LLC.................... 10,000 10,000 0 0 Marc A. Zemp.............. 90,000 90,000 0 0 Judy Ziegler IRA.......... 3,255 3,255Scott Wilfong........... 11,818 11,818 0 0
- -------- * Less than one percent1% 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 asand underlying the underlying common stock purchase warrants as follows:
SHARES OF COMMON STOCK ISSUED IN PRIVATE SHARES UNDERLYING SELLING SECURITYHOLDERS PLACEMENT WARRANTSShares of Common Stock Shares Underlying Selling Securityholders Issued in Private Placement Warrants - ----------------------- ------------------------------------------------- ----------------- Aries Domestic Fund II, L.P. ... 6,474 6,474 Aries Domestic Fund, L.P........ 23,029 23,029 The Aries Master Fund II........ 43,225 43,225 Balboa Fund.............................................Fund Ltd................. 20,000 10,000 Bank Leumi le-Israel........................................ 300,000 150,00020,000 R. Carlton Browne II............ 1,818 1,818 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 2,326Browne............... 10,909 10,909 Crescent International Ltd...... 18,000 18,000 Dimensional Partners, L.P....... 74,200 74,200 Dimensional Partners, Ltd....... 190,800 190,800 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.............................................L.P............ 50,000 50,000 Pequot Scout Fund, L.P.......... 18,182 18,182 Royal Bank of Canada............ 218,182 218,182 Seneca Capital International Ltd. .......................... 118,455 118,455 Seneca Capital, L.P............. 63,364 63,364 Vertical Ventures LLC........... 11,000 11,000 West Bay Investments, LLC....... 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
- ---------------------------------- (2) Assumes that each Selling Securityholderselling Security holder 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.security holder. (3) Dr. Anderson is a director and officer of CombiMatrix. 18 (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)(4) 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)(5) Includes 7,500 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 sharesoption at an exercise price of $3.50 per share, expiring August 5, 2001. (9) Mr. Cunniff provides consulting services to(6) Includes shares beneficially owned by Dr. Layland issued in the Company. (10) The Gorman Trust received "Finder Warrants" to purchase 5,000 shares at an exercise pricename of $23.65 per share in connection with the December 1999 Private Placement. These warrants expire on December 9, 2002. (11) First Associated SecuritiesCalvin C. Layland Pension & Profit Sharing Plan. (7) Vertical Ventures LLC acted as a finder in connection with the December 1999July 2000 Private Placement and in such capacity received "Finder Warrants" to purchase 2,008 shares at an exercise price of $23.65 per share. These warrants expire 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 37,500 shares at an exercise price of $23.65 per share. These warrants expire on December 9, 2002 (16) Dr. Montgomery is a director and officer of CombiMatrix. (17) Mr. Ryan is a director and President and Chief Executive Officer of the Company. (18) Includes 75,000 shares which are subject to options, at an exercise price of $3.75 per share, expiring DecemberPlacement. 17 2002. (19) Mr. Schurch acted as a finder in connection with the December 1999 Private Placement and in such capacity received "Finder warrants" to purchase 11,780 shares at an exercise price of $23.65 per share. These warrants expire on December 9, 2002. (20) Mr. R. Bruce Stewart is the Chairman of the Board of Directors of the Company. (21) 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. (22) 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 19 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 intoin this prospectusProspectus by reference to the Annual Report on Form 10-K of Acacia Research Corporation for the yearsyear ended December 31, 1998 and December 31, 19971999 have been so includedincorporated 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 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.18 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. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC- 0300. The Commission also makes electronic filings publicly available on its Web site. Reports,site at http://www.sec.gov. Our common stock is traded on the Nasdaq National Market under the symbol "ACRI" and 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; -1999; . our quarterly reportsreport on Form 10-Q for the quartersquarter ended March 31, 1999, June 30, 1999 and September 30, 1999; -2000; . our current reportreports on Form 8-K event date December 28, 1999;filed on February 24, 2000 and -April 7, 2000; 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 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. 2219 - --------------------------------------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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.------------------------------------------------------------------------------- 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 OUR AFFAIRS 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 ---------------------2,263,833 Shares of Common Stock ---------------- PROSPECTUS --------------------- January---------------- August , 2000 - --------------------------------------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------------------------------------- PART II ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONOther 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:
Commission registration fee................................. $31,729fee......................................... $16,006 Printing and engraving......................................engraving.............................................. 2,000 Accounting fees and expenses................................expenses........................................ 2,000 Legal fees and expenses.....................................expenses............................................. 10,000 Miscellaneous expenses......................................expenses.............................................. 5,000 Total....................................................... $50,729------- Total............................................................. $35,006 =======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERSIndemnification 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. EXHIBITSExhibits See the attached Exhibit Index that follows the signature page. II-1 ITEM 17. UNDERTAKINGSUndertakings 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-effectivepost- 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,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 FIDEbona 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 FIDEbona 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 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 FIDEbona 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 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 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pasadena, State of California, on the 24th day of January,August 4, 2000. ACACIA RESEARCH CORPORATION By: /s/ PAUL R. RYAN ----------------------------------------- Paul R. Ryan PRESIDENT AND CHIEF EXECUTIVE OFFICER
ACACIA RESEARCH CORPORATION /s/ Paul R. Ryan By: _________________________________ Paul R. Ryan Chairman of the Board and Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, each person whose signature appears below constitutes and appoints Paul R. Ryan, Peter FrankRobert L. Harris II, and Kathryn King-Van Wie,Victoria White, his or her true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the Registration Statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 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.
SIGNATURE TITLE DATE --------- ----- ---- Director, President /s/ Paul R. Ryan Chairman of the Board and /s/ PAUL R. RYANAugust 4, 2000 ____________________________________ Chief Executive Officer ------------------------------------------- (Principal Executive January 24, 2000 Paul R. Ryan (Principal Executive Officer) /s/ PETER FRANK Chief Financial Officer ------------------------------------------- (Principal Financial January 24,Robert L. Harris Director and President August 4, 2000 Peter Frank Officer)____________________________________ Robert L. Harris /s/ MARY ROSE COLONNA ------------------------------------------- Controller (Principal January 24, 2000 Mary Rose Colonna Vice President, Finance and August 4, 2000 ____________________________________ Controller (Principal Mary Rose Colonna Accounting Officer) /s/ Thomas B. Akin Director August 4, 2000 ____________________________________ Thomas B. Akin
II-4
SIGNATURE TITLE DATE --------- ----- ---- /s/ R. BRUCE STEWART ------------------------------------------- Chairman of the Board January 24,Fred A. Boom Director August 4, 2000 R. Bruce Stewart /s/ THOMAS B. AKIN ------------------------------------------- Director January 24, 2000 Thomas B. Akin /s/ FRED A. DE BOOM ------------------------------------------- Director January 24, 2000____________________________________ Fred A. de Boom /s/ EDWARDEdward W. FRYKMAN -------------------------------------------Frykman Director January 24,August 4, 2000 ____________________________________ Edward W. Frykman /s/ Gerald Knudson Director August 4, 2000 ____________________________________ Gerald Knudson
II-5 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------------- ----------- 4.1 Form of Common Stock Warrant Agreement issued as part of the December 1999July 2000 private placement 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) 5.1 Opinion of Counsel re: legality of securities being registered 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) 24.1 Powers of Attorney (included on page II-3)S-1)
- -------------------------------- (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). II-6