Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2021 | May 07, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2021 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 001-37721 | |
Entity Registrant Name | ACACIA RESEARCH CORP | |
Entity Central Index Key | 0000934549 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 49,279,453 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
State of Incorporation | DE | |
Entity Shell Company | false |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 144,807 | $ 165,546 |
Equity securities at fair value | 180,320 | 109,103 |
Equity securities without readily determinable fair value | 116,946 | 143,257 |
Investment securities - equity method investments | 33,665 | 30,673 |
Investment at fair value | 0 | 2,752 |
Accounts receivable | 4,425 | 506 |
Prepaid expenses and other current assets | 2,647 | 5,832 |
Total current assets | 482,810 | 457,669 |
Long-term restricted cash | 35,419 | 35,000 |
Patents, net of accumulated amortization | 45,050 | 16,912 |
Leased right-of-use assets | 845 | 951 |
Other non-current assets | 4,834 | 4,988 |
Total assets | 568,958 | 515,520 |
Current liabilities: | ||
Accounts payable | 3,633 | 1,019 |
Accrued expenses and other current liabilities | 3,673 | 3,707 |
Accrued compensation | 2,017 | 2,265 |
Royalties and contingent legal fees payable | 2,445 | 2,162 |
Accrued patent investment costs | 10,000 | 0 |
Senior Secured Notes Payable - short-term | 116,211 | 115,663 |
Total current liabilities | 137,979 | 124,816 |
Series A warrant liabilities | 18,243 | 6,640 |
Series A embedded derivative liabilities | 40,419 | 26,728 |
Series B warrant liabilities | 225,956 | 52,341 |
Long-term lease liabilities | 845 | 951 |
Other long-term liabilities | 5,591 | 591 |
Total liabilities | 429,033 | 212,067 |
Commitments and contingencies | ||
Series A redeemable convertible preferred stock, par value $0.001 per share; stated value $100 per share; 350,000 shares authorized, issued and outstanding as of March 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $35,000 as of March 31, 2021 and December 31, 2020, respectively | 11,777 | 10,924 |
Stockholders' equity: | ||
Common stock, par value $0.001 per share; 300,000,000 shares authorized; 49,279,453 shares issued and outstanding as of March 31, 2021 and December 31, 2020 | 49 | 49 |
Treasury stock, at cost, 4,604,365 shares as of March 31, 2021 and December 31, 2020 | (43,270) | (43,270) |
Additional paid-in capital | 650,753 | 651,416 |
Accumulated deficit | (491,326) | (326,708) |
Total Acacia Research Corporation stockholders' equity | 116,206 | 281,487 |
Noncontrolling interests | 11,942 | 11,042 |
Total stockholders' equity | 128,148 | 292,529 |
Total liabilities, redeemable convertible preferred stock, and stockholders' equity | $ 568,958 | $ 515,520 |
UNAUDITED CONDENSED CONSOLIDA_2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 49,279,453 | 49,279,453 |
Common stock, shares outstanding | 49,279,453 | 49,279,453 |
Treasury stock, shares | 4,604,365 | 4,604,365 |
Redeemable Preferred Stock [Member] | ||
Series A redeemable convertible preferred stock, par value | $ 0.001 | $ 0.001 |
Series A redeemable convertible preferred stock, value per share | $ 100 | $ 100 |
Series A redeemable convertible preferred stock, shares authorized | 350,000 | 350,000 |
Series A redeemable convertible preferred stock, shares issued | 350,000 | 350,000 |
Series A redeemable convertible preferred stock, shares outstanding | 350,000 | 350,000 |
Series A redeemable convertible preferred stock, liquidation preference | $ 35,000 | $ 35,000 |
UNAUDITED CONDENSED CONSOLIDA_3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Statement [Abstract] | ||
Revenues | $ 5,803 | $ 3,815 |
Patent portfolio operations: | ||
Inventor royalties | 95 | 426 |
Contingent legal fees | 1,094 | 234 |
Litigation and licensing expenses - patents | 2,262 | 1,037 |
Amortization of patents | 1,862 | 1,043 |
Other patent portfolio expenses (income) | 0 | (234) |
Patent portfolio expenses | 5,313 | 2,506 |
Net patent portfolio income | 490 | 1,309 |
General and administrative expenses | 6,166 | 4,878 |
Operating loss | (5,676) | (3,569) |
Other income (expense): | ||
Change in fair value of investment, net | 0 | 4,108 |
Gain (loss) on sale of investment | 839 | (3,316) |
Change in fair value of the Series A and B warrants and embedded derivatives | (198,909) | (4,382) |
Change in fair value of equity securities | 37,849 | (6,117) |
Gain on sale of equity securities | 819 | 112 |
Earnings on equity investment in joint venture | 2,730 | 0 |
Loss on foreign currency exchange | (24) | 0 |
Interest expense on Senior Secured Notes | (1,310) | 0 |
Interest (expense) income and other | (26) | 535 |
Total other expense | (158,032) | (9,060) |
Loss before income taxes | (163,708) | (12,629) |
Income tax benefit (expense) | (10) | 1,338 |
Net Loss including noncontrolling interests in subsidiaries | (163,718) | (11,291) |
Net Income attributable to noncontrolling interests in subsidiaries | (900) | 0 |
Net Loss attributable to Acacia Research Corporation | $ (164,618) | $ (11,291) |
Net Loss attributable to common stockholders - basic and diluted | $ (136,665) | $ (12,185) |
Basic and diluted net loss per common share | $ (2.81) | $ (0.24) |
Weighted average number of shares outstanding - basic and diluted | 48,596,040 | 49,875,396 |
UNAUDITED CONDENSED CONSOLIDA_4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
General and administrative expenses | $ 6,166 | $ 4,878 |
General and Administrative Expense [Member] | ||
General and administrative expenses | 5,716 | 4,546 |
Non Cash Stock Compensation Expense [Member] | ||
Non-cash stock based compensation credit | $ 450 | $ 332 |
UNAUDITED CONDENSED CONSOLIDA_5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands | Series A Redeemable Convertible Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning balance, shares at Dec. 31, 2019 | 350,000 | 50,370,987 | ||||||
Beginning balance, value at Dec. 31, 2019 | $ 8,089 | $ 50 | $ (39,272) | $ 652,003 | $ (439,656) | $ 1,833 | $ 174,958 | |
Net Loss including noncontrolling interests in subsidiaries | (11,291) | (11,291) | ||||||
Accretion of Series A redeemable convertible preferred stock to redemption value | 631 | (631) | (631) | |||||
Dividend on Series A Redeemable Convertible Preferred Stock | (263) | (263) | ||||||
Compensation expense for share-based awards, net of forfeitures, shares | 19,354 | |||||||
Compensation expense for share-based awards, net of forfeitures, value | 332 | 332 | ||||||
Repurchase of common stock, shares | (576,898) | |||||||
Repurchase of common stock, value | (1,314) | (1,314) | ||||||
Ending balance, shares at Mar. 31, 2020 | 350,000 | 49,813,443 | ||||||
Ending balance, value at Mar. 31, 2020 | $ 8,720 | $ 50 | (40,586) | 651,441 | (450,947) | 1,833 | 161,791 | |
Beginning balance, shares at Dec. 31, 2020 | 350,000 | 49,279,453 | ||||||
Beginning balance, value at Dec. 31, 2020 | $ 10,924 | $ 49 | (43,270) | 651,416 | (326,708) | 11,042 | 292,529 | |
Net Loss including noncontrolling interests in subsidiaries | (164,618) | 900 | (163,718) | |||||
Accretion of Series A redeemable convertible preferred stock to redemption value | 853 | (853) | (853) | |||||
Dividend on Series A Redeemable Convertible Preferred Stock | (260) | (260) | ||||||
Compensation expense for share-based awards, net of forfeitures, shares | ||||||||
Compensation expense for share-based awards, net of forfeitures, value | 450 | 450 | ||||||
Ending balance, shares at Mar. 31, 2021 | 350,000 | 49,279,453 | ||||||
Ending balance, value at Mar. 31, 2021 | $ 11,777 | $ 49 | $ (43,270) | $ 650,753 | $ (491,326) | $ 11,942 | $ 128,148 |
UNAUDITED CONDENSED CONSOLIDA_6
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities: | ||
Net loss including noncontrolling interests in subsidiaries | $ (163,718) | $ (11,291) |
Adjustments to reconcile net loss including noncontrolling interests in subsidiaries to net cash provided by (used in) operating activities: | ||
Change in fair value of investment, net | 0 | (4,108) |
Loss (gain) on sale of investment | (839) | 3,316 |
Depreciation and amortization | 1,897 | 1,064 |
Amortization of debt discount and issuance costs | 702 | 0 |
Change in fair value of Series A redeemable convertible preferred stock embedded derivative | 13,691 | 3,708 |
Change in fair value of Series A warrants | 11,603 | (958) |
Change in fair value of Series B warrants | 173,615 | 1,631 |
Non-cash stock compensation | 450 | 332 |
Loss on foreign currency exchange | 24 | 0 |
Change in fair value of equity securities | (37,849) | 6,005 |
Gain on sale of equity securities | (819) | 0 |
Earnings on equity investment in joint venture | (2,730) | 0 |
Changes in assets and liabilities: | ||
Accounts receivable | (3,919) | (110) |
Prepaid expenses and other assets | (843) | (784) |
Accounts payable and accrued expenses | 2,332 | (908) |
Royalties and contingent legal fees payable | 283 | (108) |
Net cash used in operating activities | (6,120) | (2,211) |
Cash flows from investing activities: | ||
Patent acquisition | (11,000) | (5,780) |
Sale of investment at fair value | 3,591 | 905 |
Purchases of equity securities | (9,200) | (29,501) |
Maturities and sales of equity securities | 2,702 | 35,046 |
Purchases of property and equipment | (33) | (163) |
Net cash (used in) provided by investing activities | (13,940) | 507 |
Cash flows from financing activities: | ||
Repurchase of common stock | 0 | (1,314) |
Dividend on Series A Redeemable Convertible Preferred Stock | (260) | (263) |
Issuance of Series B warrants | 0 | 4,600 |
Paydown of Senior Secured Notes - short term | (50,000) | 0 |
Reissuance of Senior Secured Notes - short term | 50,000 | 0 |
Net cash (used in) provided by financing activities | (260) | 3,023 |
(Decrease) increase in cash and cash equivalents and restricted cash | (20,320) | 1,319 |
Cash and cash equivalents and restricted cash, beginning | 200,546 | 92,359 |
Cash and cash equivalents and restricted cash, ending | 180,226 | 93,678 |
Supplemental schedule of noncash investing activities: | ||
Patent acquisition in exchange of notes receivable | 4,000 | 0 |
Patent acquisition accrued liability - short term | 10,000 | 0 |
Patent acquisition accrued liability - long term | $ 5,000 | $ 0 |
1. DESCRIPTION OF BUSINESS AND
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business As used herein, “we,” “us,” “our,” “Acacia” and the “Company” refer to Acacia Research Corporation and/or its wholly and majority-owned and controlled operating subsidiaries, and/or where applicable, its management. Acacia was incorporated on January 25, 1993 under the laws of the State of California. In December 1999, Acacia changed its state of incorporation from California to Delaware. Acacia acquires businesses and operating assets that the Company believes to be undervalued and where the Company believes it can leverage its resources and skill sets to realize and unlock value. The Company intends to leverage its (i) access to flexible capital that can be deployed unconditionally, (ii) expertise in corporate governance and operational restructuring, (iii) willingness to invest in out of favor industries and businesses that suffer from a complexity discount and untangle complex, multi-factor situations, and (iv) expertise and relationships in certain sectors, to complete strategic acquisitions of businesses, divisions, and/or assets with a focus on mature technology, healthcare, industrial and certain financial segments. Acacia seeks to identify opportunities where the Company believes it is an advantaged buyer, where the Company can avoid structured sale processes and create the opportunity to purchase businesses, divisions and/or assets of companies at an attractive price due to the Company’s unique capabilities, relationships, or expertise, or where Acacia believes the target would be worth more to the Company than to other buyers. Acacia operates its business based on three key principles of People, Process and Performance and have built a management team with identified expertise in Research, Execution and Operation of the Company’s targeted acquisitions. Acacia, through its operating subsidiaries, also currently engages in its legacy business of investing in, licensing and enforcing patented technologies. Acacia’s operating subsidiaries partner with inventors and patent owners, applying their legal and technology expertise to patent assets to unlock the financial value in their patented inventions. In recent years, Acacia has also invested in technology companies. Acacia leverages its experience, expertise, data and relationships developed as a leader in the intellectual property (“IP”) industry to pursue these opportunities. In some cases, these opportunities will complement and/or supplement Acacia’s primary licensing and enforcement business. Acacia’s operating subsidiaries generate revenues and related cash flows from the granting of IP rights (hereinafter, “IP Rights”) for the use of patented technologies that its operating subsidiaries control or own. Acacia’s operating subsidiaries assist patent owners with the prosecution and development of their patent portfolios, the protection of their patented inventions from unauthorized use, the generation of licensing revenue from users of their patented technologies and, where necessary, with the enforcement against unauthorized users of their patented technologies through the filing of patent infringement litigation. Acacia’s operating subsidiaries are principals in the licensing and enforcement effort, obtaining control of the rights in the patent portfolio, or control of the patent portfolio outright. Acacia’s operating subsidiaries own or control the rights to multiple patent portfolios, which include U.S. patents and certain foreign counterparts, covering technologies used in a wide variety of industries. Neither Acacia nor its operating subsidiaries invent new technologies or products; rather, Acacia depends upon the identification and investment in new patents, inventions and companies that own IP through its relationships with inventors, universities, research institutions, technology companies and others. If Acacia’s operating subsidiaries are unable to maintain those relationships and identify and grow new relationships, then they may not be able to identify new technology-based opportunities for sustainable revenue and/or revenue growth. During the three months ended March 31, 2021, Acacia obtained control of one new patent portfolio. During fiscal year 2020, Acacia obtained control of five new patent portfolios. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Acacia and its wholly and majority-owned and controlled subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnotes required by U.S. GAAP in annual financial statements have been omitted or condensed in accordance with quarterly reporting requirements of the Securities and Exchange Commission (“SEC”). These interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020, as reported by Acacia in its Annual Report on Form 10-K filed with the SEC on March 29, 2021, as well as in our other public filings with the SEC. The condensed consolidated interim financial statements of Acacia include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of Acacia’s consolidated financial position as of March 31, 2021, and results of its operations and its cash flows for the interim periods presented. The consolidated results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Acacia believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, the valuation of the equity instruments, the valuation of Series A redeemable convertible preferred stock (the “Series A Redeemable Convertible Preferred Stock”), embedded derivatives, Series A warrants (the “Series A Warrants”), Series B warrants (the “Series B Warrants”), stock-based compensation expense, impairment of patent-related intangible assets, the determination of the economic useful life of amortizable intangible assets, income taxes and valuation allowances against net deferred tax assets, require its most difficult, subjective or complex judgments. COVID-19 Pandemic and the CARES Act The full impact of the COVID-19 pandemic continues to evolve as of the date of this report. While the Company does not expect the current situation to present direct risks to its business, and it has not had a material impact to date, the COVID-19 pandemic could adversely impact the Company’s operations, as well as the operations of its licensees and other business partners. Our cash is held in major financial institutions in government instruments and high-quality short-term bonds. Our business is fully able to operate in a socially distanced and/or remote capacity and in accordance with applicable laws, policies, and best practices. Our workforce is provided ample paid sick leave, and we have in place robust disaster recovery and business continuity policies that have been revised to account for a long-term remote work contingency such as this. However, the ongoing pandemic may present risks that we do not currently consider material or risks that may evolve quickly that could have a materially adverse effect on our business, results of operations and financial condition. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer's social security payments, net operating loss utilization and carryback periods and modifications to the net interest deduction limitations. The CARES Act has not had a material impact on the Company’s income tax provision. On December 27, 2020, the President of the United States signed the Consolidated Appropriations Act, 2021 (“Consolidated Appropriations Act”) into law. The Consolidated Appropriations Act is intended to enhance and expand certain provisions of the CARES Act, allows for the deductions of expenses related to the Payroll Protection Program funds received by companies, and provides an update to meals and entertainment expensing for 2021. The Consolidated Appropriations Act did not have a material impact to the Company’s income tax provision for 2020. The Company will continue to evaluate the impact of the Consolidated Appropriations Act on its financial position, results of operations and cash flows, if any. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Principles The consolidated financial statements and accompanying notes are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of Acacia and its wholly and majority-owned and controlled subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Noncontrolling interests in Acacia’s majority-owned and controlled operating subsidiaries (“noncontrolling interests”) are separately presented as a component of stockholders’ equity. Consolidated net income or (loss) is adjusted to include the net (income) or loss attributed to noncontrolling interests in the consolidated statements of operations. Refer to the accompanying consolidated statements of Series A Redeemable Convertible Preferred Stock and stockholders’ equity for total noncontrolling interests. In 2020, in connection with the transaction with Link Fund Solutions Limited, which is more fully described in Note 11, the Company acquired equity securities of Malin J1 Limited (“MalinJ1”). MalinJ1 is included in the Company’s consolidated financial statements because the Company, through its interest in the equity securities of MalinJ1, has the ability to control the operations and activities of MalinJ1. Viamet HoldCo LLC, a Delaware limited liability company and wholly-owned subsidiary of Acacia (see Note 11), is the majority shareholder of MalinJ1. A wholly owned subsidiary of Acacia is the general partner of the Acacia Intellectual Property Fund, L.P. (the “Acacia IP Fund”), which was formed in August 2010. The Acacia IP Fund has been included in the Company’s consolidated financial statements since 2010, as Acacia’s wholly owned subsidiary, the general partner of Acacia IP Fund, has the ability to control the operations and activities of the Acacia IP Fund. The Acacia IP Fund was terminated as of December 31, 2017 and dissolved in 2020. Revenue Recognition Revenue is recognized upon transfer of control of promised bundled IP Rights and other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive in exchange for those IP Rights. Revenue contracts that provide promises to grant the right to use IP Rights as they exist at the point in time at which the IP Rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue is recognized at the point in time that the applicable performance obligations are satisfied and all other revenue recognition criteria have been met. For the periods presented, revenue contracts executed by the Company primarily provided for the payment of contractually determined, one-time, paid-up license fees in consideration for the grant of certain IP Rights for patented technologies owned or controlled by Acacia. Revenues also included license fees from sales-based revenue contracts, the majority of which were originally executed in prior periods, which provide for the payment of quarterly license fees based on quarterly sales of applicable product units by licensees (“Recurring Revenue Agreements”). Revenues may also include court ordered settlements or awards related to our patent portfolio or sales of our patent portfolio. IP Rights granted included the following, as applicable: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The IP Rights granted were perpetual in nature, extending until the legal expiration date of the related patents. The individual IP Rights are not accounted for as separate performance obligations, as (i) the nature of the promise, within the context of the contract, is to transfer combined items to which the promised IP Rights are inputs and (ii) the Company's promise to transfer each individual IP right described above to the customer is not separately identifiable from other promises to transfer IP Rights in the contract. Since the promised IP Rights are not individually distinct, the Company combined each individual IP Right in the contract into a bundle of IP Rights that is distinct, and accounted for all of the IP Rights promised in the contract as a single performance obligation. The IP Rights granted were “functional IP rights” that have significant standalone functionality. Acacia's subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights. Acacia’s operating subsidiaries have no further obligation with respect to the grant of IP Rights, including no express or implied obligation to maintain or upgrade the technology, or provide future support or services. The contracts provide for the grant (i.e., transfer of control) of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the contract. Licensees legally obtain control of the IP Rights upon execution of the contract. As such, the earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met. Revenue contracts generally provide for payment of contractual amounts with 30-90 days of execution of the contract, or the end of the quarter in which the sale or usage occurs for Recurring Revenue Agreements. Contractual payments made by licensees are generally non-refundable. For sales-based royalties, the Company includes in the transaction price some or all of an amount of estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Notwithstanding, revenue is recognized for a sales-based royalty promised in exchange for a license of IP Rights when the later of (i) the subsequent sale or usage occurs, or (ii) the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied. Estimates are generally based on historical levels of activity, if available. Revenues from contracts with significant financing components (either explicit or implicit) are recognized at an amount that reflects the price that a licensee would have paid if the licensee had paid cash for the IP Rights when they transfer to the licensee. In determining the transaction price, the Company adjusts the promised amount of consideration for the effects of the time value of money. As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the entity transfers promised IP Rights to a customer and when the customer pays for the IP Rights will be one year or less. In general, the Company is required to make certain judgments and estimates in connection with the accounting for revenue contracts with customers. Such areas may include identifying performance obligations in the contract, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct from other promised goods or services, evaluating whether a license transfers to a customer at a point in time or over time, allocating the transaction price to separate performance obligations, determining whether contracts contain a significant financing component, and estimating revenues recognized at a point in time for sales-based royalties. Revenues were comprised of the following for the periods presented: Three Months Ended March 31, 2021 2020 Paid-up Revenue Agreements $ 5,410 $ 3,300 Recurring Revenue Agreements 393 515 Total Revenue $ 5,803 $ 3,815 Refer to “ Inventor Royalties and Contingent Legal Expenses Patent Portfolio Operations Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs. These costs are included under the caption “Patent Portfolio operations” in the accompanying consolidated statements of operations. Inventor Royalties and Contingent Legal Expenses Inventor royalties are expensed in the condensed consolidated statements of operations in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, upfront advances paid to patent owners by Acacia’s operating subsidiaries are recoverable from future net revenues. Patent costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the unaudited condensed consolidated statements of operations. Any unamortized upfront advances recovered from net revenues are expensed in the period recovered and included in amortization expense in the unaudited condensed consolidated statements of operations. Contingent legal fees are expensed in the unaudited condensed consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Inventor royalty and contingent legal agreements typically provide for payment by the Company of contractual amounts 30 days subsequent to the fiscal quarter end during which related license fee payments are received from licensees by the Company. Concentrations Financial instruments that potentially subject Acacia to concentrations of credit risk are cash equivalents, equity securities and accounts receivable. Acacia places its cash equivalents and equity securities primarily in highly rated money market funds and investment grade marketable securities. Cash and cash equivalents are also invested in deposits with certain financial institutions and may, at times, exceed federally insured limits. Acacia has not experienced any significant losses on its deposits of cash and cash equivalents. The Company does not have any material foreign operations. Based on the jurisdiction of the entity obligated to satisfy payment obligations pursuant to the applicable revenue arrangement, for the three months ended March 31, 2021 and 2020, 90% and 4%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. Three licensees individually represented approximately 68%, 11%, and 10% of accounts receivable at March 31, 2021. Two licensees individually represented approximately 62% and 21% of accounts receivable at December 31, 2020. Patents Patents include the cost of patents or patent rights (hereinafter, collectively “patents”) acquired from third-parties or obtained in connection with business combinations. Patent costs are amortized utilizing the straight-line method over their remaining economic useful lives. Refer to Note 4 for additional information regarding our patents. Impairment of Long-lived Assets Acacia reviews long-lived assets and intangible assets for potential impairment annually (quarterly for patents) and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded in an amount equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. In the event that management decides to no longer allocate resources to a patent portfolio, an impairment loss equal to the remaining carrying value of the asset is recorded. Refer to Note 4 for additional information. Fair value is generally estimated using the “Income Approach,” focusing on the estimated future net income-producing capability of the patent portfolios over their estimated remaining economic useful life. Estimates of future after-tax cash flows are converted to present value through “discounting,” including an estimated rate of return that accounts for both the time value of money and investment risk factors. Estimated cash inflows are typically based on estimates of reasonable royalty rates for the applicable technology, applied to estimated market data. Estimated cash outflows are based on existing contractual obligations, such as contingent legal fee and inventor royalty obligations, applied to estimated license fee revenues, in addition to other estimates of out-of-pocket expenses associated with a specific patent portfolio’s licensing and enforcement program. The analysis also contemplates consideration of current information about the patent portfolio including, status and stage of litigation, periodic results of the litigation process, strength of the patent portfolio, technology coverage and other pertinent information that could impact future net cash flows. Cash and Cash Equivalents Acacia considers all highly liquid, equity securities with original maturities of three months or less when purchased to be cash equivalents. For the periods presented, Acacia’s cash equivalents are comprised of investments in AAA rated money market funds that invest in first-tier only securities, which primarily includes: domestic commercial paper, securities issued or guaranteed by the U.S. government or its agencies, U.S. bank obligations, and fully collateralized repurchase agreements. Acacia’s cash equivalents are measured at fair value using quoted prices that represent Level 1 inputs. Long Term Restricted Cash Long-term restricted cash relates primarily to the proceeds received from the issuance of Series A Redeemable Convertible Preferred Stock which are held in an escrow account. The amounts are to be released to the Company upon, among other things, (i) the consummation of a suitable investment or acquisition by the Company or (ii) the conversion of Series A Redeemable Convertible Preferred Stock into common stock. Fair Value Measurements U.S. GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. Refer to Note 9 to our notes to consolidated financial statements for more information related to our fair value measurement. Equity Securities at Fair Value Investments in equity securities are reported at fair value on a recurring basis, with related realized and unrealized gains and losses in the value of such securities recorded in the unaudited condensed consolidated statements of operations in other income (expense). Dividend income is included in the unaudited condensed consolidated statements of operations in other income (expense). Equity securities at fair value for the periods presented were comprised of the following: Cost Gross Gross Fair Value (In thousands) Security Type March 31, 2021: Equity securities - LF equity - common stock $ 40,053 $ 138,241 $ (10,198 ) $ 168,096 Equity securities - other equity - common stock $ 11,676 $ 1,100 $ (552 ) $ 12,224 Equity securities at fair value - common stock $ 51,729 $ 139,341 $ (10,750 ) $ 180,320 December 31, 2020: Equity securities - LF equity - common stock $ 32,765 $ 72,689 $ (583 ) $ 104,871 Equity securities - other equity - common stock $ 4,086 $ 1,410 $ (1,264 ) $ 4,232 Equity securities at fair value - common stock $ 36,851 $ 74,099 $ (1,847 ) $ 109,103 Equity securities without readily determinable fair value For equity securities that do not have readily determinable fair value, the Company elected to report them under the measurement alternative. They are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. The fair values of the private company securities were estimated based on recent financing transactions and secondary market transactions and factoring in any adjustments for illiquidity or preference of these securities. Changes in fair value are reported in the consolidated statements of operations in other income (expense). Investments at Fair Value On an individual investment basis, Acacia may elect to account for investments in companies where the Company has the ability to exercise significant influence over operating and financial policies of the investee, at fair value. If the fair value method is applied to an investment that would otherwise be accounted for under the equity method of accounting, it is applied to all of the financial interests in the same entity that are eligible items (i.e., common stock and warrants). We elected the fair value method for our investment in Veritone, Inc. (“Veritone”) upon acquisition of the investment. As of March 31, 2021, we have no more investment in Veritone stocks and warrants. Stock-Based Compensation The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. The fair value of each option award is estimated on the date of grant using a Black-Scholes option-pricing model. Forfeitures are accounted for as they occur. Restricted stock units granted in September 2019 with market-based vesting conditions vest based upon the Company achieving specified stock price targets over a three-year period. The effect of a market condition is reflected in the estimate of the grant-date fair value of the options utilizing a Monte Carlo valuation technique. Compensation cost is recognized with a market-based vesting condition provided that the requisite service is rendered, regardless of when, if ever, the market condition is satisfied. Assumptions utilized in connection with the Monte Carlo valuation technique included: estimated risk-free interest rate of 1.38 percent; term of 3.00 years; expected volatility of 38 percent; and expected dividend yield of 0 percent. The risk-free interest rate was determined based on the yields available on U.S. Treasury zero-coupon issues. The expected stock price volatility was determined using historical volatility. The expected dividend yield was based on expectations regarding dividend payments. Profits Interest Units (“Units”) were accounted for in accordance with Accounting Standards Codification (“ASC”) 718-10, “Compensation - Stock Compensation.” The vesting conditions did not meet the definition of service, market or performance conditions, as defined in ASC 718. As such, the Units were classified as liability awards. Compensation expense was adjusted for changes in fair value prorated for the portion of the requisite service period rendered. Initially, compensation expense was recognized on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which was five years. Upon full vesting of the award, which occurred during the three months ended September 30, 2017, previously unrecognized compensation expense was immediately recognized in the period. The Company has a purchase option to purchase the vested Units that are not otherwise forfeited after termination of continuous service. The exercise price of the purchase option is the fair market value of the Units on the date of termination of continuous service. As of March 31, 2021, the Units totaled $591,000, which was their fair value as of December 31, 2018 after termination of service. Series A Warrants The fair value of the Series A Warrants is estimated using a Black-Scholes option-pricing model. The fair value of the Series A Warrants as of March 31, 2021 was estimated based on the following assumptions: volatility of 30 percent, risk-free rate of 1.29 percent, term of 6.54 years and a dividend yield of 0 percent. Refer to Note 10 for additional information. Series B Warrants The fair value of the Series B Warrants is estimated using a Black-Scholes option-pricing model. In the quarter ended March 31, 2021, there was a change in methodology used to an acceptable Black-Scholes option-pricing model from a Monte Carlo valuation technique used to value the Series B Warrants as of December 31, 2020. The fair value of the Series B Warrants as of March 31, 2021 was estimated based on the following assumptions: (1) volatility of 30 percent, risk-free rate of 1.31 percent, term of 6.63 years, and a dividend yield of 0 percent, and (2) volatility of 25 percent, risk-free rate of 0.11 percent, term of 1.4 years and a dividend yield of 0 percent. Refer to Note 10 for additional information. Embedded derivatives Embedded derivatives that are required to be bifurcated from their host contract are valued separately from the host instrument. The binomial model determines the value of a convertible bond instrument by valuing its two separate components (i.e., a cash only component which is subject to the selected risk-adjusted discount rate and an equity component where settlement is subject to a risk-free rate) within a single lattice framework. The binomial model utilizes the Tsiveriotis and Fernandes implementation in which a convertible instrument is split into two separate components: a cash-only component which is subject to the selected risk-adjusted discount rate and an equity component which is subject only to the risk-free rate. The model considers the (i) implied volatility of the value of our common stock, (ii) appropriate risk-free interest rate, (iii) credit spread, (iv) dividend yield, (v) dividend accrual (and a step-up in rates), and (vi) event probabilities of the various conversion and redemption scenarios. The volatility of the Company’s common stock is estimated by analyzing the Company’s historical volatility, implied volatility of publicly traded stock options, and the Company’s current asset composition and financial leverage. The selected volatility, as described below, represents a haircut from the Company’s actual realized historical volatility. A volatility haircut is a concept used to describe a commonly observed occurrence in which the volatility implied by market prices involving options, warrants, and convertible debt is lower than historical actual realized volatility. The assumed base case term used in the valuation model is the period remaining until November 15, 2027, the maturity date. The risk-free interest rate is based on the yield on the U.S. Treasury with a remaining term equal to the expected term of the conversion and early redemption options. The significant assumptions utilized in the Company’s valuation of the embedded derivative at March 31, 2021 are as follows: volatility of 30 percent, risk-free rate of 1.3 percent, discount rate of 8.8 percent, and a dividend yield of 0 percent. The fair value measurement of the embedded derivative is sensitive to these assumptions and changes in these assumptions could result in a materially different fair value measurement. Refer to Note 10 for additional information. Treasury Stock Repurchases of the Company’s outstanding common stock are accounted for using the cost method. The applicable par value is deducted from the appropriate capital stock account on the formal or constructive retirement of treasury stock. Any excess of the cost of treasury stock over its par value is charged to additional paid-in capital and reflected as treasury stock on the condensed consolidated balance sheets. Impairment of Investments Acacia reviews its investments quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In making this judgment, Acacia considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. If the cost of an investment exceeds its fair value, Acacia evaluates, among other factors, general market conditions and the duration and extent to which the fair value is less than cost. Acacia also considers specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in the condensed consolidated statements of operations and a new cost basis in the investment is established. Income Taxes Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s condensed consolidated financial statements or consolidated income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realization of such assets. The provision for income taxes for interim periods is determined using an estimate of Acacia’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, Acacia updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded. The Company’s effective tax rates were (0%) and 11% for the three ended March 31, 2021 and 2020, respectively. Tax benefit (expense) for the periods presented primarily reflects the impact of state taxes and foreign taxes withholding or refund incurred on revenue agreements executed with third-party licensees domiciled in foreign jurisdictions. The Company has recorded full valuation allowance against our net deferred tax assets as of March 31, 2021 and 2020. These assets primarily consist of foreign tax credits, capital loss carryforwards and net operating loss carryforwards. |
3. LOSS PER SHARE
3. LOSS PER SHARE | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
LOSS PER SHARE | 3. LOSS PER SHARE The following table presents the shares of common stock outstanding used in the calculation of basic and diluted net income (loss) per share: Three Months Ended March 31, 2021 2020 (In thousands, except share and per share information) Numerator: Net loss attributable to Acacia Research Corporation $ (164,618 ) $ (11,291 ) Dividend on Series A redeemable convertible preferred stock (263 ) (263 ) Accretion of Series A redeemable convertible preferred stock (852 ) (631 ) Undistributed earnings allocated to participating securities 29,068 – Net loss attributable to common stockholders - basic and diluted (136,665 ) (12,185 ) Denominator: Weighted-average shares used in computing net loss per share attributable to common stockholders - basic and diluted 48,596,040 49,875,396 Basic and diluted net loss per common share $ (2.81 ) $ (0.24 ) |
4. PATENTS, NET OF ACCUMULATED
4. PATENTS, NET OF ACCUMULATED AMORTIZATION | 3 Months Ended |
Mar. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
PATENTS, NET OF ACCUMULATED AMORTIZATION | 4. PATENTS, NET OF ACCUMULATED AMORTIZATION Acacia’s only identifiable intangible assets at March 31, 2021 and December 31, 2020 are patents and patent rights. Patent-related accumulated amortization totaled $321,784,000 and $319,922,000 as of March 31, 2021 and December 31, 2020, respectively. Acacia’s patents have remaining estimated economic useful lives ranging from thirty-two to fifty-eight months. The weighted-average remaining estimated economic useful life of Acacia’s patents is approximately four years. The following table presents the scheduled annual aggregate amortization expense as of March 31, 2021: For the years ending December 31, (In thousands) Remainder of 2021 $ 7,836 2022 10,448 2023 10,381 2024 9,005 2025 6,630 Thereafter 750 $ 45,050 For the three months ended March 31, 2021, Acacia accrued patent and patent rights acquisition costs totaling $15 million, of which $10 million is due December 1, 2021, and $5 million is due February 18, 2023. They are included in Accrued patent investment costs and Other long-term liabilities in the accompanying consolidated balance sheets, respectively. |
5. INVESTMENT AT FAIR VALUE
5. INVESTMENT AT FAIR VALUE | 3 Months Ended |
Mar. 31, 2021 | |
Schedule of Investments [Abstract] | |
INVESTMENT AT FAIR VALUE | 5. INVESTMENT AT FAIR VALUE During 2016 and 2017, Acacia made certain investments in Veritone. As a result of these transactions, Acacia received an aggregate total of 4,119,521 shares of Veritone common stock and warrants to purchase a total of 1,120,432 shares of Veritone common stock at an exercise price of $13.61 per share expiring between 2020 and 2027. During the three months ended March 31, 2020, Acacia sold all remaining 298,450 shares Veritone common stock and recorded a realized loss of $3.3 million. During the year ended December 31, 2020, Acacia exercised 963,712 Veritone warrants, and recorded a realized gain of $11.5 million. During the three months ended March 31, 2021, Acacia exercised all remaining 156,720 warrants, and recorded a realized gain of $839,000. Changes in the fair value of Acacia’s investment in Veritone are recorded as unrealized gains or losses in the consolidated statements of operations. For the three months ended March 31, 2021 and 2020, the accompanying condensed consolidated statements of operations reflected the following: Three Months Ended March 31, 2021 2020 (In thousands) Change in fair value of investment, warrants $ – $ 630 Change in fair value of investment, common stock – 3,478 Gain on sale of investment, warrants 839 – Loss on sale of investment, common stock – (3,316 ) Net realized and unrealized gain (loss) on investment at fair value $ 839 $ 792 |
6. COMMITMENTS AND CONTINGENCIE
6. COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 6. COMMITMENTS AND CONTINGENCIES Patent Enforcement Certain of Acacia’s operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights. In connection with any of Acacia’s operating subsidiaries’ patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against Acacia or its operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material. Facility Leases The Company primarily leases office facilities under operating lease arrangements that will end in various years through July 2024. On June 7, 2019, we entered into a building lease agreement (the “New Lease”) with Jamboree Center 4 LLC (the “Landlord”). Pursuant to the New Lease, we have leased approximately 8,293 square feet of office space in Irvine, California. The New Lease commenced on August 1, 2019. The term of the New Lease is 60 months from the commencement date, provides for annual rent increases, and does not provide us the right to early terminate or extend our lease terms. On January 7, 2020, we entered into a building lease agreement (the “New York Office Lease”) with Sage Realty Corporation (the “New York Office Landlord”). Pursuant to the New York Office Lease, we have leased approximately 4,000 square feet of office space for our corporate headquarters in New York, New York. The New York Office Lease commenced on February 1, 2020. The term of the New York Office Lease is 24 months from the commencement date, provides for annual rent increases, and does not provide us the right to early terminate or extend our lease terms. Operating lease costs were $150,000 and $121,000 for the three months ended March 31, 2021 and 2020, respectively. The table below presents aggregate future minimum payments due under the New Lease and the New York Office Lease discussed above, reconciled to lease liabilities included in the consolidated balance sheet as of March 31, 2021: Operating Leases (In thousands) 2021 $ 444 2022 370 2023 364 2024 218 Thereafter – Total minimum payments $ 1,396 Less: short-term lease liabilities (551 ) Long-term lease liabilities $ 845 Other Matters Acacia is subject to claims, counterclaims and legal actions that arise in the ordinary course of business. Management believes that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on Acacia’s condensed consolidated financial position, results of operations or cash flows. On September 6, 2019, Slingshot Technologies, LLC, or Slingshot, filed a lawsuit in Delaware Chancery Court against the Company and Acacia Research Group, LLC, or collectively, the Acacia Entities, Monarch Networking Solutions LLC (“Monarch”), Acacia board member Katharine Wolanyk, and Transpacific IP Group, Ltd., or Transpacific. Slingshot alleges that the Acacia Entities and Monarch misappropriated its confidential and proprietary information, purportedly furnished to the Acacia Entities and Monarch by Ms. Wolanyk, in acquiring a patent portfolio from Transpacific after Slingshot’s exclusive option to purchase the same patent portfolio from Transpacific had already expired. Slingshot seeks monetary damages, as well as equitable and injunctive relief related to its alleged right to own the portfolio. On March 15, 2021, the court issued orders granting Monarch’s motion to dismiss for lack of personal jurisdiction and Ms. Wolanyk’s motion to dismiss for lack of subject matter jurisdiction. The Acacia Entities maintain that Slingshot’s allegations are baseless, that the Acacia Entities neither had access to nor used Slingshot’s information in acquiring the portfolio, that the Acacia Entities acquired the portfolio as a result of the independent efforts of its IP licensing group, and that Slingshot suffered no damages given its exclusive option to purchase the portfolio had already ended and it has proven itself incapable of closing on the portfolio purchase. During the three months ended March 31, 2021, we incurred no operating expenses for settlement and contingency accruals. During the three months ended March 31, 2020, operating expenses included a net income for settlement offset by contingency accruals totaling $234,000, net of prior accruals. At March 31, 2021, our contingency accruals are not material. |
7. STOCKHOLDERS' EQUITY
7. STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
STOCKHOLDES' EQUITY | 7. STOCKHOLDERS’ EQUITY Repurchases of Common Stock On August 5, 2019, Acacia’s Board of Directors approved a stock repurchase program, which authorized the purchase of up to $10.0 million of the Company's common stock through open market purchases, through block trades, through 10b5-1 plans, or by means of private purchases, from time to time, through July 31, 2020. Stock repurchases for the periods presented, all of which were purchased as part of a publicly announced plan or program, were as follows: Total Number Average Approximate Dollar Plan Expiration Date March 20, 2020 - March 31, 2020 576,898 $ 2.28 $ 8,686,000 July 31, 2020 April 1, 2020 - April 23, 2020 1,107,639 $ 2.42 $ 6,001,000 July 31, 2020 Totals for 2020 1,684,537 $ 2.37 In determining whether or not to repurchase any shares of Acacia’s common stock, Acacia’s Board of Directors consider such factors, among others, as the impact of the repurchase on Acacia’s cash position, as well as Acacia’s capital needs and whether there is a better alternative use of Acacia’s capital. Acacia has no obligation to repurchase any amount of its common stock under the Stock Repurchase Program. Repurchases to date were made in the open market in compliance with applicable SEC rules. The authorization to repurchase shares presented an opportunity to reduce the outstanding share count and enhance stockholder value. Tax Benefits Preservation Plan On March 12, 2019, Acacia’s Board of Directors announced that it had unanimously approved the adoption of a Tax Benefits Preservation Plan (the “Plan”). Our stockholders ratified the adoption of the Plan in July 2019. The purpose of the Plan is to protect the Company’s ability to utilize potential tax assets, such as net operating loss carryforwards and tax credits to offset potential future taxable income. The Plan is designed to reduce the likelihood that the Company will experience an ownership change by discouraging (i) any person or group from acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock and (ii) any existing stockholders who, as of the time of the first public announcement of the adoption of the Plan, beneficially own more than 4.9% of the Company’s then-outstanding shares of the Company’s common stock from acquiring additional shares of the Company’s common stock (subject to certain exceptions). There is no guarantee, however, that the Plan will prevent the Company from experiencing an ownership change. In connection with the adoption of the Plan, Acacia’s Board of Directors authorized and declared a dividend distribution of one right for each outstanding share of the Company’s common stock to stockholders of record at the close of business on March 16, 2019. On or after the distribution date, each right would initially entitle the holder to purchase one one-thousandth of a share of the Company’s Series B Junior Participating Preferred Stock, $0.001 par value for a purchase price of $12.00. On March 15, 2021 the rights expired pursuant to their terms. The Company has a provision in its Amended and Restated Certificate of Incorporation, as amended (the “Charter Provision”) which generally prohibits transfers of its common stock that could result in an ownership change. Like the Plan, the purpose of the Charter Provision is to protect the Company’s ability to utilize potential tax assets, such as net operating loss carryforwards and tax credits to offset potential future taxable income. The Charter Provision was approved by the Company’s stockholders on July 15, 2019. |
8. RECENT ACCOUNTING PRONOUNCEM
8. RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Changes and Error Corrections [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | 8. RECENT ACCOUNTING PRONOUNCEMENTS Recent Accounting Pronouncements – Recently Adopted In December of 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("ASU 2019-12"). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 as of January 1, 2021. The adoption of ASU 2019-12 did not have a material effect on the Company's current financial position, results of operations or financial statement disclosures. Recent Accounting Pronouncements – Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to replace the incurred loss methodology with an expected credit loss model that requires consideration of a broader range of information to estimate credit losses over the lifetime of the asset, including current conditions and reasonable and supportable forecasts in addition to historical loss information, to determine expected credit losses. Pooling of assets with similar risk characteristics and the use of a loss model are also required. Also, in April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to clarify the inclusion of recoveries of trade receivables previously written off when estimating an allowance for credit losses. The amendments in this update will be effective for the Company in fiscal year 2023, with early adoption permitted. Management is currently evaluating the impact that the amendments in this update may have on the Company’s condensed consolidated financial statements. |
9. FAIR VALUE MEASUREMENTS
9. FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | 9. FAIR VALUE MEASUREMENTS U.S. GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows: (i) Level 1 - Observable Inputs (ii) Level 2 - Pricing Models with Significant Observable Inputs (iii) Level 3 - Unobservable Inputs Whenever possible, the Company is required to use observable market inputs (Level 1 - quoted market prices) when measuring fair value. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured. In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. Acacia holds the following types of financial instruments at March 31, 2021 and December 31, 2020: Equity securities at fair value. Investments at fair value - common stock Investments at fair value - warrants. Series A Warrants. Series B Warrants. Embedded derivative liability. Financial assets and liabilities measured at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 (In thousands) Assets as of March 31, 2021: Equity securities at fair value $ 122,469 $ 57,851 $ – Total recurring fair value measurements as of March 31, 2021 $ 122,469 $ 57,851 $ – Assets as of December 31, 2020: Equity securities at fair value $ 109,103 $ – $ – Investment at fair value - warrants – 2,752 – Total recurring fair value measurements as of December 31, 2020 $ 109,103 $ 2,752 $ – Liabilities as of March 31, 2021: Series A warrants $ – $ – $ 18,243 Series B warrants – – 225,956 Embedded derivative liabilities – – 40,419 Total liabilities as of March 31, 2021 $ – $ – $ 284,618 Liabilities as of December 31, 2020: Series A warrants $ – $ 6,640 $ – Series B warrants – – 52,341 Embedded derivative liabilities – – 26,728 Total liabilities as of December 31, 2020 $ – $ 6,640 $ 79,069 The following table sets forth a summary of the changes in the estimated fair value of the Company’s Level 3 liabilities, which are measured at fair value on a recurring basis: Series A Warrants Liability Series A Preferred Stock Embedded Derivative Liability Series B Warrants Liability (In thousands) Opening balance as of January 1, 2021 $ – $ 26,728 $ 52,341 Transfers into Level 3 6,640 – – Remeasurement to fair value 11,603 13,691 173,615 Balance as of March 31, 2021 $ 18,243 $ 40,419 $ 225,956 |
10. STARBOARD INVESTMENT
10. STARBOARD INVESTMENT | 3 Months Ended |
Mar. 31, 2021 | |
Notes to Financial Statements | |
Starboard Investment | 10. STARBOARD INVESTMENT Series A Redeemable Convertible Preferred Stock On November 18, 2019, the Company entered into a Securities Purchase Agreement with Starboard Value LP (“Starboard”) and certain funds and accounts affiliated with, or managed by, Starboard (collectively, the “Buyers”) pursuant to which the Company issued (i) 350,000 shares of Series A Redeemable Convertible Preferred Stock with a par value of $0.001 per share and a stated value of $100 per share, and (ii) Series A Warrants to purchase up to 5,000,000 shares of the Company’s common stock to the Buyers. The Securities Purchase Agreement also established the terms of certain senior secured notes and additional warrants (the “Series B Warrants”) which may be issued to Starboard in the future. On June 4, 2020, the Company entered into a Supplemental Agreement, as defined below under “Senior Secured Notes”, with certain contractual agreements affecting the Series A Redeemable Convertible Preferred Stock, reflected below. The Series A Redeemable Convertible Preferred Stock can be converted into a number of shares of common stock equal to (i) the stated value thereof plus accrued and unpaid dividends, divided by (ii) the conversion price of $3.65 (subject to certain anti-dilution adjustments). Holders may elect to convert the Series A Redeemable Convertible Preferred Stock into common stock at any time. The Company may elect to convert the Series A Redeemable Convertible Preferred Stock into shares of Common Stock any time on or after November 15, 2025, provided that the closing price of the Company’s common stock equals or exceeds 190% of the conversion price for 30 consecutive trading days and assuming certain other conditions of the common stock have been met. Holders have the option to redeem all or a portion of the Series A Redeemable Convertible Preferred Stock during the periods of May 15, 2021 through August 15, 2021 and May 15, 2022 through August 15, 2022, provided that there is not outstanding at least $50.0 million aggregate principal of senior secured notes to the Buyers pursuant to the Securities Purchase Agreement at the time of the redemption. Holders also have the option to redeem all or a portion of the Series A Redeemable Convertible Preferred Stock during the period of November 15, 2024 through February 15, 2025. Additionally, holders have the option to redeem all or a portion of the Series A Redeemable Convertible Preferred Stock upon the occurrence of (i) a change of control or (ii) various other triggering events, such as the suspension from trading or delisting of the Company’s common stock. If the Series A Redeemable Convertible Preferred Stock is redeemed at the option of the holders, the redemption price may include a make-whole amount or a stated premium, depending on the redemption scenario. The Company may redeem all, and not less than all, of the Series A Redeemable Convertible Preferred Stock (i) upon a change of control or (ii) during the period of May 15, 2022 through August 15, 2022, provided that there is not outstanding at least $50.0 million aggregate principal of the senior secured notes at the time of the redemption, and assuming certain conditions of the common stock have been met. If the Series A Redeemable Convertible Preferred Stock is redeemed at the option of the Company, the redemption price would include a make-whole amount or a 15% premium depending on the circumstances. If any Series A Redeemable Convertible Preferred Stock remains outstanding on November 15, 2027, the Company shall redeem such Series A Redeemable Convertible Preferred Stock in cash. In all redemption scenarios, the redemption price for the Series A Redeemable Convertible Preferred Stock includes the stated value plus accrued and unpaid dividends. In addition, depending on the redemption scenario, the redemption price may also include a make-whole amount or stated premium as described above. When the Company issues Notes, the Holder may exchange the Series A Redeemable Convertible Preferred Stock for (i) Notes and (ii) Series B Warrants to purchase common stock. The Series A Redeemable Convertible Preferred Stock accrues cumulative dividends quarterly at annual rate of 3.0% on the stated value. Upon consummation of the approved investment in June 2020, the dividend rate increased to 8.0% on the stated value. Upon certain triggering events, the dividend rate will increase to 7.0% if the triggering event occurs before an approved investment or 10.0% on the stated value if the triggering event occurs after an approved investment. In connection with the approved investment in June 2020, the Company and the Buyers agreed that the dividend rate on the Series A Redeemable Convertible Preferred Stock would accrue at 3.0% so long as no triggering event occurs and the Company maintains $35 million in escrow. Series A Redeemable Convertible Preferred Stock also participates on an as-converted basis in any regular or special dividends paid to common stockholders. No accrued and unpaid dividends as of March 31, 2021. Holders of the Series A Redeemable Convertible Preferred Stock have the right to vote with common stockholders on an as-converted basis on all matters. Holders of Series A Redeemable Convertible Preferred Stock will also be entitled to a separate class vote with respect to amendments to the Company’s organizational documents that generally have an adverse effect on the Series A Redeemable Convertible Preferred Stock. Upon liquidation of the Company, holders of Series A Redeemable Convertible Preferred Stock have a liquidation preference over holders of our common stock and will be entitled to receive, prior to any distribution to holders of our common stock, an amount equal to the greater of (i) the stated value plus accrued and unpaid dividends or (ii) the amount that would have been received if the Series A Redeemable Convertible Preferred Stock had been converted into common stock immediately prior to the liquidation event at the then effective conversion price. The Company determined that certain features of the Series A Redeemable Convertible Preferred Stock should be bifurcated and accounted for as a derivative. Each of these features are bundled together as a single, compound embedded derivative. Total proceeds received and transaction costs incurred from the issuance of the Series A Redeemable Convertible Preferred Stock amounted to $35 million and $1.3 million, respectively. Proceeds received were allocated based on the fair value of the instrument without the Series A Warrants and of the Series A Warrants themselves at the time of issuance. The proceeds allocated to the Series A Redeemable Convertible Preferred Stock were then further allocated between the host preferred stock instrument and the embedded derivative, with the embedded derivative recorded at fair value and the Series A Redeemable Convertible Preferred Stock recorded at the residual amount. The portion of the proceeds allocated to the Series A Warrants, embedded derivative, and Series A Redeemable Convertible Preferred Stock was $4.8 million, $21.2 million, and $8.9 million, respectively. Transaction costs were also allocated between the Series A Redeemable Convertible Preferred Stock and the Series A Warrants on the same basis as the proceeds. The transaction costs allocated to the Series A Redeemable Convertible Preferred Stock were treated as a discount to the Series A Redeemable Convertible Preferred Stock. The transaction costs allocated to the Series A Warrants were expensed as incurred. The Company classifies the Series A Redeemable Convertible Preferred Stock as mezzanine equity as the instrument will become redeemable at the option of the holder in various scenarios or otherwise on November 15, 2027. As it is probable that the Series A Redeemable Convertible Preferred Stock will become redeemable, the Company accretes the instrument to its redemption value using the effective interest method and recognizes any changes against additional paid in capital in the absence of retained earnings. Accretion for the three months ended March 31, 2021 was $853,000. In connection with the issuance of the Series A Redeemable Convertible Preferred Stock, the Company executed a Registration Rights Agreement with Starboard and the Buyers and a Governance Agreement with Starboard and certain affiliates of Starboard. Under the Registration Rights Agreement, the Company agreed to provide certain registration rights with respect to the Series A Redeemable Convertible Preferred Stock and shares of Common Stock issued upon conversion. In accordance with the Governance Agreement, the Company agreed to (i) increase the size of the Board of Directors from six to seven members, (ii) appoint Jonathan Sagal as a director of the Company, (iii) grant Starboard the right to recommend two additional directors for appointment to the board, (iv) form a Strategic Committee of the Board tasked with sourcing and performing due diligence on potential acquisition targets, (v) appoint certain directors to the Strategic Committee, and (vi) appoint a director to the Nominating and Corporate Governance Committee. The following features of the Series A Redeemable Convertible Preferred Stock are required to be bifurcated from the host preferred stock and accounted for separately as an embedded derivative: (i) the right of the holders to redeem the shares (the “put option”), (ii) the right of the holders to receive common stock upon conversion of the shares (the “conversion option”), (iii) the right of the Company to redeem the shares (the “call option”), and (iv) the change in dividend rate upon consummation of an approved investment or a triggering event (the “contingent dividend rate feature”). These features are required to be accounted for separately from the Series A Redeemable Convertible Preferred Stock because the features were determined to be not clearly and closely related to the debt-like host and also did not meet any other scope exceptions for derivative accounting. Therefore, these features are bundled together and are accounted for as a single, compound embedded derivative liability. Accordingly, we have recorded an embedded derivative liability representing the combined fair value of each of these features. The embedded derivative liability is adjusted to reflect fair value at each period end with changes in fair value recorded in the “Change in fair value of redeemable preferred stock embedded derivative” financial statement line item of the accompanying consolidated statements of operations. As of March 31, 2021, the fair value of the Series A embedded derivative was $40.4 million. Series A Warrants On November 18, 2019, in connection with the issuance of the Series A Redeemable Convertible Preferred Stock, the Company issued a detachable Series A Warrants to acquire up to purchase 5,000,000 shares of common stock at a price of $3.65 per share (subject to certain anti-dilution adjustments) at any time during a period of eight years beginning on the instrument’s issuance date of the Series A Warrants. The fair value of the Series A Warrants was $4.8 million. The Series A Warrants will be recognized at fair value at each reporting period until exercised, with changes in fair value recognized in other income (expense) in the accompanying consolidated statements of operations. As of March 31, 2021, the fair value of the Series A Warrants was $18.2 million. As of March 31, 2021, the Series A Warrants have not been exercised. The Series A Warrants are classified as a liability in accordance with ASC 480, Distinguishing Liabilities from Equity, as the agreement provides for net cash settlement upon a change in control, which is outside the control of the Company. Series B Warrants On February 25, 2020, pursuant to the terms of the Securities Purchase Agreement with Starboard and the Buyers, the Company issued Series B Warrants to purchase up to 100 million shares of the Company’s common stock at an exercise price (subject to certain price-based anti-dilution adjustments) of either (i) $5.25 per share, if exercising by cash payment, within 30 months from the issuance date (i.e., August 25, 2022); or (ii) $3.65 per share, if exercising by cancellation of a portion of Notes. The Company issued the Series B Warrants for an aggregate purchase price of $4.6 million. The Series B Warrants expire on November 15, 2027. In connection with the issuance of the Notes on June 4, 2020, the terms of certain of the Series B Warrants were amended to permit the payment of the lower exercise price of $3.65 through the payment of cash, rather than only through the cancellation of Notes outstanding, at any time until the expiration date of November 15, 2027. Only 31,506,849 of the Series B Warrants are subject to this adjustment with the remaining balance of 68,493,151 Series B Warrants continuing under their original terms. As of March 31, 2021, the Series B Warrants have not been exercised. The Series B Warrants will be recognized at fair value at each reporting period until exercised, with changes in fair value recognized in the consolidated statements of operations in other income (expense). As of March 31, 2021, the fair value of the Series B Warrants was $226.0 million. The Series B Warrants are classified as a liability in accordance with ASC 480, Distinguishing Liabilities from Equity, as the agreement provides for net cash settlement upon a change in control, which is outside the control of the Company. Senior Secured Notes Pursuant to the Securities Purchase Agreement dated November 18, 2019 with Starboard and the Buyers, on June 4, 2020, the Company issued $115 million in Notes to the Buyers. Also on June 4, 2020, in connection with the issuance of the Notes, the Company entered into a Supplemental Agreement with Starboard (the “Supplemental Agreement”), pursuant to which the Company agreed to redeem $80 million aggregate principal amount of the Notes by September 30, 2020, and $35 million aggregate principal amount of the Notes by December 31, 2020, resulting in the total principal outstanding being paid by December 31, 2020. Per the Supplemental Agreement, interest is payable semiannually at a rate of 6.00% per annum, and in an event of default, the interest rate is increased to 10% per annum. The Notes include certain financial and non-financial covenants. Additionally, all or any portion of the principal amount outstanding under the Notes may, at the election of Starboard, be surrendered to the Company for cancellation in payment of the exercise price upon the exercise of Series B Warrants. On June 30, 2020, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with Merton Acquisition HoldCo LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“Merton”) and Starboard, on behalf of itself and on behalf of certain funds and accounts under its management, including the holders of the Notes. Pursuant to the Exchange Agreement, the holders of the Notes exchanged the entire outstanding principal amount for new senior notes (the “New Notes”) issued by Merton having an aggregate outstanding original principal amount of $115 million. The New Notes bear interest at a rate of 6.00% per annum and had a maturity date of December 31, 2020. The New Notes are fully guaranteed by the Company and are secured by an all-assets pledge of the Company and Merton and non-recourse equity pledges of each of the Company’s material subsidiaries. Pursuant to the Exchange Agreement, the New Notes (i) are deemed to be “Notes” for purposes of the Securities Purchase Agreement, (ii) are deemed to be “June 2020 Approved Investment Notes” for purposes of the Supplemental Agreement, and therefore the Company has agreed to redeem $80 million principal amount of the New Notes by September 30, 2020 and $35 million principal amount of the New Notes by December 31, 2020, and (iii) are deemed to be “Notes” for the purposes of the Series B Warrants, and therefore may be tendered pursuant to a Note Cancellation under the Series B Warrants on the terms set forth in the Series B Warrants and the New Notes. Delivery of notes in the form of the New Notes will also satisfy the delivery of Exchange Notes pursuant to Section 16(i) of the Certificate of Designations of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share. The New Notes will not be deemed to be “Notes” for the purposes of the Registration Rights Agreement, dated as of November 18, 2019, by and among the Company, Starboard and the Buyers. Because the New Notes are to be settled within twelve months pursuant to their terms, they are classified as current liabilities on the balance sheet. The Company capitalized $4.6 million in lender fees and $0.5 million in other issuance costs associated with the issuance of the Notes. The $4.6 million of lender fees are recognized as long term deferred debt issuance cost and will be amortized to interest expense until November 15, 2027, the maturity date of Series A Redeemable Convertible Preferred Stock. The $0.5 million issuance costs are recognized as a discount on the Notes and will be amortized to interest expense over the contractual life of the Notes. There is $1.5 million accrued and unpaid interest on the New Note as of March 31, 2021. On January 29, 2021, the Company redeemed $50 million of the New Notes. On March 31, 2021, the Company reissued $50 million of the New Notes for a total principal amount outstanding of New Notes as of March 31, 2021 of $115 million and the parties agreed that the Company will redeem the remaining $115 million of the principal amount of the New Notes on or before July 15, 2021. Modifications to Series A Redeemable Convertible Preferred Stock and Series B Warrants The June 4, 2020 Supplemental Agreement also provided for (i) a waiver of increased dividends under the original terms of the Series A Redeemable Convertible Preferred Stock that would have otherwise accrued due to the Company’s use of the $35 million proceeds received from Starboard and the Buyers upon the issuance of the Series A Redeemable Convertible Preferred Stock in November 2019, (ii) the replacement of original optional redemption rights for the Series A Redeemable Convertible Preferred Stock provided to both the Company and the holders that otherwise would have been nullified through the issuance of the Notes, and (iii) an amendment to the terms of the previously issued Series B Warrants to permit the payment of the lower exercise price of $3.65 through the payment of cash, rather than only through the cancellation of Notes outstanding, at any time until the expiration of the Series B Warrants on November 15, 2027. Only 31,506,849 of the Series B Warrants are subject to this adjustment with the remaining balance of 68,493,151 Series B Warrants continuing under their original terms. We analyzed the amendments to the terms of the Series A Redeemable Convertible Preferred Stock and determined that the amendments were not significant. Therefore, the amendments are accounted for as a modification on a prospective basis. The incremental fair value of the Series B Warrants associated with the modification of their terms in connection with the issuance of the Notes is $1.3 million and is recognized as a discount on the Notes and will be amortized to interest expense over the contractual life of the Notes. As of March 31, 2021, $1,133,000 was amortized to interest expense. As of March 31, 2021, $196,000 is remaining to be amortized until the Final Redemption Date of July 15, 2021. |
11. LF EQUITY INCOME FUND PORTF
11. LF EQUITY INCOME FUND PORTFOLIO INVESTMENT | 3 Months Ended |
Mar. 31, 2021 | |
Investments, Debt and Equity Securities [Abstract] | |
LF EQUITY INCOME FUND PORTFOLIO INVESTMENT | 11. LF EQUITY INCOME FUND PORTFOLIO INVESTMENT On April 3, 2020, the Company entered into an Option Agreement with Seller, which included general terms through which the Company was provided the option to purchase life sciences equity securities in a portfolio of public and private companies (“Portfolio Companies”) for an aggregate purchase price of £223.9 million, approximately $277.5 million at the exchange rate on April 3, 2020. On June 4, 2020, the Company executed the Transaction Agreement between Link Fund Solutions Limited, Seller, and the Company. Pursuant to the Transaction Agreement, the Company agreed to purchase from Seller and Seller agreed to transfer to the Company the specified equity securities of all Portfolio Companies at set prices at various future dates. The transfer dates would vary among the Portfolio Companies as the Transaction Agreement gives the Company the exclusive right to determine when to call for transfer of each security, and because each Portfolio Company (or its existing equity holders) may be required to approve the transfer due to rights of first refusals and other company-specific terms and conditions. Thus, the execution of the Transaction Agreement resulted in forward contracts for the Company to purchase equity securities in each public and private company at a specified price on a future date. In accordance with the Transaction Agreement, the Company transferred the total purchase price of £223.9 million into an escrow account. Upon the transfer of equity securities in the Portfolio Companies to the Company, the associated funds were released from the escrow account to Seller based on the consideration amount assigned to the equity securities for such Portfolio Companies in the Transaction Agreement. As of December 31, 2020, all of the equity securities in the Portfolio Companies were transferred to the Company pursuant to the Transaction Agreement. The Company has sold a portion of the equity securities of such Portfolio Companies while retaining an interest in a number of operating businesses, including a controlling interest in one of the Portfolio Companies. For accounting purposes, the total purchase price of the portfolio was allocated to the individual equity securities based on their individual fair values as of April 3, 2020, in order to establish an appropriate cost basis for each of the acquired securities. The fair values of the public company securities were based on their quoted market price. The fair values of the private company securities were estimated based on recent financing transactions and secondary market transactions and factoring in a discount for the illiquidity of these securities. Changes in the fair value of Acacia’s investment in the Portfolio Companies are recorded as unrealized gains or losses in the condensed consolidated statements of operations. For the three months ended March 31, 2021 and 2020, the accompanying condensed consolidated statements of operations reflected the following: Three Months Ended March 31, 2021 2020 (In thousands) Change in fair value of equity securities - LF Fund securities $ 37,176 $ – Net realized and unrealized gain on investment in LF Fund securities $ 37,176 $ – As part of the Company’s acquisition of equity securities in the Portfolio Companies, the Company acquired a majority interest in the equity securities of MalinJ1, which were transferred to the Company on December 3, 2020. The acquisition of the MalinJ1 securities was accounted for as an asset acquisition as there was a change of control of MalinJ1 and substantially all of the fair value of the assets acquired was concentrated in a single identifiable asset, an investment in Viamet Pharmaceuticals Holdings, LLC (“Viamet”). As such the cost basis of the MalinJ1 securities was used to allocate to the Viamet investment, the single identifiable asset, and no goodwill was recognized. The Company through its consolidation of MalinJ1 accounts for the Viamet investment under the equity method as it owns 37.9% of outstanding shares of Viamet. |
12. SUBSEQUENT EVENTS
12. SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | 12. SUBSEQUENT EVENTS On May 4, 2021, the Company made an additional $9.8 million investment in one of the Portfolio Companies. |
1. DESCRIPTION OF BUSINESS AN_2
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Description of Business As used herein, “we,” “us,” “our,” “Acacia” and the “Company” refer to Acacia Research Corporation and/or its wholly and majority-owned and controlled operating subsidiaries, and/or where applicable, its management. Acacia was incorporated on January 25, 1993 under the laws of the State of California. In December 1999, Acacia changed its state of incorporation from California to Delaware. Acacia acquires businesses and operating assets that the Company believes to be undervalued and where the Company believes it can leverage its resources and skill sets to realize and unlock value. The Company intends to leverage its (i) access to flexible capital that can be deployed unconditionally, (ii) expertise in corporate governance and operational restructuring, (iii) willingness to invest in out of favor industries and businesses that suffer from a complexity discount and untangle complex, multi-factor situations, and (iv) expertise and relationships in certain sectors, to complete strategic acquisitions of businesses, divisions, and/or assets with a focus on mature technology, healthcare, industrial and certain financial segments. Acacia seeks to identify opportunities where the Company believes it is an advantaged buyer, where the Company can avoid structured sale processes and create the opportunity to purchase businesses, divisions and/or assets of companies at an attractive price due to the Company’s unique capabilities, relationships, or expertise, or where Acacia believes the target would be worth more to the Company than to other buyers. Acacia operates its business based on three key principles of People, Process and Performance and have built a management team with identified expertise in Research, Execution and Operation of the Company’s targeted acquisitions. Acacia, through its operating subsidiaries, also currently engages in its legacy business of investing in, licensing and enforcing patented technologies. Acacia’s operating subsidiaries partner with inventors and patent owners, applying their legal and technology expertise to patent assets to unlock the financial value in their patented inventions. In recent years, Acacia has also invested in technology companies. Acacia leverages its experience, expertise, data and relationships developed as a leader in the intellectual property (“IP”) industry to pursue these opportunities. In some cases, these opportunities will complement and/or supplement Acacia’s primary licensing and enforcement business. Acacia’s operating subsidiaries generate revenues and related cash flows from the granting of IP rights (hereinafter, “IP Rights”) for the use of patented technologies that its operating subsidiaries control or own. Acacia’s operating subsidiaries assist patent owners with the prosecution and development of their patent portfolios, the protection of their patented inventions from unauthorized use, the generation of licensing revenue from users of their patented technologies and, where necessary, with the enforcement against unauthorized users of their patented technologies through the filing of patent infringement litigation. Acacia’s operating subsidiaries are principals in the licensing and enforcement effort, obtaining control of the rights in the patent portfolio, or control of the patent portfolio outright. Acacia’s operating subsidiaries own or control the rights to multiple patent portfolios, which include U.S. patents and certain foreign counterparts, covering technologies used in a wide variety of industries. Neither Acacia nor its operating subsidiaries invent new technologies or products; rather, Acacia depends upon the identification and investment in new patents, inventions and companies that own IP through its relationships with inventors, universities, research institutions, technology companies and others. If Acacia’s operating subsidiaries are unable to maintain those relationships and identify and grow new relationships, then they may not be able to identify new technology-based opportunities for sustainable revenue and/or revenue growth. During the three months ended March 31, 2021, Acacia obtained control of one new patent portfolio. During fiscal year 2020, Acacia obtained control of five new patent portfolios. |
Basis of Presentation | Accounting Principles The consolidated financial statements and accompanying notes are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Acacia believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, the valuation of the equity instruments, the valuation of Series A redeemable convertible preferred stock (the “Series A Redeemable Convertible Preferred Stock”), embedded derivatives, Series A warrants (the “Series A Warrants”), Series B warrants (the “Series B Warrants”), stock-based compensation expense, impairment of patent-related intangible assets, the determination of the economic useful life of amortizable intangible assets, income taxes and valuation allowances against net deferred tax assets, require its most difficult, subjective or complex judgments. |
COVID-19 Pandemic and the CARES Act | COVID-19 Pandemic and the CARES Act The full impact of the COVID-19 pandemic continues to evolve as of the date of this report. While the Company does not expect the current situation to present direct risks to its business, and it has not had a material impact to date, the COVID-19 pandemic could adversely impact the Company’s operations, as well as the operations of its licensees and other business partners. Our cash is held in major financial institutions in government instruments and high-quality short-term bonds. Our business is fully able to operate in a socially distanced and/or remote capacity and in accordance with applicable laws, policies, and best practices. Our workforce is provided ample paid sick leave, and we have in place robust disaster recovery and business continuity policies that have been revised to account for a long-term remote work contingency such as this. However, the ongoing pandemic may present risks that we do not currently consider material or risks that may evolve quickly that could have a materially adverse effect on our business, results of operations and financial condition. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer's social security payments, net operating loss utilization and carryback periods and modifications to the net interest deduction limitations. The CARES Act has not had a material impact on the Company’s income tax provision. On December 27, 2020, the President of the United States signed the Consolidated Appropriations Act, 2021 (“Consolidated Appropriations Act”) into law. The Consolidated Appropriations Act is intended to enhance and expand certain provisions of the CARES Act, allows for the deductions of expenses related to the Payroll Protection Program funds received by companies, and provides an update to meals and entertainment expensing for 2021. The Consolidated Appropriations Act did not have a material impact to the Company’s income tax provision for 2020. The Company will continue to evaluate the impact of the Consolidated Appropriations Act on its financial position, results of operations and cash flows, if any. |
2. SUMMARY OF SIGNIFICANT ACC_2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Accounting Principles | Accounting Principles The consolidated financial statements and accompanying notes are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). |
Principles of Consolidation | Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of Acacia and its wholly and majority-owned and controlled subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Noncontrolling interests in Acacia’s majority-owned and controlled operating subsidiaries (“noncontrolling interests”) are separately presented as a component of stockholders’ equity. Consolidated net income or (loss) is adjusted to include the net (income) or loss attributed to noncontrolling interests in the consolidated statements of operations. Refer to the accompanying consolidated statements of Series A Redeemable Convertible Preferred Stock and stockholders’ equity for total noncontrolling interests. In 2020, in connection with the transaction with Link Fund Solutions Limited, which is more fully described in Note 11, the Company acquired equity securities of Malin J1 Limited (“MalinJ1”). MalinJ1 is included in the Company’s consolidated financial statements because the Company, through its interest in the equity securities of MalinJ1, has the ability to control the operations and activities of MalinJ1. Viamet HoldCo LLC, a Delaware limited liability company and wholly-owned subsidiary of Acacia (see Note 11), is the majority shareholder of MalinJ1. A wholly owned subsidiary of Acacia is the general partner of the Acacia Intellectual Property Fund, L.P. (the “Acacia IP Fund”), which was formed in August 2010. The Acacia IP Fund has been included in the Company’s consolidated financial statements since 2010, as Acacia’s wholly owned subsidiary, the general partner of Acacia IP Fund, has the ability to control the operations and activities of the Acacia IP Fund. The Acacia IP Fund was terminated as of December 31, 2017 and dissolved in 2020. |
Revenue Recognition | Revenue Recognition Revenue is recognized upon transfer of control of promised bundled IP Rights and other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive in exchange for those IP Rights. Revenue contracts that provide promises to grant the right to use IP Rights as they exist at the point in time at which the IP Rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue is recognized at the point in time that the applicable performance obligations are satisfied and all other revenue recognition criteria have been met. For the periods presented, revenue contracts executed by the Company primarily provided for the payment of contractually determined, one-time, paid-up license fees in consideration for the grant of certain IP Rights for patented technologies owned or controlled by Acacia. Revenues also included license fees from sales-based revenue contracts, the majority of which were originally executed in prior periods, which provide for the payment of quarterly license fees based on quarterly sales of applicable product units by licensees (“Recurring Revenue Agreements”). Revenues may also include court ordered settlements or awards related to our patent portfolio or sales of our patent portfolio. IP Rights granted included the following, as applicable: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The IP Rights granted were perpetual in nature, extending until the legal expiration date of the related patents. The individual IP Rights are not accounted for as separate performance obligations, as (i) the nature of the promise, within the context of the contract, is to transfer combined items to which the promised IP Rights are inputs and (ii) the Company's promise to transfer each individual IP right described above to the customer is not separately identifiable from other promises to transfer IP Rights in the contract. Since the promised IP Rights are not individually distinct, the Company combined each individual IP Right in the contract into a bundle of IP Rights that is distinct, and accounted for all of the IP Rights promised in the contract as a single performance obligation. The IP Rights granted were “functional IP rights” that have significant standalone functionality. Acacia's subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights. Acacia’s operating subsidiaries have no further obligation with respect to the grant of IP Rights, including no express or implied obligation to maintain or upgrade the technology, or provide future support or services. The contracts provide for the grant (i.e., transfer of control) of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the contract. Licensees legally obtain control of the IP Rights upon execution of the contract. As such, the earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met. Revenue contracts generally provide for payment of contractual amounts with 30-90 days of execution of the contract, or the end of the quarter in which the sale or usage occurs for Recurring Revenue Agreements. Contractual payments made by licensees are generally non-refundable. For sales-based royalties, the Company includes in the transaction price some or all of an amount of estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Notwithstanding, revenue is recognized for a sales-based royalty promised in exchange for a license of IP Rights when the later of (i) the subsequent sale or usage occurs, or (ii) the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied. Estimates are generally based on historical levels of activity, if available. Revenues from contracts with significant financing components (either explicit or implicit) are recognized at an amount that reflects the price that a licensee would have paid if the licensee had paid cash for the IP Rights when they transfer to the licensee. In determining the transaction price, the Company adjusts the promised amount of consideration for the effects of the time value of money. As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the entity transfers promised IP Rights to a customer and when the customer pays for the IP Rights will be one year or less. In general, the Company is required to make certain judgments and estimates in connection with the accounting for revenue contracts with customers. Such areas may include identifying performance obligations in the contract, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct from other promised goods or services, evaluating whether a license transfers to a customer at a point in time or over time, allocating the transaction price to separate performance obligations, determining whether contracts contain a significant financing component, and estimating revenues recognized at a point in time for sales-based royalties. Revenues were comprised of the following for the periods presented: Three Months Ended March 31, 2021 2020 Paid-up Revenue Agreements $ 5,410 $ 3,300 Recurring Revenue Agreements 393 515 Total Revenue $ 5,803 $ 3,815 Refer to “ Inventor Royalties and Contingent Legal Expenses |
Patent Portfolio Operations | Patent Portfolio Operations Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs. These costs are included under the caption “Patent Portfolio operations” in the accompanying consolidated statements of operations. Inventor Royalties and Contingent Legal Expenses Inventor royalties are expensed in the condensed consolidated statements of operations in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, upfront advances paid to patent owners by Acacia’s operating subsidiaries are recoverable from future net revenues. Patent costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the unaudited condensed consolidated statements of operations. Any unamortized upfront advances recovered from net revenues are expensed in the period recovered and included in amortization expense in the unaudited condensed consolidated statements of operations. Contingent legal fees are expensed in the unaudited condensed consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Inventor royalty and contingent legal agreements typically provide for payment by the Company of contractual amounts 30 days subsequent to the fiscal quarter end during which related license fee payments are received from licensees by the Company. Concentrations Financial instruments that potentially subject Acacia to concentrations of credit risk are cash equivalents, equity securities and accounts receivable. Acacia places its cash equivalents and equity securities primarily in highly rated money market funds and investment grade marketable securities. Cash and cash equivalents are also invested in deposits with certain financial institutions and may, at times, exceed federally insured limits. Acacia has not experienced any significant losses on its deposits of cash and cash equivalents. The Company does not have any material foreign operations. Based on the jurisdiction of the entity obligated to satisfy payment obligations pursuant to the applicable revenue arrangement, for the three months ended March 31, 2021 and 2020, 90% and 4%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. Three licensees individually represented approximately 68%, 11%, and 10% of accounts receivable at March 31, 2021. Two licensees individually represented approximately 62% and 21% of accounts receivable at December 31, 2020. |
Patents | Patents Patents include the cost of patents or patent rights (hereinafter, collectively “patents”) acquired from third-parties or obtained in connection with business combinations. Patent costs are amortized utilizing the straight-line method over their remaining economic useful lives. Refer to Note 4 for additional information regarding our patents. |
Impairment of Long-lived Assets | Impairment of Long-lived Assets Acacia reviews long-lived assets and intangible assets for potential impairment annually (quarterly for patents) and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded in an amount equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. In the event that management decides to no longer allocate resources to a patent portfolio, an impairment loss equal to the remaining carrying value of the asset is recorded. Refer to Note 4 for additional information. Fair value is generally estimated using the “Income Approach,” focusing on the estimated future net income-producing capability of the patent portfolios over their estimated remaining economic useful life. Estimates of future after-tax cash flows are converted to present value through “discounting,” including an estimated rate of return that accounts for both the time value of money and investment risk factors. Estimated cash inflows are typically based on estimates of reasonable royalty rates for the applicable technology, applied to estimated market data. Estimated cash outflows are based on existing contractual obligations, such as contingent legal fee and inventor royalty obligations, applied to estimated license fee revenues, in addition to other estimates of out-of-pocket expenses associated with a specific patent portfolio’s licensing and enforcement program. The analysis also contemplates consideration of current information about the patent portfolio including, status and stage of litigation, periodic results of the litigation process, strength of the patent portfolio, technology coverage and other pertinent information that could impact future net cash flows. |
Cash and Cash Equivalents | Cash and Cash Equivalents Acacia considers all highly liquid, equity securities with original maturities of three months or less when purchased to be cash equivalents. For the periods presented, Acacia’s cash equivalents are comprised of investments in AAA rated money market funds that invest in first-tier only securities, which primarily includes: domestic commercial paper, securities issued or guaranteed by the U.S. government or its agencies, U.S. bank obligations, and fully collateralized repurchase agreements. Acacia’s cash equivalents are measured at fair value using quoted prices that represent Level 1 inputs. |
Long Term Restricted Cash | Long Term Restricted Cash Long-term restricted cash relates primarily to the proceeds received from the issuance of Series A Redeemable Convertible Preferred Stock which are held in an escrow account. The amounts are to be released to the Company upon, among other things, (i) the consummation of a suitable investment or acquisition by the Company or (ii) the conversion of Series A Redeemable Convertible Preferred Stock into common stock. |
Fair Value Measurements | Fair Value Measurements U.S. GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. Refer to Note 9 to our notes to consolidated financial statements for more information related to our fair value measurement. |
Equity Securities at Fair Value | Equity Securities at Fair Value Investments in equity securities are reported at fair value on a recurring basis, with related realized and unrealized gains and losses in the value of such securities recorded in the unaudited condensed consolidated statements of operations in other income (expense). Dividend income is included in the unaudited condensed consolidated statements of operations in other income (expense). Equity securities at fair value for the periods presented were comprised of the following: Cost Gross Gross Fair Value (In thousands) Security Type March 31, 2021: Equity securities - LF equity - common stock $ 40,053 $ 138,241 $ (10,198 ) $ 168,096 Equity securities - other equity - common stock $ 11,676 $ 1,100 $ (552 ) $ 12,224 Equity securities at fair value - common stock $ 51,729 $ 139,341 $ (10,750 ) $ 180,320 December 31, 2020: Equity securities - LF equity - common stock $ 32,765 $ 72,689 $ (583 ) $ 104,871 Equity securities - other equity - common stock $ 4,086 $ 1,410 $ (1,264 ) $ 4,232 Equity securities at fair value - common stock $ 36,851 $ 74,099 $ (1,847 ) $ 109,103 Equity securities without readily determinable fair value For equity securities that do not have readily determinable fair value, the Company elected to report them under the measurement alternative. They are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. The fair values of the private company securities were estimated based on recent financing transactions and secondary market transactions and factoring in any adjustments for illiquidity or preference of these securities. Changes in fair value are reported in the consolidated statements of operations in other income (expense). |
Investments at Fair Value | Investments at Fair Value On an individual investment basis, Acacia may elect to account for investments in companies where the Company has the ability to exercise significant influence over operating and financial policies of the investee, at fair value. If the fair value method is applied to an investment that would otherwise be accounted for under the equity method of accounting, it is applied to all of the financial interests in the same entity that are eligible items (i.e., common stock and warrants). We elected the fair value method for our investment in Veritone, Inc. (“Veritone”) upon acquisition of the investment. As of March 31, 2021, we have no more investment in Veritone stocks and warrants. |
Stock-Based Compensation | Stock-Based Compensation The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. The fair value of each option award is estimated on the date of grant using a Black-Scholes option-pricing model. Forfeitures are accounted for as they occur. Restricted stock units granted in September 2019 with market-based vesting conditions vest based upon the Company achieving specified stock price targets over a three-year period. The effect of a market condition is reflected in the estimate of the grant-date fair value of the options utilizing a Monte Carlo valuation technique. Compensation cost is recognized with a market-based vesting condition provided that the requisite service is rendered, regardless of when, if ever, the market condition is satisfied. Assumptions utilized in connection with the Monte Carlo valuation technique included: estimated risk-free interest rate of 1.38 percent; term of 3.00 years; expected volatility of 38 percent; and expected dividend yield of 0 percent. The risk-free interest rate was determined based on the yields available on U.S. Treasury zero-coupon issues. The expected stock price volatility was determined using historical volatility. The expected dividend yield was based on expectations regarding dividend payments. Profits Interest Units (“Units”) were accounted for in accordance with Accounting Standards Codification (“ASC”) 718-10, “Compensation - Stock Compensation.” The vesting conditions did not meet the definition of service, market or performance conditions, as defined in ASC 718. As such, the Units were classified as liability awards. Compensation expense was adjusted for changes in fair value prorated for the portion of the requisite service period rendered. Initially, compensation expense was recognized on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which was five years. Upon full vesting of the award, which occurred during the three months ended September 30, 2017, previously unrecognized compensation expense was immediately recognized in the period. The Company has a purchase option to purchase the vested Units that are not otherwise forfeited after termination of continuous service. The exercise price of the purchase option is the fair market value of the Units on the date of termination of continuous service. As of March 31, 2021, the Units totaled $591,000, which was their fair value as of December 31, 2018 after termination of service. |
Series A Warrants | Series A Warrants The fair value of the Series A Warrants is estimated using a Black-Scholes option-pricing model. The fair value of the Series A Warrants as of March 31, 2021 was estimated based on the following assumptions: volatility of 30 percent, risk-free rate of 1.29 percent, term of 6.54 years and a dividend yield of 0 percent. Refer to Note 10 for additional information. |
Series B Warrants | Series B Warrants The fair value of the Series B Warrants is estimated using a Black-Scholes option-pricing model. In the quarter ended March 31, 2021, there was a change in methodology used to an acceptable Black-Scholes option-pricing model from a Monte Carlo valuation technique used to value the Series B Warrants as of December 31, 2020. The fair value of the Series B Warrants as of March 31, 2021 was estimated based on the following assumptions: (1) volatility of 30 percent, risk-free rate of 1.31 percent, term of 6.63 years, and a dividend yield of 0 percent, and (2) volatility of 25 percent, risk-free rate of 0.11 percent, term of 1.4 years and a dividend yield of 0 percent. Refer to Note 10 for additional information. |
Embedded derivatives | Embedded derivatives Embedded derivatives that are required to be bifurcated from their host contract are valued separately from the host instrument. The binomial model determines the value of a convertible bond instrument by valuing its two separate components (i.e., a cash only component which is subject to the selected risk-adjusted discount rate and an equity component where settlement is subject to a risk-free rate) within a single lattice framework. The binomial model utilizes the Tsiveriotis and Fernandes implementation in which a convertible instrument is split into two separate components: a cash-only component which is subject to the selected risk-adjusted discount rate and an equity component which is subject only to the risk-free rate. The model considers the (i) implied volatility of the value of our common stock, (ii) appropriate risk-free interest rate, (iii) credit spread, (iv) dividend yield, (v) dividend accrual (and a step-up in rates), and (vi) event probabilities of the various conversion and redemption scenarios. The volatility of the Company’s common stock is estimated by analyzing the Company’s historical volatility, implied volatility of publicly traded stock options, and the Company’s current asset composition and financial leverage. The selected volatility, as described below, represents a haircut from the Company’s actual realized historical volatility. A volatility haircut is a concept used to describe a commonly observed occurrence in which the volatility implied by market prices involving options, warrants, and convertible debt is lower than historical actual realized volatility. The assumed base case term used in the valuation model is the period remaining until November 15, 2027, the maturity date. The risk-free interest rate is based on the yield on the U.S. Treasury with a remaining term equal to the expected term of the conversion and early redemption options. The significant assumptions utilized in the Company’s valuation of the embedded derivative at March 31, 2021 are as follows: volatility of 30 percent, risk-free rate of 1.3 percent, discount rate of 8.8 percent, and a dividend yield of 0 percent. The fair value measurement of the embedded derivative is sensitive to these assumptions and changes in these assumptions could result in a materially different fair value measurement. Refer to Note 10 for additional information. |
Treasury Stock | Treasury Stock Repurchases of the Company’s outstanding common stock are accounted for using the cost method. The applicable par value is deducted from the appropriate capital stock account on the formal or constructive retirement of treasury stock. Any excess of the cost of treasury stock over its par value is charged to additional paid-in capital and reflected as treasury stock on the condensed consolidated balance sheets. |
Impairment of Investments | Impairment of Investments Acacia reviews its investments quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In making this judgment, Acacia considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. If the cost of an investment exceeds its fair value, Acacia evaluates, among other factors, general market conditions and the duration and extent to which the fair value is less than cost. Acacia also considers specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in the condensed consolidated statements of operations and a new cost basis in the investment is established. |
Income Taxes | Income Taxes Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s condensed consolidated financial statements or consolidated income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realization of such assets. The provision for income taxes for interim periods is determined using an estimate of Acacia’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, Acacia updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded. The Company’s effective tax rates were (0%) and 11% for the three ended March 31, 2021 and 2020, respectively. Tax benefit (expense) for the periods presented primarily reflects the impact of state taxes and foreign taxes withholding or refund incurred on revenue agreements executed with third-party licensees domiciled in foreign jurisdictions. The Company has recorded full valuation allowance against our net deferred tax assets as of March 31, 2021 and 2020. These assets primarily consist of foreign tax credits, capital loss carryforwards and net operating loss carryforwards. |
2. SUMMARY OF SIGNIFICANT ACC_3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Disaggregation of revenue | Revenues were comprised of the following for the periods presented: Three Months Ended March 31, 2021 2020 Paid-up Revenue Agreements $ 5,410 $ 3,300 Recurring Revenue Agreements 393 515 Total Revenue $ 5,803 $ 3,815 |
Schedule of equity securities | Cost Gross Gross Fair Value (In thousands) Security Type March 31, 2021: Equity securities - LF equity - common stock $ 40,053 $ 138,241 $ (10,198 ) $ 168,096 Equity securities - other equity - common stock $ 11,676 $ 1,100 $ (552 ) $ 12,224 Equity securities at fair value - common stock $ 51,729 $ 139,341 $ (10,750 ) $ 180,320 December 31, 2020: Equity securities - LF equity - common stock $ 32,765 $ 72,689 $ (583 ) $ 104,871 Equity securities - other equity - common stock $ 4,086 $ 1,410 $ (1,264 ) $ 4,232 Equity securities at fair value - common stock $ 36,851 $ 74,099 $ (1,847 ) $ 109,103 |
3. LOSS PER SHARE (Tables)
3. LOSS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Calculation of basic and diluted net loss per share | Three Months Ended March 31, 2021 2020 (In thousands, except share and per share information) Numerator: Net loss attributable to Acacia Research Corporation $ (164,618 ) $ (11,291 ) Dividend on Series A redeemable convertible preferred stock (263 ) (263 ) Accretion of Series A redeemable convertible preferred stock (852 ) (631 ) Undistributed earnings allocated to participating securities 29,068 – Net loss attributable to common stockholders - basic and diluted (136,665 ) (12,185 ) Denominator: Weighted-average shares used in computing net loss per share attributable to common stockholders - basic and diluted 48,596,040 49,875,396 Basic and diluted net loss per common share $ (2.81 ) $ (0.24 ) |
4. PATENTS, NET OF ACCUMULATE_2
4. PATENTS, NET OF ACCUMULATED AMORTIZATION (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | The following table presents the scheduled annual aggregate amortization expense as of March 31, 2021: For the years ending December 31, (In thousands) Remainder of 2021 $ 7,836 2022 10,448 2023 10,381 2024 9,005 2025 6,630 Thereafter 750 $ 45,050 |
5. INVESTMENT AT FAIR VALUE (Ta
5. INVESTMENT AT FAIR VALUE (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Schedule of Investments [Abstract] | |
Schedule of gain on investments | For the three months ended March 31, 2021 and 2020, the accompanying condensed consolidated statements of operations reflected the following: Three Months Ended March 31, 2021 2020 (In thousands) Change in fair value of investment, warrants $ – $ 630 Change in fair value of investment, common stock – 3,478 Gain on sale of investment, warrants 839 – Loss on sale of investment, common stock – (3,316 ) Net realized and unrealized gain (loss) on investment at fair value $ 839 $ 792 |
6. COMMITMENTS AND CONTINGENC_2
6. COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum operating lease payments | The table below presents aggregate future minimum payments due under the New Lease and the New York Office Lease discussed above, reconciled to lease liabilities included in the consolidated balance sheet as of March 31, 2021: Operating Leases (In thousands) 2021 $ 444 2022 370 2023 364 2024 218 Thereafter – Total minimum payments $ 1,396 Less: short-term lease liabilities (551 ) Long-term lease liabilities $ 845 |
7. STOCKHOLDERS' EQUITY (Tables
7. STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Schedule of repurchased shares | Stock repurchases for the periods presented, all of which were purchased as part of a publicly announced plan or program, were as follows: Total Number Average Approximate Dollar Plan Expiration Date March 20, 2020 - March 31, 2020 576,898 $ 2.28 $ 8,686,000 July 31, 2020 April 1, 2020 - April 23, 2020 1,107,639 $ 2.42 $ 6,001,000 July 31, 2020 Totals for 2020 1,684,537 $ 2.37 |
9. FAIR VALUE DISCLOSURES (Tabl
9. FAIR VALUE DISCLOSURES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Schedule of financial assets and liabilities at fair value | Financial assets and liabilities measured at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 (In thousands) Assets as of March 31, 2021: Equity securities at fair value $ 122,469 $ 57,851 $ – Total recurring fair value measurements as of March 31, 2021 $ 122,469 $ 57,851 $ – Assets as of December 31, 2020: Equity securities at fair value $ 109,103 $ – $ – Investment at fair value - warrants – 2,752 – Total recurring fair value measurements as of December 31, 2020 $ 109,103 $ 2,752 $ – Liabilities as of March 31, 2021: Series A warrants $ – $ – $ 18,243 Series B warrants – – 225,956 Embedded derivative liabilities – – 40,419 Total liabilities as of March 31, 2021 $ – $ – $ 284,618 Liabilities as of December 31, 2020: Series A warrants $ – $ 6,640 $ – Series B warrants – – 52,341 Embedded derivative liabilities – – 26,728 Total liabilities as of December 31, 2020 $ – $ 6,640 $ 79,069 |
Schedule of changes in fair value Level 3 liabilities | The following table sets forth a summary of the changes in the estimated fair value of the Company’s Level 3 liabilities, which are measured at fair value on a recurring basis: Series A Warrants Liability Series A Preferred Stock Embedded Derivative Liability Series B Warrants Liability (In thousands) Opening balance as of January 1, 2021 $ – $ 26,728 $ 52,341 Transfers into Level 3 6,640 – – Remeasurement to fair value 11,603 13,691 173,615 Balance as of March 31, 2021 $ 18,243 $ 40,419 $ 225,956 |
11. LF EQUITY INCOME FUND POR_2
11. LF EQUITY INCOME FUND PORTFOLIO INVESTMENT (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of unrealized gains or losses | For the three months ended March 31, 2021 and 2020, the accompanying condensed consolidated statements of operations reflected the following: Three Months Ended March 31, 2021 2020 (In thousands) Change in fair value of equity securities - LF Fund securities $ 37,176 $ – Net realized and unrealized gain on investment in LF Fund securities $ 37,176 $ – |
1. DESCRIPTION OF BUSINESS AN_3
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details Narrative) - Integer | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Number of new patent portfolios acquired | 1 | 5 |
2. SUMMARY OF SIGNIFICANT ACC_4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES : Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Product Information [Line Items] | ||
Revenues | $ 5,803 | $ 3,815 |
Paid Up Revenue Agreements [Member] | ||
Product Information [Line Items] | ||
Revenues | 5,410 | 3,300 |
Recurring Revenue Agreements [Member] | ||
Product Information [Line Items] | ||
Revenues | $ 393 | $ 515 |
2. SUMMARY OF SIGNIFICANT ACC_5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES : Trading Securities (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||
Equity securities - cost | $ 51,729 | $ 36,851 | |
Available-for-sale Securities, Gross Unrealized Gain | 139,341 | 74,099 | |
Available-for-sale Securities, Gross Unrealized Loss | (10,750) | (1,847) | |
Equity securities at fair value | 180,320 | 109,103 | |
Equity Securites - LF Fund Securities [Member] | |||
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||
Available-for-sale Securities, Gross Unrealized Gain | 138,241 | ||
Available-for-sale Securities, Gross Unrealized Loss | (10,198) | ||
Equity securities - other equity [Member] | |||
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||
Equity securities - cost | 11,676 | 4,086 | |
Available-for-sale Securities, Gross Unrealized Gain | 1,100 | 1,410 | |
Available-for-sale Securities, Gross Unrealized Loss | (552) | (1,264) | |
Equity securities at fair value | 12,224 | 4,232 | |
Equity Securites - LF Fund Public Securities [Member] | |||
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||
Equity securities - cost | 40,053 | 32,765 | |
Available-for-sale Securities, Gross Unrealized Gain | $ 72,689 | ||
Available-for-sale Securities, Gross Unrealized Loss | $ (583) | ||
Equity securities at fair value | $ 168,096 | $ 104,871 |
2. SUMMARY OF SIGNIFICANT ACC_6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Sep. 30, 2019 | Dec. 31, 2020 | |
Product Information [Line Items] | ||||
Effective tax rate | 0.00% | 11.00% | ||
Stock-Based Compensation [Member] | ||||
Stock-Based Compensation Assumptions | ||||
Risk-free interest rate | 1.38% | |||
Expected term | 3 years | |||
Expected volatility | 38.00% | |||
Expected dividend | 0.00% | |||
Measurement Input, Price Volatility [Member] | Embedded Derivative [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 25% | |||
Measurement Input, Price Volatility [Member] | Black Scholes Model [Member] | Series A Warrants [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 30% | |||
Measurement Input, Price Volatility [Member] | Monte Carlo Method [Member] | Restricted Stock Units [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 38% | |||
Measurement Input, Price Volatility [Member] | Monte Carlo Method [Member] | Series B Warrants [Member] | Warrant Price $5.25 per share [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 30% | |||
Measurement Input, Price Volatility [Member] | Monte Carlo Method [Member] | Series B Warrants [Member] | Warrant Price $3.65 per share [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 30% | |||
Measurement Input, Risk Free Interest Rate [Member] | Embedded Derivative [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 1.3% | |||
Measurement Input, Risk Free Interest Rate [Member] | Black Scholes Model [Member] | Series A Warrants [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 1.29% | |||
Measurement Input, Risk Free Interest Rate [Member] | Monte Carlo Method [Member] | Restricted Stock Units [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 1.38% | |||
Measurement Input, Risk Free Interest Rate [Member] | Monte Carlo Method [Member] | Series B Warrants [Member] | Warrant Price $5.25 per share [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 1.31% | |||
Measurement Input, Risk Free Interest Rate [Member] | Monte Carlo Method [Member] | Series B Warrants [Member] | Warrant Price $3.65 per share [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 0.11% | |||
Measurement Input, Expected Term [Member] | Black Scholes Model [Member] | Series A Warrants [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 6.54 years | |||
Measurement Input, Expected Term [Member] | Monte Carlo Method [Member] | Restricted Stock Units [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 3.00 years | |||
Measurement Input, Expected Term [Member] | Monte Carlo Method [Member] | Series B Warrants [Member] | Warrant Price $5.25 per share [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 6.63 years | |||
Measurement Input, Expected Term [Member] | Monte Carlo Method [Member] | Series B Warrants [Member] | Warrant Price $3.65 per share [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 1.4 years | |||
Measurement Input, Expected Dividend Rate [Member] | Embedded Derivative [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 0% | |||
Measurement Input, Expected Dividend Rate [Member] | Black Scholes Model [Member] | Series A Warrants [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 0% | |||
Measurement Input, Expected Dividend Rate [Member] | Monte Carlo Method [Member] | Restricted Stock Units [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 0% | |||
Measurement Input, Expected Dividend Rate [Member] | Monte Carlo Method [Member] | Series B Warrants [Member] | Warrant Price $5.25 per share [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 0% | |||
Measurement Input, Expected Dividend Rate [Member] | Monte Carlo Method [Member] | Series B Warrants [Member] | Warrant Price $3.65 per share [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 0% | |||
Measurement Input, Discount Rate [Member] | Embedded Derivative [Member] | ||||
Product Information [Line Items] | ||||
Assumptions used for derivatives | 8.8% | |||
Revenue Benchmark [Member] | One Licensee [Member] | ||||
Product Information [Line Items] | ||||
Concentration risk percentage | 61.00% | 52.00% | ||
Revenue Benchmark [Member] | One Licensee 2 [Member] | ||||
Product Information [Line Items] | ||||
Concentration risk percentage | 9.00% | 33.00% | ||
Revenue Benchmark [Member] | One Licensee 3 [Member] | ||||
Product Information [Line Items] | ||||
Concentration risk percentage | 8.00% | 9.00% | ||
Revenue Benchmark [Member] | One Licensee 4 [Member] | ||||
Product Information [Line Items] | ||||
Concentration risk percentage | 8.00% | |||
Revenue Benchmark [Member] | One Licensee 5 [Member] | ||||
Product Information [Line Items] | ||||
Concentration risk percentage | 8.00% | |||
Revenue Benchmark [Member] | Foreign Licensee [Member] | ||||
Product Information [Line Items] | ||||
Concentration risk percentage | 90.00% | 4.00% | ||
Accounts Receivable [Member] | One Licensee [Member] | ||||
Product Information [Line Items] | ||||
Concentration risk percentage | 68.00% | 62.00% | ||
Accounts Receivable [Member] | One Licensee 2 [Member] | ||||
Product Information [Line Items] | ||||
Concentration risk percentage | 11.00% | 21.00% | ||
Accounts Receivable [Member] | One Licensee 3 [Member] | ||||
Product Information [Line Items] | ||||
Concentration risk percentage | 10.00% |
3. LOSS PER SHARE (Details)
3. LOSS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Numerator: | ||
Net loss attributable to Acacia Research Corporation | $ (164,618) | $ (11,291) |
Dividend on Series A redeemable convertible preferred stock | (263) | (263) |
Accretion of Series A redeemable convertible preferred stock | (852) | (631) |
Undistributed earnings allocated to participating securities | 29,068 | 0 |
Net income (loss) attributable to common stockholders - diluted | $ (136,665) | $ (12,185) |
Denominator: | ||
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders - diluted | 48,596,040 | 49,875,396 |
Basic and diluted net loss per common share | $ (2.81) | $ (0.24) |
4. PATENTS, NET OF ACCUMULATE_3
4. PATENTS, NET OF ACCUMULATED AMORTIZATION (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Remainder of 2021 | $ 7,836 | |
2022 | 10,448 | |
2023 | 10,381 | |
2024 | 9,005 | |
2025 | 6,630 | |
Thereafter | 750 | |
Patents, net | $ 45,050 | $ 16,912 |
4. PATENTS, NET OF ACCUMULATE_4
4. PATENTS, NET OF ACCUMULATED AMORTIZATION (Details Narrative) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Accumulated amortization | $ 321,784 | $ 319,922 |
Accrued patent acquisition costs | 15,000 | |
Accrued patent acquisition costs due within a year | 10,000 | |
Accrued patent acquisition costs due within 1 year | ||
Accrued patent acquisition costs due within 2 years | $ 5,000 |
5. INVESTMENT AT FAIR VALUE (De
5. INVESTMENT AT FAIR VALUE (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Investment Holdings [Line Items] | ||
Change in fair value of investment | $ 0 | $ 4,108 |
Net realized and unrealized gain (loss) on investment | 839 | 792 |
Warrant Investment [Member] | ||
Investment Holdings [Line Items] | ||
Change in fair value of investment | 0 | 630 |
Gain on sale of investment | 839 | 0 |
Common Stock Investment [Member] | ||
Investment Holdings [Line Items] | ||
Change in fair value of investment | 0 | 3,478 |
Loss on sale of investment | $ 0 | $ (3,316) |
5. INVESTMENT AT FAIR VALUE (_2
5. INVESTMENT AT FAIR VALUE (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Repurchase Agreement Counterparty [Line Items] | |||
Realized gain | $ 839 | $ (3,316) | |
Veritone [Member] | |||
Repurchase Agreement Counterparty [Line Items] | |||
Investment shares sold | 298,450 | ||
Loss from sale of investment | $ 3,300 | ||
Veritone [Member] | Warrant Investment [Member] | |||
Repurchase Agreement Counterparty [Line Items] | |||
Warrants owned | 0 | ||
Warrants exercised | 156,720 | 963,712 | |
Realized gain | $ 839 | $ 11,500 | |
Fair value of investment | $ 0 |
6. COMMITMENTS AND CONTINGENC_3
6. COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Commitments and Contingencies Disclosure [Abstract] | ||
2021 | $ 444 | |
2022 | 370 | |
2023 | 364 | |
2024 | 218 | |
Thereafter | 0 | |
Total minimum payments | 1,396 | |
Less: short-term lease liabilities | (551) | |
Long-term lease liabilities | $ 845 | $ 951 |
6. COMMITMENTS AND CONTINGENC_4
6. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease costs, net of sublease income | $ 150 | $ 121 |
Income from settlement | $ 234 | |
Contingency accruals | $ 0 |
7. STOCKHOLDERS' EQUITY (Detail
7. STOCKHOLDERS' EQUITY (Details) - Common Stock [Member] - USD ($) $ / shares in Units, $ in Thousands | Mar. 31, 2020 | Apr. 23, 2020 | Dec. 31, 2020 |
Class of Stock [Line Items] | |||
Number of shares repurchased | 576,898 | 1,107,639 | 1,684,537 |
Average price paid per share | $ 2.28 | $ 2.42 | $ 2.37 |
Approximate value of shares that may yet be purchased | $ 8,686,000 | $ 6,001,000 | |
Plan expiration date | Jul. 31, 2020 | Jul. 31, 2020 |
7. STOCKHOLDERS' EQUITY (Deta_2
7. STOCKHOLDERS' EQUITY (Details Narrative) $ in Thousands | Aug. 05, 2019USD ($) |
Stock Repurchase Program [Member] | |
Equity, Class of Treasury Stock [Line Items] | |
Value of shares authorized for repurchase | $ 10,000 |
9. FAIR VALUE MEASUREMENTS (Det
9. FAIR VALUE MEASUREMENTS (Details - Fair Value on a Recurring Basis) - Fair Value, Recurring [Member] - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Assets [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Fair value of assets | $ 122,469 | $ 109,103 |
Assets [Member] | Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member] | ||
Fair value of assets | 122,469 | 109,103 |
Assets [Member] | Fair Value, Inputs, Level 1 [Member] | Warrant Investment [Member] | ||
Fair value of assets | 0 | |
Assets [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Fair value of assets | 57,851 | 2,752 |
Assets [Member] | Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member] | ||
Fair value of assets | 57,851 | 0 |
Assets [Member] | Fair Value, Inputs, Level 2 [Member] | Warrant Investment [Member] | ||
Fair value of assets | 2,752 | |
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Fair value of assets | 0 | 0 |
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Equity Securities [Member] | ||
Fair value of assets | 0 | 0 |
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Warrant Investment [Member] | ||
Fair value of assets | 0 | |
Liability [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Fair value of assets | 0 | 0 |
Liability [Member] | Fair Value, Inputs, Level 1 [Member] | Series A Warrants [Member] | ||
Fair value of assets | 0 | 0 |
Liability [Member] | Fair Value, Inputs, Level 1 [Member] | Series B Warrants [Member] | ||
Fair value of assets | 0 | 0 |
Liability [Member] | Fair Value, Inputs, Level 1 [Member] | Embedded Derivative Liability [Member] | ||
Fair value of assets | 0 | 0 |
Liability [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Fair value of assets | 0 | 6,640 |
Liability [Member] | Fair Value, Inputs, Level 2 [Member] | Series A Warrants [Member] | ||
Fair value of assets | 0 | 6,640 |
Liability [Member] | Fair Value, Inputs, Level 2 [Member] | Series B Warrants [Member] | ||
Fair value of assets | 0 | 0 |
Liability [Member] | Fair Value, Inputs, Level 2 [Member] | Embedded Derivative Liability [Member] | ||
Fair value of assets | 0 | 0 |
Liability [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Fair value of assets | 284,618 | 79,069 |
Liability [Member] | Fair Value, Inputs, Level 3 [Member] | Series A Warrants [Member] | ||
Fair value of assets | 18,243 | 0 |
Liability [Member] | Fair Value, Inputs, Level 3 [Member] | Series B Warrants [Member] | ||
Fair value of assets | 225,956 | 52,341 |
Liability [Member] | Fair Value, Inputs, Level 3 [Member] | Embedded Derivative Liability [Member] | ||
Fair value of assets | $ 40,419 | $ 26,728 |
9. FAIR VALUE MEASUREMENTS (D_2
9. FAIR VALUE MEASUREMENTS (Details - Changes to fair value measurement Level 3) - Liability [Member] - Fair Value, Inputs, Level 3 [Member] - Fair Value, Recurring [Member] $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Series A Warrants Liability [Member] | |
Derivative liability, beginning balance | $ 0 |
Transfers into Level 3 | 6,640 |
Remeasurement to fair value | 11,603 |
Derviative liability, ending balance | 18,243 |
Series A Embedded Derivative Liability [Member] | |
Derivative liability, beginning balance | 26,728 |
Transfers into Level 3 | 0 |
Remeasurement to fair value | 13,691 |
Derviative liability, ending balance | 40,419 |
Series B Warrants Liability [Member] | |
Derivative liability, beginning balance | 52,341 |
Transfers into Level 3 | 0 |
Remeasurement to fair value | 173,615 |
Derviative liability, ending balance | $ 225,956 |
10. STARBOARD INVESTMENT (Detai
10. STARBOARD INVESTMENT (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 5 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | 16 Months Ended | |||
Jan. 29, 2021 | Feb. 25, 2020 | Nov. 18, 2019 | Mar. 31, 2021 | Mar. 31, 2020 | Jun. 04, 2020 | Jun. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2020 | Mar. 31, 2021 | |
Fair value of embedded derivative | $ 40,419 | $ 26,728 | $ 40,419 | |||||||
Proceeds from issuance of warrants | 0 | $ 4,600 | ||||||||
Proceeds from issuance of debt | 50,000 | 0 | ||||||||
Repayment of debt | 50,000 | $ 0 | ||||||||
Securities Purchase Agreement [Member] | Senior Secured Notes [Member] | ||||||||||
Proceeds from issuance of debt | $ 115,000 | |||||||||
Repayment of debt | $ 80,000 | $ 35,000 | ||||||||
Debt stated interest rate | 10.00% | |||||||||
Notes exchanged | $ (115,000) | |||||||||
Series A Redeemable Convertible Stock [Member] | ||||||||||
Proceeds from issuance of preferred stock | 35,000 | |||||||||
Payment of stock issuance costs | 1,300 | |||||||||
Accrued and unpaid dividends | 0 | 0 | ||||||||
Accretion expense | 853 | |||||||||
Fair value of embedded derivative | 40,400 | 40,400 | ||||||||
Series B Warrants [Member] | Securities Purchase Agreement [Member] | Senior Secured Notes [Member] | ||||||||||
Fair value of warrants | 1,300 | 1,300 | ||||||||
Unamortized discount | 196 | 196 | ||||||||
Amortization of discount | 1,133 | |||||||||
Starboard [Member] | Series A Preferred Stock [Member] | ||||||||||
Stock issued | 350,000 | |||||||||
Conversion price | $ 3.65 | |||||||||
Starboard [Member] | Series A Warrants [Member] | ||||||||||
Warrants issued, shares | 5,000,000 | |||||||||
Fair value of warrants | $ 4,800 | 18,200 | 18,200 | |||||||
Starboard [Member] | Series B Warrants [Member] | ||||||||||
Warrants issued, shares | 100,000,000 | |||||||||
Proceeds from issuance of preferred stock | $ 4,600 | |||||||||
Warrant expiration date | Nov. 15, 2027 | |||||||||
Fair value of warrants | $ 226,000 | 226,000 | ||||||||
Warrants exercised | 0 | |||||||||
Merton [Member] | Securities Purchase Agreement [Member] | Senior Secured Notes [Member] | ||||||||||
Proceeds from issuance of debt | $ 50,000 | |||||||||
Repayment of debt | $ 50,000 | |||||||||
Debt stated interest rate | 6.00% | |||||||||
Notes exchanged | $ 115,000 | |||||||||
Debt maturity date | Dec. 31, 2020 | |||||||||
Capitalized lender fees | $ 4,600 | |||||||||
Unamortized discount | $ 500 | |||||||||
Accrued interest | $ 1,500 | $ 1,500 |
11. LF EQUITY INCOME FUND POR_3
11. LF EQUITY INCOME FUND PORTFOLIO INVESTMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net realized and unrealized gain (loss) on investment | $ 839 | $ 792 |
Equity Securites - LF Fund Securities [Member] | ||
Change in fair value of investment | 37,176 | 0 |
LF Fund securities [Member] | ||
Net realized and unrealized gain (loss) on investment | $ 37,176 | $ 0 |
11.LF EQUITY INCOME FUND PORTFO
11.LF EQUITY INCOME FUND PORTFOLIO INVESTMENT (Details Narrative) $ in Thousands | 3 Months Ended |
Apr. 03, 2020USD ($) | |
Option Agreement [Member] | Portfolio Companies [Member] | |
Offsetting Liabilities [Line Items] | |
Payment to acquire equity securities | $ 277,500 |