Acacia Research Corp (ACTG) 2003 Q2 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to the Acacia Research second quarter earnings release conference call. At this time I would like to inform you this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers following the presentation. I will now turn the conference over to Mr. Paul Ryan. Please go ahead, sir.

Thank you and thank you for joining us for our second quarter conference call. Before we start, I'd like to remind you that today's conference call contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and speak only of the date hereof. Our actual results may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties. Our annual report on Form 10-K, recent and forthcoming quarterly reports on Form 10-Q, recent current reports on Forms 8-K and 8-KA and other SEC filings discuss some of the important risk factors that may affect our business results of operations and financial conditions. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

The process for today's call is I'm going to review the consolidated results, and then I will give you the stand-alone results for our CombiMatrix Group division, and then Amit (ph) will give a presentation on the activities during the quarter. We will have a Q&A session on CombiMatrix (ph), and then we will follow that with the financial results of the Acacia Technologies Group and a Q&A session.

For the consolidated Acacia Research Corporation results, consolidated revenues for the second quarter of 2003 were $25,000 versus $438,000 in the comparable 2002 period. Second quarter 2003 revenues were primarily comprised of digital media transmission license fees, recognized by the Acacia Technologies Group, and service and maintenance contract revenues recognized by the CombiMatrix Group related to DNA micro array synthesizer systems sold to Keio University School of Medicine in the first quarter of 2003.

The second quarter 2003 consolidated net loss was $6,774,000 versus a consolidated net loss of $9,701,000 in the comparable 2002 period. Included in the second quarter 2003 consolidated net loss are non-cash charges totaling $1,382,000 comprised of non-cash stock compensation amortization charges of $776,000, a non-cash write-down of our investment in ADX Corporation of $207,000, and non-cash amortization of patents totaling $399,000. Non-cash stock compensation amortization charges and non-cash amortization of patents totaled $2,143,000 and $564,000, respectively, in the comparable 2002 period.

The financial condition on a consolidated basis -- total consolidated assets were $95,639,000 as of June 30, compared to $97,071,000 as of December 31, 2002. Cash and cash equivalents and short term investments on a consolidated basis totaled $55,103,000 as of June 30, compared to $54.6m as of December 31, 2002.

Moving on to the CombiMatrix Group Division, revenues for the second quarter of 2003 were $6,000 versus $438,000 in the comparable 2002 period. Second quarter revenues were comprised of service and maintenance contract revenues referred to earlier. The second quarter 2003 division net loss was $5,197,000 versus a division net loss of $5,895,000 in 2002. Included in the second quarter division net loss are non-cash charges totaling $1,050,000 comprised of non-cash stock compensation amortization charges of $776,000 and non-cash amortization of patents totaling $274,000.

Research and development costs incurred by the CombiMatrix Group decreased to $2,158,000 from $5,026,000 in the comparable 2002 period primarily due to the CombiMatrix Group's completion of several research and development projects in the third and fourth quarters of 2002 pursuant to its agreements with Roche resulting in the reduction of related research and development expenses during 2003.

Marketing, general, and administrative expenses decreased to $2,099,000 from $2,927,000 in the comparable 2002 period primarily due to reduction in corporate legal expense and professional fees related to Acacia Research Corporation's recapitalization (ph) and merger transactions completed in December of 2002. Minority interest and the net loss to subsidiaries decreased to $24,000 from $3,979,000 in the comparable 2002 period due to Acacia Research's acquisition of 100% of the ownership of interest in CombiMatrix Corporation in December of 2002.

Total assets for CombiMatrix Group were $52,909,000 as of June 30 compared to $49,973,000 as of December 31, 2002. Cash and cash equivalents and short-term investments totaled $19,263,000 as of June 30 compared to $14,896,000 as of December 31, 2002.

During the second quarter of 2003, CombiMatrix Corporation received total cash payments of $5,808,000, consisting of $4.5m related to the completion of certain milestones and $308,000 related to the delivery of prototype products and services pursuant to its agreements with Roche and an up-front payment of $1m pursuant to its agreement with Toppan, which have been recorded as deferred revenues. Total cash payments received from Roche since the inception of the relationship totaled $23,294,000. Total deferred revenues at June 30 were $16,558,000. In May 2003 Acacia Research Corporation completed a private placement of approximately 2.4 million units of Acacia Research CombiMatrix common stock and warrants; net proceeds of approximately $4,875,000 from the private placement were attributed to the CombiMatrix Group.

With that, I would like to turn the call over to Dr. Kumar (ph), who will give a review of the activities for the second quarter for the CombiMatrix Group.

Thank you, Paul. The second quarter of 2003 was a pivotal quarter for CombiMatrix. At the risk of being a little bit redundant, I would first like to highlight some key financial achievements. I'll discuss some specific events and activities of the quarter and then following that I will specifically discuss [audio break]. Actually this quarter was the best in the history of CombiMatrix. Net cash flowed to us from strategic partners Roche and Toppan as well as from customer sales, and other payments were roughly $6m. Cash outflows were roughly $4.3m, a positive flow of greater than $1.7m [audio break]. In addition to our operating performance, as Paul indicated, we completed a private financing, which yielded proceeds to us of roughly $5m. Financing helped strengthen our balance sheet and enables us to invest in Express Track our new RNAI drug discovery program.

[audio break] quarter with over $19m in cash and absolutely no debt on our balance sheet. As you may recall, we paid off a $2m [audio break] order [audio break]. Though this quarter was pivotal, it's important to look at CombiMatrix's performance over the last four quarters. It's instructive to look at CombiMatrix's performance. Here is the last two quarters of 2002, and the first two quarters of 2003. CombiMatrix has received payments totaling over $19.3m. [audio break] during that period after removing the servicing and payment of the debt [audio break] cash outflow from operating activity was a trailing 12-month of less than $6m. Much of that net cash outflow was due to the increased expenditures for R&D during the last two quarters of last year, as we readied our matrix array product suite for Roche.

For the first two quarters of this year, we have brought in payments equaling $8.1m [audio break] $7m, outflow of only $600,000. This is in line with our general goal to achieve cash flow breakeven for this year. In addition, we recently purchased, as Paul indicated -- I'm sorry -- we recently purchased the minority interest of our majority-owned subsidiary, Advanced Material Sciences. Our ownership of AMS is now 100%.

[audio break] discussed -- review the activities and notable achievements of the last quarter. In the case for previous quarters the primary activity of most of the staff at CombiMatrix was focused on the matrix array product suite being developed in partnership with Roche. To review, this relationship is a 15-year non-exclusive alliance for the co-development of a micro array product suite, which includes chips reagent software and capital equipment. Roche has provided funding for this development and will manufacture, market, sell, and distribute the products and provide us a royalty on sales. To date, the funding received has been greater than $23m from Roche, including close to $5m this quarter. Roche has announced this product suite will be launched this quarter, Q3 of 2003. Near the end of the second quarter, we shipped our first production scaled DNA micro array synthesizer to Roche's manufacturing facility in Penzberg, Germany. [audio break] scientists are in Germany right now, with staff, to bring the manufacturing system up and to train appropriate personnel.

In addition to our activities with Roche we entered into a new strategic alliance with Toppan. Toppan is a diversified multinational company with annual revenues of nearly $12b. [audio break] are in Japan but they have several facilities including three large factories in the U.S. Toppan is in a number of businesses [inaudible] including microelectronics, which is a relevant area for our purposes. After entering into the alliance, we began work with Toppan on our next-generation DNA array system. Toppan paid us $1m upon entering the alliance, and we expect to receive additional support for R&D and payments as we achieve milestones. The most important asset of this alliance is our access to Toppan's extensive semiconductor design and fabrication capabilities. The object of this relationship is the development of micro arrays, which utilize our core technology [audio break] electrochemical technology not only for synthesis but also for detection.

[audio break] detection read instruments can be reduced in size, complexity, and cost, and the performance of arrays can be improved. Initial work in this area was funded by government grants or defense-related [audio break] additional funding from Toppan, we will now jointly continue this development and will seek distribution partners for different market opportunities. Market opportunities for this type of system include all of the markets where conventional systems operate such as life science research, pharmaceutical research, agricultural research, and central laboratories diagnostics. In addition, the compactness and portability of reader units [audio break] markets where these systems include defense applications and onsite point-of-care diagnostics such as diagnostics at the hospital bed, in an ambulance, or an emergency room. [audio break] will continue to seek distribution partners for each of the market opportunities.

In the defense area, we continue our discussions with major defense companies. Also in the defense area, we expect to begin receiving the funding from the 2003 appropriations bill, which had allocated $3.6m for continued development of our system. In addition, we hope to attain additional funding for 2004 -- additional government funding for 2004.

We have also begun planning and development of our high-density array, which will have up to 500,000 sites per square centimeter. The goal of this program will be to enable analysis of the whole human genome on a single chip as well as customize the large number of genes on a particular section of the same array. In addition, the higher-density array will enable development of cost-effective chips for diagnostic application.

In the quarter we also established a relationship with Nanomaterials (ph)Discovery Corporation, a private company, which has assembled expertise and intellectual property, which we felt would be synergistic with our platform technology for the development and discovery of new materials. I would encourage those of you who are interested to visit our website and look at our Nanotechnology (ph) efforts -- the description of our Nanotechnology efforts. We have posted there some of the work we have done in this area. Suffice to say, Nanotechnology continues to be an area of increasing interest in the U.S. and internationally. We anticipate that our technology and this partnership will enable us to establish a strong position and take advantage of the interest and commercial opportunities in this area.

The end of Q1 and during Q2, we also announced the sale of two DNA micro array synthesizers to customers in Japan. We have discussed these placements before, so I won't discuss them right now.

Also during the quarter, we announced the technical milestones for CombiMatrix. On April 16, [audio break] incorporating the genetic code of the coronavirus (ph) responsible for severe acute respiratory syndrome, or SARS. Some of the virus was published on April 14th, and we were able to produce our first micro array in less than 48 hours after publication. No other organization was able to produce a SARS chip as quickly as we were.

We did not expect SARS studies to consume large numbers of chip. The achievement highlighted the power and flexibility of our technology to quickly customize and micro array with any available genetic information. Thereafter, we utilized our array technology and our bioinformatics (ph) design software to design and synthesize a number of RNAI [audio break]

[audio break] tell you to get off the speakerphone. That's why it's cutting in and out.

We are collaborating with the National Institutes of Allergy and Infectious Diseases, a division of the National Institute of Health, and the United States Army Medical Research Institute for Infectious Diseases to test the effectiveness of these and other compounds against the SARS virus.

This leads into a discussion of Express Track, our RNAI-based drug discovery program. We held a conference call on this program in June after it was launched, so I won't go over all of the detailed background. For those who are interested, I encourage you to see our website. This morning we have posted a discussion of our program and strategy in this area. Much of this content was written personally by me and addressed to the knowledgeable but non-technical user. A little background in molecular biology will be needed to understand some sections of the discussion, but most of the sections can be understood by the layperson. I urge you to go visit that section of our site.

I don't plan to go into detail on this call. I want to emphasize a few points about Express Track. We've been thinking and working in this area for some time, and our plan is to leverage our platform technology, which enables us to design and synthesize these potential drugs very quickly. How does it target viral diseases for a number of technical and public health reasons -- this is discussed on our website.

We are experts in the design and synthesis of the drug -- potential drug -- we are not experts in the virology of the diseases. Therefore, our strategy is to establish collaborations with appropriate experts to obtain in vitro data, which will then be used to establish commercial relationships for downstream development with pharmaceutical companies (electronic noise). To date, we have announced 10 viral diseases of interest. Again, the list of 10 are available on our website. [audio break] into collaborations with experts in each of those disease areas for testing of our potential drugs. [audio break] appropriate data, we will then seek to enter into long-term collaborations with companies who have the capability to develop, market, and sell the drugs.

[audio break] Roche and Toppan alliances. Our goal will be to leverage our technical expertise with the regulatory manufacturing, marketing, sales, and distribution network of our partners. On consummation of such an alliance, we anticipate we would receive R&D funding, milestone payments, and royalties upon successful launch of a drug.

While drug discovery is very capital-intensive and also very risky, the strategy enables us to work in multiple disease areas [audio break] getting much of the risk. [audio break] collaboration -- one with NIH and U.S. AMRIID for SARS, as I mentioned earlier, and the second for HIV type-1 virus with Dr. Bonaventura (ph) Clotet (ph) of irsiCaixa (ph) in Spain. Dr. Clotet is not only a leader in HIV research but also a leader in evaluating siRNA (ph) drugs against viruses.

In summary, we're very pleased with the financial performance of CombiMatrix and, needless to say, we're excited about the upcoming matrix array launch. [Audio break] forward with new Nanomaterials discovery efforts, expanding our defense-related operations, establishing additional new alliances, and, perhaps most exciting, we look forward to moving ahead with our [audio break]. With that, I'd like to turn it over to the operator to take questions regarding CombiMatrix.

Thank you, sir. The question-and-answer session will begin at this time for the CombiMatrix Group. If you are using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star, 1 on your pushbutton telephone. If you are using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star, 1 on your pushbutton telephone. If you would like to withdraw your question, please press star, 2. Your questions will be taken in the order they are received. Please stand by for your first question.

Your first question comes from Jonathan Aschoff (ph) with Maxim Group. Please state your question.

Thanks. Hi, Amit. Are there any other deliverables to Roche before launch of the matrix array?

Hello?

Hello, yes, can you hear me?

Yes, I am here.

Are there any other deliverables to Roche before launch of the matrix array?

The remaining deliverables are related to bringing manufacturing up to speed and then there are some additional R&D functions that we'll be performing for Roche.

Okay, and how aggressively will they launch in different countries?

That -- as far as we know, the launch is going to begin in Europe and then move forward into the United States and Japan. It's beginning in Europe because that's where Roche's facilities are, but we anticipate it will be a worldwide launch relatively soon.

Do you think that launch will be much different if you were to compare and contrast the 1K launch versus the 10K chip launch?

I am not sure. I assume you're asking -- the 10K will be launched at a later date, but at that point the 1K will be an established product in the market.

Okay, and what particular quarter do you think most of that Roche money will drop into as revenue?

The first full quarter of sales will be in the fourth quarter of this year, and then we will begin receiving payments after the first full quarter of sales.

No, I mean all of the deferred revenue.

Oh, I'm sorry. Well, we anticipate that we will receive that -- we will convert that deferred revenue to revenue in the third quarter upon a successful launch of the product.

Really? As early as this quarter?

To caution these comments, it will really be a determination with our auditors based on specific deliverables. So we can't guarantee it will be in the third quarter. It will be our auditors' determination of the remaining elements to be done, based on the official and accounting recognition of those deferred revenues.

Okay. How much more cash from Roche do you stand to receive?

We haven't disclosed those numbers, but it is -- we've received a large amount of the cash. There are certain minimum payments that are required to be paid upon the launch, and there are some additional milestone payments as well as R&D payments.

Okay, thanks a lot.

Mm-hm.

Thank you, our next question comes from Edward Tenthoff (ph) with Piper Jaffray. Please state your question.

Hi, thanks so much for taking my question.

Ed, I can barely hear you.

Okay, can you hear me a little bit better?

I can hear you much better now.

All right, thanks. Just real quick -- with respect to the launch, how do you see, or how is Roche communicating interest in the product specifically with respect to academic funding in Europe where I think we've seen some signs that it's been kind of weak but then, also, sort of as they start to look at the United States, where NIH funds might be starting to get free up a little bit?

Well, I think, you know, academic funding, certainly in the U.S. and in Europe and in Japan, for that matter, government funding cycles do have an impact on sales of all sorts of products in the research arena. So Roche is subject to those cyclical events. Certainly, in Japan, for example, academic funding for biotechnology is going up -- not only academic but also industrial funding -- and so Roche will benefit from that. In the U.S. we anticipate that funding for NIH, as well as in Europe, in the near future will move forward, but Roche would be subject to those issues as well as anyone else.

And one other quick follow-up question to that point -- what kind of pre-market education/marketing has Roche been conducting and have you guys been conducting to kind of prime the market a little bit?

We've done a number of product introductions at major conferences in both -- in Japan, the United States, and in Europe, and we have also -- Roche and us have gone on a sort of road show with top customers to present to them in great detail the capabilities of the platform system.

Then can you tell us any feedback from those visits?

Yeah, in general, the feedback has been very good. In fact, for example, at the Chips to Hits conference, where we and Roche did four technology presentations of our platform in October of 2002, we found that all four of those presentations were incredibly well attended -- standing room only.

I remember -- great, thank you so much and best of luck to you.

Thank you.

Thank you, our next question comes from Alan Dubro [ph] with AG Edwards. Please state your question.

With the product launch just down the road, I assume there is some type of pre-launch activities -- you know, customers testing the product, pre-sale, things like that. Can you comment on any pre-launch activity? Would it be below, at, or above our expectations so far?

I think we are all very enthusiastic about everything that we've seen pre-launch. On the Roche end, CombiMatrix side, we're focused on getting the product up and ready for manufacturing. Roche marketing is getting ready to move forward with their marketing and messages. We've talked to a number of customers and, overall, I think we're all very enthusiastic.

Do we get indications of interest? How would that work in these companies?

Yes, we do get indications of interest. That's correct.

So pre-sales, at this point, would be above expectations? Is that fair to say?

Until you have the purchase orders, you never count your money, but, in general, we've found very good response.

Okay, thank you.

Our next question comes from Bennet Chumain [ph], self employed. Please state your question.

Yes, hi, Dr. Kumar. In the field of proteinomics [ph], we seem to have a huge potential there all around the world, and I understand our technology and hardware is just ideally suited for that. Are you pursuing that hard? And, if so, how far away would something materialize in that area?

We are pursuing the proteomics (ph) field. We have a number of things that we can do on our chips with proteins. However, we are finding that most people right now are focused on mass spectroscopic analysis of proteins, and in the whole proteomics field, the applications that are getting the greatest SKUs have to do with mass spec analysis. So we're finding that there are some applications that are of interest, but our vision is never to develop a product unless we have a partner that is working with us on the co-development. So we are actively speaking with a number of partners, but until the whole area of proteomics develops into something greater than mass spectroscopy and gel electrophoresis, then we don't anticipate developing something in that field until there is a real good market opportunity, and it's not clear yet when that's going to occur.

Okay, thank you.

As a reminder, ladies and gentlemen, if you do have a question at this time for the CombiMatrix Group, please press star 1 on your pushbutton telephone. Thank you, our next question comes from Virginia Daney [ph] with Maxim Group. Please state your question.

Hi, Dr. Kumar, good afternoon.

Hi, Virginia.

I was curious to know how you plan on funding the defense side of the business that you look to building out?

Well, the initial funding for our products in that area, as you know, came from the U.S. government, and this was pre-9/11, before 9/11. In addition, we are receiving the $3.6m that was allocated to us from the appropriations bill. Also, we are hopefully in line for some additional funding next year. We are also receiving some funding from Toppan and, successive to a collaboration closing with a defense contract, we'll be receiving money from there. So, all in all, we have capital coming in from a number of different buckets this year and next year, all of which will help fund the products in that area. And, after that, we anticipate that Toppan would manufacture the chips and a defense contractor would be the distributor, with us receiving royalties, which is our business model.

And do you have a budget for that right now? How much do you think that would be to build it out? I know it's kind of at the earlier stages.

We do have a budget. That budget is subject to the types of specifications required for various applications, but I don't think I want to discuss that here on the conference call.

Okay, and are you still speaking with several parties of the defense business?

We are speaking with several parties, and we are still working with one party at the highest levels, and we hope to consummate something soon.

Okay, thank you very much.

As a reminder, ladies and gentlemen, if you do have a question for the CombiMatrix Group, please press star 1 on your pushbutton telephone at this time. If there are no further questions at this time, I'll turn the conference over to Mr. Paul Ryan. Please go ahead, sir.

Thank you. Now we'd like to move ahead with the financial results for the Acacia Technologies Group for the second quarter.

DMT license fee revenue for the second quarter of 2003 was $19,000 versus no revenues for the comparable 2002 period. Since November of 2002, the Acacia Technologies Group has entered into 27 license agreements for its DMT technology, 13 of which were executed in the second quarter. All the Acacia Technologies Group's DMT licensing agreements provide for recurring license fee payments to be made by the respective licensee over the term of the license.

The second quarter 2003 division net loss was $1,577,000 versus $3,806,000 in the comparable 2002 period. Included in the second quarter 2003 division net losses are non-cash charges totaling $332,000 comprised of a non-cash write-down of our investment in ADX Corporation of $207,000 and non-cash amortization of patents totaling $125,000.

Marketing, general, and administrative expenses decreased to $1,453,000 from $2,589,000 in the comparable 2002 period, primarily due to a reduction in professional fees related to Acacia Research Corporation's recapitalization and merger transactions completed in December of 2002, a reduction in corporate legal expense, and a reduction in overhead due to reduced general and administrative personnel compared to the prior-year quarter. The decrease was partially offset by an increase in costs related to Acacia Technology Group's ongoing DMT patent commercialization and enforcement efforts including increased legal and engineering costs related to new patent claims and the identification of potential licensees of our DMT technology.

Total assets for the Acacia Technologies Group were $42,919,000 as of June 30 compared to $47,200,000 as of December 31, 2002. Cash and cash equivalents with short-term investments totaled $35,840,000 as of June 30 compared with $39,792,000 as of December 31, 2002. With that, I'd like to turn the call over to Chip Harris, who will give a brief review of the second quarter activities. Chip?

Thank you, Paul. During the first -- or -- the second quarter, the Acacia Technologies Group entered into 13 additional licenses of the 27 that Paul had previously described for our DMT technology including, most importantly, a license with LodgeNet, which is the leader in the hotel video-on-demand industry. As we said in previous calls, one of the areas that we were going to target for potential licensees was the hotel industry and their video-on-demand applications.

LodgeNet's licensing payments will begin in the third quarter, covering their use and -- covering the use of 324,000 rooms they have converted to the digital systems. LodgeNet has projected publicly that 43% or about 417,000 of their 970,000 rooms will be digital by the end of the year, and in addition 55%, or approximately 530,000 of their rooms, will be digital by the end of 2004. The hotel industry has gone on record of saying that the digital platforms, the applications which use our technology, have delivered much higher revenues per room as well as ever-increasing margins.

Most of the additional licensing agreements that we concluded during the second quarter were from the group of 39 online adult entertainment companies that were originally named in our lawsuit. We are now down to 19 active cases and are in discussions with many of those companies.

We continued to make significant headway in the licensing process with a large number of companies. Many potential licensees are now in the process of completing their due diligence which includes meeting with our legal and engineering teams, and we have opened up licensing discussions and negotiations with a number of companies. We've also brought in an additional licensing attorney, given the large number of concurrent licensing discussions. Most major companies, which are utilizing our technology, are going through a very orderly and thorough due diligence process and are receptive to interacting with our legal engineering teams to determine if they need to license our DMT technology, and we're very encouraged by those discussions.

We also have continued to identify and contact a large number of smaller Internet-based media companies that are using our DMT technology and are starting the licensing process with those companies.

With that, I'll now turn the call back to Paul.

Thank you, Chip, and, Operator, if you could now open up the meeting for questions-and-answers.

Thank you, sir. The question-and-answer session will begin at this time for the Acacia Technologies Group. If you are using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star, 1 on your pushbutton telephone. If you would like to withdraw your question, please press star, 2. Your questions will be taken in the order they are received. Please stand by for your first question.

As a reminder, ladies and gentlemen, if you do have a question for the Acacia Technologies Group, please press star 1 on your pushbutton telephone at this time.

Our first question comes from Paul Burger [ph], private investor. Please state your question.

Hi, Chip. Is there any update on the court decision on --

-- on the V-chip?

-- on the V-chip?

No, we still have not heard anything on any of the pending decisions to be made by the judge.

Also, if I read the statement right, you have a million and a half in deferred revenue for technologies?

Yes, that's correct.

And can you give some light on that?

Yeah, a million and a half of that is really from the V-chip technology. That's a deferred revenue, and the other 58,000 or so are advance payments that have been made by licensees of the DMT technology but have not been spread over the life of the license agreement.

Okay, thanks.

As a reminder, ladies and gentlemen, if you do have a question, please press star 1 on your pushbutton telephone at this time. I am showing no further questions in queue. I will turn the conference back to Mr. Paul Ryan for closing comments.

Okay, thank you, Operator. I want to thank you all for being with us today. If anyone has further questions, you can always give me or Rob Stewart a call on the Acacia Technologies Group or talk with Amit Kumar regarding the CombiMatrix Division, and we look forward to talking with you again on the third quarter conference call. Thank you.

Ladies and gentlemen, if you'd like to access a replay for this conference call, you may do so by dialing 1-800-428-6051 or 973-709-2089 with an ID number of 301111. This concludes our conference call for today. Thank you all for participating and have a wonderful day. All parties may now disconnect.