Acacia Research Corp (ACTG) 2007 Q1 法說會逐字稿

Good afternoon.

And welcome, ladies and gentlemen, to the Acacia Research first quarter earnings release conference call.

At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode.

At the request of the company, we will open the conference up for questions and answers after each presentation.

I will now turn the conference over to Mr.

Paul Ryan.

Please go ahead, sir.

Thank you for being with us today.

This call may involve what the SEC considers to be forward-looking statements.

Please refer to our 8-K which was filed with the SEC today for our forward-looking statement disclaimer.

With me today are Chip Harris, President of Acacia Technologies, Dooyong Lee, Executive Vice President, and Clayton Haynes, our Chief Financial Officer.

Today I will give you an overview of the progress we are making in building the business, and Clayton Haynes will provide you with an analysis of our financial results.

We will then open the call for questions.

As we just reported, Acacia Technologies' revenues for the first quarter of 2007 were $25.2 million, compared to $4.7 million in the year ago period.

Trailing 12-month revenues were $55.3 million, compared to $22.4 million at the end of the first quarter of 2006.

Acacia Technologies' first quarter GAAP net income was $4.399 million or $0.16 per share, including non-cash patent amortization and non-cash compensation charges totaling $2.079 million.

Cash and cash equivalents were $53.2 million at the end of the first quarter, an increase of $8.2 million compared to $45 million at the beginning of the year.

Acacia entered into 22 new licensing agreements in the quarter, covering 11 different licensing programs.

New licensing agreements included licenses to Lexmark, LG Electronics, [inaudible] software, Men's Wearhouse, Linens & Things, General Nutrition, Tribune, the Washington Post, and major league baseball.

We began generating revenues from four new licensing programs in the quarter, and have now generated revenues from 24 different licensing programs.

We also acquired control of six new patent portfolios in the quarter, and with the three new portfolios we have announced thus far in April, we now control 66 patent portfolios.

Dooyong Lee and his Business Development team continue to do an exceptional job in acquiring new patent portfolios for future licensing.

In 2007, Acacia Technologies expects continued growth in revenues, new licensing programs, and new patent portfolios for future licensing as we build our leadership position in patent licensing.

Our recent success is increasing opportunities for partnering with owners of patented technologies for future licensing programs.

Acacia continues to build the country's leading patent licensing company.

We are meeting a huge unserved need in the market, from small technology companies, research labs and inventors who do not have the scale, expertise, or experience to effectively execute patent licensing and enforcement programs.

Currently, large companies generate 99% of all patent licensing revenue while holding only 40% of the patent in the technology sector, while small companies and individual inventors hold 60% of the patents and generate only 1% of the licensing revenues.

This clearly demonstrates that large companies know how to get paid for their patents, while small companies and inventors do not have the scale, expertise, or experience to get paid for theirs.

By partnering with Acacia, these smaller companies now have the opportunity to generate appropriate revenues from their patented technologies.

Acacia is at a very early stage in the growth of its business.

Our recent licensing success is creating new business opportunities for us, and given the current pipeline of patented technologies we are evaluating, we expect to significantly expand our business in 2007.

Our policy is not to give future revenue guidance, due to the lumpy nature of our quarterly revenues, particularly in the early stages of our growth.

What we can say is that our revenue opportunities for 2007 greatly exceed those of the past year, as we started the year with a larger number of patent portfolios for licensing, and a larger number of revenue generating licensing programs already in place.

Acacia is at a very early stage in generating revenues from its patent portfolios.

We have only begun generating revenues from 24 of our 66 patented technologies, and have realized only a small percentage of the potential revenues for many of these 24 licensing programs.

We will continue to be aggressive in adding new patent portfolios which will continue to build our future revenue base.

We continue to see a major business opportunity for our company in serving this unmet need in the marketplace.

I will now turn the call over to our Chief Financial Officer, Clayton Haynes.

Thank you, Paul.

As indicated in today's earnings press release, first quarter 2007 license fee revenues totaled $25.2 million as compared to $4.7 million in the first quarter of 2006.

During the first quarter of 2007, the Acacia Technologies group generated revenues from 11 of our technology licensing programs, including our DMT audio/video enhancement and synchronization, audio communications fraud detection, credit card fraud protection, image resolution enhancement, pop up advertising, and product activation technologies, and our first licenses for our spreadsheet automation, rule based monitoring, digital color correction for video graphic systems, and portable storage devices with links to technology licensing programs.

To date, the Acacia Technologies Group has generated revenues from 24 of its technology licensing programs.

It is important to keep in mind that license fee revenues fluctuate from period to period, primarily as a result of the following four factors.

The mix of specific dollar amounts and other financial terms and conditions of the license agreements executed each period.

Secondly, fluctuations in the number of license agreements executed each period.

Thirdly, fluctuations in the royalty per unit activities of our licensees, and finally, the timing of the receipt of periodic license fee payments and/or period reports from licensees.

Acacia management continues to measure and assess the performance and growth of our business based on total license fee revenues recognized across all of our licensing programs on a trailing 12-month basis.

Trailing 12-month revenues for the Acacia Technologies Group were $55.3 million as of March 31, 2007 as compared to $34.8 million at December 31, 2006 and $22.4 million as of March 31, 2006.

Trailing 12-month revenues as of the end of the first quarter of 2007 increased 60% compared to the end of fiscal 2006, and 147% over the end of the prior year quarter.

Our average margin, defined as gross license fees less inventor royalty's expense and contingent legal fees for the portfolios generating revenues during the period was approximately 43% in the first quarter of 2007 as compared to 41% for the first quarter of 2006.

Quarterly average margins fluctuate period to period based on the mix of patent portfolios that generate revenues each period and the related economics associated with the underlying inventor agreements and contingent legal fee arrangements, if any, related to the revenue generating portfolios.

For the first quarter of 2007, the Acacia Technologies Group reported GAAP net income of $4.399 million versus a GAAP net loss of $2.409 million in the first quarter of 2006, as illustrated in the Acacia Technologies Group comparative income statements provided in today's press release and related 8-K filed with the SEC.

Excluding the impact of non-cash patent amortization charges of $1.3 million and non-cash stock compensation charges of $763,000, the Acacia Technologies Group's first quarter 2007 net income was approximately $6.5 million as compared to breakeven for the first quarter of 2006.

First quarter 2007 total operating expenses, which includes inventor royalties and contingent legal fees, totaled $21.2 million as compared to $7.5 million in the first quarter of 2006.

The primary drivers of the quarter to quarter change in operating expenses include an $11.9 million increase in inventor royalties and contingent legal fees expense, which is directly related to the $20.5 million increase in license fee revenues recognized in the first quarter of 2007 versus the first quarter of 2006.

An increase in MG&A related to the addition of licensing, engineering, and business development personnel since the end of the prior quarter, which is reflective of the continued growth of our business.

Thirdly, an increase in facilities costs and other corporate, general, and administrative costs related to ongoing operations, including costs associated with the plan split off of CombiMatrix Corporation and a one time severance charge for an employee separation under the Acacia executive severance plan.

These increases were partially offset by a decrease in consulting expenses due to the expiration of the consulting agreement with the former CEO of Global Patent Holdings LLC and the reduction in non-cash stock compensation charges related to the employee separation previously mentioned.

First quarter 2007 patent related legal expenses increased to $1.4 million versus $366,000 in the prior year quarter.

Patent related legal expenses include prosecution and enforcement costs incurred by outside patent attorneys engaged on an hourly basis and the out of pocket expenses incurred by law firms engaged on a contingent fee basis.

Specifically, patent related legal expenses include case related costs billed by outside counsel for economic analysis and damages assessments, expert witnesses and other consultants, case related audio, video presentations for the court, and other litigation support and administration costs.

The increase in patent related legal expenses in the first quarter of 2007 versus the comparable 2006 period is primarily due to a net increase in the number of active licensing programs, and as a result, an increase in the number of ongoing patent enforcement litigations since the first quarter of 2006.

The increase in patent related legal expenses is also due to an increase in the number of enforcement actions that are further along in the litigation process, resulting in increased costs incurred in connection with the preparation for depositions, the preparation and response to discovery requests, expert witnesses, damages reports, and other costs.

We expect that patent related legal expenses will continue to fluctuate from period to period based on patent enforcement and prosecution activity associated with ongoing licensing and enforcement programs and with the commencement of new licensing and enforcement programs each period.

For fiscal 2007, estimated fixed costs for the Acacia Technologies Group are expected to be in the range of $10 million to $12 million.

Fixed costs include employee salaries and benefits, facilities costs, corporate, legal, accounting, and other general and admin costs, and are included in the marketing general and administration expense line in our income statement.

Estimated variable costs for 2007 excluding inventor royalties and contingent legal fees, are expected to be in the range of $4.5 million to $5 million for the year.

Variable costs include patent related legal expenses, patent related research, consulting, and maintenance expenses, and other patent related development and commercialization expenses.

These costs fluctuate quarter to quarter based on business development, enforcement, research, and prosecution activities each quarter.

All variable costs, excluding patent related legal expenses, are included in the marketing, general, and administration expense line in our income statement.

Variable costs, including the one-time employee severance charge included in MG&A for the first quarter of 2007 totaled approximately $672,000 versus $188,000 in the first quarter of 2006.

As of March 31, 2007, cash and short-term investment balances totaled $53.2 million versus $45 million as of the end of fiscal 2006.

Net cash inflows from operations for the first quarter of 2007 totaled $7.6 million, versus net cash outflows from operations of $688,000 for the first quarter of 2006.

In conclusion, the Acacia Technologies Group's licensing, business development, and engineers produced another strong quarter of revenue growth and overall performance for the inventors with whom we partner, and for Acacia shareholders.

We look forward to continuing to build on our first quarter growth and results through fiscal 2007.

I will now turn the call back over to Paul Ryan to begin the q-and-a portion of today's conference call.

Thanks, Clayton.

Operator, can you open up for question and answers?

Thank you, sir.

The question-and-answer session will begin for Acacia Technologies Group.

[OPERATOR INSTRUCTIONS] Please stand by for your first question, sir.

Our first question comes from Marco Petroni, MG Capital Management.

Please state your question.

On the spreadsheet automation, the image resolution enhancement patent, how much more as a percentage of the total that you got in the quarter, how much more is left on the table?

Well, those are really two separate patent portfolios.

I know, but I was just wondering how much on each one.

On spreadsheets, there are other significant companies to be licensed yet.

I can't really get into a percentage of the market number, but there are continued licensing activities in both of those portfolios.

But compared to what happened in the quarter, is it significant?

Sure.

All of the deals -- there are several large corporations that use these technologies that we plan on licensing.

So we would view the potential future revenues as significant.

Anything new with regards to raising of the Fund?

We can't really comment publicly on a private transaction.

We continue to market to people, and obviously the goal is to partner with financial partners on some of the portfolios that we've identified that have more capital.

Chip, you want to fill in on that?

We've received a lot of business development opportunities that are from significant companies on significant portfolios that maybe because of some new accounting laws can't have any continuing interest in the portfolios.

So the idea was to look for creative ways to partner those acquisition costs, and we're doing that.

When we have something significant to disclose, we'll make an announcement.

But as of right now, we don't have anything to disclose.

All right.

Thank you.

We'll take our next question from Bennett Notman, Davenport.

Please state your question.

Congratulations on the strong performance on the quarter.

Paul, could you talk a little bit about how things have changed in the market since you've become more of a known quantity, maybe what that's done to the monetization cycle, especially with potential repeat licensees?

Well, I think it's two favorable impacts.

Obviously, as we've gained visibility and established a track record, it certainly is very helpful in getting licensing deals done.

As you're aware, we have done multiple licensing deals with several leading companies, kind of a who's who list.

So certainly that facilitates and makes easier getting other deals done.

I think the more important thing is on the business development side.

We've now established a credible track record, which makes us a very desirable partner for licensing technologies.

And I think that proven track record is certainly helping to bring in additional deals for future licensing.

And then on the business development side, what might be the reason that someone is still reluctant maybe to sign up at this point in time?

Are there any hurdles that you think are still out there that you guys need to overcome?

Why don't I have Dooyong Lee, who heads up our business development address that?

There could be a number of reasons why they may not want to sign up with us.

For one, a large company that has a pre-established organization that's focused on making money out of their patents, we are basically competing with them for the same jobs.

And if they become difficult for us to come in and they will take over all of your licensing responsibilities.

So that becomes an issue.

Some large companies, obviously, have concerns about letting their core patents go to a third party, then to go out and license [inaudible] [in court] because somehow that may jeopardize their business operations, and that's a legitimate concern, obviously.

So not everybody's ready to accommodate us as a licensing partner.

But as Paul mentioned, a significant part of the patents belong to individuals and small companies, and those are the ones that we'll continue to focus, while opportunistically, we'll also try to sign up some large clients.

And if that requires additional funding, obviously, raising the funding isn't going to help us.

But in the small co market, what objections do people have?

I'm just sort of thinking that now that you've shown the ability to deliver licensing from the bigger entities, it's kind of a hard decision to turn down.

Right.

Well, that's why you see a significant increase in the number of portfolios that we sign up.

Two years ago, we signed up 9 new portfolios, last year we signed up 20.

And this year alone, in the last four months, less than four months, we signed up 9 portfolios altogether.

So certainly, I think that's reflected in the number of portfolios that we sign up, and as we continue to grow and gain more success, I think it's just going to become easier and easier.

All right.

Thank you.

We'll take our next question from Harris Hall, Singular Research.

Please state your question.

Congratulations guys on the quarter.

I'm just trying to get a little bit more precision on the size of the severance charge and the spinoff legal expenses.

The severance charge disclosed in the financials, according to our executive severance program the charge was $350,000.

Right, Clayton?

Right.

And the second part of your question?

The spinoff legal expenses and incremental?

In the first quarter of 2007, those costs were roughly $50,000.

Approximately $50,000 of spinoff costs.

And is there any update on the split off?

The third amendment, well, actually the second amendment which filed the end of December, and the second amendment was filed, I believe, about two weeks ago.

So we're just waiting to go effective on behalf of CombiMatrix.

So it probably will happen in the second quarter, you'd guess?

I would certainly hope so, yes.

The comments, obviously, usually it goes faster when you get into the amendments, so there's less questions to resolve.

So we would certainly hope that that would be done in the next 30 days.

Okay.

Can you give us a little bit of a legal update?

I know you have some big cases pending with some major defendants.

Can you remind us of that?

Well, it would be a laundry list to go through.

I mean, we have 33 litigations currently.

But weren't there some that were coming up for final decisions this year?

Well, there's a number of them at various stages of going through Markmans and going through appeals.

And the trial dates, I mean the one on E-acceleration has an established trial date of November 7th.

Other trial dates will depend upon the movement in the litigation and the process we have right now.

But certainly, there's several cases that are moving through the litigation process that will likely get to either a point of settlement or going to trial over the next twelve months.

How many do you think would go to trial if none of the defendants settled?

Well, historically, our experience is that more than likely things get moved.

They don't get accelerated too often.

It's just the nature of the federal courts.

So I think, based on what we know today, to tell you what our expectations probably -- it's going to change.

We know it will change.

As we've said in the past, people can go on to the Pacer system and see the representative schedules for these lawsuits.

But for us to anticipate or speculate as to what might and might not go is one, not in our best interests, and two, we probably won't be correct in it.

Okay.

And I know you've talked about a strategy of taking less contingency cases and hang those fixed legal costs more up front.

Is that still the plan as resources allow?

No, actually, we've continued to do the vast majority of all of our litigation on full contingency.

We've been selective in a handful of cases where we thought there was a very high likelihood that once a lawsuit was filed that the party would settle.

Usually because we've already been engaged in negotiations with the party.

So it's only been very selective use in a handful of cases, still where we pay for the litigation.

We still think it makes a lot more sense for our shareholders simply to have more portfolios and have the contingency firms bear the cost of the litigation.

And just lastly, you mentioned $7.7 million cash inflow.

Was that the cash flow from operations or the total change in cash?

That's cash flow from operations for the first quarter of '07.

During the quarter, we also took in roughly $750,000 related to stock option exercises during the period.

Which would be part of, as far as the cash flow statement, cash inflows from financing activities.

But yes, the $7.6 is cash inflows from operations.

Great.

Thank you very much.

We'll take our next question from Ryan [Haynes], Investor Capital.

Please state your question.

Hey, guys, how you doing.

Great quarter, guys.

Thank you.

I wanted to ask a question pertaining really to the Microsoft deal.

Forward looking, this deal seems pretty easy to size up, transparency wise, that it seems to involve Excel software, the spreadsheet.

Correct?

You can look at the patents.

Obviously, the patent is cited in the litigation and you can [figure out] conclusions, but we don't want to qualitatively get into the aspects that it covers.

Well, that's really where I got it, was off the actual filing of the lawsuit.

My question is this.

Forward looking, which is the most important thing, can you better define the terms of the licensing agreement as in, is it possible for us to get X amount of dollars or a cents per copy of Excel?

Like a standard royalty agreement in other copyright situations?

Again, we really can't comment.

We have a binding confidentiality agreement as part of the settlement agreement with Microsoft, and we really can't comment further on any aspect of the licensing settlement, unfortunately.

Really?

It's not uncommon, particularly in the settlement of litigation.

I mean you know you've got a lot of guys dying to hear terms of all these licensing agreements that we have in place here.

That's the one something to figure out.

Well, we'll keep executing...

I thought we were on the same side of the team.

It's not unusual in patent licensing that I would say probably 99% of the deals we've done that there is a confidentiality that no terms or conditions will be disclosed.

Well, I'll tell you that answers a big question, because we didn't know why you guys weren't disclosing everything.

That's why.

It's pretty typical in licensing.

It's pretty typical with everybody in the industry who does patent licensing.

Well then, obviously, keep doing what you're doing.

Great job.

We're on the same page, believe me.

Take care.

Okay, thank you.

[OPERATOR INSTRUCTIONS] We'll take our next question from Neil Waldman, Wooster Capital Management.

Please state your question.

Hi guys.

Great quarter.

Obviously there's a little bit of uncertainty around this Patent Reform Act that's being talked about in Washington.

I think there's a hearing today.

I just kind of wanted to hear your commentary on how you think that might impact your business.

Near-term, long-term, positive and negative.

Sure.

The proposed legislation is basically identical to the last two years, and each of the last two years it died in committee.

So it well may have no change.

We think that, based on some of the proposals, if they were enacted would actually, long-term be positive for us.

Although we don't think they're good for patent law, the issues of first to file versus first to invent, that would actually clear up ownership issues.

And as a licensing company and an enforcement company, it would take that risk out of the equation on ownership issues for us.

There's also a proposal of a post-grant opposition period following the issuance of a patent.

Again, this wouldn't have any impact on us for five or ten years and at that time would be positive, because a lot of those issues that would be addressed in the post-grand opposition period relating to prior art would get taken off the table if you needed to later go out and license and enforce the patents.

So we actually see the primary proposals that have the highest probability of possibly being enacted having no real near-term impact on our business, but very long-term would actually have a positive impact.

Great.

Okay, thanks.

And also, any update on DMT?

The current status is we have a motion for reconsideration which I believe is going to be heard by the district court in June regarding some of the most recent claims interpretation.

And once that's concluded then we'll have a clearer visibility following that, depending on what the next steps will be in the litigation.

So in June we anticipate a final motion for reconsideration on some of the patent claims in the Markman ruling, so we should have clarity by the end of December.

Great.

Thanks a lot.

Keep up the good work.

Thank you, Neil.

We'll take our next question from Bruce [Radeau], A.G.

Edwards.

Please state your question.

Well, it's on the heels of what was just asked.

But the DMT, Paul, if a new hearing starts in June, you're here by the end of August, when would be the earliest that a trial date would be, in your opinion, would be set?

We really can't speculate yet.

Obviously, we would have to go through discovery, that would be up to the court when they want to set a trial date.

So we really don't have clear visibility on that right now.

Some of the districts that we're involved in such as the Microsoft case, they set a trial date.

Most districts actually move through the litigation before setting that, so we can't really speculate on that now.

But obviously we're getting much closer than we have been.

We're basically through the Markman process, so once that's completed, it should clear the way.

Whether the court will actually give a trial date once we go into discovery, we're not certain of.

And this has been consolidated in Northern California, is that correct?

Yes it is.

All the cases have been consolidated there.

One other question.

I'm going to take a shot in the dark.

You have talked in the past about lumpiness of quarters and this one probably is no exception.

But on the lumpiness scale, any chance of getting some idea from you as to whether we've seen a real sea change here in your opinion, in terms of going forward, or whether this is potentially just another one of those quarters that spiked because of initial payments from a number of different clients?

Well, we're managing the company, and I think that most of our large shareholders are [in safe].

We're really managing it with a view toward trailing 12-month revenues to smooth out the inherent quarterly lumpiness.

And certainly we expect continued growth in 12-month trailing revenues.

I think if you take a look at any 12-month period in any sequence, we've exhibited significant revenue growth, and that's how we kind of guide people.

Because we're not trying to manage the company to hit a quarterly bogey, it wouldn't be in the best interest of our shareholders when the deals are ready to get done.

But certainly, if you can take a look over the last two years, there's been a very consistent growth in trailing 12-months revenues and we would expect that to continue, if not to accelerate.

Are you basically saying it's difficult to forecast when these numbers come through, or when the amounts come through?

Well, we know, based on our licensing programs, and we've made the statement at the outset of the year.

We continue to expect revenue growth this year over last year.

It's not prudent for us to try to give any kind of quarterly guidance, because it would affect closing of deals, and we're in constant negotiations with the parties on the other side.

If they knew we were trying to meet a quarter, they'd be inclined to try to offer us cheaper deals at the end of quarters and we don't want to ever go down that road, and we've resisted that.

So we're not in any way trying to manage from quarter to quarter.

We are very much trying to manage the 12-month trailing revenue growth, and we've consistently demonstrated that.

And we would expect that to continue.

Okay.

One last question.

In terms of both the head count, you've added a few people over the lat year or so.

Do you expect that [total] to increase?

And also, we see the headlines as to the new portfolios or individual items that you're picking up in terms of things that you can act on.

Are you seeing a substantial increase in the number of people that are now coming to Acacia now that you're being more recognized?

To answer the second part of your question, absolutely.

Our established track record now makes us much more attractive as a partner, and we are seeing much more deal flow come to us.

Dooyong and his team initially, a couple of years ago, basically was digging out all of the opportunities.

Now I would say a majority of the opportunities are coming in to us, which is great.

It's giving us a lot more opportunities to be selective on the portfolios we want to partner on.

On head count, we're at 35 people now.

I would expect we will add two or three more senior people over the balance of the year to manage the licensing of these portfolios.

So it would mostly be very senior level people who are responsible for managing five or six of these portfolios and generating the revenues.

We have had tremendous success, particularly over the last year, of recruiting some very talented, very experienced high profile people who have joined our company from major companies.

They're very experienced in both patent licensing and management litigation.

So basically we want all of those vice president level people managing their own portfolios and monetizing them.

And so as we continue to bring in more portfolios, we will continue to add senior level people.

Great.

Congratulations on a good quarter.

Thank you.

We'll take our next question from Daniel [Lenahan], private investor.

Please state your question.

How are you doing?

Congratulations on a great quarter.

Thank you.

I wanted to backtrack to confidentiality agreements in relation to the settlements.

You had said that 99% of the industry operates in that manner.

Is there ever a situation where Acacia would decide to release a settlement, in other words, you've got a high profile case where someone's got their hands in the cookie jar in relation to someone else's patent.

It would just seem like by releasing that information it would have a negative impact on the other company's stock and a positive impact on Acacia's stock, as opposed to across the board just...

in other words is that something that Acacia offers as part of the settlement to the defendant?

Typically, what you'll read about it, it's very rare for the terms and conditions of licensing agreements and patent licensing to ever be disclosed.

And usually, the party who is taking the license -- and it's a condition of the deal that it be confidential because they don't want people to know what they're paying for certain licenses.

So it's certainly not specific to us.

The cases where you do read about dollar amounts are those rare cases that actually do go to trial and have damage awards.

That's where you'll see the dollar amounts mentioned.

But in any settlements outside of litigation, it is extremely rare for those dollar amounts to ever be mentioned.

It's only in certain cases where there's a widespread licensing program.

Certainly, in digital media technology, one of our portfolios where we've done over 300 deals, once you've done that, we can characterize the general royalty rate that we licensed without jeopardizing the confidentiality of any individual agreement.

But it's standard in the industry, and there's no motivation on our part to either withhold or announce dollar amounts.

Okay.

Thank you.

[OPERATOR INSTRUCTIONS] We'll take our next question from [Paul Berger], Hammock.

Please state your question.

Hi Paul.

Congratulations on a good quarter.

Thanks.

A little color on the settlements.

Can you tell us how many deals you may have signed over, say, $3 million?

We really can't go there.

Every quarter it's different, and I don't know that it would serve any useful purpose even if we did tell people, quite frankly.

I mean, we may have quarters where we do 30 or 40 deals.

We really can't get into how big is the bread box.

Other than DMT, do we have any deals that are reoccurring, or are they all one-time settlements?

No, we do have some of the other portfolios.

We do have certain licensing transactions beginning in some of our newer portfolios that are a mix depending on the need of the licensee.

And we have got a couple of other portfolios now where we are doing recurring licensing deals.

Okay.

And also, I believe we lost the summary judgment on the Intel suit.

Was that appealed, or is it going to be appealed?

It has been.

It wasn't on Intel, it was on a case -- there's two separate cases.

One against Texas Instruments and Intel for the same technology.

The Texas Instruments portion of it was granted a summary motion, and we have appealed that.

Okay, great.

Thanks a lot.

We'll take our next question from Peter Epstein, Zerion.

Please state your question.

Hi, gentlemen.

You mentioned $750,000 of stock exercised.

Does that mean your share count is up?

Can you give me an update on that?

Yes.

During the quarter, there were about 159,000 shares that were exercised by various holders of stock options during the quarter.

So the share count included in our 12-31-06 10-K would be increased by the $159,000 of additional shares issued during the quarter.

And you have a 10-Q coming out soon?

Yes.

That should be filed in the next couple of weeks.

In your press releases when you talk about new portfolios that you have acquired, does the word acquire always mean, or sometimes mean, you're paying for them?

What it really means is control.

We have management control, and generally the typical deal is a 50/50 economics.

There are a handful of cases where we have greater than 50/50 economics where we may put some front cash to the IP holder.

I think in the last quarter it was around $100,000 in total.

A couple of years ago, people wanted our cash.

Now with our licensing success, they really want the whole back end participation.

So it's becoming increasingly rare for us to actually put out cash upfront for the acquisition.

So when you said advantages to investors in your press release, that's something like $100,000 for the quarter.

Yes.

I think the total amount in portfolios acquired in the quarter was roughly $100,000.

$110,000.

Okay, that's relatively small.

Was there a Markman hearing yesterday?

There was on our E-acceleration case, yes.

And are you able to comment in any sort of way about how that went?

No, we'll wait and see what the court's rendering of an opinion is on it.

But it was held, the oral hearings were yesterday.

Is that just a one-day hearing?

It was.

Yes.

When do you expect some information coming out of that?

We really don't know.

It's up to the court schedule.

When the judge releases it.

There's really no way of us knowing in advance the timetable.

Typically though, is it weeks or months?

There is no typical.

It could happen in as short as a week.

It can take as long as a year.

And will there be a press release by Acacia when that comes out?

We have a policy of not doing any press releases based on all the various stages of litigation.

Otherwise, we'd be doing two or three press releases a day.

We have 34 pending litigations and they all have events occurring.

So we do not comment on any of those steps on a day-by-day basis.

And the federal court system posts all these decisions on their websites anyway.

Okay.

I think that does it for me.

I'll be looking for the 10-Q, and like everyone else said, congratulations on a good quarter.

Thank you.

Okay.

Thank you.

This will conclude the question-and-answer session for Acacia Technologies Group.

We will now be placed on hold until 2:15 p.m.

when the CombiMatrix presentation will commence.