Good afternoon. And welcome ladies and gentlemen to the Acacia Research Third 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 up the conference for questions-and-answers after the presentation. I will now turn the conference over to Mr. Paul Ryan. Please go ahead, sir.

Thank you for being with us today. Today’s 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. In today’s call, the terms we, us and our refer to Acacia Research Corporation and/or its wholly and majority-owned operating subsidiaries. All intellectual property acquisitions, developments, licensing, and enforcement activities are conducted solely by certain of Acacia Research Corporation’s wholly and majority-owned operating subsidiaries. With me today are Matt Vella, who earned a well deserved promotion to President of Acacia during the third quarter. Clayton Haynes, our Chief Financial Officer, Ed Treska, our General Counsel, and Dooyong Lee, Executive Vice Presidents. Today, I will give you a quick overview of the progress we are making in growing the business. Then Matt Vella and I will respond to questions we are getting asked most frequently by analysts, shareholders and potential new investors. I will to questions regarding the recent dramatic decline in our share prices, Acacia’s capital deployment strategy, and Acacia’s expansion into the medical technology sector and then Matt will respond to questions regarding Acacia’s strategy around multi-portfolio structured licenses and a licensing strategies for our ADAPTIX 4G/LTE portfolio and for our smartphone technologies portfolio of Palm and Geoworks patents. Then Clayton Haynes will provide you with an analysis of our financial results and we will then open the call for questions. Acacia continues to build its market leadership position in patent licensing. We generated revenues of $34.9 million in the third quarter from 33 new revenue agreements, including new licensing agreements with AOL, Bank Of New York, Boston Scientific, Citigroup, Dell, Freescale, Fujitsu, Google, Hewlett-Packard, IBM, Panasonic, RPX CORP, Sony Mobile, UBS and Varian Medical Systems. The 33 new revenue agreements covered 31…

Thanks, Paul. To everybody on the call good afternoon. As Paul mentioned, we have been receiving questions regarding, one, our multi-portfolio structured license business, two, questions regarding the status of our ADAPTIX 4G/LTE license program, and three, questions regarding the status of our Palmsource, Geoworks license program. I will be providing responses to these questions. Turning to the first one, investors want to know the status of our multi-portfolio structured licensing business? In answering this question it is first important to define what is meant by our structured licensing business and by structured licensing deals? As counter distinguish from our core licensing business and are so called core licensing deals, which each involve a single patent portfolio being licensed to a single perspective licensee. A structured deal is simply what can happened when we are on track concurrently close a large number typically four, five, six or more, our core licensing agreements with a single perspective licensee. Two things happen when this pre-condition has been met which leads to a structured deal. First, the perspective licensee wants to simplify the negotiation across all asserted portfolios by amalgamating would be several individual negotiations into one composite negation that is informed by smaller individual parts. Second, when four, five, six or more of these portfolios are before perspective licensee that licensee given the large amounts of money, it typically needs to pay for licenses to all of these portfolios will want to set a structure to deal with future licensing transactions for a limited period of time. The result is a so call structured deal, which is typically quite complex and vary significantly from party to party. They are highly tailored deals that can vary according to for example which of our portfolios impacted, when assertions can be brought in the future…

Thank you, Matt. Consistent with previous earnings conference calls, I will provide a brief summary of our earnings release focusing on key components of our results for the third quarter of 2012. On a consolidated basis, revenues in the third quarter of 2012 decreased to $34.9 million, as compared to $63 million, including other operating income in the comparable prior year quarter. Third quarter 2012 revenues included license fees from 33 new licensing agreements covering 31 of our technology licensing programs as compared to 24 new licensing agreements, covering 22 of our technology licensing programs in the comparable prior year quarter. For more details, please refer to today's earnings press release for a summary of technology licensing programs contributing to revenues during the quarter. Consolidated trailing 12-month revenues totaled $205.3 million as of September 30, 2012 as compared to $177 million as of the end of the comparable prior year quarter. As Paul mentioned currently to date on a consolidated basis, our operating subsidiaries have generated revenues from 134 of our technology licensing programs as compared to 108 technology licensing programs as of the end of the comparable prior year quarter. License fee revenues continue to be uneven from period-to-period based on the various factors discussed on previous earnings conference calls and in our periodic filings with the SEC. For the third quarter of 2012, we reported a GAAP net loss of $6.4 million, or $0.13 per share, versus GAAP net income of $10.8 million, or $0.25 per fully diluted share for the comparable prior year quarter. Third quarter 2012 non-GAAP net income, which excludes the impact of non-cash patent amortization, stock compensation and excess benefit related non-cash tax amounts was $8.5 million, or $0.17 per diluted share, as compared to $18 million or $0.42 per diluted share for the…

Hi Operator. Can you please open the call for questions? Thank you.

(Operator Instructions) Your first question comes from the line of Tim Quillin of Stephens. Please go ahead.

Good afternoon. I appreciate you are going through all the frequently asked questions. Hopefully, we can come up some more. Matt, on the structured licensing deals, I'm wondering as you get to the expiration of these periods of tranquility with companies that you’ve already signed structured licensing deals with do either patent owners come to you and so you aggregate patents that way or you go out and try and find patent assets that read on those specific companies to drive another structured licensing deal around the time of the expiration or does that that should -- should we not think of it as a renewal or getting a new deal at the time of the expiration of those current agreements?

The structured deal and therefore the renewal, when you think about it really is a function of the patent portfolios will be available for research. And so the activities you described are naturally going to be in our minds as the anniversary periods so to speak, the expirations of those periods of tranquility are coming to an end. Now, you what we have we to do as well is figure out -- for a given prospective renewing licensee, what portfolio you are going to have that are going to be available for assertion and we have to organize our acquisition activities in accordance with those expectations. So the answer to your question in nutshell is yes. And -- but of course we have to look for a number of variables besides availability of patents when we think about renewals. One of those factors for example is going to be the health of the company that we’re trying to renew with for example, the industries they’re operating in, sorts of innovations that they are adding to their products where their patents are covering them or not. So the two activities, you mentioned are certainly occurring as renewals approach but other analysis has to occur as well, primarily focused on the industry in which the perspective, well, in this case be structure licensees operating and the health of the structured licensees business itself.

Okay. I think it’s important to note that we have done a number of transactions with companies that we’ve done the restructured licenses with and some very significant transactions as well. That develops the relationship once we generally do a structured trends are shown with a large company where we then are able to bring them some of our newer portfolios in advance of the renewal period and many times they choose to move forward with licensees prior to when they would be required to do so based on thinking that they can probably get a fairly good deal by doing it early rather than waiting for the renewal. So in many cases as we expand the number of companies we have these relationships with. It helps really facilitate early licensing of new portfolios and particularly ones that could have a significant impact on those particular companies.

Right. I may be wrong but your first structured licensing deal which if it was three-year covenant not issued, would be coming up for expiration in the first quarter of next year but it’s a company that you traditionally, I don’t think I have had a lot of patents that read on our company. And so it’s that one that we shouldn't -- we shouldn't think of you renewing and maybe none of them renewing exactly on the time frame, but especially not that one.

Well, also, yeah we can comment about any specific arrangement obviously because of confidentiality provisions. But I think it’s also important to note increasingly these transactions are highly customized. It is not uncommon for us to potentially have a quote carve out. In other words, companies are looking to try to get the predominate relationship on track to minimize the legal cause for themselves primarily that also helps with us. But it doesn’t necessarily mean that we can't do subsequent licensing activity depending on certain categories of products, depending on certain dollar amounts of purchases that we may make of a portfolio. So there could be ongoing transactions with a structured deal in place. And I think as we move forward, that’s going to be more the norm than it was for our first few deals. And so it’s going to be dependent when we come up to those renewal periods besides as Matt said what assets we have in place that they are interested in that makes senses and we may go on individual licenses for those or put those under a general format with a broader agreement that can result future matters. So I would look for a lot of necessary binary events but the companies we’ve established relationships with where it’s appropriate to license, it’s much more likely will be getting deals done with them.

Okay. Fair. And then throughout the quarter, you announced patent acquisitions or the headline says patent acquisitions. I know a lot of those do not involve upfront capital. I think most of them do not involve upfront capital but can you say may be in the future in press release but which ones. Do you have a capital component to them but maybe if you can talk about third quarter where that you put $24.5 million to work?

Yeah. We are looking at that situation. As I commented earlier, we’re looking for better ways. We realized that given the confidential nature of the licensing deal themselves and some of the constraints that being in litigation provides and telegraphing advance of litigation to certain companies, you may be litigating against facts and circumstances that are in the best interest of shareholders or IP partner, we do have those constraints. We recognize that and so we’re looking right now at ways that will enable us to better communicate, particularly to the analyst metric such as that they are meaningful but doing it in a way without compromising our business and we are actively exploring because we realize. We make acquisition announcement, you’ll know whether that’s a 50:50 partner or 100% ownership or cash advance and similarly when we do a license, you have no idea as to the size and scope dollars wise of the license. We appreciate the difficulty of analyst and investors tracking our progress, given those confidentiality requirements. And I believer we’re working actively and working certainly with an outside group to see if we can better communicate the metrics that we can to give you better visibility.

But one thing that’s worth noting is deep primary obstacle giving you that information is the counterparty. The seller or the passive partner often does not want that information coming out and that’s one big obstacle we have to deal with.

Okay. Where we can, we are going to try to be clear in terms of the nature of the transaction certainly whether it’s a 100% ownership or whether it’s a 50:50 or a transaction. So you have some metrics as to our economic interest in the revenues that will be generated.

Can you say how many of the patent acquisitions involved upfront capital?

I’m trying to guess, roughly…

Approximately 6% of that.

I think 6% or 7% of the 13 we used some upfront capital, and about half of them were the traditional 50-50s and about half we use capital.

Okay. And so it’s obviously a relatively low capital outlay than your portfolio that you're acquiring. Is that the right way to think about capital outlays going forward, a small upfront commitment that you recoup on the front end?

I don’t know you can make. It’s going to depend on the economics that we are agnostic as to structure and format as long as we think we can earn great returns on the investment. But as a general rule of firm, I would expect certainly if we are doing a partnering deal and we are putting cash upfront, we probably wouldn't be advancing more than 5% or 10% of the total potential revenues we think can be generated. And we do that because we think there is an extreme high likelihood knowing who we have to license that we can recoup that in early licenses and therefore derisk the transaction. So it's unlikely that we are going to be putting out more than 10% of the revenue potential upfront, particularly if there is a back end revenue share with the partner.

That’s fair.

And again that’s the modified risk for shareholders and increased returns, as you know we want to aggressively deploy the capital that we’ve got in the banks. It’s earning us nothing. And we can accretively use it by getting better back end, so many of these transactions we get all first dollars back. The patent holders get the certainty of the cash advance from us. We get first dollars back until we recoup and then most of these we are getting a preferential treatment over the 50-50. So we are getting margins of 60-40, which long-term are very accretive for our shareholders by temporarily using some capital we think on a very low risk basis.

Right, right. And just one last question before then I will step back in the queue. The inventor royalties I think was around 15% of revenue relatively low given your traditional 50-50 split. And I'm just wondering, how you got to that number and how we shouldn't and I know it's all going to depend on the mix, but how we should think about kind of a general mix on that?

Well, there was a complaint of inventor royalties in the third quarter of 2012. I guess whereby we actually credited about $2.6 million of inventor royalties in the third quarter related to amounts that were originally expensed in the third quarter of 2012. But we ended up not actually having to make that payment out to the inventor.

So those were the adjustments that probably made that artificially low and it probably would have been without those adjustments closer to 25%.

Correct, correct. Correct.

Yeah, that’s a good catch. We had an adjustment in there. We had a special situation and that kind of skewed the numbers for the quarter. If you took that out, we are probably closer to around 25%.

Yeah. Can I ask Clayton, could I ask you to explain that again? I did hear that in the prepared comments and I meant to ask about, what exactly that netted $2.6 million credit for royalties from 2Q that nearly…

Why don’t we do it offline? It’s a fairly complex transaction and in the interest of other shareholders being on the call, why don’t we do that right after the call, we’ll do. We can do that.

Okay.

Your next question comes from the line of Paul Coster of J.P. Morgan.

A question, you’ve depicted the frustration as original in this pipeline of deals, which are of growing complex to which to me really just simply means that they are getting bigger and bigger and the timeline for settling them is therefore longer. Are they all by definition structured deals?

Well, I think the rule is such that we can probably think as there is over $50 million involved. The company on the other side is probably going to want to have some form of transaction that gives some elements of a structured transaction. In other words, the guy that is going to borrow you a $50 million you probably doesn’t want you to be able to sue him on a new matter within the next week. So it varies though I’m not trying to be clear. But the timeframe that we give people and what we offer them, yeah, there is a whole variety of things and the interest becomes in getting deals that and obviously the party on the other side, leading the transaction for them doesn’t want to put their company in an embarrassing position. So on average certainly it leads to a much more meaningful dialogue about a much broader ongoing relationship. And generally we know what we're seeing is, as we increase the scope of our assets and particularly the depth and value of some of these portfolio. Companies on the other side are now engaging in negotiations that are kind of a coequals before it was us and then litigation against them and then making us wait to get paid until the moment we see what they could do with litigation. The tenor have all of that and the tone of that is changing, which is obviously very positive for the long-term development of Acacia’s business model and we think it will be less reliant on lengthy litigation and much more reliant on transaction structures where we sit down periodically and negotiate that. But in the beginning, as we have moved up the food chain in terms of value of the portfolios and dollar values of transactions, it’s move the dialogue in that direction and that adds to the time element of getting them completed.

And how many customers are sort of in this pipeline of complexed deals, sort of taking longer to come to market to get results then one would have expected. Is it handful or are we talking about more than 10, 20?

Well, just like we cannot publicize revenue forecasts on a quarter-to-quarter basis, we cannot forecast -- we can’t issue forecast in the number of such structured agreements that may be executed. We did not want to prejudice our discussions by making those forecasts but again the key of the precondition. Right, it’s anytime you’ve got three, four, five, six portfolios and one perspective licensee and we are happy to report that happening often.

Yeah. I mean, you can see our associates if you look at it by against most of the larger technology companies. Certainly we are the stage now where we’ve got multiple matters before them. So you can assume that a significant portion of those are at the point where that kind of dialogue is appropriate. We don’t want to get into specific. It is just more than 10 or less than 10 right now. Yeah, with most of those companies, the discussions are moving in that direction and the more portfolios we continue to add the more they go in that direction.

I’ve had a number of e-mails from clients and I think it all boils down to the following question which is in the next year, do you expect to post double-digit growth on the topline or if you can’t answer with a one-year timeline, can you answer with a three year timeline? What kind of growth rate you believe this company can generate on the topline?

Well, let me answer it based on assets under managements. Certainly we would realistically think we can put up those kinds of numbers. Performance wise as you know, these are all negotiated transactions. So you don't, as a public company want to go out there and put yourself on the line with the guy on the other side knowing, he can use that against you. But certainly if you look at the growth and assets, I mean we’ve got an 80% higher level of assets so far this year and historically there has always been a very high correlation between subsequent revenue growth and assets under management. It’s like a money-management company. If you’ve got the assets under management, generally revenues are going to grow. So certainly, we think those are very achievable numbers based on the growth in our assets.

At least, 10% growth in the next year for instance.

Yeah. It should be very achievable based on the asset growth sure.

All right. Good. I think that’s it for me. It seems a pretty straight forward what’s happening here and it all sounds quite good to me. Thank you.

Okay. Thank you, Paul.

Your next question comes from the line of Mark Argento of Lake Street Partners.

Yeah. A question around any kind of takeaways from the Apple, Samsung litigation, how does that essentially impact any of your portfolios good or bad.

Well, certainly we were really pleased with the valuations that Apple and their experts put on the valuation of their software patents, non-industry standard patents. And then we were further pleased with the jury’s recognition of the valuation of those patients. As you know, we have a pending trial date. The first trial in our smartphone patent portfolio and we think the Palm and Geoworks patents are very comparable to the patents that were involved in the Apple, Samsung litigation and obviously there was some very large numbers there. So we are certainly pleased that they had to have an opinion. It’s no longer our opinion, they’ve kind of valued patents in this category and the juries append on that and so that’s certainly going to be a strong evidence for us in our trial.

Great. And then when you guys look at just going out for new portfolios. I know the whole issue of standards based versus functional based patents continues to be more and more a hot topic. And when you guys think about potential damages and valuations on various portfolios, have you guys, is it your opinion that standard based patents are an area in which it’s going to be more and more difficult to command big dollar awards or how do you guys think that or how have you taken that shift and the consideration here doing your analysis?

Well, Matt answer that but you will noticed that our biggest acquisition to date of ADAPTIX were non-standard patents.

I mean, yeah, primarily tactful kind of stole my thunder. We try avoid the node. It’s not that simple though. If you take a patent individually, you certainly have to take into account the fact the European Union and other political bodies throughout the world that have control over these sorts of things are seeking to arguably regulate the price points of standard and central patents. And so that -- to ignore that you’d be operating in a foolish manner. Having said all of that though, there is so much terrific IP locked up in the standards essential categories that we don't think the asset class, or I should say subclasses disappearing. So if we can find the right price, the right metrics, the right numbers, the right concentrations and we will certainly depend. But it's certainly a factor that impacts our valuation.

That’s helpful. And then lastly this big medtech portfolio, I’m guessing that take a while to work on and get to the finish line. Let’s take a fairly comprehensive portfolio. And when you are negotiating you are sitting down with these larger companies, what’s kind of -- is it return on their capital or return on their R&D dollars, what is their main goal when they are working with you guys in terms of the monetization? Is it risk mitigation is it absolute hard dollars, what’s kind of the focus for these types of deals for the IP owner?

I think it’s primarily a return on another wide dormant asset. And then secondly making that return more predictable and less risky, and we can really help with that in a number of ways. One, we can basically put these portfolios on timetables that are functions of other portfolios that are further advancing discussions. Two, their strength in numbers, so although we bring aggregations of portfolio assertions against companies and we keep the aggregations separate and distinct. The reality is that a single perspective licensee face the number of aggregate of portfolios, is going to have to analyze its risk equation looking at several portfolio not just one and that's sort of rising to help solve proverbial patent partnerships if you will, right. And so because we -- and then number three, in addition we become the focal point and we have control of the asset and a lot of companies like operating and eventually handing the asset over to west. So we take on that risk for them. We have systems that are better handled to absorb litigation, better handled to absorb litigation risk. We do it all the time, better handled to absorb all the risks that’s associated with and patent monetization. So if you take those factors into account, not only can we get our partners a return on their otherwise dormant assets, we can do it again with a lot of risk mitigation. And then the final thing I would always say is something Paul alluded to, at least ones earlier today which is with the capital we have. We can give our partners a range of options for how they see a return. There can be some upfront money. There can be a larger back-end participation. There could be hybrids of those two and I think that’s also a something that we're finding is very, very positive.

Great. Thank you guys, appreciate it.

Yeah. Thanks, Mark.

Your next question comes from the line of Doug Thomas of JET Equity Partners.

I also appreciate the color, Paul today and I wanted to ask you, I know you are going to say that you can find very attractive uses for all of the cash that you probably got. But I’m just wondering, recognizing the manic-depressive state of the market and what I expect a much brighter prospects for the stock ahead. It might not. You consider putting a portion of the cash on the balance sheet to use in retiring some shares and buying back some stock.

We’ve certainly considered that. Obviously given the dramatic decline in the value of our company, at the moment our Board and management has decided because we see the pipeline of deals that we have right now that we are working on, and by using capital as an advance to capture deals where we think there's very low risk of not getting that capital back in early licensing and then improving our margin substantially over our traditional 50-50s. At the present time that is a better use of cash to grow this business than to buy our stock back. We see an opportunity with our experience and our capital right now to dominate this sector, and to become a much larger company. And that $400 million in capital right now is every bit is valuable, as the teams we have that can do the due diligence and handicapping and the licensing handicapping. We are very fortunate we have all three estimates that are required to make money. We've got teams that know how to do assess the risk of these portfolios. We've got teams that have very high probability of predicting revenues for portfolios and therefore determining the true value of portfolios. And we've got the money to execute. You very rarely as a company get all of those at the same time, and we are not seeing as much competition in certain of these sectors as we have in the past. There has been a lot of noise around the smartphones sector and we are certainly please, we have what we think is one of the premium portfolios in that sector but that’s not what patent licensing is all about these days, obviously medical technology and semiconductors and other fields. So right now, Doug, we just see a tremendous ability to use capital very creatively to grow this company to whole another level. And we are not saying if the circumstances don’t change or if there is unfortunately, there would be further price decline we wouldn’t consider. We never ruled anything out because as you know, we look at all this from an investment standpoint. So you are right, but right now given the deal flow that we are seeing and how we can use capital, we are going to continue on this path of making acquisitions.

Okay. I appreciate that. And the management team in the past, I mean you all alone own a lot of stock obviously. You have personally taken advantage of weakness in share price as opportunities buyback stock. Would we anticipate, could we anticipate that there be some insider buying at these levels or are you guys restricted in terms of like you said the news flow that you're expecting in the near-term?

It’s not news flow that would restrict us and there are indeed our employees that buy who aren’t subject to the insider rules. The situation is that our Board and compensation committee about three years ago saw the biggest risk to building our company was people approaching our talent and as a result we moved our restricted stock grants from annual vesting we’re often times, it’s not uncommon for guys to try to raid your people, right after they have gotten their annual restricted stock. And we did it in six months increments, one other things we didn’t consider was by doing that you basically preclude the top level executive people who are subject to insider trading rules from buying stock, unless they were willing to come out of pocket every time they get a restricted stock grant and write a separate checked to the IOS and that hasn’t happen very frequently. So, we are going to consider that going forward a new stock grants, but the way we structured it precludes us under six months swing rule from being able to effectively do that.

And then, I appreciate that too. You mentioned in the text today something that I've been wondering about for while and we’ve talked about at before but for the first time now you're talking about being engaged more actively in foreign markets. And I would imagine that your capabilities, Acacia’s capabilities are probably among the leading companies out there in terms of all the patent litigation knowledge base, you guys have acquired over the years. What is the -- what are you doing overseas and what are the opportunities -- I imagine outside of China, I imagine they are fairly large, but you’ve got a -- your focused obviously on countries where there's formal patent law and where people appreciate the value of an intellectual property and so forth. What’s the opportunity for Acacia outside the U.S.?

Great question. I think the opportunity is two-fold. First-off, the foreign enforcement opens up our royalty base. If you look at a number of markets and by markets I mean technology markets. And you overlay those technology markets over geography, you’ll often find that the people that sell technology product type A in Japan are very different than the people that sell that same technology product type in the U.S. versus Germany versus England for example. So by going overseas, if you have the assets and increasingly we're getting those assets you are adding to your royalty base that you wouldn't cover if you were just U.S. focused. So, that’s the primary benefit. But there is another benefit as well. The lawsuits in overseas will give you certain risk mixes if you will certain, costs risk mixes that are not available in the United States. The timing of lawsuits and of enforcement actions can be different overseas. The cost can be different overseas. And certain procedural rules around evident that gives you insight into what other companies are thinking in terms of how they are going to attack patents those opportunities might be available overseas, so just like an offensive coordinator in an NFL football team once a variety of offensive weapons to go to receivers, tight ends running backs, power backs. To us, the second benefit of going overseas is that we get these different tools that we can use, when we’re dealing with effectively the global licensing effort. So, those are the two primary benefits. And yeah, you're right. We are expanding our oversea enforcement effort.

We’re also expanding dramatically in the business development side. It’s a big focus of our effort right now.

Matt, are you -- would you announce whether or not, for example, the medical device portfolio that you recently announced how, in terms of the transparency that you're talking about trying to provide investors are we going to know whether or not these portfolios have international opportunities. Do you know how we are going to be able to model that?

Now, that’s a great example, where we are discussing with some outside group’s communication standpoint and indeed in that portfolio we recently acquired of 1900,000 there is significant international coverage. And that is one area that we can probably as we are putting deals together not constrain ourselves unduly with restrictions on disclosure that would enable us to better communicate with the analyst. In other words, on that portfolio if we could have set and in the future we are going to have that in mind, which companies these patents read on major companies and therefore revenue opportunities. I think obviously that would be helpful.

I mean the interesting fact is, litigation is typically public, right. There isn’t a secret litigation dockets sitting around somewhere. So, we are definitely picking a long hard look at how to explore that information to you guys, including overseas.

Okay. Thanks very much you, guys. Good luck.

We’re making your way to see the disclosure to at least telegraph in some general ways so we have a better perspective.

Okay. Thanks a lot, Paul. I appreciate it.

Okay. Thank you, Doug.

The next question comes from the line of Jeff Van Rhee of Craig-Hallum.

Couple of questions. First just on the sales cycles, can you comments on the pace of which the sales cycle has been lengthening and give us a little context in terms of just history when you started to see that lengthening, how its progressed and the last part there is just the pace at which its lengthening?

Well, we have to go on is history. And if you study both our stock and our revenue read carefully and you think back to what was happening in 2007, 2008, 2009 time period. There were an increase lags temporarily as we transitioned from a certain smaller size of average transaction to certain larger size of average transaction. And learning from that experience and looking back and as we could tell that the deal cycles, we are lengthening, but what we didn't understand at the time was that lengthening was temporary and we also didn’t understand the duration of time during, which we would see that lengthening put in place. And learning from that experience and transplanting that experience to what we're seeing right now, we expect some of this to be temporary. In other words, once the perspective licensees get used to dealing with us and then under a new modality, it will be easier to sort of repeat the modality, right in terms of the larger more complex deals. And the second things in terms of when we start to know there is the lengthening honestly we started to notice it, the moment we have the portfolio in hand and we began speaking with people. I mean, the sorts of things we were seeing were immediately different. So, I think that was -- I think that’s the two components of your question.

Right. In terms of portfolios out there and your pipeline, can you comment on a couple things, first just who you're seeing in terms of the comparative battle for those portfolios and they gives in -- give and takes in terms of how that's changed?

Right now, we’re seeing competition mostly from a strategic buyer a major corporation, who has either exposure in that area or has an interest in increasing their asset base in a particular area. And obviously, if it’s a large company they are probably going to spend more money on a different strategic and we are going to. But we are also seeing opportunities as we broaden our relationships and discussions with these large companies, there’s been a dramatic shift in behavior where a couple of years ago, it was purely adversarial. Now often times, we are getting calls from companies and some of which we haven’t really settled up on other matters with but where a particular patent issue might be resolved by our stepping in and buying something and licensing them certain rights that they may now want to put directly on balance sheet. So, overall I would say it’s more strategic corporate than it is any other patent licensing company.

And how was that different from say three, six months ago?

Well, I think the American Invents Act, certainly at one price point has really impacted the behavior of companies trying to assert patents, the Act has been made it more complex, more sophisticated, more expensive. And I think that's going to drive more business to us because we are equipped to deal those issues and some of the smaller entities are. So we are actually seeing, I think less competition on that level of kind of certain 50-50 deals. I think there are some aggregators out there, who’ve also kind of acquired what they need to, to get paid and it doesn't make sense for them to incrementally continue to make investments, because they are probably not going to get the equivalent bank for the buck on additional assets. And so we are kind of in our view certainly recently seeing less activity there.

Okay. And then could you put a little fire point may beyond in terms of the pipeline we shift to the owned IP from 50-50 sounded like pretty considerable mix shifts maybe in the works here in terms of what’s to come to the owned IP. Can you try to quantify that or give us sense maybe the opportunities that are in the portfolio, how many are -- what percent our owned IP versus maybe 6 or 12 months ago to give us a sense to the shift?

Yeah. In terms of 100% owned that’s still a small percentage, I mean, ADAPTIX well it could be a big revenue contributor on the revenues side and increase our margins. On the transactions we've done, I would say over the last year probably less than 10% of their 100% acquisition probably 40% of their 50-50 and 40% or 50% have been what we are doing some cash events. So mostly their cash events deals and 50-50 still but if an IP owner as in the case of ADAPTIX wants to liquidate, then again it just comes down to the numbers were agnostic. We rather have a partner involved to develop their technology, but if they -- if the structures such as they want to sell, we’ll certainly do that. But it’s going to be in terms of the numbers of transactions the 100% acquisitions are still going to be a fairly small percentage.

And we don't see internally at least that dichotomy. Its owned or its partnered, its really a spectrum. And the only thing we can tell you about the spectrum is that by portfolio count we still tend to do a lot of transactions that are heavy on the partnership aspect and then as Paul was saying less than 10% of forecast revenue on the upfront payment aspect. And everything will tell you is that when we do trade dollars for backend points, we do trades dollars for risk. We use the power of that capital very effectively. And all involved they aware of that and it something that it’s a big reason why we are so delighted to have normally the teams just Paul mentioned but the capital.

Right now, capital is absolutely king in this field. Now, that some of flurry of transactions around smartphones have stated there is a lot of out there for sale and do very fortunate to have the capital and that’s most important components, because with the team allow the capillary can execute. So its incredibly important for us right now.

Again, to just I am clear I think you said 50% historically had some component of cash advances just as did I hear that right and then…

I would say over the last few quarters, I would close to almost half of the deals have some cash, sometimes it’s a modest, sometimes it’s a modest cash upfront but there is some cash component, yeah upfront.

Yeah. And then -- and so if you just look at the coming the price for the next 6 to 12 months, how much higher could that 50% go meeting the amount that have cash events components in them?

It just deals specific. I mean we are agnostic that we don’t have any goal or structure around that, but probably is going to stay the same. I mean I think the last quarter about half of them required cash and half of them were 50-50s. I don’t see any -- we can't forecast, how that would be significantly different.

Sounds good. Great. Thank you.

Okay. Thank you, Jeff.

Your next question comes from the line of [Imran Halronan] from Citi.

[Klien] from Citi Capital Advisors. Paul I heard what you said about cash being incredibly important to your business but just following on Doug Thomas’ earlier question about the stock buyback, when I look at the stock, it has a low multiple on a huge cash balance like this and also the length of time that it takes you to put their capital to work. And when you yourself say that on a go-forward basis you expect to 100% cash still to be very small and you expect them to be 50-50 or some small component of cash. Has the Board discussed it all, any kind of dividend not like instituting a regular dividend but a success based dividends?

We’ve not guide into that point. Yeah, like if we have recurring revenues that we are throwing of significant amount of cash I think dividends will be potentially relevant. I think now, if we were going use capital in that way, we do a stock buyback that would make more sense. I don’t think people own our stock to get pay the dividend. I think people own our stock as they think we can become a dominant player intellectual property field. And we think we can use the capital to achieve that, if there come moments in time where it make sense to economically the buyback stock, we don’t roll it out, although we don't want to hold the promise out to investors and certainly not a keeping on our play right now.

And anything I want to…

Just to be clear I am not talking about a regular quarterly dividend. I am talking about if you win a large settlement that you agree to return a certain percentage back to shareholders in the form of special dividend.

While, we agree to an event, yeah, we can’t do certainly. I mean I don’t we could but that would make sense at this stage. Like, if we are unfortunate and we don’t necessarily add to win a large award there are some transactions that we made, they made generally the significant amount of capital and if we don’t have a current years reasonably to think we can reinvest their capital. We would return it either through one-time dividend or stock buyback depending on the price of the stock. So we don’t rule that out but right now let’s way until we get that kind of event where we have that kind of situation in front of us.

The other point worth raising is, I heard you say just know 50% of our transactions to involve capital and 50% own I mean again we see a spectrum of capital deployment patents available to us. And under some of the point in that spectrum there could be large capital outlays being made. So, you shouldn't come away from this call would be impression that how far deals are going to involve a low capital outlay and half will involve no capital outlay.

Yeah. We have seriously looked and done a very advanced stage discussions and transactions well over $100 million in some cases of $200 million. We haven’t completed those transactions yet. But certainly we are actively pursuing them and some of those types of transactions if they make sense to us, we will do. So, again that is correct, don’t think that we are only going to put this out and buy sizes of 5 million, 10 million, 15 million if we find the right transaction we will invest significantly more.

Yeah. Thank you.

Okay. Thank you.

This will conclude the question-and-answer session. I will now turn the call back to Mr. Ryan.

Hey, thank you, Operator. And thank you everyone for being on the call today. Thank you for the questions and for your patients with some of our earlier comment. And if you have any questions, as usual either give me or Matt or Rob Stewart a call. And we look forward to speaking with you next quarter. Thank you.

Thanks, everyone.

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