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Edited Transcript of FNJN earnings conference call or presentation 6-Nov-19 9:30pm GMT

Q3 2019 Finjan Holdings Inc Earnings Call

BOSTON Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Finjan Holdings Inc earnings conference call or presentation Wednesday, November 6, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jevan F. Anderson

Finjan Holdings, Inc. - CFO

* Philip Hartstein

Finjan Holdings, Inc. - President & CEO

* Vanessa Winter

Finjan Holdings, Inc. - Director of IR & Corporate Communications

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Conference Call Participants

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* Brett Reiss

Janney Montgomery Scott LLC - SVP of Private Client Group & Financial Advisor

* Ken Fried

OpenDoor Venture Capital - Founder

* Sam Rebotsky;SER Asset Management;Portfolio Manager

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Presentation

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Operator [1]

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Thank you for standing by. This is the conference operator. Welcome to the Finjan Holdings, Inc. Shareholder Update Conference Call. (Operator Instructions) And the conference is being recorded. (Operator Instructions) I would now like to turn the conference over to Ms. Vanessa Winter, Director, Investor Relations.

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Vanessa Winter, Finjan Holdings, Inc. - Director of IR & Corporate Communications [2]

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Hello, everyone, and thank you for joining us this afternoon for our shareholder update conference call. Joining me on today's call are Phil Hartstein, Finjan's President and Chief Executive Officer; and Jevan Anderson, Chief Financial Officer. As a reminder, this call is being webcast, and a replay of the webcast will be available on our website. Turning to our safe harbor.

During the course of this call, we may make statements related to our overall business outlook, future financial operating results, outcomes for pending and future litigation, accounting matters and future prospects of our operating subsidiaries. These are forward-looking statements based on certain assumptions and are subject to a number of risks and uncertainties that could cause future results to differ materially from our expectations. You can learn more about these risks in our most recent filings with the SEC. These documents are available on the Investor Relations page of our website at finjan.com. We assume no obligation to update any forward-looking statements.

I'd also like to mention that Finjan management will be presenting at the LD Micro conference on December 11 in Los Angeles, where we hope we get the opportunity to touch base with many of you in person. With that, I would like to turn the call over to Phil Hartstein, Finjan's President and CEO. Phil?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [3]

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Good afternoon, and thank you for joining us. I will start today's shareholder call with an update on our licensing program, and we'll then offer some color on our litigation program, including a number of catalysts for the coming quarters. We'll also provide some details around our current operations and how we carefully manage our expenses and investments to align with our litigation time line. Lastly, I will update you on our ongoing strategic options process. I will then turn the call over to Jevan, who will review the key financial highlights of the quarter and offer a brief update on our other businesses before we turn the call over for questions.

As a review, we often talk about the quality and importance of Finjan's patented inventions and how they contribute to the broader cybersecurity landscape. Finjan was first to invent and file for patent protection on the number of technologies that are currently being deployed in modern cybersecurity architectures. It is important to remember that the quality and importance of these patents has been established over 20 years, has been tested in more than 80 administrative challenges, has won large jury awards, survived numerous federal circuit appeals and has already led to 24 licenses to some of the industry's largest players.

In the third quarter, we executed and recognized revenue from an additional license with Mimecast. The license with Mimecast encompassed all 3 of our Finjan portfolios: Finjan Inc., Finjan Blue and Finjan Mobile, which is not unique to this deal. Over the past couple of years, increasingly common is our licensees requiring broader license rights to all of the assets and portfolios that Finjan controls. This is evidence that the diversification programs within Finjan are working to produce value. Unlike Mimecast, not all licensing prospects enjoy constructive negotiations. But we find that our licensing best practices and our intense focus on the merits of our claims yields better licensing and settlement outcomes overall. Sticking with licensing for the moment, I want to provide a brief update on our Finjan Blue subsidiary. The patent assets in our Finjan Blue subsidiary have been adding incremental value to many of the licenses struck under the Finjan Inc. program ever since we created the subsidiary with patents originating from IBM.

In other words, licenses to companies are including patents from both programs. Over time, we expect to enter into licenses to the Finjan Blue portfolio itself, driving independent value discussions as we negotiate with parties in Finjan Blue's own active pipeline. As of today, we are working towards our upcoming catalyst cycle in our enforcement program, where we already have 3 trials calendared for the first half of 2020. Those are ESET, Bitdefender, and Cisco. Three trials in the first half of 2021. Those are Check Point, Rapid7 and SonicWall, with the possibility of a fourth, Trustwave. And another 3 trials expected with dates in 2022. And those are Qualys, Palo Alto Networks and Fortinet. The buildup to this time line of catalyst represents years of work, meaningful costs, navigating the unpredictabilities of the patent landscape, repeated administrative challenges in courts calendars.

Now with the successes that Finjan has had in defending its patents, we are well positioned to realize licenses and settlements from some of our most significant cases to help drive value to the bottom line for shareholders. I mentioned, we are closing in on several trial schedules for the first half of 2020. Also, important to note, for the most part, the cost to bring these cases and pursue them to trial has largely been absorbed by the business in prior quarters and years, as part of our top line operating expense. Accordingly, we should see our litigation expenses moderate for our program going forward.

Turning first to ESET in the Southern District of California Court in San Diego before Judge Bencivengo. Oral arguments were heard on September 26, concerning 28 dispositive and Daubert motions filed collectively by the parties. On October 16, the court denied the majority of those motions, granted a few and reserved ruling on 2. We have also learned that we have an upcoming trial date set for March 9, 2020, which is great because we rarely have a trial taken off calendar and reschedule so quickly. This case is expected to run for 3 weeks.

In our international enforcement against ESET in Germany, following the March 22, 2019, Federal German Patent Court decision with regard to our 094 European patent, we filed a notice of appeal with the Federal Court of Justice of Germany in April and followed up with an appeal brief in late July. ESET's reply to the appeal brief is due by December 2.

In Bitdefender before Judge Gilliam in the Northern District of California, we are closing in on our trial date with a hearing on dispositive motions on January 9, 2020. A pretrial conference set for March 17, 2020, with a trial set to commence on April 6, 2020.

Turning to our case against Cisco before Judge Freeman in the Northern District of California. The hearing for summary judgment motions is currently scheduled for January 9, 2020. The final pretrial conference is scheduled for April 23, and the trial remains set for June 1.

As with our prior trial against Blue Coat in Judge Freeman's court, I would expect this case would run between 2 and 3 weeks with strict time limits imposed on both sides.

Briefly, I'd like to also discuss our Northern District case of California against Juniper, which is before the Honorable Judge Alsup. We have conducted a thorough analysis on the issues that have been decided to date. With special focus on the inconsistency of numerous findings as compared to previous court decisions. On 2 occasions, Finjan sought interlocutory appeal, basically, this means we ask the court to pause the case so that we could take individual issues to the CAFC on appeal, but those were both denied. Then parties filed a joint stipulation of dismissal with prejudice on August 2, 2019, allowing the court to enter a judgment in the case, clearing the way for Finjan to seek appeal to the Federal Circuit. We have engaged Fish & Richardson as co-council alongside Kramer Levin on the appeal against Juniper.

On September 9, Finjan filed a notice of appeal to the Court of Appeals for the Federal Circuit. Our opening brief is due December 18. As we sit here today, we can give you a rough forecast of an appeal decision in the first half of 2021.

Our Check Point matter is before Judge Orrick in the Northern District of California, and we have a trial date currently set for January 25, 2021.

For Rapid7, which is filed in the District Court of Delaware and before Judge Noreika, 2 days have been scheduled for a claim construction hearing. The first hearing on January 15, 2020, the second hearing on January 22, 2020. The trial is set to commence on February 22, 2021.

Turning to our Northern District of California case against SonicWall with Judge Freeman presiding. The court partially granted SonicWall's motion to conduct additional claim construction proceedings instead of Markman hearing for January 17, 2020. The trial remains scheduled to begin May 3, 2021.

Regarding Trustwave. In April of 2018, we filed a breach of contract case alleging unpaid royalties as a result of its acquisition by Singapore Telecom, also known as Singtel. This matter is before Judge Carpenter in the Superior Court of the State of Delaware. Discovery is ongoing, and the judge recently encouraged Finjan to move forward with further audits to determine what royalties are owed. The court is considering a January 2021 trial start date.

In our Northern District of California Qualys case, which is before Judge Gonzalez Rogers, there's a claim construction hearing scheduled for May 1, 2020, and we anticipate the trial to be scheduled towards the end of the second quarter of 2022.

Turning to Palo Alto Networks before Judge Hamilton in the Northern District of California, the case remains stay pending disposition of the final IPR filed by PAN. The Federal Circuit had previously vacated the PTAB's ruling concerning the validity of the 154 patent and remanded act to the PTAB for consistency with the SaaS Supreme Court case to include review of all challenged claims. PTAB issued its final decision on remand, maintaining the validity of all challenge claims, but as expected, PAN filed another appeal to the Federal Circuit, so we remain on hold in this case.

In Fortinet before Judge Donato in the Northern District of California, the parties filed a joint statement at the end of February, identifying the (technical difficulty) and claims that are at issue in the case. The case remains stay pending a further order from the court.

While case time lines remain somewhat out of our control, we feel we have hit an inflection point with 6 cases that are definitively calendared over the next 3 years. As always, and consistent with our licensing best practices, we are engaged in and remain open to settlement discussions with several of these defendants as each case moves closer to the respective trial dates. There is no question or debate that pursuing unlicensed companies using Finjan's patented technologies in the -- is an expensive proposition. In the early days of becoming a public company, we were averaging $8 million to $10 million per year in outside legal expenses. Today, with 11 cases actively docketed, we are averaging closer to $15 million a year in outside legal expenses. We have always maintained a commitment not to obfuscate those expenses in order to hide them from shareholders.

Accordingly, let me explain why the expenses have increased in recent years. We are currently managing a docket of 11 litigation matters stretching from California to Delaware. While this docket has not only doubled from the early days of being a public company, we also realized a few key factors. First, perhaps, obvious to some, the current docket has some of the largest companies using Finjan's patents and with large usage comes larger licensing fees. That means these cases funded by companies with deep resources will always cost more than cases against smaller companies. Another perhaps less obvious observation is that with the amount of licensing deals negotiated, the number of litigations and trials we've completed and the successful defense of administrative challenges, we are not able to employ some of the efficiencies you might expect.

At this point, each defendant has heard the Finjan story, is well aware of the success, both in the courts and PTAB, which means they are working in unison, digging deeper and often trying new strategies, since many of the old ones have been neutralized. What is also important to note here is that we continuously monitor our expenses for each matter to ensure that the ROI of pursuing litigation makes sense for Finjan and our shareholders.

Next, I'd like to highlight that we have been evaluating a number of areas to reduce expenses across the organization. While this initiative is not new for us, I thought we can provide you with some detail as to how we evaluate such opportunities on an ongoing basis. A few years ago, we slimmed down our internal staffing and moved to a largely outsourced model by using outside consultants where possible. This has provided us with greater flexibility to scale up and down without having to incur the higher fixed expenses during slower periods. In addition, we are always looking at our largest contracts and working with our vendors and service providers to identify cost savings. In addition, we continually monitor our investments in our operating subsidiaries to ensure they align with current and future direction of the businesses. Of our remaining subsidiary operations we currently measure Finjan Mobile, Finjan Blue and JVP against 2 criteria. One is the business unit or investment performing against its mission; and two, what is the cost to the broader organization.

Moving to the final topic for my portion of our discussion today, Finjan's strategic options process. We formally engaged Atlas Technology Group last year to advise the company on external interest in potentially acquiring the business. And currently, we have continued an internal process to identify and investigate growth initiatives, which include investments, acquisitions and partnerships. Given management's expertise in managing and monetizing intellectual property, it should not come as a surprise that we will keep our primary focus on these efforts.

Our Finjan Inc. portfolio is the most lucrative business opportunity that exists in our company today and has a catalyst cycle fast approaching that demands management's time and attention. We remain confident that there is a profitable pipeline ahead of us, and we believe as we continue to build our licensing business, accomplish settlements or yield victory in court, our opportunities could expand considerably. Again, our core competency in monetizing patents is well established, and we'll remain committed to capitalizing on that.

Lastly, as shareholders often highlight, we have not been able to provide a meaningful update since we formally engaged Atlas and publicly announced the process in August of 2018. We continue to review alternatives, which takes time, perhaps longer than expected. That said, the Board is being careful to explore these alternatives and fulfill its fiduciary obligations. We are working to bring the process to a conclusion as soon as practicable and we'll provide further updates as appropriate.

With that, I'd like to turn the call over to our CFO, Jevan Anderson.

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Jevan F. Anderson, Finjan Holdings, Inc. - CFO [4]

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Thank you, Phil. I'll start today with a brief overview of our financials, followed by an update of our other businesses. Please note that all comparisons are on a year-over-year basis unless stated otherwise.

Revenue for the third quarter ending September 30, 2019, were $5.9 million compared to no revenue for the same period in 2018.

Net loss for the quarter was $2.6 million or a loss of $0.09 per share compared to a net loss of $7.6 million or $0.28 per share for the same period last year.

Turning to expenses. SG&A for the third quarter of 2019 was $7.5 million, a slight decrease from the $7.9 million a year ago. As Phil referenced, we have taken a hard look at our operational expenses, including litigation and outside consultants, and we have been able to trim back our quarterly expenses as we await revenue-generating events. You will begin to see these expense reductions in the coming quarters. Balance sheet remains strong, and cash remains consistent, providing ample funds for our continued operations, which now shifts focus onto our enforcement programs for the first half of 2020 and continues into 2021, 2022 and perhaps beyond. We continue to successfully manage our cash position. And while we ended the quarter with $33.6 million in cash, the accounts receivable of $5.9 million as of September 30 was received just a few days later on October 3 after the quarter had closed.

Considering this, our cash balance for the previous 7 quarters has been relatively stable around $40 million, and we expect that to continue through the balance of the year. Please note that $17.2 million of our cash is in short-term investments. Further details can be found in Note 2 of the 10-Q.

Moving on to tax. Early pursue tax efficiencies, which over the years has enabled us to capitalize on considerable NOLs and seek meaningful tax refunds in the most recent instance of over $3 million, which should be received in Q4.

Now I'd like to turn to Finjan Mobile and our mobile browser VPN offering InvinciBull. We have now surpassed 2 million downloads, and we are seeing an increase in paid subscribers due to improved user engagement with our app, an e-mail marketing program to encourage conversions, additional promotions and overall enhanced user experience. We continue to innovate and grow our patent portfolio to protect our investments and inventions in Finjan Mobile.

With respect to our investment in Jerusalem Venture Partners, we have fulfilled $3.9 million of our $5 million commitment. The fund has made investments in 13 portfolio companies to date and has already yielded 2 successful exits.

In closing, we hope we have the opportunity to touch base with many of you over the coming months and appreciate you joining our call this afternoon. Now I'd like to turn the call over to Vanessa to help coordinate the Q&A.

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Vanessa Winter, Finjan Holdings, Inc. - Director of IR & Corporate Communications [5]

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Thank you, Jevan. Operator, can we poll for our first question, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Sam Rebotsky of SER Asset Management.

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Sam Rebotsky;SER Asset Management;Portfolio Manager, [2]

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Jevan, you mentioned $3 million to be received in the fourth quarter, is this recorded as a receivable? And who did you say that was from? Is that recorded as income or receivable? And the other thing, as far as Singtel, you said there are unpaid royalties. Could you sort of quantify that in a range what you would expect the minimum without a maximum?

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Jevan F. Anderson, Finjan Holdings, Inc. - CFO [3]

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Sure. The $3 million cash that's coming in is a tax refund. That's a portion of that's federal, a portion of that is state, a larger portion is state, it really stems back to a 2018 tax return and a portion of that for the Symantec tax we paid on the revenue there. So -- but net-net, that should be about $3 million back to us that we should receive here in this fourth quarter.

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [4]

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And I guess, Sam, I'll take the second half of your question, which was the unpaid royalties owed by Trustwave or Singtel, depending on how you view the corporate structure. We have audited Singtel's Trustwave unit. So we are aware of those. We have not disclosed them. It will likely become part of that contract dispute as it exists in Delaware now, but we have not disclosed that. But it's a worthwhile enough pursuit for us to be in a breach of contract case in Delaware is probably the best answer I can give you.

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Sam Rebotsky;SER Asset Management;Portfolio Manager, [5]

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So we don't have it recorded on the books as a receivable, though?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [6]

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Correct.

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Sam Rebotsky;SER Asset Management;Portfolio Manager, [7]

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Okay. And let me ask the question relative to Atlas, which we've discussed. They've been working. I'm concerned that your inability to buy stock in the open market with it trading at the price below $1.90, more or less with your book value and with all your other assets. When do you expect to be able to buy stock in the open market? And what do you expect -- and as far as legally, I don't seem to understand the fact that they haven't done anything or it's not apparent what they're doing. Why you can't buy stock in the open market? You have $8 million to buy. So I think it's beneficial to the shareholders to buy a portion of that.

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [8]

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Okay. So for -- just for the rest of the shareholders, let me sort of elaborate on Sam's question for you. I believe it's now been about 2 years that Finjan has had an authorized and open share buyback purchase program. We historically have bought back a little over $2 million in that. So that's $8 million that Sam refers to as being available. We continue to get some advice from counsel on the basis of ongoing activities here as a result of our litigations as well as having an ongoing strategic options process that precludes the company from buying stock in the open market, one. But two, perhaps more importantly, and this is where I think we sort of find some diverging views based on some of the shareholder base is that the Board has not authorized the company to be in the market to transact and to acquire shares back based off the balance sheet.

And the simple answer to that, Sam, and I'm not highlighting you, but there are other certain companies or investors or shareholders that might look at the company's cash balances and prefer to see the $8 million stay on the balance sheet for the preservation of capital to pursue the enforcement programs rather than to capitalize on what could be a very transitory low period in the share price. That maybe wouldn't have the same effect on the company's -- for the benefit to the company for doing so.

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Sam Rebotsky;SER Asset Management;Portfolio Manager, [9]

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I have one other question. Should I ask that? Or should I get back in the queue?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [10]

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No, please.

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Sam Rebotsky;SER Asset Management;Portfolio Manager, [11]

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Okay. The Symantec Broadcom transaction seems to have closed. Have you been reviewing that transaction prior? And now that it's closed, do you have any thoughts on what the valuation of what you might be able to do with the $45 million that you might get, whether it's from Symantec or whether it's from Broadcom? And the time frame left on that 4-year term?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [12]

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Sure. So let me again sort of elaborate for the benefit of all the other shareholders on the phone. When we signed a license agreement with Symantec and settlement of our litigations with both Symantec and their acquired business Blue Coat, there was an upfront cash payment of, I believe, $65 million with another $45 million outstanding, which will be based on future expected follow-on license fees payable as Symantec would be on the market, acquiring businesses. There are some criteria for which we have made public by which we would benefit from those acquisitions of third parties. There's other criteria that we have not. We -- I would tell you now are not complete in our analysis.

But despite your best efforts in drafting these types of pricing protections into contracts, contemplating a transaction where -- and here, the complexity lies in the deal with Symantec, Symantec still is a surviving entity. And on that basis, it continues to be the owner of the license. Whereas Broadcom making what effectively appears as if it's a portion of an asset acquisition or an acquisition of a portion of Symantec's business proposes challenges in pursuing that through the contractual obligations that Symantec signed up to in the license agreement. So our analysis is not complete. But I certainly don't want to mislead anybody into the presumption that this will lead to additional royalties into Finjan. I just don't have an answer to it yet.

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Sam Rebotsky;SER Asset Management;Portfolio Manager, [13]

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Okay. Okay. And the final. I sort of would differ from the Board. I think with the stock trading at with this level, I think you make yourself aware to being acquired for a rather nominal valuation by not buying stock in the open market and help and raise the price relative to your buying. You're showing your un- (technical difficulty) I think that's a negative. So I thank you, and good luck, hopefully, something happens positive.

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Operator [14]

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(Operator Instructions) The next question comes from Brett Reiss of Janney Montgomery Scott.

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Brett Reiss, Janney Montgomery Scott LLC - SVP of Private Client Group & Financial Advisor [15]

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The $15 million onerous outside expenses to finance the lawsuits. Have you explored getting that upfront from these litigation finance firms or private equity in exchange for -- yes, giving up a piece of the pie, but that would reduce the big upfront costs?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [16]

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So yes. And for most of that don't know, by way of background, just me professionally, I'm quite familiar with the types of financing opportunities that Brett is referring to. In fact, historically, Finjan has raised preferred equity into the business, and this was some of our earliest Halcyon and Soryn financing deals, I think 2015, 2016, 2017, in that time frame. So we have explored that. The cost of capital just at a broad level is expensive. I think in those 2 deals, we paid 50%. I would say on the first deal and maybe between 30% and maybe 40% on the second deal.

So -- and I know that sounds like a really outlandish rate to pay, but that's far better than 200% to 300% and never seeing those folks exit your cap table because usually there's some convertible aspects there. We are actually in a fortunate position where we don't need to sell portions of the return on those cases, given the balance sheet strength and stability that we have. But we do continue to look at that. The unfortunate reality of the state of the market today is, one, you actually have to have a claim, say a jury award, and let's just use rough numbers, by example, save $100 million jury award you might be able to take $10 million or $15 million, maybe $20 million off the table from that, but you would give up 3 to 4x that given any returns that you would actually get in those cases. So I'm fortunate that we don't have to be in a position to consider that, but we certainly do think about it, and we have used a slightly different structured financing options in the past.

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Brett Reiss, Janney Montgomery Scott LLC - SVP of Private Client Group & Financial Advisor [17]

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Right. Right. All right. There was some sort of case that found the PTAB judges were unconstitutionally appointed. Has the litigation landscape changed presently or in the near future that would make it better for the type of -- tilt the playing field more towards what we're trying to do in furthering our property rights.

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [18]

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So the case that you referenced is called Arthrex, A-R-T-H-R-E-X. The case was decided, and I think the sort of publication of it came out on Halloween. So it's relatively new. I was actually in D.C. speaking on a panel about it yesterday. I -- and let me sort of follow this through and tell you what Arthrex did. The Federal Circuit had a 3-judge panel that basically reached the determination that the PTAB's designation of judges is unconstitutional. And that raises question about what decisions they may have raised because the Federal Circuit basically decided that there was not enough oversight to that function for them to fulfill that role.

Following that through even further, if you take this into a broader context of what it means it will probably affect -- and right now, the estimates are somewhere between 150 to maybe as many as 200 cases that are pending, where this could be a challenge. Long term, what you'll see is that the 3-judge panel at the Federal Circuit will likely go en banc at the Federal Circuit, then it will likely go to the Supreme Court for final ruling if they're willing to take it.

Now there's some additional complexity here about how this is going to shake out because if we go back to some other Supreme Court cases from, I want to say, 2017, 2018 time frame, called Oil States. If -- and I sat in the Supreme Court hearings for Oil States, you would remember that one of the Supreme Court justices almost left out of his chair and made a comment in relation to PTAB judges, "You're not judges, we're judges. We've been appointed to this post. We sit here, we have all the responsibilities of judges," referring to PTAB. At that point, the Supreme Court did not decide that issue. They basically punted on it. So in my mind, and one of the positions that I represented yesterday on the panel is so what happened? The Federal Circuit has decided they want to pick a fight. It remains to be seen whether that fight will reach a consistent conclusion en banc at the Federal Circuit. And if or if not, if it goes to the Supreme Court, will they even take the issue.

Coming back to Finjan though and how this all relates to us. I don't foresee it driving anything more than maybe some time delays into our existing cases, while some of it sorts itself out. But in terms of the actual impact to our litigations, I don't see it. And the reason for that is because Finjan's had better than average, if not, inverse outcomes in PTAB proceedings, although we do continue to see some of our patents -- as petitions against our patents get through the institution stage. We tend to do better than most in the PTAB. And then, of course, with our continued licensing and district court outcomes, I don't see any real material impacts to our program.

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Brett Reiss, Janney Montgomery Scott LLC - SVP of Private Client Group & Financial Advisor [19]

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All right. I appreciate that. It made me feel like I was back in law school. Last question...

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [20]

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Well, I'm not a lawyer. So I hope it made sense.

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Brett Reiss, Janney Montgomery Scott LLC - SVP of Private Client Group & Financial Advisor [21]

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Well, maybe things do well, we'll send you to law school. I think you'd be very good. One last one. I listened to your explanation of why the company cannot buy stock to -- with Sam Rebotsky, but how about management as individuals and the Board as individuals. I think it would help the stock price if upper management showed confidence in reaching into their pocket and bought some stock down here? How about it?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [22]

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It's a fair question. We have in the past. We bought shares in the open market aside from just the standard options and RSU grants. One of the complexities about this business and something that I didn't realize until coming into this is that part of the SEC disclosure requirements obligate you to comment and provide commentary to shareholders on all of your active litigations. And those basically become sort of a -- in an obligated fashion, a prerequisite for whether or not someone in management can actually acquire shares, right? So even though litigation in our business is a tool to achieve a license, it actually falls under a different statutory requirement with the SEC.

And because of that, for example, we go through periods here where there may not be an open trading window for management that may stretch greater than a year, depending on what our litigation time line is and how close we may be sitting on, for example, I may know information right now about what we're looking at in the ESET case, or what we're looking at in the Bitdefender case, or even in Cisco, whether that relates to likelihood of settlement, settlement for what amount or maybe even a damages ask. And because of that just ongoing consistent or even persistent knowledge of what material nonpublic information is -- they constantly scare us about the disgorgement of proceeds, and I actually have our lawyer sitting in the room.

And again, I'm not a lawyer here, but so my short answer is, we have in the past, we do consider that as a viable option. I will tell you that in the past, it has not had the effect that you would think it would, in terms of management making the acquisitions. As you may know, management here, this is not a scenario where management owns 50% of this business, and we're making more collective decisions to benefit us as shareholders than we are for the actual shareholders. Management in this company actually owns far less than that. I think we're in the low single-digit percentages in aggregate on our share ownership. So this really is a company that is run by a board of independents, and we do work for the broader shareholder base.

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Operator [23]

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The next question comes from Ken Fried of OpenDoor Venture Capital.

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Ken Fried, OpenDoor Venture Capital - Founder [24]

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Can you give some color on our core licensing pipeline, ex our current litigation calendar?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [25]

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Certainly. So I think for several years now, we've been describing the licensing pipeline and the Finjan Inc. programs as a couple of dozen opportunities. Since then, we haven't really provided a tremendous revision to that number with any great specificity. I think most recently, we described that as including our litigations, we're still at about 2 dozen perspectives. You remove out the 11 that leaves you with, call it, maybe half that number remaining in the pipeline. Part of that is based on consolidation in the industry.

(technical difficulty)

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Operator [26]

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The speakers will rejoin shortly. We have the speakers back now.

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [27]

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Everybody, we've moved to a backup line. Sorry about that technical difficulties. What I was getting to is that industry consolidation as well as some of those companies actually disappearing from the landscape and continued licensing, as exampled by our most recent deal with Mimecast takes that total licensing universe downward. I expect that some of those may still move to litigation. I would prefer that the vast majority of those continue through licensing. And again, though, that does not reflect the individual pipeline that we have developing for the Finjan Blue program, licensing program itself.

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Ken Fried, OpenDoor Venture Capital - Founder [28]

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Okay. Great. And then can you guys shed any color regarding Finjan Mobile about what the active user base is, whether it's weekly or daily, weekly or monthly?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [29]

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That's a good question. I don't have that in front of me. I know that we passed the threshold of 2 million downloads. I think one of the important points to note is that the business -- the way that we view the mission of Finjan Mobile today is more focused on creating awareness around the risks of using your mobile device in an unprotected wireless environment. And just the awareness of what happens when you click go or send from your device. So one of the things that we try to do is make sure we can get it into as many hands as possible so that they can use it and benefit from it. On the usage per day, it's probably sub-100,000 plus or minus, if I had to guess. I would say, it's probably still a small fraction of the total download population, which is why the revenue as you could expect has not become material or reached a reporting line item in the company's public disclosures either.

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Ken Fried, OpenDoor Venture Capital - Founder [30]

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Okay. Got you. And then -- sorry, last question. Just following up on what Sam talked about earlier. I know the window is not open right now because of what's going with Atlas. But should the window reopen, let's assume that the Atlas due diligence, et cetera, and the window were to open so would you see a possibility? Or would the Board consider potentially? I know you don't want to use our current cash, and I totally get that. But given the large asset base of the company, would it be feasible to borrow, say, even $5 million or $10 million, against -- potentially secured against one of our numerous assets, which given how low interest rates are and how easy money is right now, I would imagine that should be fairly easy to do, and then potentially just buy back 10% or 20% of the float, right? So theoretically, we can -- we could leverage off a little bit, secured against potentially a small part of our very, very large asset base, right? And by -- given where the stock is, you could potentially drop the share count by 10% to 20%, which would be very attractive for current investors? What are your thoughts on that?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [31]

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So the first thing I would say is, our access to capital from a lending perspective. We do have access, I would say. It's probably fairly easy for us to borrow on the order of $5 million to $10 million at single digit, really industry published rates, just given the stability of the business over the last 24 months and some of our financial partners. So the ability to borrow is there. One of the things that we do pride ourselves though is not running a leveraged business. I think one of the unique positions here that we benefit from is that we don't have a huge sizable outstanding chunk of accounts payable or liabilities. We don't carry any debt.

One of the other things that I think we benefit from is -- and we mentioned this during the call is the transparency that we provide on all of the expenses. So in terms of accessing capital, it's certainly there. And utilizing that to, say, borrow against any of the business units. I'm not sure we really would have to borrow against them. And then to the third point of sure, taking some capital and deploying it to buy back shares. It really does become a question of, one, how much do you really reduce the outstanding share count? I would tell you, we probably have more information than most. The shares are actually really tightly held right now. You've seen periods in the past where the business will trade 500,000, 600,000, 700,000 shares a day. We've had periods of time where that's extended 12 to 18 months.

But right now, part of the reason that there's no liquidity is because everyone is sitting and waiting to see what's going to happen with sort of these next -- and maybe it's doing so in tranches, these next 9, 10, 11 lawsuits in sort of waves of 3 as we go into '20, '21 and '22. It is an active discussion at the Board, Ken. I don't want to tell you, I'm not trying to shut this down, that it's not a discussion. It is something that we do talk about. And we're aware of those opportunities. But again, I would kind of highlight the observations internally from this business is that given our shareholder base, given the complexities of this business really having fixed costs and unpredictable income events and all of the other outliers. It may not react as you would expect a traditional small cap to mid-cap company, even on a percentage of share buyback, MicroCap just tends to be a very fickle beast.

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Operator [32]

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The next question comes from Sam Rebotsky of SER Asset Management.

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Sam Rebotsky;SER Asset Management;Portfolio Manager, [33]

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Just a short follow-up. Your inability for shareholders' offices to buy stock. Would that also prevent them from selling stock?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [34]

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Yes. We can't sell stock. It's the same preclusion. So for example, the disgorgement provisions would be based on whether or not there was information that came out around that transaction. So for example, if you take a look at my equity holdings. I've had a 10b5-1 plan, which is really the only way to get around that that's been outstanding since, I think, August of 2015. So years and years and years ago, I put that into place. It has only triggered, I think, 1 time for a period of about 2 days within that 3.5-year time period. And -- but for that 10b5-1, you are correct. The company's management would be excluded from, and we have not benefited from, many of the spikes that have occurred in the stock as other shareholders on an unrestricted basis would.

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Sam Rebotsky;SER Asset Management;Portfolio Manager, [35]

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So you're saying the 10b5 permit you to sell? Could we have a 10b5 that permits the company to buy?

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [36]

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It's an interesting question. I'm not sure if it works that way. I know that it's really for an individual capacity, at least in the materials that I've read about it. But again, I would commit to everyone on this call that this is an active discussion at the Board. And certainly, I'm happy to raise this at our meeting next week.

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Sam Rebotsky;SER Asset Management;Portfolio Manager, [37]

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Yes. I really think this is a worthwhile. I know other companies with a 10b5 have been doing buying and the question with all your lawyers around, even though they're fighting certain kind of cases. This is an issue that would be very helpful, I think -- it seems to be. And frankly, if Atlas is the problem that you can't buy, I basically would really get rid of Atlas at this point, terminate the relationship and do something whatever you're doing in the house. And because it seems to lock you up with your hands on doing anything, and I think you should have more flexibility. I think there should be a way to have flexibility. And hopefully, you could come to some conclusion that there's more interest in the stock. And it's a good price to buy, at least I believe so. Hopefully, I'm right, but that's the way I see it.

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Philip Hartstein, Finjan Holdings, Inc. - President & CEO [38]

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Yes. I mean your message is received. I think the last time we bought shares in the open market, we were $1 above where we are today. So I think the average purchase price was around $2.90. So yes, message is received, Sam.

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Operator [39]

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This concludes the question-and-answer session. I would now like to turn the conference back over to Ms. Vanessa Winter for any closing remarks.

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Vanessa Winter, Finjan Holdings, Inc. - Director of IR & Corporate Communications [40]

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I'd just like to thank everyone for joining us today. Sorry for the technical difficulties. We hope to see you in the next couple of months. And if you need anything else, feel free to follow-up.

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Operator [41]

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This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.