ACACIA RESEARCH CORP

Operating Expenses

The operating expenses table above includes the Company’s general and administrative expense by segment and Industrial Operations and Manufacturing Operations’ sales and marketing expenses. Refer to Note 2 included in our 2024 Annual Report for additional information regarding Printronix’s and Deflecto’s operating expenses.

General and Administrative Expenses

A summary of the main drivers of the increases (decreases) in general and administrative expenses is as follows:

General and administrative expenses includes primarily salaried employee compensation and related personnel costs, administrative office and facilities costs, legal and accounting professional fees, and intangible amortization expenses. The table above includes our Manufacturing Operations general and administrative expenses for the three and nine months ended September 30, 2025, with no comparable period expense as the transaction closed in the fourth quarter of 2024.

The decreases in other general and administrative costs, which relate to our parent company and our Intellectual Property Operations, were primarily due to a decrease in corporate legal fees. The increase in compensation expense for share-based awards was primarily due to increased performance achievement associated with PSUs granted in 2023 based on a probability assessment as of September 30, 2025. Refer to Note 17 to the consolidated financial statements elsewhere herein for additional information regarding compensation expense. The decrease in general and administrative costs of Industrial Operations is due to Printronix’s continued focus on streamlining operating and administrative costs. In addition, our Energy Operations related general and administrative costs contributed an increase of $1.4 million in the nine months ended September 30, 2025 driven by the acquisition of Revolution in 2024. Refer to additional general and administrative change explanations above.

Other Income/Expense

Equity Securities Investments

Our equity securities investments, including the Life Sciences Portfolio and trading securities portfolio, are recorded at fair value at each balance sheet date. During the first quarter of 2024, Acacia fully exited its position in Arix, included in the gain on sale of equity securities in the nine months ended September 30, 2024. The 2024 period unrealized loss and realized gain primarily relates to the sale of Arix shares. Refer to periodic change explanations above. Refer to Notes 2 and 4 to the consolidated financial statements elsewhere herein for additional information regarding our investment in the Life Sciences Portfolio and other equity securities.

Our results also include unrealized gains and losses from the change in fair value of our equity securities, and, when equity securities are sold, the realized gains from those sales. The results during the three and nine months ended September 30, 2025 relate to our trading securities portfolio.

Non-recurring legacy legal expense

During the nine months ended September 30, 2024, we recorded an additional accrual of $12.9 million in connection with the AIP Matter in other income (expense) and an accrual of $2.0 million in connection with the Slingshot settlement in the consolidated statements of operations. There were no comparable expenses for the three and nine months ended September 30, 2025.

Income Taxes

Our 2025 effective tax rate was slightly higher than the U.S. federal statutory rate primarily due to nondeductible stock based compensation. Our income tax benefit for the three months ended September 30, 2025 is primarily attributable to recognizing a benefit for losses incurred during the quarter offset by foreign withholding taxes. Our income tax expense for the nine months ended September 30, 2025 is primarily attributable to the statutory rate applied to our year-to date earnings and foreign withholding taxes for which a foreign tax credit cannot be benefited.

Our 2024 effective tax rate in each period differed from the U.S. federal statutory rate primarily due to favorable withholding taxes which we could not recognize as a foreign tax credit and non-deductible items. Our income tax expense for the three months ended September 30, 2024 is primarily attributable to changes to the forecasted benefit of losses estimated for 2024. Our income tax benefit for the nine months ended September 30, 2024 is primarily attributable to recognizing an income tax benefit on losses incurred offset by foreign withholding taxes.

The effective tax rate may be subject to fluctuations during the year as new information is obtained which may affect the assumptions used to estimate the effective tax rate, including factors such as expected utilization of net operating loss carryforwards, changes in or the interpretation of tax laws in jurisdictions where the Company conducts business, the Company’s expansion into new states or foreign countries, and the amount of valuation allowances against deferred tax assets.

The Company has recorded a partial valuation allowance against our net deferred tax assets as of September 30, 2025 and December 31, 2024 for foreign tax credits and certain state net operating losses.

At September 30, 2025 and December 31, 2024, the Company had total unrecognized tax benefits of approximately $758,000 and $935,000, respectively which were recorded in other long-term liabilities. No interest and penalties have been recorded for the unrecognized tax benefits for the periods presented. At September 30, 2025, if recognized $758,000 of tax benefits would impact the Company’s effective tax rate subject to valuation allowance. The Company does not expect that the long-term liability for unrecognized benefits will change significantly within the next 12 months. The Company recognizes interest and penalties with respect to unrecognized tax benefits in income tax expense (benefit).

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

ASC 740, “Income Taxes,” requires the effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted. The Company has implemented OBBBA in the current quarter calculations.

Liquidity and Capital Resources

General

Our foreseeable material cash requirements as of September 30, 2025, are recognized as liabilities or generally are otherwise described in Note 15, “Commitments and Contingencies,” to the consolidated financial statements included elsewhere herein. In particular, our facilities lease obligations, guarantees and certain contingent obligations are further described in Note 15 to the accompanying consolidated financial statements. Historically, we have not entered into off-balance sheet financing arrangements. In addition, the obligations of our Energy Operations Business related to the Benchmark Revolving Credit Facility and the obligations of our Manufacturing Operations Business related to the Deflecto Facility are further described in Note 11 to the accompanying consolidated financial statements. The obligations of our Energy Operations Business related to the asset retirement obligations are further described in Note 10 to the accompanying consolidated financial statements.

Additional cash requirements are generally derived from our operating and investing activities including expenditures for working capital (discussed below), property and equipment, additions to oil and gas properties, human capital, business development, investments in equity securities and intellectual property, and business combinations.

Certain of our Intellectual Property Operations operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights. In connection with any of our operating subsidiaries’ patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against us or our operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material.

At September 30, 2025, our primary sources of liquidity were cash and cash equivalents on hand and cash generated from our operating activities.

Furthermore, we intend to grow our company by acquiring additional operating businesses and intellectual property assets. We expect to finance such acquisitions through cash on hand or by engaging in equity or debt financing.

Our management believes that our cash and cash equivalent balances and cash flows from operations will be sufficient to meet our cash requirements through at least twelve months from the date of this Quarterly Report and for the foreseeable future. We may, however, encounter unforeseen difficulties that may deplete our capital resources more rapidly than anticipated, including those set forth under Item 1A, “Risk Factors” in our 2024 Annual Report and Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025. Any efforts to seek additional funding could be made through issuances of equity or debt, or other external financing. However, additional funding may not be available to us on favorable terms, or at all. The capital and credit markets have experienced extreme volatility and disruption in recent years, and the volatility and impact of the disruption may continue. At times during this period, the volatility and disruption has reached unprecedented levels. In several cases, the markets have exerted downward pressure on stock prices and credit capacity for certain issuers, and the commercial paper markets may not be a reliable source of short-term financing for us. If we fail to obtain additional financing when needed, we may not be able to execute our business plans and our business, conducted by our operating subsidiaries, may suffer.

Cash, Cash Equivalents and Investments

Our consolidated cash, cash equivalents and equity securities totaled $329.0 million at September 30, 2025, compared to $297.0 million at December 31, 2024.

The Benchmark Revolving Credit Facility and Deflecto Facility include covenants potentially limiting our borrowing capacity as determined by a leverage ratio. As of September 30, 2025, we were in compliance with all financial covenants applicable to the Benchmark Revolving Credit Facility. As of September 30, 2025, we were in compliance with all financial covenants applicable to the Deflecto Facility. Refer to Note 11 to the accompanying consolidated financial statements for additional information.

Cash Flows Summary

The net change in cash and cash equivalents for the periods presented was comprised of the following:

Cash Flows from Operating Activities

Cash flows from operating activities were comprised of the following for the periods presented:

Cash receipts from ARG’s licensees totaled $75.8 million and $90.9 million for the nine months ended September 30, 2025 and 2024, respectively. Cash receipts from Printronix’s customers totaled $21.9 million and $23.8 million for the nine months ended September 30, 2025 and 2024, respectively. Cash receipts from Benchmark’s customers totaled $74.9 million and $37.4 million for the nine months ended September 30, 2025 and 2024, respectively. Cash receipts from Deflecto’s customers totaled $86.5 million for the nine months ended September 30, 2025. The fluctuations in cash receipts for the periods presented primarily reflects the corresponding fluctuations in revenues recognized during the same periods, as described above, and the related timing of payments received from licensees and customers.

Our reported cash provided by operations for the nine months ended September 30, 2025 was $62.1 million, compared to cash provided by operations of $70.4 million in the comparable prior period. The decrease in cash provided by operations was primarily due to increases from the full-year impacts of the Revolution and Deflecto transactions offset by declines in cash provided by operations from Printronix, IP and Parent.

Working Capital

Our working capital related to cash flows from operating activities at September 30, 2025 decreased to $23.9 million, compared to $36.7 million at December 31, 2024, which was comprised of the changes in assets and liabilities presented above. The decrease is primarily due to the change in prepaid expenses related to the 2025 patent portfolio acquisition related to Intellectual Property Operations.

Cash Flows used in Investing Activities

Cash flows used in investing activities were comprised of the following for the periods presented:

Cash flows used in investing activities for the nine months ended September 30, 2025 were $14.7 million, as compared to cash outflows of $117.1 million in the prior year, primarily due to the 2024 net cash outflows related to the acquisition of the Revolution assets offset by cash inflows from the sale of Arix shares.

Cash Flows from (used in) Financing Activities

Cash flows from (used in) financing activities included the following for the periods presented:

Cash flows used in financing activities for the nine months ended September 30, 2025 were $20.7 million, as compared to cash inflows of $66.6 million in the prior year. This was primarily due to borrowings on the revolving credit facility in the prior year which did not recur during the nine months ended September 30, 2025 and paydowns on the Benchmark Revolving Credit Facility and Deflecto Facility during the nine months ended September 30, 2025. Refer to Note 11 to the consolidated financial statements elsewhere herein for additional information regarding the Benchmark Revolving Credit Facility and Deflecto Facility.

Critical Accounting Estimates

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing these financial statements, we make assumptions, judgments and estimates that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates and make changes accordingly.

We believe that of the significant accounting policies discussed in Note 2 included in our 2024 Annual Report, the following accounting policies require our most difficult, subjective or complex assumptions, judgments and estimates:

•revenue recognition;

•estimates of crude oil and natural gas reserves;

•valuation of long-lived assets, goodwill and other intangible assets; and

•accounting for income taxes.

Our critical accounting estimates have not changed materially from those disclosed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2024 Annual Report. For further information on the significant accounting policies related to the revenue recognition, estimates of crude oil and natural gas reserves, valuation of long-lived assets, goodwill and other intangible assets and income taxes, refer to Note 2 to the consolidated financial statements and other related significant accounting policies included in our 2024 Annual Report.

Recent Accounting Pronouncements

The effects of accounting standards adopted in 2024 and the potential effects of accounting standards to be adopted in the future are described in Note 2 to consolidated financial statements included elsewhere herein.