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 to included in our 2025 Annual Report for additional information regarding Printronix’s and Deflecto’s operating expenses.

The increase in parent general and administrative costs was primarily due to an increase in parent company compensation and third party consulting, legal and accounting fees. The decrease in general and administrative costs of Manufacturing Operations is due to certain one-time severance expenses and professional fees related to the acquisition of Deflecto in October 2024 that were incurred during 2025 and did not recur in 2026.

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. Our results primarily 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 months ended March 31, 2026 and 2025 relate to our trading securities portfolio.

Loss on derivatives - Energy Operations

Loss on derivatives increased $5.7 million, from $5.0 million to $10.7 million in 2026, primarily due to the commodity derivative activities contributed from our Energy Operations. Refer to Note 12 for additional information regarding Benchmark’s gain and loss on its commodity derivatives.

Interest expense

Interest expense decreased $565,000, from $2.5 million to $1.9 million in 2026, primarily due to a lower average balance from the Deflecto Facility and lower interest rates in 2026 versus 2025. Refer to Note 10 to the consolidated financial statements elsewhere herein for additional information regarding the Deflecto Facility.

Other income (expense), net

Other income (expense), net increased $902,000, from other expense of $717,000 to other income of $185,000 in 2026, primarily due to sale of unoccupied units of Deflecto’s U.K. facility. Refer to Note 5 to the consolidated financial statements elsewhere herein for additional information regarding the sale.

Income Taxes

Our income tax benefit for the three months ended March 31, 2026 is primarily attributable to the losses incurred during the quarter offset by foreign withholding taxes. Our income tax expense for the three months ended March 31, 2025 is primarily attributable to the statutory rate applied to our year-to-date earnings.

Our 2026 effective tax rate was higher than the U.S. federal statutory rate primarily due to U.S. Income Tax Inclusions from our controlled foreign corporations (double taxed income) for which we can benefit from Foreign Tax Credits, Officers Compensation, and non-controlling interest partnership losses. Our 2025 effective tax rate was slightly lower than the U.S. federal statutory rate primarily due to non-controlling partnership earning allocated to minority shareholders.

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 allowance against deferred tax assets.

For the three months ended March 31, 2026, for U.S. operations, we used a discrete year-to-date effective tax rate method to calculate taxes as we determined that small changes in estimated ordinary income would result in significant changes in the estimated annual effective tax rate (“AETR”) for our U.S. operations, and therefore the AETR method would not provide a reliable estimate for the period presented. For our foreign operations, taxes have been calculated using the AETR method. The tax expense or benefit attributable to our foreign operations is computed using a separate estimated AETR for those jurisdictions and applied to their respective year-to-date ordinary income or loss in accordance with ASC 740-270-30-36.

Our effective tax rate from continuing operations was 13% for the three months ended March 31, 2026, compared to (21)% for the three months ended March 31, 2025. The primary factor causing this variation was losses in 2026 compared to income in 2025 as well as a decrease in our ability to offset double taxed foreign earnings with foreign tax credits.

The Company has recorded a partial valuation allowance against our net deferred tax assets as of March 31, 2026 and 2025 for foreign tax credits and certain state net operating losses. Refer to Note 2 to the consolidated financial statements elsewhere herein for additional income tax information.

Liquidity and Capital Resources

General

Our foreseeable material cash requirements as of March 31, 2026, are recognized as liabilities or generally are otherwise described in Note 14, “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 14 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 10 to the accompanying consolidated financial statements. The obligations of our Energy Operations Business related to the asset retirement obligations are further described in Note 9 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 natural 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 March 31, 2026, 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, energy assets 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 Annual 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,” of our 2025 Annual Report. 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 $321.7 million at March 31, 2026, compared to $324.3 million at December 31, 2025.

The Benchmark Revolving Credit Facility and Deflecto Facility include covenants potentially limiting our borrowing capacity as determined by a leverage ratio. As of March 31, 2026, we were in compliance with all financial covenants applicable to the Benchmark Revolving Credit Facility and the Deflecto Facility. Refer to Note 10 to the consolidated financial statements elsewhere herein 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 $1.5 million and $1.0 million for the three months ended March 31, 2026 and 2025, respectively. Cash receipts from Printronix’s customers totaled $8.5 million and $8.1 million for the three months ended March 31, 2026 and 2025, respectively. Cash receipts from Benchmark’s customers totaled $23.0 million and $18.7 million for the three months ended March 31, 2026 and 2025, respectively. Cash receipts from Deflecto’s customers totaled $27.2 million and $27.8 million for the three months ended March 31, 2026 and 2025. The fluctuations in cash receipts for the periods presented primarily reflect 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 three months ended March 31, 2026 was $3.4 million, compared to cash provided by operations of $2.4 million in the comparable prior period. The increase in cash provided by operations was primarily due to increases from working capital.

Working Capital

Our cash flows from working capital related changes decreased from an outflow of $44.4 million for the three months ended March 31, 2025 to inflow of $3.0 million for the three months ended March 31, 2026. The change was primarily due to negative working capital impacts in 2025 primarily due to a change in accounts receivable and royalties and contingent legal fees payable, which was related to the timing of cash receipts related to the Intellectual Property Operations Business.

Cash Flows from Investing Activities

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

Cash flows used in investing activities for the three months ended March 31, 2026 were $1.0 million, as compared to cash provided by $1.0 million in the comparable prior period. Cash used in investing activities in 2026 was primarily due to net additions to oil and gas properties partially offset by proceeds from loans receivable.

Cash Flows from Financing Activities

Cash flows from financing activities included the following for the periods presented:

Cash flows used in financing activities for the three months ended March 31, 2026 were $1.9 million, as compared to cash outflows of $6.1 million in the prior comparable period. The higher cash outflows in the three months ended March 31, 2025 were primarily due to paydowns of the Benchmark Revolving Credit Facility that did not recur in 2026. Refer to Note 10 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 2025 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 and values and standardized measure of discounted future net cash flows;

•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 2025 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 2025 Annual Report.

Recent Accounting Pronouncements

The effects of accounting standards adopted in 2026 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.