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Item 9A. Controls and Procedures

2022-03-31 compared with 2021-03-29 · 1601 added, 1857 removed, 185 unchanged (95% of the section changed)

CONTROLS AND PROCEDURES

(a) Conclusion Regarding the

Effectiveness of Disclosure Controls and Procedures

disclosure controls and procedures (as defined in Rules 13a-15(e)and 15d-15(e) under the Securities Exchange Act of 1934, as amended

(the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the

Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms

and that this information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial

Officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure

controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can

provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment

in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our

Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures

as of December 31, 2020.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief

Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective

at the reasonable assurance level.

(b) Management’s Report

on Internal Control Over Financial Reporting

Our management

is responsible for establishing and maintaining adequate “internal control over financial reporting,”

as defined in

Rule 13a-15(f) under the Exchange Act.

Our management conducted an assessment of the effectiveness of our internal control over

financial reporting as of December 31, 2020 based on the criteria set forth in the Internal Control Integrated Framework (2013)

issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on the assessment, our management has concluded

that our internal control over financial reporting was effective as of December 31, 2020.

Report of Independent Registered Public Accounting Firm

Report does not include an attestation report of our independent registered public accounting firm regarding internal control

over financial reporting.

Management’s report was not subject to attestation by our independent registered public accounting

firm pursuant to the rules of the SEC that permit us to provide only Management’s Report because we are a non-accelerated

in Internal Controls over Financial Reporting

were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule

13a-15(d)and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2020 that materially affected,

or are reasonably likely to materially affect, our internal control over financial reporting.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e)and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that this information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Rule 13a-15(f) under the Exchange Act.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021 based on the criteria set forth in the Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on the assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2021.

Exemption from Attestation Report of Independent Registered Public Accounting Firm

This Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only Management’s Annual Report because we are a non-accelerated filer.

Changes in Internal Controls over Financial Reporting

Other than certain enhanced controls in connection with the acquisition of Printronix, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d)and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Except as provided

below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein

by reference to our definitive proxy statement for our 2021 annual meeting of stockholders to be filed with the SEC no later than

April 30, 2021.

We have adopted

a Code of Conduct that applies to all employees, including our Chief Executive Officer and Chief Financial Officer and any persons

performing similar functions.

Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the SEC within 120 days after the close of our fiscal year.

Code of Conduct

We have adopted a Code of Conduct that applies to all employees, including our Chief Executive Officer and Chief Financial Officer and any persons performing similar functions.

Our Code of Conduct is provided on our internet website at www.acaciaresearch.com .

EXECUTIVE COMPENSATION

In accordance

with General Instruction G(3) to Form 10-K, the information required by this Item is incorporated herein by reference to our definitive

proxy statement for our 2021 annual meeting of stockholders to be filed with the SEC no later than April 30, 2021.

In accordance with General Instruction G(3) to Form 10-K, the information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the SEC within 120 days after the close of our fiscal year.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

In accordance

with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our

definitive proxy statement for our 2021 annual meeting of stockholders to be filed with the SEC no later than April 30, 2021.

In accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the SEC within 120 days after the close of our fiscal year.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

In accordance

with General Instruction G(3) to Form 10-K, the information required by this Item is incorporated herein by reference to our definitive

proxy statement for our 2021 annual meeting of stockholders to be filed with the SEC no later than April 30, 2021.

PRINCIPAL ACCOUNTING FEES AND SERVICES

In accordance

with General Instruction G(3) to Form 10-K, the information required by this Item is incorporated herein by reference to our definitive

proxy statement for our 2021 annual meeting of stockholders to be filed with the SEC no later than April 30, 2021.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed

as part of this report.

(1) Financial Statements

Acacia Research Corporation Consolidated

PRINCIPAL ACCOUNTANT FEES AND SERVICES

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report.

(1) Financial Statements.

Reports of Independent Registered Public Accounting Firm

Acacia Research Corporation Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm (BDO USA, LLP;

New York, NY;

PCAOB ID# 243 )

Report of Independent Registered Public Accounting Firm (GRANT THORNTON LLP;

Newport Beach, CA;

PCAOB ID# 248 )

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Series A Redeemable Convertible Preferred Stock and Stockholders’

Equity for the Years Ended December 31, 2020 and 2019

Consolidated Statements of Series A Redeemable Convertible Preferred Stock and Stockholders’ Equity for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020

Notes to Consolidated Financial Statements

(2) Financial

Statement Schedules

Financial statement

schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or

the Notes thereto.

Refer to Item 15(b)

following exhibits are either filed herewith or incorporated herein by reference:

(2) Financial Statement Schedules.

Financial statement schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or the Notes thereto.

(3) Exhibits.

Refer to Item 15(b) below.

(b) Exhibits.

The following exhibits are either filed herewith or incorporated herein by reference:

Number Description

2.1** Agreement and Plan of Merger, dated November 22, 2011, by and among Acacia Research Group LLC, Apollo Patent Corp., Adaptix, Inc., and Baker Communications Fund II (QP), L.P., solely in its capacity as representative for the shareholders of Adaptix, Inc.

(incorporated by reference to the Current Report on Form 8-K/A filed on January 19, 2012)

Agreement, dated as of June 4, 2020, between LF Equity Income Fund and Acacia Research Corporation (incorporated by reference

to the Current Report on Form 8-K filed on June 10, 2020)

and Restated Certificate of Incorporation (as updated through February 18, 2020 and currently in effect) (incorporated

by reference to the Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 16, 2020)

2.2 Transaction Agreement, dated as of June 4, 2020, between LF Equity Income Fund and Acacia Research Corporation (incorporated by reference to the Current Report on Form 8-K filed on June 10, 2020)

3.1 Certificate of Amendment of Amended and Restated Certificate of Incorporation of Acacia Research Corporation (as updated through May 18, 2021 and currently in effect) (incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed on August 16, 2021)

3.2 Amended and Restated Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock, as filed with the Delaware Secretary of State on January 7, 2020 (incorporated by reference to Appendix B to the Definitive Proxy Statement on Schedule 14A filed on January 17, 2020)

Second Amended and Restated Bylaws (incorporated by reference to the Quarterly Report on Form 10-Q for the period ended June 30, 2020, filed on August 20, 2020)

3.3 Third Amended and Restated Bylaws (incorporated by reference to the Current Report on Form 8-K filed on May 25 , 2021 )

4.1 Tax Benefits Preservation Plan, dated as of March 16, 2019, by and between Acacia Research Corporation and Computershare Inc., as Rights Agent, which includes the Form of Certificate of Designation, Preferences and Rights of Participating Preferred Stock as Exhibit A, the Form of Rights Certificate as Exhibit B and the Summary of Terms as Exhibit C (incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 15, 2019)

of Acacia Research Corporation Capital Stock (incorporated

by reference to the Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 16, 2020)

Form of Senior Secured Note (incorporated by reference to the Current Report on Form 8-K filed on July 7, 2020)

4.2 Description of Acacia Research Corporation Capital Stock (incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 16, 2020)

4.3 Form of Senior Secured Note (incorporated by reference to the Current Report on Form 8-K filed on October 6, 2021 )

4.4 Form of Series A Warrant to Purchase Common Stock (incorporated by reference to Appendix C to the Definitive Proxy Statement on Schedule 14A filed on January 17, 2020)

4.5 Form of Series B Warrant to Purchase Common Stock (incorporated by reference to Appendix D to the Definitive Proxy Statement on Schedule 14A filed on January 17, 2020)

of Indemnification Agreement (incorporated by reference to the Annual Report on Form 10-K for the year ended December 31,

2019, filed on March 16, 2020)

10.1* Form of Indemnification Agreement (incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 16, 2020)

10.2* Acacia Research Corporation Amended and Restated Executive Severance Policy (incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2008, filed on February 26, 2009)

20 unchanged sentences

Booth (incorporated by reference to the Current Report on Form 8-K filed on June 25, 2020)

Separation Agreement and General Release of Claims, effective August 10, 2018, by and between Acacia Research Group, LLC and Clayton J.

Haynes (incorporated by reference to the Current Report on Form 8-K filed on August 16, 2018)

Consulting Agreement, effective August 10, 2018, by and between Acacia Research Corporation and Clayton J.

Haynes (incorporated by reference to the Current Report on Form 8-K filed on August 16, 2018)

Separation Agreement and General Release of Claims, effective August 10, 2018, by and between Acacia Research Group, LLC and Edward J.

Treska (incorporated by reference to the Current Report on Form 8-K filed on August 16, 2018 )

Consulting Agreement, effective August 10, 2018, by and between Acacia Research Corporation and Edward J.

Treska (incorporated by reference to the Current Report on Form 8-K filed on August 16, 2018)

Agreement and General Release of Claims, dated February 12, 2019, by and between Acacia Research Group, LLC and Kirsten Hoover

(incorporated by reference to the Current Report on Form 8-K filed on February 13, 2019)

Agreement, dated September 3, 2019, by and among Acacia Research Group LLC, Acacia Research Corporation and Clifford Press (incorporated

by reference to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 12, 2019)

Agreement, dated September 3, 2019, by and among Acacia Research Group LLC, Acacia Research Corporation and Alfred Tobia (incorporated

by reference to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 12, 2019)

Agreement, dated June 4, 2020, by and between Acacia Research Group, LLC and Richard Rosenstein (incorporated by reference to

the Current Report on Form 8-K filed on June 4, 2020)

Agreement, dated June 4, 2020, by and between Acacia Research Group, LLC and Meredith Simmons (incorporated by reference to the

Current Report on Form 8-K filed on June 4, 2020)

Agreement, effective March 16, 2021, by and between Acacia Research Group, LLC and Jason Soncini (incorporated by reference to

the Current Report on Form 8-K filed on March 22, 2021)

Purchase Agreement dated November 18, 2019, by and among Acacia Research Corporation, Starboard Value LP and the investors listed

on the Schedule of Buyers attached thereto (incorporated by reference to Appendix A to the Definitive Proxy Statement on Schedule

14A filed on January 17, 2020)

Agreement, dated as of June 4, 2020, between Starboard Value, L.P.

and Acacia Research Corporation (incorporated by reference

to the Current Report on Form 8-K filed on June 10, 2020)

Agreement, dated June 30, 2020, among Acacia Research Corporation, Merton Acquisition HoldCo LLC and Starboard Value LP (incorporated

by reference to the Current Report on Form 8-K filed on July 7, 2020)

Pledge Agreement, dated June 30, 2020, entered into by Acacia Research Group LLC, Advanced Skeletal Innovations LLC and Saint Lawrence

Communications LLC in favor of Starboard Value Intermediate Fund LP, as collateral agent (incorporated by reference to the Current

Report on Form 8-K filed on July 7, 2020)

dated June 30, 2020, entered into by the Guarantors (as defined therein) in favor of the Holders (as defined therein) (incorporated

by reference to the Current Report on Form 8-K filed on July 7, 2020)

of Security Interests in Patents, dated June 30, 2020, between the Releasees (as defined therein) and Starboard Value Intermediate

Fund LP, as collateral agent.

10.17* Employment Agreement, dated September 3, 2019, by and among Acacia Research Group LLC, Acacia Research Corporation and Clifford Press (incorporated by reference to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 12, 2019)

10.18* Employment Agreement, dated September 3, 2019, by and among Acacia Research Group LLC, Acacia Research Corporation and Alfred Tobia (incorporated by reference to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 12, 2019)

10.19* Employment Agreement, dated June 4, 2020, by and between Acacia Research Group, LLC and Richard Rosenstein (incorporated by reference to the Current Report on Form 8-K filed on June 4, 2020)

10.20* Employment Agreement, dated June 4, 2020, by and between Acacia Research Group, LLC and Meredith Simmons (incorporated by reference to the Current Report on Form 8-K filed on June 4, 2020)

10.21* Employment Agreement, effective March 16, 2021, by and between Acacia Research Group, LLC and Jason Soncini (incorporated by reference to the Current Report on Form 8-K filed on March 22, 2021)

10.22* Employment Agreement, effective March 10 , 202 2 , by and amo ng Acacia Research Corporation, Acacia Research Group LLC, and Martin D.

(incorporated by reference to the Current Report on Form 8-K filed on March 15 , 202 2 )

10.23 Securities Purchase Agreement dated November 18, 2019, by and among Acacia Research Corporation, Starboard Value LP and the investors listed on the Schedule of Buyers attached thereto (incorporated by reference to Appendix A to the Definitive Proxy Statement on Schedule 14A filed on January 17, 2020)

10.24 Supplemental Agreement, dated as of June 4, 2020, between Starboard Value, L.P.

and Acacia Research Corporation (incorporated by reference to the Current Report on Form 8-K filed on June 10, 2020)

10.25 Exchange Agreement, dated June 30, 2020, among Acacia Research Corporation, Merton Acquisition HoldCo LLC and Starboard Value LP (incorporated by reference to the Current Report on Form 8-K filed on July 7, 2020)

10.26 Stock Pledge Agreement, dated June 30, 2020, entered into by Acacia Research Group LLC, Advanced Skeletal Innovations LLC and Saint Lawrence Communications LLC in favor of Starboard Value Intermediate Fund LP, as collateral agent (incorporated by reference to the Current Report on Form 8-K filed on July 7, 2020)

10.27 Guaranty, dated June 30, 2020, entered into by the Guarantors (as defined therein) in favor of the Holders (as defined therein) (incorporated by reference to the Current Report on Form 8-K filed on July 7, 2020)

10.28 Release of Security Interests in Patents, dated June 30, 2020, between the Releasees (as defined therein) and Starboard Value Intermediate Fund LP, as collateral agent.

(incorporated by reference to the Current Report on Form 8-K filed on July 7, 2020)

Rights Agreement dated November 18, 2019, by and among Acacia Research Corporation and the investors listed on the Schedule of Buyers

attached thereto (incorporated by reference to Appendix F to the Definitive Proxy Statement on Schedule 14A filed on January

Agreement dated November 18, 2019 and amended January

7, 2020 , by and among Acacia Research Corporation and the entities and natural persons set forth on the signature pages thereto

(incorporated by reference to Appendix G to the Definitive Proxy Statement on Schedule 14A filed on January 17, 2020)

Agreement dated June 7, 2019, by and between Acacia Research Corporation and Jamboree Center 4 LLC (incorporated by reference

to the Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 16, 2020)

10.29 Second Supplemental Agreement, dated as of March 31, 2021, between Starboard Value, L.P., Acacia Research Corporation, Merton Acquisition Holdco LLC and certain other direct and indirect subsidiaries of the Company (incorporated by reference to the Current Report on Form 8-K filed on April 6, 2021)

10.30 Third Supplemental Agreement, dated as of June 30, 2021, between Starboard Value, L.P., Acacia Research Corporation, Merton Acquisition Holdco LLC and certain other direct and indirect subsidiaries of the Company (incorporated by reference to the Current Report on Form 8-K filed on July 7, 2021)

10.31 Fourth Supplemental Agreement, dated as of September 30, 2021, between Starboard Value, L.P., Acacia Research Corporation, Merton Acquisition Holdco LLC and certain other direct and indirect subsidiaries of the Company (incorporated by reference to the Current Report on Form 8-K filed on October 6, 2021)

10.32 Note Amendment Agreement, dated as of November 15, 2021, between Starboard Value, L.P., on behalf of the Starboard Funds, Acacia Research Corporation and Merton Acquisition Holdco LLC (incorporated by reference to the Current Report on Form 8-K filed on November 19, 2021)

10.33 Supplement No.

5 and Amendment to the Stock Pledge Agreement, dated November 15, 2021, by and among certain direct and indirect subsidiaries of Acacia Research Corporation and Starboard Value Intermediate Fund LP, as Collateral Agent (incorporated by reference to the Current Report on Form 8-K filed on November 19, 2021)

10.34 Fifth Supplemental Agreement, dated as of November 30, 2021, between Starboard Value, L.P., on behalf of the Starboard Funds, Acacia Research Corporation and Merton Acquisition Holdco LLC (incorporated by reference to the Current Report on Form 8-K filed on December 6, 2021)

10.35 Sixth Supplemental Agreement, dated as of January 31, 2022, between Starboard Value, L.P., on behalf of the Starboard Funds, Acacia Research Corporation and Merton Acquisition Holdco LLC (incorporated by reference to the Current Report on Form 8-K filed on February 4, 2022)

10.36 Registration Rights Agreement dated November 18, 2019, by and among Acacia Research Corporation and the investors listed on the Schedule of Buyers attached thereto (incorporated by reference to Appendix F to the Definitive Proxy Statement on Schedule 14A filed on January 17, 2020)

10.37 Governance Agreement dated November 18, 2019 and amended January 7, 2020, by and among Acacia Research Corporation and the entities and natural persons set forth on the signature pages thereto (incorporated by reference to Appendix G to the Definitive Proxy Statement on Schedule 14A filed on January 17, 2020)

10.38 Lease Agreement dated June 7, 2019, by and between Acacia Research Corporation and Jamboree Center 4 LLC (incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 16, 2020)

10.39 First Amendment of Lease, dated as of August 5, 2021, between Sage Realty Corporation and Acacia Research Corporation (incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on November 1 5 , 2021)

List of Subsidiaries

Consent of Independent

Registered Public Accounting Firm

Power of Attorney (included in

the signature page hereto).

Certification of Chief

Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

Certification of Chief

Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

Certification of Chief

Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C.

Certification of Chief

Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C.

Interactive Date Files Pursuant to Rule 405 of Regulation

Consent of Independent Registered Public Accounting Firm, BDO USA, LLP

Consent of Independent Registered Public Accounting Firm , GRANT THORNTON LLP

24.1 Power of Attorney (included in the signature page hereto).

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C.

Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C.

The following financial statements from the Company’s Annual Report on Form 10-K for the years ended December 31, 2021 and 2020, formatted in Inline Extensible Business Reporting Language (iXBRL) include:

(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Series A Redeemable Convertible Preferred Stock and Stockholders' Equity, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

Cover Page Interactive Data File (formatted in iXBRL and included in Exhibit 101).

____________________

referenced exhibit is a management contract, compensatory plan or arrangement required to be filed as an exhibit to this Annual

Report on Form 10-K pursuant to Item 15(c) of Form 10-K.

of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24-b-2 of the Securities Exchange

Act of 1934, as amended.

* The referenced exhibit is a management contract, compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(c) of Form 10-K.

** Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24-b-2 of the Securities Exchange Act of 1934, as amended.

The omitted material has been separately filed with the Securities and Exchange Commission.

certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K are not deemed filed with

the SEC and are not to be incorporated by reference into any filing of Acacia Research Corporation under the Securities Act

of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual

Report on Form 10-K, regardless of any general incorporation language contained in any filing.

the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to

be signed on its behalf by the undersigned, thereunto duly authorized.

RESEARCH CORPORATION

Clifford Press

Executive Officer

We, the undersigned

directors and officers of Acacia Research Corporation, do hereby constitute and appoint Clifford Press and Richard Rosenstein,

and each of them, as our true and lawful attorneys-in-fact and agents with power of substitution, to do any and all acts and things

in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names

in the capacities indicated below, which said attorney-in-fact and agent may deem necessary or advisable to enable said corporation

to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities

and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power

and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto;

do hereby ratify and confirm all that said attorney-in-fact and agent, shall do or cause to be done by virtue hereof.

the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf

of the registrant and the capacities and on the dates indicated.

Chief Executive Officer

# Filed herewith.

† The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K are not deemed filed with the SEC and are not to be incorporated by reference into any filing of Acacia Research Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, regardless of any general incorporation language contained in any filing.

Not applicable.

FORM 10-K SUMMARY

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ACACIA RESEARCH CORPORATION

March 31, 2022 By:

/s/ Clifford Press

Clifford Press

(Principal Executive Officer)

Chief Financial Officer

Financial Officer)

(Principal Accounting Officer)

President and Chief Executive Officer (Principal Executive Officer and Duly Authorized Signatory)

POWER OF ATTORNEY

We, the undersigned directors and officers of Acacia Research Corporation, do hereby constitute and appoint Clifford Press and Richard Rosenstein, and each of them, as our true and lawful attorneys-in-fact and agents with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney-in-fact and agent may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto;

and we do hereby ratify and confirm all that said attorney-in-fact and agent, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and the capacities and on the dates indicated.

Signature Title Date

/s/ Clifford Press President and Chief Executive Officer March 31, 2022

Clifford Press (Principal Executive Officer)

/s/ Richard Rosenstein Chief Financial Officer March 31, 2022

Richard Rosenstein (Principal Financial Officer)

/s/ Kirsten Hoover Corporate Controller March 31, 2022

Kirsten Hoover (Principal Accounting Officer)

/s/ Isaac Kohlberg Director March 31, 2022

Isaac Kohlberg

/s/ Maureen O'Connell Director March 31, 2022

Maureen O'Connell

/s/ Jonathan Sagal Director March 31, 2022

Jonathan Sagal

/s/ Katharine Wolanyk Director March 31, 2022

Katharine Wolanyk

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Acacia Research Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Acacia Research Corporation (the “Company”) as of December 31, 2021, the related consolidated statements of operations, series A redeemable convertible preferred stock and stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Fair value measurements of the Series A and B Warrants and embedded derivative liabilities in the Series A Redeemable Convertible Preferred Stock.

As described further in Note 11 to the consolidated financial statements, the Series A and B Warrants are recorded at fair value using the Black-Scholes option-pricing model.

The embedded derivative liabilities in the Series A Redeemable Convertible Preferred Stock (embedded derivative) are recorded at fair value using a binomial model.

The Black Scholes option-pricing model and the binomial model require management to make significant assumptions, which include the determination of volatility and credit spread (binomial model only).

We identified the fair value measurements of the Series A and B Warrants and embedded derivative as a critical audit matter.

The principal consideration for our determination is management’s significant judgment related to the assumptions of volatility and credit spread.

Auditing these significant assumptions involved subjective auditor judgment and the use of our valuation specialist.

The primary procedures we performed to address this critical audit matter included:

• Utilizing personnel with specialized knowledge and skills in valuation to evaluate the reasonableness of the Company’s assumptions by:

(1) comparing volatility and credit spread assumptions against available market data and historical amounts and (2) validating the mathematical accuracy of the models by performing an independent calculation and comparing to management’s concluded valuations.

/s/ BDO USA, LLP

We have served as the Company’s auditor since 2021.

March 31, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

1 unchanged sentence

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets

of Acacia Research Corporation (and subsidiaries) (the “Company”) as of December 31, 2020 and 2019, the related consolidated

statements of operations, series A redeemable convertible preferred stock and stockholders’

equity, and cash flows for each

of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of

the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in

the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of Acacia Research Corporation and subsidiaries (the “Company”) as of December 31, 2020, the related consolidated statements of operations, series A redeemable convertible preferred stock and stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and

are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks

of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as

well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis

for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising

from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate

opinion on the critical audit matter or on the accounts or disclosures to which it relates.

measurements of the Series B Warrants and embedded derivative in the Series A Redeemable Convertible Preferred Stock.

As described further in Note 16 to the consolidated financial

statements, the Company entered into a Securities Purchase Agreement with Starboard Value LP, pursuant to which the Company issued

(i) Series A Redeemable Convertible Preferred Stock and (ii) Series A Warrants.

The Securities Purchase Agreement also established

terms of certain additional warrants, referred to as the Series B Warrants.

The Series A Redeemable Convertible Preferred Stock

contained certain features that required to be bifurcated and accounted for as a compound embedded derivative.

We identified the fair value measurements of the Series B Warrants

and embedded derivatives in the Series A Redeemable Convertible Preferred Stock (together, “Series B Warrants and Series

A Embedded Derivative Liabilities”) as a critical audit matter.

The principal considerations for our determination that the

fair value measurement of the Series B Warrants and Series A Embedded Derivative Liabilities was a critical audit matter are as

There is limited observable market data available for the Series B Warrants and Series A Embedded Derivative Liabilities

as they are complex financial instruments and, as such, the fair value measurement requires management to make complex judgments

in order to identify and select the significant assumptions, which include the volatility and credit spread.

In addition, the fair

value measurements of the Series B Warrants and Series A Embedded Derivative Liabilities require the use of complex financial models,

including Monte Carlo valuation techniques and binomial lattice models.

As a result, obtaining sufficient appropriate audit evidence

related to the fair value measurements required significant auditor subjectivity.

Our audit procedures related to the fair value measurements

of the Series B Warrants and Series A Embedded Derivative Liabilities included the following among others.

With the assistance

of our firm valuation specialists, we evaluated the reasonableness of the Company’s valuation methodology and assumptions

(1) comparing selected assumptions against available market data and historical amounts and (2) validating the mathematical

accuracy of the models by developing an independent calculation and comparing to management’s concluded valuations.

GRANT THORNTON LLP

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2007.

We served as the Company’s auditor from 2007 to 2021.

Newport Beach, California

March 29, 2021

March 29, 2021 (except for Notes 7, 19 and 20, as to which the date is March 31, 2022)

ACACIA RESEARCH CORPORATION

BALANCE SHEETS

(In thousands,

except share and per share information)

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

Current assets:

Cash and cash equivalents $ 308,943 $ 165,546

Trading securities - debt

Trading securities - equity

Investment securities - private equity

Equity securities at fair value 361,778 109,103

Equity securities without readily determinable fair value 5,816 143,257

Investment securities - equity method investments 30,934 30,673

Investment at fair value (Note 6)

Accounts receivable

Investment at fair value — 2,752

Accounts receivable, net 9,517 506

Inventories 8,930 —

Prepaid expenses and other current assets 4,764 5,832

1 unchanged sentence

Long-term restricted cash 418 35,000

Patents, net of accumulated amortization

Property, plant and equipment, net 4,183 270

Goodwill 7,470 —

Other intangible assets, net 48,793 16,912

Leased right-of-use assets 2,027 951

Other non-current assets 5,283 505

Total assets $ 798,856 $ 511,307

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY

4 unchanged sentences

Royalties and contingent legal fees payable 2,463 2,162

Senior Secured Notes Payable - short-term

Deferred revenue 1,114 —

Senior Secured Notes Payable 181,248 115,663

Total current liabilities 200,190 124,816

Deferred revenue, net of current portion 581 —

Series A warrant liabilities 11,291 6,640

2 unchanged sentences

Long-term lease liabilities 2,027 951

Deferred income tax liabilities, net 18,552 —

Other long-term liabilities 6,161 591

Total liabilities 353,628 212,067

Commitments and contingencies (Note 10)

Commitments and contingencies

Series A redeemable convertible preferred stock, par value $ 0.001 per share;

stated value $ 100 per share;

350,000 shares authorized, issued and outstanding as of December 31, 2020 and December 31, 2019, respectively;

aggregate liquidation preference of $35,000 as of December 31, 2020 and December 31, 2019, respectively

350,000 shares authorized, issued and outstanding as of December 31, 2021 and 2020;

aggregate liquidation preference of $ 35,000 as of December 31, 2021 and 2020

14,753 10,924

Stockholders' equity:

4 unchanged sentences

300,000,000 shares authorized;

49,279,453 and 50,370,987 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively

Treasury stock, at cost, 4,604,365 and 2,919,828 shares as of December 31, 2020 and December 31, 2019, respectively

48,807,748 and 49,279,453 shares issued and outstanding as of December 31, 2021 and 2020, respectively

Treasury stock, at cost, 5,388,469 and 4,604,365 shares as of December 31, 2021 and 2020, respectively

( 47,281 ) ( 43,270 )

Additional paid-in capital 648,389 651,416

4 unchanged sentences

Total liabilities, redeemable convertible preferred stock, and stockholders' equity $ 798,856 $ 511,307

The accompanying

notes are an integral part of these consolidated financial statements.

ACACIA RESEARCH

STATEMENTS OF OPERATIONS

(In thousands,

except share and per share information)

Portfolio operations:

Inventor royalties

Contingent legal fees

Litigation and licensing expenses - patents

Amortization of patents

Other portfolio expenses (income)

Total portfolio operations

Net portfolio income (loss)

The accompanying notes are an integral part of these consolidated financial statements.

ACACIA RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

Years Ended December 31,

Intellectual property operations $ 76,043 $ 29,782

Industrial operations 12,004 —

Total revenues 88,047 29,782

Costs and expenses:

Cost of revenues - intellectual property operations 28,691 24,824

Cost of sales - industrial operations 7,407 —

Engineering and development expenses - industrial operations 200 —

Sales and marketing expenses - industrial operations 1,538 —

General and administrative expenses 35,666 24,476

Operating loss

Total costs and expenses 73,502 49,300

Operating income (loss) 14,545 ( 19,518 )

Other income (expense):

Change in fair value of investment, net (Note 6)

Gain (loss) on sale of investment (Note 6)

Impairment of other investment

Gain on disposal of other investment

Change in fair value of the Series A and B warrants and embedded derivatives

Equity securities investments:

Change in fair value of equity securities 87,527 176,173

Gain on sale of equity securities 116,129 7,352

Earnings on equity investment in joint venture 3,530 —

Net realized and unrealized gain 207,186 183,525

Gain on sale of prepaid investment and derivative — 2,845

Change in fair value of trading securities and equity securities

Gain on sale of trading securities

Change in fair value of investment ( 2,752 ) 5,474

Gain on sale of investment 3,591 8,187

Change in fair value of the Series A and B warrants and embedded derivatives ( 40,408 ) ( 58,238 )

Loss on foreign currency exchange ( 89 ) ( 4,905 )

2 unchanged sentences

Total other income 160,107 127,590

Income (loss) before income taxes

Income tax benefit

Net income (loss) including noncontrolling interests in subsidiaries

Net loss attributable to noncontrolling interests in subsidiaries

Net income (loss) attributable to Acacia Research Corporation

Net income (loss) attributable to common stockholders - basic

Basic net income (loss) per common share

Income before income taxes 174,652 108,072

Income tax (expense) benefit ( 24,287 ) 1,159

Net income including noncontrolling interests in subsidiaries 150,365 109,231

Net income attributable to noncontrolling interests in subsidiaries ( 1,168 ) —

Net income attributable to Acacia Research Corporation $ 149,197 $ 109,231

Income per share:

Net income attributable to common stockholders - Basic $ 118,804 $ 86,846

Weighted average number of shares outstanding - Basic 48,797,290 48,840,829

Net income (loss) attributable to common stockholders - diluted

Diluted net income (loss) per common share

Basic net income per common share $ 2.43 $ 1.78

Net income attributable to common stockholders - Diluted $ 188,224 $ 84,894

Weighted average number of shares outstanding - Diluted 98,470,870 57,435,128

(1) General and administrative expenses were comprised of the following:

General and administrative expenses

Non-cash stock compensation expense - G&A

Total general and administrative expenses

The accompanying

notes are an integral part of these consolidated financial statements.

ACACIA RESEARCH

STATEMENTS OF SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

(In thousands,

except share information)

the Year Ended December 31, 2020

A Redeemable Convertible Preferred Stock

Noncontrolling

Stockholders'

at December 31, 2019

attributable to Acacia Research Corporation

of Series A Redeemable Convertible Preferred Stock to redemption value

Series A Redeemable Convertible Preferred Stock

Stock options

expense for share-based awards, net of forfeitures

of common stock

of Acacia Intellectual Property Fund, L.P.

Distributions

to noncontrolling interests in subsidiaries

December 31, 2020

For the Year Ended December 31, 2019

Redeemable Convertible Preferred Stock

Noncontrolling

Stockholders'

Diluted net income per common share $ 1.91 $ 1.48

The accompanying notes are an integral part of these consolidated financial statements.

ACACIA RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

(In thousands, except share data)

Year Ended December 31, 2021

Series A Redeemable Convertible Preferred Stock Common Stock Treasury Stock Additional

Paid-in Capital Accumulated Deficit Noncontrolling

Operating Subsidiaries Total

Stockholders' Equity

Shares Amount Shares Amount

Balance at December 31, 2020 350,000 $ 10,924 49,279,453 $ 49 $ ( 43,270 ) $ 651,416 $ ( 330,921 ) $ 11,042 $ 288,316

Net loss attributable to Acacia Research Corporation

Issuance of Series A Redeemable

Convertible Preferred Shares, net of embedded derivative, Series A Warrant, and issuance costs

Net income including noncontrolling interests in subsidiaries — — — — — — 149,197 1,168 150,365

Distributions to noncontrolling interests in subsidiaries — — — — — — — ( 1,168 ) ( 1,168 )

Accretion of Series A Redeemable Convertible Preferred Stock to redemption value — 3,829 — — — ( 3,829 ) — — ( 3,829 )

Dividend on Series A Redeemable Convertible Preferred Stock — — — — — ( 1,452 ) — — ( 1,452 )

Stock options exercised — — 60,000 1 — 201 — — 202

Compensation expense for share-based awards, net of forfeitures

Net loss attributable to noncontrolling interests in subsidiaries

Issuance of common stock for vesting of restricted stock units — — 28,834 — — — — — —

Issuance of common stock for unvested restricted stock awards, net of forfeitures — — 223,565 — — — — — —

Compensation expense for share-based awards — — 0 — — 2,053 — — 2,053

Repurchase of common stock — — ( 784,104 ) ( 1 ) ( 4,011 ) — — — ( 4,012 )

Balance at December 31, 2021 350,000 $ 14,753 48,807,748 $ 49 $ ( 47,281 ) $ 648,389 $ ( 181,724 ) $ 11,042 $ 430,475

The accompanying

notes are an integral part of these consolidated financial statements.

ACACIA RESEARCH

STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements.

ACACIA RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

(In thousands, except share data)

Year Ended December 31, 2020

Series A Redeemable Convertible Preferred Stock Common Stock Treasury Stock Additional

Paid-in Capital Accumulated Deficit Noncontrolling

Operating Subsidiaries Total

Stockholders' Equity

Shares Amount Shares Amount

Balance at December 31, 2019 350,000 $ 8,089 50,370,987 $ 50 $ ( 39,272 ) $ 652,003 $ ( 439,656 ) $ 1,833 $ 174,958

Net income attributable to Acacia Research Corporation — — — — — — 109,231 — 109,231

Accretion of Series A Redeemable Convertible Preferred Stock to redemption value — 2,835 — — — ( 2,835 ) — — ( 2,835 )

Dividend on Series A Redeemable Convertible Preferred Stock — — — — — ( 1,382 ) — — ( 1,382 )

Stock options exercised — — 13,333 — — 48 — — 48

Issuance of common stock for vesting of restricted stock units — — 14,354 — — — — — —

Issuance of common stock for unvested restricted stock awards, net of forfeitures — — 565,316 — — — — — —

Compensation expense for share-based awards — — — — — 1,662 — — 1,662

Repurchase of common stock — — ( 1,684,537 ) ( 1 ) ( 3,998 ) — — — ( 3,999 )

Dissolution of Acacia Intellectual Property Fund, L.P.

— — — — — 1,920 ( 496 ) ( 1,424 ) —

Distributions to noncontrolling interests in subsidiaries — — — — — — — ( 409 ) ( 409 )

Acquisition of MalinJ1 — — — — — — — 11,042 11,042

Balance at December 31, 2020 350,000 $ 10,924 49,279,453 $ 49 $ ( 43,270 ) $ 651,416 $ ( 330,921 ) $ 11,042 $ 288,316

The accompanying notes are an integral part of these consolidated financial statements.

ACACIA RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Years Ended December 31,

Cash flows from operating activities:

Net income (loss) including noncontrolling interests in subsidiaries

Adjustments to reconcile net income (loss) including noncontrolling interests in subsidiaries to net cash provided by (used in) operating activities:

Change in fair value of investment, net (Note 6)

Loss (gain) on sale of investment (Note 6)

Impairment of other investment

Gain on disposal of other investment (Note 6)

Net income including noncontrolling interests in subsidiaries $ 150,365 $ 109,231

Adjustments to reconcile net income including noncontrolling interests in subsidiaries to net cash provided by (used in)

operating activities:

Change in fair value of investment, net 2,752 ( 5,474 )

Gain on sale of investment ( 3,591 ) ( 8,187 )

Depreciation and amortization 10,688 4,800

Amortization of debt discount and issuance costs 110 7,051

Change in fair value of Series A redeemable convertible preferred stock embedded derivative

Change in fair value of Series A redeemable convertible preferred stock embedded derivatives ( 8,280 ) 8,754

Change in fair value of Series A warrants 4,651 3,072

Change in fair value of Series B warrants 44,037 46,412

Non-cash stock compensation

Compensation expense for share-based awards 2,053 1,662

Loss on foreign currency exchange 89 4,905

Change in fair value of trading securities and equity securities - private

Gain on sale of trading securities

Change in fair value of equity securities ( 87,527 ) ( 176,173 )

Gain on sale of equity securities ( 116,129 ) ( 7,352 )

Gain on sale of prepaid investment and derivative — ( 2,845 )

Earnings on equity investment in joint venture ( 3,530 ) —

Changes in assets and liabilities:

Accounts receivable ( 747 ) 5

Inventories 1,906 —

Prepaid expenses and other assets ( 78 ) ( 2,919 )

1 unchanged sentence

Royalties and contingent legal fees payable 301 ( 16 )

Net cash used in operating activities

Deferred revenue ( 246 ) —

Deferred income tax liabilities 15,742 —

Net cash provided by (used in) operating activities 13,326 ( 19,620 )

Cash flows from investing activities:

Acquisition, net of cash acquired (Note 3) ( 33,250 ) —

Patent acquisition ( 21,000 ) ( 13,780 )

Sale of investment at fair value (Note 6)

Sale of other investments (Note 6)

Purchases of trading securities

Maturities and sales of trading securities

Acquisition of LF Equity Income Fund equity securities

Sale of investment at fair value 3,591 12,409

Purchases of equity securities ( 66,624 ) ( 46,492 )

Sales of equity securities 154,784 228,873

Maturities and sales of debt securities — 118,459

Cash distributed for notes receivable ( 4,021 ) —

Acquisition of Life Sciences Portfolio equity securities — ( 280,263 )

Distributions received from equity investment in joint venture 2,362 —

Distributions to noncontrolling interests in operating subsidiary — ( 409 )

Purchases of property and equipment ( 91 ) ( 199 )

Net cash provided by (used in) investing activities

Net cash provided by investing activities 35,751 18,598

Cash flows from financing activities:

1 unchanged sentence

Issuance of Senior Secured Notes, net of lender fee 115,000 110,437

Paydown of Senior Secured Notes ( 50,000 ) —

Senior Secured Notes issuance costs paid to other parties — ( 496 )

Dividend on Series A Redeemable Convertible Preferred Stock ( 1,452 ) ( 1,382 )

Issuance of Series A redeemable convertible preferred stock and Series A warrants, net of issuance costs

Issuance of Series B warrants — 4,600

1 unchanged sentence

Net cash provided by financing activities 59,738 109,209

Increase (decrease) in cash and cash equivalents and restricted cash

Increase in cash and cash equivalents and restricted cash 108,815 108,187

Cash and cash equivalents and restricted cash, beginning 200,546 92,359

Cash and cash equivalents and restricted cash, ending $ 309,361 $ 200,546

The accompanying

notes are an integral part of these consolidated financial statements

ACACIA RESEARCH

CONSOLIDATED FINANCIAL STATEMENTS

Supplemental schedule of cash flow information:

Interest paid $ 7,336 $ 1,259

Income taxes paid (refunded) 25 ( 3,482 )

Noncash investing and financing activities:

Patent acquisition in exchange of notes receivable 4,000 —

Patent acquisition accrued liabilities 5,000 —

Distribution to noncontrolling interests in subsidiaries 1,168 —

The accompanying notes are an integral part of these consolidated financial statements

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DESCRIPTION OF BUSINESS

As used herein, “we,”

“us,”

“our,”

“Acacia”

and the “Company”

refer to Acacia Research Corporation and/or its wholly and majority-owned and controlled operating subsidiaries, and/or where

applicable, its management.

Acacia acquires businesses and operating assets

that the Company believes to be undervalued and where the Company believes it can leverage its resources and skill sets to realize and

unlock value.

The Company intends to leverage its (i) access to flexible capital that can be deployed unconditionally, (ii) expertise

in corporate governance and operational restructuring, (iii) willingness to invest in out of favor industries and businesses that suffer

from a complexity discount and untangle complex, multi-factor situations, and (iv) expertise and relationships in certain sectors, to

complete strategic acquisitions of businesses, divisions, and/or assets with a focus on mature technology, healthcare, industrial and

certain financial segments.

Acacia seeks to identify opportunities where the Company believes it is an advantaged buyer, where the Company

can avoid structured sale processes and create the opportunity to purchase businesses, divisions and/or assets of companies at an attractive

price due to the Company’s unique capabilities, relationships, or expertise, or where Acacia believes the target would be worth

more to the Company than to other buyers.

Acacia operates its business based on three

key principles of People, Process and Performance and have built a management team with identified expertise in Research, Execution

and Operation of the Company’s targeted acquisitions.

Acacia, through

its operating subsidiaries, also currently engages in its legacy business of investing in, licensing and enforcing patented technologies.

Acacia’s operating subsidiaries partner with inventors and patent owners, applying their legal and technology expertise

to patent assets to unlock the financial value in their patented inventions.

In recent years, Acacia has also invested in technology

Acacia leverages its experience, expertise, data and relationships developed as a leader in the IP industry to pursue

these opportunities.

In some cases, these opportunities will complement and/or supplement Acacia’s primary licensing and

enforcement business.

Acacia’s

operating subsidiaries generate revenues and related cash flows from the granting of IP rights for the use of patented technologies

that its operating subsidiaries control or own.

Acacia’s operating subsidiaries assist patent owners with the prosecution

and development of their patent portfolios, the protection of their patented inventions from unauthorized use, the generation

of licensing revenue from users of their patented technologies and, where necessary, with the enforcement against unauthorized

users of their patented technologies through the filing of patent infringement litigation.

Acacia’s

operating subsidiaries are principals in the licensing and enforcement effort, obtaining control of the rights in the patent portfolio,

or control of the patent portfolio outright.

Acacia’s operating subsidiaries own or control the rights to multiple patent

portfolios, which include U.S.

patents and certain foreign counterparts, covering technologies used in a wide variety of industries.

Neither Acacia

nor its operating subsidiaries invent new technologies or products;

rather, Acacia depends upon the identification and investment

in new patents, inventions and companies that own IP through its relationships with inventors, universities, research institutions,

technology companies and others.

If Acacia’s operating subsidiaries are unable to maintain those relationships and identify

and grow new relationships, then they may not be able to identify new technology-based opportunities for sustainable revenue and/or

revenue growth.

During fiscal

year 2020, Acacia obtained control of five new patent portfolios.

During fiscal

year 2019, Acacia obtained control of four new patent portfolios.

Acacia was incorporated

on January 25, 1993 under the laws of the State of California.

In December 1999, Acacia changed its state of incorporation from

California to Delaware.

OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements and accompanying notes are prepared on the accrual basis of accounting in

accordance with generally accepted accounting principles in the United States of America ("U.S.

of Consolidation.

The accompanying consolidated financial statements include the accounts of Acacia and its wholly and majority-owned

and controlled subsidiaries.

Material intercompany transactions and balances have been eliminated in consolidation.

Noncontrolling

interests in Acacia’s majority-owned and controlled operating subsidiaries (“noncontrolling interests”) are

separately presented as a component of stockholders’

Consolidated net income or (loss) is adjusted to include the

net (income) or loss attributed to noncontrolling interests in the consolidated statements of operations.

Refer to the accompanying

consolidated statements of Series A redeemable convertible preferred stock and stockholders’

equity for total noncontrolling

In 2020, in connection with the transaction

with Link Fund Solutions Limited, which is more fully described in Note 17, the Company acquired equity securities of Malin J1

Limited (“MalinJ1”).

MalinJ1 is included in the Company’s consolidated financial statements because the Company,

through its interest in the equity securities of MalinJ1, has the ability to control the operations and activities of MalinJ1.

Viamet HoldCo LLC, a Delaware limited liability company and wholly-owned subsidiary of Acacia (see Note 17), is the majority shareholder

A wholly owned

subsidiary of Acacia is the general partner of the Acacia Intellectual Property Fund, L.P.

(the “Acacia IP Fund”),

which was formed in August 2010.

The Acacia IP Fund is included in the Company’s consolidated financial statements since

2010, as Acacia’s wholly owned subsidiary, as the general partner, has the ability to control the operations and activities

of the Acacia IP Fund.

Acacia Research Corporation (the “Company,” “we,” “us,” or "our") is a permanent capital platform that purchases businesses based on the differentials between public and private market valuations.

We use a wide range of transactional and operational capabilities to realize the intrinsic value in the businesses that we acquire.

Our ideal transactions include the acquisition of public or private companies, the acquisition of divisions of other companies, or structured transactions that can result in the recapitalization or restructuring of the ownership of a business to enhance value.

Our focus to date has been on companies with market values in the sub-$2 billion range and particularly on businesses valued at $1 billion or less.

We are, however, opportunistic, and may pursue acquisitions that are larger under the right circumstance.

We operate our business based on three key principles of People, Process and Performance and have built a management team with demonstrated expertise in Research, Transactions and Execution, and Operations and Management of our targeted acquisitions.

We utilized these skill sets and resources to acquire a portfolio of equity securities of public and private life science businesses, or the “Life Sciences Portfolio,” in June 2020.

As of December 31, 2021, we have monetized a portion of the portfolio while retaining an interest in a number of operating businesses, including a controlling interest in one of the companies in the portfolio.

Further, some of the businesses in which we continue to hold an interest generate revenues through the receipt of royalties.

Intellectual Property Operations – Patent Licensing, Enforcement and Technologies Business

Acacia invests in intellectual property and related absolute return assets and engages in the licensing and enforcement of patented technologies.

Through our Patent Licensing, Enforcement and Technologies Business we are a principal in the licensing and enforcement of patent portfolios, with our operating subsidiaries obtaining the rights in the patent portfolio or purchasing the patent portfolio outright.

We assume all responsibility for advancing operational expenses while pursuing a patent licensing and enforcement program, and when applicable, share net licensing revenue with our patent partners as that program matures, on a pre-arranged and negotiated basis.

We may also provide upfront capital to patent owners as an advance against future licensing revenue.

Currently, on a consolidated basis, our operating subsidiaries own or control the rights to multiple patent portfolios, which include U.S.

patents and certain foreign counterparts, covering technologies used in a variety of industries.

We generate revenues and related cash flows from the granting of IP rights for the use of patented technologies that our operating subsidiaries control or own.

Our Intellectual Property Operations business depends upon the identification and investment in new patents, inventions and companies that own IP through our relationships with inventors, universities, research institutions, technology companies and others.

If Acacia’s operating subsidiaries are unable to maintain those relationships and identify and grow new relationships, then they may not be able to identify new technology-based opportunities for sustainable revenue and/or revenue growth.

During the year ended December 31, 2021, Acacia obtained control of one new patent portfolio.

During 2020, Acacia obtained control of five new patent portfolios.

Industrial Operations Acquisition

On October 7, 2021, we consummated our first operating company acquisition of Printronix Holding Corporation and subsidiaries (“Printronix”).

Printronix is a leading manufacturer and distributor of industrial impact printers, also known as line matrix printers, and related consumables and services.

The Printronix business serves a diverse group of customers that operate across healthcare, food and beverage, manufacturing and logistics, and other sectors.

This mature technology is known for its ability to operate in hazardous environments.

Printronix has a manufacturing site located in Malaysia and third-party configuration sites located in the United States, Singapore and Holland, along with sales and support locations around the world to support its global network of users, channel partners and strategic alliances.

This acquisition was made

at what we believe to be an attractive purchase price, and we are now supporting existing management in its execution of strategic partnerships to generate growth.

We acquired all of the outstanding stock of Printronix, for a cash purchase price of approximately $ 37.0 million, which included an initial $ 33.0 million cash payment and a $ 4.0 million working capital adjustment.

The Company's consolidated financial statements include Printronix's consolidated operations from October 7, 2021 through December 31, 2021.

Refer to Note 3 for additional information.

COVID-19 Pandemic

The full impact of the COVID-19 pandemic continues to evolve as of the date of this report.

While the Company does not expect the current situation to present direct risks to its business, and it has not had a material impact to date, the COVID-19 pandemic could adversely impact the Company’s operations, as well as the operations of its licensees and other business partners.

Our cash is held in major financial institutions primarily in government instruments.

Our business is fully able to operate in a socially distanced and/or remote capacity and in accordance with applicable laws, policies and best practices.

Our workforce is provided ample paid sick leave, and we have in place robust disaster recovery and business continuity policies that have been revised to account for a long-term remote work contingency such as this.

However, the ongoing pandemic may present risks that we do not currently consider material or risks that may evolve quickly that could have a materially adverse effect on our business, results of operations and financial condition.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Principles

The consolidated financial statements and accompanying notes are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America ("U.S.

Correction of Immaterial Error

In connection with the preparation of the Company’s consolidated financial statements during the year ended December 31, 2021, the Company identified and recorded an adjustment to the current and prior periods related to the estimated amortization period of deferred debt issuance costs.

T he Company evaluated the error a nd determined that the related impact did not materially misstate previously issued consolidated financial statements.

Although the Company concluded that the misstatement was n ot material to its previously issued consolidated financial statements, the Company has determined it is appropriate to revise its previously issued consolidated financial statements to correct for the error .

Refer to Note 20 for additional information including a summary of the adjustments to certain previously reported financial information.

Principles of Consolidation

The consolidated financial statements include the accounts of Acacia and its wholly and majority-owned and controlled subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation.

Noncontrolling interests in Acacia’s majority-owned and controlled operating subsidiaries (“noncontrolling interests”) are separately presented as a component of stockholders’ equity.

Consolidated net income or (loss) is adjusted to include the net (income) or loss attributed to noncontrolling interests in the consolidated statements of operations.

Refer to the Consolidated Statements of Series A Redeemable Convertible Preferred Stock and Stockholders’ Equity for total noncontrolling interests.

In 2020, in connection with the transaction with Link Fund Solutions Limited, which is more fully described in Note 4, the Company acquired equity securities of Malin J1 Limited (“MalinJ1”).

MalinJ1 is included in the Company’s consolidated financial statements because the Company, through its interest in the equity securities of MalinJ1, has the ability to control the operations and activities of MalinJ1.

Viamet HoldCo LLC, a Delaware limited liability company and wholly-owned subsidiary of Acacia, is the majority shareholder of MalinJ1.

A wholly-owned subsidiary of Acacia is the general partner of the Acacia Intellectual Property Fund, L.P.

(the “Acacia IP Fund”), which was formed in August 2010.

The Acacia IP Fund has been included in the Company’s consolidated financial statements since 2010, as Acacia’s wholly-owned subsidiary, the general partner of Acacia IP Fund, has the ability to

control the operations and activities of the Acacia IP Fund.

The Acacia IP Fund was terminated as of December 31, 2017 and dissolved in 2020.

Segment Reporting

The Company uses the management approach, which designates the internal organization that is used by management for making operating decisions and assessing performance as the basis of the Company’s reportable segments.

Refer to Note 19 for additional information regarding our two reportable business segments:

Intellectual Property Operations and Industrial Operations.

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from these estimates.

Acacia believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, estimates of variable consideration for revenue, including sales returns, the valuation of equity securities without readily determinable fair value, the determination of excess and obsolete inventories, bad debt allowances and product warranty liabilities, the valuation of Series A redeemable convertible preferred stock (the “Series A Redeemable Convertible Preferred Stock”), embedded derivatives, Series A warrants (the “Series A Warrants”) and Series B warrants (the “Series B Warrants”), stock-based compensation expense, impairment of goodwill, patent-related and other intangible assets, the determination of the economic useful life of amortizable intangible assets, and income taxes and valuation allowances against net deferred tax assets, require its most difficult, subjective or complex judgments.

Revenue Recognition

Revenue is recognized upon transfer of control of promised bundled IP rights (hereinafter “IP Rights”) and other

contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive in exchange

for those IP Rights.

Revenue contracts that provide promises to grant the right to use IP Rights as they exist at the point in

time at which the IP Rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue

is recognized at the point in time that the applicable performance obligations are satisfied and all other revenue recognition

criteria have been met.

For the periods

presented, revenue contracts executed by the Company primarily provided for the payment of contractually determined, one-time,

paid-up license fees in consideration for the grant of certain IP Rights for patented technologies owned or controlled by Acacia

(“Paid-up Revenue Agreements”).

Revenues also included license fees from sales-based revenue contracts, the majority

of which were originally executed in prior periods, which provide for the payment of quarterly license fees based on quarterly

sales of applicable product units by licensees (“Recurring Revenue Agreements”).

Revenues may also include court ordered

settlements or awards related to our patent portfolio ("Other Settlements") or sales of our patent portfolio ("Sales").

Intellectual Property Operations

Acacia's revenue is recognized upon transfer of control (i.e., by the granting) of promised bundled IP Rights and other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive in exchange for those IP Rights.

Revenue contracts that provide promises to grant the right to use IP Rights as they exist at the point in time at which the IP Rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue is recognized at the point in time that the applicable performance obligations are satisfied and all other revenue recognition criteria have been met.

For the periods presented, revenue contracts executed by Acacia primarily provided for the payment of contractually determined, one-time, paid-up license fees in consideration for the grant of certain IP Rights for patented technologies owned or controlled by Acacia.

Revenues also included license fees from sales-based revenue contracts, the majority of which were originally executed in prior periods, which provide for the payment of quarterly license fees based on quarterly sales of applicable product units by licensees (“Recurring License Revenue Agreements”).

Revenues may also include court ordered settlements or awards related to our patent portfolio or sales of our patent portfolio.

IP Rights granted included the following, as applicable:

(i) the grant of a non-exclusive, retroactive and future license to manufacture

and/or sell products covered by patented technologies, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain

claims, and (iv) the dismissal of any pending litigation.

The IP Rights granted were perpetual in nature, extending until the

legal expiration date of the related patents.

The individual IP Rights are not accounted for as separate performance obligations,

as (i) the nature of the promise, within the context of the contract, is to transfer combined items to which the promised IP Rights

are inputs and (ii) the Company's promise to transfer each individual IP right described above to the customer is not separately

identifiable from other promises to transfer IP Rights in the contract.

Since the promised

IP Rights are not individually distinct, the Company combined each individual IP right in the contract into a bundle of IP rights

that is distinct, and accounted for all of the IP Rights promised in the contract as a single performance obligation.

The IP Rights

granted were “functional IP rights”

that have significant standalone functionality.

Acacia's subsequent activities

do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has

Acacia’s operating subsidiaries have no further obligation with respect to the grant of IP Rights, including no

express or implied obligation to maintain or upgrade the technology, or provide future support or services.

The contracts provide

for the grant (i.e., transfer of control) of the licenses, covenants-not-to-sue, releases, and other significant deliverables

upon execution of the contract.

Licensees legally obtain control of the IP Rights upon execution of the contract.

earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and

all other revenue recognition criteria have been met.

Revenue contracts generally provide for payment of contractual amounts with

30-90 days of execution of the contract, or the end of the quarter in which the sale or usage occurs for Recurring Revenue Agreements.

(i) the grant of a non-exclusive, future license to manufacture and/or sell products covered by patented technologies, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation.

The IP Rights granted were generally perpetual in nature, extending until the legal expiration date of the related patents.

The individual IP Rights are not accounted for as separate performance obligations, as (i) the nature of the promise, within the context of the contract, is to grant combined items to which the promised IP Rights are inputs and (ii) the Company's promise to grant each individual IP right described above to the customer is not separately identifiable from other promises to grant IP Rights in the contract.

Since the promised IP Rights are not individually distinct, Acacia combined each individual IP Right in the contract into a bundle of IP Rights that is distinct, and accounted for all of the IP Rights promised in the contract as a single performance obligation.

The IP Rights granted were “functional IP rights” that have significant standalone functionality.

Acacia’s subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights.

Acacia’s operating subsidiaries have no further obligation with respect to the grant of IP Rights, including no express or implied obligation to maintain or upgrade the technology, or provide future support or services.

The contracts provide for the grant of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the contract.

Licensees legally obtain control of the IP Rights upon execution of the

As such, the earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met.

Revenue contracts generally provide for payment of contractual amounts within 15-90 days of execution of the contract, or the end of the quarter in which the sale or usage occurs for Recurring License Revenue Agreements.

Contractual payments made by licensees are generally non-refundable.

For sales-based

royalties, the Company includes in the transaction price some or all of an amount of estimated variable consideration to the extent

that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty

associated with the variable consideration is subsequently resolved.

Notwithstanding, revenue is recognized for a sales-based

royalty promised in exchange for a license of IP Rights when the later of (i) the subsequent sale or usage occurs, or (ii) the

performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied.

Estimates are generally

based on historical levels of activity, if available.

Revenues from

contracts with significant financing components (either explicit or implicit) are recognized at an amount that reflects the price

that a licensee would have paid if the licensee had paid cash for the IP Rights when they transfer to the licensee.

In determining

the transaction price, the Company adjusts the promised amount of consideration for the effects of the time value of money.

a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing

component if the Company expects, at contract inception, that the period between when the entity transfers promised IP Rights

to a customer and when the customer pays for the IP Rights will be one year or less.

the Company is required to make certain judgments and estimates in connection with the accounting for revenue contracts with customers.

Such areas may include identifying performance obligations in the contract, estimating the timing of satisfaction of performance

obligations, determining whether a promise to grant a license is distinct from other promised goods or services, evaluating whether

a license transfers to a customer at a point in time or over time, allocating the transaction price to separate performance obligations,

determining whether contracts contain a significant financing component, and estimating revenues recognized at a point in time

for sales-based royalties.

Revenues were

comprised of the following for the periods presented:

For sales-based royalties from Recurring License Revenue Agreements, Acacia includes in the transaction price some or all of an amount of estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Notwithstanding, revenue is recognized for a sales-based royalty promised in exchange for a license of IP Rights when the later of (i) the subsequent sale or usage occurs, or (ii) the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied.

Estimates are generally based on historical levels of activity, if available.

Revenues from contracts with significant financing components (either explicit or implicit) are recognized at an amount that reflects the price that a licensee would have paid if the licensee had paid cash for the IP Rights when they are granted to the licensee.

In determining the transaction price, Acacia adjusts the promised amount of consideration for the effects of the time value of money.

As a practical expedient, Acacia does not adjust the promised amount of consideration for the effects of a significant financing component if Acacia expects, at contract inception, that the period between when the entity grants promised IP Rights to a customer and when the customer pays for the IP Rights will be one year or less.

In general, Acacia is required to make certain judgments and estimates in connection with the accounting for revenue contracts with customers.

Such areas may include identifying performance obligations in the contract, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct from other promised goods or services, evaluating whether a license transfers to a customer at a point in time or over time, allocating the transaction price to separate performance obligations, determining whether contracts contain a significant financing component, and estimating revenues recognized at a point in time for sales-based royalties.

License revenues were comprised of the following for the periods presented:

Years Ended December 31,

(In thousands)

Paid-up Revenue Agreements

Recurring Revenue Agreements

Total Revenue

Refer to “Inventor

Royalties and Contingent Legal Expenses”

below for information on related direct costs of revenues.

Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and

enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent

counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting

and other expenses paid to third-parties and the amortization of patent-related investment costs.

These costs are included under

the caption “Portfolio operations”

in the accompanying consolidated statements of operations.

Royalties and Contingent Legal Expenses.

Inventor royalties are expensed in the consolidated statements of operations in the

period that the related revenues are recognized.

In certain instances, pursuant to the terms of the underlying inventor agreements,

upfront advances paid to patent owners by Acacia’s operating subsidiaries are recoverable from future net revenues.

costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents,

or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense

in the consolidated statements of operations.

Any unamortized upfront advances recovered from net revenues are expensed in the

period recovered and included in amortization expense in the consolidated statements of operations.

There were no patent acquisition

expenses for the years ended December 31, 2020 and 2019.

Contingent legal

fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized.

where there are no recoveries from potential infringers, no contingent legal fees are paid;

however, Acacia’s operating

subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement.

Fair Value Measurements.

defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability

in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and

also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available.

to Note 14 to our notes to consolidated financial statements for more information related to our fair value measurement.

Cash Equivalents .

Acacia considers all highly liquid, trading securities with original maturities of three months or less

when purchased to be cash equivalents.

For the periods presented, Acacia’s cash equivalents are comprised of investments

in AAA rated money market funds that invest in first-tier only securities, which primarily includes:

domestic commercial paper,

securities issued or guaranteed by the U.S.

government or its agencies, U.S.

bank obligations, and fully collateralized repurchase

Acacia’s cash equivalents are measured at fair value using quoted prices that represent Level 1 inputs.

Restricted Cash .

Long-term restricted cash relates to the proceeds received from the issuance of Series A redeemable convertible

preferred stock (the “Series A Redeemable Convertible Preferred Stock”) which are held in an escrow account.

are to be released to the Company upon, among other things, (i) the consummation of a suitable investment or acquisition by the

Company or (ii) the conversion of Series A Redeemable Convertible Preferred Stock into common stock (see Note 16).

Trading Securities- Debt.

in debt securities are reported at fair value on a recurring basis, with related realized and unrealized gains and losses recorded

in the consolidated statements of operations in other income (expense).

Realized and unrealized gains and losses are recorded based

on the specific identification method.

Interest is included in other income (expense).

Trading Securities - Equity.

in equity securities are reported at fair value on a recurring basis, with related realized and unrealized gains and losses in

the value of such securities recorded in the consolidated statements of operations in other income (expense).

Dividend income is

included in other income (expense).

Investment Securities

Private Equity.

As the private company equity securities do not have readily determinable fair value, we have elected

to report them under the measurement alternative.

They are reported at cost minus impairment, if any, plus or minus changes resulting

from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

The fair values

of the private company securities were estimated based on recent financing transactions and secondary market transactions and factoring

in any adjustments for illiquidity or preference of these securities.

Changes in fair value are reported in the consolidated statements

of operations in other income (expense).

Paid-up license revenue agreements $ 73,585 $ 28,389

Recurring License Revenue Agreements 2,458 1,393

Total $ 76,043 $ 29,782

Industrial Operations

Printronix recognizes revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration which it expects to receive for providing those goods or services.

To determine the transaction price, Printronix estimates the amount of consideration to which it expects to be entitled in exchange for transferring promised goods or services to a customer.

Elements of variable consideration are estimated at the time of sale which primarily include product rights of return, rebates, price protection and other incentives that occur under established sales programs.

These estimates are developed using the expected value or the most likely amount method and are reviewed and updated, as necessary, at each reporting period.

Revenues, inclusive of variable consideration, are recognized to the extent it is probable that a significant reversal recognized will not occur in future periods.

The provision for returns and sales allowances is determined by an analysis of the historical rate of returns and sales allowances over recent quarters, and adjusted to reflect management’s future expectations.

Printronix enters into contract arrangements that may include various combinations of tangible products (which include printers, consumables and parts) and services, which are generally capable of being distinct and accounted for as separate performance obligations.

Printronix evaluates whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract has more than one performance obligation.

This evaluation requires judgement, and the decision to combine a group of contracts or separate the combined or single contract into multiple distinct performance obligations may impact the amount of revenue recorded in a reporting period.

Printronix deems performance obligations to be distinct if the customer can benefit from the product or service on its own or together

with readily available resources (i.e.

capable of being distinct) and if the transfer of products or services is separately identifiable from other promises in the contract (i.e.

distinct within the context of the contract).

For contract arrangements that include multiple performance obligations, Printronix allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices for each performance obligation.

In general, standalone selling prices are observable for tangible products and standard software while standalone selling prices for repair and maintenance services are developed with an expected cost-plus margin or residual approach.

Regional pricing, marketing strategies and business practices are evaluated to derive the estimated standalone selling price using a cost-plus margin methodology.

Printronix recognizes revenue for each performance obligation upon transfer of control of the promised goods or services.

Control is deemed to have been transferred when the customer has the ability to direct the use of and has obtained substantially all of the remaining benefits from the goods and services.

The determination of whether control transfers at a point in time or over time requires judgment and includes consideration of the following:

1) the customer simultaneously receives and consumes the benefits provided as Printronix performs its promises, 2) the performance creates or enhances an asset that is under control of the customer, 3) the performance does not create an asset with an alternative use to Printronix, and 4) Printronix has an enforceable right to payment for its performance completed to date.

Revenues for products are generally recognized upon shipment, whereas revenues for services are generally recognized over time, assuming all other criteria for revenue recognition have been met.

Incremental costs of obtaining a contract are expensed as incurred.

Service revenue commissions are tied to the revenue recognized during the current year of the related sale.

Printronix offers printer-maintenance services through service agreements that customers may purchase separately from the printer.

These agreements commence upon expiration of the standard warranty period.

Printronix provides the point-of-customer-contact, dispatches calls and sells the parts used for printer repairs to service providers.

Printronix contracts third parties to perform the on-site repair services at the time of sale which covers the period of service at a set amount.

The maintenance service agreements are separately priced at a stand-alone value.

For those transactions in which maintenance service agreements are purchased concurrently with the purchase of printers, the revenue is deferred based on the selling price, which approximates the stand-alone value for separately sold maintenance services agreements.

Revenue from maintenance service contracts are recognized on a straight-line basis over the period of each individual contract, which is consistent with the pattern in which the benefit is consumed by the customer.

Printronix's net revenues from October 7, 2021 through December 31, 2021 were comprised of the following (in thousands):

Printers, consumables and parts $ 10,934

Services 1,070

Total $ 12,004

Refer to Note 19 for additional information regarding net sales to customers by geographic region.

Deferred revenue on the consolidated balance sheets represents a contract liability under Accounting Standards Codification (“ASC”) 606 and consists of payments and billings in advance of the performance.

Printronix recognized approximately $ 800,000 in revenue that was previously included in the beginning balance (October 7, 2021) of deferred revenue during the period from October 7, 2021 through December 31, 2021.

Printronix's payment terms vary by the type and location of its customers and the products, solutions or services offered.

The time between invoicing and when payment is due is not significant.

In instances where the timing of revenue recognition differs from the timing of invoicing, Printronix has determined that its contracts do not include a significant financing component.

Printronix's remaining performance obligations, following the transfer of products to customers, primarily relate to repair and support services.

The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $ 772,000 , inclusive of deferred revenue, as of December 31, 2021.

On average, remaining performance obligations as of December 31, 2021 are expected to be recognized over a period of approximately two years .

Cost of Revenues

Intellectual Property Operations

Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to original patent owners, patent maintenance and prosecution costs, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs.

Cost of revenues were comprised of the following for the periods presented:

Years Ended December 31,

(In thousands)

Inventor royalties $ 1,142 $ 7,349

Contingent legal fees 12,074 7,419

Litigation and licensing expenses 5,462 5,683

Amortization of patents 9,851 4,681

Other patent portfolio expense (income) 162 ( 308 )

Total $ 28,691 $ 24,824

Inventor Royalties and Contingent Legal Expenses

Inventor royalties are expensed in the consolidated statements of operations in the period that the related revenues are recognized.

Patent costs, including any upfront advances paid to patent owners by Acacia’s operating subsidiaries, that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the consolidated statements of operations.

Any unamortized upfront advances recovered from net revenues are expensed in the period recovered and included in amortization expense in the consolidated statements of operations.

Contingent legal fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized.

In instances where there are no recoveries from potential infringers, no contingent legal fees are paid;

however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement.

Inventor royalty and contingent legal agreements generally provide for payment by the Company of contractual amounts 30 days subsequent to the quarter end during which related license fee payments are received from licensees by the Company.

Industrial Operations

Included in cost of sales are inventory costs (refer to " Inventories " below), indirect labor, overhead and warranty costs.

Printronix offers both assurance-type and service-type product warranties with varying terms depending on the product, region and customer contracts.

Warranty periods range from three months to two years .

The provision for warranty costs is determined by applying the historical claims experience and estimated repair costs to the outstanding units under warranty.

The following is a summary of the accrued warranty liabilities for the period from October 7, 2021 through December 31, 2021, which are included in accrued expenses and other current liabilities, and other long-term liabilities in the consolidated balance sheet as of December 31, 2021 (in thousands):

Beginning balance (October 7, 2021) $ 260

Estimated future warranty expense 17

Warranty claims settled ( 55 )

Ending balance $ 222

Concentrations

Intellectual Property Operations

Financial instruments that potentially subject Acacia to concentrations of credit risk are cash equivalents and accounts receivable.

Acacia places its cash equivalents primarily in highly rated money market funds and investment grade marketable securities.

Cash and cash equivalents are also invested in deposits with certain financial institutions and may, at times, exceed federally insured limits.

Acacia has not experienced any significant losses on its deposits of cash and cash equivalents.

Two licensees individually accounted for 66 % and 16 % of revenues recognized during the year ended December 31, 2021.

Three licensees individually accounted for 64 %, 10 % and 7 % of revenues recognized during the year ended December 31, 2020.

Historically, Acacia has not had material foreign operations.

Based on the jurisdiction of the entity obligated to satisfy payment obligations pursuant to the applicable license revenue arrangement, for the years ended December 31, 2021 and 2020, 69 % and 8 %, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions.

During the fourth quarter of 2021, Acacia generated substantial revenue from a paid-up licensee domiciled in an Asia-Pacific country.

Refer to Note 19 for additional information regarding revenue from customers by geographic region.

Two licensees individually represented approximately 59 % and 41 % of accounts receivable at December 31, 2021.

Two licensees individually represented approximately 62 % and 21 % of accounts receivable at December 31, 2020.

Industrial Operations

No single Printronix customer accounted for more than 10% of revenue during the period from October 7, 2021 through December 31, 2021.

Printronix has foreign operations, refer to Note 19 for additional information regarding net sales to customers by geographic region.

Accounts receivable from one customer represented 11 % of accounts receivable as of December 31, 2021.

Exposure to credit risk is limited by the large number of customers comprising the remainder of the Printronix customer base and by periodic customer credit evaluations performed by Printronix.

No Printronix vendor accounted for 10% or more of purchases during the period from October 7, 2021 through December 31, 2021.

Accounts payable to one vendor represented 14 % of accounts payable as of December 31, 2021.

Cash and Cash Equivalents

Acacia considers all highly liquid securities with original maturities of three months or less when purchased to be cash equivalents.

For the periods presented, Acacia’s cash equivalents are comprised of investments in AAA rated money market funds that invest in first-tier only securities, which primarily include domestic commercial paper and securities issued or guaranteed by the U.S.

government or its agencies.

Equity Securities at Fair Value

Investments in equity securities are reported at fair value on a recurring basis, with related realized and unrealized gains and losses in the value of such securities recorded in the consolidated statements of operations in other income or (expense).

Dividend income is included in other income or (expense).

Refer to Note 11 for additional information related to fair value measurements.

Equity securities at fair value for the periods presented were comprised of the following:

Security Type Cost Gross

Loss Fair Value

(In thousands)

December 31, 2021:

Equity securities - Life Sciences Portfolio (Note 4) $ 56,037 $ 262,811 $ ( 1,488 ) $ 317,360

Equity securities 43,822 2,068 ( 1,472 ) 44,418

Total $ 99,859 $ 264,879 $ ( 2,960 ) $ 361,778

December 31, 2020:

Equity securities - Life Sciences Portfolio (Note 4) $ 32,765 $ 72,689 $ ( 583 ) $ 104,871

Equity securities 4,086 1,410 ( 1,264 ) 4,232

Total $ 36,851 $ 74,099 $ ( 1,847 ) $ 109,103

Debt Securities

Investments in debt securities were reported at fair value on a recurring basis, with related realized and unrealized gains and losses recorded in the consolidated statements of operations in other income or (expense).

Realized and unrealized gains and losses were recorded based on the specific identification method.

Interest is included in other income or (expense).

During the year ended December 31, 2020, we sold our investments in debt securities, resulting in proceeds from the sales and maturities of $ 118.5 million.

Equity Securities Without Readily Determinable Fair Value

For equity securities that do not have a readily determinable fair value, the Company elected to report them under the measurement alternative.

They are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

The fair values of the private company securities were estimated based on recent financing transactions and secondary market transactions and factoring in any adjustments for illiquidity or preference of these securities.

Changes in fair value are reported in the consolidated statements of operations in other income or (expense).

To date, the Company has not recorded any impairments nor upward or downward adjustments on our equity securities without readily determinable fair values held as of December 31, 2021.

Refer to Note 4 for additional information.

Equity Method Investments

Equity investments in common stock and in-substance common stock without readily determinable fair values in companies over which the Company has the ability to exercise significant influence, are accounted for using the equity method of accounting.

Acacia includes its proportionate share of earnings and/or losses of its equity method investees in earnings on equity investment in joint venture in the consolidated statements of operations.

Refer to Note 4 for additional information.

Investments in preferred stock with substantive liquidation preferences are accounted for at cost, (subject to impairment considerations, as described below, if any), as adjusted for the impact of changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

In-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity's common stock.

An investment in preferred stock with substantive liquidation preferences over common stock, is not substantially similar to common stock, and therefore is not considered in-substance common stock.

A liquidation preference is substantive if the

investment has a stated liquidation preference that is significant, from a fair value perspective, in relation to the purchase price of the investment.

A liquidation preference in an investee that has sufficient subordinated equity from a fair value perspective is substantive because, in the event of liquidation, the investment will not participate in substantially all of the investee's losses, if any.

The initial determination of whether an investment is substantially similar to common stock is made on the initial date of investment if the Company has the ability to exercise significant influence over the operating and financial policies of the investee.

That determination is reconsidered if (i) contractual terms of the investment are changed, (ii) there is a significant change in the capital structure of the investee, including the investee's receipt of additional subordinated financing, or (iii) the Company obtains an additional interest in an investment, resulting in the method of accounting for the cumulative interest being based on the characteristics of the investment at the date at which the Company obtains the additional interest.

Investment at Fair Value

On an individual investment basis, Acacia may elect to account for investments in companies where the Company has the ability to exercise significant influence over operating and financial policies of the investee, at fair value.

If the fair value method is applied to an investment that would otherwise be accounted for under the equity method of accounting, it is applied to all of the financial interests in the same entity that are eligible items (i.e., common stock and warrants).

We elected the fair value method for our investment in Veritone, Inc.

(“Veritone”) upon acquisition of the investment.

Since March 2021, we have no more investment in Veritone stocks and warrants.

Refer to Note 5 for additional information.

Impairment of Investments

evaluates its investments in marketable and private equity securities for potential impairment, employing a methodology on a quarterly

basis that considers available quantitative and qualitative evidence.

If the cost or carrying value of an investment exceeds its

estimated fair value, the Company evaluates, among other factors, general market conditions, credit quality of instrument issuers,

the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold, or plans

or ability to sell.

Fair value is estimated based on publicly available market information or other estimates determined by management.

Investments are considered to be impaired when a decline in fair value is estimated to be other-than-temporary.

Acacia reviews

impairments associated with its investments in these securities and determines the classification of any impairment as temporary

or other-than-temporary.

An impairment is deemed other-than-temporary unless (a) Acacia has the ability and intent to hold an investment

for a period of time sufficient for recovery of its carrying amount and (b) positive evidence indicating that the investment’s

carrying amount is recoverable within a reasonable period of time outweighs any evidence to the contrary.

All available evidence,

both positive and negative, is considered to determine whether, based on the weight of such evidence, the carrying amount of the

investment is recoverable within a reasonable period of time.

For investments classified as available-for-sale, unrealized losses

that are other-than-temporary are recognized in the consolidated statements of operations.

Concentration

of Credit Risks.

Financial instruments that potentially subject Acacia to concentrations of credit risk are cash equivalents,

trading securities and accounts receivable.

Acacia places its cash equivalents and trading securities primarily in highly rated

money market funds and investment grade marketable securities.

Cash and cash equivalents are also invested in deposits with certain

financial institutions and may, at times, exceed federally insured limits.

Acacia has not experienced any significant losses on

its deposits of cash and cash equivalents.

Three licensees

individually accounted for 64%, 10% and 7%, respectively, of revenues recognized during the year ended December 31, 2020.

licensees individually accounted for 43%, 22% and 15%, respectively, of revenues recognized during the year ended December 31,

Two licensees individually represented approximately 62% and 21%, respectively, of accounts receivable at December 31, 2020.

Two licensees individually represented approximately 70% and 17%, respectively, of accounts receivable at December 31, 2019.

2019, 8% and 39%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions, based on the jurisdiction

of the entity obligated to satisfy payment obligations pursuant to the applicable revenue arrangement.

The Company does not have

any material foreign operations.

performs credit evaluations of its licensees with significant receivable balances, if any, and has not experienced any

significant credit losses.

Accounts receivable are recorded at the executed contract amount and generally do not bear

Acacia reviews its investments quarterly for indicators of other-than-temporary impairment.

This determination requires significant judgment.

In making this judgment, Acacia considers available quantitative and qualitative evidence in evaluating potential impairment of its investments.

If the cost of an investment exceeds its fair value, Acacia evaluates, among other factors, general market conditions and the duration and extent to which the fair value is less than cost.

Acacia also considers specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors.

Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in the consolidated statements of operations and a new cost basis in the investment is established.

Accounts Receivable and Allowance for Doubtful Accounts

Intellectual Property Operations

Acacia performs credit evaluations of its licensees with significant receivable balances, if any, and has not experienced any significant credit losses.

Accounts receivable are recorded at the executed contract amount and generally do not bear interest.

Collateral is not required.

An allowance for doubtful accounts may be established to reflect the Company’s

best estimate of probable losses inherent in the accounts receivable balance, and is reflected as a contra-asset account on

the balance sheet and a charge to operating expenses in the consolidated statements of operations for the applicable period.

An allowance for doubtful accounts may be established to reflect the Company’s best estimate of probable losses inherent in the accounts receivable balance, and is reflected as a contra-asset account on the balance sheets and a charge to general and administrative expenses in the consolidated statements of operations for the applicable period.

The allowance is determined based on known troubled accounts, historical experience, and other currently available evidence.

There was no allowance for doubtful accounts established for the periods presented.

of Financial Instruments.

The carrying value of cash and cash equivalents, restricted cash, accounts receivables, and current

liabilities approximates their fair values due to their short-term maturities.

and Equipment.

There was no allowance for doubtful accounts established as of December 31, 2021 and 2020.

Industrial Operations

Printronix's accounts receivable are recorded at the invoiced amount and do not bear interest.

Printronix performs initial and periodic credit evaluations on customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness.

The allowance for doubtful accounts is determined by evaluating individual customer receivables, based on contractual terms, reviewing the financial condition of customers, and from the historical experience of write-offs.

Receivable losses are charged against the allowance when management believes the account has become uncollectible.

Subsequent recoveries, if any, are credited to the allowance.

As of December 31, 2021, Printronix's combined allowance for doubtful accounts and allowance for sales returns was $ 78,000 .

Printronix's inventories, which include material, labor and overhead costs, are valued at the lower of cost or net realizable value.

Cost is determined at standard cost adjusted on a first-in, first-out basis for variances.

Cost includes shipping and handling fees and other costs, including freight insurance and customs duties for international shipments, which are

subsequently expensed to cost of sales.

Printronix evaluates and records a provision to reduce the carrying value of inventory for estimated excess and obsolete stocks based upon forecasted demand, planned obsolescence and market conditions.

Refer to Note 6 for additional information.

Long-Term Restricted Cash

Restricted cash relates primarily to the proceeds received from the issuance of Series A Redeemable Convertible Preferred Stock which are held in an escrow account (refer to Note 10).

Such amounts were to be released to the Company upon, among other things, (i) the consummation of a suitable investment or acquisition by the Company or (ii) the conversion of Series A Redeemable Convertible Preferred Stock into common stock.

During October 2021, the Company consummated a suitable acquisition, and accordingly $ 35.0 million was released to the Company.

Property, Plant and Equipment

Property and equipment are recorded at cost.

Major additions and improvements that materially extend useful

lives of property and equipment are capitalized.

Major additions and improvements that materially extend useful lives of property and equipment are capitalized.

Maintenance and repairs are charged against the results of operations as incurred.

When these assets are sold or otherwise disposed of, the asset and related depreciation are relieved, and any gain or loss is

included in the consolidated statements of operations for the period of sale or disposal.

Depreciation and amortization is computed

on a straight-line basis over the following estimated useful lives of the assets:

Furniture and

Computer hardware and software

Leasehold improvements

2 to 5 years (Lesser of lease

term or useful life of improvement)

Rental payments

on operating leases are charged to expense in the consolidated statements of operations on a straight-line basis over the lease

Patents include the cost of patents or patent rights (hereinafter, collectively “patents”) acquired from third-parties

or obtained in connection with business combinations.

Patent costs are amortized utilizing the straight-line method over their

remaining economic useful lives, ranging from one to five years.

Company adopted ASC 842 as of January 1, 2019, electing the practical expedient approaches.

The primary impact of adopting ASC

842 for the Company was the recognition in the consolidated balance sheet of certain lease-related assets and liabilities for

operating leases with terms longer than 12 months.

Such amounts were not previously accounted for in the Company's consolidated

balance sheets.

The Company’s leases primarily consist of facility leases which are classified as operating leases.

Company assesses whether an arrangement contains a lease at inception.

The Company recognizes a lease liability to make contractual

payments under all leases with terms greater than twelve months and a corresponding right-of-use asset, representing its right

to use the underlying asset for the lease term.

Upon adoption of ASC 842 on January 1, 2019, the carrying value of certain lease

related liabilities for its excess of lease payments over anticipated sublease income existing at that date, was offset against

the related right-of-use assets.

Lease expense is recognized on a straight-line basis over the lease term.

at Fair Value .

On an individual investment basis, Acacia may elect to account for investments in companies where the Company

has the ability to exercise significant influence over operating and financial policies of the investee, at fair value.

fair value option is applied to an investment that would otherwise be accounted for under the equity method of accounting, it

is applied to all of the financial interests in the same entity that are eligible items (i.e., common stock and warrants).

Investments - equity method investments .

Equity investments in common stock and in-substance common stock without readily

determinable fair values in companies over which the Company has the ability to exercise significant influence, are accounted

for using the equity method of accounting.

Acacia includes its proportionate share of earnings and/or losses of its equity

method investees in equity in earnings (losses) of investee in the consolidated statements of operations.

in preferred stock with substantive liquidation preferences are accounted for at cost, (subject to impairment considerations,

as described below, if any), as adjusted for the impact of changes resulting from observable price changes in orderly transactions

for identical or similar investments of the same issuer.

In-substance common stock is an investment in an entity that has risk

and reward characteristics that are substantially similar to that entity's common stock.

An investment in preferred stock with

substantive liquidation preferences over common stock, is not substantially similar to common stock, and therefore is not considered

in-substance common stock.

A liquidation preference is substantive if the investment has a stated liquidation preference that

is significant, from a fair value perspective, in relation to the purchase price of the investment.

A liquidation preference in

an investee that has sufficient subordinated equity from a fair value perspective is substantive because, in the event of liquidation,

the investment will not participate in substantially all of the investee's losses, if any.

The initial determination of whether an

investment is substantially similar to common stock is made on the initial date of investment if the Company has the ability to

exercise significant influence over the operating and financial policies of the investee.

That determination is reconsidered if

(i) contractual terms of the investment are changed, (ii) there is a significant change in the capital structure of the investee,

including the investee's receipt of additional subordinated financing, or (iii) the Company obtains an additional interest in

an investment, resulting in the method of accounting for the cumulative interest being based on the characteristics of the investment

at the date at which the Company obtains the additional interest.

When these assets are sold or otherwise disposed of, the asset and related depreciation are relieved, and any gain or loss is included in the consolidated statements of operations for the period of sale or disposal.

Refer to Note 7 for additional information.

Depreciation and amortization is computed on a straight-line basis over the following estimated useful lives of the assets:

Machinery and equipment 2 to 10 years

Furniture and fixtures 3 to 5 years

Computer hardware and software 3 to 5 years

Leasehold improvements 2 to 5 years (Lesser of lease term or useful life of improvement)

Goodwill and Other Intangible Assets

Goodwill represents the excess of the acquisition price of a business over the fair value of identified net assets of that business.

We evaluate goodwill for impairment at least annually.

When evaluating goodwill for impairment, we estimate the fair value of the reporting unit.

Several methods may be used to estimate a reporting unit’s fair value, including, but not limited to, discounted projected future net earnings or net cash flows and multiples of earnings.

If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, then the excess is charged to earnings as an impairment loss.

Refer to Notes 3 and 8 for additional information.

of Long-lived Assets.

Acacia reviews long-lived assets and intangible assets for potential impairment annually (quarterly

for patents) and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the

asset, an impairment loss is recorded equal to the excess of the asset’s carrying value over its fair value.

is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available.

If quoted market

prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of

estimated future cash flows.

In the event that management decides to no longer allocate resources to a patent portfolio, an impairment

loss equal to the remaining carrying value of the asset is recorded.

Acacia's patents include the cost of patents or patent rights acquired from third-parties or obtained in connection with business combinations.

Acacia's patent costs are amortized utilizing the straight-line method over their estimated useful lives, ranging from five to ten years .

Refer to Note 8 for additional information.

Fair value is

generally estimated using the “Income Approach,”

focusing on the estimated future net income-producing capability

of the patent portfolios over the estimated remaining economic useful life.

Estimates of future after-tax cash flows are converted

to present value through “discounting,”

including an estimated rate of return that accounts for both the time value

of money and investment risk factors.

Estimated cash inflows are typically based on estimates of reasonable royalty rates for

the applicable technology, applied to estimated market data.

Estimated cash outflows are based on existing contractual obligations,

such as contingent legal fee and inventor royalty obligations, applied to estimated license fee revenues, in addition to other

estimates of out-of-pocket expenses associated with a specific patent portfolio’s licensing and enforcement program.

analysis also contemplates consideration of current information about the patent portfolio including, status and stage of litigation,

periodic results of the litigation process, strength of the patent portfolio, technology coverage and other pertinent information

that could impact future net cash flows.

Printronix's intangible assets consist of trade names and trademarks, patents and customer and distributor relationships.

These definite-lived intangible assets, at the time of acquisition, are recorded at fair value and are stated net of accumulated amortization.

Printronix currently amortizes the definite-lived intangible assets on a straight-line basis over their estimated useful lives of seven years .

Refer to Notes 3 and 8 for additional information.

The Company’s leases primarily consist of facility leases which are classified as operating leases.

The Company assesses whether an arrangement contains a lease at inception.

The Company recognizes a lease liability to make contractual payments under all leases with terms greater than twelve months and a corresponding right-of-use asset, representing its right to use the underlying asset for the lease term.

Lease expense is recognized on a straight-line basis over the lease term.

Refer to Note 13 for additional information.

Impairment of Long-lived Assets

The Company reviews long-lived assets, patents and other intangible assets for potential impairment annually (quarterly for patents) and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of

the asset, an impairment loss is recorded in an amount equal to the excess of the asset’s carrying value over its fair value.

If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available.

If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows.

In the event that management decides to no longer allocate resources to a patent portfolio, an impairment loss equal to the remaining carrying value of the asset is recorded.

Fair value is generally estimated using the “Income Approach,” focusing on the estimated future net income-producing capability of the patent portfolios over their estimated remaining economic useful life.

Estimates of future after-tax cash flows are converted to present value through “discounting,” including an estimated rate of return that accounts for both the time value of money and investment risk factors.

Estimated cash inflows are typically based on estimates of reasonable royalty rates for the applicable technology, applied to estimated market data.

Estimated cash outflows are based on existing contractual obligations, such as contingent legal fee and inventor royalty obligations, applied to estimated license fee revenues, in addition to other estimates of out-of-pocket expenses associated with a specific patent portfolio’s licensing and enforcement program.

The analysis also contemplates consideration of current information about the patent portfolio including, status and stage of litigation, periodic results of the litigation process, strength of the patent portfolio, technology coverage and other pertinent information that could impact future net cash flows.

Refer to Note 8 for additional information.

Series A and B Warrants

The fair value of the Series A and B Warrants are estimated using a Black-Scholes option-pricing model.

Refer to Notes 10 and 11 for additional information related to the Series A and B Warrants and their fair value measurements.

Embedded Derivatives

Embedded derivatives that are required to be bifurcated from their host contract are valued separately from the host instrument.

A binomial lattice framework is used to estimate the fair value of the embedded derivative in the Series A Redeemable Convertible Preferred Stock issued by the Company in 2019.

Refer to Notes 10 and 11 for additional information related to the embedded derivatives and their fair value measurements.

Contingent Liabilities

The Company, from time to time, is involved in certain legal proceedings.

Based upon consultation with outside

counsel handling its defense in these matters and the Company’s analysis of potential outcomes, if the Company determines

that a loss arising from such matters is probable and can be reasonably estimated, an estimate of the contingent liability is

recorded in its consolidated financial statements.

If only a range of estimated loss can be determined, an amount within the range

that, based on estimates, assumptions and judgments, reflects the most likely outcome, is recorded as a contingent liability in

the consolidated financial statements.

In situations where none of the estimates within the estimated range is a better estimate

of probable loss than any other amount, the Company records the low end of the range.

Any such accrual would be charged to expense

in the appropriate period.

Litigation expenses for these types of contingencies are recognized in the period in which the litigation

services were provided.

Certain of Acacia’s

operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights.

In connection with

any of Acacia’s 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 Acacia or its operating subsidiaries or award attorney’s fees and/or expenses

to a defendant(s), which could be material, and if required to be paid by Acacia or its operating subsidiaries, could materially

harm the Company’s operating results and financial position.

Compensation.

The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the

award, and is recognized as an expense on a straight-line basis over the employee’s requisite service period (generally

the vesting period of the equity award).

The fair value of restricted stock and restricted stock units awards is determined by

the product of the number of shares or units granted and the grant date market price of the underlying common stock.

value of each option award is estimated on the date of grant using a Black-Scholes option-pricing model.

Forfeitures are accounted

for as they occur.

stock units granted in September 2019 with market-based vesting conditions vest based upon the Company achieving specified stock

price targets over a three-year period.

The effect of a market condition is reflected in the estimate of the grant-date fair value

of the options utilizing a Monte Carlo valuation technique.

Compensation cost is recognized with a market-based vesting condition

provided that the requisite service is rendered, regardless of when, if ever, the market condition is satisfied.

Assumptions utilized

in connection with the Monte Carlo valuation technique included:

estimated risk-free interest rate of 1.38 percent;

expected volatility of 38 percent;

and expected dividend yield of 0 percent.

The risk-free interest rate was determined

based on the yields available on U.S.

Treasury zero-coupon issues.

The expected stock price volatility was determined using historical

The expected dividend yield was based on expectations regarding dividend payments.

Profits Interest

Units (“Units”) are accounted for in accordance with Accounting Standards Codification (“ASC”) 718-10,

“Compensation - Stock Compensation.”

The Units vest as described at Note 9, and therefore, the vesting conditions

do not meet the definition of service, market or performance conditions, as defined in ASC 718.

As such, the Units are classified

as liability awards.

Liability classified awards are measured at fair value on the grant date and re-measured each reporting period

at fair value until the award is settled.

Compensation expense is adjusted each reporting period for changes in fair value prorated

for the portion of the requisite service period rendered.

Initially, compensation expense was recognized on a straight-line basis

over the employee’s requisite service period (generally the vesting period of the equity award) which was five years.

full vesting of the award, which occurred during the three months ended September 30, 2017, previously unrecognized compensation

expense was immediately recognized in the period, and will continue to be fully recognized for any changes in fair value, until

the Units are settled.

The Company has a purchase option to purchase the vested Units that are not otherwise forfeited after termination

of continuous service.

The exercise price of the purchase option is the fair market value of the Units on the date of termination

of continuous service.

At each reporting date, the value of the Units that are subject to the purchase option will be the measured

at the fair value on the termination date.

Non-cash stock compensation expense related to the Units is reflected in general and

administrative expense in the accompanying consolidated statements of operations.

Series A Warrants.

fair value of the Series A warrants (the “Series A Warrants”) is estimated using a Black-Scholes option-pricing model.

fair value of the Series A Warrants as of December 31, 2020 was estimated based on the following assumptions:

volatility of 29 percent,

risk-free rate of 0.62 percent, term of 6.79 years and a dividend yield of 0 percent.

The fair value of the Series A Warrants as of December

31, 2019 was estimated based on the following assumptions:

volatility of 30 percent, risk-free rate of 1.85 percent, term of 7.79 years

and a dividend yield of 0 percent.

Refer to Notes 16 for additional information.

The fair value of the Series B Warrants is estimated using Monte Carlo valuation technique.

The fair value of

the Series B Warrants as of December 31, 2020 was estimated based on event probabilities of future exercise scenarios and the

following weighted-average assumptions:

(1) volatility of 29 percent, risk-free rate of 0.63 percent, term of 6.87 years, a dividend

yield of 0 percent, and a discount for lack of marketability of 10 percent, and (2) volatility of 50 percent, risk-free rate of

0.12 percent, term of 1.65 years and a dividend yield of 0 percent, and a discount for lack of marketability of 10 percent.

to Notes 16 for additional information.

derivatives .

Embedded derivatives that are required to be bifurcated from their host contract are valued separately from host

A binomial lattice framework is used to estimate the fair value of the embedded derivative in the Series A Redeemable

Convertible Preferred Stock.

Refer to Notes 16 for additional information.

model utilizes the Tsiveriotis and Fernandes (“TF”) implementation in which a convertible instrument is split into

two separate components:

a cash-only component which is subject to the selected risk-adjusted discount rate and an equity component

which is subject only to the risk-free rate.

The model considers the (i) implied volatility of the value of our common stock,

(ii) appropriate risk-free interest rate, (iii) credit spread, (iv) dividend yield, (v) dividend accrual (and a step-up in rates),

and (vi) event probabilities of the various conversion and redemption scenarios.

The implied volatility of the Company’s common

stock is estimated based on a haircut applied to the historical volatility.

A volatility haircut is a concept used to describe a commonly

observed occurrence in which the volatility implied by market prices involving options, warrants, and convertible debt is lower than historical

actual realized volatility.

The assumed base case term used in the valuation model is the period remaining until November 15, 2027 (the

maturity date).

The risk-free interest rate is based on the yield on the U.S.

Treasury with a remaining term equal to the expected term

of the conversion and early redemption options.

The significant assumptions utilized in the Company’s valuation of the embedded

derivative at December 31, 2020 are as follows:

volatility of 29 percent, risk-free rate of 0.62 percent, a credit spread of 19 percent

and a dividend yield of 0 percent.

The significant assumptions utilized in the Company’s valuation of the embedded derivative at

December 31, 2019 are as follows:

volatility of 30 percent, risk-free rate of 1.86 percent, a credit spread of 25 percent and a dividend

yield of 0 percent.

The fair value measurement of the embedded derivative is sensitive to these assumptions and changes in these assumptions

could result in a materially different fair value measurement.

Income Taxes.

Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets

and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s consolidated financial

statements or consolidated income tax returns.

A valuation allowance is established to reduce deferred tax assets if all, or some

portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future

realization of such assets.

accepted accounting principles, a tax position is a position in a previously filed tax return or a position expected to be taken

in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities.

Tax positions are

recognized only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the position

will be sustained upon examination.

Tax positions that meet the more likely than not threshold are measured using a probability

weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.

Segment Reporting.

Acacia uses the

management approach, which designates the internal organization that is used by management for making operating decisions and

assessing performance as the basis of Acacia’s reportable segments.

The Company manages its operations as a single segment

for the purposes of assessing performance and making operating decisions.

Use of Estimates .

The preparation

of financial statements in conformity with generally accepted accounting principles in the United States of America requires management

to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets

and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the

reporting period.

Actual results could differ from these estimates.

Acacia believes that, of the significant accounting policies

described herein, the accounting policies associated with revenue recognition, the valuation of the equity instruments discussed

at Notes 6, 14 and 17, the valuation of Series A redeemable convertible preferred stock, Series A warrants, Series B warrants,

and embedded derivatives, stock-based compensation expense, impairment of patent-related intangible assets, the determination of

the economic useful life of amortizable intangible assets, income taxes and valuation allowances against net deferred tax assets,

require its most difficult, subjective or complex judgments.

For periods in which the Company generates net income, the Company computes basic net income per share attributable

to common stockholders using the two-class method required for capital structures that include participating securities.

the two-class method, securities that participate in non-forfeitable dividends, such as the Company’s outstanding unvested

restricted stock and Series A Redeemable Convertible Preferred Stock, are considered participating securities and are allocated

a portion of the Company’s earnings.

For periods in which the Company generates a net loss, net losses are not allocated

to holders of the Company’s participating securities as the security holders are not contractually obligated to share in

the Company’s losses.

Basic net income

(loss) per share of common stock is computed by dividing net (income) loss attributable to common stockholders by the weighted

average number of shares of common stock outstanding for the period.

Diluted net income (loss) per share of common stock is computed

by dividing net income (loss) attributable to common stockholders by the weighted average number of common and dilutive common

equivalent shares outstanding for the period using the treasury stock method or the as-converted method, or the two-class method

for participating securities, whichever is more dilutive.

Potentially dilutive common stock equivalents consist of stock options,

restricted stock units, unvested restricted stock, Series A Redeemable Convertible Preferred Stock, Series A Warrants, and Series

The following

table presents the calculation of basic and diluted income per share of common stock:

(In thousands, except share and per share information)

Net income (loss) attributable to Acacia Research Corporation

Dividend on Series A redeemable convertible preferred stock

Accretion of Series A redeemable convertible preferred stock

Undistributed earnings allocated to participating securities

Net income (loss) attributable to common stockholders - basic

Accretion of Series A redeemable convertible preferred stock

Change in fair value of Series A redeemable convertible preferred stock embedded derivative

Change in fair value of Series A warrants

Change in fair value of dilutive Series B warrants

Interest expense associated with Starboard Notes, net of tax

Undistributed earnings allocated to participating securities

Reallocation of undistributed earnings to participating securities

Net income (loss) attributable to common stockholders - diluted

Weighted-average shares used in computing net income (loss) per share attributable to common stockholders - basic

Potentially dilutive common shares:

Series A Preferred Stock

Restricted stock units

Employee stock options

Based upon consultation with outside counsel handling its defense in these matters and the Company’s analysis of potential outcomes, if the Company determines that a loss arising from such matters is probable and can be reasonably estimated, an estimate of the contingent liability is recorded in its consolidated financial statements.

If only a range of estimated loss can be determined, an amount within the range that, based on estimates, assumptions and judgments, reflects the most likely outcome, is recorded as a contingent liability in the consolidated financial statements.

In situations where none of the estimates within the estimated range is a better estimate of probable loss than any other amount, the Company records the low end of the range.

Any such accrual would be charged to expense in the appropriate period.

Litigation expenses for these types of contingencies are recognized in the period in which the litigation services were provided.

Refer to Note 13 for additional information.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, restricted cash, accounts receivables and current liabilities approximates their fair values due to their short-term maturities.

Fair Value Measurements

GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available.

Refer to Note 11 for additional information.

Treasury Stock

Repurchases of the Company’s outstanding common stock are accounted for using the cost method.

The applicable par value is deducted from the appropriate capital stock account on the formal or constructive retirement of treasury stock.

Any excess of the cost of treasury stock over its par value is charged to additional paid-in capital and reflected as treasury stock in the consolidated balance sheets.

Refer to Note 14 for additional information.

Engineering and Development

Engineering and development costs are expensed as incurred and consist of labor, supplies, consulting and other costs related to developing and improving Printronix's products.

Printronix expenses advertising costs, including promotional literature, brochures and trade shows, as incurred.

Advertising expense was approximately $ 52,000 during the period from October 7, 2021 through December 31, 2021, and is included in sales and marketing expenses in the 2021 consolidated statement of operations.

Stock-Based Compensation

The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which is generally one to three years .

The fair value of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) are determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option-pricing model.

Forfeitures are accounted for as they occur.

Refer to Note 15 for additional information.

Foreign Currency Gains and Losses

In connection with our Printronix business, the U.S.

dollar is the functional currency for all of the foreign subsidiaries.

Transactions that are recorded in currencies other than the U.S.

dollar may result in transaction gains or losses at the end of the reporting period and when trade receipts and payments occur.

For these subsidiaries, the assets and liabilities have been re-measured at the end of the period for changes in exchange rates, except inventories and property, plant and equipment, which have been remeasured at historical average rates.

The consolidated statements of operations have been reevaluated at average rates of exchange for the reporting period, except cost of sales and depreciation, which have been reevaluated at historical rates.

All foreign currency exchange activity is recorded in the consolidated statements of operations.

Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s consolidated financial statements or consolidated income tax returns.

A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realization of such assets.

GAAP, a tax position is a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities.

Tax positions are recognized only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the position will be sustained upon examination.

Tax positions that meet the more likely than not threshold are measured using a probability weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.

Refer to Note 17 for additional information.

Income Per Share

For periods in which the Company generates net income, the Company computes basic net income per share attributable to common stockholders using the two-class method required for capital structures that include participating securities.

Under the two-class method, securities that participate in non-forfeitable dividends, such as the Company’s outstanding unvested restricted stock and Series A Redeemable Convertible Preferred Stock, are considered participating securities and are

allocated a portion of the Company’s earnings.

For periods in which the Company generates a net loss, net losses are not allocated to holders of the Company’s participating securities as the security holders are not contractually obligated to share in the Company’s losses.

Basic net income/loss per share of common stock is computed by dividing net income/loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted net income/loss per share of common stock is computed by dividing net income/loss attributable to common stockholders by the weighted average number of common and dilutive common equivalent shares outstanding for the period using the treasury stock method or the as-converted method, or the two-class method for participating securities, whichever is more dilutive.

Potentially dilutive common stock equivalents consist of stock options, restricted stock units, unvested restricted stock, Series A Redeemable Convertible Preferred Stock, Series A Warrants and Series B Warrants.

Refer to Note 18 for additional information.

Recent Accounting Pronouncements

Recently Adopted

In December of 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” The update removed certain exceptions to the general principles in Topic 740 in U.S.

The Company adopted the update on January 1, 2021.

The adoption of the update did not have a material effect on the Company’s financial position, results of operations or financial statement disclosures.

Not Yet Adopted

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” to replace the incurred loss methodology with an expected credit loss model that requires consideration of a broader range of information to estimate credit losses over the lifetime of the asset, including current conditions and reasonable and supportable forecasts in addition to historical loss information, to determine expected credit losses.

Pooling of assets with similar risk characteristics and the use of a loss model are also required.

Also, in April 2019, the FASB issued ASU No.

2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” to clarify the inclusion of recoveries of trade receivables previously written off when estimating an allowance for credit losses.

The amendments in these updates will be effective for the Company on January 1, 2023, with early adoption permitted.

Management is currently evaluating the impact that the amendments in these updates may have on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU No.

2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” to simplify the accounting for convertible instruments by eliminating large sections of the existing guidance in this area.

It also eliminates several triggers for derivative accounting, including a requirement to settle certain contracts by delivering registered shares.

This update reduces the number of accounting models for convertible instruments, revises the derivatives scope exception, and provides targeted improvements for earnings per share.

Upon adoption, companies have the option to apply a modified or full retrospective transition approach.

The amendments in this update will currently be effective for the Company on January 1, 2024, with early adoption permitted.

Management is currently evaluating the impact that the amendments in this update may have on the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU No.

2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” to require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with “Revenue from Contracts with Customers (Topic 606).” At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

The amendments in this update should be applied prospectively and will be effective for the Company on January 1, 2023, with early adoption permitted.

Management is currently evaluating the impact that the amendments in this update may have on the Company’s consolidated financial statements.

On October 7, 2021, we entered into a Stock Purchase Agreement and acquired all of the issued and outstanding shares of capital stock of Printronix.

Printronix became a consolidated subsidiary of our operations as of this date.

Printronix provides multi-technology printing solutions for the industrial, financial and logistics transportation industries.

Printronix is engaged in the business of selling (i) line matrix printers, serial dot matrix printers, impact printers and related consumables and parts, (ii) continuous form paper, (iii) printer management tools and (iv) services related to the foregoing throughout the world.

The products are generally used in industrial settings such as manufacturing plants and distribution centers.

Printronix has a manufacturing site located in Malaysia and third-party configuration sites located in the United States, Singapore, and Holland, along with sales and support locations around the world to support its global network of users, channel partners and strategic alliances.

The following unaudited pro forma summary presents consolidated information, as if the business combination had occurred on January 1, 2020:

Years Ended December 31,

(Unaudited, in thousands)

Revenues $ 119,725 $ 67,663

Net income attributable to Acacia Research Corporation 153,641 106,919

We had material, nonrecurring pro forma adjustments directly attributable to the business combination included in the above pro forma revenues and net income.

These adjustments included an increase of $ 2.8 million in property and equipment related to the finalization of the valuations and an increase of $ 1.9 million related to finished goods inventory.

The adjustments also included a decrease of $ 557,000 in deferred revenue.

In 2021, we incurred $ 457,000 of acquisition-related costs.

These expenses are included in general and administrative expenses for the year ended December 31, 2021 and are reflected in pro forma net income for the year ended December 31, 2020, in the table above.

The following table summarizes the consideration transferred to acquire Printronix and the recognized amounts of identifiable assets acquired and liabilities assumed at the acquisition date (in thousands):

Fair value of consideration transferred:

Cash $ 35,937

Transaction expenses paid to Sellers

Other purchase price adjustments

Total consideration 37,142

Identifiable assets acquired and liabilities assumed:

Cash and cash equivalents 3,892

Trade receivables 8,281

Inventories 10,837

Prepaid expenses and other current assets 2,786

Property, plant and equipment, net 4,261

Leased right-of-use assets 1,590

Customer relationships 5,300

Trade names and trademarks 3,430

Patents 3,400

Other assets 752

Trade and other payables ( 7,849 )

Deferred revenue ( 1,941 )

Long-term lease liabilities ( 1,590 )

Other long-term liabilities ( 3,477 )

Total identifiable net assets 29,672

Goodwill $ 7,470

Intangible Assets and Liabilities

As of December 31, 2021, management has finalized the valuations of all acquired assets and liabilities assumed in the acquisition.

Goodwill of $ 7.5 million represents the excess of the consideration transferred over the estimated fair values of assets acquired and liabilities assumed.

The goodwill recognized is primarily attributed to the assembled workforce of Printronix and new customer relationships that did not exist at the time of the transaction.

None of the goodwill resulting from the acquisition is deductible for tax purposes.

All of the goodwill acquired is allocated to the Printronix reporting unit.

Other intangible assets include $ 5.3 million of customer relationships, $ 3.4 million of patents, and $ 3.4 million of trade names and trademarks, all with weighted average useful lives of 7 years.

Refer to Note 8 for additional information.

The fair values of all intangibles were estimated using the income approach.

Specifically, the multi-period excess earnings method was applied in the valuation of the customer relationships, and the relief-from-royalty method was applied in the valuation of the patents and trade names.

These fair value measurements are based on significant inputs unobservable in the market and, therefore, represent a Level 3 measurement as defined in ASC 820.

The key assumptions in applying the multi-period excess earnings method include the discount rate, attrition rate, estimated profit margin and contributory asset charges.

The key assumptions in applying the relief-from-royalty method include the applicable projected revenues, discount rate, remaining economic life or rate of obsolescence and estimated royalty rate.

Refer to Note 11 for additional information related to fair value measurements.

EQUITY SECURITIES PORTFOLIO INVESTMENT

On April 3, 2020, the Company entered into an Option Agreement with LF Equity Income Fund (“Seller”), which included general terms through which the Company was provided the option to purchase life sciences equity securities in a portfolio

of public and private companies (“Life Sciences Portfolio”) for an aggregate purchase price of £ 223.9 million, approximately $ 277.5 million at the exchange rate on April 3, 2020.

On June 4, 2020, the Company executed the Transaction Agreement between Link Fund Solutions Limited, Seller, and the Company.

Pursuant to the Transaction Agreement, the Company agreed to purchase from Seller and Seller agreed to transfer to the Company the specified equity securities of all companies in the Life Sciences Portfolio at set prices at various future dates.

The transfer dates would vary among the Life Sciences Portfolio companies as the Transaction Agreement gives the Company the exclusive right to determine when to call for transfer of each security, and because each Life Sciences Portfolio company (or its existing equity holders) may be required to approve the transfer due to rights of first refusals and other company-specific terms and conditions.

Thus, the execution of the Transaction Agreement resulted in forward contracts for the Company to purchase equity securities in each public and private company at a specified price on a future date.

In accordance with the Transaction Agreement, the Company transferred the total purchase price of £ 223.9 million into an escrow account.

Upon the transfer of equity securities in the Life Sciences Portfolio to the Company, the associated funds were released from the escrow account to Seller based on the consideration amount assigned to the equity securities for such Life Sciences Portfolio company in the Transaction Agreement.

As of December 31, 2020, all of the equity securities in the Life Sciences Portfolio were transferred to the Company pursuant to the Transaction Agreement.

The Company has sold a portion of the equity securities of such Life Sciences Portfolio while retaining an interest in a number of operating businesses, including a controlling interest in one of the companies.

For accounting purposes, the total purchase price of the Life Sciences Portfolio was allocated to the individual equity securities based on their individual fair values as of April 3, 2020, in order to establish an appropriate cost basis for each of the acquired securities.

The fair values of the public company securities were based on their quoted market price.

The fair values of the private company securities were estimated based on recent financing transactions and secondary market transactions and factoring in a discount for the illiquidity of these securities.

As of December 31, 2021 and 2020, the total fair value of the remaining Life Sciences Portfolio investment was $ 343.1 million and $ 267.8 million, respectively.

During the year ended December 31, 2020, Seller returned a total of £ 4.5 million of the Company’s prepaid investment upon the failure to obtain the approval of the existing equity holders, pursuant to their rights of first refusals, of one of the companies in connection with the transfer of its securities.

In addition, due to an ownership restriction applicable to one of the companies, the Company sold a small portion of an equity securities derivative for £ 33,000 before the remaining shares of such company could be transferred to us.

The Company recognized a net gain of $ 2.8 million related to the returned prepaid investments and sale of the derivative.

Changes in the fair value of Acacia’s investment in the Life Sciences Portfolio are recorded as unrealized gains or losses in the consolidated statements of operations.

The consolidated statements of operations reflected the following net realized and unrealized gains from our Life Sciences Portfolio:

Years Ended December 31,

(In thousands)

Change in fair value of equity securities of public companies $ 188,875 $ 72,104

Change in fair value of equity securities without readily determinable fair value — 103,751

Conversion of equity securities without readily determinable fair value

to equity securities of public companies ( 102,067 ) —

Gain (loss) on sale of equity securities of public companies 115,172 ( 3,930 )

Gain on sale of prepaid investment and derivative — 2,845

Net realized and unrealized gain $ 201,980 $ 174,770

On October 13, 2021, Adaptix Limited issued $ 4.0 million in limited unsecured notes due in 2026 to Ratcliffe 2 Ltd., a subsidiary of Merton Healthcare Holdco II LLC.

The interest rate on the notes is 8 percent per year.

During the year ended December 31, 2021, we recorded $ 69,000 in interest income related to the notes.

The receivable was $ 4.0 million and is included in other non-current assets on the consolidated balance sheet as of December 31, 2021.

As part of the Company’s acquisition of equity securities in the Life Sciences Portfolio, the Company acquired a majority interest in the equity securities of MalinJ1 ( 63.9 %), which were transferred to the Company on December 3, 2020.

acquisition of the MalinJ1 securities was accounted for as an asset acquisition as there was a change of control of MalinJ1 and substantially all of the fair value of the assets acquired was concentrated in a single identifiable asset, an investment in Viamet Pharmaceuticals Holdings, LLC (“Viamet”).

As such, the cost basis of the MalinJ1 securities was used to allocate to the Viamet investment, the single identifiable asset, and no goodwill was recognized.

The Company through its consolidation of MalinJ1 accounts for the Viamet investment under the equity method as MalinJ1 owns 41.0 % of outstanding shares of Viamet.

During the year ended December 31, 2021, our consolidated earnings on equity investment was $ 3.5 million, included in the consolidated statement of operations, and distributions received amounted to approximately $ 2.4 million to Acacia and approximately $ 1.2 million to noncontrolling interests.

INVESTMENT AT FAIR VALUE

During 2016 and 2017, Acacia made certain investments in Veritone.

As a result of these transactions, Acacia received an aggregate total of 4,119,521 shares of Veritone common stock and warrants to purchase a total of 1,120,432 shares of Veritone common stock at an exercise price of $ 13.61 per share expiring between 2020 and 2027.

During 2018, Acacia sold 2,700,000 shares Veritone common stock and recorded a realized loss of $ 19.1 million.

During 2019, Acacia sold 1,121,071 shares Veritone common stock and recorded a realized loss of $ 9.2 million.

During the year ended December 31, 2020, Acacia sold all remaining 298,450 shares of Veritone common stock and recorded a realized loss of $ 3.3 million.

During the year ended December 31, 2020, Acacia exercised 963,712 warrants and recorded a realized gain of $ 11.5 million.

During the year ended December 31, 2021, Acacia exercised all remaining 156,720 warrants and recorded a realized gain of $ 3.6 million.

The Company no longer has an investment in Veritone common stock and warrants.

Unrealized and realized gains or losses from our investment in Veritone are recorded in the change in fair value of investment and gain on sale of investment, respectively, in the consolidated statements of operations.

The consolidated statements of operations reflected the following net realized and unrealized gains:

Years Ended December 31,

(In thousands)

Change in fair value of investment, warrants $ ( 2,752 ) $ 1,996

Change in fair value of investment, common stock — 3,478

Gain on sale of investment, warrants 3,591 11,503

Loss on sale of investment, common stock — ( 3,316 )

Net realized and unrealized gain $ 839 $ 13,661

Printronix's inventories consisted of the following:

(In thousands)

Raw materials $ 3,207

Subassemblies and work in process 1,712

Finished goods 4,011

Inventories $ 8,930

PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:

(In thousands)

Machinery and equipment $ 2,077 $ —

Furniture and fixtures 1,036 144

Computer hardware and software 614 152

Leasehold improvements 1,034 120

Accumulated depreciation and amortization ( 578 ) ( 146 )

Property, plant and equipment, net $ 4,183 $ 270

Total depreciation and amortization expense in the consolidated statements of operations was $ 438,000 and $ 119,000 for the years ended December 31, 2021 and 2020, respectively.

Our Intellectual Property Operations includes depreciation and amortization in general and administrative expenses, and our Industrial Operations, for the period from October 7, 2021 through December 31, 2021, allocates depreciation and amortization to all applicable operating expense categories.

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Changes in the carrying amount of goodwill consisted of the following:

Year Ended December 31,

(In thousands)

Beginning balance $ —

Acquisition of business 7,470

Impairment losses —

Ending balance $ 7,470

The ending balance of goodwill includes no accumulated impairment losses to date.

Refer to Note 3 for additional information related to the Printronix acquisition.

Other intangible assets, net consisted of the following:

December 31, 2021

Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Book Value

(In thousands)

Intellectual property operations 6 years $ 331,403 $ ( 294,341 ) $ 37,062

Industrial operations 7 years 3,400 ( 112 ) 3,288

Total patents 334,803 ( 294,453 ) 40,350

Customer relationships - industrial operations 7 years 5,300 ( 174 ) 5,126

Trade name and trademarks - industrial operations 7 years 3,430 ( 113 ) 3,317

Total $ 343,533 $ ( 294,740 ) $ 48,793

December 31, 2020

Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Book Value

(In thousands)

Intellectual property operations 7 years $ 336,834 $ ( 319,922 ) $ 16,912

Total patents $ 336,834 $ ( 319,922 ) $ 16,912

Total intangible asset amortization expense in the consolidated statements of operations was $ 10.3 million and $ 4.7 million for the years ended December 31, 2021 and 2020, respectively.

The Company did not record charges related to the impairment of intangible assets for the years ended December 31, 2021 and 2020.

There was approximately $ 152,000 in accelerated amortization of intangible assets for the year ended December 31, 2021 and none in 2020.

During 2021, Acacia reduced its gross patent costs and accumulated amortization by approximately $ 35.0 million for patents that were fully amortized.

Intellectual Property Operations amortization of patents is expensed in cost of revenues and Industrial Operations amortization, for the period from October 7, 2021 through December 31, 2021, is expensed in general and administrative expenses.

The following table presents the scheduled annual aggregate amortization expense (in thousands):

Years Ending December 31,

2022 $ 12,136

Thereafter 3,066

Total $ 48,793

During the year ended December 31, 2021, Acacia accrued certain patent and patent rights acquisition costs, of which $ 5.0 million is due February 18, 2023.

Such amount is included in other long-term liabilities in the consolidated balance sheet as of December 31, 2021.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

(In thousands)

Accrued legal expenses $ — $ 2,284

Customer deposit 3,000 —

Income taxes payable 506 —

Product warranty liability, current 84 —

Service contract costs 307 —

Short-term lease liability 935 589

Other accrued liabilities 957 834

Total $ 5,789 $ 3,707

STARBOARD INVESTMENT

Series A Redeemable Convertible Preferred Stock

On November 18, 2019, the Company entered into a Securities Purchase Agreement with Starboard Value LP (“Starboard”) and certain funds and accounts affiliated with, or managed by, Starboard (collectively, the “Buyers”) pursuant to which the Company issued (i) 350,000 shares of Series A Redeemable Convertible Preferred Stock with a par value of $ 0.001 per share and a stated value of $ 100 per share, and (ii) Series A Warrants to purchase up to 5 million shares of the Company’s common stock to the Buyers.

The Securities Purchase Agreement also established the terms of certain senior secured notes and additional Series B Warrants which may be issued to Starboard in the future.

On June 4, 2020, the Company entered into a Supplemental Agreement, as defined below under “Senior Secured Notes”, with certain contractual agreements affecting the Series A Redeemable Convertible Preferred Stock, reflected below.

The Series A Redeemable Convertible Preferred Stock can be converted into a number of shares of common stock equal to (i) the stated value thereof plus accrued and unpaid dividends, divided by (ii) the conversion price of $ 3.65 (subject to certain anti-dilution adjustments).

Holders may elect to convert the Series A Redeemable Convertible Preferred Stock into common stock at any time.

The Company may elect to convert the Series A Redeemable Convertible Preferred Stock into shares of Common Stock any time on or after November 15, 2025, provided that the closing price of the Company’s common stock equals or exceeds 190 % of the conversion price for 30 consecutive trading days and assuming certain other conditions of the common stock have been met.

Holders have the option to redeem all or a portion of the Series A Redeemable Convertible Preferred Stock during the period of May 15, 2022 through August 15, 2022, provided that there is not outstanding at least $ 50.0 million aggregate principal of senior secured notes to the Buyers pursuant to the Securities Purchase Agreement at the time of the redemption.

Holders also have the option to redeem all or a portion of the Series A Redeemable Convertible Preferred Stock during the period of November 15, 2024 through February 15, 2025.

Additionally, holders have the option to redeem all or a portion of the Series A Redeemable Convertible Preferred Stock upon the occurrence of (i) a change of control or (ii) various other triggering events, such as the suspension from trading or delisting of the Company’s common stock.

If the Series A Redeemable Convertible Preferred Stock is redeemed at the option of the holders, the redemption price may include a make-whole amount or a stated premium, depending on the redemption scenario.

The Company may redeem all, and not less than all, of the Series A Redeemable Convertible Preferred Stock (i) upon a change of control or (ii) during the period of May 15, 2022 through August 15, 2022, provided that there is not outstanding at least $ 50.0 million aggregate principal of the senior secured notes at the time of the redemption, and assuming certain conditions of the common stock have been met.

If the Series A Redeemable Convertible Preferred Stock is redeemed at the option of the Company, the redemption price would include a make-whole amount or a 15 % premium depending on the circumstances.

If any Series A Redeemable Convertible Preferred Stock remains outstanding on November 15, 2027, the Company shall redeem such Series A Redeemable Convertible Preferred Stock in cash.

In all redemption scenarios, the redemption price for the Series A Redeemable Convertible Preferred Stock includes the stated value plus accrued and unpaid dividends.

In addition, depending on the redemption scenario, the redemption price may also include a make-whole amount or stated premium as described above.

When the Company issues Notes, the Holder may exchange the Series A Redeemable Convertible Preferred Stock for (i) Notes and (ii) Series B Warrants to purchase common stock.

The Series A Redeemable Convertible Preferred Stock accrues cumulative dividends quarterly at annual rate of 3.0 % on the stated value.

Upon certain triggering events, the dividend rate will increase to 7.0% if the triggering event occurs before an approved investment or 10.0% on the stated value if the triggering event occurs after an approved investment.

In connection with the approved investment in June 2020, the Company and the Buyers agreed that the dividend rate on the Series A Redeemable Convertible Preferred Stock would accrue at 3.0% so long as no triggering event occurs and the Company maintains $ 35.0 million in escrow.

Series A Redeemable Convertible Preferred Stock also participates on an as-converted basis in any regular or special dividends paid to common stockholders.

During October 2021, the Company consummated a suitable acquisition, accordingly $ 35.0 million was released to the Company from escrow (refer to Note 3).

Upon consummation of the approved acquisition in October 2021, the dividend rate increased to 8.0 % on the stated value.

There are no accrued and unpaid dividends as of December 31, 2021.

Holders of the Series A Redeemable Convertible Preferred Stock have the right to vote with common stockholders on an as-converted basis on all matters.

Holders of Series A Redeemable Convertible Preferred Stock will also be entitled to a separate class vote with respect to amendments to the Company’s organizational documents that generally have an adverse effect on the Series A Redeemable Convertible Preferred Stock.

Upon liquidation of the Company, holders of Series A Redeemable Convertible Preferred Stock have a liquidation preference over holders of our common stock and will be entitled to receive, prior to any distribution to holders of our common stock, an amount equal to the greater of (i) the stated value plus accrued and unpaid dividends or (ii) the amount that would have been received if the Series A Redeemable Convertible Preferred Stock had been converted into common stock immediately prior to the liquidation event at the then effective conversion price.

The Company determined that certain features of the Series A Redeemable Convertible Preferred Stock should be bifurcated and accounted for as a derivative.

Each of these features are bundled together as a single, compound embedded derivative.

During 2019, total proceeds received and transaction costs incurred from the issuance of the Series A Redeemable Convertible Preferred Stock amounted to $ 35.0 million and $ 1.3 million, respectively.

Proceeds received were allocated based on the fair value of the instrument without the Series A Warrants and of the Series A Warrants themselves at the time of issuance.

The proceeds allocated to the Series A Redeemable Convertible Preferred Stock were then further allocated between the host preferred stock instrument and the embedded derivative, with the embedded derivative recorded at fair value and the Series A Redeemable Convertible Preferred Stock recorded at the residual amount.

The portion of the proceeds allocated to the Series A Warrants, embedded derivative, and Series A Redeemable Convertible Preferred Stock was $ 4.8 million, $ 21.2 million, and $ 8.9 million, respectively.

Transaction costs were also allocated between the Series A Redeemable Convertible Preferred Stock and the Series A Warrants on the same basis as the proceeds.

The transaction costs allocated to the Series A Redeemable Convertible Preferred Stock were treated as a discount to the Series A Redeemable Convertible Preferred Stock.

The transaction costs allocated to the Series A Warrants were expensed as incurred.

The Company classifies the Series A Redeemable Convertible Preferred Stock as mezzanine equity as the instrument will become redeemable at the option of the holder in various scenarios or otherwise on November 15, 2027.

As it is probable that the Series A Redeemable Convertible Preferred Stock will become redeemable, the Company accretes the instrument to its redemption value using the effective interest method and recognizes any changes against additional paid in capital in the absence of retained earnings.

Accretion for the years ended December 31, 2021 and 2020 was $ 3.8 million and $ 2.8 million, respectively.

In connection with the issuance of the Series A Redeemable Convertible Preferred Stock, the Company executed a Registration Rights Agreement with Starboard and the Buyers and a Governance Agreement with Starboard and certain affiliates of Starboard.

Under the Registration Rights Agreement, the Company agreed to provide certain registration rights with respect to the Series A Redeemable Convertible Preferred Stock and shares of common stock issued upon conversion.

In accordance with the Governance Agreement, the Company agreed to (i) increase the size of the Board of Directors from six to seven members, (ii) appoint Jonathan Sagal as a director of the Company, (iii) grant Starboard the right to recommend two additional directors for appointment to the board, (iv) form a Strategic Committee of the Board tasked with sourcing and performing due diligence on potential acquisition targets, (v) appoint certain directors to the Strategic Committee, and (vi) appoint a director to the Nominating and Corporate Governance Committee.

The following features of the Series A Redeemable Convertible Preferred Stock are required to be bifurcated from the host preferred stock and accounted for separately as an embedded derivative:

(i) the right of the holders to redeem the shares (the “put option”), (ii) the right of the holders to receive common stock upon conversion of the shares (the “conversion option”), (iii) the right of the Company to redeem the shares (the “call option”), and (iv) the change in dividend rate upon consummation of an approved investment or a triggering event (the “contingent dividend rate feature”).

These features are required to be accounted for separately from the Series A Redeemable Convertible Preferred Stock because the features were determined to be not clearly and closely related to the debt-like host and also did not meet any other scope exceptions for derivative accounting.

Therefore, these features are bundled together and are accounted for as a single, compound embedded derivative liability.

Accordingly, we have recorded an embedded derivative liability representing the combined fair value of each of these features.

The embedded derivative liability is adjusted to reflect fair value at each period end with changes in fair value

recorded other income or (expense) in the “Change in fair value of the Series A and B warrants and embedded derivatives” financial statement line item of the consolidated statements of operations.

As of December 31, 2021 and 2020, the fair value of the Series A embedded derivative was $ 18.4 million and $ 26.7 million, respectively.

Series A Warrants

On November 18, 2019, in connection with the issuance of the Series A Redeemable Convertible Preferred Stock, the Company issued detachable Series A Warrants to acquire up to 5 million shares of common stock at a price of $ 3.65 per share (subject to certain anti-dilution adjustments) at any time during a period of eight years beginning on the instrument’s issuance date of the Series A Warrants.

The fair value of the Series A Warrants was $ 4.8 million upon issuance.

The Series A Warrants will be recognized at fair value at each reporting period until exercised, with changes in fair value recognized in other income or (expense) in the consolidated statements of operations.

As of December 31, 2021 and 2020, the fair value of the Series A Warrants was $ 11.3 million and $ 6.6 million, respectively.

As of December 31, 2021, the Series A Warrants have not been exercised.

The Series A Warrants are classified as a liability in accordance with ASC 480, "Distinguishing Liabilities from Equity", as the agreement provides for net cash settlement upon a change in control, which is outside the control of the Company.

Series B Warrants

Weighted-average shares used in computing net income (loss) per share attributable to common stockholders - diluted

Basic net income (loss) per common share

Diluted net income (loss) per common share

Anti-dilutive potential common shares excluded from the computation of diluted net income (loss) per common share:

Equity-based incentive awards

On February 25, 2020, pursuant to the terms of the Securities Purchase Agreement with Starboard and the Buyers, the Company issued Series B Warrants to purchase up to 100 million shares of the Company’s common stock at an exercise price (subject to certain price-based anti-dilution adjustments) of either (i) $ 5.25 per share, if exercising by cash payment, within 30 months from the issuance date (i.e., August 25, 2022);

or (ii) $ 3.65 per share, if exercising by cancellation of a portion of Notes.

The Company issued the Series B Warrants for an aggregate purchase price of $ 4.6 million.

The Series B Warrants expire on November 15, 2027.

In connection with the issuance of the Notes on June 4, 2020, the terms of certain of the Series B Warrants were amended to permit the payment of the lower exercise price of $ 3.65 through the payment of cash, rather than only through the cancellation of Notes outstanding, at any time until the expiration date of November 15, 2027.

31,506,849 of the Series B Warrants are subject to this adjustment with the remaining balance of 68,493,151 Series B Warrants continuing under their original terms.

As of December 31, 2021, the Series B Warrants have not been exercised.

The Series B Warrants will be recognized at fair value at each reporting period until exercised, with changes in fair value recognized in other income or (expense) in the consolidated statements of operations.

As of December 31, 2021 and 2020, the fair value of the Series B Warrants was $ 96.4 million and $ 52.3 million, respectively.

The Series B Warrants are classified as a liability in accordance with ASC 480, "Distinguishing Liabilities from Equity", as the agreement provides for net cash settlement upon a change in control, which is outside the control of the Company.

Senior Secured Notes

On June 4, 2020, pursuant to the Securities Purchase Agreement dated November 18, 2019 with Starboard and the Buyers, the Company issued $ 115.0 million in Notes to the Buyers.

Also on June 4, 2020, in connection with the issuance of the Notes, the Company entered into a Supplemental Agreement with Starboard (the “Supplemental Agreement”), as discussed further below.

On June 30, 2020, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with Merton Acquisition HoldCo LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“Merton”) and Starboard, on behalf of itself and on behalf of certain funds and accounts under its management, including the holders of the Notes.

Pursuant to the Exchange Agreement, the holders of the Notes exchanged the entire outstanding principal amount for new senior notes (the “New Notes”) issued by Merton having an aggregate outstanding original principal amount of $ 115.0 million.

The New Notes bear interest at a rate of 6.00 % per annum and had a maturity date of December 31, 2020.

The New Notes are fully guaranteed by the Company and are secured by an all-assets pledge of the Company and Merton and non-recourse equity pledges of each of the Company’s material subsidiaries.

Pursuant to the Exchange Agreement, the New Notes (i) are deemed to be “Notes” for purposes of the Securities Purchase Agreement, (ii) are deemed to be “June 2020 Approved

Investment Notes” for purposes of the Supplemental Agreement, and with the Company agreeing to redeem $ 80.0 million principal amount of the New Notes by September 30, 2020 and $ 35.0 million principal amount of the New Notes by December 31, 2020, and (iii) are deemed to be “Notes” for the purposes of the Series B Warrants, and therefore may be tendered pursuant to a Note Cancellation under the Series B Warrants on the terms set forth in the Series B Warrants and the New Notes.

Delivery of notes in the form of the New Notes will also satisfy the delivery of Exchange Notes pursuant to Section 16(i) of the Certificate of Designations of the Company’s Series A Convertible Preferred Stock, par value $ 0.001 per share.

The New Notes will not be deemed to be “Notes” for the purposes of the Registration Rights Agreement, dated as of November 18, 2019, by and among the Company, Starboard and the Buyers.

Because the New Notes are to be settled within twelve months pursuant to their terms, they are classified as current liabilities in the consolidated balance sheets.

The Company capitalized $ 4.6 million in lender fees and $ 0.5 million in other issuance costs associated with the issuance of the Notes.

The $ 4.6 million of lender fees were initially recognized as long-term deferred debt issuance costs and were included in other non-current assets in the consolidated balance sheets up to and as of September 30, 2021, and were to be amortized to interest expense until November 15, 2027, the original maturity/expiration date of the transactions governed by the Starboard investment.

During the fourth quarter of 2021, it was determined the correct deferred debt issuance costs amortization period was the approximate seven month period ended December 31, 2020, the initial redemption date of the Notes.

Accordingly, the Company has adjusted the related prior period consolidated financial statements to reflect this correction.

Refer to Note 20 " Correction of Immaterial Error " for additional information.

The $ 0.5 million issuance costs are recognized as a discount on the Notes and will be amortized to interest expense over the contractual life of the Notes.

There was $ 1,338,000 and $ 863,000 accrued and unpaid interest on the New Notes as of December 31, 2021 and 2020, respectively.

On January 29, 2021, the Company redeemed $ 50.0 million of the New Notes and on March 31, 2021, the Company reissued $ 50.0 million of the New Notes.

On June 30, 2021, the Company issued $ 30.0 million in additional New Notes (the “June 2021 Merton Notes”) and amended the maturity date of the New Notes to October 15, 2021.

On September 30, 2021, the Company issued $ 35.0 million in additional New Notes (the “September 2021 Merton Notes”) and amended the maturity date of the New Notes to December 1, 2021.

The June and September 2021 Merton Notes cannot be used to exercise Series B Warrants issued to Starboard Value.

On November 30, 2021, the Company amended the maturity date of the New Notes to January 31, 2022.

The total principal amount outstanding of New Notes as of December 31, 2021 and 2020 was $ 180.0 million and $ 115.0 million, respectively.

The New Notes interest rate remains at 6.00 % per annum as of December 31, 2021.

On January 31, 2022, the Company amended the maturity date of the New Notes to April 15, 2022, and agreed to repay an aggregate of $ 15.0 million principal amount of the New Notes, resulting in a principal amount outstanding of $ 165.0 million.

Modifications to Series A Redeemable Convertible Preferred Stock and Series B Warrants

The June 4, 2020 Supplemental Agreement also provided for (i) a waiver of increased dividends under the original terms of the Series A Redeemable Convertible Preferred Stock that would have otherwise accrued due to the Company’s use of the $ 35.0 million proceeds received from Starboard and the Buyers upon the issuance of the Series A Redeemable Convertible Preferred Stock in November 2019, (ii) the replacement of original optional redemption rights for the Series A Redeemable Convertible Preferred Stock provided to both the Company and the holders that otherwise would have been nullified through the issuance of the Notes, and (iii) an amendment to the terms of the previously issued Series B Warrants to permit the payment of the lower exercise price of $ 3.65 through the payment of cash, rather than only through the cancellation of Notes outstanding, at any time until the expiration of the Series B Warrants on November 15, 2027.

31,506,849 of the Series B Warrants are subject to this adjustment with the remaining balance of 68,493,151 Series B Warrants continuing under their original terms.

We analyzed the amendments to the Series A Redeemable Convertible Preferred Stock and determined that the amendments were not significant.

Therefore, the amendments are accounted for as a modification on a prospective basis.

The incremental fair value of the Series B Warrants associated with the modification of their terms in connection with the issuance of the Notes was $ 1.3 million and is recognized as a discount on the Notes and will be amortized to interest expense over the contractual life of the Notes.

For the years ended December 31, 2021 and 2020, $ 103,000 and $ 1.2 million, respectively, was amortized to interest expense.

As of December 31, 2021, $ 68,000 is remaining to be amortized until the maturity date of April 15, 2022.

FAIR VALUE MEASUREMENTS

The three-level hierarchy of valuation techniques established to measure fair value is defined as follows:

(i) Level 1 - Observable Inputs :

Quoted prices in active markets for identical investments;

(ii) Level 2 - Pricing Models with Significant Observable Inputs :

Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.;

(iii) Level 3 - Unobservable Inputs :

Unobservable inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Management estimates include certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs, including the entity’s own assumptions in determining the fair value of derivatives and certain investments.

Whenever possible, the Company is required to use observable market inputs (Level 1) when measuring fair value.

In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.

The assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.

In certain cases, inputs used to measure fair value may fall into different levels of the fair value hierarchy.

The Company holds the following types of financial instruments at fair value on a recurring basis as of December 31, 2021 and 2020:

Equity Securities at Fair Value.

Equity securities includes investments in public company common stock and are recorded at fair value based on the quoted market price of each share on the valuation date.

The fair value of these securities are within Level 1 of the valuation hierarchy.

Equity investments that do not have regular market pricing, but for which fair value can be determined based on other data values or market prices, are recorded at fair value within Level 2 of the valuation hierarchy.

At December 31, 2021, our Level 2 equity securities include an investment measured with an applied pricing model that includes significant observable inputs to the public company common stock value.

The fair value of this Level 2 equity security investment as of December 31, 2021 was estimated based on a discount of 3 percent determined using the following significant inputs to the pricing model:

expected term of restriction of 3 months and volatility of approximately 45 percent.

Investments at Fair Value - Warrants.

Acacia’s equity investment in Veritone warrants was recorded at fair value based on the Black-Scholes option-pricing model (Level 2).

Refer to Note 5 for additional information.

Series A Warrants.

Series A Warrants are recorded at fair value, using Black-Scholes option-pricing model (Level 3).

In the quarter ended March 31, 2021, there was a change in estimate with regard to the calculation of the volatility assumption used in the Black-Scholes option-pricing model.

As a result, the Series A Warrants are now measured as Level 3 as opposed to Level 2 as measured previously.

The fair value of the Series A Warrants as of December 31, 2021 was estimated based on the following significant assumptions:

volatility of 30 percent, risk-free rate of 1.33 percent, term of 5.79 years and a dividend yield of 0 percent.

The fair value of the Series A Warrants as of December 31, 2020 was estimated based on the following significant assumptions:

volatility of 29 percent, risk-free rate of 0.62 percent, term of 6.79 years and a dividend yield of 0 percent.

Refer to the " Embedded derivative liabilities" discussion below for additional information on assumptions.

Series B Warrants.

Repurchases of the Company’s outstanding common stock are accounted for using the cost method.

The applicable

par value is deducted from the appropriate capital stock account on the formal or constructive retirement of treasury stock.

excess of the cost of treasury stock over its par value is charged to additional paid-in capital, and reflected as Treasury Stock

on the consolidated balance sheets.

Trading securities

for the periods presented were comprised of the following:

Series B Warrants are recorded at fair value, using Black-Scholes option-pricing model (Level 3).

In the quarter ended March 31, 2021, there was a change in methodology used to an acceptable Black-Scholes option-pricing model from a Monte Carlo valuation technique used to value the Series B Warrants as of December 31, 2020.

The fair value of the Series B Warrants as of December 31, 2021 was estimated based on the following significant assumptions:

(1) volatility of 30 percent, risk-free rate of 1.34 percent, term of 5.88 years and a dividend yield of 0 percent, and (2) volatility of 25 percent, risk-free rate of 0.25 percent, term of 0.65 years and a dividend yield of 0 percent.

The fair value of the

Series B Warrants as of December 31, 2020 was estimated based on the following significant assumptions:

(1) volatility of 29 percent, risk-free rate of 0.63 percent, term of 6.87 years, a dividend yield of 0 percent and a discount for lack of marketability of 10.00 percent, and (2) volatility of 50 percent, risk-free rate of 0.12 percent, term of 1.65 years, a dividend yield of 0 percent and a discount for lack of marketability of 10.00 percent.

Refer to the " Embedded derivative liabilities" discussion below for additional information on assumptions.

Embedded derivative liabilities.

Embedded derivatives that are required to be bifurcated from their host contract are evaluated and valued separately from the host instrument.

A binomial lattice framework is used to estimate the fair value of the embedded derivative in the Series A Redeemable Convertible Preferred Stock issued by the Company in 2019 (Level 3).

The binomial model utilizes the Tsiveriotis and Fernandes implementation in which a convertible instrument is split into two separate components within a single lattice framework:

a cash-only component which is subject to the selected risk-adjusted discount rate and an equity component which is subject only to the risk-free rate.

The model considers the (i) implied volatility of the value of our common stock, (ii) appropriate risk-free interest rate, (iii) credit spread, (iv) dividend yield, (v) dividend accrual (and a step-up in rates), and (vi) event probabilities of the various conversion and redemption scenarios.

The volatility of the Company’s common stock is estimated by analyzing the Company’s historical volatility, implied volatility of publicly traded stock options, and the Company’s current asset composition and financial leverage.

The selected volatility, as described below, represents a haircut from the Company’s actual realized historical volatility.

A volatility haircut is a concept used to describe a commonly observed occurrence in which the volatility implied by market prices involving options, warrants, and convertible debt is lower than historical actual realized volatility.

The assumed base case term used in the valuation model is the period remaining until November 15, 2027, the Series A Redeemable Convertible Preferred Stock maturity date.

The risk-free interest rate is based on the yield on the U.S.

Treasury with a remaining term equal to the expected term of the conversion and early redemption options.

The significant assumptions utilized in the Company’s valuation of the embedded derivative at December 31, 2021 are as follows:

volatility of 30 percent, risk-free rate of 1.30 percent, term of 5.87 years , a dividend yield of 0 percent and a discount rate of 9.60 percent.

The significant assumptions utilized in the Company’s valuation of the embedded derivative at December 31, 2020 are as follows:

volatility of 29 percent, risk-free rate of 0.62 percent, term of 6.87 years, a discount rate of 19.25 percent and a dividend yield of 0 percent .

The fair value measurement of the embedded derivative is sensitive to these assumptions and changes in these assumptions could result in a materially different fair value measurement.

Financial assets and liabilities measured at fair value on a recurring basis were as follows:

Level 1 Level 2 Level 3 Total

(In thousands)

Security Type

December 31, 2021:

Trading securities - equity

Equity securities at fair value $ 113,630 $ 248,148 $ — $ 361,778

Total $ 113,630 $ 248,148 $ — $ 361,778

December 31, 2020:

Trading securities - debt

Trading securities - equity

securities as of December 31, 2020 and 2019, were comprised of investments in equity securities of publicly held companies (equity

securities) and investments in corporate bonds (debt securities).

For the year ended December 31, 2020, proceeds from the sale

and maturity of debt securities and equity securities were $118,459,000 and $46,383,000 , respectively.

For the year ended December 31, 2019, proceeds from the sale and maturity of debt securities and equity securities were $49,751,000

and $25,339,000, respectively.

Accrued expenses

consist of the following at December 31, 2020 and 2019:

(In thousands)

Accrued legal expenses - patent

Accrued consulting and other professional fees

Short-term lease liability

Other accrued liabilities

Acacia’s

only identifiable intangible assets are patents and patent rights, with estimated remaining economic useful lives ranging from

one to five years.

For all periods presented, all of Acacia’s identifiable intangible assets were subject to amortization.

The gross carrying amounts and accumulated amortization related to investments in intangible assets as of December 31, 2020 and

2019 are as follows (in thousands):

Gross carrying amount - patents

Accumulated amortization - patents (1)

_____________

Includes patent impairment charges for the applicable periods.

The weighted-average

remaining estimated economic useful life of Acacia’s patents and patent rights is 4 years.

Scheduled annual aggregate amortization

expense is estimated to $4,450,000 in 2021, $4,451,000 in 2022, $4,376,000 in 2023, $3,005,000 in 2024, and $630,000 thereafter.

Acacia did not record

charges related to the impairment of patent-related intangible assets for the years ended December 31, 2020 and December 31, 2019.

is no accelerated amortization or sales for patent-related assets for the years ended December 31, 2020 and December 31, 2019.

INVESTMENT AT FAIR VALUE

and 2017, Acacia made certain investments in Veritone, Inc.

(“Veritone”).

As a result of these transactions, Acacia

received an aggregate total of 4,119,521 shares of Veritone common stock and warrants to purchase a total of 1,120,432 shares

of Veritone common stock at an exercise price of $13.61 per share expiring between 2020 and 2027.

During the year ended December

31, 2020, Acacia exercised 963,712 warrants, and recorded a realized gain of $11.5 million.

At December 31, 2020, the fair value

of the 156,720 remaining warrants held by Acacia totaled $2,752,000.

the year ended December 31, 2019, Acacia sold 1,121,071 shares Veritone common stock and recorded a realized loss of $9.2 million.

During the three months ended March 31, 2020, Acacia sold all remaining 298,450 shares Veritone common stock and recorded a realized

loss of $3.3 million.

Changes in the

fair value of Acacia’s investment in Veritone are recorded as unrealized gains or losses in the consolidated statements

of operations.

For the year ended December 31, 2020, and 2019, the accompanying consolidated statements of operations reflected

the following:

Equity securities at fair value $ 109,103 $ — $ — $ 109,103

Investment at fair value - warrants — 2,752 — 2,752

Total $ 109,103 $ 2,752 $ — $ 111,855

December 31, 2021:

Series A warrants $ — $ — $ 11,291 $ 11,291

Series A embedded derivative liabilities — — 18,448 18,448

Series B warrants — — 96,378 96,378

Total $ — $ — $ 126,117 $ 126,117

December 31, 2020:

Series A warrants $ — $ 6,640 $ — $ 6,640

Series A embedded derivative liabilities — — 26,728 26,728

Series B warrants — — 52,341 52,341

Total $ — $ 6,640 $ 79,069 $ 85,709

The following table sets forth a summary of the changes in the estimated fair value of the Company’s Level 3 liabilities, which are measured at fair value as a on a recurring basis:

Series A Warrant Liabilities Series A Embedded Derivative Liabilities Series B Warrant Liabilities Total

(In thousands)

Change in fair value of investment, warrants

Change in fair value of investment, common stock

Gain on sale of investment, warrants

Loss on sale of investment, common stock

Net realized and unrealized gain on investment at fair value

STOCKHOLDERS’

of Common Stock.

In February 2018, Acacia’s Board of Directors authorized the repurchase of up to $20,000,000 of the

Company’s outstanding common stock in open market purchases or private purchases, from time to time, in amounts and at prices

to be determined by the Board of Directors at its discretion (the “Stock Repurchase Program”).

On August 5, 2019,

Acacia’s Board of Directors approved a new stock repurchase program, which authorized the purchase of up to $10.0 million

of the Company's common stock through open market purchases, through block trades, through 10b5-1 plans, or by means of private

purchases, from time to time, through July 31, 2020.

In determining

whether or not to repurchase any shares of Acacia’s common stock, Acacia’s Board of Directors consider such factors

as the impact of the repurchase on Acacia’s cash position, as well as Acacia’s capital needs and whether there is

a better alternative use of Acacia’s capital.

Acacia has no obligation to repurchase any amount of its common stock under

the Stock Repurchase Program.

Repurchases to date were made in the open market in compliance with applicable SEC rules.

The authorization

to repurchase shares presented an opportunity to reduce the outstanding share count and enhance stockholder value.

The repurchased

shares are expected to be retired.

Monthly stock repurchases for the periods presented, all of which were purchased as part of

a publicly announced plan or program, were as follows:

Approximate Dollar

Balance at December 31, 2019 $ — $ 17,974 $ — $ 17,974

Issuance of Series B warrants — — 4,600 4,600

Remeasurement to fair value — 8,754 47,741 56,495

Balance at December 31, 2020 — 26,728 52,341 79,069

Transfer to Level 3 6,640 — — 6,640

Remeasurement to fair value 4,651 ( 8,280 ) 44,037 40,408

Balance at December 31, 2021 $ 11,291 $ 18,448 $ 96,378 $ 126,117

In accordance with U.S.

GAAP, from time to time, the Company measures certain assets at fair value on a nonrecurring basis.

The Company reviews the carrying value of equity securities without readily determinable fair value, equity method investments and patents on a quarterly basis for indications of impairment, and other long-lived assets at least annually.

When indications of potential impairment are identified, the Company may be required to determine the fair value of those assets and record an adjustment for the carrying amount in excess of the fair value determined.

Any fair value determination would be based on valuation approaches, which are appropriate under the circumstances and utilize Level 2 and Level 3 measurements as required.

In connection with our Printronix acquisition, nonrecurring Level 3 valuations were performed for certain intangible assets, refer to Note 3 for additional information.

RELATED PARTY TRANSACTIONS

During 2019, Acacia purchased shares of common stock of Drive Shack, Inc.

(“Drive Shack”) for an aggregate purchase price of $ 2.4 million.

At the time, Drive Shack and Clifford Press, Chief Executive Officer and director of Acacia, were related parties as Mr.

Press was a board member of Drive Shack until June 2021.

The market value of the investment was $ 1.4 million as of December 31, 2020.

During the year ended December 31, 2021, Acacia sold its investment receiving proceeds of $ 1.8 million and recognized a loss of $ 515,000 .

The Company reimbursed an aggregate amount of $ 408,000 as of December 31, 2021 to a former executive officer in connection with legal fees incurred following such officer’s departure from the Company.

COMMITMENTS AND CONTINGENCIES

Facility Leases

Acacia primarily leases office facilities under operating lease arrangements that will end in various years through February 2025.

On June 7, 2019, Acacia entered into a building lease agreement with Jamboree Center 4 LLC.

Pursuant to the lease, we have leased approximately 8,293 square feet of office space in Irvine, California.

The lease commenced on August 1, 2019.

The term of the lease is 60 months from the commencement date, provides for annual rent increases, and does not provide us the right to early terminate or extend our lease terms.

On January 7, 2020, Acacia entered into a building lease agreement with Sage Realty Corporation.

Pursuant to the lease, we have leased approximately 4,600 square feet of office space for our corporate headquarters in New York, New York.

The lease commenced on February 1, 2020.

The term of the lease is 24 months from the commencement date, provides for annual rent increases, and does not provide us the right to early terminate or extend our lease terms.

During August 2021, we entered into a first amendment of the New York office lease, to commence for a period of three years upon landlords’ substantial completion of adequate substitution space.

On January 25, 2022, the substitution space was substantially completed and the new expiration date is February 28, 2025.

Printronix conducts its foreign and domestic operations using leased facilities under non-cancelable operating leases that expire at various dates through February 2028.

The significant Printronix leases are as follows:

• On November 10, 2020, Printronix entered into a building lease agreement with PPC Irvine Center Investment, LLC for office space in Irvine, California.

The lease commenced on April 1, 2021.

The term of the lease is 65 months from the commencement date, provides for annual rent increases and provides the right to early terminate the lease under certain circumstances, as well as extend the lease term.

• On September 30, 2019, Printronix entered into a building lease agreement with Dynamics Sing Sdn.

Bhd for warehouse/manufacturing space in Johor, Malaysia.

The lease commenced on December 29, 2019.

The term of the lease is 48 months from the commencement date, has no annual rent increases and provides the right to early terminate or extend our lease term.

The Malaysia factory lease has two renewal options for an additional four years and one additional renewal option for two years .

• On November 28, 2019, Printronix entered into a building lease agreement with PF Grand Paris for office space in Paris, France.

The lease commenced on March 1, 2019.

The term of the lease is 109 months from the commencement date, has no annual rent increases and provides the right to early terminate the lease under certain circumstances, however does not provide for an extension of the lease term.

• On November 1, 2020, Printronix entered into a building lease agreement with Shanghai SongYun Enterprise Management Center for office space in Shanghai, China.

The lease commenced on November 1, 2020.

The term of the lease is 48 months from the commencement date, has no annual rent increases and provides the right to early terminate or extend the lease term.

The Company's operating lease costs, including Printronix for the period from October 7, 2021 through December 31, 2021, were $ 851,000 , and $ 603,000 for the years ended December 31, 2021 and 2020, respectively.

The table below presents aggregate future minimum payments due under the Company's leases discussed above, reconciled to long-term lease liabilities and short-term lease liabilities (included in accrued expenses and other current liabilities) included in the consolidated balance sheet as of December 31, 2021 (in thousands):

Years Ending December 31,

Thereafter 29

Total minimum payments 2,962

short-term lease liabilities ( 935 )

Long-term lease liabilities $ 2,027

Inventor Royalties and Contingent Legal Expenses

In connection with the investment in certain patents and patent rights, certain of Acacia’s operating subsidiaries executed related agreements which grant to the former owners of the respective patents or patent rights, the right to receive inventor royalties based on future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios.

Acacia’s operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement activities.

These law firms may be retained on a contingent fee basis whereby such law firms are paid on a scaled percentage of any negotiated fees, settlements or judgments awarded based on how and when the fees, settlements or judgments are obtained.

Patent Enforcement and Legal Proceedings

The Company is subject to claims, counterclaims and legal actions that arise in the ordinary course of business.

Management believes that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

Certain of Acacia’s operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights.

In connection with any of Acacia’s 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 Acacia or its operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material.

In December 2017, the Federal Court of Canada allowed a counterclaim for invalidity of a patent asserted by Rapid Completions LLC and awarded costs payable by Rapid Completions LLC.

During the year ended December 31, 2021, the Company made approximately $ 1.2 million in settlement payments.

This settlement was fully paid as of December 31, 2021 and all claims were withdrawn.

On September 6, 2019, Slingshot Technologies, LLC, or Slingshot, filed a lawsuit in Delaware Chancery Court against the Company and Acacia Research Group, LLC, or collectively, the Acacia Entities, Monarch Networking Solutions LLC (“Monarch”), Acacia board member Katharine Wolanyk, and Transpacific IP Group, Ltd., or Transpacific.

Slingshot alleges that the Acacia Entities and Monarch misappropriated its confidential and proprietary information, purportedly furnished to the Acacia Entities and Monarch by Ms.

Wolanyk, in acquiring a patent portfolio from Transpacific after Slingshot’s exclusive option to purchase the same patent portfolio from Transpacific had already expired.

Slingshot seeks monetary damages, as well as equitable and injunctive relief related to its alleged right to own the portfolio.

On March 15, 2021, the court issued orders granting Monarch’s motion to dismiss for lack of personal jurisdiction and Ms.

Wolanyk’s motion to dismiss for lack of subject matter jurisdiction.

The remaining parties then commenced discovery, and have since served initial written requests and responses, notices of the depositions of the parties’ corporate designees, and initial

document productions.

The Chancery Court has set a two-day trial on liability for April 18–19, 2023, with a third day of trial on damages to follow in the event that Slingshot prevails on liability.

The Acacia Entities maintain that Slingshot’s allegations are baseless, that the Acacia Entities neither had access to nor used Slingshot’s information in acquiring the portfolio, that the Acacia Entities acquired the portfolio as a result of the independent efforts of its IP licensing group, and that Slingshot suffered no damages given its exclusive option to purchase the portfolio had already ended and it has proven itself incapable of closing on the portfolio purchase.

During the year ended December 31, 2021, Acacia incurred $ 162,000 in operating expenses for settlement and contingency accruals.

During the year ended December 31, 2020, operating expenses included a net income for settlement, offset by contingency accruals totaling $ 308,000 , net of prior accruals.

At December 31, 2021 and 2020, our contingency accrual balance, included in accrued expenses and other current liabilities in the consolidated balance sheets, was zero and $ 1.3 million, respectively.

Guarantees and Indemnifications

Certain of Acacia’s operating subsidiaries have made guarantees and indemnities under which they may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions, including revenue transactions in the ordinary course of business.

In connection with certain facility leases, Acacia and certain of its operating subsidiaries have indemnified lessors for certain claims arising from the facilities or the leases.

Acacia indemnifies its directors and officers to the maximum extent permitted under the laws of the State of Delaware.

However, Acacia has a directors and officers insurance policy that may reduce its exposure in certain circumstances and may enable it to recover a portion of future amounts that may be payable, if any.

The duration of the guarantees and indemnities varies and, in many cases is indefinite but subject to statute of limitations.

The majority of guarantees and indemnities do not provide any limitations of the maximum potential future payments that Acacia could be obligated to make.

To date, Acacia has made no payments related to these guarantees and indemnities.

Acacia estimates the fair value of its indemnification obligations to be insignificant based on this history and therefore, have not recorded any liability for these guarantees and indemnities in the consolidated balance sheets.

Additionally, no events or transactions have occurred that would result in a material liability at December 31, 2021.

Printronix posted collateral in the form of a surety bond or other similar instruments, which are issued by independent insurance carriers (the “Surety”), to cover the risk of loss related to certain customs and employment activities.

If any of the entities that hold such bonds should require payment from the Surety, Printronix would be obligated to indemnify and reimburse the Surety for all costs incurred.

As of December 31, 2021, Printronix had approximately $ 100,000 of these bonds outstanding.

Environmental Cleanup

Printronix maintained a manufacturing operation in a leased facility in Irvine, California from 1980 to 1994.

The facility was used for similar manufacturing operations by another tenant from 1968 to 1977.

The manufacturing operations employed by the previous tenant are believed to have resulted in the contamination of soil and groundwater under the facility which included chlorinated volatile organic compounds (“VOCs”).

Evidence indicates that the VOCs requiring cleanup were used by the prior tenant and not by Printronix.

Printronix worked with the prior tenant, which agreed to share the costs of the activities in an equal percentage with Printronix, and the state regulatory agencies, including the California Department of Toxic Substances Control, to investigate and cleanup the subsurface contamination.

A significant soil cleanup project was completed in 2017.

In 2020, Printronix executed an agreement with the prior tenant whereby the prior tenant would take 100% responsibility for the costs and process of the cleanup going forward.

Printronix is in process of filing for release of such responsibility from a governmental agency and so may currently be found to be secondarily liable if the prior tenant cannot fulfil their responsibilities under the agreement.

Accordingly, Printronix no longer takes part in monitoring or paying for any future investigation or cleanup activity.

Printronix expects to have no such further costs associated with this facility.

During 2020, Printronix was able to recover $ 24,000 from the prior tenant.

During the period from October 7, 2021 through December 31, 2021, Printronix incurred no related legal fees.

STOCKHOLDERS’ EQUITY

Repurchases of Common Stock

On August 5, 2019, Acacia’s Board of Directors approved a stock repurchase program, which authorized the purchase of up to $ 10.0 million of the Company’s common stock through open market purchases, through block trades, through 10b5-1 plans, or by means of private purchases, from time to time, through July 31, 2020.

On December 6, 2021, Acacia’s Board of Directors approved a stock repurchase program, which authorized the purchase of up to $ 15.0 million of the Company’s common stock through open market purchases, through block trades, through 10b5-1 plans, or by means of private purchases, from time to time, through December 6, 2022.

Stock repurchases, all of which were purchased as part of a publicly announced plan or program, were as follows:

Purchased Average

Share Approximate Dollar

Value of Shares that

1 unchanged sentence

under the Program

Plan Expiration Date

(In thousands)

March 20, 2020 - March 31, 2020 576,898 $ 2.28 $ 8,686

July 31, 2020

April 1, 2020 - April 23, 2020 1,107,639 $ 2.42 $ 6,001

July 31, 2020

Totals for 2020

Preservation Plan .

On March 12, 2019, Acacia’s Board of Directors announced that it had unanimously approved the adoption

of a Tax Benefits Preservation Plan (the “Plan”).

The purpose of the Plan is to protect the Company’s ability

to utilize potential tax assets, such as net operating loss carryforwards and tax credits to offset potential future taxable income.

designed to reduce the likelihood that the Company will experience an ownership change by discouraging (i) any person or group

from acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock and (ii) any existing stockholders

who, as of the time of the first public announcement of the adoption of the Plan, beneficially own more than 4.9% of the Company’s

then-outstanding shares of the Company’s common stock from acquiring additional shares of the Company’s common stock

(subject to certain exceptions).

There is no guarantee, however, that the Plan will prevent the Company from experiencing an ownership

In connection

with the adoption of the Plan, Acacia’s Board of Directors authorized and declared a dividend distribution of one right

for each outstanding share of the Company’s common stock to stockholders of record at the close of business on March 16,

On or after the distribution date, each right would initially entitle the holder to purchase one one-thousandth of a share

of the Company’s Series B Junior Participating Preferred Stock, $0.001 par value for a purchase price of $12.00.

also has a provision in its Amended and Restated Certificate of Incorporation, as amended (the “Charter Provision”)

which generally prohibits transfers of its common stock that could result in an ownership change.

Like the Plan, the purpose of

the Charter Provision is to protect the Company’s ability to utilize potential tax assets, such as net operating loss carryforwards

and tax credits to offset potential future taxable income.

The Charter Provision was approved by the Company’s stockholders

on July 15, 2019.

Acacia’s

income tax benefit (expense) for the fiscal periods presented consisted of the following:

Total repurchases in 2020 1,684,537 $ 2.37

December 10, 2021 - December 31, 2021 784,104 $ 5.12 $ 11,004

During February 2022, we completed the December 2021 program with total common stock purchases of 3,125,819 shares for the aggregate amount of $ 15.0 million.

In determining whether or not to repurchase any shares of Acacia’s common stock, Acacia’s Board of Directors consider such factors, among others, as the impact of the repurchase on Acacia’s cash position, as well as Acacia’s capital needs and whether there is a better alternative use of Acacia’s capital.

Acacia has no obligation to repurchase any amount of its common stock under the Stock Repurchase Program.

Repurchases to date were made in the open market in compliance with applicable SEC rules.

The authorization to repurchase shares presented an opportunity to reduce the outstanding share count and enhance stockholder value.

Tax Benefits Preservation Plan

On March 12, 2019, Acacia’s Board of Directors announced that it had unanimously approved the adoption of a Tax Benefits Preservation Plan (the “Plan”).

Our stockholders ratified the adoption of the Plan in July 2019.

The purpose of the Plan is to protect the Company’s ability to utilize potential tax assets, such as net operating loss carryforwards and tax credits to offset potential future taxable income.

The Plan is designed to reduce the likelihood that the Company will experience an ownership change by discouraging (i) any person or group from acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock and (ii) any existing stockholders who, as of the time of the first public announcement of the adoption of the Plan, beneficially own more than 4.9% of the Company’s then-outstanding shares of the Company’s common stock from acquiring additional shares of the Company’s common stock (subject to certain exceptions).

There is no guarantee, however, that the Plan will prevent the Company from experiencing an ownership change.

In connection with the adoption of the Plan, Acacia’s Board of Directors authorized and declared a dividend distribution of one right for each outstanding share of the Company’s common stock to stockholders of record at the close of business on March 16, 2019.

On or after the distribution date, each right would initially entitle the holder to purchase one one-thousandth of a share of the Company’s Series B Junior Participating Preferred Stock, $ 0.001 par value for a purchase price of $ 12.00 .

On March 15, 2021 the rights expired pursuant to their terms.

The Company has a provision in its Amended and Restated Certificate of Incorporation, as amended (the “Charter Provision”) which generally prohibits transfers of its common stock that could result in an ownership change.

Like the Plan, the purpose of the Charter Provision is to protect the Company’s ability to utilize potential tax assets, such as net operating loss carryforwards and tax credits to offset potential future taxable income.

The Charter Provision was approved by the Company’s stockholders on July 15, 2019.

EQUITY-BASED INCENTIVE PLANS

Stock-Based Incentive Plans

The 2013 Acacia Research Corporation Stock Incentive Plan (“2013 Plan”) and the 2016 Acacia Research Corporation Stock Incentive Plan (“2016 Plan”) (collectively, the “Plans”) were approved by the stockholders of Acacia in May 2013 and June 2016, respectively.

All Plans allow grants of stock options, stock awards and performance shares with respect to Acacia common stock to eligible individuals, which generally includes directors, officers, employees and consultants.

Except as noted below, the terms and provisions of the Plans are identical in all material respects.

Acacia’s compensation committee administers the discretionary option grant and stock issuance programs.

The compensation committee determines which eligible individuals are to receive option grants or stock issuances under those programs, the time or times when the grants or issuances are to be made, the number of shares subject to each grant or issuance, the status of any granted option as either an incentive stock option or a non-statutory stock option under the federal tax laws, the vesting schedule to be in effect for the option grant or stock issuance and the maximum term for which any granted option is to remain outstanding.

The exercise price of options is generally equal to the fair market value of Acacia’s common stock on the date of grant.

Options generally begin to be exercisable one year after grant and generally expire ten years after grant.

Stock options with time-based vesting generally vest over three years and restricted shares with time-based vesting generally vest in full after one to three years (generally representing the requisite service period).

The Plans terminate no later than the tenth anniversary of the approval of the incentive plans by Acacia’s stockholders.

The Plans provide for the following separate programs:

Stock Issuance Program .

Under the stock issuance program, eligible individuals may be issued shares of common stock directly, upon the attainment of performance milestones or the completion of a specified period of service or as a bonus for past services.

Under this program, the purchase price for the shares shall not be less than 100 % of the fair market value of the shares on the date of issuance, and payment may be in the form of cash or past services rendered.

The eligible individuals receiving RSAs shall have full stockholder rights with respect to any shares of common stock issued to them under the Stock Issuance Program, whether or not their interest in those shares is vested.

Accordingly, the eligible individuals shall have the right to vote such shares and to receive any regular cash dividends paid on such shares.

The eligible individuals receiving RSUs shall not have full stockholder rights until they vest.

Discretionary Option Grant Program .

Under the discretionary option grant program, Acacia’s compensation committee may grant (1) non-statutory options to purchase shares of common stock to eligible individuals in the employ or service of Acacia or its subsidiaries (including employees, non-employee board members and consultants) at an exercise price not less than 85 % of the fair market value of those shares on the grant date, and (2) incentive stock options to purchase shares of common stock to eligible employees at an exercise price not less than 100 % of the fair market value of those shares on the grant date (not less than 110 % of fair market value if such employee actually or constructively owns more than 10 % of Acacia’s voting stock or the voting stock of any of its subsidiaries).

The number of shares of common stock initially reserved for issuance under the 2013 Plan was 4,750,000 shares.

No new additional shares will be added to the 2013 Plan without security holder approval (except for shares subject to outstanding awards that are forfeited or otherwise returned to the 2013 Plan).

The stock issuable under the 2013 Plan shall be shares of authorized but unissued or reacquired common stock, including shares repurchased by the Company on the open market.

In June 2016, 625,390 shares of common stock available for issuance under the 2013 Plan were transferred into the 2016 Plan.

At December 31, 2021, there were 296,705 shares available for grant under the 2013 Plan.

The number of shares of common stock initially reserved for issuance under the 2016 Plan was 4,500,000 shares plus 625,390 shares of common stock available for issuance under the 2013 Plan, as of the effective date of the 2016 Plan.

At December 31, 2021, there were 2,673,757 shares available for grant under the 2016 Plan.

Upon the exercise of stock options, the granting of RSAs, or the delivery of shares pursuant to vested RSUs, it is Acacia’s policy to issue new shares of common stock.

Acacia’s Board of Directors may amend or modify the Plans at any time, subject to any required stockholder approval.

As of December 31, 2021, there are 6,197,070 shares of common stock reserved for issuance under the Plans.

The following table summarizes stock option activity for the Plans:

Options Weighted Average Exercise Price Aggregate Intrinsic Value Weighted

Remaining Contractual Life

(In thousands)

Outstanding at December 31, 2019 325,333 $ 4.38 $ 109 4.4 years

Granted — $ — $ —

Exercised ( 13,333 ) $ 3.60 $ 7

Forfeited/Expired ( 1,917 ) $ 3.99 $ 1

Outstanding at December 31, 2020 310,083 $ 4.41 $ 104 2.2 years

Granted 393,750 $ 5.84 $ —

Exercised ( 60,000 ) $ 3.36 $ 177

Forfeited/Expired ( 88,416 ) $ 3.97 $ 103

Outstanding at December 31, 2021 555,417 $ 5.61 $ 71 7.3 years

Exercisable at December 31, 2021 161,667 $ 5.05 $ 71 1.7 years

Expected to vest at December 31, 2021 393,750 $ 5.84 $ — 9.6 years

Unrecognized stock-based compensation expense at December 31, 2021 (in thousands) $ 612

Weighted average remaining vesting period at December 31, 2021 2.4 years

Stock options granted in 2021 are time-based and will vest in full after three years .

During the year ended December 31, 2021, the Company granted 393,750 non-qualified stock options at a grant-date fair value of $ 1.79 per share using the Black-Scholes option-pricing model.

The fair value was estimated based on the following assumptions:

volatility of 30 percent, risk-free interest rate of 0.92 percent, term of 6.00 years and a dividend yield of 0 percent as the Company does not pay common stock dividends.

The risk-free rate is based on the term assumption and U.S.

Treasury constant maturities as published by the Federal Reserve.

The Company currently uses the "simplified" method for determining the term, due to the limited option grant history, which assumes that the exercise date of an option would be halfway between its vesting date and the expiration date.

No options were granted during the year ended December 31, 2020.

The aggregate fair value of options vested during the years ended December 31, 2021 and 2020 was $ 18,000 and $ 54,000 , respectively.

The following table summarizes nonvested restricted stock activity for the Plans:

Shares Weighted

Average Grant

Date Fair Value Units Weighted

Average Grant

Date Fair Value

Nonvested at December 31, 2019 475,619 $ 2.98 900,000 $ 1.42

Granted 592,000 $ 3.52 166,500 $ 3.19

Vested ( 352,762 ) $ 3.12 — $ —

Forfeited ( 30,851 ) $ 2.85 ( 80,000 ) $ 3.19

Nonvested at December 31, 2020 684,006 $ 3.38 986,500 $ 1.58

Granted 324,401 $ 5.56 506,500 $ 5.84

Vested ( 394,169 ) $ 3.30 ( 28,834 ) $ 3.19

Forfeited ( 96,669 ) $ 3.77 ( 450,000 ) $ 1.42

Nonvested at December 31, 2021 517,569 $ 4.74 1,014,166 $ 3.73

Unrecognized stock-based compensation expense at December 31, 2021 (in thousands) $ 1,928 $ 2,823

Weighted average remaining vesting period at December 31, 2021 1.6 years 2.3 years

RSAs and RSUs granted in 2021 are time-based and will vest in full after one to three years .

The aggregate fair value of RSAs vested during the years ended December 31, 2021 and 2020 was $ 1.3 million and $ 1.1 million, respectively.

The aggregate fair value of RSUs vested during the year ended December 31, 2021 was $ 92,000 .

No RSUs were vested during the year ended December 31, 2020.

Certain RSUs were granted in September 2019 with market-based vesting conditions that vest based upon the Company achieving specified stock price targets over a three-year period.

The effect of a market condition is reflected in the estimate of the grant-date fair value of the options utilizing a Monte Carlo valuation technique.

Compensation expense is recognized with a market-based vesting condition provided that the requisite service is rendered, regardless of when, if ever, the market condition is satisfied.

Assumptions utilized in connection with the Monte Carlo valuation technique, that resulted in a fair value of $ 1.42 per unit, included:

risk-free interest rate of 1.38 percent, term of 3.00 years, expected volatility of 38 percent and expected dividend yield of 0 percent.

The risk-free interest rate was determined based on the yields available on U.S.

Treasury zero-coupon issues.

The expected stock price volatility was determined using historical volatility.

The expected dividend yield was based on expectations regarding dividend payments.

During the year ended December 31, 2021, 450,000 RSUs were forfeited, leaving 450,000 units with market-based vesting conditions outstanding and unvested at period end.

The remaining units are expected to fully vest on September 3, 2022.

Compensation expense for RSUs with market-based vesting conditions for the years ended December 31, 2021 and 2020, was $( 71,000 ) and $ 427,000 , respectively.

Compensation expense for share-based awards recognized in general and administrative expenses was comprised of the following:

Years Ended December 31,

(In thousands)

Options $ 104 $ 37

RSAs 1,521 1,155

Total compensation expense for share-based awards $ 2,053 $ 1,662

Total unrecognized stock-based compensation expense as of December 31, 2021 was $ 5.4 million, which will be amortized over a weighted average remaining vesting period of 2.0 years.

Profits Interest Plan

Profits Interest Units (“PIUs”) were accounted for in accordance with ASC 718-10, “Compensation - Stock Compensation.” The vesting conditions did not meet the definition of service, market or performance conditions, as defined in ASC 718.

As such, the PIUs were classified as liability awards.

Compensation expense was adjusted for changes in fair value prorated for the portion of the requisite service period rendered.

Initially, compensation expense was recognized on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which was five years.

Upon full vesting of the award, which occurred during the three months ended September 30, 2017, previously unrecognized compensation expense was immediately recognized in the period.

The Company has a purchase option to purchase the vested PIUs that are not otherwise forfeited after termination of continuous service.

The exercise price of the purchase option is the fair market value of the PIUs on the date of termination of continuous service.

The individuals holding PIUs are no longer employed by the Company.

Included in other long-term liabilities in the consolidated balance sheets as of December 31, 2021 and 2020, the PIUs totaled $ 591,000 , which was their fair value as of December 31, 2018 after termination of service.

RETIREMENT SAVINGS PLANS AND EXECUTIVE SEVERANCE POLICY

Retirement Savings Plans

Acacia has an employee savings and retirement plan under Section 401(k) of the Internal Revenue Code.

The plan is a defined contribution plan in which eligible employees may elect to have a percentage of their compensation contributed to the plan, subject to certain guidelines issued by the Internal Revenue Service.

There were no contributions made by Acacia during the years ended December 31, 2021 and 2020.

In the United States of America, Printronix has a 401(k) Savings and Investment Plan, for all eligible U.S.

employees, which is designed to be tax deferred in accordance with the provisions of Section 401(k).

Printronix matches employee contributions dollar-for-dollar up to the first 1 percent of compensation, and then an additional $ 0.50 to-the-dollar on the next 1 percent of employee compensation.

Printronix's contributions have graded-vesting annually and become fully vested to the employee after four full years of employment.

During the period from October 7, 2021 through December 31, 2021, Printronix's total contribution to the plan was $ 9,000 .

Printronix has statutory obligations to contribute to overseas employee retirement funds or the local social security pension funds in China, Malaysia, Singapore, France, Netherlands and the United Kingdom.

During the period from October 7, 2021 through December 31, 2021, Printronix's total contribution overseas was $ 189,000 .

Executive Severance Policy

Under Acacia’s Amended Executive Severance Policy, full-time employees as of July 2017 and prior with the title of Senior Vice President and higher (“SVP and higher”) are entitled to receive certain benefits upon termination of employment.

If employment of an SVP and higher employee is terminated for other than cause or other than on account of death or disability, Acacia will (i) promptly pay to the SVP and higher employee a lump sum amount equal to the aggregate of (a) accrued obligations (i.e., annual base salary through the date of termination to the extent not theretofore paid and any compensation previously deferred (together with any accrued interest or earnings thereon) and any accrued vacation pay, and reimbursable expenses, in each case to the extent not theretofore paid) and (b) three (3) months of base salary for each full year that the SVP and higher employee was employed by Acacia (the “Severance Period”), up to a maximum of twelve (12) months (eighteen (18) months for executive officers of Acacia Research Corporation) of base salary, and (ii) provide to the SVP and higher employee, Acacia paid COBRA coverage for the medical and dental benefits selected in the year in which the termination occurs, for the duration of the Severance Period.

Results for the year ended December 31, 2021 and 2020 include $ 332,000 and $ 304,000 of expenses incurred under the executive severance policy.

The components of income before income taxes were as follows:

Years Ended December 31,

(In thousands)

Domestic $ 175,635 $ 108,072

Foreign ( 983 ) —

Total $ 174,652 $ 108,072

For purposes of reconciling the Company’s provision for income taxes at the statutory rate and the Company’s income tax expense (benefit) at the effective tax rate, a notional 21% tax rate was applied as follows:

Years Ended December 31,

Statutory federal tax rate - expense (benefit) 21 % 21 %

Foreign rate differential 5 % ( 1 ) %

Nondeductible permanent items ( 1 ) % — %

Expired tax attributes 4 % — %

Derivative fair value adjustment 5 % 11 %

Valuation allowance ( 21 ) % ( 33 ) %

Other 1 % 1 %

Effective income tax rate 14 % ( 1 ) %

Acacia’s income tax (expense) benefit for the periods presented consisted of the following:

Years Ended December 31,

(In thousands)

State $ ( 15 ) $ ( 66 )

Foreign ( 8,530 ) 1,225

Total current ( 8,545 ) 1,159

Federal ( 54,165 ) —

State 1,573 —

Foreign 332 —

Total deferred ( 52,260 ) —

Income tax benefit

The tax effects of temporary differences

and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following at December

31, 2020 and 2019:

Change in valuation allowance 36,518 —

Income tax (expense) benefit $ ( 24,287 ) $ 1,159

The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:

(In thousands)

1 unchanged sentence

Net operating loss and capital loss carryforwards and credits $ 78,428 $ 113,561

Unrealized loss on investments held at fair value

Stock compensation

Compensation expense for share-based awards 383 497

Fixed assets and intangibles — 677

1 unchanged sentence

Accrued liabilities and other 1,495 432

Lease liability 726 330

State taxes — 15

Total deferred tax assets 81,050 115,766

2 unchanged sentences

Deferred tax liabilities:

Unrealized loss on investments held at fair value

ROU Asset ( 726 ) ( 330 )

Fixed assets and intangibles ( 2,572 ) —

Unrealized gain on investments held at fair value ( 55,696 ) ( 38,374 )

Other ( 23 ) ( 93 )

Total deferred tax liabilities ( 59,017 ) ( 38,797 )

Net deferred tax assets (liabilities)

A reconciliation of the federal

statutory income tax rate and the effective income tax rate is as follows:

Statutory federal tax rate - (benefit) expense

State income and foreign taxes, net of federal tax effect

Foreign tax credit

Noncontrolling interests in operating subsidiaries

Nondeductible permanent items

Change in tax rate

Expired capitalized loss

Valuation allowance

periods presented, the Company recorded full valuation allowances against its net deferred tax assets due to uncertainty

regarding future realization pursuant to guidance set forth in ASC 740, “Income Taxes.”

In future periods, if the

Company determines it will more likely than not be able to realize certain of these amounts, the applicable portion of the

benefit from the release of the valuation allowance will generally be recognized in the consolidated statements of operations

in the period the determination is made.

31, 2020, Acacia had U.S.

federal and state income tax net operating loss carryforwards (“NOLs”) totaling approximately

$274,283,000 and $13,809,000, respectively.

For federal income tax purposes, our NOL carryovers generated for tax years beginning

before January 1, 2018 will begin to expire in 2026.

Net deferred tax liabilities $ ( 18,552 ) $ —

As of December 31, 2021 and 2020, management assessed the realizability of deferred tax assets and evaluated the need for a valuation allowance for deferred tax assets on a jurisdictional basis.

This evaluation utilizes the framework contained in ASC 740, "Income Taxes," wherein management analyzes all positive and negative evidence available at the balance sheet date to determine whether all or some portion of the Company's deferred tax assets will not be realized.

Under this guidance, a valuation allowance must be established for deferred tax assets when it is more-likely-than-not that the asset will not be realized.

In assessing the realization of the Company's deferred tax assets, management considers all available evidence, both positive and negative.

Based upon available evidence, it was concluded on a more-likely-than-not basis that as of December 31, 2021 a valuation allowance of $ 40.6 million was needed for foreign tax credits and certain state tax attributes the Company estimates will expire prior to utilization.

As of December 31, 2020, the Company recorded a full valuation allowance of $ 77.0 million.

The valuation allowance (decreased)/increased by $( 36.4 ) million and $( 38.1 ) million for the years ended December 31, 2021 and 2020, respectively, as a result of the use of the NOLs and increase in unrealized gains.

At December 31, 2021, Acacia had U.S.

federal and state income tax net operating loss carryforwards (“NOLs”) totaling approximately $ 172.2 million and $ 38.1 million, respectively.

$ 76.4 million of federal NOL carryovers generated in tax years beginning before January 1, 2018 will begin to expire in 2034.

Pursuant to the Tax Cuts and Jobs Act enacted by the U.S.

federal government

in December 2017, for federal income tax purposes, NOL carryovers generated for our tax years beginning January 1, 2018 can be

carried forward indefinitely but will be subject to a taxable income limitation.

Our capital loss carryovers totaled $11,155,000

at December 31, 2020, expiring in 2029.

federal government in December 2017, for federal income tax purposes, NOL carryovers generated for our tax years beginning January 1, 2018 can be carried forward indefinitely but will be subject to a taxable income limitation.

For state income tax purposes, our NOLs will expire between 2024 and 2040.

As of December

31, 2020, Acacia had approximately $50,973,000 of foreign tax credits, expiring between 2021 and 2026.

In general, foreign taxes

withheld may be claimed as a deduction on future U.S.

corporate income tax returns, or as a credit against future U.S.

tax liabilities, subject to certain limitations.

(benefit) for the periods presented primarily reflects foreign taxes withheld and refunded on revenue agreements executed with

licensees in foreign jurisdictions and other state taxes.

Excluding the impact of the change in valuation allowance, annual effective

tax rates were 32% for fiscal year 2020 and 23% for fiscal year 2019.

Results for fiscal year 2020 included an unrealized gain

on our investment in Veritone which created a deferred tax liability totaling approximately $590,000, and an unrealized gain on

our investment in the LF equity income fund portfolio which created a deferred tax liability totaling approximately $37,706,000.

Results for fiscal year 2019 included an unrealized loss on Acacia’s investment in Veritone which created a deferred tax

asset totaling approximately $538,000.

Acacia is subject

to taxation in the U.S.

and in various state jurisdictions and incurs foreign tax withholdings on revenue agreements with licensees

in certain foreign jurisdictions.

As of December 31, 2021, Acacia had approximately $ 40.5 million of foreign tax credits, expiring between 2022 and 2026.

The following changes occurred in the amount of unrecognized tax benefits:

Years Ended December 31,

(In thousands)

Beginning balance $ 731 $ 731

Additions for current year tax positions 27 —

Additions included in purchase accounting for prior year positions 129 —

Reductions for prior year tax positions — —

Ending Balance (excluding interest and penalties) 887 731

Interest and penalties — —

Total $ 887 $ 731

At December 31, 2021 and 2020, the Company had total unrecognized tax benefits of approximately $ 887,000 and $ 731,000 , respectively.

At December 31, 2021 and 2020, $ 110,000 of unrecognized tax benefits are recorded in other long-term liabilities and the remaining amount is included as an offset to deferred tax assets.

No interest and penalties have been recorded for the unrecognized tax benefits for the periods presented.

At December 31, 2021, if recognized, $ 887,000 of tax benefits would impact the Company’s effective tax rate.

The Company does not expect that the liability for unrecognized tax benefits will change significantly within the next 12 months.

Acacia recognizes interest and penalties with respect to unrecognized tax benefits in income tax expense (benefit).

Acacia has identified no uncertain tax position for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within 12 months.

Acacia is subject to taxation in the U.S.

and in various state/foreign jurisdictions and incurs foreign tax withholdings on revenue agreements with licensees in certain foreign jurisdictions.

With no material exceptions, Acacia is no longer subject to U.S.

federal or state examinations

by tax authorities for years before 2016.

The California Franchise Tax Board audited the 2011 through 2016 California combined

income tax returns.

The California Franchise Tax Board has proposed adjustments for 2011 through 2016 that will result in a reduction

in our net operating loss carryforward deferred tax asset of $571,000.

As those NOL’s have been subject to a full

valuation allowance, the impact of these adjustments has no impact to the consolidated statements of operations for the periods

At both December

31, 2020 and 2019, the Company had total unrecognized tax benefits of approximately $731,000.

No interest and penalties have been

recorded for the unrecognized tax benefits for the periods presented.

At December 31, 2020, if recognized, approximately $731,000

of tax benefits, net of valuation allowance, would impact the Company’s effective tax rate.

The Company does not expect

that the liability for unrecognized tax benefits will change significantly within the next 12 months.

Acacia recognizes

interest and penalties with respect to unrecognized tax benefits in income tax expense (benefit).

Acacia has identified no uncertain

tax position for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase

or decrease within 12 months.

INCENTIVE PLANS

Incentive Plans

The 2013 Acacia

Research Corporation Stock Incentive Plan (“2013 Plan”) and the 2016 Acacia Research Corporation Stock Incentive Plan

(“2016 Plan”) (collectively, the “Plans”) were approved by the stockholders of Acacia in May 2013 and

June 2016, respectively.

All Plans allow grants of stock options, stock awards and performance shares with respect to Acacia common

stock to eligible individuals, which generally includes directors, officers, employees and consultants.

Except as noted below,

the terms and provisions of the Plans are identical in all material respects.

Acacia’s

compensation committee administers the discretionary option grant and stock issuance programs.

The compensation committee determines

which eligible individuals are to receive option grants or stock issuances under those programs, the time or times when the grants

or issuances are to be made, the number of shares subject to each grant or issuance, the status of any granted option as either

an incentive stock option or a non-statutory stock option under the federal tax laws, the vesting schedule to be in effect for

the option grant or stock issuance and the maximum term for which any granted option is to remain outstanding.

The exercise price

of options is generally equal to the fair market value of Acacia’s common stock on the date of grant.

Options generally

begin to be exercisable six months to one year after grant and generally expire seven to ten years after grant.

federal or state examinations by tax authorities for years before 2017.

The Company’s 2017 through 2021 tax years generally remain subject to examination by federal, state and foreign tax authorities.

As the Company has incurred losses in most jurisdictions, the taxing authorities can generally challenge 2014 through 2020 losses to determine either the amount of carryforward deduction reported in the open year or the amount of a net operating loss deduction that is absorbed in a closed year and supports the determination of the available net operating loss deduction for the open year under examination.

Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated foreign subsidiaries, as earnings are permanently reinvested, however, no deferred tax liability would be necessary as the parent entity would not be required to include the distribution into income as the amount would be tax free under current law.

The Tax Cuts and Jobs Act subjects a US shareholder to tax on GILTI earned by certain foreign subsidiaries.

The FASB Staff Q&A, Topic 740 No.

Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only.

We have elected to account for GILTI in the year the tax is incurred.

On March 27, 2020, the United States enacted the CARES Act which provides certain income tax benefits including the ability to carryback federal NOLs generated in 2018 through 2020 for an extended five-year period and increased the limitation for the deduction of interest expense from 30 percent to 50 percent of modified taxable income.

The CARES Act also provides other economic benefits such as allowing employers to defer payment of the employer’s portion of payroll taxes for 2020 and a refundable employee retention credit of up to $5,000 per eligible employee wages.

The Company did not realize benefits from the provisions of the CARES Act including the extended NOL carryback period, the payroll tax deferral, and the employee retention credit.

On December 27, 2020, the United States enacted the Consolidated Appropriations Act which extended many of the benefits of the CARES Act that were scheduled to expire.

The Company does not expect a material impact from the Consolidated Appropriations Act on its consolidated financial statements and related disclosures.

On March 11, 2021 the United States enacted the American Rescue Plan Act of 2021.

This Act includes various income and payroll tax measures.

The Company does not expect a material impact from the American Rescue Plan on its consolidated financial statements and related disclosures.

On June 29, 2020, the state of California passed Assembly Bill 85 which suspends the California net operating loss deduction for the 2020-2022 tax years and the R&D credit usage for the same period (for credit usages in excess of $5.0 million).

The Company does not expect a material impact from Assembly Bill 85 on its financial statements and related disclosures.

INCOME/LOSS PER SHARE

The following table presents the calculation of basic and diluted income/loss per share of common stock:

Years Ended December 31,

(In thousands, except share and per share data)

Net income attributable to Acacia Research Corporation $ 149,197 $ 109,231

Dividend on Series A redeemable convertible preferred stock ( 1,452 ) ( 1,381 )

Accretion of Series A redeemable convertible preferred stock ( 3,829 ) ( 2,835 )

Undistributed earnings allocated to participating securities ( 25,112 ) ( 18,169 )

Net income attributable to common stockholders - Basic 118,804 86,846

Dividend on Series A redeemable convertible preferred stock 1,452 —

Accretion of Series A redeemable convertible preferred stock 3,829 —

Change in fair value of Series A redeemable convertible preferred stock embedded

derivative ( 8,280 ) —

Change in fair value of Series A warrants — ( 1,348 )

Change in fair value of dilutive Series B warrants 44,037 ( 5,557 )

Interest expense associated with Starboard Notes, net of tax 4,658 1,889

Undistributed earnings allocated to participating securities 25,112 18,169

Reallocation of undistributed earnings to participating securities ( 1,388 ) ( 15,105 )

Net income attributable to common stockholders - Diluted $ 188,224 $ 84,894

Weighted average shares used in computing net income per share attributable to

common stockholders - Basic 48,797,290 48,840,829

Potentially dilutive common shares:

Series A Preferred Stock 9,589,041 —

Restricted stock units 758,682 637,044

Stock options 37,167 2,952

with time-based vesting generally vest over two to three years and restricted shares with time based vesting generally vest in

full after one to three years (generally representing the requisite service period).

The Plans terminate no later than the tenth

anniversary of the approval of the incentive plans by Acacia’s stockholders.

The Plans provide

for the following separate programs:

Discretionary Option Grant

Under the discretionary option grant program, Acacia’s compensation committee may grant (1) non-statutory

options to purchase shares of common stock to eligible individuals in the employ or service of Acacia or its subsidiaries

(including employees, non-employee board members and consultants) at an exercise price not less than 85% of the fair market

value of those shares on the grant date, and (2) incentive stock options to purchase shares of common stock to eligible employees

at an exercise price not less than 100% of the fair market value of those shares on the grant date (not less than 110% of

fair market value if such employee actually or constructively owns more than 10% of Acacia’s voting stock or the voting

stock of any of its subsidiaries).

Automatic Option Grant Program .

Through fiscal year 2016, each non-employee director received restricted stock units or stock options for the number of shares

determined by dividing the annual retainer by the grant date fair value of Acacia’s common stock on the grant date.

In addition, each new non-employee director received restricted stock units or stock options for the number of shares determined

by dividing the annual Board of Directors retainer by the grant date fair value of Acacia’s common stock on the commencement

These restricted stock units and stock options vested in a series of twelve quarterly installments over the three year

period following the grant date, subject to immediate acceleration upon a change in control.

Acacia will deliver the unrestricted

shares corresponding to the vested restricted stock units within thirty (30) days after the first to occur of the following

(i) the fifth (5th) anniversary of the grant date;

or (ii) termination of the non-employee director’s service

as a member of the Company’s Board of Directors.

The non-employee directors do not have any rights, benefits or entitlements

with respect to any shares unless and until the shares have been delivered.

Stock Issuance Program .

Under the stock issuance program, eligible individuals may be issued shares of common stock directly, upon the attainment

of performance milestones or the completion of a specified period of service or as a bonus for past services.

Under this program,

the purchase price for the shares shall not be less than 100% of the fair market value of the shares on the date of issuance,

and payment may be in the form of cash or past services rendered.

The eligible individuals receiving restricted stock awards

(“RSA”) shall have full stockholder rights with respect to any shares of Common Stock issued to them under the

Stock Issuance Program, whether or not their interest in those shares is vested.

Accordingly, the eligible individuals shall

have the right to vote such shares and to receive any regular cash dividends paid on such shares.

The eligible individuals

receiving restricted stock units (“RSU”) shall not have full stockholder rights until they vest.

The number of

shares of Common Stock initially reserved for issuance under the 2013 Plan was 4,750,000 shares.

No new additional shares will

be added to the 2013 Plan without security holder approval (except for shares subject to outstanding awards that are forfeited

or otherwise returned to the 2013 Plan).

The stock issuable under the 2013 Plan shall be shares of authorized but unissued or

reacquired Common Stock, including shares repurchased by the Company on the open market.

In June 2016, 625,390 shares of common

stock available for issuance under the 2013 Plan were transferred into the 2016 Plan.

At December 31, 2020, there were 378,270

shares available for grant under the 2013 Plan.

The number of

shares of Common Stock initially reserved for issuance under the 2016 Plan was 4,500,000 shares plus 625,390 shares of common

stock available for issuance under the 2013 Plan, as of the effective date of the Plan.

At December 31, 2020, there were 4,068,308

shares available for grant under the 2016 Plan.

Upon the exercise

of stock options, the granting of restricted stock, or the delivery of shares pursuant to vested restricted stock units, it is

Acacia’s policy to issue new shares of common stock.

Acacia’s Board of Directors may amend or modify the Plans at

any time, subject to any required stockholder approval.

As of December 31, 2020, there are 6,509,469 shares of common stock reserved

for issuance under the Plans.

award grant activity for the periods presented was as follows:

Aggregate fair value (in thousands)

Restricted stock awards with time-based service conditions

Restricted stock units with market-based service conditions

Restricted stock units with time-based service conditions

Total incentive awards granted

The following

table summarizes stock option activity for the Plans for the year ended December 31, 2020:

Weighted-Average

Contractual Term

Intrinsic Value

Outstanding at December 31, 2019

Expired/forfeited

Outstanding at December 31,

Exercisable at December 31, 2020

The aggregate

intrinsic value of options exercised during the years ended December 31, 2020 and 2019 was $7,000 and $4,000, respectively.

aggregate intrinsic value of options vested during the year ended December 31, 2020 was $8,000.

No options were granted during

the year ended December 31, 2020.

The aggregate fair value of options vested during the years ended December 31, 2020 and 2019

was $54,000 and $294,000, respectively.

As of December 31, 2020, the total unrecognized compensation expense related to non-vested

stock option awards was $9,000, which is expected to be recognized over a weighted-average term of approximately 4 months.

following table summarizes non-vested restricted share activity for the year ended December 31, 2020:

Average Grant

Date Fair Value

Nonvested restricted stock at December 31, 2019

Nonvested restricted stock at December 31, 2020

The weighted-average

grant date fair value of non-vested restricted stock granted during the years ended December 31, 2020 and 2019 was $3.38 and $2.98,

respectively.

The aggregate fair value of restricted stock that vested during the years ended December 31, 2020 and 2019 was $1,101,000

and $672,000, respectively.

As of December 31, 2020, unrecognized compensation expense related to non-vested restricted stock

awards was $2,023,000, which is expected to be recognized over a weighted-average term of approximately 2 years.

The following

table summarizes restricted stock units activity for the year ended December 31, 2020:

Average Grant

Date Fair Value

Nonvested restricted stock units at December 31, 2019

Nonvested restricted stock units at December 31, 2020

Vested restricted stock units at December 31, 2020

The weighted-average

grant date fair value of restricted units granted during the years ended December 31, 2020 was $3.19.

The aggregate fair value

of restricted stock units granted during the year ended December 31, 2020 was $276,000.

The aggregate fair value of restricted

stock units granted during the year ended December 31, 2019 was $1,280,000.

No restricted stock units were vested during the years

ended December 31, 2020 and 2019.

As of December 31, 2020, unrecognized compensation expense related to non-vested restricted

stock units was $936,000, which is expected to be recognized over a weighted-average term of approximately 2 years.

Profits Interest

16, 2017, AIP Operation LLC, a Delaware limited liability company (“AIP”), and an indirect subsidiary of Acacia, adopted

a Profits Interest Plan (the “Plan”) that provides for the grant of membership interests in AIP to certain members

of management and the Board of Directors of Acacia as compensation for services rendered for or on behalf of AIP.

interest unit granted pursuant to the Plan is intended to qualify as a “profits interest”

federal income

tax purposes and will only have value to the extent the fair value of AIP increases beyond the fair value at the issuance date

of the membership interests.

The membership interests are represented by units (the “Units”) reserved for the issuance

of awards under the Plan.

The Units entitle the holders to share in or be allocated certain AIP profits and losses and to receive

or share in AIP distributions pursuant to the AIP Limited Liability Company Operating Agreement entered into as of February 16,

2017 (the “LLC Agreement”).

In connection with the adoption of the Plan, a form of Profits Interest Agreement was

approved pursuant to which Units may be granted from time to time.

Units vest upon AIP’s achievement of certain performance

milestones (one-third upon 150% appreciation, and the remaining two-thirds upon 300% appreciation in value of Acacia’s aggregate

investment in Veritone), subject to the continued service of the recipient, and are subject to the terms and conditions of the

Plan, the Profits Interest Agreement and the LLC Agreement.

The Units were fully vested in September 2017.

Acacia owns 60% of the membership interests

in AIP and at all times will control AIP.

Profits interests totaling 400 Units, or 40% of the membership interests in AIP, were

granted in February 2017, with an aggregate grant date fair value of $722,000.

The carrying value of the Units totaled $591,000

as of December 31, 2020, based on the fair value of the Units at the recipient’s service termination date.

Upon full vesting

of the units in September 2017, all previously unrecognized compensation expense was immediately recognized.

As of December 31,

2020, AIP holds the Veritone warrants described at Note 6.

Stock compensation

expense is recognized in general and administrative expenses.

Compensation expense for the periods presented was comprised of

the following:

(in thousands)

Restricted stock awards with time-based service conditions

Restricted stock units awards with time-based service conditions

Restricted stock units with market-based vesting conditions

Stock options with time-based service vesting conditions

Total compensation expense

AND CONTINGENCIES

primarily leases office facilities under operating lease arrangements that will end in various years through July 2024.

On June 7, 2019,

we entered into a building lease agreement (the “New Lease”) with Jamboree Center 4 LLC (the “Landlord”).

Pursuant to the New Lease, we have leased approximately 8,293 square feet of office space in Irvine, California.

The New Lease

commenced on August 1, 2019.

The term of the New Lease is 60 months from the commencement date, provides for annual rent increases,

and does not provide us the right to early terminate or extend our lease terms.

leased a facility under an operating lease agreement (the “Old Lease”), the term of which ended on January 31, 2020.

The Company ceased using the facility in December 2018 and the subleased the facility for the remainder of the Old Lease term.

All sublease income under the Old Lease was received and recorded in 2019.

No sublease income on the Old Lease was recognized

On January 7,

2020, we entered into a building lease agreement (the “New York Office Lease”) with Sage Realty Corporation (the “New

York Office Landlord”).

Pursuant to the New York Office Lease, we have leased approximately 4,000 square feet of office

space in New York, New York.

The New York Office Lease commenced on February 1, 2020.

The term of the New York Office Lease is

24 months from the commencement date, provides for annual rent increases, and does not provide us the right to early terminate

or extend our lease terms.

Operating lease

costs, net of sublease income, were $603,000, and $426,000 for the years ended December 31, 2020 and 2019, respectively.

The table below

presents aggregate future minimum payments due under the New Lease and the Old Lease, reconciled to lease liabilities included

in the consolidated balance sheet as of December 31, 2020:

Operating Leases

(In thousands)

Total minimum payments

short-term lease liabilities

Long-term lease liabilities

Inventor Royalties and Contingent

Legal Expenses

In connection

with the investment in certain patents and patent rights, certain of Acacia’s operating subsidiaries executed related agreements

which grant to the former owners of the respective patents or patent rights, the right to receive inventor royalties based on

future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective

patents or patent portfolios.

Acacia’s

operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law

in connection with their licensing and enforcement activities.

These law firms may be retained on a contingent fee basis whereby

such law firms are paid on a scaled percentage of any negotiated fees, settlements or judgments awarded based on how and when

the fees, settlements or judgments are obtained.

Patent Enforcement

Certain of Acacia’s

operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights.

In connection with

any of Acacia’s 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 Acacia or its operating subsidiaries or award attorney’s fees and/or expenses

to a defendant(s), which could be material.

Acacia is subject

to claims, counterclaims and legal actions that arise in the ordinary course of business.

6, 2017, the Federal Court of Canada allowed a counterclaim for invalidity of a patent asserted by Rapid Completions LLC and awarded

costs payable by Rapid Completions LLC in an amount to be determined.

6, 2019, Slingshot Technologies, LLC (“Slingshot”) filed a lawsuit in Delaware Chancery Court against the Company

and Acacia Research Group, LLC (collectively, the “Acacia Entities”) ,

Monarch Networking Solutions LLC (“Monarch”) , Acacia board member Katharine Wolanyk, and Transpacific IP Group,

(“Transpacific”).

Slingshot alleges that the Acacia Entities and Monarch

misappropriated its confidential and proprietary information, purportedly furnished to the Acacia Entities and

Monarch by Ms.

Wolanyk, in acquiring a patent portfolio from Transpacific after Slingshot’s exclusive option to purchase

the same patent portfolio from Transpacific had already expired.

Slingshot seeks monetary damages, as well as equitable and injunctive

relief related to its alleged right to own the portfolio.

On March 15, 2021, the court

issued orders granting Monarch’s motion to dismiss for lack of personal jurisdiction and Ms.

Wolanyk’s motion to dismiss

for lack of subject matter jurisdiction.

The Acacia Entities maintain that Slingshot’s allegations are baseless,

that the Acacia Entities neither had access to nor used Slingshot’s information in acquiring the portfolio, that the Acacia

Entities acquired the portfolio as a result of the independent efforts of its IP licensing group, and that Slingshot suffered

no damages given its exclusive option to purchase the portfolio had already ended and it has proven itself incapable of closing

on the portfolio purchase.

Management believes

that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on Acacia’s

consolidated financial position, results of operations or cash flows.

Fiscal year 2020 operating expenses included a net income

for settlement offset by contingency accruals totaling $308,000, net of prior accruals.

Refer to Note 4 for information on accrued

and Indemnifications

Certain of Acacia’s

operating subsidiaries have made guarantees and indemnities under which they may be required to make payments to a guaranteed

or indemnified party, in relation to certain transactions, including revenue transactions in the ordinary course of business.

In connection with certain facility leases, Acacia and certain of its operating subsidiaries have indemnified lessors for certain

claims arising from the facilities or the leases.

Acacia indemnifies its directors and officers to the maximum extent permitted

under the laws of the State of Delaware.

However, Acacia has a directors and officers insurance policy that may reduce its exposure

in certain circumstances and may enable it to recover a portion of future amounts that may be payable, if any.

The duration of

the guarantees and indemnities varies and, in many cases is indefinite but subject to statute of limitations.

The majority of

guarantees and indemnities do not provide any limitations of the maximum potential future payments that Acacia could be obligated

To date, Acacia has made no payments related to these guarantees and indemnities.

Acacia estimates the fair value of

its indemnification obligations to be insignificant based on this history and therefore, have not recorded any liability for these

guarantees and indemnities in the accompanying consolidated balance sheets.

Additionally, no events or transactions have occurred

that would result in a material liability at December 31, 2020.

RETIREMENT SAVINGS PLAN AND

EXECUTIVE SEVERANCE POLICY

Savings Plan.

Acacia has an employee savings and retirement plan under section 401(k) of the Code (the “Plan”).

The Plan is a defined contribution plan in which eligible employees may elect to have a percentage of their compensation contributed

to the Plan, subject to certain guidelines issued by the Internal Revenue Service.

Acacia may contribute to the Plan at the discretion

of the Board of Directors.

There were no contributions made by Acacia during the periods presented.

Severance Policy.

Under Acacia’s Amended Executive Severance Policy, full-time employees as of July 2017 and prior with

the title of Senior Vice President and higher (“SVP and higher”) are entitled to receive certain benefits upon termination

of employment.

If employment of an SVP and higher employee is terminated for other than cause or other than on account of death

or disability, Acacia will (i) promptly pay to the SVP and higher employee a lump sum amount equal to the aggregate of (a) accrued

obligations (i.e., annual base salary through the date of termination to the extent not theretofore paid and any compensation

previously deferred (together with any accrued interest or earnings thereon) and any accrued vacation pay, and reimbursable expenses,

in each case to the extent not theretofore paid) and (b) three (3) months of base salary for each full year that the SVP and higher

employee was employed by the Company (the “Severance Period”), up to a maximum of twelve (12) months (eighteen (18)

months for executive officers of Acacia Research Corporation) of base salary, and (ii) provide to the SVP and higher employee,

Acacia paid COBRA coverage for the medical and dental benefits selected in the year in which the termination occurs, for the duration

of the Severance Period.

Results for the year ended December 31, 2020 and 2019 include $304,000 and $420,000 of expenses incurred

under the executive severance policy.

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for

state income taxes totaled $118,000 and $85,000 for the years ended December 31, 2020 and 2019, respectively.

Foreign taxes refunded

totaled $3,600,000 and foreign taxes withheld totaled $249,000 for the years ended December 31, 2020 and 2019, respectively.

ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements

- Not Yet Adopted.

2019, the FASB issued ASU No.

2019-12 Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes, to remove certain

exceptions and improve consistency of application, including, among other things, requiring that an entity reflect the effect

of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the

enactment date.

The amendments in this update will be effective for the Company beginning with fiscal year 2021, with early adoption

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must

be applied on a retrospective or modified retrospective basis.

Management is currently evaluating the impact that the amendments

in this update will have on the Company’s consolidated financial statements.

In June 2016,

the FASB issued ASU No.

2016-13,Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

Instruments, to replace the incurred loss methodology with an expected credit loss model that requires consideration of a broader

range of information to estimate credit losses over the lifetime of the asset, including current conditions and reasonable and

supportable forecasts in addition to historical loss information, to determine expected credit losses.

Pooling of assets with

similar risk characteristics and the use of a loss model are also required.

Also, in April 2019, the FASB issued ASU No.

Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic

825, Financial Instruments, to clarify the inclusion of recoveries of trade receivables previously written off when estimating

an allowance for credit losses.

The amendments in this update will be effective for the Company in fiscal year 2023, with early

adoption permitted.

Management is currently evaluating the impact that the amendments in this update will have on the Company’s

consolidated financial statements.

FAIR VALUE MEASUREMENTS

GAAP defines fair value as the price that would be received for an asset or the exit price that would be

paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants

on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable

inputs, where available.

The three-level hierarchy of valuation techniques established to measure fair value is defined as follows:

Level 1 - Observable Inputs :

prices in active markets for identical investments;

Level 2 - Pricing Models with

Significant Observable Inputs :

Other significant observable inputs, including quoted prices for similar investments,

interest rates, credit risk, etc.;

Level 3 - Unobservable Inputs :

unobservable inputs, including the entity’s own assumptions in determining the fair value of investments.

possible, the Company is required to use observable market inputs (Level 1 - quoted market prices) when measuring fair value.

In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant

to the fair value measurement.

The assessment of the significance of a particular input requires judgment and considers factors

specific to the asset or liability being measured.

In certain cases, inputs used to measure fair value fall into different levels

of the fair value hierarchy.

Acacia holds the following types of financial

instruments at December 31, 2020 and 2019.

Trading securities - debt.

Debt securities

includes corporate bonds with fair value that is determined by third party quotations from outside pricing services and/or computerized

pricing models, which may be based on transactions, bids or estimates.

Acacia classifies the fair value of corporate bonds within

Level 2 of the valuation hierarchy.

Trading securities - equity.

securities includes investments in public companies common stock and are recorded at fair value based on the quoted market price

of each share on the valuation date.

The fair value of these securities are within Level 1 of the valuation hierarchy.

Investments at fair value - common stock .

Acacia’s equity investment in Veritone common stock is recorded at fair value based on the quoted market price of Veritone’s

common stock on the applicable valuation date (Level 1).

Investments at fair value - warrants.

Warrants are recorded at fair value, as based on the Black-Scholes option-pricing model (Level 2).

Series A Warrants — 77,592

Series A Warrants

are recorded at fair value, using Black-Scholes option-pricing model (Level 2).

Series B Warrants 39,288,690 7,876,711

Series B Warrants are recorded at fair value, using Monte Carlo valuation technique (Level 3).

Embedded derivative liability.

derivatives that are required to be bifurcated from their host contract are evaluated and valued separately from the host instrument.

A binomial lattice framework is used to estimate the fair value of the embedded derivative in the Series A Redeemable Convertible

Preferred Stock issued by the Company in 2019 (Level 3).

Financial assets

and liabilities measured at fair value on a recurring basis were as follows:

(In thousands)

Assets as of December 31, 2020:

Trading securities - equity

Investment at fair value - warrants (Note 6)

Total recurring fair value measurements as of December 31, 2020

Assets as of December 31, 2019:

Trading securities - debt

Trading securities - equity

Investment at fair value - warrants (Note 6)

Investment at fair value - common stock (Note 6)

Total recurring fair value measurements as of December 31, 2019

Liabilities as of December 31, 2020:

Series A warrants

Series B warrants

Embedded derivative liability

Total liabilities as of December 31, 2020

Liabilities as of December 31, 2019:

Series A warrants

Embedded derivative liability

Total liabilities as of December 31, 2019

The following table sets forth a summary of the

changes in the estimated fair value of the Company’s Level 3 liabilities, which are measured at fair value as a on a recurring basis:

Series A Preferred Stock Embedded Derivative Liability

Series B Warrants Liability

(In thousands)

Opening balance as of January 1, 2019

Issuance of Series A warrants

Remeasurement to fair value

Balance as of December 31, 2019

Issuance of Series B warrants

Remeasurement to fair value

Balance as of December 31, 2020

RELATED PARTY TRANSACTIONS

During the year ended December 31, 2019, the Company purchased shares of common stock of Drive

(“Drive Shack”) for an aggregate purchase price of $2.4 million.

Drive Shack and Clifford Press, Chief Executive

Officer and director of Acacia, are related parties as Mr.

Press is a board member of Drive Shack.

The market value of the investment

was $1.4 million and $2.1 million for the years ended December 31, 2020, and December 31, 2019, respectively.

During the years ended

December 31, 2020 and 2019, the Company recognized unrealized losses from the investment of $998,000 and $263,000, respectively.

STARBOARD INVESTMENT

Redeemable Convertible Preferred Stock.

On November 18, 2019, the Company entered into a Securities Purchase Agreement with

Starboard Value LP (“Starboard”) pursuant to which the Company issued (i) 350,000 shares of Series A Redeemable Convertible

Preferred Stock with a par value of $0.001 per share and a stated value of $100 per share, and (ii) Series A Warrants to purchase

up to 5,000,000 shares of the Company’s common stock to Starboard.

The Securities Purchase Agreement also

established the terms of certain senior secured notes and additional warrants (the “Series B Warrants”) which may

be issued to Starboard in the future.

On June 4, 2020, the Company entered into a Supplemental Agreement,

as defined below under “Senior Secured Notes”, with certain contractual agreements affecting the Series A Redeemable

Convertible Preferred Stock, reflected below.

Redeemable Convertible Preferred Stock can be converted into a number of shares of common stock equal to (i) the stated value

thereof plus accrued and unpaid dividends, divided by (ii) the conversion price of $3.65 (subject to certain anti-dilution adjustments).

Holders may elect to convert the Series A Redeemable Convertible Preferred Stock into common stock at any time.

The Company may

elect to convert the Series A Redeemable Convertible Preferred Stock into shares of Common Stock any time on or after November

15, 2025, provided that the closing price of the Company’s common stock equals or exceeds 190% of the conversion price for

30 consecutive trading days and assuming certain other conditions of the common stock have been met.

Holders have the option to redeem all or

a portion of the Series A Redeemable Convertible Preferred Stock during the periods of May 15, 2021 through August 15, 2021 and

May 15, 2022 through August 15, 2022, provided that there is not outstanding at least $50.0 million aggregate principal of senior

secured notes to Starboard pursuant to the Securities Purchase Agreement at the time of the redemption.

Holders also have the option

to redeem all or a portion of the Series A Redeemable Convertible Preferred Stock during the period of November 15, 2024 through

February 15, 2025.

Additionally, holders have the option to redeem all or a portion of the Series A Redeemable Convertible Preferred

Stock upon the occurrence of (i) a change of control or (ii) various other triggering events, such as the suspension from trading

or delisting of the Company’s common stock.

If the Series A Redeemable Convertible Preferred Stock is redeemed at the option

of the holders, the redemption price may include a make-whole amount or a stated premium, depending on the redemption scenario.

The Company may redeem all, and not less

than all, of the Series A Redeemable Convertible Preferred Stock (i) upon a change of control or (ii) during the period of May

15, 2022 through August 15, 2022, provided that there is not outstanding at least $50.0 million aggregate principal of the senior

secured notes at the time of the redemption, and assuming certain conditions of the common stock have been met.

If the Series A

Redeemable Convertible Preferred Stock is redeemed at the option of the Company, the redemption price would include a make-whole

amount or a 15% premium depending on the circumstances.

If any Series A Redeemable Convertible Preferred

Stock remains outstanding on November 15, 2027, the Company shall redeem such Series A Redeemable Convertible Preferred Stock in

In all redemption scenarios, the redemption

price for the Series A Redeemable Convertible Preferred Stock includes the stated value plus accrued and unpaid dividends.

depending on the redemption scenario, the redemption price may also include a make-whole amount or stated premium as described

When the Company issues

Notes, the Holder may exchange the Series A Redeemable Convertible Preferred Stock for (i) Notes and (ii) Series B Warrants to

purchase common stock.

The Series A Redeemable Convertible Preferred

Stock accrues cumulative dividends quarterly at annual rate of 3.0% on the stated value.

Upon consummation of the approved investment

in June 2020, the dividend rate increased to 8.0% on the stated value.

Upon certain triggering events, the dividend rate will increase

to 7.0% if the triggering event occurs before an approved investment or 10.0% on the stated value if the triggering event occurs

after an approved investment.

In connection with the approved investment in June 2020, the Company and Starboard agreed that the

dividend rate on the Series A Redeemable Convertible Preferred Stock would accrue at 3.0% so long as no triggering event occurs

and the Company maintains $35 million in escrow.

Series A Redeemable Convertible Preferred Stock also participates on an as-converted

basis in any regular or special dividends paid to common stockholders.

No accrued and unpaid dividends as of December 31, 2020.

Holders of the Series A Redeemable Convertible

Preferred Stock have the right to vote with common stockholders on an as-converted basis on all matters.

Holders of Series A Redeemable

Convertible Preferred Stock will also be entitled to a separate class vote with respect to amendments to the Company’s organizational

documents that generally have an adverse effect on the Series A Redeemable Convertible Preferred Stock.

Upon liquidation of the Company, holders

of Series A Redeemable Convertible Preferred Stock have a liquidation preference over holders of our common stock and will be entitled

to receive, prior to any distribution to holders of our common stock, an amount equal to the greater of (i) the stated value plus

accrued and unpaid dividends or (ii) the amount that would have been received if the Series A Redeemable Convertible Preferred

Stock had been converted into common stock immediately prior to the liquidation event at the then effective conversion price.

The Company determined that certain features

of the Series A Redeemable Convertible Preferred Stock should be bifurcated and accounted for as a derivative.

Each of these features

are bundled together as a single, compound embedded derivative.

Total proceeds received and transaction

costs incurred from the issuance of the Series A Redeemable Convertible Preferred Stock amounted to $35 million and $1.3 million,

respectively.

Proceeds received were allocated based on the fair value of the instrument without the Series A Warrants and of the

Series A Warrants themselves at the time of issuance.

The proceeds allocated to the Series A Redeemable Convertible Preferred Stock

were then further allocated between the host preferred stock instrument and the embedded derivative, with the embedded derivative

recorded at fair value and the Series A Redeemable Convertible Preferred Stock recorded at the residual amount.

The portion of

the proceeds allocated to the Series A Warrants, embedded derivative, and Series A Redeemable Convertible Preferred Stock was $4.8

million, $21.2 million, and $8.9 million, respectively.

Transaction costs were also allocated between the Series A Redeemable Convertible

Preferred Stock and the Series A Warrants on the same basis as the proceeds.

The transaction costs allocated to the Series A Redeemable

Convertible Preferred Stock were treated as a discount to the Series A Redeemable Convertible Preferred Stock.

The transaction

costs allocated to the Series A Warrants were expensed as incurred.

The Company classifies the Series A Redeemable

Convertible Preferred Stock as mezzanine equity as the instrument will become redeemable at the option of the holder in various

scenarios or otherwise on November 15, 2027.

As it is probable that the Series A Redeemable Convertible Preferred Stock will become

redeemable, the Company accretes the instrument to its redemption value using the effective interest method and recognizes any

changes against additional paid in capital in the absence of retained earnings.

Accretion for the year ended December 31, 2020

was $2.8 million.

In connection with the issuance of the Series

A Redeemable Convertible Preferred Stock, the Company executed a Registration Rights Agreement and a Governance Agreement with

Under the Registration Rights Agreement, the Company agreed to provide certain registration rights with respect to the

Series A Redeemable Convertible Preferred Stock and shares of Common Stock issued upon conversion.

In accordance with the Governance

Agreement, the Company agreed to (i) increase the size of the Board of Directors from six to seven members, (ii) appoint a director

of the Company, (iii) grant Starboard the right to recommend two additional directors for appointment to the board, (iv) form a

Strategic Committee of the Board tasked with sourcing and performing due diligence on potential acquisition targets, (v) appoint

certain directors to the Strategic Committee, and (vi) appoint a director to the Nominating and Corporate Governance Committee.

The following features of the Series A Redeemable

Convertible Preferred Stock are required to be bifurcated from the host preferred stock and accounted for separately as an embedded

(i) the right of the holders to redeem the shares (the “put option”), (ii) the right of the holders to

receive common stock upon conversion of the shares (the “conversion option”), (iii) the right of the Company to redeem

the shares (the “call option”), and (iv) the change in dividend rate upon consummation of an approved investment or

a triggering event (the “contingent dividend rate feature”).

These features are required to be accounted

for separately from the Series A Redeemable Convertible Preferred Stock because the features were determined to be not clearly

and closely related to the debt-like host and also did not meet any other scope exceptions for derivative accounting.

these features are bundled together and are accounted for as a single, compound embedded derivative liability.

Accordingly, we have recorded an embedded

derivative liability representing the combined fair value of each of these features.

The embedded derivative liability is adjusted

to reflect fair value at each period end with changes in fair value recorded in the “Change in fair value of redeemable preferred

stock embedded derivative”

financial statement line item of the accompanying consolidated statements of operations.

December 31, 2020, the fair value of the Series A embedded derivative was $26.7 million.

Weighted average shares used in computing net income per share attributable to

common stockholders - Diluted 98,470,870 57,435,128

Basic net income per common share $ 2.43 $ 1.78

Diluted net income per common share $ 1.91 $ 1.48

Anti-dilutive potential common shares excluded from the computation of diluted

net income per common share:

Equity-based incentive awards 393,750 206,916

Series A warrants 5,000,000 —

On November 18,

2019, in connection with the issuance of the Series A Redeemable Convertible Preferred Stock, the Company issued a detachable Series

A Warrants to acquire up to purchase 5,000,000 shares of common stock at a price of $3.65 per share (subject to certain anti-dilution

adjustments) at any time during a period of eight years beginning on the instrument’s issuance date of the Series A Warrants.

The fair value of the Series A Warrants was $4.8 million.

The Series A Warrants will be recognized at fair value at each reporting

period until exercised, with changes in fair value recognized in other income (expense) in the accompanying consolidated statements

of operations.

As of December 31, 2020, the fair value of the Series A Warrants was $6.6 million.

As of December 31, 2020, the

Series A Warrants have not been exercised.

The Series A Warrants are classified as

a liability in accordance with ASC 480, Distinguishing Liabilities from Equity, as the agreement provides for net cash settlement

upon a change in control, which is outside the control of the Company.

Series B warrants — 68,493,151

On February 25, 2020, pursuant to the terms of the Securities Purchase Agreement with Starboard and the Buyers, the Company issued

Series B Warrants to purchase up to 100 million shares of the Company’s common stock at an exercise price (subject to certain

price-based anti-dilution adjustments) of either (i) $5.25 per share, if exercising by cash payment, within 30 months from the

issuance date (i.e., August 25, 2022);

or (ii) $3.65 per share, if exercising by cancellation of a portion of Notes.

issued the Series B Warrants for an aggregate purchase price of $4.6 million.

The Series B Warrants expire on November 15, 2027.

In connection with the issuance

of the Notes on June 4, 2020, the terms of certain of the Series B Warrants were amended to permit the payment of the lower exercise price

of $3.65 through the payment of cash, rather than only through the cancellation of Notes outstanding, at any time until the expiration

date of November 15, 2027.

Only 31,506,849 of the Series B Warrants are subject to this adjustment with the remaining balance of 68,493,151

Series B Warrants continuing under their original terms.

As of December 31, 2020, the Series B Warrants have not been exercised.

The Series B Warrants

will be recognized at fair value at each reporting period until exercised, with changes in fair value recognized in the consolidated

statements of operations in other income (expense).

As of December 31, 2020, the fair value of the Series B Warrants was $52.3

The Series B Warrants

are classified as a liability in accordance with ASC 480, Distinguishing Liabilities from Equity, as the agreement provides for

net cash settlement upon a change in control, which is outside the control of the Company.

Senior Secured Notes.

Pursuant to the Securities Purchase Agreement dated November 18, 2019 with Starboard and the Buyers, on June 4, 2020, the Company

issued $115 million in Notes to the Buyers.

Also on June 4, 2020, in connection with the issuance of the Notes, the Company entered

into a Supplemental Agreement with Starboard (the “Supplemental Agreement”), pursuant to which the Company agreed to

redeem $80 million aggregate principal amount of the Notes by September 30, 2020, and $35 million aggregate principal amount of

the Notes by December 31, 2020, resulting in the total principal outstanding being paid by December 31, 2020.

Per the Supplemental

Agreement, interest is payable semiannually at a rate of 6.00% per annum, and in an event of default, the interest rate is increased

to 10% per annum.

The Notes include certain financial and non-financial covenants.

Additionally, all or any portion of the principal

amount outstanding under the Notes may, at the election of Starboard, be surrendered to the Company for cancellation in payment

of the exercise price upon the exercise of Series B Warrants.

On June 30, 2020, the

Company entered into an Exchange Agreement (the “Exchange Agreement”) with Merton Acquisition HoldCo LLC, a Delaware

limited liability company and wholly-owned subsidiary of the Company (“Merton”) and Starboard, on behalf of itself

and on behalf of certain funds and accounts under its management, including the holders of the Notes.

Pursuant to the Exchange

Agreement, the holders of the Notes exchanged the entire outstanding principal amount for new senior notes (the “New Notes”)

issued by Merton having an aggregate outstanding original principal amount of $115 million.

The New Notes bear

interest at a rate of 6.00% per annum and had a maturity date of December 31, 2020.

The New Notes are fully guaranteed by the Company

and are secured by an all-assets pledge of the Company and Merton and non-recourse equity pledges of each of the Company’s

material subsidiaries.

Pursuant to the Exchange Agreement, the New Notes (i) are deemed to be “Notes”

of the Securities Purchase Agreement, (ii) are deemed to be “June 2020 Approved Investment Notes”

for purposes of the

Supplemental Agreement, and therefore the Company has agreed to redeem $80 million principal amount of the New Notes by September

30, 2020 (the “Initial Redemption Date”) and $35 million principal amount of the New Notes by December 31, 2020 (the

“Final Redemption Date”), and (iii) are deemed to be “Notes”

for the purposes of the Series B Warrants,

and therefore may be tendered pursuant to a Note Cancellation under the Series B Warrants on the terms set forth in the Series

B Warrants and the New Notes.

Delivery of notes in the form of the New Notes will also satisfy the delivery of Exchange Notes pursuant

to Section 16(i) of the Certificate of Designations of the Company’s Series A Convertible Preferred Stock, par value $0.001

The New Notes will not be deemed to be “Notes”

for the purposes of the Registration Rights Agreement, dated

as of November 18, 2019, by and among the Company, Starboard and the Buyers.

Because the New Notes

will be settled within twelve months pursuant to their terms, they are classified as current liabilities on the balance sheet.

The Company capitalized $4.6 million in lender fees and $0.5 million in other issuance costs associated with the issuance of the

The $4.6 million of lender fees are recognized as long term deferred debt issuance cost and will be amortized to interest

expense until November 15, 2027, the maturity date of Series A Redeemable Convertible Preferred Stock.

The $0.5 million issuance

costs are recognized as a discount on the Notes and will be amortized to interest expense over the contractual life of the Notes.

There is $0.9 million accrued and unpaid interest on the New Note as of December 31, 2020.

On January 29, 2021,

the Company redeemed $50 million of the New Notes, and the parties agreed that the Company will redeem the remaining $65 million

of the principal amount of the New Notes on or before July 15, 2021.

Modifications

to Series A Redeemable Convertible Preferred Stock and Series B Warrants.

The June 4, 2020 Supplemental Agreement also provided

for (i) a waiver of increased dividends under the original terms of the Series A Preferred Stock that would have otherwise accrued

due to the Company’s use of the $35 million proceeds received from Starboard and the Buyers upon the issuance of the Series

A Redeemable Convertible Preferred Stock in November 2019, (ii) the replacement of original optional redemption rights for the

Series A Redeemable Convertible Preferred Stock provided to both the Company and the holders that otherwise would have been nullified

through the issuance of the Notes, and (iii) an amendment to the terms of the previously issued Series B Warrants to permit the

payment of the lower exercise price of $3.65 through the payment of cash, rather than only through the cancellation of Notes outstanding,

at any time until the expiration of the Series B Warrants on November 15, 2027.

Only 31,506,849 of the Series B Warrants are subject

to this adjustment with the remaining balance of 68,493,151 Series B Warrants continuing under their original terms.

analyzed the amendments to the Series A Redeemable Convertible Preferred Stock and determined that the amendments were not significant.

Therefore, the amendments are accounted for as a modification on a prospective basis.

incremental fair value of the Series B Warrants associated with their modification in connection with the issuance of the Notes

is $1.3 million and is recognized as a discount on the Notes and will be amortized to interest expense over the contractual life

of the Notes.

For the year ended December 31, 2020, $1,158,000 was amortized to interest expense.

As of December 31, 2020, $171,000

is remaining to be amortized until the Final Redemption Date of July 15, 2021.

LF EQUITY INCOME FUND PORTFOLIO

April 3, 2020, the Company entered into an Option Agreement with Seller, which included general terms through which the Company

was provided the option to purchase life sciences equity securities in a portfolio of public and private companies (“Portfolio

Companies”) for an aggregate purchase price of £223.9 million, approximately $277.5 million at the exchange rate on

April 3, 2020.

June 4, 2020, the Company executed the Transaction Agreement between Link Fund Solutions Limited, Seller, and the Company.

to the Transaction Agreement, the Company will purchase from Seller and Seller will transfer to the Company the specified equity

securities of all Portfolio Companies at set prices at various future dates.

The transfer dates will vary among the Portfolio

Companies as the Transaction Agreement gives the Company the exclusive right to determine when to call for transfer of each security,

and because each Portfolio Company (or its existing equity holders) may be required to approve the transfer due to rights of first

refusals and other company-specific terms and conditions.

Thus, the execution of the Transaction Agreement resulted in forward

contracts for the Company to purchase equity securities in each public and private company at a specified price on a future date.

accordance with the Transaction Agreement, the Company transferred the total purchase price of £223.9 million into an escrow

Upon the transfer of equity securities in the Portfolio Companies

to the Company, the associated funds were released from the escrow account

to Seller based on the consideration amount assigned to the equity securities for such

Portfolio Companies in the Transaction Agreement.

As of December 31, 2020, all

of the equity securities in the Portfolio Companies were transferred to the Company pursuant to the Transaction Agreement.

Company has sold a portion of the equity securities of such Portfolio Companies while retaining an interest in a number of operating

businesses, including a controlling interest in one of the Portfolio Companies.

accounting purposes, the total purchase price of the portfolio was allocated to the individual equity securities based on their

individual fair values as of April 3, 2020, in order to establish an appropriate cost basis for each of the acquired securities.

The fair values of the public company securities were based on their quoted market price.

The fair values of the private company

securities were estimated based on recent financing transactions and secondary market transactions and factoring in a discount

for the illiquidity of these securities.

the year ended December 31, 2020, Seller returned a total of £4.5 million of the Company’s prepaid investment upon

the failure to obtain the approval of the existing equity holders, pursuant to their rights of first refusals, of one of the Portfolio

Companies in connection with the transfer of its securities.

In addition, due to an ownership restriction applicable to one of

the Portfolio Companies, the Company sold a small portion of an equity securities derivative for £33,000 before the remaining

shares of such Portfolio Company could be transferred to us.

The Company recognized a net gain of $2.8 million related to the

returned prepaid investments and sale of the derivative.

in the fair value of Acacia’s investment in the Portfolio Companies are recorded as unrealized gains or losses in the

consolidated statements of operations.

For the year ended December 31, 2020, the accompanying consolidated statements

of operations reflected the following:

Total 5,393,750 68,700,067

SEGMENT REPORTING

As of December 31, 2021, the Company operates and reports its results in two reportable segments:

Intellectual Property Operations and Industrial Operations.

Historically, the Company has managed and reported under a single reporting segment.

In October 2021, the Company acquired Printronix, which comprises all of the operations of the Company’s Industrial Operations reportable segment and led to the identification of the additional reporting segment.

The Company reports segment information based on the management approach and organizes its businesses based on products and services.

The management approach designates the internal reporting used by the chief operating decision maker for decision making and performance assessment as the basis for determining the Company’s reportable segments.

The performance measure of the Company’s reportable segments is primarily income or (loss) from operations.

Income or (loss) from operations for each segment includes all revenues, cost of revenues, gross profit and other operating expenses directly attributable to the segment.

Other than Acacia's equity securities investments, specific asset information is not included in managements review at this time.

The Company’s Intellectual Property Operations segment invests in IP and related absolute return assets, and engages in the licensing and enforcement of patented technologies.

We may also provide upfront capital to patent owners as an advance against future licensing revenue.

Currently, on a consolidated basis, our operating subsidiaries own or control the rights to multiple patent portfolios, which include U.S.

patents and certain foreign counterparts, covering technologies used in a variety of industries.

We generate revenues and related cash flows from the granting of IP rights for the use of patented technologies that our operating subsidiaries control or own.

The Company’s Industrial Operations segment generates operating income by designing and manufacturing printers and consumable products for various industrial printing applications.

Printers consist of hardware and embedded software and may be sold with maintenance service agreements.

Consumable products include inked ribbons which are used in Printronix’s printers.

Printronix’s products are primarily sold through channel partners, such as dealers and distributors, to end-users.

The Industrial Operations reporting segment did not exist prior to the acquisition of Printronix in October 2021.

Therefore, as of and for the year ended December 31, 2020, the consolidated results represented the results of the Company’s single reporting segment.

The Company's segment information, including Printronix's operations from October 7, 2021 through December 31, 2021, is as follows:

Year Ended December 31, 2021

Intellectual Property Operations Industrial Operations Total

(In thousands)

Change in fair value of trading security - LF Fund public securities

Change in fair value of investment security - LF Fund private securities

Loss on sale of trading security - LF Fund public securities

Gain on sale of prepaid investment and derivative

Net realized and unrealized gain on investment in LF Fund securities

of the Company’s acquisition of equity securities in the Portfolio Companies, the Company acquired a majority interest in the equity

securities of MalinJ1, which were transferred to the Company on December 3, 2020.

The acquisition of the MalinJ1 securities was accounted

for as an asset acquisition as there was a change of control of MalinJ1 and substantially all of the fair value of the assets acquired

was concentrated in a single identifiable asset, an investment in Viamet Pharmaceuticals Holdings, LLC (“Viamet”).

the cost basis of the MalinJ1 securities was used to allocate to the Viamet investment, the single identifiable asset, and no goodwill

was recognized.

The Company through its consolidation of MalinJ1 accounts for the Viamet investment under the equity method as it owns

37.9% of outstanding shares of Viamet.

QUARTERLY FINANCIAL DATA

following table sets forth unaudited consolidated statements of operations data for the eight quarters in the period ended December

This information has been derived from Acacia’s unaudited condensed consolidated financial statements that have

been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, include all

adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the information when read in conjunction

with the audited consolidated financial statements and related notes thereto.

Acacia’s quarterly results have been, and

may in the future be, subject to significant fluctuations.

As a result, Acacia believes that results of operations for interim

periods should not be relied upon as any indication of the results to be expected in any future periods.

Quarter Ended

(Unaudited, in thousands, except share and per share

Portfolio operations:

License fees $ 76,043 $ — $ 76,043

Printers and parts — 4,961 4,961

Consumable products — 5,973 5,973

Services — 1,070 1,070

Total revenues 76,043 12,004 88,047

Cost of revenues:

Inventor royalties 1,142 — 1,142

Contingent legal fees 12,074 — 12,074

Patent acquisition expenses

Litigation and licensing expenses - patents

Litigation and licensing expenses 5,462 — 5,462

Amortization of patents 9,851 — 9,851

Other portfolio expenses

Total portfolio operations

Net portfolio income (loss)

General and administrative expenses (including non-cash stock compensation

Impairment of patent-related intangible assets

Operating income (loss)

Total other income (expense)

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss) including noncontrolling interests

Net (income) loss attributable to noncontrolling

interests in subsidiaries

Net income (loss) attributable to Acacia

Research Corporation

Net income (loss) attributable to common

shareholders - basic

Basic income (loss) per share

Weighted-average number of shares outstanding,

Net loss attributable to common stockholders

Diluted net income (loss) per common share

Weighted average number of shares outstanding

SUBSEQUENT EVENTS

January 29, 2021, the Company redeemed $50 million of the New Notes, and the parties agreed that the Company will redeem the remaining

$65 million of the principal amount of the New Notes on or before July 15, 2021.

Other patent portfolio expense (income) 162 — 162

Cost of sales — 7,407 7,407

Total cost of revenues 28,691 7,407 36,098

Segment gross profit 47,352 4,597 51,949

Other operating expenses:

Engineering and development expenses — 200 200

Sales and marketing expenses — 1,538 1,538

Amortization of intangible assets — 399 399

General and administrative expenses 6,177 2,398 8,575

Total other operating expenses 6,177 4,535 10,712

Segment operating income $ 41,175 $ 62 41,237

Parent general and administrative expenses 26,692

Operating income 14,545

Total other income 160,107

Income before income taxes $ 174,652

For comparability purposes, Acacia's year ended December 31, 2020 general and administrative expenses, as reported in the consolidated statement of operations, were $ 24.5 million, and included parent general and administrative expenses of $ 19.5 million, which derives a comparative Intellectual Property Operations general and administrative expense amount of approximately $ 5.0 million.

(In thousands)

Equity securities investments:

Equity securities at fair value $ 361,778

Equity securities without readily determinable fair value 5,816

Investment securities - equity method investments 30,934

Total 398,528

Other parent assets 172,726

Segment total assets:

Intellectual property operations 175,286

Industrial operations 52,316

Total assets $ 798,856

The Company's revenues, including Printronix's net sales from October 7, 2021 through December 31, 2021, and long-lived tangible assets, by geographic area are presented below.

Acacia's revenues are attributed to licensees domiciled in foreign jurisdictions.

Printronix's net sales to external customers are attributed to geographic areas based upon the final destination of products shipped.

The Company, primarily through its Printronix subsidiary, has identified three global regions for marketing its products and services:

Americas, Europe, Middle East and Africa, and Asia-Pacific.

Assets are summarized based on the location of held assets.

Year Ended December 31, 2021

Intellectual Property Operations Industrial Operations Total

(In thousands)

Revenues by geographic area:

United States $ 23,256 $ 4,937 $ 28,193

Canada and Latin America 402 251 653

Total Americas 23,658 5,188 28,846

Europe, Middle East and Africa 1,841 2,589 4,430

China — 1,910 1,910

India — 1,076 1,076

Asia-Pacific, excluding China and India 50,544 1,241 51,785

Total Asia-Pacific 50,544 4,227 54,771

Total revenues $ 76,043 $ 12,004 $ 88,047

December 31, 2021

Intellectual Property Operations Industrial Operations Total

(In thousands)

Long-lived tangible assets by geographic area:

United States $ 204 $ 473 $ 677

Malaysia — 3,203 3,203

Other foreign countries — 303 303

Total $ 204 29782000 $ 3,979 $ 4,183

CORRECTION OF IMMATERIAL ERROR

The Company identified and recorded an adjustment to the current and prior periods related to the estimated amortization period of deferred debt issuance costs.

Pursuant to the Securities Purchase Agreement dated November 18, 2019 with Starboard and the Buyers, an upfront fee was payable by the Company upon the first closing of Senior Secured Notes.

The fee was defined as 1.25 % of the maximum $ 365.0 million principal amount of the Senior Secured Notes issuable under the Securities Purchase Agreement.

The Company paid and capitalized this upfront fee of $ 4.6 million upon the issuance of our Senior Secured Notes in June 2020 (refer to Note 10).

The lender fees were initially recognized as long-term deferred debt issuance costs and were included in other non-current assets in the consolidated balance sheets up to and as of September 30, 2021, and were to be amortized to interest expense until November 15, 2027, the original maturity/expiration date of the transactions governed by the Starboard investment.

Accordingly, the Company has adjusted the related prior period consolidated financial statements to reflect this correction to the periods presented below.

In accordance with Staff Accounting Bulletin ("SAB") No.

99, “Materiality,” and SAB No.

108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the error a nd determined that the related impact did not materially misstate previously issued consolidated financial statements.

Although the Company concluded that the misstatement was n ot material to its previously issued consolidated financial statements, the Company has determined it is appropriate to adjust its previously issued consolidated financial statements to correct for the error .

The following are the relevant line items from the Company's consolidated financial statements illustrating the effect of the corrections to the periods presented:

As of and for the Year Ended December 31, 2020

As Previously Reported Adjustments As Adjusted

(In thousands, except per share data)

Balance Sheet:

Other non-current assets (excluding property, plant and equipment) $ 4,718 $ ( 4,213 ) $ 505

Total assets 515,520 ( 4,213 ) 511,307

Accumulated deficit ( 326,708 ) ( 4,213 ) ( 330,921 )

Total stockholders' equity 292,529 ( 4,213 ) 288,316

Statement of Operations:

Interest expense on Senior Secured Notes $ ( 5,923 ) $ ( 4,213 ) $ ( 10,136 )

Total other income 131,803 ( 4,213 ) 127,590

Net income attributable to Acacia Research Corporation 113,444 ( 4,213 ) 109,231

Income per share:

Basic net income per common share $ 1.85 $ ( 0.07 ) $ 1.78

Diluted net income per common share $ 1.54 $ ( 0.06 ) $ 1.48

Statement of Cash Flows:

Net income including noncontrolling interests in subsidiaries $ 113,444 $ ( 4,213 ) $ 109,231

Amortization of debt discount and issuance costs 2,838 4,213 7,051

Net cash used in operating activities ( 19,620 ) — ( 19,620 )

As of and for the Three Months Ended March 31, 2021

As Previously Reported Adjustments As Adjusted

(Unaudited and in thousands, except per share data)

Balance Sheet:

Other non-current assets $ 4,834 $ ( 4,060 ) $ 774

Total assets 568,958 ( 4,060 ) 564,898

Accumulated deficit ( 491,326 ) ( 4,060 ) ( 495,386 )

Total stockholders' equity 128,148 ( 4,060 ) 124,088

Statement of Operations:

Interest expense on Senior Secured Notes $ ( 1,310 ) $ 153 $ ( 1,157 )

Total other expense ( 158,032 ) 153 ( 157,879 )

Net loss attributable to Acacia Research Corporation ( 164,618 ) 153 ( 164,465 )

Loss per share:

Basic and diluted net loss per common share $ ( 2.81 ) $ — $ ( 2.81 )

Statement of Cash Flows:

Net loss including noncontrolling interests in subsidiaries $ ( 163,718 ) $ 153 $ ( 163,565 )

Amortization of debt discount and issuance costs 702 ( 153 ) 549

Net cash used in operating activities ( 6,120 ) — ( 6,120 )

As of and for the Six Months Ended June 30, 2021

As Previously Reported Adjustments As Adjusted

(Unaudited and in thousands, except per share data)

Balance Sheet:

Other non-current assets $ 4,653 $ ( 3,907 ) $ 746

Total assets 627,732 ( 3,907 ) 623,825

Accumulated deficit ( 471,819 ) ( 3,907 ) ( 475,726 )

Total stockholders' equity 147,103 ( 3,907 ) 143,196

Statement of Operations:

Interest expense on Senior Secured Notes $ ( 3,070 ) $ 306 $ ( 2,764 )

Total other expense ( 139,653 ) 306 ( 139,347 )

Net loss attributable to Acacia Research Corporation ( 145,111 ) 306 ( 144,805 )

Loss per share:

Basic and diluted net loss per common share $ ( 3.03 ) $ 0.01 $ ( 3.02 )

Statement of Cash Flows:

Net loss including noncontrolling interests in subsidiaries $ ( 144,205 ) $ 306 $ ( 143,899 )

Amortization of debt discount and issuance costs 128 ( 306 ) ( 178 )

Net cash used in operating activities ( 6,197 ) — ( 6,197 )

As of and for the Nine Months Ended

September 30, 2021

As Previously Reported Adjustments As Adjusted

(Unaudited and in thousands, except per share data)

Balance Sheet:

Other non-current assets $ 4,482 $ ( 3,754 ) $ 728

Total assets 749,834 ( 3,754 ) 746,080

Accumulated deficit ( 382,215 ) ( 3,754 ) ( 385,969 )

Total stockholders' equity 235,862 ( 3,754 ) 232,108

Statement of Operations:

Interest expense on Senior Secured Notes $ ( 5,601 ) $ 459 $ ( 5,142 )

Total other expense ( 37,316 ) 459 ( 36,857 )

Net loss attributable to Acacia Research Corporation ( 55,507 ) 459 ( 55,048 )

Loss per share:

Basic and diluted net loss per common share $ ( 1.21 ) $ 0.01 $ ( 1.20 )

Statement of Cash Flows:

Net loss including noncontrolling interests in subsidiaries $ ( 54,601 ) $ 459 $ ( 54,142 )

Amortization of debt discount and issuance costs 460 ( 459 ) 1

Net cash used in operating activities ( 7,602 ) — ( 7,602 )

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures