What changed in ACACIA RESEARCH CORP's 10-K — 2022 vs 2023

ITEM 1. BUSINESS General Acacia Research Corporation (the “Company,” “Acacia,” “we,” “us,” or "our") is focused on acquiring and managing companies across industries including but not limited to the industrial, energy, technology, and healthcare verticals.

We focus on identifying, pursuing and acquiring businesses where we are uniquely positioned to deploy our strategy, people and processes to generate and compound shareholder value. We have a wide range of transactional and operational capabilities to realize the intrinsic value in the businesses that we acquire.

The Company’s stockholders approved the Amendment to the Amended and Restated Certificate of Designations at the Company’s annual meeting of stockholders held on May 16, 2023, which became effective on June 30, 2023.

Subsequently, and in accordance with the terms contained in the Second Amended and Restated Certificate of Designations and the Recapitalization Agreement, on July 13, 2023, Starboard converted an aggregate amount of 350,000 shares of Series A Convertible Preferred Stock of the Company, par value $0.001 per share (the “Series A Redeemable Convertible Preferred Stock”) into 9,616,746 shares of common stock, which included 27,704 shares of common stock issued in respect of accrued and unpaid dividends (the “Preferred Stock Conversion”).

Further to the terms of the Recapitalization Agreement and in accordance with the terms of the Company’s Series B Warrants (the “Series B Warrants”), on July 13, 2023, Starboard also exercised 31,506,849 of the Series B Warrants through a combination of a “Note Cancellation” and a “Limited Cash Exercise” (each as defined in the Series B Warrants), resulting in the receipt by Starboard of 31,506,849 shares of common stock (the “Series B Warrants Exercise” and, together with the Preferred Stock Conversion, the “Recapitalization Transactions”), the cancellation of $60.0 million aggregate principal amount of the Company’s senior secured notes held by Starboard (as described further in Note 10, the “Senior Secured Notes”) and the receipt by the Company of aggregate gross proceeds of approximately $55.0 million.

Following completion of the transactions contemplated by the Recapitalization Agreement, Starboard beneficially owns 61,123,595 shares of common stock as of March 11, 2024, representing approximately 61.2% of the common stock based on 99,895,473 shares of common stock issued and outstanding. No shares of Series A Redeemable Convertible Preferred Stock, no Series B Warrants, nor any Senior Secured Notes remain outstanding.

Refer to Note 10 to the consolidated financial statements for a detailed description of the Recapitalization and the Recapitalization Transactions. 3 Table of Contents Services Agreement On December 12, 2023, the Company entered into a Services Agreement with Starboard (the “Services Agreement”), pursuant to which, upon the Company’s request, Starboard will provide to the Company certain trade execution, research, due diligence and other services.

Starboard has agreed to provide the services on an expense reimbursement basis and no separate fee will be charged by Starboard for the services.

Pursuant to the Services Agreement, the Company has agreed that Starboard (and certain of its affiliates) will not be liable to the Company for acts or omissions relating to the Services Agreement in the absence of bad faith, fraud, willful misconduct or gross negligence.

The Company will also indemnify and advance expenses to Starboard (and certain of its affiliates) against any loss, cost or expense relating to third party claims in connection with the services or the Services Agreement.

The Services Agreement provides (i) that certain work product developed by each of the Company and Starboard will be owned by the party that produced such work product and (ii) for mutual confidentiality obligations between the Company and Starboard for information disclosed pursuant to the Services Agreement.

Either the Company or Starboard may terminate the Services Agreement at any time upon thirty days’ written notice.

The Audit Committee of the Board of Directors of the Company (the “Audit Committee”), consisting of entirely of disinterested directors who are independent of Starboard, reviewed, directed the negotiation of the material terms of, and ultimately approved the Services Agreement prior to the Company’s execution thereof.

The Audit Committee received, reviewed, and considered a number of factors prior to such approval, including, but not limited to, (i) the business purpose of the Services Agreement, (ii) whether comparable terms of the Services Agreement would be available to the Company in a transaction with an unrelated party and (iii) the benefits of the Services Agreement to the Company’s business and operations.

Transactions and Execution Acacia is focused on the identification, acquisition and integration of both public and private companies.

We are uniquely positioned to catalyze change with the support of our long-term capital base, depth of industry relationships and differentiated approach to transaction structuring. 4 Table of Contents Private Market Acquisitions Acacia is focused on acquiring businesses across the private market landscape.

We believe we are uniquely positioned to empower best-in-class operators as they seek to build enduring businesses within their vertical of focus. Partnering with Acacia represents an opportunity for business leaders, entrepreneurs and founders to grow their business without the constraints of a private equity fund. Public Market Acquisitions Acacia is focused on acquiring businesses across the public market landscape.

We believe we are uniquely positioned to catalyze change within companies where we have developed, alongside our industry advisors, a differentiated view of the value creation opportunity within a given business. We evaluate public companies as currently constructed today, free of historical strategic decisions made with regard to the target in question.

Where appropriate, this empowers us to unlock value through, but not limited to, identifying opportunities for improved execution, identifying opportunities where the sum-of-the-parts may be greater than the whole, and acquiring non-core strategic assets. Once we identify a favorable public market acquisition opportunity, we may purchase a strategic block of shares in the target company.

In 2020, we acquired five new patent portfolios consisting of (i) flash memory technology, (ii) voice activation and control technology, (iii) wireless networks, 5 Table of Contents (iv) internet search, advertising and cloud computing technology and (v) GPS navigation. The patents and patent rights acquired in 2021 and 2020 have estimated economic useful lives of approximately five years.

During the past five calendar years ending on December 31, 2023, we generated gross licensing revenue of approximately $225.7 million and returned approximately $84.9 million to our patent partners. Refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information concerning our Patent Licensing, Enforcement and Technologies business.

Energy Operations Business In November 2023, we invested $10.0 million to acquire a 50.4% equity interest in Benchmark Energy II, LLC ("Benchmark"). Headquartered in Austin, Texas, Benchmark is an independent oil and gas company engaged in the acquisition, production and development of oil and gas assets in mature resource plays in Texas and Oklahoma.

Benchmark is run by an experienced management team led by Chief Executive Officer Kirk Goehring, who previously served as Chief Operating Officer of both Benchmark and Jones Energy, Inc. Benchmark’s existing assets consist of over 13,000 net acres primarily located in Roberts and Hemphill Counties in Texas, and an interest in over 125 wells, the majority of which are operated.

Benchmark seeks to acquire predictable and shallow decline, cash-flowing oil and gas properties whose value can be enhanced via a disciplined, field optimization strategy, with risk managed through robust commodity hedges and low leverage.

Through its investment in Benchmark, the Company, along with the Benchmark management team, will evaluate future growth and acquisitions of oil and gas assets at attractive valuations. The Company's consolidated financial statements include Benchmark's consolidated operations from November 13, 2023 through December 31, 2023. Refer to Note 3 to the consolidated financial statements elsewhere herein for additional information.

On February 16, 2024, Benchmark entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Revolution Resources II, LLC, Revolution II NPI Holding Company, LLC, Jones Energy, LLC, Nosley Assets, LLC, Nosley Acquisition, LLC, and Nosley Midstream, LLC (collectively, “Revolution”).

Pursuant to the Purchase and Sale Agreement, Benchmark has agreed to purchase and Revolution has agreed to sell certain upstream assets and related facilities (the “Assets”) in Texas and Oklahoma, upon the terms and subject to the conditions of the Purchase and Sale Agreement (such purchase and sale, together with the other transactions contemplated by the Purchase Sale Agreement, the “Revolution Transaction”).

The Assets include approximately 140,000 net acres and approximately 470 operated producing wells in the Western Anadarko Basin throughout the Texas Panhandle and Western Oklahoma.

Under the terms and conditions of the Purchase and Sale Agreement, which has an economic effective date of March 1, 2024, the aggregate consideration to be paid to Revolution in the Revolution Transaction will consist of $145.0 million in cash (the “Purchase Price”), subject to customary post-closing adjustments.

Benchmark expects the Revolution Transaction to close in the second quarter of 2024 subject to customary closing conditions. The Company’s expected contribution to Benchmark to fund its portion of the Purchase Price, is $57.5 million, which the Company anticipates will be funded from cash on hand.

The remainder of the Purchase Price is expected to be funded by a combination of borrowings by Benchmark under a new revolving credit agreement of approximately $72.5 million and the remaining being funded through a cash contribution of approximately $15 million from McArron Partners, the other investor in Benchmark.

Lastly, our Energy Operations Business faces intense competition in identifying, evaluating, and executing attractive oil and gas asset acquisitions from other entities having similar business objectives, including major and independent oil and natural gas companies and private equity groups.

Our Energy Operations Business also competes for drilling rigs and other equipment and labor required to drill, complete, operate and develop its properties. Many of our Energy Operations Business’ competitors have substantially greater financial resources, staffs, facilities and other resources.

In addition, larger competitors may be able to absorb the burden of any changes in federal, state and local laws and regulations more easily than our Energy Operations Business, which could adversely affect its competitive position.

These competitors may be willing and able to pay more for drilling rigs, leasehold and mineral acreage and productive oil and natural gas properties and may be able to identify, evaluate, bid for and purchase a greater number of properties and prospects than our Energy Operations Business can.

Title to Oil and Natural Gas Properties It is customary in the oil and natural gas industry to make only a preliminary review of title to undeveloped oil and natural gas leases at the time they are acquired and to obtain more extensive title examinations at the time one is preparing to develop the undeveloped leases and when acquiring producing properties.

In future acquisitions, our Energy Operations Business will conduct title examinations on material portions of such properties in a manner generally consistent with industry practice.

Certain of our Energy Operations Business oil and natural gas properties may be subject to certain imperfections in title, encumbrances, easements, servitudes or other restrictions, none of which, in management's opinion, will in the aggregate materially restrict its operations. Human Capital As of December 31, 2023, on a consolidated basis, we had 170 full-time employees and two contractors.

Chief Executive Officer Jason Soncini General Counsel Robert Rasamny Chief Administrative Officer Kirsten Hoover Interim Chief Financial Officer Name Position Gavin Molinelli Senior Partner and Co-Portfolio Manager of Starboard Value LP Martin ("MJ") D. McNulty, Jr. Chief Executive Officer of the Company Isaac T.

Kohlberg Senior Associate Provost and Chief Technology Development Officer at Harvard University Maureen O' Connell Member of the Board of Directors of Board of ISACA and HH Global Ltd.

Geoff Ribar Member of the Board of Directors of Director of MACOM Technology Ajay Sundar Managing Director at Starboard Value LP Katharine Wolanyk Managing Director at Burford Capital, LLC Where You Can Find Additional Information For further details of the development of our business, refer to our website at www.acaciaresearch.com .