ACACIA RESEARCH CORP MANAGEMENT REPORT OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

The following discussion should be read in conjunction with our consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q
("Quarterly Report"). This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these "forward-looking statements" as a result of various
factors including the risks we discuss in Item 1A to our Annual Report on Form
10-K for the year ended December 31, 2021,"Risk Factors," and elsewhere herein.
For additional information, refer to the section above entitled "Cautionary Note
Regarding Forward-Looking Statements."

General

We are 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.

We are particularly attracted to complex or multi-factor situations, where value
is not fully recognized in the public markets, where values of certain
operations are masked by a diversified business mix, or where private ownership
has not invested capital necessary to drive long-term value. We aim to operate a
transactional platform through which we can initiate a strategic block position
in public companies as a path to complete whole company acquisitions or
strategic transactions that unlock value. We believe this business model is
differentiated from private equity funds, which do not typically own public
securities prior to acquiring companies, hedge funds, which do not typically
acquire entire businesses, and other acquisition vehicles such Special Purpose
Acquisition Companies, which are narrowly focused on completing one singular,
defining acquisition.

We have a strategic relationship with Starboard Value LP ("Starboard") that
provides us access to capital, industry expertise, and a deep bench of operating
partners and industry experts to evaluate potential acquisition opportunities
and enhance the oversight and value creation of such businesses once acquired.
Starboard provides ready access to its extensive network of highly successful
industry executives and, as part of our relationship, Starboard assists with
sourcing and evaluating appropriate acquisition opportunities.

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.

Intellectual property operations

We invest in IP and related absolute return assets and engage in the licensing
and enforcement of patented technologies. Through our Patent Licensing,
Enforcement and Technologies Business, operated under Acacia Research Group, LLC
and its wholly-owned subsidiaries ("ARG"), 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.

We have established a proven track record of licensing and enforcement success
with over 1,600 license agreements executed to date, across nearly 200 patent
portfolio licensing and enforcement programs. To date, we have generated gross
licensing revenue of approximately $1.7 billion, and have returned $842.3
million to our patent partners.

For more information on our intellectual property operations, see the additional detailed discussion on patents below.

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Industrial operations

In October 2021, we consummated our first operating company acquisition of
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 June 30, 2022. Refer to Note 1 to the consolidated
financial statements elsewhere herein for additional information.

For more information on our industrial operations, see the section titled “Industrial Printing Solutions” below.

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 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.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic
Security Act ("CARES Act") was signed into law on March 27, 2020. The CARES Act,
among other things, includes tax provisions relating to refundable payroll tax
credits, deferment of employer's social security payments, net operating loss
utilization and carryback periods and modifications to the net interest
deduction limitations. The CARES Act has not had a material impact on the
Company's income tax provision.

On December 27, 2020, the President of the United States signed the Consolidated
Appropriations Act, 2021 ("Consolidated Appropriations Act") into law. The
Consolidated Appropriations Act is intended to enhance and expand certain
provisions of the CARES Act, allows for the deductions of expenses related to
the Payroll Protection Program funds received by companies, and provides an
update to meals and entertainment expensing for 2021. The Consolidated
Appropriations Act did not have a material impact to the Company's income tax
provision for 2020. The Company does not expect a material impact from the
Consolidated Appropriations Act on its financial position, results of operations
and cash flows going forward.

On March 11, 2021 the United States has enacted the American Rescue Plan Act of 2021. This law includes various tax and social measures. The Company does not expect a material impact of the US rescue plan on its consolidated financial statements and related information.

Executive Overview

During 2021 and 2020, we focused on diversifying our business and leveraging our
resources and skill sets to complete strategic acquisitions of businesses,
divisions, and/or assets with a focus on mature technology, healthcare,
industrial and certain financial segments intended to unlock and realize value.
Refer to "General" above for additional information.

This led to our acquisition of the "Life Sciences Portfolio" in June 2020. In
connection with the purchase of the equity securities in the Life Sciences
Portfolio, we issued to certain funds and accounts, or the Buyers, affiliated
with, or managed by, Starboard, $115.0 million principal amount of our senior
secured notes, or Notes. As of December 31, 2020, all of the
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equity securities in the Life Sciences Portfolio were transferred to the
Company. As of June 30, 2022, 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.

Moreover, in October 2021we completed our first operating company acquisition of Printronix.

Refer to "Recent Business Matters - Starboard Securities and Senior Secured
Notes" and "Recent Business Matters - Equity Securities Portfolio Investment"
below, and "General - Industrial Operations" above, and Notes 1, 3 and 8 to the
consolidated financial statements elsewhere herein for more information related
to the Printronix acquisition, Life Sciences Portfolio and Notes, respectively.

For the six months ended June 30, 2022 and 2021, we reported consolidated
revenues of $30.2 million and $23.2 million. Cash and cash equivalents and
equity securities at fair value totaled $390.3 million as of June 30, 2022, as
compared to $670.7 million as of December 31, 2021. Our operating activities
during the periods presented were focused on the continued operation of our
Patent Licensing, Enforcement and Technologies Business, including the continued
pursuit of our ongoing patent licensing and enforcement programs, and beginning
in October 2021, our Industrial Operations business through our Printronix
subsidiary.

patent license and application

Patent Litigation Trial Dates and Related Trials

As of the date of this report, our operating subsidiaries have three pending
patent infringement cases with scheduled trial dates in the next twelve months.
Patent infringement trials are components of our overall patent licensing
process and are one of many factors that contribute to possible future revenue
generating opportunities for us. Scheduled trial dates, as promulgated by the
respective court, merely provide an indication of when, in future periods, the
trials may occur according to the court's scheduling calendar at a specific
point in time. A court may change previously scheduled trial dates. In fact,
courts often reschedule trial dates for various reasons that are unrelated to
the underlying patent assets and typically for reasons that are beyond our
control. While scheduled trial dates provide an indication of the timing of
possible future revenue generating opportunities for us, the trials themselves
and the immediately preceding periods represent the possible future revenue
generating opportunities. These future opportunities can result in varying
outcomes. In fact, it is difficult to predict the outcome of patent enforcement
litigation at the trial level and outcomes can be unfavorable. It can be
difficult to understand complex patented technologies, and as a result, this may
lead to a higher rate of unfavorable litigation outcomes. Moreover, in the event
of a favorable outcome, there is, in our experience, a higher rate of successful
appeals in patent enforcement litigation than more standard business litigation.
Such appeals are expensive and time consuming, resulting in increased costs and
a potential for delayed or foregone revenue opportunities in the event of
modification or reversal of favorable outcomes. Although we diligently pursue
enforcement litigation, we cannot predict with reliability the decisions made by
juries and trial courts. Refer to Item 1A "Risk Factors" of our Annual Report
for additional information regarding trials, patent litigation and related
risks.

Litigation and license fees

We expect patent-related legal expenses to continue to fluctuate from period to
period based on the factors summarized herein, in connection with future trial
dates, international enforcement, strategic patent portfolio prosecution and our
current and future patent portfolio investment, prosecution, licensing and
enforcement activities. The pursuit of enforcement actions in connection with
our licensing and enforcement programs can involve certain risks and
uncertainties, including the following:

•Increases in patent-related legal expenses associated with patent infringement
litigation, including, but not limited to, increases in costs billed by outside
legal counsel for discovery, depositions, economic analyses, damages
assessments, expert witnesses and other consultants, re-exam and inter partes
review costs, case-related audio/video presentations and other litigation
support and administrative costs, could increase our operating costs and
decrease our profit generating opportunities;

•Our patented technologies and enforcement actions are complex and, therefore, we may need to appeal adverse lower court decisions in order to successfully enforce our patents. In addition, these appeals may not be successful;

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•New legislation, regulations or rules related to enforcement actions, including
any fee or cost shifting provisions, could significantly increase our operating
costs and decrease our profit generating opportunities. Increased focus on the
growing number of patent-related lawsuits may result in legislative changes
which increase our costs and related risks of asserting patent enforcement
actions;

• Courts may find that our subsidiaries have violated certain legal, regulatory, federal, local or applicable rules or standards in pursuing such enforcement actions, which may expose us and our operating subsidiaries to material liabilities, which could adversely affect our results of operations and financial condition;

•The complexity of negotiations and potential magnitude of exposure for
potential infringers associated with higher quality patent portfolios may lead
to increased intervals of time between the filing of litigation and potential
revenue events (i.e., Markman dates, trial dates), which may lead to increased
legal expenses, consistent with the higher revenue potential of such portfolios;
and

•Fluctuations in overall patent portfolio related enforcement activities which
are impacted by the portfolio intake challenges discussed above could harm our
operating results and our financial position.

Investments in patent portfolios

With respect to our licensing, enforcement and overall business, neither we nor
our operating subsidiaries invent new technologies or products; rather, we
depend upon the identification and investment in patents, inventions and
companies that own IP through our relationships with inventors, universities,
research institutions, technology companies and others. If our operating
subsidiaries are unable to maintain those relationships and identify and grow
new relationships, then we may not be able to identify new technology-based
patent opportunities for sustainable revenue and /or revenue growth.

Our current or future relationships may not provide the volume or quality of
technologies necessary to sustain our licensing, enforcement and overall
business. In some cases, universities and other technology sources compete
against us as they seek to develop and commercialize technologies. Universities
may receive financing for basic research in exchange for the exclusive right to
commercialize resulting inventions. These and other strategies employed by
potential partners may reduce the number of technology sources and potential
clients to whom we can market our solutions. If we are unable to maintain
current relationships and sources of technology or to secure new relationships
and sources of technology, such inability may have a material adverse effect on
our revenues, operating results, financial condition and ability to maintain our
licensing and enforcement business.

Receipt of the patent portfolio

One of the significant challenges in the intellectual property industry continues to be obtaining quality patents due to the challenges and complexity associated with the current patent environment.

During the six months ended June 30, 2022, we did not acquire any new patent
portfolios. During 2021, we acquired one new patent portfolio consisting of
Wi-Fi 6 standard essential patents. In 2020, we acquired five new patent
portfolios consisting of (i) flash memory technology, (ii) voice activation and
control technology, (iii) wireless networks, (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.

Industrial printing solutions

Our Printronix subsidiary is a worldwide leader in multi­technology supply­chain
printing solutions for a variety of industries, including manufacturing,
transportation and logistics, retail distribution, food and beverage
distribution, and pharmaceutical distribution. Printronix's line matrix printers
are used for mission critical applications within these industries, including
labeling and inventory management, build sheets, invoicing, manifests and bills
of lading, and reporting. In China, India and other developing countries in Asia
and Africa, our printers are also prevalent in the banking and government
sectors. Printronix has manufacturing, configuration and/or distribution sites
located in Malaysia, the United States, Singapore, China and the Netherlands,
along with sales and support locations around the world to support its global
network of users, channel partners, and strategic alliances. Printronix designs
and manufactures printers and related consumable products for various industrial
printing applications. Printers consist of hardware and embedded software and
may be sold with maintenance service agreements, which are serviced by outside
contractors. Consumable products include
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inked ribbons which are used within Printronix's printers. Printronix's products
are primarily sold through Printronix's global network of channel partners, such
as dealers and distributors, to end­users.

Recent cases

Starboard safeties and Senior Secured Notes

In 2019, as part of our strategy to grow, we began evaluating a wide range of
strategic opportunities that culminated in the strategic investment in the
Company by certain funds and accounts, or the Buyers, affiliated with, or
managed by, Starboard Value LP, or Starboard. On November 18, 2019, the Company
entered into a Securities Purchase Agreement with Starboard and the Buyers, or
the Securities Purchase Agreement, pursuant to which the Buyers purchased (i)
350,000 shares of the Company's newly designated Series A Convertible Preferred
Stock, or Series A Preferred Stock, at an aggregate purchase price of $35.0
million, and warrants to purchase up to 5 million shares of the Company's common
stock, or Series A Warrants. The Securities Purchase Agreements also established
the terms of certain senior secured notes, or Notes, and additional warrants, or
the Series B Warrants, which may be issued to the Buyers in the future. Refer to
Note 8 to the consolidated financial statements elsewhere herein for additional
information related to the Series A Preferred Stock, Series A Warrants and
Series B Warrants. In connection with the Buyer's investment, Starboard was
granted certain corporate governance rights, including the right to appoint
Jonathan Sagal, Managing Director of Starboard, as a director of the Company and
recommend two additional directors for appointment to our Board of Directors.
The Series A Preferred Stock, Series A Warrants and Series B Warrants are
referred to herein as, collectively, the "Starboard Securities."

On February 14, 2020, the Company's stockholders approved, for purposes of
Nasdaq Rules 5635(b) and 5635(d), as applicable, (i) the voting of the Series A
Preferred Stock on an as-converted basis and (ii) the issuance of the maximum
number of shares of common stock issuable in connection with the potential
future (A) conversion of the Series A Preferred Stock and (B) exercise of the
Series A and Series B Warrants, in each case, without giving effect to the
exchange cap set forth in the Series A Preferred Stock Certificate of
Designations and in the Series A Warrants, issued pursuant to the Securities
Purchase Agreement dated November 18, 2019. The Company's stockholders also
approved an amendment to the Company's Amended and Restated Certificate of
Incorporation to increase the total number of authorized shares of common stock
by 200 million shares, from 100 million shares to 300 million shares.

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 of
either (i) $5.25 per share, if exercising by cash payment, 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.

On June 4, 2020, pursuant to the terms of the Securities Purchase Agreement 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, or the
Supplemental Agreement, through which, the Company agreed to redeem $80.0
million aggregate principal amount of the Notes by September 30, 2020, and $35.0
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 10.00% per
annum. In connection with the issuance of the Notes, 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. The Notes outlined certain financial and non-financial
covenants. Additionally, all or any portion of the principal amount outstanding
under the Notes may, at the election of the holders, be surrendered to the
Company for cancellation in payment of the exercise price upon the exercise of
the Series B Warrants.

On June 30, 2020, the Company entered into an Exchange Agreement, or the
Exchange Agreement, with Merton Acquisition HoldCo LLC, a Delaware limited
liability company and wholly-owned subsidiary of the Company, or Merton, and
Starboard, on behalf of itself and on behalf of the Buyers, including the
holders of the Notes. Pursuant to the Exchange Agreement, the holders of the
Notes exchanged the entire outstanding principal amount of the Notes for new
senior notes, or the New Notes, issued by Merton and 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
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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 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 between the Company, Starboard and the
Buyers.

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 2021 Merton Notes and the September 2021
Merton Notes cannot be used to exercise Series B Warrants issued to Starboard.
On November 30, 2021, the Company amended the maturity date of the New Notes to
January 31, 2022. 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. On April 14, 2022, the Company amended the New
Notes to extend the maturity date to July 15, 2022, permit the investment in
certain types of derivative instruments and permit certain guarantees in
connection with such derivative instruments, each as defined therein, and agreed
to repay an aggregate of $50.0 million principal amount of the New Notes,
resulting in a principal amount outstanding of $115.0 million. The total
principal amount outstanding of New Notes as of June 30, 2022 and December 31,
2021 was $115.0 million and $180.0 million, respectively. On July 15, 2022, the
Company amended the maturity date of the New Notes to July 14, 2023, and agreed
to repay an aggregate of $55.0 million principal amount of the New Notes,
resulting in a principal amount outstanding of $60.0 million. Refer to Note 8 to
the consolidated financial statements elsewhere herein for additional
information.

Equity portfolio investment

On April 3, 2020, the Company entered into an Option Agreement with Seller to
purchase equity securities in the 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, or Link, Seller, and the Company.
Pursuant to the Transaction Agreement, the Company will purchase from Seller and
Seller will transfer to the Company the specified equity securities of all
companies in the Life Sciences Portfolio at set prices at various future dates.
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. Refer to Note 3 to the consolidated
financial statements elsewhere herein for additional information.

Acquisition of industrial activities

Refer to “General – Industrial Operations” above for information relating to our
Printronix acquisition.

Operating Activities

Intellectual property operations

Revenue from our intellectual property operations has historically fluctuated from quarter to quarter and can vary significantly from period to period, depending on a number of factors, including the following:

•the dollar amount of agreements executed each period, which can be driven by
the nature and characteristics of the technology or technologies being licensed
and the magnitude of infringement associated with a specific licensee;
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•the specific terms and conditions of the agreements signed in each period, including the nature and characteristics of the rights granted, and the periods of infringement or duration of use contemplated by the respective payments;

•fluctuations in the total number of agreements executed each period;

•the number of, timing, results and uncertainties associated with patent
licensing negotiations, mediations, patent infringement actions, trial dates and
other enforcement proceedings relating to our patent licensing and enforcement
programs;

•the relative maturity of the licensing programs during the applicable periods;

•other external factors, including the periodic status or results of ongoing
negotiations, the status or results of ongoing litigations and appeals, actual
or perceived shifts in the regulatory environment, impact of unrelated patent
related judicial proceedings and other macroeconomic factors;

•the willingness of prospective licensees to settle significant patent
infringement cases and pay reasonable license fees for the use of our patented
technology, as such infringement cases approached a court determined trial date;
and

• Fluctuations in enforcement activity related to the overall patent portfolio which are impacted by the portfolio admission challenges discussed above.

Our management does not attempt to manage for smooth sequential periodic growth
in revenues from period to period, and therefore, periodic results can be
uneven. Unlike most operating businesses and industries, licensing revenues not
generated in a current period are not necessarily foregone but, depending on
whether negotiations, litigation or both continue into subsequent periods, and
depending on a number of other factors, such potential revenues may be pushed
into subsequent annual periods.

Industrial operations

Refer to “Industrial Printing Solutions” above for information on
by Printronix operating activities.

In addition to the following discussion of results of operations, further information on revenues and cost of revenues from our Intellectual Property and Industrial Operations segment can be found in Note 2 to the Consolidated Financial Statements elsewhere in this document.

Operating results

Summary of operating results

                                       Three Months Ended                                                              Six Months Ended
                                            June 30,                                                                       June 30,
                                     2022               2021             $ Change             % Change              2022               2021            $ Change            % Change
                                                                           

(In thousands, except percentage change values) Total revenue

                   $   16,717          $ 17,400          $     (683)                 (4  %)       $  30,224          $  23,203          $  7,021                   30  %
Total costs and expenses             22,387            15,756               6,631                  42  %           44,402             27,235            17,167                   63  %
Operating (loss) income              (5,670)            1,644              (7,314)               (445  %)         (14,178)            (4,032)          (10,146)                 252  %
Total other (expense) income        (42,020)           18,532             (60,552)               (327  %)        (121,656)          (139,347)           17,691                  (13  %)
(Loss) income before income
taxes                               (47,690)           20,176             (67,866)               (336  %)        (135,834)          (143,379)            7,545                   (5  %)
Income tax benefit (expense)            200              (510)                710                (139  %)          15,078               (520)           15,598               (3,000  %)
Net (loss) income attributable
to Acacia Research Corporation      (61,503)           19,660             (81,163)               (413  %)        (134,769)          (144,805)           10,036                   (7  %)


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Results of operations – three months ended June 30, 2022 compared to the three months ended June 30, 2021

Total revenues decreased $0.7 million to $16.7 million for the three months
ended June 30, 2022, as compared to $17.4 million for the three months ended
June 30, 2021, due to the decrease in ARG's revenues, partially offset by the
net revenues contributed from Printronix of $8.7 million. ARG executed three new
license agreements during the second quarter of 2022, a decrease of three versus
the comparable prior period, which contributed to ARG's revenues decreasing by
$9.3 million. Refer to "Investments in Patent Portfolios" above for additional
information regarding the impact of portfolio acquisition trends on current and
future licensing and enforcement related revenues. Refer to "Revenues" below for
further information.

Loss before income taxes was $47.7 million for the three months ended June 30,
2022, as compared to income of $20.2 million in the comparable prior period. The
net income decrease was comprised of the decrease in total revenues described
above and other changes in operating expenses and other income or expense as
follows:

•Inventor royalties decreased $258,000, from $448,000 to $190,000 in 2022,
primarily due to license agreement activity and related revenues generated with
inventor royalty obligations. Refer to "Cost of Revenues - Intellectual Property
Operations" below for further discussion.

•Contingent legal fees decreased $3.6 million, from $4.4 million to $755,000 in
2022, primarily due to the decrease in ARG's revenues described above. Refer to
"Cost of Revenues - Intellectual Property Operations" below for further
discussion.

•Litigation and licensing expenses decreased $748,000, from $1.8 million to $1.1
million in 2022, primarily due to a net decrease in litigation support and
third-party technical consulting expenses associated with ongoing litigation.
Refer to "Cost of Revenues - Intellectual Property Operations" below for further
discussion.

• Amortization of patent charges from our intellectual property activities decreased $12,000of $2.6 million at $2.6 million in 2022.

•Printronix cost of sales, engineering and development expenses, and sales and
marketing expenses for the second quarter of 2022 added a total of $7.0 million
to our consolidated operating expenses. Refer to "Cost of Revenues - Industrial
Operations" below for further discussion.

•General and administrative expenses increased $4.2 million, from $6.5 million
to $10.7 million in 2022, primarily due to higher parent company and
Intellectual Property Operations costs including, compensation expense for
share-based awards, accounting fees and business development related expenses,
and $2.7 million from our Industrial Operations general and administrative costs
and amortization expense for the second quarter of 2022. Refer to "General and
Administrative Expenses" below for further detail and discussion.

•Compensation expense for share-based awards, included in general and
administrative expenses above, increased $554,000, from $529,000 to $1.1 million
in 2022, primarily due to restricted stock and option grants issued to employees
and the Board of Directors in 2022 and 2021, which includes a partial offset by
forfeitures for terminated employees.

•Unrealized loss from the change in fair value of our equity securities was
$57.7 million in 2022, as compared to an unrealized gain of $11.2 million in the
comparable prior period. The unrealized loss and gain were derived from our Life
Sciences Portfolio and trading securities portfolio. The current period
unrealized loss primarily relates to valuation decreases from one Life Sciences
Portfolio company and one trading security. Refer to "Equity Securities
Investments" below for further discussion.

•Realized gain from the sale of our equity securities decreased $3.1 million,
from $14.6 million to $11.5 million in 2022. The realized gains were derived
from our Life Sciences Portfolio and trading securities portfolio. The current
period realized gain primarily relates to the partial sale of two Life Sciences
Portfolio securities and one trading security. Refer to "Equity Securities
Investments" below for further discussion.
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•Earnings on equity investment in joint venture was $42.1 million in 2022, as
compared to $7,000 in the comparable prior period. Refer to "Equity Securities
Investments" below for a detailed discussion.

•We recognized an unrealized loss of $35.1 million from the fair value
measurements of the Series A and Series B warrants and the embedded derivative
in 2022, as compared to an unrealized loss of $5.6 million in the comparable
prior period. Refer to Note 8 to the consolidated financial statements elsewhere
herein for additional information regarding the Starboard Securities.

•Loss on foreign currency exchange increased $1.7 million, from $152,000 to $1.8
million in 2022. The increase, was primarily derived from our transactions
related to our Life Sciences Portfolio investment, where certain equity security
investments are exposed to fluctuations in foreign currency exchange rates
between the U.S. dollar and the British Pound. Refer to "Equity Securities
Portfolio Investment" above and Note 3 to the consolidated financial statements
elsewhere herein for additional information.

•Interest expense on Senior Secured Notes increased $252,000, from $1.6 million
to $1.9 million in 2022, primarily due to increased interest expense from recent
Note issuances. Refer to Note 8 to the consolidated financial statements
elsewhere herein for additional information regarding the Starboard Senior
Secured Notes.

•Interest income and other, net was $863,000 in 2022, as compared to $85,000 in
the comparable prior period, mainly due to an increase in dividend income from
our cash equivalents and equity security investments. Refer to Note 2 to the
consolidated financial statements elsewhere herein for additional information
regarding our cash and cash equivalents and investments in equity securities.

Operating results – six months ended June 30, 2022 compared to the half-year ended June 30, 2021

Total revenues increased $7.0 million to $30.2 million for the six months ended
June 30, 2022, as compared to $23.2 million for the six months ended June 30,
2021, due to the net revenues contributed from Printronix of $19.5 million. ARG
executed twelve new license agreements during 2022, a decrease of one versus the
comparable prior period, which contributed to ARG's revenues decreasing by $12.5
million. Refer to "Investments in Patent Portfolios" above for additional
information regarding the impact of portfolio acquisition trends on current and
future licensing and enforcement related revenues. Refer to "Revenues" below for
further detailed discussion.

Loss before income taxes was $135.8 million for six months ended June 30, 2022,
as compared to a loss of $143.4 million in the comparable prior period. The net
loss decrease was comprised of the increase in total revenues described above
and other changes in operating expenses and other income or expense as follows:

•Inventor royalties decreased $183,000, from $543,000 to $360,000 in 2022,
primarily due to license agreement activity and related revenues generated with
inventor royalty obligations. Refer to "Cost of Revenues - Intellectual Property
Operations" below for further discussion.

•Contingent legal fees decreased $4.1 million, from $5.5 million to $1.3 million
in 2022, primarily due to the decrease in ARG's revenues described above. Refer
to "Cost of Revenues - Intellectual Property Operations" below for further
discussion.

•Litigation and licensing expenses decreased $1.8 million, from $4.1 million to
$2.3 million in 2022, primarily due to a net decrease in litigation support and
third-party technical consulting expenses associated with ongoing litigation.
Refer to "Cost of Revenues - Intellectual Property Operations" below for further
discussion.

•Amortization of patents expense from our intellectual property operations
increased $727,000, from $4.5 million to $5.2 million in 2022, due to an
increase in scheduled amortization resulting from the new portfolio acquired in
2021.

•Printronix cost of sales, engineering and development expenses, and sales and
marketing expenses for 2022 added a total of $13.4 million to our consolidated
operating expenses. Refer to "Cost of Revenues - Industrial Operations" below
for further discussion.
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•General and administrative expenses increased $9.1 million, from $12.7 million
to $21.8 million in 2022, primarily due to higher parent company and
Intellectual Property Operations costs including, compensation expense for
share-based awards, accounting fees, temporary labor, legal and business
development related expenses, and $5.5 million from our Industrial Operations
general and administrative costs and amortization expense for 2022. Refer to
"General and Administrative Expenses" below for further detail and discussion.

•Compensation expense for share-based awards, included in general and
administrative expenses above, increased $1.3 million, from $979,000 to $2.3
million in 2022, primarily due to restricted stock and option grants issued to
employees and the Board of Directors in 2022 and 2021, which includes a partial
offset by forfeitures for terminated employees.

•Unrealized loss from the change in fair value of our equity securities was
$229.9 million in 2022, as compared to an unrealized gain of $49.0 million in
the comparable prior period. The unrealized loss and gain were primarily derived
from our Life Sciences Portfolio. The current period unrealized loss primarily
relates to one Life Sciences Portfolio company's valuation decrease. Refer to
"Equity Securities Investments" below for further discussion.

•Realized gain from the sale of our equity securities increased $62.9 million,
from $15.4 million to $78.4 million in 2022. The realized gains were derived
from our Life Sciences Portfolio and trading securities portfolio. The current
period realized gain primarily relates to the partial sale of two Life Sciences
Portfolio securities and one trading security. Refer to "Equity Securities
Investments" below for further discussion.

• The profit on the participation in the joint venture was $42.1 million in 2022, compared to $2.7 million during the comparable prior period. See “Investments in Equity Securities” below for a detailed discussion.

• We recorded an unrealized loss of $2.8 million on the investment at fair value in 2021 related to our former investment in Veritone. See “Investments in Equity Securities” below for more information.

• We recorded a realized gain on the sale of $3.6 million on the investment at fair value in 2021 related to our former investment in Veritone. See “Investments in Equity Securities” below for more information.

•We recognized an unrealized loss of $7.0 million from the fair value
measurements of the Series A and Series B warrants and the embedded derivative
in 2022, as compared to an unrealized loss of $204.5 million in the comparable
prior period. Refer to Note 8 to the consolidated financial statements elsewhere
herein for additional information regarding the Starboard Securities.

•Loss on foreign currency exchange increased $2.5 million, from $176,000 to $2.6
million in 2022. The increase, was primarily derived from our transactions
related to our Life Sciences Portfolio investment, where certain equity security
investments are exposed to fluctuations in foreign currency exchange rates
between the U.S. dollar and the British Pound. Refer to "Equity Securities
Portfolio Investment" above and Note 3 to the consolidated financial statements
elsewhere herein for additional information.

•Interest expense on Senior Secured Notes increased $1.7 million, from $2.8
million to $4.5 million in 2022, primarily due to increased interest expense
from recent Note issuances. Refer to Note 8 to the consolidated financial
statements elsewhere herein for additional information regarding the Starboard
Senior Secured Notes.

•Interest income and other, net was $1.9 million in 2022, as compared to $59,000
in the comparable prior period, mainly due to an increase in dividend income
from our cash equivalents and equity security investments. Refer to Note 2 to
the consolidated financial statements elsewhere herein for additional
information regarding our cash and cash equivalents and investments in equity
securities.
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Revenue

Intellectual property operations

ARG’s revenue activity for the periods presented includes the following:

                                  Three Months Ended                                                           Six Months Ended
                                       June 30,                                                                    June 30,
                                2022               2021            $ Change            % Change             2022              2021             $ Change            % Change
                                                                     (In thousands, except percentage change values and count totals)
Paid-up license revenue
agreements                  $    7,360          $ 16,600          $ (9,240)                (56  %)       $  9,553          $ 22,010          $ (12,457)                (57  %)
Recurring license revenue
agreements                         702               800               (98)                (12  %)          1,124             1,193                (69)                 (6  %)
Total revenues              $    8,062          $ 17,400          $ (9,338)                (54  %)       $ 10,677          $ 23,203          $ (12,526)                (54  %)

New license agreements
executed                             3                 6                (3)                (50  %)             12                13                 (1)                 (8  %)
Licensing and enforcement
programs
  generating revenues                6                 2                 4                 200  %               8                 8                  -                   -  %
Licensing and enforcement
programs
  with initial revenues              -                 2                (2)               (100  %)              -                 3                 (3)               (100  %)
New patent portfolios                -                 -                 -                     n/a              -                 1                 (1)               (100  %)


For the periods presented above, the majority of the revenue agreements executed
provided for the payment of one-time, paid-up license fees in consideration for
the grant of certain IP Rights for patented technology owned by our operating
subsidiaries. These rights were primarily granted on a perpetual basis,
extending until the expiration of the underlying patents. On a year-to-date
basis, paid-up revenue decreased $12.5 million from nine new license agreements
executed during 2022 related to five programs generating revenues. Recurring
revenue, that provides for quarterly sales-based license fees, decreased $69,000
year-to-date from various on-going license arrangements including three new
license agreements executed during 2022 related to four programs generating
revenues, including one program that provided revenues in both paid-up and
recurring revenue categories.

Refer to Note 2 to the consolidated financial statements elsewhere in this document for additional information regarding our revenue arrangements and related concentrations for the periods presented in this document.

See the “Investments in Patent Portfolios” section above for information regarding the impact of portfolio acquisition trends on current and future licensing and enforcement revenues.

Industrial operations

by Printronix net revenues included the following:

                       Three Months Ended                    Six Months Ended
                            June 30,                             June 30,
                              2022                                                    2022
                            (In thousands)
Printers and parts    $             3,662                                          $  7,916
Consumable products                 4,214                                             9,598
Services                              779                                             2,033
Total                 $             8,655                                          $ 19,547


Refer to Note 2 to the consolidated financial statements elsewhere herein for
additional information regarding Printronix's revenue arrangements and related
concentrations. Refer to "Industrial Printing Solutions" above for additional
information related to Printronix's operating activities.
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Revenue cost

Intellectual property operations

                                   Three Months Ended                                                            Six Months Ended
                                        June 30,                                                                     June 30,
                                  2022                2021           $ Change            % Change             2022              2021            $ Change            % Change
                                                                              (In thousands, except percentage change values)
Inventor royalties          $      190             $   448          $   (258)                (58  %)       $    360          $    543          $   (183)                (34  %)
Contingent legal fees              755               4,356            (3,601)                (83  %)          1,304             5,450            (4,146)                (76  %)
Litigation and licensing
expenses                         1,089               1,837              (748)                (41  %)          2,333             4,099            (1,766)                (43  %)
Amortization of patents          2,600               2,612               (12)                  0  %           5,201             4,474               727                  16  %

Total                       $    4,634             $ 9,253          $ (4,619)                (50  %)       $  9,198          $ 14,566          $ (5,368)                (37  %)

Refer to the detailed explanations of the changes above for the three and six month periods ended
June 30, 2022 the cost of revenue from our intellectual property operations.

The economic terms of patent portfolio related partnering agreements and
contingent legal fee arrangements, if any, including royalty obligations, if
any, royalty rates, contingent fee rates and other terms and conditions, vary
across the patent portfolios owned or controlled by our operating subsidiaries.
In certain instances, we have invested in certain patent portfolios without
future patent partner royalty obligations. The costs associated with the
forementioned obligations fluctuate period to period, based on the amount of
revenues recognized each period, the terms and conditions of revenue agreements
executed each period and the mix of specific patent portfolios, with varying
economic terms and conditions, generating revenues each period.

Litigation and licensing expenses include patent-related litigation, enforcement
and prosecution costs incurred by law firms and external patent attorneys
engaged on either an hourly basis or a contingent fee basis. Litigation and
licensing expenses also includes third-party patent research, development,
patent prosecution and maintenance fees, re-exam and inter partes reviews,
consulting and other costs incurred in connection with the licensing and
enforcement of patent portfolios. Litigation and licensing expenses decreased
for the periods presented due to a net decrease in patent maintenance fees and
consulting fees. Refer to "Investments in Patent Portfolios" above for
additional information regarding the impact of portfolio acquisition trends on
current and future licensing and enforcement related revenues.

Industrial operations

Printronix's cost of sales for the three and six months ended June 30, 2022 was
$4.6 million and $8.8 million, respectively. Refer to Note 2 to the consolidated
financial statements elsewhere herein for additional information regarding
Printronix's cost of sales.

Operating Expenses

                                   Three Months Ended                                                           Six Months Ended
                                        June 30,                                                                    June 30,
                                  2022               2021           $ Change            % Change             2022              2021            $ Change            % Change
                                                                              (In thousands, except percentage change values)
Engineering and development
expenses - industrial
operations                   $       145          $     -          $    145                     n/a       $    335          $      -          $    335                     n/a
Sales and marketing expenses
- industrial operations            2,294                -             2,294                     n/a          4,310                 -             4,310                     n/a

General and administrative
costs - intellectual
property operations                1,807            1,438               369                   26  %          3,523             2,443             1,080                   44  %
General and administrative
costs - industrial
operations                         2,686                -             2,686                     n/a          5,541                 -             5,541                     n/a
Parent general and
administrative expenses            6,229            5,065             1,164                   23  %         12,711            10,226             2,485                   24  %
Total general and
administrative expenses           10,722            6,503             4,219                   65  %         21,775            12,669             9,106                   72  %
Total                        $    13,161          $ 6,503          $  6,658                  102  %       $ 26,420          $ 12,669          $ 13,751                  109  %


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The operating expenses table above includes the Company's general and
administrative expenses by operation and Printronix's engineering and
development expenses and sales and marketing expenses. Refer to Note 2 to the
consolidated financial statements elsewhere herein for additional information
regarding Printronix's operating expenses.

General and administrative expenses

Here is a summary of the main factors of variation of general and administrative expenses:

                                                                Three Months Ended           Six Months Ended
                                                                     June 30,                    June 30,
                                                                  2022 vs. 2021               2022 vs. 2021
                                                                               (In thousands)
Personnel costs and board fees                                $               279          $             535
Variable performance-based compensation costs                                 (20)                       237
Other general and administrative costs                                        529                      1,378
General and administrative costs - industrial operations                    2,253                      4,675
Amortization of industrial operations intangible assets                       433                        866
Compensation expense for share-based awards                                   554                      1,278
Non-recurring employee severance costs                                        191                        137
Total change in general and administrative expenses           $             4,219          $           9,106


General and administrative expenses include employee compensation and related
personnel costs, including variable performance based compensation and
compensation expense for share-based awards, office and facilities costs, legal
and accounting professional fees, public relations, stock administration,
business development, fixed asset depreciation, amortization of Industrial
Operations intangible assets, state taxes based on gross receipts and other
corporate costs.

The increases in personnel cost and board fees for the periods presented was
primarily due to an increase in headcount and related costs. The change in
variable performance-based compensation costs was primarily due to fluctuations
in performance-based compensation accruals. The increases in other general and
administrative costs, which relates to our parent company and Intellectual
Property Operations business, was primarily due to higher accounting fees,
temporary labor, legal and business development related expenses. Compensation
expense for share-based awards increased primarily due to restricted stock and
option grants issued to employees and the Board of Directors in 2022 and 2021.
Non-recurring employee severance costs fluctuate based on the severance
arrangements of terminated employees. In addition, our Industrial Operations
related general and administrative costs and amortization contributed to the
increased expenses in 2022. Refer to additional general and administrative
change explanations above.

Other Income/Expense

Equity Securities Investments

                                  Three Months Ended                                                             Six Months Ended
                                       June 30,                                                                      June 30,
                                2022               2021             $ Change            % Change              2022               2021             $ Change             % Change
                                                                           

(In thousands, except percentage change values) Change in fair value of equity securities

           $  (57,647)         $ 11,158          $ (68,805)               (617  %)       $ (229,850)         $ 49,007          $ (278,857)               (569  %)
Gain on sale of equity
securities                      11,498            14,617             (3,119)                (21  %)           78,374            15,436              62,938                 408  %
Earnings on equity
investment in joint venture     42,085                 7             42,078                     n/a           42,085             2,737              39,348               1,438  %
Net realized and unrealized
(loss) gain                     (4,064)           25,782            (29,846)               (116  %)         (109,391)           67,180            (176,571)               (263  %)

Change in fair value of
investment                           -                 -                  -                   -                    -            (2,752)              2,752                (100  %)
Gain on sale of investment           -                 -                  -                   -                    -             3,591              (3,591)               (100  %)
Total net realized and
unrealized (loss) gain      $   (4,064)         $ 25,782          $ (29,846)               (116  %)       $ (109,391)         $ 68,019          $ (177,410)               (261  %)


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Our equity securities investments, including the Life Sciences Portfolio and
trading securities portfolio, are recorded at fair value at each balance sheet
date. Refer to periodic change explanations above. Refer to Notes 2 and 3 to the
consolidated financial statements elsewhere herein for additional information
regarding our investment in the Life Sciences Portfolio and other equity
securities.

Our year-to-date results included a significant unrealized loss from the change
in fair value of our equity securities as compared to a gain in the prior
period, while realized gains from the sale of our equity securities increased,
as compared to the prior period. These changes were derived from our Life
Sciences Portfolio and trading securities portfolio, in which, our sales
activity of certain investments increased relative to securities that were held
with unrealized gains in the prior year. The current period unrealized loss
primarily relates to one Life Sciences Portfolio company's valuation decrease.

During 2021, we began to recognize earnings on our equity investment in joint
venture, which is part of the Life Sciences Portfolio. In April 2022, such
investment received a certain drug approval from the United States Food and Drug
Administration. On a consolidated basis, we are due a milestone payment in the
amount of $40.0 million to be received in the form of a deferred payment, due
and payable in October 2022, with interest accrued at 8.5% per year. In June
2022, in connection with the submission to the European Medicines Agency, on a
consolidated basis, we were due an additional milestone payment in the amount of
$1.8 million. Our portion of that milestone payment was received in July 2022.
During the second quarter of 2022, we recorded consolidated earnings on equity
investment of $42.1 million, including the two milestones and approximately
$300,000 in accrued interest. Refer to Note 3 to the consolidated financial
statements elsewhere herein for additional information.

Our prior year-to-date results included an unrealized loss on the fair value
investment in Veritone, while we recognized a realized gain on sale of the
equity investment in Veritone. Acacia no longer has an investment in Veritone
common stock and warrants. Refer to additional change explanations above. Refer
to Note 2 to the consolidated financial statements elsewhere herein for
additional information regarding our former investment in Veritone.

Income Taxes

                                 Three Months Ended                                                           Six Months Ended
                                      June 30,                                                                    June 30,
                              2022                 2021            $ Change            % Change             2022             2021           $ Change            % Change
                                                                           (In thousands, except percentage change values)
Income tax benefit
(expense)                 $    200               $ (510)         $     710                (139  %)       $ 15,078          $ (520)         $ 15,598               (3,000  %)
Effective tax rate               -   %                3  %                n/a               (3)  %             11  %            -  %               n/a                11   %


Our income tax benefit for the three and six months ended June 30, 2022
primarily reflects the decrease in deferred tax liabilities attributable to the
unrealized losses recorded in the periods presented, and our income tax expense
for the three and six months ended June 30, 2021 primarily relates to state
taxes.

Our 2022 effective tax rates were lower than the U.S. federal statutory rate
primarily due to non-taxable income, expiration of foreign tax credits and
changes in valuation allowance. Our 2021 effective tax rates were lower than the
U.S. federal statutory rate primarily due to the change in valuation allowance,
as well as state income taxes. The effective tax rate may be subject to
fluctuations during the year as new information is obtained which may affect the
assumptions used to estimate the effective tax rate, including factors such as
expected utilization of net operating loss carryforwards, changes in or the
interpretation of tax laws in jurisdictions where the Company conducts business,
the Company's expansion into new states or foreign countries, and the amount of
valuation allowances against deferred tax assets. The Company has recorded a
partial valuation allowance against our net deferred tax assets as of June 30,
2022 and December 31, 2021. These assets primarily consist of foreign tax
credits and net operating loss carryforwards.

Inflation

Historically, inflation has not had a significant impact on us or any of our
subsidiaries. While insignificant to our consolidated enterprise, during the six
months ended June 30, 2022, our Printronix subsidiary experienced some inflation
from higher freight costs and in the cost of raw materials than in previous
years. While Printronix inventory costs have been impacted by these inflationary
pressures, up to this point Printronix has generally been able to adjust selling
prices in response to these higher costs.
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Cash and capital resources

General

Our material cash requirements as of June 30, 2022, are recognized as
liabilities or are otherwise described in Note 11, "Commitments and
Contingencies," to the consolidated financial statements included elsewhere
herein. Cash requirements are generally derived from our operating and investing
activities including expenditures for working capital (discussed below), human
capital, business development, investments in equity securities and intellectual
property, and business combinations. Our facilities lease obligations,
guarantees and certain contingent obligations are further described in Note 11
to the consolidated financial statements. Historically, we have not entered into
off-balance sheet financing arrangements. At June 30, 2022, we had unrecognized
tax benefits, as further described in Note 2 to the consolidated financial
statements.

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 us or Acacia's operating subsidiaries or award attorney's fees and/or
expenses to a defendant(s), which could be material.

Our primary sources of liquidity are cash and cash equivalents on hand generated
from our operating activities, and as deemed appropriate by management from our
availability of Senior Secured Notes (discussed above under the caption "Recent
Business Matters - Starboard Securities and Senior Secured Notes"). Our
management believes that our cash and cash equivalent balances, anticipated cash
flows from operations and our availability of Senior Secured Notes will be
sufficient to meet our cash requirements through at least twelve months from the
date of this report and for the foreseeable future. We may, however, encounter
unforeseen difficulties that may deplete our capital resources more rapidly than
anticipated, including those set forth under Item 1A, "Risk Factors" of our
Annual Report. Any efforts to seek additional funding could be made through
issuances of equity or debt, or other external financing. However, additional
funding may not be available to us on favorable terms, or at all. The capital
and credit markets have experienced extreme volatility and disruption in recent
years, and the volatility and impact of the disruption may continue. At times
during this period, the volatility and disruption has reached unprecedented
levels. In several cases, the markets have exerted downward pressure on stock
prices and credit capacity for certain issuers, and the commercial paper markets
may not be a reliable source of short-term financing for us. If we fail to
obtain additional financing when needed, we may not be able to execute our
business plans and our business, conducted by our operating subsidiaries, may
suffer.

Cash, cash equivalents and investments

Our consolidated cash, cash equivalents, equity securities at fair value and
long-term restricted cash totaled $390.3 million at June 30, 2022, compared to
$671.1 million at December 31, 2021.

Cash flow summary

The net change in cash and cash equivalents and restricted cash for the periods presented includes the following items:

                                                                    Six Months Ended June 30,
                                                                    2022                   2021
                                                                          (In thousands)
Net cash (used in) provided by:
Operating activities                                          $      (17,553)         $    (8,027)
Investing activities                                                  78,547                  (28)
Financing activities                                                (106,410)              29,571
(Decrease) increase in cash and cash equivalents and
restricted cash                                               $      (45,416)         $    21,516


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Cash flow from operating activities

Cash receipts from ARG's licensees totaled $4.8 million and $11.0 million for
the six months ended June 30, 2022 and 2021, respectively. Cash receipts from
Printronix's customers totaled $20.9 million for the six months ended June 30,
2022. The fluctuations in cash receipts for the periods presented primarily
reflects the corresponding fluctuations in revenues recognized during the same
periods, as described above, and the related timing of payments received from
licensees and customers.

Our reported cash used in operations for the six months ended June 30, 2022
increased to $17.6 million, as compared to $8.0 million in the comparable prior
period, due to net outflows from the total changes in assets and liabilities
(refer to Working Capital discussion below), most notably from accounts payable
and accrued expense related payments, and the total change in net loss
(described above) and related noncash adjustments.

Working capital

Our working capital related to cash flows from operating activities at June 30,
2022 increased to $10.6 million, compared to $4.3 million at December 31, 2021,
which was comprised of the changes discussed below.

Accounts receivable increased to $13.7 million at June 30, 2022, compared to
$9.5 million at December 31, 2021. Printronix's inventories increased to $12.1
million at June 30, 2022, compared to $8.9 million at December 31, 2021. Prepaid
expenses and other current assets increased to $5.3 million at June 30, 2022,
compared to $4.8 million at December 31, 2021. Accounts payable, accrued
expenses and other current liabilities and accrued compensation increased to
$16.4 million at June 30, 2022, compared to $15.4 million at December 31, 2021.
Royalties and contingent legal fees payable slightly increased to $2.6 million
at June 30, 2022, compared to $2.5 million at December 31, 2021. The royalties
and contingent legal fees payable are generally scheduled to be paid in the
subsequent quarter upon our receipt of the related fee payments from licensees,
in accordance with the underlying contractual arrangements. Printronix's current
deferred revenue increased to $1.4 million at June 30, 2022, compared to $1.1
million at December 31, 2021.

Cash flow from investing activities

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

                                                                     Six Months Ended June 30,
                                                                     2022                  2021
                                                                          (In thousands)

Patent acquisition                                             $      (5,000)         $   (11,000)
Sale of investment at fair value                                           -                3,591
Purchases of equity securities                                      (107,537)             (27,871)
Sales of equity securities                                           191,494               33,467

Distributions received from equity investment in joint venture             -                1,830

Purchases of property and equipment                                     (410)                 (45)

Net cash provided by (used in) investing activities            $      

78,547 $ (28)

Cash flow from investing activities for the six months ended June 30, 2022
increased to $78.5 millioncompared to an output of $28,000 in the comparable prior period, primarily due to net cash inflows from equity transactions in our Life Sciences portfolio in 2022. Equity portfolio investmentabove, and Note 3 to the consolidated financial statements elsewhere in this document for additional information relating to the life sciences portfolio.

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Cash flow from financing activities

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

                                                                     Six Months Ended June 30,
                                                                     2022                   2021
                                                                          (In thousands)
Repurchase of common stock                                    $       (39,508)         $         -
Issuance of Senior Secured Notes, net of lender fee                         -               80,000
Paydown of Senior Secured Notes                                       (65,000)             (50,000)

Dividend on Series A Redeemable Convertible Preferred Stock            (1,399)                (523)

Taxes paid related to net equity settlement of equity-based awards

                                                                   (503)                   -
Proceeds from exercise of stock options                                     -                   94
Net cash (used in) provided by financing activities           $      

(106,410) $29,571


Cash outflows from financing activities for the six months ended June 30, 2022
increased to $106.4 million, as compared to cash flow of $29.6 million in the
comparable prior period, primarily due to activity related to our Senior Secured
Notes and our common stock repurchases (refer to Note 12). Refer to "Recent
Business Matters - Starboard Securities and Senior Secured Notes," above, and
Note 8 to the consolidated financial statements elsewhere herein for additional
information related to the Senior Secured Notes.

Critical accounting estimates

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

We believe that of the significant accounting policies discussed in Note 2 to
the consolidated financial statements included elsewhere herein, the following
accounting policies require our most difficult, subjective or complex
assumptions, judgments and estimates:

•revenue recognition;

•valuation of long-term assets and other intangible assets;

•valuation of the Series A Warrants and the Series B Warrants;

•valuation of embedded derivatives; and

• accounting for income taxes.

We discuss below the critical accounting assumptions, judgements and estimates
associated with these policies. Historically, our critical accounting estimates
relative to our significant accounting policies have not differed materially
from actual results. For further information on the related significant
accounting policies, refer to Note 2 to the consolidated financial statements.

Revenue recognition

As described below, significant management judgment must be exercised and used in relation to the revenue recognized in any accounting period. Material differences may result in the amount and timing of revenue recognized or deferred for any period, if management has made different judgments.

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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. For additional information
regarding Printronix's net revenues, refer to Note 2 to the consolidated
financial statements.

Valuation of long-lived assets and other intangible 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. For additional information regarding ARG's patent
portfolio valuation estimates, refer to Note 2 to the consolidated financial
statements. The Company did not record any long-lived asset, patent or other
intangible asset impairment charges for the six months ended June 30, 2022 and
2021.

Valuation of Series A Warrants and Series B Warrants

The fair value of the Series A and B Warrants are estimated using a
Black-Scholes option-pricing model. Refer to Note 9 to the consolidated
financial statements for detailed information related to these fair value
measurements. Of the assumptions used in the Black-Scholes option-pricing model,
volatility changes would have the most significant impact on the fair value. As
of June 30, 2022, a hypothetical 10% increase in the volatility would have
resulted in an increased liability balance of approximately $1.4 million and
$14.4 million, in our Series A and B Warrants, respectively.

Valuation of 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. Refer to Note 9 to the consolidated
financial statements for detailed information related to this fair value
measurement. Of the assumptions used in the binomial lattice framework, discount
rate changes would have the most significant impact on the fair value. As of
June 30, 2022, a hypothetical 1% increase in the discount rate would have
resulted in an increased liability balance of approximately $1.0 million.

Accounting for income taxes

As part of the process of preparing our consolidated financial statements, we
are required to estimate our income taxes in each of the jurisdictions in which
we operate. This process involves the estimating of our actual current tax
exposure together with assessing temporary differences resulting from differing
treatment of items. These differences result in deferred tax assets and
liabilities, which are included within our consolidated balance sheets. We must
then assess the likelihood that our deferred tax assets will be recovered from
future taxable income and to the extent we believe that recovery is not likely,
we must establish a valuation allowance. To the extent we establish a valuation
allowance or increase this allowance in a period, we must include an expense
within the tax provision in the consolidated statements of operations.

Significant management judgment is required in determining our provision for
income taxes, our deferred tax assets and liabilities and our valuation
allowance. Due to uncertainties related to our ability to utilize certain
deferred tax assets in future periods, we have recorded a partial valuation
allowance against our net deferred tax assets as of June 30, 2022 and
December 31, 2021. These assets primarily consist of foreign tax credits,
capital loss carryforwards and net operating loss carryforwards. Refer to Note 2
to the consolidated financial statements for additional information.
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In assessing the need for a valuation allowance, management has considered both
the positive and negative evidence available, including but not limited to,
estimates of future taxable income and related probabilities, estimates
surrounding the character of future income and the timing of realization,
consideration of the period over which our deferred tax assets may be
recoverable, our recent history of net income and prior history of losses,
projected future outcomes, industry and market trends and the nature of existing
deferred tax assets. In management's estimate, any positive indicators,
including forecasts of potential future profitability of our businesses, are
outweighed by the uncertainties surrounding our estimates and judgments of
potential future taxable income, primarily due to uncertainties surrounding the
timing of realization of future taxable income and the character of such income
in particular future periods (i.e. foreign or domestic). In the event that
actual results differ from these estimates or we adjust these estimates should
we believe we would be able to realize these deferred tax assets in the future,
an adjustment to the valuation allowance would increase income in the period
such determination was made.

Any changes in judgments, assumptions and estimates associated with our analysis of the need for a valuation allowance in future periods could materially affect our financial condition and results of operations in periods during from which these determinations are made.

Recent accounting pronouncements

See Note 2 to the consolidated financial statements included elsewhere herein.

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