Acacia(ACTG) - 2023 Q2 - Quarterly Report

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section highlights forward-looking statements, their inherent risks, and the safe harbor provisions under the Private Securities Litigation Reform Act of 1995 - This Quarterly Report contains forward-looking statements that involve risks and uncertainties, intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995[14] - Forward-looking statements cover business, operating, development, investment and finance strategies, relationship with Starboard Value LP, acquisition activities, financial results, intellectual property licensing, capital expenditures, earnings, litigation, regulatory matters, markets, liquidity, and accounting[14] - Key risks include inability to acquire or integrate businesses, employee retention, cybersecurity incidents, fluctuations in legal expenses, patent invalidity, supply chain disruptions, and external events like political unrest or pandemics[14] PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Acacia Research Corporation for the three and six months ended June 30, 2023, and 2022, including balance sheets, statements of operations, statements of equity, and cash flows, along with comprehensive notes detailing accounting policies, investments, liabilities, and segment information Condensed Consolidated Balance Sheets | Metric | June 30, 2023 (Unaudited) (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :--------------------------------------- | :------------------------------------ | | ASSETS | | | | Total current assets | $485,792 | $427,985 | | Total assets | $534,708 | $482,928 | | LIABILITIES & EQUITY | | | | Total current liabilities | $77,806 | $87,209 | | Total liabilities | $176,121 | $193,682 | | Total stockholders' equity | $335,433 | $269,322 | Unaudited Condensed Consolidated Statements of Operations | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $7,904 | $16,717 | $22,707 | $30,224 | | Operating loss | $(12,529) | $(5,670) | $(21,853) | $(14,178) | | Loss before income taxes | $(20,424) | $(47,690) | $(8,494) | $(135,834) | | Net loss attributable to Acacia Research Corporation | $(18,779) | $(61,503) | $(9,332) | $(134,769) | | Basic net loss per common share | $(0.36) | $(1.44) | $(0.26) | $(3.06) | | Diluted net loss per common share | $(0.36) | $(1.44) | $(0.26) | $(3.06) | - Total revenues decreased by 53% for the three months ended June 30, 2023, and by 25% for the six months ended June 30, 2023, primarily due to decreases in both Intellectual Property Operations and Industrial Operations revenues[27][237][246] - Net loss attributable to Acacia Research Corporation significantly decreased by 69% for the three months and 93% for the six months ended June 30, 2023, compared to the prior year, largely driven by changes in fair value of equity securities and warrants[27][237][246] Unaudited Condensed Consolidated Statements of Series A Redeemable Convertible Preferred Stock and Stockholders' Equity | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Series A Redeemable Convertible Preferred Stock | $23,154 | $19,924 | | Common Stock | $58 | $43 | | Treasury Stock | $(98,258) | $(98,258) | | Additional Paid-in Capital | $738,712 | $663,284 | | Accumulated Deficit | $(316,121) | $(306,789) | | Total Stockholders' Equity | $335,433 | $269,322 | - Total stockholders' equity increased from $269.3 million at December 31, 2022, to $335.4 million at June 30, 2023, primarily due to an increase in additional paid-in capital from the Rights Offering and stock option exercises[22][34] - The accumulated deficit increased from $(306.8) million to $(316.1) million during the six months ended June 30, 2023, reflecting the net loss for the period[22][34] Unaudited Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(19,122) | $(17,553) | | Net cash provided by investing activities | $9,218 | $78,547 | | Net cash provided by (used in) financing activities | $77,322 | $(106,410) | | Increase (decrease) in cash and cash equivalents | $67,402 | $(45,416) | | Cash and cash equivalents, ending | $355,188 | $263,945 | - Cash flows from financing activities significantly increased to $77.3 million provided in H1 2023, compared to $106.4 million used in H1 2022, primarily due to proceeds from the Rights Offering[38][286] - Net cash provided by investing activities decreased from $78.5 million in H1 2022 to $9.2 million in H1 2023, mainly due to lower net cash inflows from equity securities transactions[38][284] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations of the company's significant accounting policies, financial statement components, and related party transactions 1. DESCRIPTION OF BUSINESS This note describes the company's opportunistic capital platform strategy, its relationship with Starboard Value, LP, and its two primary business segments - Acacia Research Corporation operates as an opportunistic capital platform, acquiring businesses based on public/private market valuation differentials, focusing on companies with market values under $2 billion, particularly $1 billion or less[41] - The company maintains a strategic relationship with Starboard Value, LP, which provides access to industry expertise and assistance in sourcing and evaluating acquisition opportunities[43] - The company's business segments include Intellectual Property Operations (