Company: ACTG
Filing Date: 2025-04-09
Form Type: DEF 14A
Source: 0000934549-25-000014
Chunk: 42

Company: ACACIA RESEARCH CORP
Filing Date: 2025-04-09
Form: DEF 14A
Chunk 42
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 by our stockholders, would become effective upon its filing with the Secretary of State of the State of Delaware, which we would expect to do as soon as practicable after the Charter Amendment Proposal is adopted by our stockholders. Even if adopted by the stockholders, the Board retains the authority to abandon the A&R Charter at any time prior to the filing and effectiveness of the A&R Charter with the Secretary of State of the State of Delaware, without any further action by the stockholders of the Company, if the Board determines, in its sole discretion, that the A&R Charter is no longer in the best interests of the Company and its stockholders.

#### Background
Our past operations generated significant NOLs. Under federal tax laws, we generally can use our NOLs (i) generated after 2017 to offset up to 80% of our future taxable income generated each year and (ii) generated prior to 2018 to offset 100% of our taxable income. NOLs generated after 2017 can be carried forward by us indefinitely and do not expire, while NOLs generated prior to 2018 can be carried forward for up to 20 years, at which point they “expire” for such purposes. We believe our NOLs are a very valuable asset. At December 31, 2024, we had U.S. federal NOLs totaling approximately $104.0 million.

Our ability to utilize our NOLs to offset future taxable income may be significantly limited if we experience an “ownership change,” as determined under Section 382 of the Internal Revenue Code (“Section 382”). Under Section 382, an “ownership change” occurs if a stockholder or a group of stockholders that is deemed to own (directly, indirectly and under certain constructive ownership rules) at least 5% of our common stock increases its ownership of our stock by more than 50 percentage points over its lowest ownership percentage within a rolling three-year period. If an ownership change occurs, Section 382 would impose an annual limit on the amount of our NOLs that we can use to offset taxable income equal to (a) the product of the total value of our outstanding equity immediately prior to the ownership change (reduced by certain items specified in Section 382) and the federal long-term tax-exempt interest rate in effect for the month of the ownership change, plus (b) our “recognized built-in gains” as defined in and determined under Section 382. This limitation could significantly limit or