Acacia Research Corporation

of the starboard warrants and embedded derivatives liabilities. The decrease in the liability is primarily due to the decrease in share price at March 31, 2023, compared to December 31, 2022, and a decrease in liability for the shortened term. At the beginning of 2023, our NOL totaled approximately $63.8 million, And since that time, we have effectively sheltered most of our gains. We will continue to evaluate the most efficient ways to maximize this asset. Turning to the balance sheet. Cash and equity securities at fair value sold 425 million at March 31st, 2023, compared to 349.4 million at December 31st, 2022. Equity securities without readily determinable fair value totaled $5.8 million at March 31, 2023, which amount was unchanged from December 31, 2022. Investment securities representing equity method investments net of non-controlling interest totaled $19.9 million at March 31, 2023, unchanged from December 31, 2022. All payments tied to milestones that have already been achieved and earned by Malin J1 through its interest in Viamet have been received. Acacia owns 64% of Malin J1, resulting in a beneficial ownership of 26% in Viamet. Total indebtedness, which represents the senior secured notes issued to Starboard, was $61.4 million at March 31, 2023. More detail on these results have been made available in the press release issued earlier today and in our quarterly report on Form 10-Q, which we will file with the SEC later today. Now for a review of our book value. Our GAAP book value at March 31st, 2023 was $355.7 million, or $6.07 for basic share, compared to $269.3 million or $6.19 per share at December 31st, 2022. This value reflects the rights offering that was completed in the first quarter. Total liabilities for warrants and convertible preferred stock to be eliminated upon exercise or expiration of all such warrants and convertible preferred stock was $85 million at March 31st, 2023. Our GAAP book value, as discussed today, includes the impact of all warrant and embedded derivative liabilities on our balance sheet, which in turn reflects the impact of the changes in the company's share price over time. As these liabilities would be extinguished upon exercise or expiration of these warrants and convertible preferred stock, we think it's more useful to consider our book value should all of these instruments be converted. the Starboard transaction should convert or extinguish these transactions with the final step being the exercise of our Series B warrants in Q3 of this year. The press release issued earlier today includes a detailed breakdown of our capital structure and the explanations of how our capital structure will change as a result of the ongoing steps of our process with Starboard. In summary, upon completion of the recapitalization transactions with Starboard. Starboard purchased 15 million new shares in the recently completed rights offering at $5.25 per share for total proceeds of $78.8 million in the first quarter of 2023. $35 million in face value of Series A preferred stock will be eliminated and 9.6 million shares of common stock would be issued at $3.65 per share in Q3 2023, following Acacia's annual meeting of stockholders. 61.4 million of liabilities attributable to the senior secured notes will be converted into common equity, and Starboard will invest an additional 55 million in cash related to the Series B warrant exercise. 31.5 million shares of common stock would be issued at $3.65 per share in Q2 and Q3 of 2023. Eighty-five million of total warrant and embedded derivative liabilities attributable the Series B warrants and Series A preferred stock would be eliminated in Q2 and Q3 of 2023. Acacia would pay Starboard a total of $66 million as consideration for early exercise of the Series B warrants and convertible preferred stock in Q3 of 2023. And Acacia will incur transaction costs associated with the negotiation and consummation of the recapitalization transactions. The expected impact of the completion of the recapitalization transactions would be an incremental 153 million in book value and an incremental 41.1 million of shares outstanding. Assuming such completion, pro forma book value would be 508.7 million and diluted shares outstanding would be 99.6 million. resulting in pro forma book value per share of $5.10 at March 31, 2023. Over the next few months, the transaction agreed to with Starboard will result in the streamlining of our capital structure and the strengthening of our capital base. This should be complete by the time we report our second quarter results in mid-August. We continue to believe that cash per share is an important metric for measuring our progress. As of March 31, 2023, our cash and equity securities per share stood at $7.26. On a pro forma basis, assuming completion of all phases of the Starboard transaction, our cash and equity securities per share would be approximately $4.12. With that, we'd be pleased to take your questions.

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