ACACIA RESEARCH CORPACTG
ACACIA RESEARCH CORP Fair Value Disclosure
FAIR VALUE MEASUREMENTS
U.S. GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows:
(i)Level 1 - Observable Inputs: Quoted prices in active markets for identical investments;
(ii)Level 2 - Pricing Models with Significant Observable Inputs: Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.; and
(iii)Level 3 - Unobservable Inputs: Unobservable inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Management estimates include certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs, including the entity’s own assumptions in determining the fair value of derivatives and certain investments.
Whenever possible, the Company is required to use observable market inputs (Level 1) when measuring fair value. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured. In certain cases, inputs used to measure fair value may fall into different levels of the fair value hierarchy.
The Company held the following types of financial instruments at fair value on a recurring basis as of December 31, 2025 and 2024:
Equity Securities. Equity securities includes investments in public company common stock and are recorded at fair value based on the quoted market price of each share on the valuation date. The fair value of these securities are within Level 1 of the valuation hierarchy. Equity investments that do not have regular market pricing, but for which fair value can be determined based on other data values or market prices, are recorded at fair value within Level 2 of the valuation hierarchy.
Commodity Derivative Instruments. Commodity derivative instruments are recorded at fair value using industry standard models using assumptions and inputs which are substantially observable in active markets throughout the full term of the instruments. These include market price curves, quoted market prices in active markets, credit risk adjustments, implied market volatility and discount factors. The fair value of these instruments are within Level 2 of the valuation hierarchy. During 2024, Benchmark executed derivative contracts with counterparties and also executed an International Swap Dealers Association Master Agreement (“ISDA”) with its counterparties. The net aggregate fair value of the open commodity derivatives assets was $5.8 million and $2.1 million as of December 31, 2025 and 2024, respectively and was recorded in prepaid expenses and other current assets and other non-current assets, in the consolidated balance sheet (refer to Note 2 for additional information).
Bitcoin option contracts. Bitcoin option contracts includes Bitcoin exchange-traded options that are recorded at fair value based on the quoted market price of each option on the valuation date. The fair value of these options are within Level 1 of the valuation hierarchy.
Financial assets and liabilities measured at fair value on a recurring basis were as follows:
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| December 31, 2025: | |||||||||||||||||||||||
| Equity securities | $ | 17,551 | $ | — | $ | — | $ | 17,551 | |||||||||||||||
| Commodity derivative instruments | $ | — | $ | 5,832 | $ | — | $ | 5,832 | |||||||||||||||
| Bitcoin option contracts | 162 | — | — | 162 | |||||||||||||||||||
| December 31, 2024: | |||||||||||||||||||||||
| Equity securities | $ | 23,135 | $ | — | $ | — | $ | 23,135 | |||||||||||||||
| Commodity derivative instruments | $ | — | $ | 2,114 | $ | — | $ | 2,114 | |||||||||||||||
Information about financial instruments that are eligible for offset in the consolidated balance sheets were as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Commodity derivative assets | |||||||||||
| Gross amount of recognized assets | $ | 6,229 | $ | 3,220 | |||||||
| Gross amount offset on the balance sheet | (397) | (1,106) | |||||||||
| Net amount of assets on the balance sheet | $ | 5,832 | $ | 2,114 | |||||||
| Commodity derivative liabilities | |||||||||||
| Gross amount of recognized liabilities | $ | 397 | $ | 1,106 | |||||||
| Gross amount offset on the balance sheet | (397) | (1,106) | |||||||||
| Net amount of liabilities on the balance sheet | $ | — | $ | — | |||||||
Benchmark’s realized derivative gain was $3.7 million and $2.6 million for the years ended December 31, 2025 and 2024, respectively. Benchmark’s unrealized derivative gain was $3.7 million for the year ended December 31, 2025 and unrealized derivative loss was $610,000 for the year ended December 31, 2024, respectively.
In accordance with U.S. GAAP, from time to time, the Company measures certain assets and liabilities at fair value on a nonrecurring basis. Assets and liabilities accounted for on a non-recurring basis include asset retirement obligations incurred by the drilling of new oil and natural gas wells, the change in estimated asset retirement obligations, and the carrying value of proved and unproved oil and natural gas properties following impairment. The fair value of the asset retirement obligations is measured using valuation techniques consistent with the income approach, which converts future cash flows to a single discounted amount and significant inputs include the estimated plug and abandonment cost per well, the estimated life per well and the credit-adjusted risk-free rate. The fair value of the asset retirement obligations are within Level 3 of the fair value hierarchy. In connection with our Revolution Transaction, the fair value of the oil and gas properties was determined based upon estimated future discounted cash flow, a Level 3 input, using estimated production which we reasonably expect, and estimated prices adjusted for differentials. Unobservable inputs include estimated future oil and natural gas production, prices, operating and development costs and a discount rate of 12%, all Level 3 inputs within the fair value hierarchy. The Company also reviews the carrying value of equity securities without readily determinable fair value, equity method investments and patents on a quarterly basis for indications of impairment, and other long-lived assets at least annually. When indications of potential impairment are identified, the Company may be required to determine the fair value of those assets and record an adjustment for the carrying amount in excess of the fair value determined. Any fair value determination would be based on valuation approaches, which are appropriate under the circumstances and utilize Level 2 and Level 3 measurements as required. In connection with our Deflecto acquisition, nonrecurring Level 3 valuations were performed for certain intangible assets, refer to Note 3 for additional information.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 17, 2023 | |
| 2020 | Mar 29, 2021 | |
| 2019 | Mar 16, 2020 | |
| 2018 | Mar 15, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.