Acacia Research ACTG Manufacturing Operations — Customer rebates

Deflecto utilizes the loss rate method in determining its lifetime expected credit losses on its receivables. This method is used for calculating an estimate of losses based primarily on Deflecto’s historical loss experience. In determining its loss rates, the Company evaluates information related to its historical losses, adjusted for current conditions and further adjusted for the period of time that can be reasonably forecasted. Qualitative and quantitative adjustments related to current conditions and the reasonable and supportable forecast period consider the following: past due receivables and the customer creditworthiness on the level of estimated credit losses in the existing receivables. Deflecto’s allowance for expected credit losses and discounts was $492,000 and $683,000 as of June 30, 2026 and December 31, 2025, respectively. Customer rebate reserves were $3.3 million and $3.4 million as of June 30, 2026 and December 31, 2025, respectively. Deflecto’s allowance for expected credit losses and discounts and customer rebates are reported as a reduction of accounts receivable.