RideNow Group, Inc.

NOTE 2 –REVENUE

Revenue is disaggregated by major lines of goods and services as follows:

NOTE 3 –ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following as of December 31:

(1) Primarily amounts due from manufacturer for holdbacks, rebates, co-op advertising, warranty and supplies returns.

NOTE 4 –INVENTORY AND VEHICLE FLOOR PLAN NOTES PAYABLE

Inventory, net of reserves, consisted of the following as of December 31:

New inventory costs are generally reduced by manufacturer holdbacks, incentives, floor plan assistance, and non-reimbursement-based manufacturer advertising rebates, while the related vehicle floor plan payables shown below are reflective of the gross cost of the powersports vehicle. The vehicle floor plan payables may also be higher than the inventory cost due to the timing of the sale of a vehicle and payment of the related liability. Vehicle floor plan facilities are due on demand, but in the case of new vehicle inventories, are generally paid within a few business days after the related vehicles are sold.

Vehicle Floor Plan Notes Payable

Floor plan notes payable consisted of the following as of December 31:

(1) Balance at December 31, 2023 included borrowings under a floor plan line for pre-owned inventory with J. P. Morgan that was paid off on October 23, 2024 and discharged on November 15, 2024. Balance as of December 31, 2024 included a related-party pre-owned inventory floor plan line (see Note 15).

The Company relies on its floor plan vehicle financing credit lines (“Floor Plan Lines”) to finance new and pre-owned powersports vehicle inventory at its retail locations. Inventory serves as collateral under floor plan notes payable borrowings. The inventory balance in its entirety also serves as collateral under the Credit Agreement and the Indenture (both as defined in Note 8). Floor plan notes payable (trade) reflects amounts borrowed to finance the purchase of specific new and, to a lesser extent, pre-owned powersports vehicle inventory with corresponding manufacturers' captive finance subsidiaries (“trade lenders”). Floor plan notes payable (non-trade) represents amounts borrowed to finance the purchase of specific new and pre-owned powersports vehicle inventories with non-trade lenders. Changes in vehicle floor plan notes payable (trade) are reported as operating cash flows, and changes in floor plan notes payable (non-trade) are reported as financing cash flows in the accompanying Consolidated Statements of Cash Flows.

New vehicle floor plan facilities generally utilize SOFR or ADB (Average Daily Balance)-based interest rates and generally ranged between 8.0% and 17.2% as of December 31, 2024. Pre-owned vehicle floor plan facilities are based on prime or SOFR and ranged between 8.5% and 9.5% as of December 31, 2024. The aggregate capacity to finance our inventory under the new and pre-owned vehicle floor plan facilities as of December 31, 2024 was $356.1 million.

NOTE 5 –PROPERTY AND EQUIPMENT, NET

The following table summarizes property and equipment, net, as of December 31:

NOTE 6 –FRANCHISE RIGHTS AND OTHER INTANGIBLE ASSETS

Franchise rights and other intangible assets as of December 31 were comprised of the following:

(1) Attributed to the Company’s powersports reporting unit. Net of accumulated impairment of $182.0 million and $142.7 million as of December 31, 2024 and 2023, respectively.

(2) Primarily consists of non-compete agreements, which will become fully amortized in 2025.

There was no change in the carrying amount of goodwill in 2024. The following is a summary of the changes in the carrying amount of goodwill by reporting unit in 2023:

NOTE 7 –ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

The following table summarizes accounts payable and other current liabilities as of December 31:

(1) Includes $0.3 million as of December 31, 2023 that was reclassified from current liabilities of discontinued operations.

NOTE 8 –LONG-TERM DEBT

Long-term debt consisted of the following as of December 31:

(1) Interest payments are required quarterly. Fair value as of December 31, 2024 was $243.8 million.

(2) This debt was fully repaid on January 2, 2025. Fair value at December 31, 2024 was $40.0 million, which is essentially principal plus accrued interest.

(3) This debt was fully repaid on January 2, 2024. Interest rate at December 31, 2023 was 12.8%.

(4) Carrying value approximates fair value due to the nature of this debt.

As of December 31, 2024, principal payments on our long-term debt were due as follows ($ in millions):

Term Loan Credit Agreement

The Company has a term loan credit agreement (as amended, the “Credit Agreement”) among the Company, as borrower, the lenders party thereto, and Oaktree Fund Administration, LLC, (“Oaktree”) as administrative agent and collateral agent. Borrowings under the Credit Agreement bear interest at a rate per annum equal, at the Company’s option, to either (a) SOFR with a floor of 1.00%, plus an applicable margin of 8.25%, or (b) a fluctuating adjusted base rate in effect from time to time, plus an applicable margin of 7.25%, with an additional 0.50% interest that accrued from August 9, 2023 to December 31, 2024. At the Company’s option,1.0% of the regular interest and all of the additional 0.50% interest may be paid in kind. Interest expense was $42.1 million in 2024 and $53.6 million in 2023 and included amortization of debt discount and deferred issuance costs of $7.5 million and $7.3 million, respectively. The interest rate on December 31, 2024, including the additional 0.50% interest, was 13.60%.

Obligations under the Credit Agreement are secured by a first-priority lien on substantially all of the assets of the Company and its domestic wholly owned subsidiaries (the “Subsidiary Guarantors”), although certain assets of the Company and Subsidiary Guarantors are subject to a first-priority lien in favor of floor plan lenders, and such liens and priority are subject to certain other exceptions. The Subsidiary Guarantors also guarantee the obligations of the Company under the Credit Agreement.

The Company is subject to certain leverage ratio financial covenants and liquidity covenants under the Credit Agreement. The Company was in compliance with all financial and non-financial covenants with the Credit Agreement at December 31, 2024 and has classified obligations under the Credit Agreement as a non-current liability.

6.75% Convertible Senior Notes

The 6.75% convertible senior notes (the “Notes”) were outstanding pursuant to an Indenture (the “Indenture”), by and between the Company and Wilmington Trust, National Association as the Trustee and collateral agent for the Trustee and the holders of the Notes (in such capacity, the “Indenture Collateral Agent”). The Indenture included customary representations, warranties and covenants by the Company and customary closing conditions. The Notes bore interest at 6.75% per annum that was payable semiannually on January 1 and July 1 of each year. The entire balance of the Notes is included in the current portion of long-term debt in the accompanying Consolidated Balance Sheet at December 31, 2024. The Notes matured on January 1, 2025 and were repaid on January 2, 2025, as permitted.

RumbleOn Finance Line of Credit

RumbleOn Finance (“ROF”) and an indirect subsidiary of RumbleOn had a consumer finance facility for ROF’s use in underwriting consumer loans. On December 29, 2023, the Company sold the loan portfolio held at RumbleOn Finance for $17.0 million and on January 2, 2024 repaid the outstanding balance of the loan from the cash proceeds received. The ROF loan amount was included in the current portion of long-term debt in the accompanying Consolidated Balance Sheet at December 31, 2023.

NOTE 9 –LEASES

Supplemental information related to leases as of December 31 was as follows ($ in millions):

The weighted-average remaining lease terms and discount rates for our operating and financing leases as of December 31 for the corresponding year were as follows:

The following table provides information related to the lease costs of finance and operating leases ($ in millions):

The following table provides information related to the portion of operating lease assets and liabilities which are attributable to related-party operating leases (described in Note 15) at December 31 ($ in millions):

Supplemental cash flow information related to leases was as follows:

The following table summarizes the future minimum payments for leases as of December 31, 2024:

Sale-Leaseback Transactions

2024 Sale-Leaseback

In December 2024, the Company entered into a sale-leaseback transaction with a related third party discussed in more detail in Note 15. Under these agreements, the Company soldone of its dealership properties, including land, buildings and certain improvements, at a price of $4.0 million and then leased the assets back from a related party through the 2024 sale-leaseback transaction.

The 2024 sale-leaseback met the criteria under GAAP for a true sale. The Company removed the assets from its records and will recognize rent expense related to the leased assets. The ROU asset and short- and long-term liabilities related to this lease are in the amounts reflected above for December 31, 2024 and are included on our consolidated balance sheet.

2023 Sale-Leaseback

In September 2023, the Company entered into a sale and master lease agreement (a “sale-leaseback”) with an unrelated third party. Under these agreements, the Company sold eight of its dealership properties, including land, buildings and certain improvements, at a price of $50.0 million and then leased the assets back through the sale-leaseback transaction.

Based on certain criteria and in accordance with GAAP, the transaction was accounted for as a failed sale-leaseback. As a result, the dealership property assets remain on the consolidated balance sheet at their historical net book value and are depreciated over the remaining term of the master lease. Afinancing obligation liability was recognized in the amount of the net proceeds received in the amount of $48.2 million. The Company does not recognize rent expense related to the leased assets. Instead, monthly rent payments under the master agreement (initially, $0.3 million, increasing annually by the lesser oftwo times the Consumer Price Index or 2% during the initial term and all option periods) will be recorded as interest expense and a reduction of the outstanding liability over the expected term of the lease.

NOTE 10 –STOCKHOLDERS' EQUITY

Stock-Based Compensation

The Company has a shareholder-approved stock incentive plan (as amended, the “Plan”) allowing for the issuance of restricted stock units (“RSUs”), stock options (“Options”), performance-based restricted stock units (“PSUs”), performance stock options (“Performance Options”), and other equity awards (collectively, “Awards”). As of December 31, 2024, there were 3,291,461 shares of Class B common stock that had been authorized for issuance under the Plan, of which 530,000 shares remained available for future issuance. RSUs and Options generally vest based on continued service by the recipient of the Award to the Company over a period of up tothree years. Options generally expireten years after the grant date.

Stock-based compensation expense was as follows:

Unamortized stock-based compensation expense as of December 31, 2024 and its amortization period follows:

(1) Forfeited as of January 13, 2025, due to the resignation of our CEO.

Restricted Stock Units

RSU activity, including PSUs, was as follows:

Valuation of PSUs and Performance Options with Stock Performance Hurdles

The assumptions used to estimate the fair value of grants with market performance hurdles, which were in the form of PSUs in 2024 and Performance Options in 2023 were as follows:

(1) In order for the award to vest, the value of Class B common stock must reach and remain at or above the threshold price for a period of 30 days (in addition to recipient remaining an employee).

The following is a summary of the Options (including Performance Options) activity:

No stock options were exercised during 2024 or 2023. The 825,000 Performance Options unvested as of the end of 2024 were forfeited effective January 13, 2025 due to the resignation of our former Chief Executive Officer (“CEO”).

2024 Rights Offering

The Company commenced a $10.0 million rights offering on November 26, 2024 that expired on December 12, 2024. To effect this rights offering, the Company’s existing shareholders were granted a dividend of subscription rights to purchase a designated number of shares of Class B common stock at a price of $4.18 per share. Pursuant to the terms of a standby purchase agreement with related party Stone House Capital Management, LLC, a Delaware limited liability company (“Stone House”), Stone House acquired $1.5 million of Class B common stock that had not been purchased by other existing shareholders. Net proceeds after costs incurred to effect the rights offering were $9.1 million. These net proceeds reflect $0.7 million of costs that were accrued and not yet paid as of December 31, 2024. The transaction resulted in the issuance of 2.4 million new shares of Class B common stock. The Company used cash proceeds from this rights offering on January 2, 2025 to pay a portion of the amount due under the 6.75% convertible senior notes.

2023 Rights Offering

The Company commenced a $100.0 million rights offering on November 13, 2023 that expired on December 5, 2023. as extended by the Company. To effect this rights offering, the Company’s existing shareholders were granted a dividend of subscription rights to purchase a designated number of shares of Class B common stock at a price of $5.50 per share. Pursuant to the terms of a standby purchase agreement with related parties Mark Tkach, William Coulter and StoneHouse and collectively, the “Standby Purchasers”, the Standby Purchasers acquired $18.9 million of Class B common stock that had not been purchased by other existing shareholders. Net proceeds after expenses incurred to effect the rights offering were $98.4 million, of which the Company used $50.0 million to pay down a portion of the outstanding term loan indebtedness under the Credit Agreement. The transaction resulted in the issuance of 18.2 million new shares of Class B common stock.

Common Stock Warrants

In 2023, the Company issued warrants to Oaktree and the lenders party to the Credit Agreement to purchase up to 1.2 million shares of Class B common stock at an exercise price of $12.00, which is subject to adjustment based on the terms of the Credit Agreement. The exercise price for these warrants was $11.09 and $11.25 as of December 31, 2024 and 2023, respectively. Such warrants are exercisable for up tofive years following the date of issuance. These warrants were classified as equity.

Preferred Stock

The Company has authorized 10 million shares of $0.001 par value preferred stock, with none issued or outstanding as of December 31, 2024 or 2023.

NOTE 11 –SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

NOTE 12 –INCOME TAXES

The components of the income tax provision (benefit) from continuing operations were as follows:

A reconciliation of the statutory U.S. Federal income tax rate of 21% to our effective income tax rate follows:

Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting and amounts used for tax purposes. The major components of deferred tax assets and liabilities are as follows:

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. As of December 31, 2024 and 2023, management has evaluated the realizability of the Company’s deferred tax assets and recorded a valuation allowance against the Company’s federal and state deferred tax assets, as it is more likely than not that the deferred tax assets will not be realized based on the evidence evaluated.

As of December 31, 2024 and 2023, the Company has federal net operating loss carryforwards of $140.2 million and $112.4 million, all of which were generated in years beginning in 2018 and can be carried forward indefinitely. As of December 31, 2024 and 2023, the Company had state net operating loss carryforwards of $100.2 million and $64.8 million, a portion of which begin to expire in 2029. As a result of various ownership changes, the Company’s federal and state net operating losses are subject to limitations under Internal Revenue Code Section 382.

We do not have unrecognized tax benefits related to uncertain tax positions. Tax years 2019 through 2023 remain open to examination by the U.S. federal and state taxing jurisdictions, as carryforward attributes generated in prior years may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have been or will be used in a future period. The Company files income tax returns in the U.S. federal and various state jurisdictions. There are currently no federal or state audits in progress.

NOTE 13 –LOSS PER SHARE

The following common stock equivalents were outstanding as of December 31 were excluded from the calculations of loss per share because they were anti-dilutive or because their market condition had not been met:

(1) On January 2, 2025 these notes were repaid and no shares were issued.

(2) Forfeited in January 2025.

NOTE 14 –SUPPLEMENTAL CASH FLOW INFORMATION

The following table includes supplemental cash flow information, including noncash investing and financing activity:

(1) For supplemental cash flow information related to leases, see Note 9.

Cash paid for interest included $15.4 million in 2024 and $12.5 million in 2023 of interest paid to finance floor plan inventory.

The following table provides a reconciliation of cash and restricted cash as of December 31 reported within the accompanying consolidated balance sheets that sum to the amounts shown in the accompanying consolidated statements of cash flows:

(1)Amounts included in restricted cash are primarily comprised of the deposits required under the Company’s various Floor Plan Lines and the RumbleOn Finance line of credit before it was repaid in January 2024.

NOTE 15 –RELATED PARTY TRANSACTIONS

Sale of Property

On December 27, 2024, the Company sold a certain dealership property in Florida to an entity controlled by William Coulter (“Coulter”) and Mark Tkach (“Tkach”), for $4.0 million, which was deemed to be at fair market value. Coulter and Tkach are both directors and former executive officers of the Company and holders of the Company’s Class B common stock. The Company then entered into an operating lease with an entity controlled by Coulter and Tkach commencing on December 28, 2024 with a 10-year term and initial annual base rent of $0.3 million that increases 2% per year. This lease does not contain a purchase option.

2024 Backstop Purchase

On December 19, 2024, under the terms of the Support and Standby Purchase Agreement dated as of November 26, 2024 (the “Support and Standby Purchase Agreement”), among the Company, Stone House Capital Management, LLC, which is a holder of Class B common stock and is managed by Mark Cohen, a director of the Company (together with its affiliates,

“Stone House” or “Standby Purchaser”), and Tkach and Coulter (collectively, the “Support Purchasers” and, together with the Standby Purchaser, the “Investors”), the Company issued and sold to the Standby Purchaser 349,333 shares of Class B common stock at an exercise price of $4.18 per share (the “Backstop Securities”) for an aggregate purchase price of approximately $1.5 million. The Backstop Securities represented the shares of the Company’s Class B common stock that remained unsubscribed for by the stockholders of the Company as of the expiration of the subscription period of its $10.0 million rights offering.

In connection with the Support and Standby Purchase Agreement, other than reimbursement of legal and other fees by the Company, the Investors did not receive any fees or other remuneration. On December 19, 2024, the Company entered into a registration rights agreement (the "Registration Rights Agreement") by and among the Company and the Investors granting the Investors registration rights in respect of certain shares of Class B common stock (the "Registrable Securities"), as required under the Support and Standby Purchase Agreement. Pursuant to the Registration Rights Agreement, the Company has agreed to file a resale registration statement for the Registrable Securities as soon as practicable after the execution of the Registration Rights Agreement, and to use commercially reasonable efforts to cause it to become effective as soon as possible after such filing, but in not event later than sixty (60) days after the date of such filing. The Registration Rights Agreement also contains indemnification and other provisions customary for transactions of this nature.

Pre-Owned Inventory Floor Plan Line

On December 6, 2024, the Company entered into a floor plan facility agreement with related parties Coulter, Tkach and Ridenow Management LLLP, an entity controlled by Coulter and/or Tkach that provides up to $16.0 million of revolving availability that bears interest based on SOFR plus 5.0%. As of December 31, 2024, the amount owed by the Company to the related parties under this facility was $15.9 million.

Leases

As of December 31, 2024, the Company has 27 leases of properties consisting primarily of dealerships and offices from related parties. Each related party lease is with a wholly owned subsidiary of the Company as the tenant and an entity controlled by Coulter and/or Tkach, as the landlord. The aggregate annual base rent payments for these leases was approximately $16.4 million in 2024, with base rent increasing 2% annually. Most of the leases commenced a 20-year term on September 1, 2021. Two of the leases were entered into in 2024, one with a 20-year term containing a purchase option and the other with a 10-year term. See Note 9 for the ROU assets and liabilities associated with the related party leases.

Employment of Immediate Family Members

Tkach hastwo immediate family members that are employed by the Company. One family member received aggregate gross pay of $0.4 million in 2024 and $0.5 million in 2023, including the income from vested RSUs under the Plan. The second family member received aggregate gross pay of $0.1 million in 2024 and $0.2 million in 2023. On January 13, 2025, the Board appointed Tkach’s son, Cameron Tkach, as Executive Vice President and Chief Operating Officer.

2023 Backstop Purchase

On December 8, 2023, under the terms of the Standby Purchase Agreement dated as of August 8, 2023, as amended (the “Purchase Agreement”), among the Company, Tkach, Coulter and Stone House (together with Tkach and Coulter, the “2023 Standby Purchasers”), the Company issued and sold to the 2023 Standby Purchasers 3,443,289 shares of Class B common stock at an exercise price of $5.50 per share (the “2023 Backstop Securities”) for an aggregate purchase price of approximately $18.9 million (the “2023 Backstop Purchase”). The 2023 Backstop Securities represent the shares of the Company’s Class B common stock that remained unsubscribed for by the shareholders of the Company as of the expiration of the subscription period of the Company’s 2023 rights offering. Coulter and Tkach are directors and former executive officers of the Company. Subject to the terms and conditions of the Purchase Agreement, the Company agreed to provide Stone House with the right to designate one nominee to the Board not later than 60 days after the date of the Purchase Agreement. Mark Cohen, managing member of Stone House, was appointed as a director pursuant to the board nomination right granted to Stone House under the Purchase Agreement.

Pursuant to the Purchase Agreement, the Company agreed to reimburse the 2023 Standby Purchasers for reasonable out-of-pocket costs and expenses incurred by them in connection with the negotiation, execution and delivery of the Purchase Agreement and the transactions contemplated thereby, including reasonable and documented fees and disbursements of counsel to each 2023 Standby Purchaser. The Company did not pay or give, directly or indirectly, any commission or other remuneration, including underwriting discounts and commissions, in connection with the issuance of the 2023 Backstop Securities.

Proxy Settlement Agreement and Related Transactions

In 2023, certain disputes arose between Tkach and Coulter, on the one hand, and the Company and the then serving members of the Company’s management, on the other hand, which led Tkach and Coulter to submit a notice of intent to make nominations and submit proposals for consideration at our 2023 annual stockholder meeting (the “2023 Annual Meeting”). In June 2023, the Company reached a binding settlement agreement with Coulter and Tkach relating to the matters in dispute, which was reflected in a binding term sheet pursuant to which the Company agreed to take certain corporate governance actions, including selecting Tkach as a director and naming Coulter as a Board observer until the 2023 Annual Meeting, and nominating Coulter for election as a director at the 2023 Annual Meeting, and, for a period of 90 days following execution of the Term Sheet, Coulter and Tkach agreed to vote as recommended by the Board at any annual meeting or special meeting of the Company’s stockholders, and to refrain from calling any special meetings of the Company’s stockholders, granting or soliciting proxies (other than to named proxies included in the Company’s proxy card for any stockholder meeting), or making any nominations or proposals at any annual or special meetings of stockholders. The Company also agreed to reimburse the reasonable, documented, out of pocket advisor fees and expenses incurred by Coulter and Tkach in connection with their proxy contest, which were estimated to be $2.5 million.

On June 30, 2023, the Company entered into a Cooperation Agreement with Coulter and Tkach, formalizing the parties’ agreements under the Term Sheet. Following Tkach’s initial term on the Board, the Cooperation Agreement provided for an appointment as a Board observer until such time as he was appointed as a director. Pursuant to the Cooperation Agreement, Coulter and Tkach have unrestricted access to attend and participate in any meetings of the Board or any committee thereof held while an observer to the Board. Substantially all of the terms of the Term Sheet and the Cooperation Agreement have been implemented, and the Company is not aware of any actions remain to be taken that are likely to lead to a material dispute among the parties as to the performance of their respective obligations thereunder.

Bidpath Software License

In 2022, the Company entered intotwo agreements with Bidpath Incorporated, a company owned by Adam Alexander, a former director of the Company, that provided the Company with (i) a perpetual, non-exclusive license to the then-current source code, as well as all future source code, of foundational technology for its inventory management platform, and (ii) support and maintenance services, all of which remained in development prior to Company’s termination of the contract effective August 31, 2023, pursuant to the contract’s terms.

In 2023, the Company paid Bidpath $0.2 million for support and maintenance services and recorded a $2.6 million impairment charge upon termination of the contract for the related costs that had been capitalized.

NOTE 16 -SEGMENT REPORTING

Business segments are components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) to assess operating performance and allocate resources. Our CODM is our Chairman and CEO. Our operations are organized by management into operating segments by line of business. The CODM evaluates performance and allocates resources based on the segment operating income (loss) of the operating segments, which excludes impairment charges, amortization and depreciation that are included in operating income (loss) on the consolidated statement of operations and includes floor plan interest expense, which is not included in operating income (loss) on the consolidated statement of operations. The CODM uses segment operating income in the annual budget and forecasting process, and considers budget-to-actual variances on a periodic basis.

We havetwo reportable segments: (1) powersports dealership group and (2) vehicle transportation services. The powersports dealership group segment is primarily comprised of powersports dealerships that sell new and pre-owned powersports vehicles; parts, service and accessories; and finance and inventory products for powersports vehicles sold. The vehicle transportation services segment provides nationwide transportation brokerage services between dealerships and auctions.

The powersports dealership group segment is significantly larger and requires more investment than our vehicle transportation services segment. The operating income of the powersports segment includes operating overhead and corporate costs. The most significant costs for both segments are their cost of revenue and compensation and related costs. Assets are not used for purposes of assessing performance or allocating resources and, as a result, such information has not been presented.

(1) Other operating expenses represent general and administrative expenses, advertising, professional fees, and stock-based compensation expenses. The detail for such expenses on a consolidated basis is included in Note 11 and is attributable to the Powersports Dealership Group except for $0.7 million that was in Vehicle Transportation Services.

(1) Revenue in 2023 included $0.4 million of revenue from the discontinued automotive segment. All other revenue is from external customers.

(2) Other operating expenses represent general and administrative expenses, advertising, professional fees, and stock-based compensation expenses. The detail for such expenses on a consolidated basis is included in Note 11 and is attributable to the Powersports Dealership Group except for $0.4 million that was in Vehicle Transportation Services.

NOTE 17 -DISCONTINUED OPERATIONS

As of June 30, 2023, the Company had completed all substantial activities pertaining to the wind down of its automotive business, which represented a strategic shift having a major effect on our operations and financial results. All direct revenues, costs, and expenses related to commercial operations of the wholesale automotive business are reported within loss from discontinued operations in the Consolidated Statements of Operations. No amounts for shared general and administrative operating support expenses were allocated to discontinued operations. Discontinued operations consisted of the following:

NOTE 18 –COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, the Company is involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, as of December 31, 2024 the Company does not believe that the ultimate resolution of any legal actions, either individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity, and capital resources.

Future litigation may be necessary to defend the Company by determining the scope, enforceability and validity of third-party proprietary rights or to establish its own proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

SEC Investigation

On June 28, 2024, the Company received a subpoena from the SEC requesting documents created during or relating to the period from January 1, 2021 through the date of the subpoena. The subpoena covers documents relating to, among other matters, the Company’s previously disclosed internal investigation into the use of Company resources by the Company’s former Chairman and CEO Marshall Chesrown; the Company’s review, consideration and approval, and the underlying terms of, related party transactions; employment, compensation, reimbursement and severance arrangements; and disclosures and communications to customers and investors regarding the company’s RideNow Cash Offer tool and certain of its technology. The Company is in the process of gathering and has commenced production of the requested documents.

The Company cannot predict the ultimate outcome or timing of the SEC investigation, what, if any, actions may be taken by the SEC or the effect that such actions may have on the business, prospects, operating results and financial condition of the Company.

Delaware Litigation

As previously disclosed, the Company began an investigation of certain allegations surrounding Marshall Chesrown’s use of Company resources in 2023. On June 11, 2023, Mr. Chesrown delivered a resignation letter to the Board in his capacity as CEO (the “CEO Resignation Letter”) and on July 7, 2023, Mr. Chesrown delivered a resignation letter to the Board in his capacity as a member of the Board of Directors (the “Board Resignation Letter” and together with the CEO Resignation Letter, the “Resignation Letters”). In the CEO Resignation Letter, Mr. Chesrown indicated that he was resigning for “good reason” under his employment agreement and described his disagreement with several recent corporate governance, disclosure and other actions taken by the Company, the Board and certain of its members. In the Board Resignation Letter, Mr. Chesrown further detailed his disagreement with actions taken by the Company, the Board and certain of its members and indicated his intent to pursue legal claims. The Company disagrees with the characterization of the allegations and assertions described in the Resignation Letters. The Company and Mr. Chesrown conducted a pre-suit mediation in October 2023, as required in his employment agreement, but did not resolve the matter. On March 13, 2024, Mr. Chesrown filed suit against the Company in Delaware Superior Court for the claims asserted in his Resignation Letters. Mr. Chesrown is seeking a declaratory judgment that he resigned with good reason, termination compensation damages in the amount of $7.5 million, general and reputational damages in the amount of $50.0 million, punitive damages, attorney's fees and litigation costs. The parties are now engaged in the initial stages of discovery. The subject matter of the litigation overlaps with the investigation begun by the Company in 2023. As of the date of this filing, the Company has not decided what further actions, if any, may be taken with regard to the investigation allegations. We intend to defend the litigation claims vigorously; however, we can provide no assurance regarding the outcome of this matter.

Letters of Credit

We issue letters of credit to secure the Company’s various financial obligations, including floor plan financing arrangements and insurance policy deductibles and other claims. The total amount of outstanding letters of credit was $7.4 million. We do not believe that it is probable that any outstanding letters of credit will be drawn upon.

NOTE 19 –SUBSEQUENT EVENTS

CEO Separation

On January 24, 2025, the Company entered into a separation agreement with Michael Kennedy (the “Separation Agreement”), whose employment as CEO of the Company ended as of January 13, 2025 (the “Separation Date”). Pursuant to the Separation Agreement and in accordance with the employment agreement entered into between the Company and Mr. Kennedy effective as of November 1, 2023, Mr. Kennedy will receive certain benefits over 12 months following the effective Separation Date and his Performance Options were forfeited.