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) Balance as of January 1, 2024 was $16.0 million.

(2) Balance as of January 1, 2024 was $9.8 million.

(3) 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) Includes 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 6.5% and 16.6% as of December 31, 2025. Pre-owned vehicle floor plan facilities are based on prime or SOFR and ranged between 7.0% and 8.3% as of December 31, 2025. The aggregate capacity to finance our inventory under the new and pre-owned vehicle floor plan facilities as of December 31, 2025 was $341.5 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 powersports reporting unit.

(2) Attributed to the vehicle transportation services reporting unit.

NOTE 7 –ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

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

NOTE 8 –LONG-TERM DEBT

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

(1) Interest payments are required quarterly. Fair value was $215.7 million and $243.8 million as of December 31, 2025 and 2024, respectively. Interest rates were 11.9% and 13.6% as of December 31, 2025 and 2024, respectively.

(2) Fair value was $8.7 million as of December 31, 2025. See Note 15 for a description of the Subordinated Loans, which are with related parties.

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

As of December 31, 2025, 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 3.00%, plus an applicable margin of 7.75%, or (b) a fluctuating adjusted base rate in effect from time to time, plus an applicable margin of 6.75%. At the Company’s option,1.0% of interest may be paid in kind. Interest expense was $36.8 million in 2025 and $42.1 million in 2024 and included amortization of debt discount and deferred issuance costs of $8.7 million and $7.5 million, respectively.

Obligations under the Credit Agreement are secured by a first-priority lien on substantially all of the assets of the Company and its 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.

On August 10, 2025, the parties to the Credit Agreement executed Amendment No. 10 to the Credit Agreement (“Amendment No. 10”), which, among other things: (i) extended the maturity date of the Credit Agreement from August 31, 2026 to September 30, 2027; (ii) required the Company to prepay $20.0 million of the borrowings under the Credit Agreement (“Senior Loans”) using the proceeds of the Subordinated Loans, as defined in Note 15, and other funds; (iii) reduced the interest rate applicable to the Senior Loans by 0.5% per annum, which is reflected in the interest rates described above; (iv) added certain reporting covenants; (v) added milestones requiring the Company to commence a refinancing process prior to September 30, 2026 and complete the refinancing on or prior to November 30, 2026, and provided that failure to achieve such milestones will be an event of default under the Credit Agreement unless, prior to such milestone dates the Company (a) reduces the outstanding principal amount of the Senior Loans to the lesser of (1) $150 million and (2)3.25 x Consolidated EBITDA or (b) both (1) forms a special committee of the Company’s board of directors (the “Board”) to negotiate and recommend to the Board for approval any strategic alternatives, including any recapitalization, refinancing, any transaction resulting in a change of control or a sale of all or substantially all assets of the Company and its subsidiaries and (2) engages an investment banker or financial advisor acceptable to the Administrative Agent to evaluate and execute the strategic alternatives of the Company, and (vi) modified the financial maintenance covenants in the Credit Agreement. In connection with

Amendment No. 10, the Company will pay a customary exit fee equal to $2.1 million, representing 1.0% of the aggregate outstanding principal amount due under the Credit Agreement at the time of the execution of the amendment after giving effect to the aforementioned prepayment of borrowings, that is due at the maturity of the Credit Agreement or thee payoff date of all obligations under the Credit Agreement. Due to the extension of the maturity date and the reduced rate described above, the new effective interest rate for borrowings under the Credit Agreement is lower than it was prior to the debt modification.

Pursuant to Amendment No. 10, on August 28, 2025, the Company amended and restated warrants, dated August 14, 2023, between the Company and each applicable Lender to (i) reset the strike price at a 25% premium to the 30-day post-announcement volume weighted average trading price of the Company Class B common stock and (ii) extended the term of such warrants to August 10, 2030. See Note 10.

The Company is subject to certain maximum leverage ratio financial covenants and minimum liquidity financial covenants under the Credit Agreement. The Company was in compliance with all financial and non-financial covenants in the Credit Agreement at December 31, 2025 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.

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):

(1) Net of sublease income of $2.1 million in 2025 and $0.6 million in 2024.

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, 2025:

2024 Sale-Leaseback Transaction

In December 2024, the Company entered into a sale-leaseback transaction with a related 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 transaction. The assets sold were removed from the Company’s records, and we recognize rent expense related to the leased assets. The ROU asset and liabilities related to this lease are on our consolidated balance sheets.

NOTE 10 –STOCKHOLDERS' EQUITY (DEFICIT)

Stock-Based Compensation

The Company has a stockholder-approved stock incentive plan (as amended, the “Plan”) allowing for the issuance of restricted stock units (“RSUs”), stock options (“Options”), and other equity awards (collectively, “Awards”). As of December 31, 2025, there were 5,791,461 shares of Class B common stock that had been authorized for issuance under the Plan, of which 653,740 shares remained available for future issuance. RSUs and Options vest either based on continued service by the recipient of the Award to the Company over a period of up tothree years or by achievement of a performance target. Options generally expireten years after the grant date. Unamortized stock-based compensation expense as of December 31, 2025 was $3.6 million, which is expected to be amortized over a weighted-average period of 2.0 years.

Stock-based compensation expense was as follows:

Restricted Stock Units

RSU activity was as follows:

Valuation of Restricted Stock Units with Stock Performance Hurdles

The assumptions used to estimate the fair value of grants with market performance hurdles 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 20 days for the 2025 grants and 30 days for the 2024 grants (in addition to recipient remaining an employee and other terms of the grant agreements).

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

No stock options were exercised during 2025 or 2024. 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 stockholders 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 stockholders. 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 to pay a portion of the amount due under the 6.75% convertible senior notes on January 2, 2025.

Class B 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 that was subject to adjustment based on the terms of the Credit Agreement (“Old Warrants”). The parties to the Credit Agreement executed Amendment No. 10 on August 10, 2025. As required by Amendment No. 10, the Company amended these warrants and extended their term to August 10, 2030 (“New Warrants”). The strike price of the New Warrants was set at $4.02 following the measurement period and is subject to certain adjustments as defined in the Credit Agreement. These warrants were classified as equity, and the incremental fair value of the New Warrants, which was recorded as additional paid-in capital, was determined to be $1.1 million higher than the Old Warrants using the Black-Scholes option pricing model with the following assumptions as of the valuation date:

(1) The strike price for the new warrants was estimated using a Monte Carlo simulation, as the actual exercise price was not yet known as of the valuation date (i.e., the lesser of $11.09 or a 25% premium to the volume-weighted average price of the Company’s Class B common stock over trading days that extended beyond the valuation date).

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, 2025 or 2024.

NOTE 11 –SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

NOTE 12 –INCOME TAXES

The components of the loss before income taxes were as follows:

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

A reconciliation of the statutory U.S. federal income tax rate of 21.0% to our effective income tax rate follows:

For both 2025 and 2024, the state and local effective tax rate was primarily driven by operations in Texas, which accounted for more than 50% of the total state and local tax impact.

The nature, effect, and underlying causes of the material items within the state and local category primarily relate to the apportionment of income based on the specific sales and payroll factors within the significant jurisdictions, as well as certain state-specific tax credits and incentives.

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, 2025 and 2024, 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, 2025 and 2024, the Company has federal net operating loss carryforwards of $139.2 million and $140.2 million, all of which were generated in years beginning in 2018 and can be carried forward indefinitely. As of December 31, 2025 and 2024, the Company had state net operating loss carryforwards of $85.7 million and $100.2 million, respectively, 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.

The components of income taxes paid (received) were as follows:

Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions:

We do not have unrecognized tax benefits related to uncertain tax positions. Tax years 2021 through 2024 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:

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 $11.1 million in 2025 and $15.4 million in 2024 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 certain of the Company’s floor plan lines.

NOTE 15 –RELATED PARTY TRANSACTIONS

Subordinated Loans with Related Parties

On August 25, 2025, the Company issued separate unsecured subordinated promissory notes (collectively, the “Subordinated Loans”) payable to each of SH Capital Partners, L.P. (an entity controlled by Mark Cohen, who is a holder of the Company’s Class B common stock and a member of the Board), Face Canyon LLC (an entity controlled by William Coulter), and Mark Tkach (collectively, the “Lenders”) to evidence $3.3 million of unsecured subordinated loans made by each Lender to the Company. William Coulter (“Coulter”) and Mark Tkach (“Tkach”) are both directors and former executive officers of the Company and holders of the Company’s Class B common stock. The Company used the aggregate gross proceeds of the Subordinated Loans, or $10.0 million, to prepay outstanding principal amounts owed under the Credit Agreement (as defined in Note 8), which was a requirement set forth in Amendment No. 10 (as defined in Note 8). The Subordinated Loans bear interest at a rate of 13.0% per annum, payable semi-annually in arrears on the last business day of each February and August, beginning February 27, 2026. Interest is in-kind and capitalized to the principal balance of the Subordinated Loans. Each Subordinated Loan matures on August 31, 2028, unless earlier repaid or accelerated in accordance with its terms.

In the event a Lender participates in a Specified Equity Offering (as defined in the Subordinated Loan), the Company is required to use the net cash proceeds received from such Lender in such Specified Equity Offering to make a mandatory prepayment of such Lender’s Subordinated Loan.

Each Subordinated Loan is guaranteed on a joint and several basis by the Company’s subsidiaries that are guarantors under the Credit Agreement (each, a “Subordinated Guaranty”). Subject to the terms of the corresponding Subordinated Loan, each Subordinated Guaranty is irrevocable and unconditional and will remain in effect until all obligations under such Subordinated Note are satisfied.

The Subordinated Loans are contractually subordinated in right of payment to the loans outstanding under the Company’s Credit Agreement. Interest expense on the Subordinated Loans was $0.5 million in 2025.

Leases

As of December 31, 2025, the Company has 26 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 leases generally have 20-year terms, most of which commenced on September 1, 2021, with base rent increasing 2% annually. Two of the leases were entered into in 2024, one of which has a purchase option. The aggregate annual rent payments for these leases was approximately $16.9 million in 2025. See Note 9 for the ROU assets and liabilities associated with the related party leases.

Termination Payment Associated with Related Party Lease

In September 2025, the Company paid a $0.5 million fee that was associated with the termination of a lease for a property that was no longer being used in operations. The lease was with an entity controlled by Coulter and Tkach, as the landlord.

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 Tkach that provides up to $16.0 million of revolving availability that bears interest based on SOFR plus 5.0%. The amounts owed by the Company to the related parties under this facility were $6.2 million and $15.9 million as of December 31, 2025 and 2024, respectively.

Employment of Immediate Family Members

Mr. Tkach hastwo immediate family members that were employed by the Company during the past two years: one as an executive vice president (“EVP”) and one as a commissioned sales representative. The EVP received aggregate gross pay, including grants of restricted stock, of $0.5 million in 2025 and $0.4 million in 2024, including the income from vested RSUs under the Plan. The second family member received aggregate gross pay of $0.3 million in 2025 and $0.1 million in 2024.

Sale of Property

On December 27, 2024, the Company sold a certain dealership property in Florida to an entity controlled by Coulter and Tkach, for $4.0 million, which was deemed to be at fair market value. The Company then entered into an operating lease with an entity controlled by Coulter and Tkach commencing on December 28, 2024 with initial annual base rent of $0.3 million and is included in “Leases” above.

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, (together with its affiliates, “Stone House” or “Standby Purchaser”), and Coulter and Tkach (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.

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 reportable segment, which excludes impairment charges, loss (gain) on the sale of assets, and 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 statements of operations. Accordingly, the segment operating income is shown below with a reconciliation to operating loss as reported on the consolidated statements 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 hadtwo reportable segments for 2025 and 2024: (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, which ceased operations at the end of 2025, provided 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 required. The operating income for the powersports segment includes operating overhead and corporate costs. The most significant costs for both segments are their cost of revenue and compensation-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 $0.8 million that was in Vehicle Transportation Services.

(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.

NOTE 17 –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, 2025 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. 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 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 $9.4 million. We do not believe that it is probable that any outstanding letters of credit will be drawn upon.