Beneficient

Previous wording

The following discussion and analysis should be read in conjunction with “Cautionary Note Regarding Forward-Looking Statements,” and the accompanying consolidated financial statements and notes thereto of Beneficient (f/k/a The Beneficient Company Group, L.P.) set forth in Part I, Item I of this Quarterly Report on Form 10-Q and our March 31, 2024 audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on July 9, 2024 (“Annual Report”). This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Except as otherwise required by the context, references to the “Company,” “Ben,” “we,” “us,” “our,” and “our operating subsidiaries,” are to Beneficient, a Nevada corporation and its consolidated subsidiaries (but excluding the Customer ExAlt Trusts as defined below). References to “BCG,” “Ben,” “we,” “us,” “our,” and similar terms, prior to the effective time of the Conversion, refer to the registrant when it was a Delaware limited partnership and such references following the effective time of the Conversion, refer to the registrant in its current corporate form as a Nevada corporation called “Beneficient.” All references to “Beneficient” refer solely to Beneficient, a Nevada corporation, “BCG” refer solely to The Beneficient Company Group, L.P., and all references to “BCH” refer solely to Beneficient Company Holdings, L.P., a subsidiary of BCG.

Current wording

The following discussion and analysis should be read in conjunction with “Cautionary Note Regarding Forward-Looking Statements,” and the accompanying consolidated financial statements and notes thereto of Beneficient (f/k/a The Beneficient Company Group, L.P.) set forth in Part I, Item I of this Quarterly Report on Form 10-Q and our March 31, 2024 audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on July 9, 2024 (“Annual Report”). This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Except as otherwise required by the context, references to the “Company,” “Ben,” “we,” “us,” “our,” and “our operating subsidiaries,” are to Beneficient, a Nevada corporation and its consolidated subsidiaries (but excluding the Customer ExAlt Trusts as defined below). References to “BCG,” “Ben,” “we,” “us,” “our,” and similar terms, prior to the effective time of the Conversion, refer to the registrant when it was a Delaware limited partnership and such references following the effective time of the Conversion, refer to the registrant in its current corporate form as a Nevada corporation called “Beneficient.” All references to “Beneficient” refer solely to Beneficient, a Nevada corporation, “BCG” refer solely to The Beneficient Company Group, L.P., and all references to “BCH” refer solely to Beneficient Company Holdings, L.P., a subsidiary of Beneficient.

Previous wording

Our Ben Liquidity and Ben Custody business segments, which relate to our current operating subsidiaries that are owned by the holders of equity in the Company (including BCH), recognize revenue through (i) interest income on ExAlt Loans made to the Customer ExAlt Trusts in connection with our liquidity transactions for Customers, (ii) fee income billed at closing, but recognized as revenue ratably over the expected life of the alternative asset, for each liquidity transaction with Customers for services including access to and use of the AltAccess platform, transfer of the alternative assets, and delivery of the consideration to the client, and (iii) recurring fee income recognized each period for providing services including trustee, custody, and trust administration of the Customer ExAlt Trusts while they hold investments. Ben Liquidity and Ben Custody revenue recognized for the three and six months ended September 30, 2024 and 2023 is as follows:

Current wording

Our Ben Liquidity and Ben Custody business segments, which relate to our current operating subsidiaries that are owned by the holders of equity in the Company (including BCH), recognize revenue through (i) interest income on ExAlt Loans made to the Customer ExAlt Trusts in connection with our liquidity transactions for Customers, (ii) fee income billed at closing, but recognized as revenue ratably over the expected life of the alternative asset, for each liquidity transaction with Customers for services including access to and use of the AltAccess platform, transfer of the alternative assets, and delivery of the consideration to the client, and (iii) recurring fee income recognized each period for providing services including trustee, custody, and trust administration of the Customer ExAlt Trusts while they hold investments. Ben Liquidity and Ben Custody revenue recognized for the three and nine months ended December 31, 2024 and 2023 is as follows:

Previous wording

a. Ben Liquidity recognized $12.0 million and $13.0 million in interest income during the three months ended September 30, 2024 and 2023, respectively. For the six months ended September 30, 2024 and 2023, Ben Liquidity recognized interest income of $22.8 million and $25.0 million, respectively.

Current wording

a. Ben Liquidity recognized $11.3 million and $11.3 million in interest income during the three months ended December 31, 2024 and 2023, respectively. For the nine months ended December 31, 2024 and 2023, Ben Liquidity recognized interest income of $34.1 million and $36.3 million, respectively.

Previous wording

b. Ben Custody recognized $5.4 million and $6.5 million in trust services and administration revenues during the three months ended September 30, 2024 and 2023, respectively, comprised of both the fee income billed at the closing of the transactions that is being amortized into revenue and the recurring fee income billed during the periods. For the six months ended September 30, 2024 and 2023, Ben Custody recognized trust services and administration revenues of $10.8 million and$13.1 million, respectively, comprised of both the fee income billed at the closing of the transactions that is being amortized into revenue and the recurring fee income billed during the periods.

Current wording

b. Ben Custody recognized $5.4 million and $5.9 million in trust services and administration revenues during the three months ended December 31, 2024 and 2023, respectively, comprised of both the fee income billed at the closing of the transactions that is being amortized into revenue and the recurring fee income billed during the periods. For the nine months ended December 31, 2024 and 2023, Ben Custody recognized trust services and administration revenues of $16.2 million and$19.0 million, respectively, comprised of both the fee income billed at the closing of the transactions that is being amortized into revenue and the recurring fee income billed during the periods.

Previous wording

Accounts (such redesignated portion, the “Preferred A.0 Non-Redeemable Accounts”) and (ii) the remaining fifty percent (50%) of the capital account balances in the Preferred A.0 Accounts to remain redeemable (such remaining Preferred A.0 Accounts being the “Preferred A.0 Redeemable Accounts”), with the amendment and redesignation being applicable to all holders of the Preferred A.0 Accounts (the foregoing being referred to as the “Redesignation”). As a result of the Redesignation, approximately $125.5 million of temporary equity was reclassified to permanent equity as of September 30, 2024.

Current wording

On September 30, 2024, Ben LLC in its capacity as the sole general partner of BCH, entered into and adopted the First Amendment to the BCH A&R LPA in order to, among other things, effect (i) the redesignation of fifty percent (50%) of the aggregate capital account balances in the BCH Preferred Series A Subclass 0 Unit Accounts as non-redeemable Preferred A.0 Accounts (such redesignated portion, the “Preferred A.0 Non-Redeemable Accounts”) and (ii) the remaining fifty percent (50%) of the capital account balances in the Preferred A.0 Accounts to remain redeemable (such remaining Preferred A.0 Accounts being the “Preferred A.0 Redeemable Accounts”), with the amendment and redesignation being applicable to all holders of the Preferred A.0 Accounts (the foregoing being referred to as the “Redesignation”). As a result of the Redesignation, approximately $125.5 million of temporary equity was reclassified to permanent equity as of September 30, 2024. Also, on November 21, 2024, an additional $35.0 million was redesignated to BCH Preferred A.0 Non-Redeemable and as such is included in permanent equity as of December 31, 2024.

Previous wording

On June 27, 2023, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, the Company shall have the right, but not the obligation, to sell to Yorkville up to $250.0 million of Class A common stock at the Company’s request any time during the commitment period commencing on June 27, 2023 (the “Effective Date”) and terminating on the 36-month anniversary of the Effective Date. Each issuance and sale by the Company to Yorkville under the SEPA (an “Advance”) is subject to a maximum limit equal to the greater of: (i) an amount equal to 100% of the aggregate volume traded of the Company’s Class A common stock on the Nasdaq Stock Market, LLC (“Nasdaq”) for the five trading days immediately preceding an Advance Notice (as defined in the SEPA), or (ii) $10,000,000, which amount may be increased upon mutual consent. The Company shall not affect any sales under the SEPA and Yorkville shall not have any obligation to purchase shares of Class A common stock under the SEPA to the extent that after giving effect to such purchase and sale the aggregate number of shares of Class A common stock issued under the SEPA together with any shares of Class A common stock issued in connection with any other related transactions that may be considered part of the same series of transactions, where the average price of such sales would be less than $219.20 and the number of shares issued would exceed 19.9% of the outstanding voting Common Stock as of the date of the SEPA (the “Exchange Cap”). On June 20, 2024, the Company obtained stockholder approval pursuant to Nasdaq Listing Rule 5635(d) for the issuance of shares of Class A common stock to Yorkville in excess of the Exchange Cap.

Current wording

On June 27, 2023, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”).

Previous wording

On February 6, 2024, Ben Liquidity entered into agreements to finance liquidity transactions with respect to alternative assets with a NAV of $2.0 million. Pursuant to such transaction, the Customer ExAlt Trusts acquired the alternative assets, and in exchange for such interest, the customer received 200,000 shares of the Company’s Series B-2 Resettable Convertible Preferred Stock, par value $0.001 per share (the “Series B-2 preferred stock”), with such Series B-2 preferred stock being convertible into shares of the Company’s Class A common stock. Each share of the Series B-2 preferred stock is convertible at the election of the holder into shares of the Class A common stock initially at a conversion price of $3.20 per share (the “B-2 Conversion Price”). The B-2 Conversion Price is subject to reset from time to time and a floor price of $1.60 per share. A maximum of 125,000 shares of Class A common stock may be issued upon conversion of the Series B-2 preferred stock.

Current wording

On December 31, 2024, Ben Liquidity entered into agreements to finance liquidity transactions related to a primary capital transaction with respect to a limited partner interest in an investments fund with a NAV of $1.4 million. Pursuant to such transaction, the Customer ExAlt Trusts acquired the limited partnership, and in exchange for such interest, the customer received 136,193 shares of the Company’s Series B-5 Resettable Convertible Preferred Stock, par value $0.001 per share (the “Series B-5 preferred stock”), with such Series B-5 preferred stock being convertible into shares of the Company’s Class A common stock. Each share of the Series B-5 preferred stock is convertible at the election of the holder into shares of the Class A common stock initially at a conversion price of $0.694 per share, which is only subject to customary adjustments and is otherwise fixed. A maximum of 1,962,435 shares of Class A common stock may be issued upon conversion of the Series B-5 preferred stock.

Previous wording

On April 9, 2024 and June 21, 2024, respectively, the Company issued 11,354 shares and 3,431 shares of Class A common stock of the Company to a consultant of the Company. The issuance of the Class A common stock pursuant to these transactions was not registered under the Securities Act and each was issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.

Current wording

On October 9, 2024; November 15, 2024; December 12, 2024, and January 9, 2025, respectively, the Company issued 4,175; 6,164; 9,517 and 10,929 shares of Class A common stock of the Company to a consultant of the Company. The issuance of the Class A common stock pursuant to these transactions was not registered under the Securities Act and each was issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.

Previous wording

On each of October 2, 2023; October 4, 2023; February 26, 2024; March 11,2024; May 3, 2024; May 6, 2024; May 7, 2024; May 13, 2024 and June 12, 2024; Yorkville purchased 250; 6,250; 8,938; 33,379; 200,000; 74,260; 14,053; 60,994 and 100,000 shares of Class A common stock for prices of $191.41; $101.24; $15.52; $14.90; $7.18; $5.82; $5.82; $4.85 and $3.09 per share, respectively, pursuant to the terms of the SEPA. Sales proceeds for these equity sales under the terms of the SEPA were approximately $3.9 million. Such issuances were in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.

Current wording

On each of November 18, 2024; November 27, 2024 and January 8, 2025; Yorkville purchased 3,274,000; 75,000, and 73,100 shares of Class A common stock for prices of $1.57; $1.21 and $0.78 per share, respectively, pursuant to the terms of the SEPA. Sales proceeds for these equity sales under the terms of the SEPA were approximately $5.3 million during the period of October 1, 2024 through February 7, 2025. Such issuances were in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.

Previous wording

On August 6, 2024, the Company, entered into a securities purchase agreement (the “Purchase Agreement”) with Yorkville, in connection with the issuance and sale by the Company of convertible debentures (the “Convertible Debentures”) issuable in an aggregate principal amount of up to $4 million, which will be convertible into shares of the Company’s Class A common stock (as converted, the “Conversion Shares”). Yorkville purchased and the Company issued $2 million in aggregate principal amount of Convertible Debentures upon the signing the Purchase Agreement (the “First Closing”). Additionally, on November 13, 2024, the Company issued an additional $2 million in aggregate principal amount of Convertible Debentures for proceeds of approximately $1.8 million (the “Second Closing”). Contemporaneously with the execution and delivery of the Purchase Agreement, certain of the Company’s subsidiaries entered into a global guaranty agreement in favor of Yorkville with respect to the Company’s obligations under the Purchase Agreement, the Convertible Debentures and the Yorkville Warrants (as defined below).

Current wording

On August 6, 2024, the Company, entered into a securities purchase agreement (the “Purchase Agreement”) with Yorkville, in connection with the issuance and sale by the Company of convertible debentures (the “Convertible Debentures”) issuable in an aggregate principal amount of up to $4.0 million, which are convertible into shares of the Company’s Class A common stock (as converted, the “Conversion Shares”). Yorkville purchased and the Company issued $2.0 million in aggregate principal amount of Convertible Debentures upon the signing the Purchase Agreement (the “First Closing”). Additionally, on November 13, 2024, the Company issued an additional $2.0 million in aggregate principal amount of Convertible Debentures for proceeds of approximately $1.8 million (the “Second Closing”). Contemporaneously with the execution and delivery of the Purchase Agreement, certain of the Company’s subsidiaries entered into a global guaranty agreement in favor of Yorkville with respect to the Company’s obligations under the Purchase Agreement, the Convertible Debentures and the Yorkville Warrants (as defined below).

Previous wording

The Convertible Debentures do not bear interest, subject to a potential increase to 18.0% per annum (or the maximum amount permitted by applicable law) upon the occurrence of certain events of default. The Convertible Debentures will mature on February 6, 2025 and will result in gross proceeds to the Company of approximately $3.6 million. The Convertible Debentures will be issued at an original issue discount of 10%. The Company will be required to make monthly cash payments of principal in the amount of $1.3 million (or such lesser amount as may then be outstanding) plus all accrued and unpaid interest as of such payment. Such payments will commence 30 days following the Second Closing and will continue on a monthly basis thereafter until the Convertible Debentures are repaid in full, subject to certain conditions as described in the Convertible Debentures.

Current wording

The Convertible Debentures do not bear interest, subject to a potential increase to 18.0% per annum (or the maximum amount permitted by applicable law) upon the occurrence of certain events of default. The Convertible Debentures mature on February 6, 2025 and resulted in gross proceeds to the Company of approximately $3.6 million. The Convertible Debentures were issued at an original issue discount of 10%. The Company is required to make monthly cash payments of principal in the amount of $1.3 million (or such lesser amount as may then be outstanding) plus all accrued and unpaid interest as of such payment. Such payments commenced 30 days after the Second Closing and will continue on a monthly basis thereafter until the Convertible Debentures are repaid in full, subject to certain conditions as described in the Convertible Debentures.The Convertible Debentures were fully repaid by the February 6, 2025 maturity date.

Previous wording

On July 16, 2024, the Company received a notice from the Nasdaq Staff indicating that it is no longer in compliance with the minimum stockholders’ equity requirement (the “Minimum Stockholders’ Equity Requirement”) for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Notice”). Nasdaq Listing Rule

Current wording

On July 16, 2024, the Company received a notice from the Nasdaq Staff indicating that it is no longer in compliance with the minimum stockholders’ equity requirement (the “Minimum Stockholders’ Equity Requirement”) for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Notice”). Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2,500,000 or meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations, which the Company does not currently meet.

Previous wording

Pursuant to the Stockholders’ Equity Notice and the Listing Rules of Nasdaq, Nasdaq provided the Company with 45 calendar days, or until August 30, 2024, to submit a plan to regain compliance with the Minimum Stockholders’ Equity Requirement. On August 30, 2024, the Company timely submitted a plan to the Staff to regain compliance with the Minimum Stockholders’ Equity Requirement. If the Company’s plan to regain compliance is accepted, the Staff can grant an extension of up to 180 calendar days from the date of the notice to evidence compliance. If the Company’s plan to regain compliance is not accepted, or if it is accepted and the Company does not regain compliance in the timeframe required by Nasdaq, the Nasdaq Staff could provide notice that the Company’s shares of Class A common stock are subject to delisting. In such an event, the Company would have the right to request a hearing before the Panel. The hearing request would automatically stay any suspension or delisting action pending the completion of the hearings process. The Stockholders’ Equity Notice had no immediate impact on the listing of the Class A common stock, which will continue to be listed and traded on Nasdaq under the symbol “BENF,” subject to the Company’s compliance with the other listing requirements of Nasdaq. While we have not yet heard if the Staff will accept the plan submitted on August 30, 2024, the Company is currently progressing under the plan submitted to the Staff to regain compliance with the Minimum Stockholders’ Equity Requirement. Although the Company intends to use all reasonable efforts to achieve compliance with the Minimum Stockholders’ Equity Requirement, there can be no assurance that the Company will be able to regain compliance with the Minimum Stockholders’ Equity Requirement or that the Company will otherwise be in compliance with other applicable Nasdaq listing criteria.

Current wording

Pursuant to the Stockholders’ Equity Notice and the Listing Rules of Nasdaq, Nasdaq provided the Company with 45 calendar days, or until August 30, 2024, to submit a plan to regain compliance with the Minimum Stockholders’ Equity Requirement. On August 30, 2024, the Company timely submitted a plan to the Staff to regain compliance with the Minimum Stockholders’ Equity Requirement. On November 25, 2024, Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC confirming that the Company had regained compliance with the Minimum Stockholders’ Equity Requirement, after giving pro forma effect to the (i) redesignation of approximately $35 million of BCH Preferred Series A Subclass 0 Unit Accounts into non-redeemable BCH Preferred Series A Subclass 0 Unit Accounts and (ii) the Company’s sale of 3,274,000 shares of its Class A common stock to Yorkville on November 15, 2024, for aggregate consideration of approximately $5.1 million, pursuant to the SEPA, which resulted in pro forma stockholders’ equity of $26.9 million as of September 30, 2024. However, if the Company fails to evidence compliance with the Minimum Stockholders’ Equity Requirement upon filing its next periodic report it may be subject to delisting. At that time, the Staff will provide written notification to the Company, which may then appeal Staff’s determination to a Nasdaq Hearings Panel. In this Quarterly Report on Form 10-Q, we report permanent equity amounts greater than the Minimum Stockholders’ Equity Requirement. The Stockholders’ Equity Notice had no immediate impact on the listing of the Class A common stock, which continues to be listed and traded on Nasdaq under the symbol “BENF,” subject to the Company’s compliance with the other listing requirements of Nasdaq. Although the Company intends to use all reasonable efforts to maintain compliance with the Minimum Stockholders’ Equity Requirement, there can be no assurance that the Company will be able to maintain compliance with the Minimum Stockholders’ Equity Requirement or that the Company will otherwise be in compliance with other applicable Nasdaq listing criteria in the future.

Previous wording

On July 25, 2024, the Company received a notice from Nasdaq (the “Audit Committee Notice”) confirming that the Company was no longer in compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605, which requires that the audit committee of a listed company be comprised of at least three “independent directors” (as defined in Nasdaq Listing Rule 5605(a)(2)). Pursuant to Nasdaq Listing Rule 5605(c)(4), the Company intends to rely on the cure period to reestablish compliance with Nasdaq Listing Rule 5605. The cure period is generally defined as until the earlier of the Company’s next annual meeting of stockholders or July 21, 2025. If the Company’s next annual meeting of stockholders is held before January 15, 2025, then the Company must evidence compliance no later than January 15, 2025.

Current wording

On July 25, 2024, the Company received a notice from Nasdaq (the “Audit Committee Notice”) confirming that the Company was no longer in compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605, which requires that the audit committee of a listed company be comprised of at least three “independent directors” (as defined in Nasdaq Listing Rule 5605(a)(2)). Pursuant to Nasdaq Listing Rule 5605(c)(4), the Company relied on the cure period to reestablish compliance with Nasdaq Listing Rule 5605. The cure period is generally defined as until the earlier of the Company’s next annual meeting of stockholders or July 21, 2025. If the Company’s next annual meeting of stockholders is held before January 15, 2025, then the Company must evidence compliance no later than January 15, 2025.

Previous wording

On September 30, 2024, Patrick J. Donegan was appointed to the Board as an independent director and a member of the Audit, Products and Related Party Transactions, Credit and Enterprise Risk committees of the Board. The Board is in the process of identifying and selecting an additional member of the Board who qualifies as “independent” and meets the audit committee criteria set forth in Nasdaq Listing Rule 5605. The Board intends to comply fully with Nasdaq audit committee requirements by or before the end of the cure period described above, but there can be no assurance that the Company will be able to regain compliance with Nasdaq Listing Rule 5605 or that the Company will otherwise be in compliance with other applicable Nasdaq listing criteria. The Audit Committee Notice had no immediate impact on the listing of the Class A common stock, which will continue to be listed and traded on Nasdaq under the symbol “BENF,” subject to the Company’s compliance with the other listing requirements of Nasdaq.

Current wording

On September 30, 2024, Patrick J. Donegan was appointed to the Board as an independent director and a member of the Audit, Products and Related Party Transactions, Credit and Enterprise Risk committees of the Board. On November 21, 2024, Karen J. Wendel was appointed to the Board as an independent director and member of the Audit committee of the Board. On November 25, 2024, the Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC confirming that, following the appointment of Ms. Wendel to the Board and the Audit committee, the Company had regained compliance with the audit committee composition requirements set forth in the Nasdaq Listing Rule 5605. The Audit Committee Notice had no immediate impact on the listing of the Class A common stock, which continued to be listed and traded on Nasdaq under the symbol “BENF,” during the period from the receipt of the Audit Committee Notice on July 25, 2024 until the receipt of the letter on November 25, 2024 confirming that compliance with audit committee composition requirements had been regained.

Previous wording

–Volatility in the price of our Class A common stock. The price of our Class A common stock may impact our ability to enter into liquidity transactions with our Customers. If our stock price declines, our potential Customers may be less likely to engage with us and accept our Class A common stock in exchange for their alternative assets. Furthermore, a significant sustained decrease in our stock price has in the past been an indicator, and in the future may indicate, that impairment is present and may require a quantitative impairment assessment of our assets including goodwill and intangible assets. Any such future impairment charges for goodwill may reduce our overall assets and may result in a change in the perceived value of the Company and ultimately may be reflected as a reduction in the market price of our securities. Additionally, we have begun to enter into financings in which the Customer ExAlt Trusts use our Class A common stock or convertible preferred stock as consideration to meet capital calls or make other capital contributions in alternative asset funds, which in turn hold such securities as an investment. Volatility, either positively or negatively, in the price of our Class A common stock may have a compounding effect on our consolidated investment income and cause further decreases in our stock price in the event our securities comprise a significant portion of such alternative asset funds’ aggregate assets.

Current wording

–Volatility in the price of our Class A common stock. The price of our Class A common stock may impact our ability to enter into liquidity transactions with our Customers. If our stock price declines, our potential Customers may be less likely to engage with us and accept our Class A common stock, or securities convertible into our Class A common stock, in exchange for their alternative assets. Furthermore, a significant sustained decrease in our stock price has in the past been an indicator, and in the future may indicate, that impairment is present and may require a quantitative impairment assessment of our assets including goodwill and intangible assets. Any such future impairment charges for goodwill may reduce our overall assets and may result in a change in the perceived value of the Company and ultimately may be reflected as a reduction in the market price of our securities. Additionally, we have begun to enter into financings in which the Customer ExAlt Trusts use our Class A common stock or convertible preferred stock as consideration to meet capital calls or make other capital contributions in alternative asset funds, which in turn hold such securities as an investment. Volatility, either positively or negatively, in the price of our Class A common stock may have a compounding effect on our consolidated investment income and cause further decreases in our stock price in the event our securities comprise a significant portion of such alternative asset funds’ aggregate assets.

Previous wording

We continue to evaluate the impact of the ongoing Russia-Ukraine conflict, Israel-Hamas conflict and other items, such as inflation and rising interest rates, and assess the impact on financial markets and our business. Our future results may be adversely affected by slowdowns in fundraising activity and the pace of new liquidity transactions with our customers.

Current wording

We continue to evaluate the impact of the ongoing Russia-Ukraine conflict, Israel-Hamas conflict and other items, such as inflation, rising interest rates, changes in regulatory requirements and tariffs, and assess the impact on financial markets and our business. Our future results may be adversely affected by slowdowns in fundraising activity and the pace of new liquidity transactions with our customers.

Previous wording

–Utilization of Derivative Instruments to Manage Risk. From time to time, Ben manages its exposure to market risks by utilizing various forms of derivative instruments to limit exposure to changes in the relative values of investments that may result from market developments. In September 2023, all put options that were held by Ben were sold, including the portion of the put options that were attributable to the third party involved in the loan participation transaction. No additional derivative instruments have been purchased since September 2023. For the three months ended September 30, 2023, Ben recognized losses of$0.7 millionon the put options, of which approximately$0.3 million is attributable to Ben or Ben’s loan portfolio, with the remainder attributable principally to the loan involved in the participation loan transaction. For the six months ended September 30, 2023, Ben has recognized losses of$3.0 millionon the put options, of which approximately$2.0 million is attributable to Ben or Ben’s loan portfolio, with the remainder attributable principally to the loan involved in the participation loan transaction.. As the

Current wording

–Utilization of Derivative Instruments to Manage Risk. From time to time, Ben manages its exposure to market risks by utilizing various forms of derivative instruments to limit exposure to changes in the relative values of investments that may result from market developments. In September 2023, all put options that were held by Ben were sold, including the portion of the put options that were attributable to the third party involved in the loan participation transaction. No additional derivative instruments have been purchased since September 2023. For the nine months ended December 31, 2023, Ben has recognized losses of$3.0 millionon the put options, of which approximately$2.0 million is attributable to Ben or Ben’s loan portfolio, with the remainder attributable principally to the loan involved in the participation loan transaction. As the Company did not have any put options or other similar instruments during the quarter ended December 31, 2024, there are no comparable gains or losses in the current period.

Previous wording

–Bankruptcy of GWG Holdings. On August 1, 2023 (the “Effective Date”), the plan of reorganization of GWG Holdings was declared effective. On the Effective Date, all securities previously issued by GWG Holdings were cancelled and converted to interests in the GWG Wind Down Trust. As of September 30, 2024, Ben held 0.8 million interests of Series A1 and 2.5 million interests of Series E of the GWG Wind Down Trust, and the Customer ExAlt Trusts held 82.0 million, 14.5 million, and 9.8 million interests of Series A1, Series A2, and Series E, respectively, of the GWG Wind Down Trust. These interests are accounted for at fair value, with unrealized gains (losses) recognized in earnings in the gain (loss) on financial instruments, net line item of the consolidated statements of comprehensive income (loss). Fair value is calculated using quoted prices for similar instruments observed in the equity capital market and is classified as a Level 2 investment in the fair value hierarchy. Since the GWG Wind Down Trust’s primary asset is its investment in the Class A common stock of Ben, the Company’s Class A common stock quoted market price is the underlying asset. Prior to the Effective Date, Ben held 2.5 million shares of GWG Holdings common stock and the Customer ExAlt Trusts held 9.8 million shares of GWG Holdings common stock and L Bonds due 2023 of GWG Life, LLC, a Delaware limited liability company and wholly-owned subsidiary of GWG Holdings (“GWG Life”) with an aggregate principal amount of $94.8 million (“L Bonds”). The investment in GWG Holdings’ common stock was accounted for at fair value with changes in fair value recognized in earnings. The investment in L Bonds was accounted for as an available-for-sale debt security, with unrealized gains (losses) recognized in accumulated other comprehensive income (loss). During the six months ended September 30, 2024 and 2023, the Company has recognized net losses of nominal and$1.2 million, respectively, related to its interests in the GWG Wind Down Trust (or GWG Holdings, as applicable), and the Customer ExAlt Trusts recognized net losses of $0.5 million and $44.4 million, respectively, related to its interest in the GWG Wind Down Trust (or GWG Holdings, as applicable), all of which is reflected in the consolidated statements of comprehensive income (loss). As of September 30, 2024, the fair value of Ben’s interest in the GWG Wind Down Trust was nominal and the fair value of the Customer ExAlt Trusts’ interest in the GWG Wind Down Trust was nominal. On the Effective Date, the shared services agreement by and between Ben and GWG Holdings (the “Shared Services Agreement”) was terminated and all receivables and related allowances owed to Ben under the Shared Services Agreement were written off.

Current wording

–Bankruptcy of GWG Holdings. On August 1, 2023 (the “Effective Date”), the plan of reorganization of GWG Holdings was declared effective. On the Effective Date, all securities previously issued by GWG Holdings were cancelled and converted to interests in the GWG Wind Down Trust. As of December 31, 2024, Ben held 0.8 million interests of Series A1 and 2.5 million interests of Series E of the GWG Wind Down Trust, and the Customer ExAlt Trusts held 82.0 million, 14.5 million, and 9.8 million interests of Series A1, Series A2, and Series E, respectively, of the GWG Wind Down Trust. These interests are accounted for at fair value, with unrealized gains (losses) recognized in earnings in the gain (loss) on financial instruments, net line item of the consolidated statements of comprehensive income (loss). Fair value is calculated using quoted prices for similar instruments observed in the equity capital market and is classified as a Level 2 investment in the fair value hierarchy. Since the GWG Wind Down Trust’s primary asset is its investment in the Class A common stock of Ben, the Company’s Class A common stock quoted market price is the underlying asset. Prior to the Effective Date, Ben held 2.5 million shares of GWG Holdings common stock and the Customer ExAlt Trusts held 9.8 million shares of GWG Holdings common stock and L Bonds due 2023 of GWG Life, LLC, a Delaware limited liability company and wholly-owned subsidiary of GWG Holdings (“GWG Life”) with an aggregate principal amount of $94.8 million (“L Bonds”). The investment in GWG Holdings’ common stock was accounted for at fair value with changes in fair value recognized in earnings. The investment in L Bonds was accounted for as an available-for-sale debt security, with unrealized gains (losses)

Previous wording

–Vesting of performance based awards. Certain of our restricted equity units were granted with a performance-based condition. The performance condition was met upon public listing in June 2023 and expense for vested units was recognized during the three months ended June 30, 2023. The recognition of the remaining compensation cost will be recognized over the remaining vesting period. Total recognized compensation cost related to these awards was $0.3 million and$0.8 million for thethree and six months ended September 30, 2024, respectively, and $3.4 million and $11.4 million for the same periods of 2023, respectively. Total unrecognized compensation cost related to these awards was approximately $1.2 million as of September 30, 2024. During the three andsix months ended September 30, 2024, approximately$2.4 million of compensation cost, which isthe full grant date fair value of the RSUs, was recognized for awards tothree employees. The awards do not require continuing employment by the individuals.

Current wording

–Vesting of performance based awards. Certain of our restricted equity units were granted with a performance-based condition. The performance condition was met upon public listing in June 2023 and expense for vested units was recognized during the three months ended June 30, 2023. The recognition of the remaining compensation cost will be recognized over the remaining vesting period. Total recognized compensation cost related to these awards was$0.2 million and $1.0 millionfor thethree and nine months ended December 31, 2024, respectively, and $0.5 million and $8.9 million for the same periods of 2023, respectively. Total unrecognized compensation cost related to these awards was approximately$1.0 million as of December 31, 2024. During thenine months ended December 31, 2024, approximately$2.4 million of compensation cost, which isthe full grant date fair value of the RSUs, was recognized for awards tothree employees. The awards do not require continuing employment by the individuals.

Previous wording

–Goodwill Impairment. Goodwill is tested for impairment at least annually and, more frequently between annual tests, whenever events or circumstances make it more likely than not that the fair value of a reporting unit has fallen below its carrying value. Subsequent to the public listing on June 8, 2023, and through September 30, 2024, the Company has experienced a significant sustained decline in the price of its Class A common stock and its related market capitalization. We believe that these factors indicated that the fair value of our reporting units had more likely than not fallen below their carrying values during the relevant periods in fiscal 2024 and in the first two quarters of fiscal 2025. As a result, during fiscal 2024, we wrote the carrying value of the Ben Liquidity, Ben Custody, Ben Insurance, and Ben Markets reporting units, as applicable, down to their estimated fair values and recognized cumulatively during fiscal 2024 a non-cash goodwill impairment charge of $2.4 billion, including$1.1 billion and$306.7 million of non-cash goodwill impairment at the Ben Liquidity and Ben Custody reporting units during the quarters ended June 30, 2023 and September 30, 2023, respectively. Further, management performed interim impairment tests of goodwill as of June 30, 2024 and September 30, 2024, and determined on each date that additional non-cash goodwill impairment occurred resulting in$3.4 million and $0.3 million, respectively, at the Ben Custody and Ben Markets reporting units. Total goodwill remaining as of September 30, 2024 is$9.9 million.

Current wording

–Goodwill Impairment. Goodwill is tested for impairment at least annually and, more frequently between annual tests, whenever events or circumstances make it more likely than not that the fair value of a reporting unit has fallen below its carrying value. Subsequent to the public listing on June 8, 2023, and through December 31, 2024, the Company has experienced a significant sustained decline in the price of its Class A common stock and its related market capitalization. We believe that these factors indicated that the fair value of our reporting units had more likely than not fallen below their carrying values during the relevant periods in fiscal 2024 and in the first three quarters of fiscal 2025. As a result, during fiscal 2024, we wrote the carrying value of the Ben Liquidity, Ben Custody, Ben Insurance, and Ben Markets reporting units, as applicable, down to their estimated fair values and recognized cumulatively during fiscal 2024 a non-cash goodwill impairment charge of $2.4 billion, including$1.1 billion, $306.7 million, and $883.2 million of non-cash goodwill impairment at the Ben Liquidity and Ben Custody reporting units during the quarters ended June 30, 2023, September 30, 2023 and December 31, 2023, respectively. Further, management performed interim impairment tests of goodwill as of June 30, 2024, September 30, 2024 and December 31, 2024, and determined that additional non-cash goodwill impairment occurred resulting in$3.4 million,$0.3 million, and nil, respectively, at the Ben Custody and Ben Markets reporting units. Total goodwill remaining as of December 31, 2024 is$9.9 million.

Previous wording

–Termination of Customer ExAlt Trust Loan Payable. On October 18, 2023, all obligations owed under the Customer ExAlt Trust loan payable were repaid by transferring $56.7 million of alternative assets. The payoff of the Customer ExAlt Trust Loan Payable was accounted for as a debt extinguishment in accordance with ASC 470, Debt, during the quarter ended December 31, 2023. The financial statements included in this Quarterly Report on Form 10-Q for the three and six months ended September 30, 2023 reflect changes in the fair value of the alternative assets ultimately transferred to settled the ExAlt Trust loan payable as well as interest expense associated with the ExAlt Trust loan payable whereas current fiscal year financial statements would not have any such activity associated with the transferred alternative assets or the ExAlt Trust loan payable.

Current wording

–Termination of Customer ExAlt Trust Loan Payable. On October 18, 2023, all obligations owed under the Customer ExAlt Trust loan payable were repaid by transferring $56.7 million of alternative assets. The payoff of the Customer ExAlt Trust Loan Payable was accounted for as a debt extinguishment in accordance with ASC 470, Debt, during the quarter ended December 31, 2023. The financial statements included in this Quarterly Report on Form 10-Q for the three andnine months ended December 31, 2023 reflect changes in the fair value of the alternative assets, through October 18, 2023, ultimately transferred to settled the ExAlt Trust loan payable as well as interest expense associated with the ExAlt Trust loan payable whereas current fiscal year financial statements would not have any such activity associated with the transferred alternative assets or the ExAlt Trust loan payable.

Previous wording

–Resolution of certain liabilities. During the three and six months ended September 30, 2024, the Company released approximately $23.5 million of liabilities based on the execution of letter agreements with the counterparties releasing the Company of such liabilities. The release of the $23.5 million in liabilities resulted in the recognition of a gain that is reflected in the (gain) loss on liability resolution line item of the consolidated statements of comprehensive income (loss) for thethree and six months ended September 30, 2024. There were no such similar amounts included in the same periods in the prior year. Approximately $19.2 million of the liabilities released related to a portion of the interest commitments described in Note 9 to the consolidated financial statements included in our 2024 Form 10-K that the Company has been accruing each period since 2018. On a go-forward basis, since we will no longer be accruing interest expense on a portion of the interest commitments for which we have been released of such obligation, interest expense should reduce by approximately $1 million per quarter related to these interest commitments.

Current wording

–Resolution of certain liabilities. During the nine months ended December 31, 2024, the Company released approximately$23.5 million of liabilities based on the execution of letter agreements with the counterparties releasing the Company of such liabilities. The release of the $23.5 million in liabilities resulted in the recognition of a gain that is reflected in the (gain) loss on liability resolution line item of the consolidated statements of comprehensive income (loss) for the nine months ended December 31, 2024. There were no such similar amounts included in the same periods in the prior year. Approximately $19.2 million of the liabilities released related to a portion of the interest commitments described in Note 9 to the consolidated financial statements included in our 2024 Form 10-K that the Company has been accruing each period since 2018. On a go-forward basis, since we will no longer be accruing interest expense on a portion of the interest commitments for which we have been released of such obligation, interest expense should reduce by approximately $1 million per quarter related to these interest commitments.

Previous wording

During the three and six months ended September 30, 2024 and 2023, we earned revenues on a consolidated basis from the following primary sources:

Current wording

During the three and nine months ended December 31, 2024 and 2023, we earned revenues on a consolidated basis from the following primary sources:

Previous wording

•Professional Services. Professional services includes consulting fees, legal fees, audit fees, and other services.

Current wording

•Professional Services. Professional services includes legal fees, audit fees, consulting fees, and other services.

Previous wording

Loss on financial instruments, net decreased $42.6 million for the three months ended September 30, 2024, compared to the same period of 2023, driven by the changes in fair value of the financial instruments held during the period. Loss on financial instruments, net for the three months ended September 30, 2024 was primarily driven by an $0.2 million decrease in the value of our interests in the GWG Wind Down Trust and a $0.8 million combined loss in the fair value on the convertible debt, warrants and derivative liability, offset by a $0.7 million increase in the fair value of public equity securities. Loss on financial instruments, net for the three months ended September 30, 2023 included a $41.8 million decrease in the value of our interests in the GWG Wind Down Trust. Such decrease is net of a $13.7 million gain recognized upon reclassification of unrealized net gains related to the Company's previously classified available-for-sale debt securities from accumulated other comprehensive income. Additional drivers included a $0.7 million net decrease in the fair value of public equity securities combined with a $0.7 million decrease to the fair value of put options held, partially offset by a $0.2 million decrease in the fair value of a derivative liability and a $0.2 million decrease in the fair value of warrant liability.

Current wording

Loss on financial instruments, net decreased $17.5 million for the three months ended December 31, 2024, compared to the same period of 2023, driven by the changes in fair value of the financial instruments held during the period. Loss on financial instruments, net for the three months ended December 31, 2024 was primarily driven by a $0.4 million decrease in the fair value of public equity securities and a $0.1 million combined loss in the fair value on the convertible debt, warrants and derivative liability. Loss on financial instruments, net for the three months ended December 31, 2023 was primarily driven by an $18.7 million decrease in the value of our interests in the GWG Wind Down Trust. Additional drivers included a $0.8 million decrease in the fair value of warrant liability partially offset by a $0.2 million net decrease in the fair value of public equity securities.

Previous wording

Investment income (loss), net increased $8.6 million for the three months ended September 30, 2024, compared to the same period of 2023, driven by changes in the NAV of investments in alternative assets held by certain of the Customer ExAlt Trusts. Investment income was $8.5 million for the three months ended September 30, 2024, which was driven by $4.8 million of upward quoted market price adjustments, $2.3 million of upward adjustments to our relative share of the respective fund’s NAV based on updated financial information received from the funds’ investment manager or sponsor, and $1.5 million of upward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar. Investment loss was nominal for the three months ended September 30, 2023, which was driven by $3.1 million of upward adjustments to our relative share of the respective fund’s NAV based on updated financial information received from the funds’ investment manager or sponsor offset by $1.6 million of downward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar and $1.5 million of downward quoted market price adjustments.

Current wording

Investment income, net increased $16.4 million for the nine months ended December 31, 2024, compared to the same period of 2023, driven by changes in the NAV of investments in alternative assets held by certain of the Customer ExAlt Trusts. Investment income was $24.3 million for the nine months ended December 31, 2024, which was driven by $26.9 million of upward adjustments to our relative share of the respective fund’s NAV based on updated financial information received from the funds’ investment manager or sponsor offset by $2.4 million of downward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar and $2.2 million of downward quoted market price adjustments. Investment income was $7.9 million for the nine months ended December 31, 2023, which was driven by $4.6 million of upward quoted market price adjustments, $2.3 million of upward adjustments to our relative share of the respective fund’s NAV based on updated financial information received from the funds’ investment manager or sponsor, and $0.9 million of upward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar.

Previous wording

Loss on financial instruments, net decreased $44.9 million for the six months ended September 30, 2024, compared to the same period of 2023, driven by the changes in fair value of the financial instruments held during the period. Loss on financial instruments, net for the six months ended September 30, 2024 was primarily driven by a $0.5 million decrease in the value of our interests in the GWG Wind Down Trust and a $0.8 million decrease in the fair value of on the convertible debt, warrants and derivative liability. Loss on financial instruments, net for the six months ended September 30, 2023 was primarily driven by a $41.8 million decrease in the value of our interests in the GWG Wind Down Trust. Such decrease is net of a $13.7 million gain recognized upon reclassification of unrealized net gains related to the Company’s previously classified available-for-sale debt securities from accumulated other comprehensive income. Additional drivers include a $4.4 million decrease in the fair value of public equity securities combined with a $3.0 million decrease to the fair value of put options held, partially offset by a $1.6 million decrease in the fair value of a derivative liability and a $1.7 million decrease in the fair value of a warrant liability.

Current wording

Loss on financial instruments, net decreased $62.4 million for the nine months ended December 31, 2024, compared to the same period of 2023, driven by the changes in fair value of the financial instruments held during the period. Loss on financial instruments, net for the nine months ended December 31, 2024 was primarily driven by a $0.5 million decrease in the value of our interests in the GWG Wind Down Trust, $0.4 million decrease in the fair value of public equity securities and a $0.8 million decrease in the fair value of on the convertible debt, warrants and derivative liability. Loss on financial instruments, net for the nine months ended December 31, 2023 was primarily driven by a $60.5 million decrease in the value of our interests in the GWG Wind Down Trust. Such decrease is net of a $13.7 million gain recognized upon reclassification of unrealized net gains related to the Company’s previously classified available-for-sale debt securities from accumulated other comprehensive income. Additional drivers include a $4.6 million decrease in the fair value of public equity securities combined with a $3.0 million decrease to the fair value of put options held, partially offset by a $1.6 million decrease in the fair value of a derivative liability and a $2.5 million decrease in the fair value of a warrant liability.

Previous wording

Employee compensation and benefits decreased $8.3 million for the three months ended September 30, 2024, compared to the same period in 2023. The decrease is principally related to a $5.1 million decrease in equity-based compensation as the comparable period included$3.4 million recognized upon vesting of awards previously subject to a performance condition, which was satisfied by Ben’s public listing in June 2023, and the comparable period included new grants which were partially vested on the grant date. Additionally, there was a $3.1 million decrease in payroll and other benefit related costs due to a lower headcount in fiscal 2025 as compared to fiscal 2024 primarily due to the employees furloughed and terminated in the latter part of fiscal 2024. With the implementation of our operating cost reduction plan in November 2023, employee compensation and benefits began reflecting the lower expense of approximately $1.0 million per month beginning in November 2023 and such decrease has increased in recent months due to further attrition.

Current wording

Employee compensation and benefits decreased $4.4 million for the three months ended December 31, 2024, compared to the same period in 2023. The decrease is principally related to a $3.2 million decrease in payroll and other benefit related costs, including accrued but unpaid discretionary bonus amounts, due to a lower headcount in fiscal 2025 as compared to fiscal 2024 primarily due to the employees furloughed and terminated in the latter part of fiscal 2024 as well as further attrition during the current fiscal year. Additionally, there was a $1.2 million decrease in equity-based compensation also a result of lower headcount during the three months ended December 31, 2024 as compared to the same period of 2023. With the implementation of our operating cost reduction plan in November 2023, employee compensation and benefits began reflecting the lower expense of approximately $1.0 million per month beginning in November 2023, and such decrease has increased in recent months due to further attrition.

Previous wording

Other expenses decreased $2.4 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily driven by a decrease in travel and entertainment ($1.5 million) and depreciation ($0.6 million). The table below provides additional detail regarding our other expenses. As mentioned above, with the implementation of our operating cost reduction plan, as updated during the three months ended December 31, 2023, other expenses were expected to decrease and may decrease further as opportunities arise.

Current wording

Other expenses decreased $2.8 million for the three months ended December 31, 2024, compared to the same period in 2023, primarily driven by decreases in travel and entertainment ($1.4 million) and depreciation ($0.7 million). The table below provides additional detail regarding our other expenses. As mentioned above, with the implementation of our operating cost reduction plan, as updated during the three months ended December 31, 2023, other expenses were expected to decrease and may decrease further as opportunities arise.

Previous wording

Employee compensation and benefits decreased $40.2 million for the six months ended September 30, 2024, compared to the same period in 2023. The decrease is principally related to a $31.1 million decrease in equity-based compensation and a $9.1 million decrease in payroll and other benefit related costs. The comparable period included equity-based compensation of$11.4 million recognized upon vesting of awards previously subject to a performance condition, which was satisfied by Ben’s public listing in June 2023, and$15.0 million in equity-based compensation recognizedas a result of transactions completed as part of the BCG Recapitalization. Additionally, there were additional equity grants in fiscal 2024 that resulted in a higher expenses than the limited grants that occurred in fiscal 2025. Additionally, there was a $9.1 million decrease in payroll and other benefit related costs due to a lower headcount in fiscal 2025 as compared to fiscal 2024 primarily due to the employees furloughed and terminated in the latter part of fiscal 2024. The lower headcount also impacts the equity-based compensation amounts being recognized. With the implementation of our operating cost reduction plan in November 2023, employee compensation and benefits began reflecting the lower expense of approximately $1.0 million per month beginning in November 2023 and such decrease has increased in recent months due to further attribution. This also resulted in adjustment to our accrued annual incentive bonus pool related to the decreased headcount in the fiscal 2025 year-to-date amounts.

Current wording

Employee compensation and benefits decreased $44.6 million for the nine months ended December 31, 2024, compared to the same period in 2023. The decrease is principally related to a $32.4 million decrease in equity-based compensation and a $12.3 million decrease in payroll and other benefit related costs. The comparable period included equity-based compensation of $8.9 million recognized upon vesting of awards previously subject to a performance condition, which was satisfied by Ben’s public listing in June 2023, and $15.0 million in equity-based compensation recognized as a result of transactions completed as part of the BCG Recapitalization. Additionally, there were additional equity grants in fiscal 2024 that resulted in a higher expenses than the limited grants that occurred in fiscal 2025. Additionally, there was a $12.3 million decrease in payroll and other benefit related costs due to a lower headcount in fiscal 2025 as compared to fiscal 2024 primarily due to the employees furloughed and terminated in the latter part of fiscal 2024. The lower headcount also impacts the equity-based compensation amounts being recognized. With the implementation of our operating cost reduction plan in November 2023, employee compensation and benefits began reflecting the lower expense of approximately $1.0 million per month beginning in November 2023 and such decrease has increased in recent months due to further attrition. This also resulted in adjustments to our accrued but unpaid annual incentive bonus pool related to the decreased headcount in the fiscal 2025 year-to-date amounts.

Previous wording

Interest expense decreased $0.3 million for the six months ended September 30, 2024, compared to the same period in 2023. The decrease was primarily driven by a $1.7 million decrease in the amortization of deferred financing costs accounted for as a premium combined with a $1.7 million increase interest expense on all other borrowings including the new HH-BDH Credit Agreement borrowing in October 2023, offset by a $3.7 million decrease in interest expense on the Customer ExAlt Trust Loan Payable, which was extinguished in October 2023.

Current wording

Interest expense decreased $1.7 million for the nine months ended December 31, 2024, compared to the same period in 2023. The decrease was primarily driven by a $4.1 million decrease in interest expense on the Customer ExAlt Trust Loan Payable, which was extinguished in October 2023, and a $1.1 million decrease as a result of the resolution of certain liabilities as of September 30, 2024 that were accruing interest of approximately $1.0 million per quarter offset by a $1.7 million decrease in the amortization of deferred financing costs accounted for as a premium combined with a $1.7 million increase in interest expense on all other borrowings including the new HH-BDH Credit Agreement borrowing in October 2023.

Previous wording

Professional services expenses decreased $4.2 million for the six months ended September 30, 2024, compared to the same period in 2023, primarily due to a decrease in legal fees of $2.3 million due to a higher percentage of legal activity expected to be eligible for reimbursement from our D&O insurance carriers combined with in other professional fees reflecting our cost reduction efforts and the higher expenses in fiscal 2024 associated our public listing in June 2023.

Current wording

Professional services expenses decreased $4.1 million for the nine months ended December 31, 2024, compared to the same period in 2023, primarily due to a decrease in legal fees of $1.6 million due to a higher percentage of legal activity expected to be eligible for reimbursement from our D&O insurance carriers combined with a decrease in other professional fees reflecting our cost reduction efforts and the higher expenses in fiscal 2024 associated our public listing in June 2023.

Previous wording

During the six months ended September 30, 2024, we completed interim impairment tests for goodwill and as a result, recorded non-cash impairment charges totaling $3.7 million. See—Critical Accounting Estimates below and Note 6 to the Consolidated Financial Statements in “Part 1, Item 1.—Financial Statements” of this Quarterly Report on Form 10-Q for further information. Similar interim impairment tests for goodwill was performed for during the six months ended September 30, 2023 which resulted in a non-cash impairment charge totaling $1.4 billion.

Current wording

During the nine months ended December 31, 2024, we completed interim impairment tests for goodwill and as a result, recorded non-cash impairment charges totaling $3.7 million. See—Critical Accounting Estimates below and Note 6 to the Consolidated Financial Statements in “Part 1, Item 1.—Financial Statements” of this Quarterly Report on Form 10-Q for further information. Similar interim impairment tests for goodwill was performed for during the nine months ended December 31, 2023 which resulted in a non-cash impairment charge totaling $2.3 billion.

Previous wording

Other expenses decreased $6.2 million for the six months ended September 30, 2024, compared to the same period in 2023. The largest decrease relates to lower travel and entertainment, which reflects approximately $2.7 million of lower costs associated with an aircraft dry lease that expired on January 1, 2024. The table below provides additional detail regarding our other expenses.

Current wording

Other expenses decreased $9.1 million for the nine months ended December 31, 2024, compared to the same period in 2023. The largest decrease relates to lower travel and entertainment, which reflects approximately $4.6 million of lower costs associated with an aircraft dry lease that expired on January 1, 2024, along with lower depreciation and amortization of $1.8 million and lower insurance and taxes of $1.5 million. The table below provides additional detail regarding our other expenses.

Previous wording

Interest income decreased $1.0 million during the three months ended September 30, 2024 compared to the same period in 2023. The decrease was primarily driven by an overall decreases in interest income due to lower carrying value of loan receivables, which is driven by higher allowance for credit losses, along with a higher percentage of loan being placed on nonaccrual status.

Current wording

Interest income increased by a nominal amount during the three months ended December 31, 2024 compared to the same period in 2023. The increase was primarily driven compounding interest on the loans offset partially by a higher percentage of loan being placed on nonaccrual status.

Previous wording

Employee compensation and benefits decreased $1.1 million during the three months ended September 30, 2024 compared to the same period in 2023. The decrease was driven by payroll and other benefit related costs due to a lower headcount in fiscal 2025 as compared to fiscal 2024 primarily due to the employees furloughed and terminated in fiscal 2024 as well as further attrition in our headcounts in the current fiscal year.

Current wording

Employee compensation and benefits decreased $0.6 million during the three months ended December 31, 2024 compared to the same period in 2023. The decrease was driven by payroll and other benefit related costs due to a lower headcount in fiscal 2025 as compared to fiscal 2024 primarily due to the employees furloughed and terminated in fiscal 2024 as well as further attrition in our headcount in the current fiscal year.

Previous wording

Provision forcredit losses was $4.8 million for the three months ended September 30, 2024 as compared to $60.5 million as of the same period in 2023. The provision for the current period reduced over prior period primarily due to improved collateral values and resulting expected cash flows related to the loan portfolio outpacing the net growth in the amortized cost basis due interest capitalizing at a higher rate than loan payments. Approximately $47.1 million of the provision for credit losses in in quarter ended September 30, 2023 related to losses associated with the collateral comprised of interests in the GWG Wind Down Trust. No amount of the provision for credit losses in the quarter ended September 30, 2024 related to losses associated with the collateral comprised of interests in the GWG Wind Down Trust.

Current wording

Provision forcredit losses was $10.2 million for the three months ended December 31, 2024 as compared to $8.1 million as of the same period in 2023. The provision for the current period increased over the prior period primarily due to interest capitalization outpacing loan paydowns from distributions from the collateral and growth in value of the collateral. No amount of the provision for credit losses in the quarter ended December 31, 2024 related to losses associated with the collateral comprised of interests in the GWG Wind Down Trust.

Previous wording

Prior to the start of fiscal year 2025, all goodwill associated with Ben Liquidity was written off asnon-cash goodwill impairment charges including approximately $220.2 million during the quarter ended September 30, 2023. Accordingly, during the three months ended September 30, 2024, while we completed an interim impairment test for goodwill in the current period, there was no such non-cash goodwill impairment charge for Ben Liquidity. See—Critical Accounting Estimates below and Note 6 to the Consolidated Financial Statements in “Part 1, Item 1.—Financial Statements” of this Quarterly Report on Form 10-Q for further information.

Current wording

Prior to the start of fiscal year 2025, all goodwill associated with Ben Liquidity was written off asnon-cash goodwill impairment charges including approximately $604.7 million during the quarter ended December 31, 2023. Accordingly, during the three months ended December 31, 2024, while we completed an interim impairment test for goodwill in the current period, there was no such non-cash goodwill impairment charge for Ben Liquidity. See—Critical Accounting Estimates below and Note 6 to the Consolidated Financial Statements in “Part 1, Item 1.—Financial Statements” of this Quarterly Report on Form 10-Q for further information.

Previous wording

Interest income decreased $2.2 million during the six months ended September 30, 2024 compared to the same period in 2023. The decrease was primarily driven by an overall decrease in interest income due to lower carrying value of loan receivables, which is driven by higher allowance for credit losses, along with a higher percentage of loan being placed on nonaccrual status.

Current wording

Interest income decreased $2.2 million during the nine months ended December 31, 2024 compared to the same period in 2023. The decrease was primarily driven by an overall decrease in interest income due to lower carrying value of loan receivables, which is driven by higher allowance for credit losses, along with a higher percentage of loan being placed on nonaccrual status.