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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-14 · 115 added, 148 removed, 239 unchanged (52% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report.

Any reference to Binah Capital Group, Inc.

refers to Binah Capital Group, Inc.

and our consolidated subsidiaries on a forward-looking basis or as the context requires, to the historical results of BMS Management Services LLC.

Any reference to “BMS Management Services LLC” refers to the entities comprising the Binah Capital Group, Inc.

business prior to the consummation of the Business Combination.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto contained elsewhere in this report and with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC.

References to the “Company,” “us” or “we” refer to Binah Capital Group, Inc.

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Business Overview

Binah Capital Group, Inc., a Delaware corporation (the “Company), is a leading consolidator of retail wealth management businesses that owns and operates ten entities, four of which are broker-dealers, three of which are registered investment advisors, and three of which are insurance entities, that have over 1900 registered individuals working within the financial services industries.

The Company is a leading consolidator of retail wealth management businesses that owns and operates ten entities, four of which are broker-dealers, three of which are registered investment advisors, and three of which are insurance entities, that have over 1900 registered individuals working within the financial services industries.

The Company focuses on three critical areas comprised of the hybrid, independent, and W2 business models to allow affiliated advisors to choose the operating model that works best for them and run their practices on their own terms.

The Company’s platform adds to its flexibility by providing a variety of custody and clearing firm options to accommodate the unique business needs of advisors.

On March 15, 2024 (the “Closing Date”), Binah Capital consummated the transactions contemplated by that certain Agreement and Plan of Merger, dated July 7, 2022 (as amended, the “Merger Agreement” and the consummation of such contemplated transactions, the “Closing”), by and among Kingswood Acquisition Corp, a Delaware corporation (“KWAC”), Binah Capital, Kingswood Merger Sub, Inc., a Delaware corporation (“Kingswood Merger Sub”), Wentworth Merger Sub, LLC, a Delaware limited liability company (“Wentworth Merger Sub”), and Wentworth Management Services LLC, a Delaware limited liability company (dba, Binah Management Services, “BMS”).

Binah Capital, Kingswood Merger Sub and Wentworth Merger Sub were newly formed entities that were formed for the sole purpose of entering into and consummating the transaction set forth in the Merger Agreement.

Binah Capital was a wholly-owned direct subsidiary of KWAC and both Kingswood Merger Sub and Wentworth Merger Sub were wholly-owned direct subsidiaries of Binah Capital.

On the Closing Date, Kingswood Merger Sub merged with and into KWAC, with KWAC continuing as the surviving entity as a wholly-owned subsidiary of Binah Capital and Wentworth Merger Sub merged with and into BMS, with BMS continuing as the surviving entity as a wholly-owned subsidiary of Binah Capital.

Following the BMS merger, KWAC acquired, and Binah Capital contributed to KWAC all of the common units of BMS directly held by Binah Capital after the Wentworth merger, such that, following the Binah Capital contribution, BMS became a wholly-owned subsidiary of KWAC.

Upon the consummation of the Business Combination, (i) the holders of shares of KWAC’s common stock (“ KWAC Common Stock ”) issued and outstanding immediately prior to the effective time of the Business Combination (other than any redeemed shares) received one share of common stock of Holdings (“ Holdings Common Stock ”) in exchange for each share of KWAC Common Stock held by them, subject to adjustment as more fully described herein, (ii) 1,100,000 shares of Holdings Common Stock issued to Sponsor was placed by Holdings into an escrow account and will not be released to the Sponsor unless the dollar volume-weighted average price of Holdings Common Stock exceeds $12.00 for 20 trading days within any 30-day trading period during the four-year period following the consummation of the Business Combination, (iii) the holders of each whole warrant to purchase KWAC Class A Common Stock received one warrant to purchase Holdings Common Stock at an exercise price of $11.50 per share, (iv) 12 million shares of Holdings Common Stock, subject to adjustment as more fully described herein, was issued to the equity holders of BMS in proportion to their ownership interests in BMS, (v) an additional 1,100,000 shares of Holdings Common Stock was issued to certain equity holders of BMS, (vi) 3,084,450 KWAC Private Placement Warrants held by Sponsor were forfeited immediately prior to the effective time of the Business Combination, and (vii) 3,084,450 warrants to purchase Holding Common Stock at an exercise price of $11.50 per share were issued to the equity holders of BMS in proportion to their ownership interests in BMS.

As a result of the Business Combination, BMS became an indirect, wholly-owned subsidiary of Holdings.

Additionally, on the Closing Date, Holdings entered into a Subscription Agreement with an investor for the purchase of 1,500,000 shares of Holdings’ Series A Redeemable Convertible Preferred Stock (the “ Holdings Series A Stock ”) in a private placement at $9.60 per share, for an aggregate purchase price of $14,400,000 (the “ Series A PIPE ”).

The Holdings Series A Stock may be converted into shares of Holdings Common Stock after the second anniversary of the closing of the Series A PIPE, which such conversion shall initially be 1.5 shares of Holdings Common Stock for each share of Series A Convertible Preferred Stock, subject to certain adjustments provided in the Certificate of Designations.

Our Sources of Revenue

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Financial Highlights

Results for the three and nine-month period ended September 30, 2024 included a net loss of approximately $(1.2) million and $(3.5) million and total revenue of approximately $42.2 million and $124.3 million, respectively, which compares to net income and total revenue of $0.2 million and $ 1.4 million and approximately $42.9 million and $126.7 million, respectively, for the three and nine month period ended September 30, 2023.

Total advisory and brokerage assets served were $26.9 billion at September 30, 2024, compared to $22.8 billion at September 30, 2023.

Total net new assets were $0.4 billion and $(1.8) billion for the three- and nine-month period ended September 30, 2024, compared to $0.5 and $(3.2) billion for the same period in 2023.

Net new advisory assets were $0.0 billion and (0.1) billion for the three and nine-month period ended September 30, 2024, compared to $0.0 billion and $(0.5) billion for the same period in 2023.

Advisory assets were $2.5 billion at September 30, 2024, which is an increase of approximately 23% from the the $2.0 billion at September 30, 2023.

Net new brokerage assets were $0.4 and (1.7) billion for the three and nine-month period ended September 30, 2024, compared to $0.5 billion and $(2.7) billion for the same period in 2023.

Brokerage assets were $24.5 billion at September 30, 2024, up 17.5% from $20.8 billion at September 30, 2023.

Results for the three-month period ended March 31, 2025 included net income of approximately $1.0 million and total revenue of approximately $48.9 million, which compares to a net loss and total revenue of $(1.6) million and approximately $41.4 million, respectively, for the three-month period ended March 31, 2024.

Total advisory and brokerage assets served were $25.7 billion at March 31, 2025, compared to $24.9 billion at March 31, 2024.

Total net new assets were $(0.2) billion for the three-month period ended March 31, 2025, compared to $(1.5) billion for the same period in 2024.

Net new advisory assets were $0.1 billion for the three-month period ended March 31, 2025, compared to $(0.1) billion for the same period in 2024.

Advisory assets were $2.5 billion at March 31, 2025, which is an increase of 12% as compared to the $2.3 billion at March 31, 2024.

Net new brokerage assets were $(0.3) billion for the three-month period ended March 31, 2025, compared to $(1.4) billion for the same period in 2024.

Brokerage assets were $23.2 billion at March 31, 2025, up 2% from $22.7 billion at March 31, 2024.

Gross Profit Trend

Gross profit, a non-GAAP financial measure, was $8.4 million and $23.5 million for the three and nine-month period ended September 30, 2024, an increase of approximately 20% and 3% from $7.0 million and $22.8 million for the three and nine-month period ended September 30, 2023.

Gross profit, a non-GAAP financial measure, was $8.6 million for the three-month period ended March 31, 2025, an increase of 11% from $7.8 million for the three-month period ended March 31, 2024.

See the “Key Performance Metrics and Non-GAAP Financial Measures” section for additional information on gross profit.

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Our key operating, business and financial metrics are as follows:

As of and for the Three Months Ended September 30,

Operating Metric (dollars in billions)

Advisory and Brokerage Assets

Brokerage assets

Advisory assets

Total Advisory and Brokerage Assets

Net New Assets

Net new brokerage assets

Net new advisory assets

Total Net New Assets

Financial Metrics (dollars in millions)

Total revenue

Net income (loss)

Non-GAAP Financial Metrics (dollars in millions)

Gross Profit(1)

As of and for the Nine Months Ended September 30,

As of and for the Three Months Ended March 31,

Operating Metric (dollars in billions)

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Below is a calculation of gross profit for the periods presented (in millions):

For the Three Months Ended September 30,

Total revenue

Commission and fees

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Total revenue

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Below is a reconciliation of net income to EBITDA for the periods presented (in millions):

For the Three Months Ended September 30,

EBITDA Reconciliation

Net income (loss)

Interest expense

Provision for income taxes

Depreciation and amortization

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

EBITDA Reconciliation

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Bureau of Economic Analysis, the U.S.

economy grew at an annualized pace of 2.8% in the third quarter of 2024, after growing at an annualized pace of 1.6% and 2.8% in the first and second quarter of this year, respectively.

economy added roughly 558,000 jobs in the third quarter of 2024, while the unemployment rate averaged 4.1% in the third quarter of 2024, consistent with the average in the prior quarter.

economy contracted by 0.3% in the first quarter of 2025, which is the first decline in GDP since the first quarter of 2022.

Although inflation, interest rates and volatile global markets were all headwinds, the U.S.

economy added roughly 456,000 jobs in the first quarter of 2025, while the unemployment rate was 4.2% in the first quarter of 2025, which is consistent with the prior quarter.

The unemployment rate has remained in a narrow range of 4.0% to 4.2 since May 2024.

Our business is also sensitive to current and expected short-term interest rates, which are largely driven by Fed policy.

During the third quarter of 2024, Fed policymakers lowered the target range for the federal funds rate to 4.8% to 5.0%.

The equity markets surged to new highs resulting in the S&P 500 returning 5.9% during the third quarter of 2024.

During the first quarter of 2025, Fed policymakers maintained the target range for the federal funds rate in the 4.25% to 4.5% range.

The equity markets declined during the first quarter of 2025 resulting in the S&P 500 declining 4.4%.

Please consult the Factors Affecting Our Financial Condition and Results of Operations, including those described in the section titled “ Risk Factors .”

Basis of Presentation

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Currently, we conduct business through one operating segment.

The consolidated financial statements have been prepared assuming that we will continue as a going concern.

See Note 1 in the accompanying consolidated financial statements for further details.

The condensed consolidated financial statements have been prepared assuming that we will continue as a going concern.

See Note 2 in the accompanying condensed consolidated financial statements for further details.

Results of Operations

The following presents an analysis of our results of operations for the three and nine-month periods ended September 30, 2024 and 2023 ( in thousands ):

For the three months ended September 30,

For the nine months ended September 30,

The following presents an analysis of our results of operations for the three-month periods ended March 31, 2025 and 2024 ( in thousands ):

For the three months ended March 31,

Revenue from Contracts with Customers :

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Total revenues

For the three months ended September 30,

For the nine months ended September 30,

Commissions and fees

For the three months ended March 31,

Commission and fees

Employee compensation and benefits

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Total expenses

Income (loss) before provision (benefit) for income taxes

Provision (benefit) for income taxes

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

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Accordingly, total commission revenue is reported on a gross basis.

See Note 4 - Revenues From Contracts with Customers within the notes to the condensed consolidated financial statements for the three and nine-month periods ended September 30, 2024, and 2023 for further details regarding our commission revenue by product category.

The following tables sets forth the components of our commission revenue for the three and nine-month periods ended September 30, 2024 and 2023 (in thousands):

For the three months ended September 30,

Total commission revenue

For the nine months ended September 30,

See Note 4 - Revenues From Contracts with Customers within the notes to the condensed consolidated financial statements for the three-month periods ended March 31, 2025, and 2024 for further details regarding our commission revenue by product category.

The following tables sets forth the components of our commission revenue for the three-month periods ended March 31, 2025 and 2024 (in thousands):

For the three-month period ended March 31,

Total commission revenue

Sales-based revenue decreased by approximately $2.5 and $8.1 million or 13.2% and 14.5% for the three and nine-month period ended September 30, 2024, respectively, as compared to 2023.

Trailing based revenue increased by approximately $1.8 and $6.8 million or 10.9% and 14.3% for the three and nine-month periods ended September 30, 2024, respectively, as compared to 2023.

The decrease in sales-based revenue for the three and nine-month periods ended September 30, 2024 as compared to 2023 is attributable to a decrease in the generation of transactional based products.

The increase in the trailing based revenues is primarily due to the positive market performance related to the trail-eligible assets.

Commission revenue is generated from brokerage assets.

The following tables summarize the brokerage assets as of September 30, 2024 and 2023 (in billions):

As of September 30,

Sales-based revenue increased by approximately $4.6 million or 29.5% for the three-month period ended March 31, 2025, as compared to 2024.

Trailing based revenue increased by approximately $2.1 million or 11.3% for the three-month period ended March 31, 2025, as compared to 2024.

The increase in sales-based revenue for the three-month periods ended March 31, 2025, as compared to 2024 is attributable to an increase in the generation of transactional based products.

The increase in the trailing based revenues is due to the increase in trail-based assets resulting from inflows of assets and positive market volatility.

Commission revenue is generated from

brokerage assets.

The following tables summarize the brokerage assets for the three-month periods ended March 31, 2025 and 2024 (in billions):

As of March 31,

Brokerage Assets

Included in the brokerage assets above are trail-eligible assets as follows (in billions):

As of September 30,

As of March 31,

Trail-Eligible Assets

The following table summarizes activity impacting brokerage assets for the periods ended (in billions):

Three Months Ended September 30,

Balance - Beginning of period

Net new brokerage assets(1)

Market impact(2)

Balance - End of period

Nine Months Ended September 30,

Three Months Ended March 31,

Balance - Beginning of period

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The advisory fees generated from the Company’s corporate advisory platform are based on a percentage of the market value of the eligible assets in the clients’ advisory accounts.

Advisory fees increased by approximately 14.7% and 11.7% for the three and nine-month periods ended September 30, 2024, respectively, as compared to the same periods in September 30, 2023, due to positive returns in the market offset by outflows of advisory assets.

The following tables summarizes the advisory assets as of September 30, 2024 and 2023 (in billions):

As of September 30,

Advisory fees increased by approximately 21.7% for the three-month periods ended March 31, 2025, as compared to the same period in March 31, 2024, due to positive returns in the market from the period of March 31, 2024 to the period ending March 31, 2025 and net inflows of advisory assets during the period ended March 31, 2025.

The following tables summarizes the advisory assets for the three-month periods ended March 31, 2025 and 2024 (in billions):

As of March 31,

Advisory Assets

The following table summarizes activity impacting advisory assets for the periods ended (in billions):

Three Months Ended September 30,

Balance - Beginning of period

Net new advisory assets(1)

Market impact(2)

Balance - End of period

Nine Months Ended September 30,

Three Months Ended March 31,

Balance - Beginning of period

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Other income primarily includes amounts earned by the Company related to marketing and incentives earned from the sales of certain investment products by the financial advisors to its clients, primarily alternative investments, as well as sponsorship income.

The decrease in interest and other income for the period ended September 30, 2024, compared to 2023 is primarily related to a non-recurring income item that was earned in March 2023.

The decrease in interest and other income for the period ended March 31, 2025, compared to 2024 is primarily related to a non-recurring income item that was earned in March 2024.

Operating Expenses

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The following table sets forth our payout rate, which is a statistical or operating measure and monitored to review that such costs of revenue remain consistent on a period over period basis:

For the three months ended September 30,

For the Nine Months ended September 30,

For the three and nine-month periods ended September 30, 2024, the payout rate decreased as compared to 2023 as a result of in the prior year there was a non-recurring commissionable product that carried a payout at 90%.

For the three months ended March 31,

For the three-month periods ended March 31, 2025, the payout rate increased as compared to 2024 as a result of an increase in transactional products sold during the first quarter of 2025 which included a pay-out to the financial advisors in the range of 90%.

Employee compensation and benefits

Employee compensation and benefits includes salaries, wages, benefits and related taxes for our employees.

Employee compensation and benefits for the three-month period ended September 30, 2024 increased as compared to September 30, 2023, by 27.5%, which relates to the addition of personnel costs attributed to the Company now operating as a public company.

Employee compensation and benefits for the nine-month period ended September 30, 2024 increased as compared to September 30, 2023, by 11.3% which relates to the addition of personnel costs attributed to the Company now operating as a public company.

Employee compensation and benefits for the three-month period ended March 31, 2025 increased by $0.9 million as compared to March 31, 2024, which is directly related to the additional personnel costs attributed to the Company now operating as a public company.

Rent and occupancy

Rent and occupancy remained relatively consistent for the three-month period ended September 30, 2024 as compared to September 30, 2023 increasing slightly by 0.2%.

Rent and occupancy remained relatively consistent for the nine-month period ended September 30, 2024 as compared to September 30, 2023 decreasing by 3.3%.

Rent and occupancy remained relatively consistent for the three-month period ended March 31, 2025 as compared to March 31, 2024 decreasing slightly by 3.4%.

Professional fees

Professional fees includes costs incurred related to legal and accounting services.

Professional fees for the three and nine-month periods ended September 30, 2024, as compared to 2023 increased by $0.4 million and $3.6 million, respectively, which is directly related to transaction costs associated with the Business Combination and specific costs related to the Company now operating as a public company.

Professional fees for the three-month periods ended March 31, 2025, as compared to 2024 decreased by $3.8 million, which is directly related to the non-recurring transaction costs associated with the closing of the Business Combination that were incurred during the period ended March 31, 2024.

Technology fees

Technology fees primarily represent infrastructure costs that support the Company’s technology and communications costs.

Technology fees decreased by $0.2 million and $0.3 million for the three and nine-month periods ended September 30, 2024, respectively, as compared to 2023.

Technology fees increased by $0.4 million for the three-month period ended March 31, 2025, as compared to 2024.

Interest expense

Interest expense primarily includes interest associated with the Company’s credit facility and other debt obligations.

Interest expense decreased by $0.5 million and $1.3 million for the three and nine-month periods ended September 30, 2024, respectively, as compared to 2023 resulting from the repayment and restructuring of the related party debt obligations of BMS.

Interest expense decreased by $0.5 million for the three-month period ended March 31, 2025, as compared to 2024 resulting from the repayment and restructuring of the related party debt obligations of BMS and the re-financing of the senior credit facility.

Depreciation and amortization

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Provision for Income Taxes

Our effective income tax rate was approximately (46)% and (26)% for the three and nine-month periods ended September 30, 2024, as compared to (100)% and 20% for the same periods in 2023, respectively.

The decrease in our effective tax rate was related to the transaction expenses related to the Reverse Recapitalization.

Our effective income tax rate was approximately 23% three-month period ended March 31, 2025, as compared to (7)% for the same period in 2024.

The increase in our effective tax rate was related to the net income generated for the three-month period ended March 31, 2025.

Liquidity and capital resources

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Sources of Liquidity

As of September 30, 2024, we had $19.1 million outstanding under our Senior Credit Facility with Oak Street Funding, LLC, net of debt issuance costs.

As of March 31, 2025, we had $19.1 million outstanding under our Credit Agreement with Byline Bank, net of unamortized debt issuance costs.

The associated debt facilities are as follows:

Oak Street Funding, LLC

On April 2, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”) with Oak Street Funding LLC (“Oak Street”) in the amount of $25 million.

This note payable bears interest at the prime rate (“Prime”) (8.00% as of September 30, 2024) plus 2.25% and has a 10-year term and a 3-month interest only repayment provision.

As of September 30, 2024 and December 31, 2023, the outstanding balance of the Oak Street note, net of unamortized debt issuance costs was $16.2 million and $17.6 million, respectively.

On April 25, 2021, the Company entered into an additional promissory note with Oak Street in the amount of $4.1 million related to the acquisition of WEG (“WEG Note”).

This note payable bears interest at Prime plus 2.25% and has a 10-year term.

As of September 30, 2024 and December 31, 2023, the outstanding balance of this note, net of unamortized debt issuance costs was $3.0 million and $3.2 million, respectively.

Under the Oak Street notes, the Company is subject to certain covenants as defined in the agreements.

As of September 30, 2024 and December 31, 2023, the Company was in compliance with all financial related covenants.

The minimum payments and maturities of the Oak Street notes as of September 30, 2024 were as follows (in thousands):

On December 23, 2024 (the “Credit Agreement Closing Date”), BMS, entered into a Credit Agreement (the “Credit Agreement”) with Byline Bank, as lender (the “Lender”), pursuant to which the Lender agreed, at the BMS’s request, to (i) make to BMS a term loan in the original principal amount of $20.3 million (the “Term Loan”), which was funded on the Credit Agreement Closing Date;

(ii) make to BMS, from time to time, certain non-revolving loans (the “Non-Revolving Loans”) in an aggregate principal amount of up to $1.0 million (the “Non-Revolving Loan Commitment”), to be funded through, but excluding, the Maturity Date (as defined below);

and (iii) issue to BMS, from time to time, letters of credit (the “Letters of Credit” and together with the Term Loan and Non-Revolving Loans, the “Loans”) until the earliest to occur of (a) the one year from the Credit Agreement Closing Date and (b) the date on which the Non-Revolving Loans are fully drawn.

As of March 31, 2025 and December 31, 2024, the outstanding balance on the Term Loan was $19.1 million and $19.6 million, net of debt issuance costs, respectively.

Under the terms of the Credit Agreement, to the extent that BMS requests a Letter of Credit, the Non-Revolving Loan Commitment shall be permanently reduced in an amount equal to the amount of such Letter of Credit.

The Non-Revolving Loans may not be requested by BMS and may only be advanced in connection with a repayment of a Letter of Credit (“LC Payment”).

As of March 31, 2025 and December 31, 2024, there are no amount outstanding under the Non-Revolving Loan or Letters of Credit.

The Loans (both principal and any remaining unpaid interest) made by the Lender to BMS are scheduled to mature and become immediately due and payable in full on December 23, 2029 (“Maturity Date”).

The obligations under the Credit Agreement shall bear interest (i) as to the Term Loan, a per annum variable interest rate equal to the Applicable Margin (as defined in the Credit Agreement) plus the greater of (x) the Term Secured Overnight Financing Rate (“SOFR”) (as defined in the Credit Agreement) and (y) one percent (1.00%) (the “Term Loan Interest Rate”);

(ii) as to the Non-Revolving Loans or any reimbursement obligations relating to a Letter of Credit, at an interest rate equal to SOFR plus four percent (4.00%) per annum;

and (iii) if any other obligations is created under the Loan Documents (as defined in the Credit Agreement), at the Term Loan Interest Rate.

As of March 31, 2025 and December 31, 2024, the effective interest rate was 8.3%.

The Term Loan was used by BMS to refinance Existing Credit Facilities (as defined in the Credit Agreement) and the Non-Revolving Loans must be used solely to reimburse the Lender with respect to any Letters of Credit issued to BMS.

The Term Loan refinanced and retired the previous Oak Street Funding Facility.

The Credit Agreement also includes customary covenants for a transaction of this type, including covenants limiting the indebtedness that can be incurred by BMS and restricting BMS’s ability to make certain loans and investments.

Additionally, BMS is subject to financial covenants whereby BMS and its subsidiaries on a consolidated basis may not have, as of the last day of each fiscal quarter, commencing with fiscal quarter ending on March 31, 2025, (1) a fixed charge coverage ratio as of the last day of the fiscal quarter for the twelve (12) month period then ended of not less than 1.20 to 1.00;

(ii) a senior net leverage ratio as of the last day of such Fiscal Quarter for the twelve (12) month period then ended, of (A) for the fiscal quarter ended March 31, 2025 and each fiscal quarter through and including September 30, 2025, not more than 3.00 to 1.00;

and (B) for the fiscal quarter ended December 31, 2025 and each fiscal quarter ending thereafter, not more than 2.75 to 1.00;

or (iii) an annualized revenue received from custodians of at least $18.0 million.

Also, in accordance with the Credit Agreement, BMS has deposited $1.0 million into an A/P Reserve Account and is classified as restricted cash.

The minimum calendar year payments and maturities of the Term Loan as of March 31, 2025 were as follows ( in thousands ) :

Series A Redeemable Convertible Preferred Stock

On March 15, 2024 (the “Funding Date”) in connection with the consummation of the Business Combination, Holdings and BMS entered into a Subscription Agreement with an investor for the purchase of 1,500,000 shares of Holdings’ Series A Redeemable Convertible Preferred Stock (the “ Holdings Series A Stock ”) in a private placement at $9.60 per share, for an aggregate purchase price of $14,400,000 (the “ Series A PIPE ”).

On March 15, 2024 (the “Funding Date”) in connection with the consummation of the Business Combination, Holdings and Wentworth entered into a Subscription Agreement with an investor for the purchase of 1,500,000 shares of Holdings’ Series A Redeemable Convertible Preferred Stock (the “ Holdings Series A Stock ”) in a private placement at $9.60 per share, for an aggregate purchase price of $14.4 million (the “ Series A PIPE ”).

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At the discretion of Holdings the payment may be made in cash or up to 50% of the amount due, in duly authorized, validly issued, fully paid and non-assessable share of Holdings Series A Stock at a value of $10 per share.

As of March 31, 2025, the Company accrued 50% of the dividend to be paid in cash in the amount of $0.2 million and paid an in - kind dividend in the amount $0.2 million.

As of December 31, 2024, the Company accrued 50% of the dividend to be paid in cash in the approximate amount of $0.2 million.

The Holdings Series A Stock has liquidation preferences in the event of a voluntary or involuntary liquidation as follows:

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Series B Convertible Preferred Stock

On September 4, 2024, the Company entered into a Subscription Agreement with certain investors for the purchase of 150,000 shares of Holdings’ Series B Convertible Preferred Stock (the “ Holdings Series B Stock ”) in a private placement at $10.00 per share, for an aggregate purchase price of $1,500,000).

The Holdings Series B Stock may be converted into shares of Holdings Common Stock, at the option of the investor at a rate equal to the quotient of (i) $10.00 divided, by (ii) the product of (A) .80 multiplied by, (B) the volume weighted average price for the 20 trading days during the 30-day period immediately prior to such conversion, provided that in no event shall the denominator be less than $6.00 per share (the “Conversion Rate”).

On September 4, 2024, the Company entered into a Subscription Agreement with an investor for the purchase of 150,000 shares of Holdings’ Series B Convertible Preferred Stock (the “ Holdings Series B Stock ”) in a private placement at $10.00 per share, for an aggregate purchase price of $1.5 million.

The Holdings Series B Stock may be converted into shares of Holdings Common Stock, at the option of the investor at a rate equal to the quotient of (i) $10.00 divided, by (ii) the product of (A).

80 multiplied by, (B) the volume weighted average price for the 20 trading days during the 30-day period immediately prior to such conversion, provided that in no event shall the denominator be less than $6.00 per share (the “Conversion Rate”).

Additionally, the Holdings Series B Stock carries a cumulative dividend at a rate of nine percent (7%) per annum, payable and compounded quarterly on the last day of each quarter.

At the discretion of Holdings, the payment may be made in cash or up to 50% of the amount due, in duly authorized, validly issued, fully paid and non-assessable share of Holdings Series B Stock at a value of $10 per share.

As of March 31, 2025 and December 31, 2024, included in accounts payable, accrued expenses and other liabilities on the accompanying consolidated statement of financial condition is an accrued dividend in the amount of $0.03 million that was paid subsequent to March 31, 2025 and December 31, 2024.

The Company may, at its option, in whole, or part, redeem the Holdings Series B Stock any time after the first anniversary of the date of the Subscription Agreement at a redemption price equal to the greater of (i) $12.00 per share of Holdings Series B Stock, plus accrued but unpaid dividends or (A) 1.20 multiplied by (B) the volume weighted average price for 20 trading days during the 30-day period immediately prior to the redemption;

provided that such price shall not greater than $20.00.

Other promissory notes

On November 30, 2017, BMS issued subordinated promissory notes in the aggregate principal amount of approximately $3.6 million to certain sellers in connection with the acquisition of the PKSH Entities.

Promissory notes - affiliates

On November 30, 2017, Wentworth issued subordinated promissory notes in the aggregate principal amount of approximately $3.6 million to certain sellers in connection with the acquisition of the PKSH Entities.

These notes had a maturity date of May 17, 2023 and accrued interest at a rate of 10% annually.

The interest on these notes continued to accrue until such time as these notes were paid or restructured.

Contingent consideration subordinated promissory notes

Additionally, in connection with the acquisition of the PKSH Entities, BMS agreed to pay contingent consideration in the amount of $5.0 million to certain sellers.

The conditions related to this contingency were met on November 30, 2018, and thus the notes had been issued to the sellers.

The interest on these notes continued to accrue until such time as these notes were paid.

Additionally, in connection with the acquisition of the PKSH Entities, the Company agreed to pay contingent consideration in the amount of $5.0 million to certain sellers.

The conditions related to this contingency were met on November 30, 2018, and thus the notes

had been issued to the sellers.

These subordinated promissory notes had a maturity date of May 30, 2023, and accrued interest at a rate of 10% annually.

The interest on these notes continued to accrue until such time as these notes were paid or restructured.

As of December 31, 2023, the amount of principal and accrued interest related to these promissory notes was approximately $12.2 million.

Related interest expense was approximately $0 million and $0.5 million for the periods ended September 30, 2024 and 2023, respectively.

The interest on these notes continued to accrue until such time as these notes were paid.

In connection with the closing of the Business Combination, the Company paid approximately $3.4 million on these notes.

In addition to the paydown, the noteholders agreed to forgive the remaining accrued but unpaid interest of approximately $3.8 million and entered into new promissory notes in the principal amount of approximately $5.3 million in the aggregate.

In addition to the paydown, the noteholders (all of whom are stockholders and/or key employees) agreed to forgive the remaining accrued but unpaid interest of approximately $3.8 million and entered into new promissory notes in the principal amount of approximately $5.3 million in the aggregate.

The amounts outstanding as of March 31, 2025 was $5.3 million.

The amount outstanding as of December 31, 2024 was $5.4 million which included accrued interest that was paid subsequently.

The terms of these new promissory notes provide for maturity on May 15, 2027 and carries an interest rate of Prime plus 1.00%, but no less than 7.50% per annum.

Other commitments

BMS had entered into promissory notes with certain of its members to provide for working capital.

As of December 31, 2023, the amount of principal and accrued interest related to these notes were approximately $5.2 million.

The notes carried an interest at the rate of 10% and were due on demand.

In connection with the closing of the Business Combination, the noteholders agreed to satisfy all outstanding obligations, including the payment of principal and interest, in exchange for an amount of cash equal to approximately $0.9 million, forgiveness of certain other obligations owed to a noteholder and the issuance of 357,000 shares of Common Stock of Binah Capital Group, Inc.

The following table sets forth a summary of cash flows for the nine-month period ended September 30, 2024 and 2023:

Related interest expense was approximately $0.1 and $0.02 for the three-months ended March 31, 2025 and 2024, respectively.

The following table sets forth a summary of cash flows for the three-month periods ended March 31, 2025 and 2024:

(in thousands)

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by (used in) financial activities

Net cash (used in) provided by financing activities

Net change in cash flows

Cash Flows from Operating Activities .

Net cash used in operating activities was $2.4 million for the nine-month period ended September 30, 2024, compared to net cash provided by of $0.4 million for the nine-month period ended September 30 2023, representing a decrease of approximately $2.7 million or 766%.

The decrease was primarily attributable to the decrease in net income of approximately $4.9 million to a net loss of $(3.5) million.

Net cash provided by operating activities was $1.1 million for the three-month period ended March 31, 2025, compared to net cash used in of $3.1 million for the three-month period ended March 31 2024, representing an increase of approximately $4.2 million or 134%.

The increase was primarily attributable to the decrease in the net loss of approximately $1.5 million to net income of $1.0 million or a change of $2.6 million.

Cash Flows from Investing Activities .

Net cash used in investing activities was $.02 million for the nine-month period ended September 30, 2024, compared to $0.1 million for the nine-month period ended September 30, 2023.

The increase was primarily related to a decrease in the purchases of property and equipment.

Net cash used in investing activities was $0.01 million for the three-month period ended March 31, 2025, consistent with the $0.01 million for the three-month period ended March 31, 2024.

Cash Flows from Financing Activities .

Net cash provided by financing activities was approximately $2.0 million for the nine-month period ended September 30, 2024 compared to cash used in financing activities of approximately $1.9 million for the nine-month period ended September 30, 2023.

Net cash used in financing activities was approximately $0.7 million for the three-month period ended March 31, 2025 compared to cash provided by financing activities of approximately $1.7 million for the three-month period ended March 31, 2024.

The change is primarily related to the proceeds received from the Redeemable Convertible Preferred Financing offset by the repayments of the BMS related party debt obligations.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and other commitments as of September 30, 2024:

The following table summarizes our contractual obligations and other commitments as of March 31, 2025:

Payments Due by period

4 unchanged sentences

Long-term debt obligations (1)

Interest payments

Promissory notes - affiliates (2)

Operating lease obligations (3)

(1) Represents principal obligations related to the Oak Street credit facility that was entered into during the years ended December 31, 2020 and 2021.

(1) Represents principal obligations related to the Byline Credit Agreement that was entered into during the year ended December 31, 2024.

(2) Represents the obligations under the amounts due to certain sellers of the PKSH entities.

(3) Represents future minimum lease payments as of September 30, 2024, under non-cancelable office leases.

The notes mature in March 2027.

(3) Represents future minimum lease payments as of March 31, 2025, under non-cancelable office leases.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Although these estimates are based on the

Company’s knowledge of current events and actions the Company may undertake in the future, actual results could differ from those estimates and assumptions.

Although these estimates are based on the Company’s knowledge of current events and actions the Company may undertake in the future, actual results could differ from those estimates and assumptions.

We define our critical accounting policies and estimates as those that require us to make subjective judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles.

3 unchanged sentences

Management exercises judgment in determining whether the Company is the principal (i.e., reports revenues on a gross basis) or agent (i.e., reports revenue on a net basis).

For additional information see Note 4 in the consolidated financial statements as of and for the three and nine-months periods ended September 30, 2024 and 2023.

For additional information see Note 4 in the consolidated financial statements as of and for the three-months periods ended March 31, 2025 and 2024.

Goodwill and Other Intangible Assets

11 unchanged sentences

Our guideline public company method incorporates revenue and earnings multiples from publicly traded companies with operations and other characteristics similar to each reporting unit.

As a result of the 2023 and 2022 annual impairment tests, the fair value of the reporting units was 257% and 266% greater than its carrying value, respectively.

As a result of the 2024 and 2023 annual impairment tests, the fair value of the reporting units was approximately 270% and 257% greater than its carrying value, respectively.

Since there have been no events or circumstances which indicated that it was more likely than not the fair value of the reporting units were below their carrying amount, interim goodwill tests were not considered necessary.

15 unchanged sentences

Recently Issued Accounting Pronouncements

Refer to Note 2 - Summary of Significant Accounting Policies, within the notes to the consolidated financial statements for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us.

Refer to Note 2 - Summary of Significant Accounting Policies, within the notes to the condensed consolidated financial statements for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis