UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-56442

GPB Holdings II, LP

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	47-3870808 (I.R.S. Employer Identification No.)
c/o Highline Management, Inc. 3355 Old Field Pont Road, Suite 1 East ~~33rd Street, Suite 807~~ ~~New York~~Greenwich, NYCT (Address of principal executive offices)	~~10016~~06830 (Zip Code)

(877) 489-8484

Registrant’s telephone number, including area code

Securities ~~to be~~ registered pursuant to Section 12(b) of the Act:




Title of each class	Trading Symbol(s)	Name of each exchange on which each class is registered
None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
		Emerging growth company	☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Table of Contents


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements:
	Condensed Consolidated ~~Balance Sheets~~Statements of Net Assets in Liquidation as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023	2
	Condensed Consolidated ~~Statements~~Statement of Changes in Net Assets in Liquidation for the three months ended March 31, 2024	3
	Condensed Consolidated Statement of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 ~~and 2022~~	4
	Condensed Consolidated ~~Statements~~Statement of Comprehensive loss for the three months ended March 31, 2023	5
	Condensed Consolidated Statement of Changes in Partners’ Capital for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 ~~and 2022~~	6
	Condensed Consolidated ~~Statements~~Statement of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 ~~and 2022~~	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3725
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4929
Item 4.	Controls and Procedures	4930
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	5131
Item 1A.	Risk Factors	6031
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds ~~and Issuer Purchases of Equity Securities~~	6031
Item 3.	Defaults Upon Senior Securities	6031
Item 4.	Mine Safety Disclosures	6031
Item 5.	Other Information	6031
Item 6.	Exhibits	6132
	Signatures	6233

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated ~~Balance Sheets~~Statement of Net Assets in Liquidation

(Liquidation Basis)

(Dollars in thousands)

(Unaudited)

Item 1. Unaudited Condensed Consolidated Financial Statements.

September 30,

December 31,


2023

2022
Assets




Current assets:




Cash and cash equivalents

$
50,706

$
334,427
Restricted cash

—

18,227
Investment securities, current portion

297,847

—
Accounts receivable, net

27,070

26,909
Inventories

868

1,097
Prepaid expenses

4,832

5,649
Contract assets

653

15,740
Assets held for sale, continuing operations

29,357

—
Assets held for sale, discontinued operations

11,550

21,583
Total current assets

422,883

423,632
Non-current assets:




Property and equipment, net

8,951

8,245
Investment securities, net of current portion

734

729
Equity method investments

8,830

15,467
Right-of-use assets operating

5,551

6,535
Goodwill

71,549

78,895
Intangible assets, net

45,684

67,973
Other non-current assets

719

699
Total non-current assets

142,018

178,543
Total assets

$
564,901

$
602,175


	March 31,		December 31,
	2024		2023
Assets
Cash and cash equivalents	$	17,690	$	33,038
Investment securities		497,481		340,196
Escrow receivable		12,892		13,393
Assets held for sale, discontinued operations		—		145,585
Total assets	$	528,063	$	532,212
Liabilities
Liability for estimated costs in excess of estimated receipts during liquidation	$	39,811	$	50,510
Distribution payable for tax withholding		1,100		1,000
Debt		—		3,333
Due to related parties		173		23
Total liabilities		41,084		54,866
Commitments and Contingencies (See “Note 5. Commitments and Contingencies”)
Net assets in liquidation:
Net assets attributable to the Partnership in liquidation		485,768		464,245
Net assets attributable to the non-controlling interests in liquidation		1,211		13,101
Total net assets in liquidation	$	486,979	$	477,346

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated ~~Balance Sheets~~Statement of Changes in Net Assets in Liquidation

(Liquidation Basis)

(Dollars in thousands)

(Unaudited)

September 30,

December 31,


2023

2022
Liabilities and Partners’ Capital




Current liabilities:




Accounts payable

$
6,545

$
8,192
Accrued expenses

20,072

21,510
Deferred revenue and customer deposits

4,601

19,319
Long-term debt, current portion

4,175

1,724
Finance lease liabilities, current portion

132

224
Operating lease liabilities, current portion

2,507

2,533
Liabilities held for sale, continuing operations

7,905

—
Due to related parties

4,429

374
Total current liabilities

50,366

53,876
Non-current liabilities:

Long-term debt, net of current portion

1,354

25
Finance lease liabilities, net of current portion

—

159
Operating lease liabilities, net of current portion

2,778

3,498
Deferred tax liabilities

4,016

4,033
Other liabilities

597

816
Total non-current liabilities

8,745

8,531
Total liabilities

59,111

62,407
Commitments and contingencies (see Note 11)

Partners’ capital

Partners’ capital attributable to the Partnership

502,753

529,172
Accumulated other comprehensive loss

(2,607)

(2,170)
Total partners’ capital attributable to the Partnership

500,146

527,002
Non-controlling interests

5,644

12,766
Total partners’ capital

505,790

539,768
Total liabilities and partners’ capital

$
564,901

$
602,175


	Three Months
	Ended March 31,
	2024
Net assets in liquidation, beginning of period	$	477,346
Changes in assets and liabilities in liquidation:
Decrease in investment securities		(86)
Decrease in liability for estimated costs in excess of estimated receipts during liquidation		9,135
Increase in distribution payable for tax withholding		(147)
Increase in due to related party		(150)
Net changes in liquidation value		8,752
Changes in net assets in liquidation resulting from settlement of assets and liabilities:
Proceeds received in excess of assets recorded		881
Changes in net assets in liquidation		9,633
Net assets in liquidation, end of period	$	486,979

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

(Dollars in thousands)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,


2023

2022

2023

2022
Revenues:









Product revenue

$
5,035

$
25,790

$
26,261

$
56,171
Service revenue

33,803

30,493

106,049

92,899
Debt investment interest income

79

77

236

248
Gain on sale of investment securities

—

—

29

—
Unrealized gain on investment securities

231

76

63

76
Other revenue

—

—

—

67
Total revenues

39,148

56,436

132,638

149,461
Cost of revenues:

Cost of goods sold

8,010

10,920

20,175

26,321
Cost of services

19,102

15,302

58,823

52,108
Total cost of revenues

27,112

26,222

78,998

78,429
Gross profit

12,036

30,214

53,640

71,032
Operating expenses (income):

Selling, general and administrative expenses

25,924

25,047

67,838

65,106
Managerial assistance fee, related party

3,089

2,939

9,205

8,315
Rent expense

863

1,054

2,873

3,319
Loss from equity method investments

8,235

7,596

4,287

6,572
Gain on disposal of businesses

(7,460)

—

(7,460)

(6,723)
Loss (gain) on changes in contingent liability

400

—

(5,891)

—
Impairment of goodwill and intangibles

—

—

15,004

—
Depreciation and amortization

4,128

3,715

12,768

11,393
Total net operating expenses

35,179

40,351

98,624

87,982
Operating loss

(23,143)

(10,137)

(44,984)

(16,950)
Other income (expense):

Interest expense

(79)

(36)

(338)

(2,787)
Interest expenses, related parties

—

(1)

—

(400)
Interest income

4,658

1,322

10,718

1,707
Loss on extinguishment of debt

—

—

—

(4,502)
Other expense

(374)

(345)

(1,820)

(493)
Total other income (expense)

4,205

940

8,560

(6,475)
Loss from continuing operations, before tax

(18,938)

(9,197)

(36,424)

(23,425)
Income tax expense

(95)

(195)

(562)

(550)
Net loss from continuing operations

(19,033)

(9,392)

(36,986)

(23,975)
Net income (loss) from discontinued operations

767

(176)

1,357

1,469
Gain on sale of discontinued operations

—

300

—

7,919
Net income from discontinued operations

767

124

1,357

9,388
Net loss of continuing and discontinued operations

(18,266)

(9,268)

(35,629)

(14,587)
Net income (loss) attributable to non-controlling interests

(4,601)

164

(10,379)

2,539
Net loss attributable to the Partnership

$
(13,665)

$
(9,432)

$
(25,250)

$
(17,126)


	Three Months
	Ended March 31,
	2023
Operating expenses (income):
Selling, general and administrative expenses	$	5,718
Managerial assistance fee, related party		3,028
Income from equity method investments		(3,464)
Total net operating expenses		5,282
Operating loss		(5,282)
Other income:
Interest income		3,319
Other income		119
Total other income		3,438
Net loss from continuing operations		(1,844)
Income from discontinued operations		1,068
Income tax expense, discontinued operations		(211)
Net income from discontinued operations		857
Net loss from continuing and discontinued operations		(987)
Net income attributable to non-controlling interests		244
Net loss attributable to the Partnership	$	(1,231)

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statement of ~~Operatins~~Comprehensive Income

(Dollars in thousands)

(Unaudited)

Three months ended September 30,

Nine months ended September 30,


2023

2022

2023

2022
Net loss

$
(18,266)

$
(9,268)

$
(35,629)

$
(14,587)
Other comprehensive loss:

Foreign currency translation loss

(354)

(418)

(479)

(943)
Total other comprehensive loss

(18,620)

(9,686)

(36,108)

(15,530)
Other comprehensive loss attributable to non-controlling interests

(31)

(34)

(42)

(93)
Net income (loss) attributable to non-controlling interest

(4,601)

164

(10,379)

2,539
Comprehensive loss attributable to the Partnership

$
(13,988)

$
(9,816)

$
(25,687)

$
(17,976)


	Three Months
	Ended March 31,
	2023
Net loss		(987)
Other comprehensive loss:
Foreign currency translation loss		(132)
Total comprehensive loss		(1,119)
Other comprehensive loss attributable to non-controlling interests		(12)
Net income attributable to non-controlling interest		244
Comprehensive loss attributable to the Partnership	$	(1,351)

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Partners’ Capital

(Dollars in thousands)

(Unaudited)


									Partners’																Partners’
									Capital		Accumulated														Capital		Accumulated
	Class A		Class A-1		Class B		Class B-1		Attributable		Other		Non-				Class A		Class A-1		Class B		Class B-1		Attributable		Other		Non-
	Limited		Limited		Limited		Limited		to GPB		Comprehensive		Controlling				Limited		Limited		Limited		Limited		to GPB		Comprehensive		Controlling
	Partners		Partners		Partners		Partners		Holdings II, LP		Loss		Interests		Total		Partners		Partners		Partners		Partners		Holdings II, LP		Loss		Interests		Total
Partners’ capital - December 31, 2021	$	228,859	$	117,833	$	134,729	$	70,482	$	551,903	$	(1,201)	$	16,566	$	567,268
Distributions to non-controlling interest holders		—		—		—		—		—		—		(42)		(42)
Net (loss) income		(1,462)		(706)		(650)		(299)		(3,117)		—		1,961		(1,156)
Other comprehensive loss		—		—		—		—		—		(93)		(12)		(105)
Partners’ capital - March 31, 2022	$	227,397	$	117,127	$	134,079	$	70,183	$	548,786	$	(1,294)	$	18,473	$	565,965
Distributions to non-controlling interests holders		—		—		—		—		—		—		(384)		(384)
Net (loss) income		(2,440)		(1,156)		(598)		(383)		(4,577)		—		414		(4,163)
Other comprehensive loss		—		—		—		—		—		(374)		(47)		(421)
Partners’ capital - June 30, 2022	$	224,957	$	115,971	$	133,481	$	69,800	$	544,209	$	(1,668)	$	18,456	$	560,997
Distributions to partners		(885)		(457)		(526)		(274)		(2,142)				204		(1,938)
Distributions to non-controlling interests holders		—		—		—		—		—		—		(5,682)		(5,682)
Net (loss) income		(4,114)		(2,041)		(2,176)		(1,101)		(9,432)		—		164		(9,268)
Other comprehensive loss		—		—		—		—		—		(384)		(34)		(418)
Partners’ capital - September 30, 2022	$	219,958	$	113,473	$	130,779	$	68,425	$	532,635	$	(2,052)	$	13,108	$	543,691
Partners’ capital - December 31, 2022	$	212,740	$	118,598	$	129,372	$	68,462	$	529,172	$	(2,170)	$	12,766	$	539,768	$	212,740	$	118,598	$	129,372	$	68,462	$	529,172	$	(2,170)	$	12,766	$	539,768
Transfers		5		(5)		—		—		—		—		—		—		5		(5)		—		—		—		—		—		—
Tax withholding distributions		(36)		(14)		(19)		(10)		(79)		—		—		(79)		(36)		(14)		(19)		(10)		(79)		—		—		(79)
Contributions from non-controlling interest		—		—		—		—		—		—		3,800		3,800
Contribution																		—		—		—		—		—		—		3,800		3,800
Net (loss) income		(732)		(291)		(186)		(22)		(1,231)		—		244		(987)		(732)		(291)		(186)		(22)		(1,231)		—		244		(987)
Other comprehensive loss		—		—		—		—		—		(120)		(12)		(132)		—		—		—		—		—		(120)		(12)		(132)
Partners’ capital - March 31, 2023	$	211,977	$	118,288	$	129,167	$	68,430	$	527,862	$	(2,290)	$	16,798	$	542,370	$	211,977	$	118,288	$	129,167	$	68,430	$	527,862	$	(2,290)	$	16,798	$	542,370
Transfers		(17)		17		—		—		—		—		—		—
Purchase of non-controlling interest		(438)		(244)		(267)		(141)		(1,090)		—		(395)		(1,485)
Net loss		(4,281)		(2,414)		(2,412)		(1,247)		(10,354)		—		(6,022)		(16,376)
Other comprehensive income		—		—		—		—		—		6		1		7
Partners’ capital - June 30, 2023	$	207,241	$	115,647	$	126,488	$	67,042	$	516,418	$	(2,284)	$	10,382	$	524,516
Transfers		6		(6)		2		(2)		—		—		—		—
Distribution to non-controlling interest holders		—		—		—		—		—		—		(106)		(106)
Net loss		(5,698)		(3,067)		(3,222)		(1,678)		(13,665)		—		(4,601)		(18,266)
Other comprehensive loss		—		—		—		—		—		(323)		(31)		(354)
Partners’ capital - September 30, 2023	$	201,549	$	112,574	$	123,268	$	65,362	$	502,753	$	(2,607)	$	5,644	$	505,790

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

Nine Months Ended September 30,


2023

2022
Cash flows from operating activities:




Net loss from continuing operations:

$
(36,986)

$
(23,975)
Net income from discontinued operations, excluding gain

1,357

1,469
Gain on sale of discontinued operations

—

7,919
Net loss

(35,629)

(14,587)
Adjustments to reconcile net loss to net cash used in operating activities:

Loss from equity method investments

4,287

6,572
Gain on sale of securities

(29)

—
Gain on disposal of business

(7,460)

(6,723)
Unrealized gain on investment securities

(63)

(76)
(Gain) loss on sale of property, equipment, and leased assets

(175)

48
Gain on reduction of contingent liability

(5,891)

—
Impairment of goodwill and intangibles

15,004

—
Bad debt (recoveries) expense, net

(234)

2,097
Depreciation and amortization

14,299

12,340
Amortization of deferred financing costs

—

286
Amortization of right of use assets - operating

2,585

3,288
Accrued interest receivable on short term investments

(768)

—
Loss on extinguishment of debt

—

4,502
Changes in deferred tax liabilities

(14)

(15)
Changes in operating assets and liabilities, net of effects from business combinations and dispositions:

Accounts receivable, net

(1,378)

(3,927)
Due from related parties

—

(106)
Inventories

228

59
Prepaid expenses

708

95
Contract assets

15,087

1,224
Other assets

(45)

421
Accounts payable

(961)

460
Accrued expenses

(4,627)

(170)
Due to related parties

4,429

11
Customer deposits

(9,957)

(2,608)
Payments on lease liabilities - operating

(2,417)

(3,287)
Other current liabilities

—

(205)
Other liabilities

(217)

(131)
Operating cash flows from discontinued operations, net

(1,357)

(1,469)
Net cash used in operating activities

(14,595)

(1,901)
Cash flows from investing activities:

Proceeds from sale of business (net of cash withheld)

12,736

14,283
Purchase of business (net of cash acquired)

(11,673)

—
Purchase of short term investments

(1,059,358)

—
Proceeds from sale of debt investments

87

2,135
Distribution received from investee

13,740

38,643
Collections of notes receivable - related party

—

295
Purchase of property and equipment

(1,792)

(1,422)
Proceeds from sale of property and equipment

374

—
Proceeds from sale of short term investments

762,279

—
Payments for intangibles and long lived assets

(472)

(465)
Net cash (used in) provided by investing activities

(284,079)

53,469
Cash flows from financing activities:




Repayments of notes payable - related party

—

(6,500)
Repayments on loans payable

(1,325)

(57,502)
Repayments on finance lease obligations

(170)

(183)
Proceeds from lines of credit

—

620
Repayments on lines of credit

(104)

(752)
Distributions

(79)

(4,020)
Purchase of non-controlling interest

(1,485)

—
Distributions to non-controlling interest

(106)

(5,671)
Net cash used in financing activities

(3,269)

(74,008)
Effect of exchange rate changes on cash

(5)

(44)
Net decrease in cash and cash equivalents

(301,948)

(22,484)
Cash and cash equivalents and restricted cash of continuing operations - beginning of period

352,654

375,801
Cash and cash equivalents and restricted cash of continuing operations - end of period

$
50,706

$
353,317

Supplemental schedule of non-cash investing and financing activities:

Distribution payable

$
—

$
(437)
Payment of accrued expenses directly from proceeds of sale

81

—
Operating lease asset valuation adjustment

—

(748)
Operating lease liability valuation adjustment

—

748
Operating lease assets assumed

(606)

(1,141)
Operating lease liabilities assumed

606

1,141
Finance lease assets assumed

—

(418)
Finance lease liabilities assumed

—

418
Contingent liability assumed

11,140

—
Non-controlling interest contribution

3,800

—


	Three Months
	Ended March 31,
	2023
Cash flows from operating activities:
Net loss	$	(987)
Adjustments to reconcile net loss to net cash used in operating activities:
Income from equity method investments		(3,464)
Gain on sale of debt investments		(29)
Changes in operating assets and liabilities, net of effects from business combinations and dispositions:
Prepaid expenses		133
Accrued expenses		(207)
Due to related parties		1,443
Net operating cash flows from discontinued operations		(62)
Net cash used in operating activities		(3,173)

Cash flows from investing activities:
Proceeds from sale of debt investments		87
Purchase of business (net of cash acquired)		(12,857)
Distribution received from investee		8,040
Net investing cash flows of discontinued operations		(785)
Net cash used in investing activities		(5,515)

Cash flows from financing activities:
Distributions		(79)
Net financing cash flows of discontinued operations		(116)
Net cash used in financing activities		(195)

Effect of exchange rate changes on cash		(9)

Net decrease in cash and cash equivalents		(8,892)
Cash and cash equivalents and restricted cash - beginning of period		352,654
Cash and cash equivalents and restricted cash - end of period	$	343,762

Supplemental schedule of non-cash investing and financing activities:
Contingent liability assumed	$	11,140
Non-controlling interest contribution		3,800

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization, Basis of Presentation and ~~Nature of the Business~~Other

Organization

GPB Holdings II, LP (“Holdings II”, the “Partnership”, “we”, “us”, “our” or the “Registrant”) is a holding company which was organized as a Delaware limited partnership on April 17, 2015 and commenced operations on June 1, 2015.

GPB Capital Holdings, LLC (“General Partner”, “Capital Holdings”, “GPB Capital” or “GPB”), a Delaware limited liability company and registered investment adviser, is the Partnership’s General Partner pursuant to the terms of the Fourth Amended and Restated Agreement of Limited Partnership, dated April 26, 2018 (as the same may be amended from time to time, the “LPA”). Pursuant to the LPA, GPB conducts and manages our business. Robert Chmiel, GPB’s Chief Executive Officer and Chief Financial Officer, currently serves as the sole manager of GPB under the terms of GPB’s limited liability company agreement. GPB has entered into a management services agreement with GPB’s wholly owned subsidiary, Highline Management, Inc. (“Highline”), pursuant to which Highline provides certain management services to GPB to assist GPB in fulfilling GPB’s duties as the Partnership’s General Partner.

Basis of Presentation

The Condensed Consolidated Financial Statements until December 31, 2023, have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) assuming the Partnership would continue as a going concern. As discussed below within this “Note 1. Organization, Basis of Presentation and Other”, on December 31, 2023, the Partnership transitioned to the liquidation basis of accounting. The unaudited interim Condensed Consolidated Financial Statements include all adjustments (consisting of normal recurring adjustments) necessary in the judgement of management for a fair presentation of the results for the periods presented. Accordingly, the Condensed Consolidated Financial Statements do not include all of the information and notes required by U.S. GAAP for complete financial statements. Additionally, changes in net assets in liquidation for the interim periods are not necessarily indicative of the results that can be expected for a full year. The unaudited Condensed Consolidated Financial Statements herein should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2024 (the “Form 10-K”).

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of the Partnership and its subsidiaries in which it has a controlling interest. Intercompany accounts and transactions have been eliminated in consolidation. The Partnership has a controlling interest when it owns a majority of the voting interest in an entity or when it is the primary beneficiary of a variable interest entity (“VIE”). When determining which enterprise is the primary beneficiary, management considers (i) the entity’s purpose and design, (ii) which variable interest holder has the power to direct the activities that most significantly impact the entity’s economic performance, and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. When certain events occur, the Partnership reconsidered whether it was the primary beneficiary of that VIE. A VIE is an entity in which the equity investment holders have not contributed sufficient capital to finance its activities or the equity investment holders do not have defined rights and obligations normally associated with an equity investment.

Divestiture of Substantially All of the Partnership’s Assets

Commencing in the second half of fiscal 2023, the Partnership entered into agreements to divest of its portfolio companies previously comprising its Technology-Enabled Services segment. Those divested portfolio companies included Experience Care, LLC, (“Experience Care”), which was sold on August 23, 2023 for $12.7 million in net cash proceeds, Cantata Health, LLC (“Cantata”), which was sold on October 24, 2023 for $22.3 million in net cash proceeds, and the entirety of the Partnership’s 96% indirect ownership interest in HealthPrime International, LLC (“HealthPrime” or “HPI”), which was sold on January 19, 2024 for $190.0 million in net cash proceeds (collectively, the “Divested Technology-Enabled Services Portfolio Companies”). Also, in the second half of fiscal 2023, Erus Holdings LLC (“Erus”), a 60% owned portfolio company of the Partnership, filed for Chapter 7 Bankruptcy (“Chapter 7”) protection on November 8, 2023. Erus accounted for substantially all of the assets and operational activities of the Partnership’s Energy segment. The Chapter 7 filing resulted in the appointment of a trustee for the Erus entities who is charged with liquidating their assets and distributing the proceeds to creditors in accordance with the U.S. Bankruptcy Code. (Erus, together with the Divested Technology-Enabled Services Portfolio Companies, the “Divested Businesses”).

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Subject to the Plan of Liquidation discussed below, and as of the date of these financial statements, the Partnership continues to hold its investments in Hotel Internet Services, LLC, (“HIS”) and Quantum Energy Holdings, LLC, (“Quantum”). These investments were previously accounted for under the equity method and included as part of the Technology-Enabled Services segment and the Energy segment, respectively but are now included as part of the Partnership’s remaining Corporate and Other segment.

The Partnership determined that the Divested Businesses qualified as a component under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-20 Financial Statement Presentation, Discontinued Operations (“ASC 205-20”) because they represented operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the remainder of the Partnership’s operations. Further, the Divested Businesses represent a strategic shift in the Partnership’s business and their disposal will have a major effect on the entity’s operations and financial results. The Partnership also determined that the Divested Businesses met the criteria to be classified as “held for sale” upon entering into the agreements to sell and the filing for Chapter 7 protection. Consequently, the Partnership has classified the assets and liabilities comprising the Divested Businesses as “Assets held for sale, discontinued operations” in the accompanying Condensed Consolidated Statement of Net Assets in Liquidation as of December 31, 2023, and the results of operations and cash flows as discontinued operations in the Condensed Consolidated Statement of Operations and Cash Flows for the three months ended March 31, 2023.

Plan of Liquidation

Concurrent with reaching an agreement in principle to sell all of the Partnership’s membership interests in HPI (the “HPI Transaction”), Highline, on behalf of GPB, commenced the plan to liquidate the Partnership’s remaining net assets and wind up the Partnership (“Plan of Liquidation”). Highline management reached its decision to commence the Plan of Liquidation because of, among other things, the advanced stage of the HPI Transaction, and that no further plans to deploy capital in other investments are contemplated. In accordance with U.S. GAAP, liquidation of the Partnership was thereby determined to be imminent, resulting in adoption of the liquidation basis of accounting as of December 31, 2023.

Liquidation is considered imminent when the likelihood is remote that we will return from liquidation and either (a) the Plan of Liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the Plan of Liquidation will be blocked by other parties, or (b) the Plan of Liquidation is being imposed by other forces (for example, involuntary bankruptcy).

The Highline Board of Directors (the “Board”) formally approved the commencement of the Plan of Liquidation at the Board meeting held on December 29, 2023. The Board concluded that it was appropriate to adopt liquidation accounting in accordance with U.S. GAAP for financial reporting purposes, using a “convenience date” of December 31, 2023.

The Partnership cannot predict the timing or amount of any distributions to its limited partners (the "Limited Partners"), because uncertainties exist as to: (i) the ultimate amount of expenses associated with implementing its monetization strategy, liabilities, operating costs, and amounts to be set aside for claims; (ii) obligations and provisions during the liquidation and winding-up process; and (iii) the timing and outcome of the pending litigation, and the related timing to complete such transactions during the overall liquidation process. Upon transitioning to the liquidation basis of accounting on December 31, 2023, the Partnership estimated the liquidation process would be complete by December 31, 2026, an estimate that is in part, driven by the anticipated sale of the remaining Partnership assets and the anticipated commencement date for the Criminal Case as described in “Note 5. Commitments and Contingencies”. No assurances can be provided that the expected liquidation completion date will be met and future changes to this expected date could have a material impact in the Condensed Consolidated Financial Statements and the amount, if any, is ultimately distributed to our Limited Partners.

Following the Implementation of the Plan of Liquidation

Highline’s approval to commence the Plan of Liquidation and to dissolve substantially all of the net assets of the Partnership on December 29, 2023, requires our financial statements to be prepared in accordance with the liquidation basis of accounting as defined in the FASB ASC 205-30 Financial Statement Presentation, Liquidation Basis of Accounting (“ASC 205-30”). The liquidation basis of accounting differs significantly from the going concern basis, as summarized below.

Under the liquidation basis of accounting, the consolidated balance sheet and consolidated statements of operations, equity and cash flows are no longer presented. The liquidation basis of accounting requires a statement of net assets in liquidation, a statement of changes

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

in net assets in liquidation and all disclosures necessary to present relevant information about our expected resources in liquidation. The liquidation basis of accounting may only be applied prospectively from the day liquidation becomes imminent and the initial statement of changes in net assets in liquidation may present only changes in net assets that occurred during the period since that date.

Under the liquidation basis of accounting, our assets are measured at their estimated net realizable value, or liquidation value, which represents the amount of their estimated cash proceeds or other consideration from liquidation, based on current contracts, estimates and other indications of sales value, and includes assets held for sale. In developing these estimates, we utilized the forecasts generated by our management.

Under the liquidation basis of accounting, we recognize liabilities as they would have been recognized under the going concern basis as adjusted for the timing assumptions related to the liquidation process and they will not be reduced to expected settlement values prior to settlement. Our liabilities are derecognized when we pay the obligation or when we are legally released from being the primary obligor under the liability.

The valuation of our assets and liabilities, as described above, represents estimates, based on present facts and circumstances, of the net realizable value of the assets and costs associated with carrying out the Plan of Liquidation. The actual values and costs associated with carrying out the Plan of Liquidation may differ from amounts reflected in the Condensed Consolidated Financial Statements because of the Plan of Liquidation's inherent uncertainty. These differences may be material. In particular, these estimates will vary with the length of time necessary to complete the Plan of Liquidation. It is currently anticipated that a majority of the assets we owned on the date the Plan of Liquidation, as approved by Highline, will be sold by December 31, 2025, with liquidation complete by December 31, 2026, however, no assurances can be provided that this date will be met. This date was determined through management consultation with the Board, consultation with the Monitor (as defined below), the timing of Mr. Gentile’s criminal trial and outcome and the settling of pending litigation as the main components driving the estimate on timing of complete liquidation.

Net assets in liquidation represents the estimated liquidation value to holders of Units upon liquidation. It is not possible to predict with certainty the timing or aggregate amount which may ultimately be distributed to our Limited Partners and no assurance can be given that the distributions will equal or exceed the estimate presented in these Condensed Consolidated Financial Statements.

Prior to Implementation of the Plan of Liquidation

The Condensed Consolidated Financial Statements through December 31, 2023, have been prepared on the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and were prepared in accordance with U.S. GAAP.

Nature of Business

~~The Partnership provides~~Prior to the sale of substantially all of the Partnership’s assets, we provided a range of strategic, operational and management resources to our subsidiaries which ~~are~~were engaged in a number of diverse business activities. Our Chief Operating Decision Maker (“CODM”) ~~who manages the segments as detailed below,~~ regularly ~~reviews~~reviewed consolidated financial information, ~~evaluates~~evaluated overall strategic performance, and ~~allocates~~allocated resources to the ~~Partnership. We report~~Partnership in three distinct segments: the Technology-Enabled Services segment, the Energy segment and the Corporate and Other segment. After the divestiture of our ~~businesses in~~assets, we are now reporting our business operation solely as “Corporate and Other”.

The Corporate and Other segment primarily consisted of other operating segments that were not reportable under the ~~three segments for accounting purposes based on how our CODM views the Partnership as follows:~~

●

Technology-Enabled Services segment (“Technology-Enabled Services” or “TES”) acquires and operates Technology-Enabled Services portfolio companies which provide Technology-Enabled Services to healthcare companies. Services provided include the sale and licensing of various electronic health records software and practice management software platforms for ambulatory, acute and long-term healthcare facilities. The customer base served by our TES portfolio companies is dispersed across the U.S., related territories, Costa Rica, Philippines, and India. As of September 30, 2023, Holdings II owned 96% of Project Halo Holdings, LLC (“Halo”), which is comprised of Cantata Health Solutions, LLC (“Cantata”) (formerly Meta Healthcare IT Solutions, LLC), which was sold on October 24, 2023, and Experience Care, LLC (“Experience Care”) (formerly Cantata Health, LLC) which was sold on August 23, 2023; and 91.5% of HealthPrime International, LLC (“HealthPrime” or “HPI”), all of which are accounted for under the consolidation method through the date of sale. Our Technology-Enabled Services segment also has a non-controlling investment of 31% in Hotel Internet Services, LLC (“HIS”) as of September 30, 2023 which is accounted for under the equity method. HIS provides the equipment and associated internet services to hotels, resorts, military, student housing, casinos, and many other commercial venues.

●

Energy segment (“Energy”) acquires and operates companies that provide services in the solar panel market and other services in the energy sector. As of September 30, 2023, the Partnership owned 60% of Erus Holdings, LLC (“Erus”), which is accounted for under the consolidation method, through the date of bankruptcy (see below). In January 2022, the Partnership sold its investment in its subsidiary Greenwave Energy, LLC (“Greenwave”). The Partnership has a 50% non-controlling equity method investment in Quantum Energy Holdings, LLC (“Quantum”). Quantum provides customer acquisition services to the alternative energy industry.

●

Corporate and Other segment primarily consists of other operating entities that are not reportable under the quantitative thresholds under United States Generally Accepted Accounting Principles (“U.S. GAAP”), or arequantitative thresholds under U.S. GAAP, or were the selling, general and administrative expenses of the Partnership. The Partnership owns a 33.5% interest in GPB Prime Holdings, LLC (“GPB Prime”), an equity method investment. In March 2022, the Partnership sold its real estate investment in 124 Middleneck Realty LLC (“Middleneck”).

~~Erus, which comprises the majority~~ of the ~~assets~~Partnership. The Partnership owns a 33.5% interest in GPB Prime Holdings, LLC (“GPB Prime”), an operator of automotive retail dealerships. The Partnership has a 50% non-controlling investment in Quantum. Quantum provides customer acquisition services to the alternative energy industry. The Partnership also has a non-controlling investment of 31% in HIS. HIS provides the equipment and operating activity in the Energy Segment, filed for Chapter 7 Bankruptcy (“Chapter 7”) protection on November 8, 2023. The combination of increasingly higher interest rates, and lower installation activity has ledassociated internet access services to increasingly difficult conditions in the sector, and have had a direct material impact on Erus’s business, profitability and cash-flow. In response, Erus implemented a number of initiatives and explored strategic alternatives, including a sale of the business. Despite best efforts to aggressively restructure the business and consummate a sale, management, working with its legal, financial and other advisors,hotels,

810

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~decided that it was in~~resorts, military, student housing, casinos, and many other commercial venues. Quantum and HIS were formerly accounted for under the ~~best interests of all Erus stakeholders~~equity method but are now accounted for the Erus entities to cease business operations and file Chapter 7 petitions in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 7 filing will result in the appointment of a trustee for the Erus entities who will be charged with liquidating their assets and distributing the proceeds to creditors in accordance with the U.S. Bankruptcy Code. In the three months ended September 30, 2023, the Partnership recorded write-offs of materials and inventory to itsat estimated net realizable value ~~resulting in charges~~pursuant to our Plan of ~~$3.4 million recorded in cost~~Liquidation.

New Accounting Pronouncements

As a result of ~~goods, and $4.5 million as it relates to contract~~adopting Liquidation Basis of Accounting, we believe no new accounting pronouncements will have a material impact on our consolidated net assets in ~~selling, general and administrative expenses~~liquidation or consolidated changes in ~~the Condensed Consolidated Statements of Operations.~~

~~Further information regarding our reportable business segments is contained~~net assets in ~~“Note 13. Business Segments”. Further information regarding equity method investments is contained in “Note 6. Equity Method Investments”.~~liquidation.

2. Significant Accounting Policies

The significant accounting policies used in preparation of these Condensed Consolidated Financial Statements are disclosed in our ~~Annual report on~~ Form 10-K, filed with the ~~Securities and Exchange Commission (the “SEC”)~~SEC on March ~~31, 2023 (the “Form 10-K”),~~28, 2024, and there have been no changes to the ~~Partnership’s~~Partnership's significant accounting policies during the ~~nine~~three months ended ~~September 30, 2023.~~

~~Basis of Presentation~~

The accompanying unaudited Condensed Consolidated Financial Statements as of September 30, 2023, and for the three and nine months ended September 30, 2023 and 2022 have been prepared in accordance with U.S. GAAP for interim financial information reporting purposes and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. The unaudited Condensed Consolidated Financial Statements herein should be read in conjunction with our audited Consolidated Financial Statements and notes included in the Form 10-K filed with the SEC on March 31, ~~2023.~~

~~Principles of Consolidation and Equity Method~~

These Condensed Consolidated Financial Statements include the accounts of the Partnership and its subsidiaries in which it has a controlling interest. Intercompany accounts and transactions have been eliminated in consolidation.

Our strategy in the segments in which we choose to participate is to invest in and operate income producing, middle market private companies primarily in North America. We focus on owning and operating portfolio companies on a long-term basis with a goal of maximizing returns for our investors by improving operational performance, and in turn, increasing the value. We strive to create long-term value and generate cash flow from operations for our Limited Partners, as such term is defined in the LPA, by building industry-leading companies. To accomplish our objectives, we acquire controlling interests in operating companies and provide managerial expertise and investment capital to develop the operations and enhance the overall value of the business. In other situations, we acquire equity that affords us the ability to exercise significant influence over the business without a controlling stake. For this reason, we classify the earnings from our investments in entities where we have the ability to exercise significant influence as a component of operating income in our Condensed Consolidated Statements of Operations.2024.

Cash, Cash Equivalents and ~~Short Term Investments~~Investment Securities

Cash and cash equivalents includes cash on hand, cash in bank accounts without ~~restriction, and investments in Treasury Bills with original maturities of no longer than three months.~~restriction. The Partnership maintains cash balances with financial institutions that, at times, may exceed federally insured limits. Management periodically evaluates the creditworthiness of these institutions and has not experienced any losses on such deposits.

911

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of ~~September 30, 2023,~~March 31, 2024, the standard Federal Deposit Insurance Corporation (the “FDIC”) insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. Any deposit in excess of this insured amount could be lost. As of ~~September 30, 2023,~~March 31, 2024, substantially all of the Partnership’s ~~$50.7~~$17.7 million of deposited cash held in banks was in excess of the FDIC coverage limit.

As of September 30, 2023, $297.8 million was invested in Treasury Bills, with original maturities on the date of purchase in excess of three months and was presented as short-term investments on the Condensed Consolidated Balance Sheets. The Treasury Bills are recorded at fair value which includes accrued interest and any unrealized appreciation.

~~As of September 30, 2023 and December 31, 2022, the Partnership had cash deposited in certain financial institutions in excess of FDIC insured levels.~~ The Partnership regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents. However, in March and April 2023, certain U.S. government banking regulators took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened uncertainties in the financial markets. While these and other current events have not had a material direct impact on the Partnership’s ~~operations,~~Plan of Liquidation, if further liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions of the United States, the Partnership’s ability to access cash ~~or enter into new financing arrangements~~ may be threatened, which could have a material adverse effect on its ~~business, financial condition~~net assets in liquidation.

Investment securities include Corporate Stock and ~~results~~Treasury Bills with original maturities on the date of ~~operations.~~

~~Restricted Cash~~

purchase of greater than three months. As of ~~September 30, 2023~~March 31, 2024, $497.2 million was invested in Treasury Bills with original maturities on the date of purchase in excess of three months and December 31, 2022, the Partnership held nil and $18.2 million, respectively, of total restricted cash which represents $11.0 million for the sale of Alliance Physical Therapy Partners, LLC (“Alliance”) and $7.2 million for the purchase of AdvantEdge Healthcare Solutions, Inc. (“AHS”) at December 31, 2022. The Partnership received the $11.0 million in escrow from Alliance and the $7.2 million from AHS during the nine months ended September 30, 2023.

~~Fair Value Measurements~~

The Partnership utilizes valuation techniques that maximize the use of observable inputs. The Partnership determines fair value based on assumptions that market participants would use in pricing an asset or liabilityis presented as Investment securities in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

●

~~Level 1~~~~Inputs:~~ ~~Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.~~

●

~~Level 2~~~~Inputs:~~ ~~Other than quoted prices included in Level 1, inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.~~

●

~~Level 3~~~~Inputs:~~ Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

~~A financial instruments categorization with the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.~~

~~Assets Held for Sale~~

~~The Partnership classifies long-lived assets (disposal groups) to be sold as held for sale in accordance with ASU 2014-08,~~ ~~Presentation Of Financial Statements (ASC Topic 205) And Property, Plant, And Equipment (ASC Topic 360): Reporting Discontinued~~ ~~Operations~~ ~~And Disclosures Of Disposals Of Components Of An Entity~~ (“ASU 2014-08”), in the period in which all of the following criteria are met: management, having the authority to approve the action, commits to a plan to sell the asset; the asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets; an active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated; the sale of the asset (disposal group)

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to~~ Condensed Consolidated ~~Financial Statements~~

~~(Unaudited)~~

~~is probable, and transfer~~Statement of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset beyond one year; the asset (disposal group) is being actively marketed for sale at a price that is reasonableNet Assets in ~~relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.~~

The fair value of a long-lived asset (disposal group) less any costs to sell is assessed each reporting period it remains classified as held for sale and any subsequent changes are reported as an adjustment to the carrying value of the asset (disposal group), as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale. Upon determining that a long-lived asset (disposal group) meets the criteria to be classified as held for sale, the Partnership reports the assets and liabilities of the disposal group for all periods presented in the line items assets held for sale and liabilities held for sale in the accompanying Consolidated Balance Sheets.

The Partnership recognizes an impairment loss if the carrying amount of the long-lived asset (disposal group) exceeds the estimated fair value of the long-lived asset (disposal group) less cost to sell. If the Partnership recognizes an impairment loss, the adjusted carrying amount of the long-lived asset (disposal group) becomes its carrying amount.Liquidation.

Risks and Uncertainties

We are subject to a number of legal proceedings atinvolving both the Partnership and ~~our portfolio companies,~~its subsidiaries, as described in “Note ~~11.~~5. Commitments and Contingencies.” While we are vigorously defending our position in these proceedings, there is uncertainty surrounding their related outcomes and timing. The cost to defend, and outcomes of these proceedings, could affect the liquidity of the Partnership and the use of available cash.

~~The Technology-Enabled Services industry~~Under the liquidation basis of accounting, we estimate the liquidation value of our assets and recognize future costs expected to be incurred during the liquidation period. Our estimate of future legal costs is ~~subject to rapid innovation, which forces companies to move swiftly to react to changes~~a significant estimate recorded as a component of liability for estimated costs in excess of estimated receipts during liquidation in the ~~industry. Maintenance~~Condensed Consolidated Statements of ~~state-of-the-art technology~~Net Assets in Liquidation. These estimates will be periodically reviewed and ~~network equipment is costly and requires expertise. It~~adjusted as appropriate, any such adjustments may be material. There can be difficult to accurately price our Technology-Enabled Services portfolio companies’ long-term service contracts, which could negatively affect our business. Renewal of customer service contracts and establishment of new customer relationships are essential for growth of our Technology-Enabled Services portfolio companies. Our revenue could decline if we are unable to renew contracts and establish new relationships. Our Technology-Enabled Services portfolio companies derive a significant portion of their revenues from a limited number of customers. Our Technology-Enabled Services portfolio companies rely on their top vendor partners. We outsource a significant portion of our Technology-Enabled Services to offshore service providers which can subject us to a number of risksno assurance that may affect our ability to meet our customers’ expectations, contractual obligations and regulatory requirements. If the emerging technologies and platforms upon which we build our products do not gain or continue to maintain broad market acceptance, or if we fail to develop and introduce in a timely manner new products and services compatible with such emerging technologies, we maythese estimated values will be realized. Such amounts should not be able to compete effectively and our ability to generate revenue will suffer. We are dependent on our license rights and other services from third parties, which may cause us to discontinue, delay or reduce product shipments. We may experience interruption at our data centers or client support facilities. In our healthcare information technology businesses, we and our clients are subject to a number of existing laws, regulations and industry initiatives, including The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and other data privacy regulations, and we are susceptible to a continually changing and complex regulatory environment.

We own and operate portfolio companies engaged in the energy business, which are subject to various market and regulatory risks that could have a negative impact on our financial results, including changes to government-sponsored incentives to adoption of solar energy, solar panel supply chain interruptions and changes in the relative price of energy sources supplying the electric grid. Many of our customers in this segment finance their purchases, and high levels of inflation or increased interest rates may discourage such purchases in the future.

Our energy segment had one major vendor that accounted for substantially all material purchases in cost of sales for the three and nine months ended September 30, 2023 and 2022, respectively. Accounts payable to this vendor were $1.4 million and $1.5 million at September 30, 2023 and December 31, 2022, respectively.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

On February 11, 2021, the United States District Court for the Eastern District of New York (the “EDNY Court”), in a contested civil proceeding filed by the SEC (the “SEC Action”), appointed Joseph T. Gardemal IIItaken as an ~~independent monitor over GPB (the “Monitor”) until further order~~indication of the ~~Court (the “Order”). The Monitor is required to assess~~timing or the ~~Partnership’s operations~~amount of future distributions or our actual dissolution. See “Footnote 1. Organization, Basis of Presentation, and ~~business, and make recommendations to the EDNY Court, which may include continuation of GPB’s operations subject to the Monitorship, a liquidation of assets, or filing~~Other” for ~~reorganization in bankruptcy.~~

The Order provides that the Monitor will remain in place until terminated by order of the EDNY Court, and grants the Monitor the authority to approve or disapprove proposed material corporate transactions by GPB, the Partnership or its subsidiaries, extensions of credit by them outside the ordinary course of business, decisions to resume distributions to the Limited Partners of the Partnership, or any decision to file any bankruptcy or receiver petition for any of them, among other actions. On June 13, 2022, the SEC filed by Order to Show Cause in the SEC Action an application to (i) convert the existing Monitorship over GPB and the GPB-managed funds to a Receivership, and appoint the previously-appointed Monitor, Joseph T. Gardemal III, as Receiver; and (ii) impose a litigation injunction on cases filed against GPB and the GPB-managed funds (the “Receivership Application”). The Receivership Application and the Proposed Order Appointing Receiver and Imposing Litigation Injunction (the “Proposed Order”) were filed with the EDNY Court with consent of GPB’s management. If appointed, the receiver could assume the right to operate and manage the business and we may be subject to, among other things, closer monitoring of our day-to-day activities and books and records than under the current Monitorship. We may also be prohibited from making certain investments or undertaking other activities that we would have otherwise pursued, may be required to settle disputes, including with creditors, in ways that we may not otherwise have agreed to outside of Receivership, or otherwise be subject to reorganization or liquidation.

Objections to the Report and Recommendation, and all responses submitted thereto, were filed with the EDNY Court as of September 29, 2023. The EDNY Court will consider the Report and Recommendation and determine whether, and to what extent, to adopt it in a final ruling; it will not become a legally binding Order until it is adopted by the EDNY Court. Should the EDNY Court adopt the Report and Recommendation, a party would be permitted to appeal the decision to the United States Court of Appeals for the Second Circuit.

Future outbreaks of COVID-19 could have a material adverse impact on our businesses, financial condition and results of operations. Our impacted businesses have rebounded well to at or near pre-COVID-19 sales levels. However, future COVID-19 outbreaks in the markets in which we operate may in the future cause changes in customer behaviors, including a decrease for healthcare services, and for home and commercial solar systems. This may lead to increased valuation risks, such as impairment of long-lived assets. Uncertainties in the global economy may negatively impact our suppliers and other business partners, which may interrupt our supply chain and require other changes to our operations. These and other factors may adversely impact our financial condition, liquidity and cash flow.further information.

Our access to ~~our~~ cash and cash equivalents, and investment securities in amounts adequate to finance our operations could be significantly impaired by the financial institutions, with which we have arrangements. Any material decline in our ability to access our cash and cash equivalents could adversely impact our ability to meet certain steps in our ~~operating expenses, provide~~Plan of Liquidation, pay distributions, result in breaches of our contractual obligations or result in violations of federal or state wage and hour laws, among other ~~things, any~~things. Additionally, given our significant investment in Treasury Bills as of ~~which~~March 31, 2024, changes in interest rates could impact our estimated cash inflows during the liquidation period. These risks and uncertainties could have material adverse impacts on our operations and ~~liquidity.~~the amount of total net assets in liquidation.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3. ~~Revenue Recognition~~Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation

The ~~following~~liquidation basis of accounting requires the estimation of net cash flows from operations and all costs associated with implementing and completing the Plan of Liquidation. These accrued receipts and costs are estimated and are anticipated to be collected and paid out over the liquidation period. We project that we will have estimated costs in excess of estimated receipts during the liquidation period. These amounts can vary significantly due to, among other things, the net realizable value of our remaining assets, estimates of direct costs incurred to complete the sale of such assets, the timing and amounts associated with discharging known and contingent liabilities, the costs associated with the winding up of operations, and other costs that we may incur which are not currently foreseeable. These accrued receipts and costs will be adjusted periodically as projections and assumptions change. Upon transition to the liquidation basis of accounting on December 31, 2023, we accrued receipts and costs expected to be earned or incurred during liquidation which is ~~a disaggregation~~anticipated to be complete by December 31, 2026, however, no assurances can be provided that this date will be met. The liability for estimated costs in excess of revenue by major product or service lines, separated by reportable segments from which the Partnership generates its revenue. For more detailed information about reportable segments, see “Note 13. Business Segments”.estimated receipts during liquidation at March 31, 2024 and December 31, 2023 was comprised of (in thousands):


	March 31, 2024		December 31, 2023
Total estimated receipts during remaining liquidation period	$	19,626	$	21,769
Total estimated costs of operations:
Selling, general and administrative expenses		(47,920)		(58,596)
Selling, general and administrative expenses - related party		(11,517)		(13,683)
Total estimated costs during remaining liquidation period		(59,437)		(72,279)
Liability for estimated costs in excess of estimated receipts during liquidation	$	(39,811)	$	(50,510)

Technology -

Enabled

(Dollars in thousands)

Services

Energy

Total
Three Months Ended September 30, 2023







Product revenue

$
247

$
4,788

$
5,035
Service revenue

33,803

—

33,803

Revenue Stream

Software licenses

$
247

$
—

$
247
Software maintenance and support

3,847

—

3,847
Professional services

5,159

—

5,159
Medical billing and services

24,797

—

24,797
Solar panel sales

—

4,788

4,788

Timing of Revenue Recognition

Products and services transferred at a point in time

$
247

$
4,788

$
5,035
Products and services transferred over time

33,803

—

33,803

The change in liability for estimated costs in excess of estimated receipts during liquidation between December 31, 2023 and March 31, 2024, is as follows (in thousands):


					Changes in Estimated
			Net Change in		Future Cash Flows
	December 31, 2023		Working Capital⁽³⁾		During Liquidation ⁽⁴⁾		March 31, 2024
Assets:
Estimated receipts from investments⁽¹⁾	$	21,769	$	(8,021)	$	5,878	$	19,626
Liabilities:
Corporate expenditures⁽²⁾		(72,279)		9,585		3,257	$	(59,437)
Liability for estimated costs in excess of estimated receipts during liquidation	$	(50,510)	$	1,564	$	9,135	$	(39,811)

Technology -

Enabled

(Dollars in thousands)

Services

Energy

Total
Nine Months Ended September 30, 2023







Product revenue

$
857

$
25,404

$
26,261
Service revenue

106,049

—

106,049

Revenue Stream

Software licenses

$
857

$
—

$
857
Software maintenance and support

12,127

—

12,127
Professional services

16,966

—

16,966
Medical billing and services

76,956

—

76,956
Solar panel sales

—

25,404

25,404

Timing of Revenue Recognition

Products and services transferred at a point in time

$
857

$
25,404

$
26,261
Products and services transferred over time

106,049

—

106,049

1.Estimated receipts from investments consists of total estimated receipts during liquidation from estimated interest income accrued from investment securities and the net realizable value of our remaining investments.

2.Corporate expenditures consists of (i) selling, general and administrative expenses, (ii) managerial assistant fees, and (iii) legal and consulting fees related to our corporate activities.

3.Net change in working capital represents changes in assets and liabilities for the three months ended March 31, 2024, primarily as a result of actual cash receipts or payments.

4.Changes in estimated future cash flows during liquidation includes adjustments to previous estimates and changes in estimated holding periods of our assets, if applicable.

During the three months ended March 31, 2024, the Partnership accrued interest income expected to be received on the investment securities invested in Treasury Bills of approximately $5.9 million. This resulted in an increase to the total estimated receipts during the remaining liquidation period within the liability for estimated costs in excess of estimated receipts during liquidation.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

During the three months ended March 31, 2024, the Partnership revised its projection for legal and legal indemnification costs, primarily as a result of a change in allocation between the GPB-managed Funds, resulting in a decrease of $2.6 million, in selling, general and administrative expenses - corporate within the liability for estimated costs in excess of estimated receipts during liquidation.

The remaining $0.7 million increase relates primarily to the change in estimated future costs during liquidation for other professional fees as a result of a change in allocation between the GPB-managed Funds.

Technology -

Enabled

(Dollars in thousands)

Services

Energy

Total
Three Months Ended September 30, 2022







Product revenue

$
857

$
24,933

$
25,790
Service revenue

30,493

—

30,493

Revenue Stream

Software licenses

$
857

$
—

$
857
Software maintenance and support

5,838

—

5,838
Professional services

4,834

—

4,834
Medical billing and services

19,821

—

19,821
Solar panel sales

—

24,933

24,933

Timing of Revenue Recognition

Products and services transferred at a point in time

$
857

$
24,933

$
25,790
Products and services transferred over time

30,493

—

30,493

Technology -

Enabled

(Dollars in thousands)

Services

Energy

Total
Nine Months Ended September 30, 2022







Product revenue

$
2,121

$
54,050

$
56,171
Service revenue

92,899

—

92,899

Revenue Stream

Software licenses

$
2,121

$
—

$
2,121
Software maintenance and support

15,143

—

15,143
Professional services

17,764

—

17,764
Medical billing and services

59,992

—

59,992
Solar panel sales

—

54,050

54,050

Timing of Revenue Recognition

Products and services transferred at a point in time

$
2,121

$
54,050

$
56,171
Products and services transferred over time

92,899

—

92,899

Debt investment interest income, gain on the sale of investment securities, unrealized gain on investment securities, and other revenue earned from success fees on debt investments included in our consolidated revenues are not within the scope of ASC 606 Revenue from Contracts with Customers.

4. ~~Acquisitions,~~ Disposals, Assets Held for Sale and Discontinued Operations

Commencing in 2023, we no longer consolidate the Technology-Enabled Services and Energy segments within our financial results or reflect the financial results of these segments within our continuing results of operations. Commencing in 2021, we no longer consolidate the Automotive Retail segment or reflect the financial results of this segment within our continuing results of operations. The historical results of operations and financial positions of the Technology-Enabled Services, Energy, and Automotive Retail segments through the date of divestiture, are reported as discontinued operations in the Condensed Consolidated Financial Statements.

2023 ~~ACQUISITION~~DISPOSITIONS

Technology-Enabled Services

On ~~January 6,~~December 15, 2023, ~~with an effective date of January 1, 2023, HPI,~~the Partnership entered into an agreement to ~~acquire substantially all~~sell the entirety of the Partnership’s indirect ownership interest in HPI for $190.0 million in net cash proceeds. On January 19, 2024, the Partnership completed the sale of HPI. On January 19, 2024 the Partnership distributed $11.9 million to the non-controlling interest holders of HPI. The assets ~~of ALN Medical Management, LLC, (“ALN”), a provider of revenue cycle management~~ and business related management services for total purchase consideration of $26.7 million. The purchase consideration was comprised of cash consideration of $11.7 million (net of cash acquired of $0.1 million); the fair value of an earnout of $11.1 million, which is a Level 3 financial asset; and, the fair value of rollover units of $3.8 million, which are defined as 1,339 of Class A-1 Unitsliabilities of HPI ~~Holdings, LLC,~~had been classified as held for sale at their net realizable value as of December 31, 2023.

On October 24, 2023, the ~~parent~~Partnership sold 100% of ~~HPI (“HPI Holdings”), which are recorded~~its equity interests in ~~non-controlling interest in partners’ capital. Included~~Cantata, for $22.3 million in net ~~assets is the assumption~~cash proceeds. The Partnership recorded a gain of ~~promissory notes of $5.2 million. The terms~~approximately $1.5 million on disposal of the ~~assumed promissory notes are discussed~~business in ~~“Note 10. Borrowings”.~~October 2023.

On August 23, 2023, the Partnership sold the assets and liabilities of Experience Care for $12.7 million in net cash proceeds. The ~~earnout was valued using~~Partnership recorded a ~~discounted cash flow analysis, significant assumptions include~~gain of approximately $7.5 million on disposal of the ~~risk-free rate of 4.3%~~business in August 2023.

The Partnership’s investments in HPI, Experience Care and Cantata previously constituted the ~~credit spread rate of 8.4%, and is included in accrued expenses in~~Technology-Enabled Services Segment.

Summarized operating results for the ~~Condensed Consolidated Balance Sheets~~Technology-Enabled Services segment for the three months ended March 31, 2023 were as ~~of September 30, 2023 see “Note 7, Fair Value”.~~follows:


	Three months
	ended March 31,
(Dollars in thousands)	2023
Revenues	$	36,160
Cost of revenues		20,148
Gross profit		16,012
Operating expenses		14,421
Operating income		1,591
Other expense		1,309
Income from discontinued operations, before tax		282
Income tax expense		211
Net income from discontinued operations		71
Net income attributable to non-controlling interests		10
Net income attributable to the Partnership	$	61

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~The components~~Energy

Erus, which comprised the majority of the assets ~~acquired~~ and ~~liabilities assumed, which are recorded at estimated fair values, are~~operating activity in the Energy Segment, filed for Chapter 7 protection on November 8, 2023. The combination of increasingly higher interest rates, and lower installation activity has led to increasingly difficult conditions in the sector, and have had a direct material impact on Erus’ business, profitability and cash-flow. In response, Erus implemented a number of initiatives and explored strategic alternatives, including a sale of the business. Despite best efforts to aggressively restructure the business and consummate a sale, management, working with its legal, financial and other advisors, decided that it was in the best interests of all Erus stakeholders for the Erus entities to cease business operations and file Chapter 7 petitions in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 7 filing resulted in the appointment of a trustee for the Erus entities who will be charged with liquidating their assets and distributing the proceeds to creditors in accordance with the U.S. Bankruptcy Code.

Summarized operating results for the Energy segment for the three months ended March 31, 2023 were as follows:

(Dollars in thousands)

Current assets

$
5,392
Operating lease assets

1,131
Other current assets

683
Property and equipment

1,255
Intangible assets

6,800
Goodwill

19,337
Debt

(5,208)
Operating lease liabilities

(1,120)
Current liabilities

(1,557)
Total net assets

$
26,713


	Three months
	ended March 31,
(Dollars in thousands)		2023
Revenues	$	12,561
Cost of revenues		6,428
Gross profit		6,133
Operating expenses		5,479
Operating income		654
Other expense		28
Net income from discontinued operations		626
Net income attributable to non-controlling interests		234
Net income attributable to the Partnership	$	392

The Partnership has finalized the purchase price and there have been no material adjustments from the preliminary allocation. The purchase of ALN resulted in the recognition of goodwill in the Partnership’s Condensed Consolidated Financial Statements, which is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized and includes the expected synergies from combining ALN and HPI. ALN is included in the HPI reporting unit.

~~In connection with the ALN acquisition, the Partnership identified the following intangible assets:~~

(Dollars in thousands)

Useful Lives
Customer relationships

$
5,200

5 years
Trade name

1,600

5 years

$
6,800

The accompanying Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2023, includes $5.6 million and $16.8 million of revenue and net loss of $0.6 million and $2.7 million, respectively, related to ALN for the period from January 1, 2023 (date of acquisition), through September 30, 2023. The Partnership’s unaudited pro forma consolidated results of operations for the three and nine months ended September 30, 2022, are summarized in the table below, assuming the acquisition of ALN occurred on January 1, 2022. These unaudited pro forma results of operations have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which would have actually resulted had the acquisition occurred on January 1, 2022, or are they indicative of future results of operations.

~~The Partnership’s unaudited pro forma consolidated results of operations (as if the acquisition of ALN had occurred on January 1, 2022) is as follows:~~

Three months ended

Nine months ended
(Dollars in thousands)

September 30, 2022

September 30, 2022
Pro forma revenue

$
62,572

$
169,004
Pro forma net loss from continuing operations

(9,877)

(24,372)

~~2023 DISPOSITIONS~~

On August 23, 2023, the Partnership sold the assets and liabilities of Experience Care for $12.7 million in net cash proceeds. The Partnership recorded a gain of $7.5 million on disposal of the business in August 2023 in the Condensed Consolidated Statements of Operations.

On October 24, 2023, the Partnership sold 100% of its equity interests in Cantata, for $26.0 million in an all cash transaction. The assets and liabilities of Cantata have been classified as held for sale as of September 30, 2023. The Partnership recorded a gain of approximately $2.0 million on disposal of the business in October 2023.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The following tables reconcile the assets and liabilities of Cantata to the amount recorded as assets and liabilities held for sale, continuing operations in the accompanying Condensed Consolidated Balance Sheets at September 30, 2023:

(Dollars in thousands)


Assets


Accounts receivable, net

$
5,267
Prepaid expenses

1,215
Intangible assets

13,087
Goodwill

9,567
Property and equipment, net

71
Other non-current assets

150
Current assets held for sale, continuing operations

$
29,357

Liabilities


Accounts payable

$
942
Accrued expenses

3,199
Customer deposits

3,619
Other current liabilities

145
Current liabilities held for sale, continuing operations

$
7,905

~~2022 DISPOSITIONS~~

In January 2022, Greenwave, a subsidiary of the Partnership, entered into an Asset Purchase Agreement with United Energy Trading, LLC (“UET”). The Asset Purchase Agreement became effective on January 1, 2022, at which time UET acquired all customer contracts for the sale of natural gas or renewable energy credits and carbon offsets as well as intellectual property rights to the Greenwave name in exchange for $4.4 million in net cash proceeds. The $4.4 million in net cash proceeds were received in January 2022. The Partnership recorded a gain of $4.4 million on disposal of the business in January 2022 in the Condensed Consolidated Statements of Operation.

In March 2022, the Partnership sold Middleneck, the real estate of its shuttered Tower Ford dealership for net proceeds of $9.9 million, to the current operator of an auto dealership on the site, subject to standard post-closing adjustments. The Partnership recorded a gain of approximately $2.3 million on disposal of the real estate in 2022 in the Condensed Consolidated Statements of Operation.

~~Discontinued Operations~~

The following dispositions represent a strategic shift in the Partnership’s operations and financial results. Therefore, the Partnership is presenting the operating results and cash flows as discontinued operations in the accompanying Condensed Consolidated Financial Statements for all periods presented.

Automotive Retail

GPB Prime, in which the Partnership continues to hold a 33.5% ~~equity~~ investment, completed the sale of substantially all of its assets, including real estate, three collision centers and 28 dealerships in 2021. The Partnership also sold its wholly owned dealership, Orangeburg Subaru LLC (“Orangeburg”), in 2021. The carrying value of the Partnership’s remaining investment in GPB Prime of ~~$11.6~~$1.3 million and ~~$21.6~~$3.8 million as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, is included in ~~assets held~~the liability for ~~sale, discontinued operations on~~estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated ~~Balance Sheets.~~Statements of Net Assets in Liquidation. In January 2024 and ~~July~~March 2023, GPB Prime distributed ~~$8.0~~$2.3 million and ~~$3.4~~$8.0 million, respectively, to the Partnership. ~~In 2022, GPB Prime reached additional agreements with M&T Bank to allow for distributions to the Partnership of $28.5 million in March 2022 and $10.0 million in April 2022, respectively.~~ Following the completion of the sale, the Partnership has no involvement in the operations of GPB Prime or Orangeburg.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~5. Receivables, net~~

~~Receivables, net of allowance for doubtful accounts, consisted of the following:~~

September 30,

December 31,
(Dollars in thousands)

2023

2022
Receivables




Energy

$
1,235

$
1,866
Technology-enabled services

27,094

27,155
Total

28,329

29,021
Allowance for doubtful accounts

��
Energy

(594)

(223)
Technology-enabled services

(665)

(1,889)
Total

(1,259)

(2,112)
Receivables, net

$
27,070

$
26,909

~~6. Equity Method Investments~~

The ~~carrying amounts of equity method investments were as follows:~~

September 30, 2023

December 31, 2022

Ownership

Carrying

Ownership

Carrying
(Dollars in thousands)

Segment

Percentage

Amount

Percentage

Amount
Investment







Quantum Energy Holdings, LLC

Energy

50.0
%
$
1,686

50.0
%
$
9,397
Hotel Internet Services, LLC

Technology-Enabled Services

31.0
%

7,144

31.0
%

5,996
Other

—



74

$
8,830

$
15,467

~~Income from equity method investments~~summarized operating results for the ~~three and nine months ended September 30, 2023 and 2022 were as follows:~~

Three months ended September 30,

Nine months ended September 30,
(Dollars in thousands)

2023

2022

2023

2022
Investment








Quantum Energy Holdings, LLC

$
(8,627)

$
(2,934)

$
(5,361)

$
(2,983)
Hotel Internet Services, LLC

392

(4,780)

1,148

(3,707)
Other

—

118

(74)

118
Total

$
(8,235)

$
(7,596)

$
(4,287)

$
(6,572)

In March 2023, Quantum sold one of its operating companies and the Partnership recorded its share of the gain of $3.0 million which is included in income from equity method investments in the Condensed Consolidated Statement of Operations for the nine months ended September 30, 2023. For the nine months ended September 30, 2023, Quantum made distributions of $2.3 million to the Partnership.

For the three and nine months ended September 30, 2023, impairment charges of $8.6 million were recorded on Quantum in loss from equity method investments in the Condensed Consolidated Statement of Operations. The charge was the result of increased regulation of the telemarketing industry in the third quarter which caused the Company to incur net losses during the third quarter of 2023 which are permanent in nature. The impairment was based on a quantitative assessment that indicated that the carrying value was greater than the fair value. Fair values were determined using the market approach.

For the three and nine months ended September 30, 2022, impairment charges of $2.9 million and $5.1 million, were recorded on Quantum and HIS, respectively, which is recorded in income from equity method investments in the Condensed Consolidated Statement

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

of Operations. The charge at HIS was the result of a permanent degradation in expected performance and cash flows due to the loss of a primary revenue source. The loss of a primary revenue source is a direct result of the cessation of the manufacture of a technology component used in the delivery of the internet services for which a cost-effective alternative is not presently available. The charge at Quantum was the result of the culmination of the deterioration in its customer base and its decision not to expand into new markets due to the excessive migration costs both of which are considered to be permanent in nature. The impairment was based on a quantitative assessment that indicated that the carrying value was greater than the fair value. Fair values were determined using a combination of the income approach and the market approach.

~~7. Fair Value Measurements~~

~~The following tables present the cost basis and fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis:~~

Fair value Measurement Using

Total
(Dollars in Thousands)

Level 1

Level 2

Level 3

Fair Value
September 30, 2023








Assets:








Investment securities:








United States Treasury Bills

$
297,847

$
—

$
—

$
297,847
Other investment securities

—

—

734

734

$
297,847

$
—

$
734

$
298,581

Liabilities:



Contingent liability ⁽¹⁾

$
—

$
—

$
9,221

$
9,221
Total liabilities

$
—

$
—

$
9,221

$
9,221

December 31, 2022



Assets:



United States Treasury Bills ⁽²⁾

$
304,300

$
—

$
—

$
304,300
Investment securities:



Other investment securities

—

—

729

729
Total assets

$
304,300

$
—

$
729

$
305,029

Liabilities:



Contingent liability ⁽¹⁾

$
—

$
—

$
7,216

$
7,216
Total liabilities

$
—

$
—

$
7,216

$
7,216

⁽¹⁾ ~~Included in accrued expenses on the Condensed Consolidated Balance Sheets.~~

⁽²⁾ ~~Included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.~~

The Partnership’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of any level for the nine months ended September 30, 2023 or the year ended December 31, 2022.

The Partnership classifies its United Sates Treasury bills as Level 1 assets under the fair value hierarchy, as these assets have been valued using quoted market prices in active markets without valuation adjustment.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The reconciliation of the Partnership’s contingent liability, which is recorded in accrued liabilities in the Condensed Consolidated Balance Sheets, measured at fair value on a recurring basis using unobservable inputs (Level 3), is as follows:

Contingent

Liability
Balance, December 31, 2022

$
7,216
Add: ALN acquisition

11,140
Less:

Payments

(3,244)
Gain on reduction of liability

(5,891)
Balance, September 30, 2023

$
9,221

~~Contingent liabilities are included in accrued liabilities on the Condensed Consolidated Balance Sheets.~~

The Partnership estimated the contingent liability using a discounted cash flow analysis, significant assumptions include a risk-free interest rate of 4.3% and a credit spread rate of 8.4%. The risk-free interest rate is based on U.S. Treasury zero-coupon yield curve on the valuation date commensurate with the payment term. The credit spread rate is based on similar debt instruments. Changes in interest rates did not have a material effect on the fair value of the contingent liabilities. There were no changes to the assumptions from January 6, 2023 (acquisition date, see “Note 4. Acquisitions, Dispositions, Assets Held for Sale and Discontinued Operations”) to September 30, 2023.

~~8. Property and Equipment~~

~~Components of property and equipment were as follows:~~

September 30,

December 31,
(Dollars in thousands)

2023

2022
Property and equipment




Buildings

$
4,624

$
4,476
Leasehold improvements

747

747
Computer and office equipment

5,568

4,410
Furniture and fixtures

1,083

528
Vehicles

1,359

2,272
Computer software

2,203

1,473
Total

15,584

13,906
Accumulated depreciation and amortization

(6,633)

(5,661)
Total property and equipment, net

$
8,951

$
8,245

Depreciation and amortization expense related to property and equipment for the three and nine months ended September 30, 2023 was $0.8 million and $2.1 million, respectively, and for the three and nine months ended September 30, 2022 was $0.5 million and $1.5 million, respectively.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~9. Goodwill and Intangible Assets~~

~~At September 30, 2023 and December 31, 2022, goodwill balances consisted of the following:~~

Technology -




Enabled

(Dollars in thousands)

Services

Energy

Total
Balance, December 31, 2022

$
64,601

$
14,294

$
78,895
Goodwill acquired through business combinations

19,337

—

19,337
Impairment of Goodwill

—

(14,294)

(14,294)
Dispositions

(2,822)

—

(2,822)
Reclassification to held for sale

(9,567)

—

(9,567)
Balance, September 30, 2023

$
71,549

$
—

$
71,549

The Partnership performed quantitative impairment testing in 2023 and 2022. For the nine months ended September 30, 2023, an impairment loss of $14.3 million was recorded in the Energy Segment. The impairment was due to decreasing revenue and cash flows and sales pipeline partially resulting from higher interest rates and inflation and an increase in the costs needed to complete installations. See further information on goodwill acquired and disposed or reclassified which is included in “Note 4. Acquisitions, Dispositions, Assets held for Sale and Discontinued Operations”.

~~As of September 30, 2023 and December 31, 2022, intangible assets consisted of the following:~~

Weighted

Gross

Average

Carrying

Accumulated

Net Carrying

Remaining
(Dollars in thousands)

Amount

Impairment

Amortization

Amount

Lives (Years)
September 30, 2023

Customer relationships

$
57,848

$
—

$
(21,451)

$
36,397

4.9
Trademark and trade names ⁽¹⁾

6,460

(710)

(2,923)

2,827

3.3
Software development and platform cost

12,744

—

(6,284)

6,460

2.4
Covenant not to compete

700

—

(700)

—

—
Total

$
77,752

$
(710)

$
(31,358)

$
45,684

December 31, 2022










Customer relationships

$
90,658

$
—

$
(37,993)

$
52,665

5.6
Trademark and trade names ⁽¹⁾

5,760

—

(3,108)

2,652

1.7
Software development and platform cost

38,610

—

(25,954)

12,656

4.1
Covenant not to compete

1,341

—

(1,341)

—

—
Total

$
136,369

$
—

$
(68,396)

$
67,973

1.	~~Includes indefinite lived intangible assets not subject to amortization totaling $0.9 million and $1.6 million as of September 30, 2023 and December 31, 2022, respectively.~~

~~The Partnership capitalized software development costs of $0.5 million during each of the nine months ended September 30, 2023 and 2022.~~

~~Amortization expense related to intangible assets was $12.2 million and $10.8 million for the nine months ended September 30, 2023 and 2022, respectively, and $3.6 million and $3.5 million~~Automotive Retail segment for the three months ended ~~September 30,~~March 31, 2023 ~~and 2022, respectively.~~

The amortization expense for software development and platform costs included in cost of revenues was $1.5 million and $0.9 million, respectively, for the nine months ended September 30, 2023 and 2022, and $0.2 million and $0.3 million, respectively, for the three months ended September 30, 2023 and 2022.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~were inconsequential.

The Partnership reviews each reporting unit and definite-lived intangible asset for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amount to future undiscounted cash flows the assets are expected to generate. If the goodwill or the definite-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair market value. The Partnership recorded an impairment loss based on a quantitative assessment that indicated that the carrying value was greater than fair value of $0.7 million related to trade names in the Energy Segment during the nine months ended September 30, 2023.

The Partnership reclassified $54.9 million of intangible assets net of $41.8 million of amortization at September 30, 2023, to assets held for sale on the Condensed Consolidated Balance Sheets after committing to sell 100% of the equity in Cantata. Estimated amortization expense as of September 30, 2023 for each of the next five years and thereafter is as follows:

Estimated
(Dollars in thousands)

Amortization Expense
2024

$
10,674
2025

9,489
2026

8,599
2027

5,909
2028

3,109
Thereafter

7,003
Total

$
44,783

~~10. Borrowings~~

~~Debt~~

~~Debt, other than amounts due to related-parties and lease obligations, as of September 30, 2023 and December 31, 2022, consisted of the following:~~

September 30,

December 31,
(Dollars in thousands)

2023

2022
Promissory notes

$
3,958

$
—
Installment note

50

125
Lines of credit

1,521

1,624
Total long-term debt

5,529

1,749
Less: current maturities

(4,175)

(1,724)
Long term debt, less current maturities

$
1,354

$
25

~~The aggregate contractual maturities of debt as of September 30, 2023 were as follows:~~

Contractual
(Dollars in thousands)

Amount
2024

$
4,175
2025

1,354
Total

$
5,529

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Promissory Notes~~

~~The Partnership held the following Promissory notes:~~

●

As part of HPI’s acquisition of ALN, the Partnership assumed promissory notes of $5.2 million to be repaid in eight quarterly installments of approximately $0.6 million beginning April 15, 2023, including interest of 8.0% per annum. Repayments on the promissory note were $0.6 million and $1.2 million for the three and nine months ended September 30, 2023, respectively.

●

The Partnership has a credit agreement outstanding with BBVA Compass Bank. The credit agreement requires equal principal payments plus interest at the bank’s Prime Rate plus 4.0%. Repayments were $25 thousand and $75 thousand in the three and nine months ended September 30, 2023 and 2022, respectively. The note matures in March 2024. The outstanding amount due on the note as of September 30, 2023 and December 31, 2022 was $0.1 million. The note payable is secured by substantially all the assets of the Partnership.

~~Lines of Credit~~

~~The Partnership had the following credit lines as of September 30, 2023 and December 31, 2022:~~

●

The Partnership has a line of credit with BBVA Compass Bank. The line requires monthly payments of interest only at the Prime Rate plus 0.25% per annum (8.75% as of September 30, 2023 and 7.75% as of December 31, 2022) through maturity in July 2026. The outstanding balance on the line of credit as of September 30, 2023 and December 31, 2022, was $1.5 million and $1.6 million, respectively. There were no additional borrowings under the line of credit in the nine months ended September 30, 2023 and 2022, respectively. Repayments on the line of credit were $0.1 million and $0.8 million in the nine months ended September 30, 2023 and 2022, respectively.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~11.~~5. Commitments and Contingencies

We, our General Partner, and our portfolio companies are involved in a number of regulatory, litigation, arbitration and other proceedings or investigations, many of which expose us to potential financial loss. We are advancing funds, pursuant to indemnification clauses in the LPA, to officers and directors, as well as GPB, its principals, representatives, and affiliates, for any costs they may incur in connection with their legal defense of such disputes as required by various agreements or governing law. This advancing of funds does not cover any potential future outcomes or settlements that result from these disputes.

We establish reserves or escrows for legal actions when potential losses associated with the actions become probable and the costs can be reasonably estimated. The actual costs of resolving legal actions may be substantially higher or lower than the amounts reserved or placed in escrow for those actions. Distributions may be delayed or withheld until such reserves are no longer needed or the escrow period expires. If liabilities exceed the amounts reserved or placed in escrow, Limited Partners may need to fund the difference by refunding some or all distributions previously received. During the three months ended March 31, 2024, GPB decreased the estimated legal indemnification costs expected to be paid during the liquidation term resulting in a decrease in the liability for estimated costs in excess of estimated receipts during liquidation of $2.6 million. Legal indemnification expenses paid during the three months ended

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

March 31, 2024, were $4.8 million and reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount.

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, the Partnership ~~accrued $4.9~~paid $3.6 million ~~and $12.1 million, respectively, and $1.7 million and $4.2 million for the three and nine months ended September 30, 2022, respectively~~ of legal indemnification expenses recorded in selling, general and administrative expenses in the Condensed Consolidated ~~Statements~~Statement of Operations.

With respect to all significant litigation and regulatory matters facing us and our General Partner, we have considered the likelihood of an adverse outcome. It is possible that we could incur losses pertaining to these matters that may have a material adverse effect on our operational results, financial condition or liquidity in any future reporting period. We understand that the General Partner is currently paying legal costs associated with these actions for itself and certain indemnified parties. The Partnership expects to provide partial, or in many cases complete, reimbursement to the General Partner as required by various agreements or governing law.

Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable a loss will be incurred, and that the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We regularly evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, if any, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgement is required to determine both the likelihood of there being, and the estimated amount of a loss related to, such matters. We continue to evaluate these legal matters and potential future losses in accordance with FASB ASC 450, Contingencies.

Regulatory and Governmental Matters

GPB and certain of its principals and affiliates face various regulatory and governmental matters. GPB seeks to comply with all laws, rules, regulations and investigations into any potential or alleged violation of law. In such situations where GPB disagrees with the Government’s allegations made against it, GPB intends to vigorously defend itself in court. These matters could have a material adverse effect on GPB and/or the Partnership’s ~~business, acquisitions, or results~~net assets in liquidation

Federal Matters

On February 4, 2021, the SEC filed a contested civil enforcement action (the “SEC Action”) against GPB, Ascendant Capital, LLC (“Ascendant”), Ascendant Alternative Strategies, LLC (“AAS”), David Gentile, Jeffry Schneider and Jeffrey Lash in the United States District Court for the Eastern District of ~~operations.~~New York (the “EDNY Court”). No GPB-managed partnership is a named defendant in the SEC Action. The SEC Action alleges several violations of the federal securities laws, including securities fraud. The SEC is seeking disgorgement and civil monetary penalties, among other remedies.

Also on February 4, 2021, the U.S. Attorney’s Office for the Eastern District of New York (the “USAO”) brought a Criminal indictment against Mr. Gentile, Mr. Schneider, and Mr. Lash (the “Criminal Case”). The indictment in the Criminal Case alleges conspiracy to commit securities fraud, conspiracy to commit wire fraud, and securities fraud against all three individuals. Mr. Gentile and Mr. Lash were also charged with two counts of wire fraud. We understand that the USAO intends to seek criminal forfeiture. Promptly following his indictment, Mr. Gentile resigned from all management and board positions with GPB and Highline, the GPB-managed funds, including the Partnership, and subsidiaries of the Partnership. On June 6, 2023, Mr. Lash pled guilty to one count of wire fraud in the Criminal Case pursuant to a plea agreement. Mr. Lash’s sentencing was originally scheduled for April 4, 2024, but has been postponed to a future undetermined date, In a status conference held on April 15, 2024, the judge in the Criminal Case, on consent of all parties, ordered that the trial, previously scheduled to begin on June 3, 2024, is to be adjourned to June 10, 2024.

Appointment of Monitor and Application for Receivership

On February 11, 2021, the EDNY Court in the SEC Action appointed Joseph T. Gardemal III as the ~~Monitor~~independent monitor over GPB (the “Monitor”) until further order of the EDNY ~~Court.~~Court (the “Monitor Order”). The EDNY Court appointed the Monitor in response to a request from the SEC, which asserted that the Monitor was necessary to protect investors in light of the alleged misconduct of GPB Capital’s former CEO, David Gentile. In its February 4, 2021 ~~Complaint~~complaint (“the Complaint”) in the SEC Action, the SEC alleged that Mr. Gentile, as the owner and then-CEO of GPB Capital, along with Jeffry Schneider, the owner of Ascendant, GPB’s placement agent, ~~(as defined below),~~ lied to investors about the source of money used to make 8% annualized distribution payments to investors. According to the SEC, Mr.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Gentile and others allegedly told investors that the distribution payments were paid exclusively with monies generated by GPB portfolio companies, but as alleged, GPB actually used investor money to pay portions of the annualized 8% distributions. The Complaint further contains allegations that Mr. Gentile and others manipulated financial statements of certain limited partnership funds that GPB manages to perpetuate the deception by giving the false appearance that the funds’ income was closer to generating sufficient income to cover the distribution payments than it actually was. Moreover, the Complaint alleges that Mr. Gentile engaged in undisclosed self-dealing, including by omitting from investor communications certain conflicts of interest and fees and other compensation that he received, totaling approximately $8.0 million.

In support of the Monitor Order, the SEC contended that the Monitor would provide assurances to investors, GPB’s counterparties, and the public that an unbiased and qualified person who was not beholden to Mr. Gentile was vetting any significant transactions and decisions, and looking out for the interests of investors. Accordingly, pursuant to the Monitor Order, GPB shall (i) grant the Monitor access to all non-privileged books, records and account statements for the GPB-managed funds, including the Partnership, as well as their portfolio companies; and (ii) cooperate fully with requests by the Monitor reasonably calculated to fulfill the Monitor’s duties. ~~As noted below, the Order was amended on April 14, 2021 (the “Amended Order”).~~

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The Monitor Order provides that the Monitor will remain in place until terminated by order of the EDNY Court, and grants the Monitor the authority to approve or disapprove proposed material corporate transactions by GPB, the Partnership and its subsidiaries, extensions of credit by them outside the ordinary course of business, decisions to make distributions to the Limited Partners of the Partnership, or any decision to file any bankruptcy or receiver petition for any of them, among other actions. The Monitor is not required to approve the issuance of ~~the Condensed Consolidated Financial Statements included within~~ this Quarterly Report on Form 10-Q (“Form 10-Q”), nor has management sought or obtained approval from the Monitor.

On April 14, 2021, the EDNY Court entered an ~~Amended~~amendment to the Monitor Order ~~providing~~(the “Amended Monitor Order”), which provided that, in addition to the SEC and GPB, certain State regulators will receive access to the periodic reports filed by the Monitor pursuant to the Amended Monitor Order.

On May 31, 2022, Mr. Gentile filed a motion in the SEC Action to modify the Amended Monitor Order pursuant to Rule 60(b) of the Federal Rules of Civil Procedure ~~(the “Rule~~(“Rule 60(b) Motion”). In his Rule 60(b) Motion, Mr. Gentile ~~is seeking~~sought a court order to, among other things, (i) narrow the scope of the Monitor’s responsibilities; and (ii) direct the Monitor to ensure that GPB does not sell or otherwise dispose of assets or portfolio companies that the Partnership owns before the completion of a “strategic assessment” to be conducted by three new managers Mr. Gentile ~~purportedly~~purported to have appointed to GPB on May 27, 2022. On that same day, May 31, 2022, the Monitor notified Mr. Gentile and GPB that Mr. Gentile’s purported appointment of three new managers to GPB without Monitor approval was, ~~amongst other things,~~ in violation of the Amended Monitor Order. Mr. Gentile and GPB were, at that time, given ten (10) business days to cure the violation of the Amended Monitor Order. The cure period expired without any steps having been taken to comply with the Monitor’s notification of violation of the Amended Monitor Order.

On June 13, 2022, the SEC filed by order to show cause in the SEC Action an application and order to (i) convert the existing Monitorship over GPB and the GPB-managed funds to a Receivership, and appoint the ~~previously-appointed~~ Monitor, Joseph T. Gardemal III, as Receiver; and (ii) impose a litigation injunction on cases filed against GPB and the GPB-managed funds (the “Receivership Application” ~~and “Proposed Order”~~). The Receivership Application and the Proposed Order Appointing Receiver and Imposing Litigation Injunction (the “Proposed Order”) were filed with the EDNY Court with the consent of GPB’s management.

The Receivership Application seeks the appointment of Mr. Gardemal as Receiver in order to, in part, streamline the process by which GPB and the GPB-managed funds liquidate remaining portfolio company assets and distribute money to Limited Partners, subject to the EDNY Court’s supervision. The Proposed Order would grant to Mr. Gardemal, generally, all powers and authorities previously possessed by the entities subject to the Proposed Order, as well as the powers possessed by the officers, directors, managers and others previously in charge of those entities, and permits him to, among other things, take all such actions necessary to preserve receivership assets.

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Limited Partners, in the EDNY Court, to prevent potentially disparate actions in different courts that could negatively impact the assets proposed to be subject to the EDNY Court’s jurisdiction and control.

On July 28, 2023, an Eastern District of New York Magistrate Judge issued a Report and Recommendation (‘R&R”), recommending that the EDNY Court grant the SEC’s Receivership Application (i.e., convert the monitorship to a receivership), including the imposition of a litigation injunction. The Magistrate Judge further recommended that Mr. Gentile’s Rule 60(b) Motion be denied as moot, or alternatively, that it be denied as procedurally improper.

~~Objections~~ Mr. Gentile’s and Mr. Schneider’s objections to the ~~Report and Recommendation,~~R&R, and all responses ~~submitted~~ thereto, were filed with the EDNY Court as of September 29, 2023. The EDNY Court will consider the Report and Recommendation and determine whether, and to what extent, to adopt it in a final ruling; it will not become a legally binding Order until it is adopted by the EDNY Court. Should

On December 7, 2023, the EDNY Court ~~adopt~~issued an Order, granting the ~~Report~~SEC’s Receivership Application and ~~Recommendation, a party would be permitted~~adopting the SEC’s Proposed Order (the “Receivership Order”). On December 12, 2023, Mr. Gentile and Mr. Schneider filed notice of appeal with the EDNY Court of the Receivership Order, along with an Application for Order to ~~appeal~~Show Cause to the ~~decision~~EDNY Court to stay the Receivership Order pending resolution of Mr. Gentile’s and Mr. Schneider’s appeal to the United States Court of Appeals for the Second ~~Circuit.~~

~~Federal Matters~~

Circuit (the “Second Circuit”). On ~~February 4, 2021, the SEC Action was filed against GPB, Ascendant Capital, LLC (“Ascendant”), Ascendant Alternative Strategies, LLC (“AAS”), David Gentile, Jeffry Schneider and Jeffrey Lash in~~December 14, 2023, the EDNY ~~Court. No GPB-managed partnership is~~Court denied the Order to Show Cause, but exercised its discretion to grant a ~~named~~

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~defendant in the SEC Action. The SEC Action alleges several violations~~temporary stay of the ~~federal securities laws, including securities fraud. The SEC is seeking disgorgement and civil monetary penalties, among other remedies.~~

Also on February 4, 2021, the United States Attorney’s Office (the “USAO”) brought the Criminal Case against Mr. Gentile, Mr. Schneider, and Mr. Lash. The indictment in the Criminal Case alleges conspiracyReceivership Order to ~~commit securities fraud, conspiracy to commit wire fraud, and securities fraud against all three individuals.~~allow Mr. Gentile and Mr. ~~Lash were also charged with two counts of wire fraud. We understand that the USAO intends~~Schneider to seek ~~criminal forfeiture.~~a stay pending appeal of the Receivership Order from the Second Circuit. On December 21, 2023, Mr. Gentile ~~resigned from all management~~ and ~~board positions~~Mr. Schneider timely filed their motion for a stay pending appeal with ~~GPB~~the Second Circuit. The parties to the appeal agreed to an expedited briefing, which was completed on April 12, 2024. If the Receivership Order is affirmed on appeal, the Receiver would assume the power to operate and ~~Highline, and~~manage the ~~GPB-managed funds,~~Partnership but would have the power to authorize or delegate said power to others, including the ~~Partnership,~~current management team at GPB. Under the Receivership, we may be subject to, among other things, closer monitoring of our day-to-day activities and ~~subsidiaries of~~books and records than under the ~~Partnership, promptly following his indictment. In a status conference held on April 17, 2023,~~current Monitorship. We may also be prohibited from making certain investments or undertaking activities that we would have otherwise pursued, may be required to settle certain disputes (including disputes with creditors), or otherwise may be subject to reorganization. This may also impact our estimates regarding costs expected to be incurred during the Judge in the Criminal Case scheduled the trial for June 3, 2024. On June 6, 2023, Mr. Lash pled guilty to one count of wire fraud in the Criminal Case pursuant to a plea agreement. Mr. Lash’s sentencing is currently scheduled for April 4, 2024.liquidation process.

State Matters

On May 27, 2020, the ~~State~~Massachusetts Securities Division of ~~Massachusetts~~the Office of the Secretary of the Commonwealth (“Massachusetts”) filed an Administrative Complaint against GPB for alleged violations of the Massachusetts Uniform Securities Act. No GPB-managed fund is a named defendant. The complaint alleges, among other things, that the offering documents for several GPB-managed funds, including the Partnership, included material misstatements or omissions. Massachusetts ~~is seeking~~seeks both monetary and administrative relief, including disgorgement and rescission to Massachusetts residents who purchased interest in the GPB-managed funds. This matter is ~~currently~~ stayed, pending resolution of the Criminal Case.

On February 4, 2021, seven ~~state~~State securities regulators (from Alabama, Georgia, Illinois, Missouri, New Jersey, New York, and South Carolina, collectively the “States”) each filed suit against GPB. No GPB-managed fund is a named defendant in any of the suits. Several of the suits also named Ascendant, AAS, Mr. Gentile, Mr. Schneider, and Mr. Lash as defendants. The States’ lawsuits allege, among other things, that the offering documents for several GPB-managed funds, including the Partnership, included material misstatements and omissions. The States ~~are seeking~~seek both monetary and administrative relief, including disgorgement and rescission. The cases brought by the States have been stayed pending the conclusion of the ~~related~~ Criminal Case. The State of New Jersey has voluntarily dismissed its case, without prejudice to re-file it following the conclusion of the Criminal Case.

Actions Asserted Against GPB and Others, Not Including the Partnership

Ismo J. Ranssi, derivatively on behalf of Armada Waste Management, LP, v. GPB Capital Holdings, LLC, et al. (New York Supreme Court, New York County, Index No. 654059/2020)

In August 2020, plaintiffs filed a derivative action against GPB, Ascendant, AAS, Axiom, David Gentile, Mark D. Martino, and Jeffry Schneider in New York Supreme Court. GPB Waste Management, LP is named as a nominal defendant. The Partnership is not a named defendant. The Complaint alleges, among other things, that the offering documents for certain GPB managed funds include material misstatements and omissions. Plaintiffs bring causes of action against GPB for breach of fiduciary duty, breach of contract, unjust enrichment, and an equitable accounting, and against all other defendants for breach of fiduciary duty and aiding and abetting breach of fiduciary duty, and unjust enrichment. The plaintiffs seek a declaration from the Court that defendants breached duties owed to them, and that defendants must indemnify GPB Waste Management, LP for costs in connection with the suit. Plaintiffs also seek unspecified

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

damages and an equitable accounting, and an Order that defendants disgorge all fees obtained through the sale of GPB Waste Management, LP “securities”. Any potential losses associated with this matter cannot be estimated at this time.

~~Galen G. Miller and E. Ruth Miller,~~Michael Peirce, derivatively on behalf of GPB ~~Holdings II,~~Automotive Portfolio, LP v. GPB Capital Holdings, LLC, ~~et al. (New York Supreme Court, New York County, Index No. 656982/2019)~~

~~In November 2019, plaintiffs filed a derivative action against GPB,~~ Ascendant ~~AAS,~~Capital, LLC, Ascendant Alternative Strategies, LLC, Axiom ~~Michael Cohn,~~Capital Management, Inc., Steven Frangioni, David Gentile, William Jacoby, Minchung Kgil, Mark D. Martino and Jeffry Schneider, -and- GPB Automotive Portfolio, LP, Nominal Defendant (New York Supreme Court, New York County, Case No. 652858/2020)

In July 2020, plaintiff filed a derivative action in New York Supreme Court ~~New York County.~~against GPB, Ascendant, AAS, Axiom, Steve Frangioni, David Gentile, William Jacoby, Minchung Kgil, Mark Martino, and Jeffry Schneider. The Partnership was named only as a nominal defendant. An Amended Complaint was filed on or about March 2, 2020, alleging, among other things, that the offering documents for certain GPB-managed funds include material misstatements and omissions. The Amended Complaint alleges ~~causes~~various breaches of ~~action for breach~~fiduciary duty and/or aiding and abetting the breaches of fiduciary duty against all ~~defendants; aiding and abetting breach of fiduciary duty against Ascendant, AAS, Axiom and Mr. Martino;~~defendants, breach of contract against ~~GPB;~~GPB, unjust enrichment, ~~against all defendants;~~ and an equitable ~~accounting against GPB. The plaintiffs~~accounting. Plaintiffs are seeking declaratory relief, disgorgement, ~~of alleged unjust enrichment, unspecified damages as a result~~

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~of alleged wrongful acts, costs of the action, and~~restitution, an equitable ~~accounting.~~accounting, and unspecified damages. Any potential losses associated with this matter cannot be estimated at this time.

Actions Asserted Against GPB and Others, Including the Partnership

For all matters below in which the Partnership is a defendant and where the partnership disagrees with the allegations against it, we intend to vigorously defend against the allegations, however no assurances can be given that we will be successful.

John Thomas Alberto, et al. v. GPB Capital Holdings, LLC, GPB Automotive Portfolio, LP, GPB Cold Storage, LP, GPB Holdings, LP, GPB Holdings Qualified, LP, GPB Holdings II, LP, GPB Holdings III, LP, GPB NYC Development, LP, GPB Waste Management, LP, Ascendant Capital, LLC, Alternative Strategies, LLC, Axiom Capital Management, Inc., DJ Partners, MR Ranger, LLC, David Gentile, Jeffry Schneider, Jeffrey Lash, Mark Martino, and DOES 1-50 (New York Supreme Court, New York County, Index No. 651143/2023)

In March 2023, plaintiffs filed an action in New York Supreme Court against the above-named defendants, alleging, inter alia, breaches of contract, breaches of fiduciary duty, constructive fraud, conspiracy to commit fraud, negligent misrepresentation, unjust enrichment, and violations of New York General Business Laws. Defendants were not served with the complaint until June 2023. Plaintiffs are seeking compensatory, punitive, and exemplary damages, restitution, rescission, and an equitable accounting. Any potential losses associated with this matter cannot be estimated at this time.

~~Michael Peirce,~~Galen G. Miller and E. Ruth Miller, derivatively on behalf of GPB ~~Automotive Portfolio,~~Holdings II, LP, v. GPB Capital Holdings, LLC, et al. (New York Supreme Court, New York County, Index No. 656982/2019)

In November 2019, plaintiffs filed a derivative action against GPB, Ascendant, ~~Capital, LLC, Ascendant Alternative Strategies, LLC,~~AAS, Axiom, ~~Capital Management, Inc.,~~Michael Cohn, Steven Frangioni, David Gentile, William Jacoby, Minchung Kgil, Mark D. Martino, and Jeffry Schneider ~~-and- GPB Automotive Portfolio, LP, Nominal Defendant (New~~in New York Supreme Court, New York ~~County, Case No. 652858/2020)~~

~~In July~~County. The Partnership was named only as a nominal defendant. An Amended Complaint was filed on or about March 2, 2020, ~~plaintiff filed a derivative action in New York Supreme Court against GPB, Ascendant, AAS, Axiom, Steve Frangioni, David Gentile, William Jacoby, Minchung Kgil, Mark Martino,~~alleging, among other things, that the offering documents for certain GPB-managed funds include material misstatements and ~~Jeffry Schneider.~~omissions. The Amended Complaint alleges ~~various breaches~~causes of ~~fiduciary duty and/or aiding and abetting the breaches~~action for breach of fiduciary duty against all ~~defendants,~~defendants; aiding and abetting breach of fiduciary duty against Ascendant, AAS, Axiom and Mr. Martino; breach of contract against ~~GPB,~~GPB; unjust enrichment against all defendants; and an equitable ~~accounting. Plaintiffs~~accounting against GPB. The plaintiffs are seeking ~~declaratory relief,~~ disgorgement ~~restitution,~~of alleged unjust enrichment, unspecified damages as a result of alleged wrongful acts, costs of the action, and an equitable ~~accounting, and unspecified damages.~~accounting. Any potential losses associated with this matter cannot be estimated at this time.

Alfredo J. Martinez, et al. v. GPB Capital Holdings, LLC, et al. (Delaware Chancery Court, Case No. 2019-1005)

In December 2019, plaintiffs filed a civil action in Delaware Court of Chancery to compel inspection books and records from GPB, as General Partner, and from the Partnership, GPB Holdings I, GPB Automotive Portfolio, LP, and GPB Waste Management. In June 2020, the court dismissed plaintiffs’ books and records request, but allowed a contract claim for specific performance to proceed as a

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

plenary action. The plaintiffs are seeking unspecified damages and penalties. Any potential losses associated with this matter cannot be estimated at this time.

Alfredo J. Martinez and HighTower Advisors v. GPB Capital Holdings, LLC, et al. (Delaware Chancery Court, Case No. 2020-0545)

In July 2020, plaintiff filed a complaint against GPB, Armada Waste Management GP, LLC, Armada Waste Management, LP, the Partnership, GPB Automotive Portfolio, LP, and GPB Holdings, LP in the Delaware Court of Chancery to compel inspection of GPB’s books and records based upon specious and unsubstantiated allegations regarding alleged fraudulent activity, mismanagement, and breaches of fiduciary duty. The plaintiffs are seeking an order compelling GPB to permit inspection of documents related to Armada Waste, as well as for costs and fees. Any potential losses associated with this matter cannot be estimated at this time.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

In re: GPB Capital Holdings, LLC Litigation (formerly, Adam Younker, Dennis and Cheryl Schneider, Elizabeth Plaza, and Plaza Professional Center Inc. PFT Sharing v. GPB Capital Holdings, LLC, et al. and Peter G. Golder, individually and on behalf of all others similarly situated, v. GPB Capital Holdings, LLC, et al.) (New York Supreme Court, New York County, Case No. 157679/2019)

In May 2020, plaintiffs filed a consolidated class action complaint in New York Supreme Court, New York County, against GPB, GPB Holdings, GPB Holdings II, GPB Holdings III, the Partnership, GPB Cold Storage, GPB Waste Management, David Gentile, Jeffrey Lash, Macrina Kgil, a/k/a Minchung Kgil, William Edward Jacoby, Scott Naugle, Jeffry Schneider, AAS, Ascendant, and Axiom Capital Management. The Complaint alleges, among other things, that the offering documents for certain GPB-managed funds, include material misstatements and omissions. The plaintiffs are seeking disgorgement, unspecified damages, and other equitable relief. Any potential losses associated with this matter cannot be estimated at this time.

Phillip J. Cadez, et al. v. GPB Capital Holdings, LLC, et al. (Delaware Chancery Court, Case No. 2020-0402)

In May 2020, plaintiffs filed a derivative action in Delaware Court of Chancery against GPB, David Gentile, Jeffrey Lash, and Jeffry Schneider. The complaint also names GPB Holdings, LP, and the Partnership as nominal defendants. Previously, plaintiffs had filed a complaint to compel inspection of books and records, which had been dismissed without prejudice.

In the current action, plaintiffs are alleging breaches of fiduciary duties and/or the aiding and abetting of those breaches, unjust enrichment, and with regard to GPB, breach of the Partnerships’ Limited Partnership Agreements. Plaintiffs are seeking unspecified damages based on the causes of action pled, equitable relief in the form of a directive to remove GPB as the General Partner of GPB Holdings, LP and the Partnership, a constructive trust, costs of the action (including attorneys’ fees), and other declaratory and equitable relief. Any potential losses associated with this matter cannot be estimated at this time.

Jeff Lipman and Carol Lipman, derivatively on behalf of GPB Holdings II, LP and GPB Automotive Portfolio, LP v. GPB Capital Holdings, LLC, et al. (Delaware Chancery Court, Case No. 2020-0054)

In January 2020, plaintiffs filed a derivative action in Delaware Court of Chancery against GPB, David Gentile, Jeffrey Lash, and Jeffry Schneider. The complaint alleges breaches of fiduciary duty and/or aiding and abetting breaches of fiduciary duty against each of the defendants, and declaratory relief from the Court related to allegations of fraud, gross negligence, and willful misconduct. The plaintiffs seek unspecified damages and declaratory forms of relief. Any potential losses associated with this matter cannot be estimated at this time.

Mary Purcell, et al. v. GPB Holdings II, LP, et al. (Cal. Supreme Court, Orange County, Case No. 30-2019-01115653-CU-FR-CJC)

In December 2019, plaintiffs filed a civil action in Superior Court in Orange County, California against Rodney Potratz, FSC Securities Corporation, GPB Automotive Portfolio, LP, the Partnership, GPB, David Gentile, Roger Anscher, William Jacoby, Jeffrey Lash, Ascendant, Trevor Carney, Jeffry Schneider, and DOES 1 - 15, inclusive. An Amended Complaint was filed on or about June 10, 2020. In the Amended Complaint, Plaintiffs allege breach of contract against GPB Capital and DOES 1-15, inclusive; statutory and common law fraud against all defendants; breach of fiduciary duty against all defendants; and negligence against all defendants. Plaintiffs allege

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

losses in excess of $4.8 million and are seeking rescission, compensatory damages, unspecified equitable relief and punitive damages, and interest and attorneys’ fees in unspecified amounts. Any potential losses associated with this matter cannot be estimated at this time.

Barbara Deluca and Drew R. Naylor, on behalf of themselves and other similarly situated Limited Partners, v. GPB Automotive Portfolio, LP et al. (S.D.N.Y., Case No. 19-CV-10498)

In November 2019, plaintiffs filed a putative class action complaint in the United States District Court for the Southern District of New York against GPB, GPB Holdings II, LP, the Partnership, David Gentile, Jeffery Lash, AAS, Axiom, Jeffry Schneider, Mark Martino, and Ascendant. The Complaint alleges fraud and material omissions and misrepresentations to induce investment and losses in excess of $1.27 billion. The plaintiffs are seeking disgorgement, compensatory, consequential, and general damages; disgorgement; rescission; restitution; punitive damages; and the establishment of a constructive trust. While the parties to the action stipulated in 2021 to stay this action pending resolution of the criminal case against defendants David Gentile and Jeffry Schneider, the Court nevertheless ordered

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

the stay lifted as to the so-called “Auditor Defendants” in January 2023. In September 2023, the Court denied a motion by the Auditor Defendants to stay the case, and instead has directed that certain discovery ~~continue in the case.~~continue. Any potential losses associated with this matter cannot be estimated at this time.

Kinnie Ma Individual Retirement Account, et al., individually and on behalf of all others similarly situated, v. Ascendant Capital, LLC, et al. (W.D. Texas, Case No. 19-CV-01050)

In October 2019, plaintiffs filed a putative class action in the United States District Court for the Western District of Texas against GPB, certain GPB-managed limited partnerships, including the Partnership, for which GPB is the General Partner, AAS, and Ascendant, as well as certain principals of the GPB-managed limited partnerships, auditors, broker-dealers, a fund administrator, and other individuals. The Complaint alleges violations and/or aiding and abetting violations of the Texas Securities Act, fraud, substantial assistance in the commission of fraud, breach of fiduciary duty, substantial assistance in breach of fiduciary duty, and negligence. Plaintiffs allege losses in excess of $1.8 billion and are seeking compensatory damages in an unspecified amount, rescission, fees and costs, and class certification. Any potential losses associated with this matter cannot be estimated at this time.

On June 1, 2022, the Western District of Texas Court consolidated this matter with Barasch v. GPB Capital, et al. (19-cv-01079); only the Kinnie Ma case continues, including the claims at issue in the Barasch v. GPB Capital matter and Loretta Dehay (as described below), which were consolidated under the Kinnie Ma docket number. On June 23, 2022, the Court denied Defendants David Gentile and Jeffry Schneider’s motion to stay the case pending the resolution of the criminal case, U.S. v. Gentile, et al., No. 1:21-CR-54-DG (E.D.N.Y. Jan. 29, 2021). Plaintiffs filed a consolidated complaint on July 1, 2022, and defendants filed answers thereafter. On August 21, 2023, the Court granted the indicted defendants’ May 2023 motion to stay proceedings pending resolution of the related criminal case. ~~Plaintiffs have filed their objection to and~~On March 21, 2024, the District Judge denied Plaintiffs’ appeal of the ~~Court’s decision.~~Magistrate Judge’s order staying the case, and affirmed the order granting Defendants’ motion to stay.

Concorde Investment Services, LLC v. GPB Capital Holdings, LLC, et al. (New York Supreme Court, New York County, Index No. 650928/2021)

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

economic advantage, indemnity, and declaratory relief, and includes a demand for arbitration. Plaintiff’s demands include compensatory damages of at least $5.0 million, punitive damages, and a declaration that Concorde is contractually indemnified by the Defendants.

In October 2021, the New York State Supreme Court ordered the action be stayed so that the Plaintiffs could pursue claims in arbitration. By the same Order, the New York State Supreme Court denied the Defendants’ motions to dismiss the Complaint. Any potential losses associated with this action cannot be estimated at this time.

Concorde Investment Services, LLC v. GPB Capital Holdings, LLC, GPB Holdings, LP, GPB Automotive Portfolio, LP, GPB Waste Management, LP (American Arbitration Association, Case No. 01-21-0018-1470)

In December 2021, claimant Concorde Investment Services, LLC (“Concorde”, the Plaintiff in the New York case set forth above) filed a Demand for Arbitration with the American Arbitration Association (AAA). The arbitration, however, was dormant while certain issues in the New York case were litigated. In January 2023, Concorde successfully sought the appointment of ~~an arbitration~~a 3-arbitrator panel to proceed against GPB Capital and the GPB-managed funds (the “GPB Funds”). Concorde seeks indemnification related to lawsuits and arbitrations brought against Concorde by its clients with respect to the limited partnership interests Concorde sold in the GPB Funds, and based upon the so-called “dealer agreements” entered into between Concorde and the GPB Funds. ~~On request of Concorde, a three-member arbitration panel has been appointed.~~ On or about April 25, 2023, the panel denied the Respondents’ request to file either a motion to dismiss the arbitration, or to stay the arbitration pending the resolution of the related Criminal Case. On ~~October~~November 3, 2023, ~~Respondents requested~~following a telephonic conference ~~before~~with the panel, ~~regarding~~the panel denied the GPB Respondents’ request to stay the arbitration ~~until~~pending a decision ~~is issued~~ by the EDNY Court on the ~~appointment of a Receiver over GPB Capital.~~Receivership Application. Arbitration proceedings commenced on April 29, 2024. Any potential losses associated with this action cannot be estimated at this time.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Jeffry Schneider v. GPB Capital~~TTA Consideration Holdings, LLC ~~et al., Case No. 2021-0963 (Court of Chancery, DE)~~

~~In November 2021, Plaintiff,~~ f/k/a ~~former affiliate of GPB Capital~~ALN Medical Management, LLC v. HPI Holdings, LLC filed a Complaint in Chancery Court in Delaware against GPB Capital Holdings, LLC and each of the funds it manages, including the Partnership, seeking a ruling that he is contractually entitled to mandatory advancement of legal fees by GPB Capital with respect to several lawsuits in which Plaintiff is named. On March 24, 2022, the Chancery Court issued a bench ruling, finding that Plaintiff was entitled to advancement of his legal fees from GPB Capital.

~~David Gentile v. GPB Capital Holdings, LLC et al., Case~~(Case No. ~~2021-1102-SG (Court of Chancery, DE)~~2024-0213-NAC)

On or about ~~December 20, 2021, Plaintiff David Gentile, founder and former Chief Executive Officer of GPB Capital~~March 5, 2024, TTA Consideration Holdings, LLC f/k/a ALN Medical Management (“Plaintiff”), LLC filed ~~a Complaint~~suit in Delaware Chancery Court ~~in Delaware~~ against ~~GPB Capital~~HPI Holdings, LLC ~~and each~~(“HPI”).

Plaintiff alleges that HPI improperly refused to issue to Plaintiff a so-called Synergy Earn Out payment that was required to be made per the terms of the ~~funds it manages, including~~January 1, 2023 Asset Purchase Agreement entered into between ALN (as seller) and Health Prime International (as buyer). Plaintiff contends that HPI is intentionally and wrongfully hindering Plaintiff’s ability to be paid under the ~~Partnership, seeking entry of~~applicable agreements between the parties. Plaintiff seeks monetary damages in an ~~Order governing his contractual entitlement~~amount calculated pursuant to ~~advancement of legal fees by GPB Capital~~the agreements at issue in the case, pre and post-judgment interest, and attorneys’ fees. HPI denies any wrongdoing in connection with ~~respect~~the lawsuit and intends to ~~several lawsuits in which Plaintiff is named. On April 12, 2022, the Chancery Court entered the parties’ Stipulation and Advancement Order governing~~vigorously defend itself against Plaintiff’s ~~entitlement to advancement of attorneys’ fees and expenses.~~claims. Any potential losses associated with this matter cannot be estimated at this time.

Actions asserted by GPB

GPB Capital Holdings, LLC et al. v. Patrick Dibre (New York Supreme Court, Nassau County, Case No. 606417/2017)

In July 2017, GPB, the Partnership, GPB Holdings I, LP, GPB Holdings Automotive, LLC, and GPB Portfolio Automotive, LLC filed suit in New York State Supreme Court, Nassau County, against Patrick Dibre, one of their former operating partners, for breach of contract, breach of fiduciary duty, fraud and conversion arising out of the Defendant’s sale of certain automobile dealerships to the GPB Plaintiffs. Mr. Dibre answered GPB’s Complaint, and asserted counterclaims alleging breach of contract and unjust enrichment. Plaintiffs have since filed amended complaints, narrowing the prior claims to focus on certain specific provisions in the documents governing the sale of the dealerships at issue. The plaintiffs seek damages based on the value of the subject dealerships related to the alleged breach, and also seek an order of specific performance compelling Mr. Dibre to fulfill other obligations under the governing documents. Any ruling in favor of the Partnership or potential losses associated with this matter cannot be determined or estimated at this time.

GPB Capital Holdings, LLC et al. v. Patrick Dibre and 2150 Aventura Realty LLC (11th Judicial Circuit Ct, Miami-Dade County, Case No. 2023-021013-CA-01)

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

above). GPB at the same time recorded a Notice of Lis Pendens on the real property at issue, which is located in Miami-Dade County, Florida, making a formal legal record of GPB and the other Plaintiffs’ enforceable and legally cognizable equitable interests in and to the property at issue. Neither Dibre nor 2150 Aventura Realty LLC has appeared in the case. Accordingly, on or about September 29, 2023, the Court granted Plaintiffs’ motion for a default against 2150 Aventura Realty LLC, and on or about October 18, 2023, the Court granted Plaintiffs’ motion for a default against Dibre. Any potential ruling in favor of the Partnership cannot be determined at this time.

~~Portfolio Company Litigation~~

~~Doctor’s Emergency Service, P.A. v. Professional Management, Inc. and AdvantEdge Healthcare Solutions, Inc. (Circuit Court for Baltimore City, No. 24-C-23-001840 CN)~~

In April 2023, Plaintiff Doctor’s Emergency Service, P.A., a customer of AdvantEdge Healthcare Solutions, Inc. (“AdvantEdge”), filed suit against AdvantEdge and another party for breach of contract and breach of fiduciary duties relating to a dispute over purported negligent billing practices. Plaintiff seeks in excess of $3 million in damages. AdvantEdge disputes the Plaintiff’s allegations, and has filed claims under various insurance policies to potentially cover any loss. Any potential losses associated with this matter cannot be estimated at this time.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, if any, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgement is required to determine both the likelihood of there being and the estimated amount of a loss related to such matters. We continue to evaluate these legal matters and potential future losses in accordance with FASB ASC 450, Contingencies.

~~Actions Settled During Periods Presented~~

~~AMR Auto Holdings - SM, LLC d/b/a Prime Subaru Manchester v. Subaru of New England, Inc. (New Hampshire Motor Vehicle Industry Board, Case No. 2021-01)~~

Prime Subaru Manchester had a franchise agreement (“Subaru Dealer Agreement”) with Subaru of New England, Inc., the distributor of Subaru vehicles in New Hampshire (“SNE”), pursuant to which Prime Subaru Manchester owned and operated a Subaru dealership in Manchester, New Hampshire. On September 13, 2021, Prime Subaru Manchester notified SNE that it proposed to transfer substantially all of the assets of its dealership to Group 1 Automotive, Inc. (“Group 1”), pursuant to a purchase agreement. To comply with the requirements of the Subaru Dealer Agreement and New Hampshire law, Prime Subaru Manchester asked for SNE’s consent to the transfer to Group 1; SNE refused to approve the transfer (the “Turndown”). On December 10, 2021, Prime Subaru Manchester, as Protestor, filed a Protest action against SNE, as Respondent, with the New Hampshire Motor Vehicle Industry Board (the “NHMVIB”) (Case No. 2021-01), claiming that the Turndown by SNE breached the Subaru Dealer Agreement and New Hampshire law, and seeking a ruling from the NHMVIB, that SNE unreasonably and in violation of law withheld its consent to the proposed transfer of the assets of Prime Subaru Manchester to Group 1, as well as awarding costs and attorney’s fees to Prime Subaru Manchester.

After discovery by both sides, the NHMVIB held a final hearing on the Protest action on August 2, 2022. On August 10, 2022, the NHMVIB deliberated and a Final Order on Hearing was issued by the NHMVIB on August 12, 2022 in which it was ordered that Prime Subaru Manchester’s Protest was granted because SNE unreasonably withheld consent of the sale of the dealership to Group 1 in violation of New Hampshire law, and SNE’s claims were denied.

On or about September 1, 2022, SNE filed with the NHMVIB a Motion for Rehearing, asking the NHMVIB to reconsider its Final Order in favor of Prime Subaru Manchester. On September 12, 2022, Prime Subaru Manchester filed a Reply to SNE’s Motion for Rehearing with the NHMVIB. On October 4, 2022, the NHMVIB deliberated and, on October 11, 2022, issued an Order denying SNE’s Motion for Rehearing.

As set forth in more detail below, SNE then sought to overturn the NHMVIB’s ruling in the New Hampshire State Courts. However, following the parties’ September 2023 settlement, the actions commenced by SNE in New Hampshire State Court has been discontinued.

~~Subaru of New England, Inc. v. AMR Auto Holdings–SM LLC d/b/a Prime Subaru Manchester (Hillsborough Superior Court Northern District, New Hampshire, 216-2022-CV-00786)~~

On November 10, 2022, SNE filed an appeal with the Hillsborough Northern District Superior Court of New Hampshire, seeking to overturn the Final Order of the NHMVIB and to obtain an order that SNE’s Turndown complied with New Hampshire law. On July 6, 2023, the New Hampshire Superior Court ruled in favor of Prime Subaru Manchester, affirming the NHMVIB’s Final Order. On August 7, 2023, SNE filed a notice of appeal of the Superior Court’s ruling to the New Hampshire Supreme Court.

On September 15, 2023, Prime Subaru Manchester and Group 1 agreed with SNE to settle the litigation first filed in Superior Court and later appealed to the New Hampshire Supreme Court. All litigation has been discontinued. Following the parties’ settlement agreement, ownership of the Subaru Manchester dealership transferred to Group 1 on October 16, 2023.

Lance Cotten, Alex Vavas and Eric Molbegat v. GPB Capital Holdings, LLC, Automile Holdings LLC D/B/A Prime Automotive Group, David Gentile, David Rosenberg, Philip Delzotta, Joseph Delzotta, and any other related entities (New York Supreme Court, Nassau County, Case No. 604943/2020)

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

alleged that defendants engaged in fraudulent and discriminatory schemes against customers and engaged in retaliatory actions against plaintiffs, who were employed by Garden City Nissan from August until October 2019. The plaintiffs sought damages pursuant to New York Labor Law Section 740 and Executive Law Section 296. In May 2023, the parties agreed to settle the action. No costs associated with the settlement were charged to the Partnership.

~~Monica Ortiz, on behalf of herself and other individuals similarly situated v. GPB Capital Holdings LLC; Automile Holdings, LLC d/b/a Prime Automotive Group; David~~ ~~Gentile~~~~; David Rosenberg; Philip Delzotta; Joseph Delzotta; and other affiliated entities and individuals (New York Supreme Court, Nassau County, Case No. 604918/2020)~~

In May 2020, plaintiff filed a class action in New York Supreme Court, Nassau County against GPB, Automile Holdings LLC d/b/a Prime Automotive Group, David Gentile, David Rosenberg, Philip Delzotta, Joseph Delzotta, and other affiliated entities and individuals. The complaint alleged deceptive and misleading business practices of the named defendants with respect to the marketing, sale, and/or leasing of automobiles and the financial and credit products related to the same. Plaintiff alleged defendants’ collection of fraudulent rebates exceeded $1.0 million, and sought class-wide injunctive relief, along with monetary and punitive damages and costs and fees. In May 2023, the parties agreed to settle the action. No costs associated with the settlement were charged to the Partnership.

~~GPB Lender, LLC v. GPB Capital Holdings, LLC (New York Supreme Court, Nassau County, Index No. 604887/2022)~~

On or about April 14, 2022, plaintiff GPB Lender, LLC, a related entity, filed a lawsuit against GPB Capital Holdings, LLC in New York Supreme Court, Nassau County, for breaches of a promissory note and breaches of contract related to a 2016 loan agreement and a 2019 loan agreement entered into between the parties. Plaintiff alleged that it is owed approximately $2.0 million in unpaid principal and interest under the promissory note. Plaintiff also alleged that it is owed approximately $0.4 million in unpaid principal and interest under the two loan agreements. On January 30, 2023, the Court granted GPB Lender, LLC’s motion for summary judgment in the principal amount of approximately $2.5 million, plus interest. No costs associated with the settlement were charged to the Partnership.

~~Cient LLC v. GPB Capital Holdings, LLC (New York Supreme Court, Nassau County, Index No. 604886/2022)~~

On or about April 14, 2022, plaintiff Cient LLC, a related entity, filed a lawsuit against GPB Capital Holdings, LLC in New York Supreme Court, Nassau County, for breach of a loan agreement and breach of contract relating to a 2019 loan agreement entered into by the parties. Plaintiff alleged that approximately $0.8 million in unpaid principal remains due, along with accrued and unpaid interest. On January 30, 2023, the Court granted Cient LLC’s motion for summary judgment in the principal amount of $0.9 million, plus interest. No costs associated with the settlement were charged to the Partnership.

~~Plymouth Rock Holding LLC v. GPB Capital Holdings, LLC (New York Supreme Court, Nassau County, Index No. 604873/2022)~~

On or about April 14, 2022, plaintiff Plymouth Rock Holding, LLC, a related entity, filed a lawsuit against GPB Capital Holdings, LLC in New York Supreme Court, Nassau County, for breach of a loan agreement and breach of contract relating to a 2019 loan agreement entered into by the parties. Plaintiff alleged that approximately $0.3 million in unpaid principal remains due, along with accrued and unpaid interest. On January 30, 2023, the Court granted Plymouth Rock Holding LLC’s motion for summary judgment in the principal amount of $0.4 million, plus interest. No costs associated with the settlement were charged to the Partnership.

~~Tom Alberto, et al. v. GPB Capital Holdings, LLC,~~ et ~~al. (American Arbitration Association, Case Number: 01-22-0001-5433)~~

On or about April 13, 2022, claimants, investors in funds managed by GPB Capital Holdings, LLC, commenced an arbitration with the American Arbitration Association against GPB Capital Holdings, LLC, GPB Automotive Portfolio, LP, GPB Holdings II, LP, GPB Cold Storage, LP, GPB Holdings, LP, GPB Holdings II, LP, GPB Holdings Qualified, LP, GPB Holdings III, LP, GPB NYC Development, LP, and GPB Waste Management, LP, along with other non-GPB parties. All claimants were customers of Concorde Investment Services, LLC (“Concorde”), and each purchased his or her limited partnership interest in a GPB-managed Fund through Concorde. Claimants asserted claims based on fraud, breach of fiduciary duty, breach of contract, among others, and claimed to have suffered millions of dollars in damages.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

GPB contended that the arbitration was improperly filed, and as such commenced a proceeding in New York State Supreme Court (GPB Capital Holdings, LLC et al. v. Tom Alberto et al., Index No. 656432/2022), solely for the purpose of seeking a stay of the arbitration. In July 2022, following the Court’s entry of an Order temporarily staying the arbitration, the parties stipulated and agreed to the entry of a court order entering judgment for GPB and the other petitioners. The arbitration will be permanently stayed upon the Court so-ordering the parties stipulation. In a letter dated December 20, 2022, the American Arbitration Association informed the parties to the arbitration that, as of December 20, 2022, the arbitration was closed.

~~12.~~6. Related Party Transactions

FEES AND EXPENSES

The Partnership incurred the following related party fees and expenses:

Managerial Assistance Fee

Per the LPA and Private Placement Memorandum (the “PPM”), GPB, as General Partner, is entitled to receive an annualized ~~managerial assistance fee (the “Managerial~~Managerial Assistance ~~Fee”)~~Fee for providing managerial assistance services to the Partnership and its portfolio companies and equity method investees. Those services include conducting the day-to-day operations of the Partnership inclusive of the identification, management and disposition of underlying portfolio companies and other duties assumed and stated under the LPA. The Managerial Assistance Fee does not include expenses related to In-House Services and Operations Support Services (defined below under “Partnership Expenses”) provided to the Partnership or its portfolio companies and equity method investees. Such expenses are in addition to, and not in lieu of, the Managerial Assistance Fee. The Managerial Assistance Fee is payable by the Partnership quarterly, in advance, at 2.0% per annum for Class A and B Units and 1.75% per annum for Class A-1 and B-1 Units calculated on each Limited ~~Partners’~~Partner’s Gross Capital Contributions. GPB, in its sole discretion, may defer, reduce or waive all or a portion of the Managerial Assistance Fee with respect to one or more Limited Partners for any period of time (and intends to waive the Managerial Assistance Fee with respect to GPB H2 SLP, LLC, as defined below, and its affiliates that invest in the Partnership).

Managerial Assistance Fees paid during the three months ended March 31, 2024 were $1.8 million, which reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statement of Net Assets in Liquidation by a corresponding amount. Managerial Assistance Fees charged to ~~“Managerial~~managerial assistance fee, related ~~party”~~party and included in the Condensed Consolidated ~~Statements~~Statement of Operations for the three months ended ~~September 30,~~March 31, 2023 and 2022 were $3.1 million and $2.9 million, respectively. Managerial Assistance Fees charged to “Managerial assistance fee, related party” and included in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2023 and 2022 were $9.2 million and $8.3 million, respectively. The Partnership has non-interest-bearing payables of $4.1 million and nil to GPB for these expenses as of September 30, 2023 and December 31, 2022, respectively, which are included in amounts due to related parties in the Condensed Consolidated Balance Sheets.was $3.0 million.

Partnership Expenses

The Partnership pays its own operating expenses. GPB is responsible for its or its affiliates’ general and administrative costs and expenses and its day to day overhead expenses of managing the Partnership and is not entitled to be reimbursed by the Partnership for such expenses other than for the portion of the total compensation of ~~GBP’s~~GPB’s or its affiliates (including holding companies), officers and employees relating to the time such officers or employees provide In-House Services or Operations Support Services to the Partnership or its investee entities. Such expenses are in addition to, and not in lieu of, the Managerial Assistance Fee. “In-House Services” include but are not limited to accounting, legal, compliance, information technology, human resources, and operational and management services to the Partnership or the investee entities. “Operations Support Services” include, but are not limited to, operational support and consulting services and similar services to, or in connection with, the identification, acquisition, holding and improvement of the investee entities. In addition GPB, on occasion, pays Partnership expenses on the Partnerships’ behalf when operationally feasible and obtains reimbursement. Upon request from GPB, the Partnership reimburses GPB in full for all of the expenses paid on its behalf. The Partnership expenses paid for by the Partnership to GPB are passed along to vendors that are unrelated parties which are included in general and administrative expenses - corporate in “Note 3. Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation”.

Partnership expenses paid during the three months ended March 31, 2024 were $6.0 million, which reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount. Partnership expenses included as a component of selling, general and administrative expenses in the Condensed Consolidated ~~Statements~~Statement of Operations for the three months ended ~~September 30,~~March 31, 2023, ~~and 2022,~~ were $6.3 million and $3.0 million, respectively. Partnership expenses included as a component of selling, general and administrative expenses in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2023 and 2022, were $14.8 million and $7.8 million, respectively. As of September 30, 2023 and December 31, 2022, respectively, the Partnership has non-interest-bearing payables of $0.4 million and nil, to GPB for these expenses, which are included in amounts due to related parties in the Condensed Consolidated Balance Sheets.$4.0 million.

3223

Table of Contents

GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~NOTES RECEIVABLE FROM RELATED PARTIES~~

In February 2016, the Partnership entered into a loan agreement with Quantum, an equity method investee. This “interest only” loan bore interest at 4% per annum through 2017 and 8% per annum through March 2022. Subsequent repayments and additional lending resulted in a loan balance of $0.1 million at December 31, 2021, which was included in note receivable – related party in the Condensed Consolidated Balance Sheets. During the three months ended September 30, 2022, no payments were received. During the nine months ended September 30, 2022, payments of $0.1 million were received. The note was repaid in full at December 31, 2022.

During 2019, the Partnership loaned Quantum $0.8 million under an additional loan agreement to be used for purposes of closing their Florida office. The loan had a 36-month term which expired in October 2022 and accrued interest at 8% annually. The principal and interest payments commenced in April 2020. Subsequent repayments resulted in a loan balance of $0.3 million at December 31, 2021. During the three months ended September 30, 2022, payments of $0.1 million were received. During the nine months ended September 30, 2022, payments of $0.2 million were received. The note was repaid in full at December 31, 2022.

~~NOTES PAYABLE TO RELATED PARTIES~~

In 2017, a term loan agreement of $13 million was entered into by Halo of which Meta HealthCare IT Solutions, LLC and Cantata were co-borrowers, with Rural India Supporting Trust (“RIST”), a company that controls a board seat of Halo. Interest-only payments accrued at an annual rate of 10.0%. In September 2020, Halo entered into the First Amendment to Intercreditor Agreement with RIST which required Halo to pay down $6.5 million of its outstanding debt obligation and extended the maturity date of the term loan to December 31, 2022. The loan agreement contained certain financial and non-financial covenants. On February 24, 2022, the Partnership paid off the RIST loan principal in full and outstanding interest on behalf of the borrowers. For the three months ended September 30, 2023 and 2022, interest expense related to these notes were nil and nil, respectively, included in interest expense to related parties in the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2023 and 2022, interest expense related to these notes were nil and $0.1 million, respectively, included in interest expense to related parties in the Condensed Consolidated Statements of Operations.

CONSULTING AGREEMENTS

For the three months ended ~~September 30,~~March 31, 2023, ~~and 2022,~~ Erus paid ~~nil and~~ $0.1 million, ~~respectively,~~ for consulting fees to a non-controlling interest member of Erus, who was also previously a member of Erus’ management. ~~For the nine months ended September 30, 2023 and 2022, Erus paid $0.1 million and $0.2 million, respectively, for consulting fees to a non-controlling interest member of Erus.~~ The consulting fees are recorded in ~~selling, general and administrative expenses~~net income from discontinued operations in the Condensed Consolidated ~~Statements~~Statement of Operations.

Quantum, ~~an equity method investee of the Partnership,~~ incurred expenses of ~~$29 thousand and~~ $0.2 million for the three months ended ~~September 30, 2023 and 2022, respectively. Quantum incurred expenses of $0.2 million and $0.5 million for the nine months ended September 30, 2023 and 2022, respectively.~~March 31, 2023. The expenses were related to the provision of consulting services from several companies owned by officers of the ~~subsidiary. Accounts payable related to these services were nil~~subsidiary and ~~$0.2 million, as~~are included in selling, general and administrative expenses in the Condensed Consolidated Statement of ~~September 30, 2023 and December 31, 2022, respectively.~~Operations.

OTHER RELATED PARTY TRANSACTIONS

GPB’s principals, certain other individuals and entities that have assisted and may in the future assist in our operations are and/or will be members in GPB H2 SLP, LLC, a Delaware limited liability company (the “Special LP”). The Special LP will receive a profit allocation, commonly referred to as “carried interest”, from the Partnership in accordance with the waterfall provisions in the LPA. For the three months ended March 31, 2024 and 2023 there have been no profit allocations allocated to the Special LP.

For the three months ended ~~September 30,~~March 31, 2023, ~~and 2022, respectively,~~ Erus paid ~~nil and $0.2~~$0.1 million to Reimagine Roofing, Barrier Insulation and Brooks Enterprises, companies affiliated with one of the Erus’ senior executives. ~~For the nine months ended September 30, 2023 and 2022, respectively, Erus paid $0.5 million and $0.3 million to Reimagine Roofing, Barrier Insulation and Brooks Enterprises.~~ These fees are included in ~~cost of services~~net income from discontinued operations in the Condensed Consolidated ~~Statements~~Statement of Operations.

Erus occasionally ~~sells~~sold customer accounts to an entity controlled by a non-controlling interest member of Erus, who is a member of the subsidiary’s management. For the three months ended ~~September 30,~~March 31, 2023, ~~and 2022,~~ the amounts sold were ~~$11 thousand and~~ $0.3 million, ~~respectively,~~ which are included in ~~product revenue~~net income from discontinued operations in the Condensed Consolidated ~~Statements~~Statement of Operations. For the nine months ended September 30, 2023 and 2022, the amounts sold were $0.5 million and $0.8 million, respectively, which are included in product revenue in the Condensed Consolidated Statements of Operations.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

HPI, a subsidiary of the Partnership, entered into sales transactions with a company controlled by a director of the subsidiary. Revenues related to this relationship were $1.5 million ~~and $1.3 million~~ for the three months ended ~~September 30, 2023 and 2022, respectively. Revenues related to this relationship were $4.6 million and $4.5 million for the nine months ended September 30, 2023 and 2022, respectively.~~March 31, 2023. These revenues were included in ~~service revenue~~net income from discontinued operations in the Condensed Consolidated ~~Statements~~Statement of Operations. Accounts receivable were $0.6 million and $0.5 million, as of September 30, 2023 and December 31, 2022, respectively, and are included in accounts receivable, net on the Condensed Consolidated Balance Sheets.

As compensation for the services to be rendered by Highline, the Partnership pays operation service provider fee (“OSP”) fees to Highline for an annual amount agreed to by GPB and Highline, subject to the ~~Highline~~ Board’s approval, following Highline’s delivery of the annual written budget to GPB detailing the fees, costs and expenses that will be incurred by Highline in providing its Services. OSP fees paid for the three months ended March 31, 2024 were $0.4 million, and reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount. The Partnership recorded OSP fees as a component of selling, general and administrative expenses in the Condensed Consolidated ~~Statements~~Statement of Operations of ~~$0.4 million and~~ $0.4 million for the three months ended September 30, 2023 and 2022, respectively. The Partnership recorded OSP fees as a component of selling, general and administrative expenses in the Condensed Consolidated Statements of Operations of $1.2 million and $1.4 million for the nine months ended September 30, 2023 and 2022, respectively.

On July 18, 2022, HPI Holdings entered into an agreement to acquire 100% of the outstanding shares of MDS Medical, LLC (“MDS”) for cash consideration of $13.5 million net of $0.5 million to be paid to a non-controlling shareholder. Transaction costs were $0.3 million. At the consummation of the transaction, the assets and liabilities of MDS were recorded on HPI’s books at their respective carrying values. No gain or loss was recorded in connection with the transaction as MDS and HPI Holdings were both under common control of the Partnership prior to and after the consummation of the transaction. MDS is included in the HPI Holdings reporting unit. The Partnership and non-controlling shareholder executed a contribution agreement in connection with the acquisition, which states that the non-controlling shareholder will receive eight quarterly installments of $63 thousand starting in July 2022. During the three months ended September 30, 2023, no payment was made, under the terms of the new employment agreement with such non-controlling shareholder. During the nine months ended September 30, 2023, two payments were made. As of September 30, 2023, the outstanding payable balance was $0.3 million, which is included in accounts payable in the Condensed Consolidated Balance Sheets. As of DecemberMarch 31, 2022, the outstanding payable balance was $0.4 million, which is included in amounts due to related parties in the Condensed Consolidated Balance Sheets. On May 31, 2023, the employment of the non-controlling shareholder was terminated. At that time, an agreement was executed to repurchase all of his membership interest in HPI for $1.5 million, pay an integration bonus amount of $16 thousand, a revenue bonus of $0.1 million and a severance of $50 thousand. The contribution agreement amount and revenue bonus will be paid if the MDS business line exceeds $12.5 million for calendar year 2023. The severance amount will be paid over a six month period effective June 2023.

~~During the three months and nine months ended September 30, 2023, respectively, Quantum made profit distributions totaling $0.4 million and $2.3 million to the Partnership.~~

~~13. Business Segments~~

ASC 280, Segment Reporting, requires use of the management approach model for segment reporting, which considers how management organizes segments within the Partnership to allocate resources, make operating decisions and assess performance. The reportable segments are among the business activities of the Partnership for which discrete financial information is available and for which operating results are regularly reviewed by its CODM. The Partnership’s CODM is its Chief Executive Officer. Management deems operating segments that exceed certain quantitative thresholds to be reportable segments. Our segments coincide with how our businesses are managed.

~~As of September 30, 2023, the Partnership has the following reportable segments:~~

●

~~Technology-Enabled Services;~~

●

~~Energy; and~~

●

~~Corporate and Other.~~

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The last segment, which we refer to as “Corporate and Other,” primarily consists of other operating segments that are not reportable under the quantitative thresholds, or are selling, general and administrative expenses of the Partnership.

~~Segment results incorporate the revenues and expenses of consolidated subsidiaries from the date of acquisition.~~

~~Reportable segments’ financial data were as follows:~~

Technology






Enabled

Corporate

(Dollars in thousands)

Services

Energy

and Other

Total
Three Months Ended September 30, 2023

Revenue

$
34,050

$
4,788

$
310

$
39,148
(Income) loss from equity method investments

(392)

8,627

—

8,235
Depreciation and amortization

4,026

102

—

4,128
Gain on disposal of businesses

(7,460)

—

—

(7,460)
Loss on change in contingent liability

400

—

—

400
Operating income (loss)

7,671

(20,645)

(10,169)

(23,143)
Income from discontinued operations

—

—

767

767
Expenditures for long-lived assets

(705)

—

—

(705)
Total assets

238,465

8,399

318,037

564,901

Nine Months Ended September 30, 2023

Revenue

$
106,906

$
25,404

$
328

$
132,638
(Income) loss from equity method investments

(1,074)

5,361

—

4,287
Depreciation and amortization

12,433

335

—

12,768
Gain on disposal of businesses

(7,460)

—

—

(7,460)
Gain on reduction of contingent liability

(5,891)

—

—

(5,891)
Asset impairment

—

15,004

—

15,004
Operating income (loss)

16,474

(33,157)

(28,301)

(44,984)
Income from discontinued operations

—

—

1,357

1,357
Expenditures for long-lived assets

(2,199)

(65)

—

(2,264)
Total assets

238,465

8,399

318,037

564,901

Three Months Ended September 30, 2022

Revenue

$
31,350

$
24,933

$
153

$
56,436
(Income) loss from equity method investments

4,780

2,934

(118)

7,596
Depreciation and amortization

3,583

132

—

3,715
Operating income (loss)

(3,254)

215

(7,098)

(10,137)
Net income from discontinued operations

—

—

124

124
Expenditures for long-lived assets

458

277

—

735

Nine Months Ended September 30, 2022

Revenue

$
95,020

$
54,050

$
391

$
149,461
(Income) loss from equity method investments

3,707

2,983

(118)

6,572
Depreciation and amortization

10,996

397

—

11,393
Gain on disposal of businesses

—

(4,424)

(2,299)

(6,723)
Operating income (loss)

(1,270)

3,044

(18,724)

(16,950)
Net income from discontinued operations

—

—

9,388

9,388
Expenditures for long-lived assets

1,037

385

—

1,422

Operating segments do not sell products to each other; however, several of the portfolio companies in the Technology-Enabled Services segment paid management fees to the Corporate and Other operating segment for services performed by Corporate. These fees have been eliminated from the respective segment information above.

~~Table of Contents~~

~~GPB HOLDINGS II, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

3624

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial ~~Information~~Condition and Results of Operations

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND FINANCIAL CONDITION~~Forward Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes and the other financial information included elsewhere in thisThis Quarterly Report on Form 10-Q (“Form 10-Q”), as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and ~~our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 31, 2023. This discussion contains~~similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. These forward-looking statements, ~~that involve significant~~including with regards to our Plan of Liquidation, as defined below, are based on our current, reasonable expectations and assumptions, which expectations and assumptions are subject to risks and ~~uncertainties. As a result of many factors,~~uncertainties that could cause our actual results ~~may~~to differ materially from those ~~anticipated~~reflected in ~~these~~the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Form 10-Q. Given these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law.

For purposes of this Management’s Discussion and Analysis of Financial Condition and Results of Operations section, we use the terms “Holdings II,” “the Partnership,” “we”, “us”, “our” or “Registrant” to refer to the business of GPB Holdings II, LP and its consolidated subsidiaries, unless content otherwise indicated.

~~Impact of COVID-19 on Our Operations, Financial Condition, Results of Operations, and Liquidity~~

The effects of the COVID-19 pandemic continue to evolve. Our impacted businesses have rebounded to at or near pre-COVID-19 sales levels. However, future COVID-19 outbreaks in the markets in which we operate may cause changes in customer behaviors, including a decrease for healthcare services, and for home and commercial solar systems. This may lead to increased valuation risks, such as impairment of long-lived assets. Uncertainties in the global economy may negatively impact our suppliers and other business partners, which may interrupt our supply chain and require other changes to our operations. These and other factors may adversely impact our financial condition, liquidity and cash flow.

~~Supply Chain Disruptions~~

The Partnership has had supply chain disruptions, specifically in the Energy segment and our portfolio company Erus. The solar industry has, and continues to experience, supply chain disruptions due to COVID-19, issues related to the Antidumping and Countervailing Duties, Anti Circumvention for solar panels imported into the United States from Cambodia, Malaysia, Thailand and Vietnam filed by a domestic solar manufacturer, the Uyghur Forced Labor Protection Act and Forced Labor Withhold Release Order and tariffs imposed under Section 201 of the Trade Act of 1974, the ongoing conflict between Russia and Ukraine and a rise in global inflationary pressures. In order to offset the delays due to supply chain disruptions, Erus works closely with its suppliers to ensure the required materials for its systems are ordered and obtained prior to their scheduled installation date and in the event of a delay, alternative installation plans are put in place in a timely manner and in compliance with the applicable utility company guidelines and any local, state or federal laws or regulations. Erus also monitors the market for potential alternative panel brands and if there is any issue with its current supplier, Erus is able to quickly notify its design and sales teams that alternative panels are being used to ensure the correct plans are generated and presented to the customer on a timely basis and in compliance with the applicable utility company guidelines and any local, state or federal laws or regulations.

~~Interest Rates~~

We are exposed to certain market risks, including the effects of changes in interest rates and changes in consumer attitude and spending patterns, which are inherent to our businesses and arise from transactions entered into in the normal course of operations. For example, many of Erus’ customers finance their purchases, and rising interest rates have and may further discourage such purchases in the future. In addition, in a high inflation environment, customers have and may further elect to forgo purchasing the products and services we offer in favor of other necessary expenditures. Further, we have a significant cash balance that is currently earning higher interest. However, if interest rates decrease in the future, we will earn a lower return on our cash balances.

We currently do not have any material outstanding debt with variable interest rates, and we do not use derivatives or other financial instruments for trading or speculative purposes. However, certain of our portfolio companies may in the future incur debt with variable interest rates or make use of derivative financial instruments to manage the economic impacts of increasing inflation and general instability in global financial markets. We do not expect the future use of these financial instruments by any of our portfolio companies to have any material effect on our business, financial condition or results of operations.

~~Table of Contents~~

OVERVIEW

~~The Partnership~~GPB Holdings II, LP (“Holdings II”, the “Partnership”, “we”, “us”, “our” or the “Registrant”) is a holding company which was organized as a Delaware limited partnership on April 17, 2015 and commenced operations on June 1, 2015.

GPB Capital Holdings, LLC (“General Partner”, “Capital Holdings”, “GPB Capital” or “GPB”), a Delaware limited liability company and registered investment adviser, is the Partnership’s General Partner pursuant to the terms of the Fourth Amended and Restated ~~LPA,~~Agreement of Limited Partnership, dated April 26, 2018 (as the same may be amended from time to ~~time)~~time, the “LPA”). Pursuant to the LPA, GPB conducts and manages our business. Robert Chmiel, GPB’s Chief Executive Officer and Chief Financial Officer, currently serves as the sole manager of GPB under the ~~term~~terms of GPB’s limited liability company agreement. GPB has entered into a management services agreement with GPB’s wholly owned subsidiary, Highline Management, Inc. (“Highline”), pursuant to which Highline provides certain management services to GPB to assist GPB in fulfilling GPB’s duties as the Partnership’s General Partner.

On February 4, 2021, the Securities and Exchange (the “SEC”) filed a contested civil enforcement action (the “SEC Action”) against GPB, Ascendant Capital, LLC (“Ascendant”), Ascendant Alternative Strategies, LLC (“AAS”), David Gentile, Jeffry Schneider and Jeffrey Lash in the EDNY Court, as defined below. No GPB-managed partnership is a named defendant. The SEC Action alleges several violations of the federal securities laws, including securities fraud. The SEC is seeking disgorgement and civil monetary penalties, among other remedies.

Also on February 4, 2021, the U.S. Attorney’s Office for the Eastern District of New York (the “USAO”) brought a criminal indictment against Mr. Gentile (GPB’s sole Member), Mr. Schneider, and Mr. Lash (the “Criminal Case”). The indictment in the Criminal Case alleges conspiracy to commit securities fraud, conspiracy to commit wire fraud, and securities fraud against all three individuals. Mr. Gentile and Mr. Lash were also charged with two counts of wire fraud. We understand that the USAO intends to seek criminal forfeiture. Promptly following his indictment, Mr. Gentile resigned from all management and board positions with GPB and Highline, the GPB-managed funds, including the Partnership, and subsidiaries of the Partnership. On June 6, 2023, Mr. Lash pled guilty to one count of wire fraud in the Criminal Case pursuant to a plea agreement. Mr. Lash’s sentencing was originally scheduled for April 4, 2024, but has been postponed to a future undetermined date. In a status conference held on April 15, 2024, the judge in the Criminal Case, on consent of all parties, ordered that the trial, previously scheduled to begin on June 3, 2024, is adjourned to June 10, 2024.

On February 11, 2021, the United States District Court for the Eastern District of New York (the “EDNY Court”) in the SEC Action appointed Joseph T. Gardemal III as the independent monitor over GPB (the “Monitor”) until further order of the EDNY Court ~~issued an Order, appointing the~~(the “Monitor Order”). The Monitor ~~who~~ was granted the authority to approve or disapprove proposed material corporate transactions by GPB, the Partnership or its subsidiaries. ~~The~~On April 14, 2021,the EDNY Court entered an amendment to the Monitor Order (the “Amended Monitor Order”), which provided that, in addition to the SEC and GPB, certain State regulators will receive access to the periodic reports filed by the Monitor pursuant to the ~~original Order and an April 14, 2021~~ Amended ~~Order,~~Monitor Order. The Monitor, is thus required to assess the Partnership’s operations and business, and make recommendations to the EDNY Court, which may include continuation of the operations subject to his monitoring,

Table of Contents

or a liquidation of assets, or filing for reorganizing in bankruptcy. See ~~“Part II - Other Information - Item 1. Legal Proceedings”~~“Footnote 5. Commitments and Contingencies” in the Notes to the Financial Statements included in the Form 10-Q for additional information.

~~Our~~Prior to the sale of substantially all of the Partnership’s assets, our strategy in the segments in which we ~~choose to participate is~~participated was to own and operate income producing, middle-market private companies primarily in North America on a long-term basis with a goal of maximizing returns for our investors by improving performance of operations, thereby increasing the value of these companies. To accomplish our objectives, we ~~provide~~provided managerial expertise and investment capital to our portfolio companies in order to develop the operations and enhance the overall value of the business. In other situations, we ~~have~~had equity interests that ~~enable~~enabled us to exercise significant influence but not control over the businesses. Following our strategy, we ~~classify~~classified the earnings from our investments in entities where we ~~have~~had the ability to exercise significant influence as a component of operating income in our Condensed Consolidated Statement of Operations.

Our focus iswas primarily on owning and operating our portfolio companies in our Technology-Enabled Services, Automotive Retail and Energy segments. ~~We also intend~~

Divestiture of Substantially All of the Partnership’s Assets

Commencing in the second half of fiscal 2023, the Partnership entered into agreements to ~~maintain~~divest of its portfolio companies previously comprising its Technology-Enabled Services segment. Those divested portfolio companies included Experience Care, LLC, (“Experience Care”) which was sold on August 23, 2023, for $12.7 million in net cash proceeds, Cantata Health, LLC (“Cantata”) which was sold on October 24, 2023, for $22.3 million in net cash proceeds, and ~~maximize~~ the ~~value~~entirety of ~~all~~the Partnership’s 96% indirect ownership interest in HealthPrime International, LLC (“HealthPrime” or “HPI”) which was sold on January 19, 2024 for $190.0 million in net cash proceeds (collectively, the “Divested Technology-Enabled Services Portfolio Companies”). Also, in the second half of our other investments, which are made for the purpose of generating income from operations. We intend to continually consider strategic transactions on an opportunistic basis, such as spinoffs of businesses, the sale offiscal 2023, Erus Holdings LLC (“Erus”), a 60% owned portfolio company ~~or the sale of a business line.~~

~~OUR SEGMENTS~~

The Partnership provides a range of strategic, operational and management resources to our subsidiaries which are engaged in a number of diverse business activities. Our CODM, who manages the segments as detailed below, regularly reviews consolidated financial information, evaluates overall strategic performance, and allocates resources to the Partnership. We report our businesses in the three segments for accounting purposes based on how our CODM views the Partnership as follows:

●

Technology-Enabled Services segment acquires and operates Technology-Enabled Services portfolio companies which provide Technology-Enabled Services to healthcare companies. Services provided include the sale and licensing of various electronic health records software and practice management software platforms for ambulatory, acute and long-term care facilities. The customer base served by our TES portfolio companies is dispersed across the U.S., related territories, Costa Rica, Philippines, and India. As of September 30, 2023, Holdings II owned 96% of Halo, which is comprised of Cantata (formerly Meta Healthcare IT Solutions, LLC), which was sold on October 24, 2023, and Experience Care (formerly Cantata Health, LLC) which was sold on August 23, 2023; and 91.5% of HealthPrime, all of which are accounted for under the consolidation method through the date of sale. Our Technology-Enabled Services segment also has a non-controlling investment of 31% in HIS as of September 30, 2023, which is accounted for under the equity method. HIS provides the equipment and associated services to hotels, resorts, military, student housing, casinos, and many other commercial venues.

●

Energy segment acquires and operates companies that provide services in the solar panel market and other services in the energy sector. As of September 30, 2023, the Partnership owned 60% of Erus, which is accounted for under the consolidation method, through the date of bankruptcy (see below). In January 2022, the Partnership sold its investment in its subsidiary Greenwave Energy, LLC. The Partnership has a 50% non-controlling equity method investment in Quantum. Quantum provides customer acquisition services to the alternative energy industry.

~~Table of Contents~~

●

Corporate and Other segment primarily consists of other operating entities that are not reportable under the quantitative thresholds under U.S. GAAP, or are the selling, general and administrative expenses of the Partnership. The Partnership owns a 33.5% interest in GPB Prime, an equity method investment. In March 2022, the Partnership sold its real estate investment in Middleneck.

~~Our operations are primarily located in the United States of America.~~

~~Erus, which comprises the majority~~ of the ~~assets and operating activity in the Energy Segment,~~Partnership, filed for Chapter 7 Bankruptcy (“Chapter 7”) protection on November 8, 2023. The combination of increasingly higher interest rates, and lower installation activity has led to increasingly difficult conditions in the sector, and have had a direct material impact on Erus’s business, profitability and cash-flow. In response, Erus ~~implemented a number of initiatives and explored strategic alternatives, including a sale~~accounted for substantially all of the ~~business. Despite best efforts to aggressively restructure~~assets and operational activities of the business and consummate a sale, management, working with its legal, financial and other advisors, decided that it was in the best interests of all Erus stakeholders for the Erus entities to cease business operations and file Chapter 7 petitions in the U.S. Bankruptcy Court for the District of Delaware.Partnership’s Energy segment. The Chapter 7 filing ~~will result~~resulted in the appointment of a trustee for the Erus entities who ~~will be~~is charged with liquidating their assets and distributing the proceeds to creditors in accordance with the U.S. Bankruptcy Code. In(Erus, together with the ~~three months ended September 30, 2023,~~Divested Technology-Enabled Services Portfolio Companies, the “Divested Businesses”).

Subject to the Plan of Liquidation discussed below and as of the date of these financial statements, the Partnership ~~recorded write-offs of materials~~continues to hold its investments in Hotel Internet Services, LLC, (“HIS”) and inventory to its net realizable value resulting in charges of $3.4 million recorded in cost of goods, and $4.5 million as it relates to contract assets in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

~~Segment results incorporate the revenues and expenses of consolidated subsidiaries and the equity in earnings (loss) of unconsolidated~~Quantum Energy Holdings, LLC, (“Quantum”). These investments were previously accounted for under the equity method and included as part of the Technology-Enabled Services segment and the Energy segment, respectively, but are now included as part of the Partnership’s remaining Corporate and Other segment.

The Partnership determined that the Divested Businesses qualified as a component under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-20 Financial Statement Presentation, Discontinued Operations (“ASC 205-20”) because they represented operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the ~~date~~remainder of ~~acquisition.~~the Partnership’s operations. Further, the Divested Businesses represent a strategic shift in the Partnership’s business and their disposal will have a major effect on the entity’s operations and financial results. The Partnership also determined that the Divested Businesses met the criteria to be classified as held for sale upon entering into the agreements to sell and the filing for Chapter 7 protection. Consequently, the Partnership has classified the assets and liabilities comprising the Divested Businesses as “Assets held for sale, discontinued operations” in the accompanying Condensed Consolidated Statement of Net Assets in Liquidation as of December 31, 2023, and the results of operations and cash flows as discontinued operations in the Condensed Consolidated Statement of Operations and Cash Flows for the three months ended March 31, 2023.

See “Note 4. Disposals, Assets Held for Sale and Discontinued Operations” in our Condensed Consolidated Financial Statements included in in “Part I, Item 1” and “Part II, Item 6. Exhibits” for more information.

3926

Table of Contents

Plan of Liquidation

Following the Implementation of the Plan of Liquidation

Under the liquidation basis of accounting, the consolidated balance sheet and consolidated statements of operations, equity and cash flows are no longer presented.

The liquidation basis of accounting requires a statement of net assets in liquidation, a statement of changes in net assets in liquidation and all disclosures necessary to present relevant information about our expected resources in liquidation. The liquidation basis of accounting may only be applied prospectively from the day liquidation becomes imminent and the initial statement of changes in net assets in liquidation may present only changes in net assets that occurred during the period since that date.

Table of Contents

The valuation of our assets and liabilities, as described above, represents estimates, based on present facts and circumstances, of the net realizable value of the assets and costs associated with carrying out the Plan of Liquidation. The actual values and costs associated with carrying out the Plan of Liquidation may differ from amounts reflected in the Condensed Consolidated Financial Statements because of the Plan of Liquidation's inherent uncertainty. These differences may be material. In particular, these estimates will vary with the length of time necessary to complete the Plan of Liquidation. It is currently anticipated that a majority of the assets we owned on the date the Plan of Liquidation as approved by Highline will be sold by December 31, 2025, with liquidation complete by December 31, 2026, however, no assurances can be provided that this date will be met. This date was determined through management consultation with the Board, consultation with the Monitor and the Partnership’s external counsel and contemplates such matters as the sale of the remaining investments in HIS, Quantum and the note receivable from TDR Riverwalk LLC (an unrelated Florida limited liability company, “Riverwalk”), the timing of Mr. Gentile’s criminal trial and outcome and the settling of pending litigation as the main components driving the estimate on timing of complete liquidation. Any delays in the timing of the resolution of these matters could significantly delay both the completion date and the amounts available to be distributed upon liquidation.

OUR SEGMENTS

Prior to the sale of substantially all of the Partnership’s assets, we provided a range of strategic, operational and management resources to our subsidiaries which were engaged in a number of diverse business activities. Our Chief Operating Decision Maker (“CODM”) regularly reviewed consolidated financial information, evaluated overall strategic performance, and allocated resources to the Partnership in three distinct segments, the Technology-Enabled Services segment, the Energy segment and the Corporate and Other segment. After the divestiture of our assets, we are now reporting our business operation solely as “Corporate and Other”.

The Corporate and Other segment primarily consisted of other operating segments that were not reportable under the quantitative thresholds under U.S. GAAP, or were the selling, general and administrative expenses of the Partnership. The Partnership owns a 33.5% interest in GPB Prime Holdings, LLC (“GPB Prime”), an operator of automotive retail dealerships. The Partnership has a 50% non-controlling investment in Quantum. Quantum provides customer acquisition services to the alternative energy industry. The Partnership also has a non-controlling investment of 31% in HIS. HIS provides the equipment and associated internet access services to hotels, resorts, military, student housing, casinos, and many other commercial venues. Quantum and HIS were formerly accounted for under the equity method but are now accounted for at estimated net realizable value pursuant to our Plan of Liquidation.

RESULTS OF OPERATIONS

In light of the adoption of Liquidation Basis of Accounting as of December 31, 2023, the results of operations for the current period are not comparable to the prior year period. Due to the adoption of the Plan of Liquidation, we no longer consider this to be a key performance measure, and we no longer report results of our operations information.

Table of Contents

The following table summarizes the results of our operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, ~~and 2022.~~under the going concern basis of accounting.

Three Months Ended September 30,

2023 vs 2022

Nine Months Ended September 30,

2023 vs 2022

Increase

% Increase

Increase

% Increase

(Dollars in thousands)

2023

2022

(Decrease)

(Decrease)

2023

2022

(Decrease)

(Decrease)

Revenues:

















Product revenue

$
5,035

$
25,790

$
(20,755)

(80.5)
%
$
26,261

$
56,171

$
(29,910)

(53.2)
%
Service revenue

33,803

30,493

3,310

10.9
%

106,049

92,899

13,150

14.2
%
Debt investment interest income

79

77

2

2.6
%

236

248

(12)

(4.8)
%
Gain on sale of investment securities

—

—

—

—
%

29

—

29

100.0
%
Unrealized gain on investment securities

231

76

155

203.9
%

63

76

(13)

(17.1)
%
Other revenue

—

—

—

—
%

—

67

(67)

(100.0)
%
Total revenues

39,148

56,436

(17,288)

(30.6)
%

132,638

149,461

(16,823)

(11.3)
%
Cost of revenues:

Cost of goods sold

8,010

10,920

(2,910)

(26.6)
%

20,175

26,321

(6,146)

(23.4)
%
Cost of services

19,102

15,302

3,800

24.8
%

58,823

52,108

6,715

12.9
%
Total cost of revenues

27,112

26,222

890

3.4
%

78,998

78,429

569

0.7
%
Gross profit

12,036

30,214

(18,178)

(60.2)
%

53,640

71,032

(17,392)

(24.5)
%
Operating expenses (income):

Selling, general and administrative expenses

25,924

25,047

877

3.5
%

67,838

65,106

2,732

4.2
%
Managerial assistance fee, related party

3,089

2,939

150

5.1
%

9,205

8,315

890

10.7
%
Rent expense

863

1,054

(191)

(18.1)
%

2,873

3,319

(446)

(13.4)
%
Loss from equity method investments

8,235

7,596

639

8.4
%

4,287

6,572

(2,285)

(34.8)
%
Gain on disposal of businesses

(7,460)

—

(7,460)

(100.0)
%

(7,460)

(6,723)

(737)

11.0
%
Loss (gain) on changes in contingent liability

400

—

400

100.0
%

(5,891)

—

(5,891)

(100.0)
%
Impairment of goodwill and intangibles

—

—

—

—
%

15,004

—

15,004

100.0
%
Depreciation and amortization

4,128

3,715

413

11.1
%

12,768

11,393

1,375

12.1
%
Total net operating expenses

35,179

40,351

(5,172)

(12.8)
%

98,624

87,982

10,642

12.1
%
Operating loss

(23,143)

(10,137)

(13,006)

(128.3)
%

(44,984)

(16,950)

(28,034)

(165.4)
%
Other income (expense):

Interest expense

(79)

(36)

(43)

119.4
%

(338)

(2,787)

2,449

87.9
%
Interest expenses, related parties

—

(1)

1

100.0
%

—

(400)

400

100.0
%
Interest income

4,658

1,322

3,336

252.3
%

10,718

1,707

9,011

527.9
%
Loss on extinguishment of debt

—

—

—

—
%

—

(4,502)

4,502

100.0
%
Other expense

(374)

(345)

(29)

(8.4)
%

(1,820)

(493)

(1,327)

(269.2)
%
Total other income (expense)

4,205

940

3,265

347.3
%

8,560

(6,475)

15,035

232.2
%
Loss from continuing operations, before tax

(18,938)

(9,197)

(9,741)

(105.9)
%

(36,424)

(23,425)

(12,999)

(55.5)
%
Income tax expense

(95)

(195)

100

51.3
%

(562)

(550)

(12)

(2.2)
%
Net loss from continuing operations

(19,033)

(9,392)

(9,641)

(102.7)
%

(36,986)

(23,975)

(13,011)

(54.3)
%
Net income (loss) from discontinued operations

767

(176)

943

535.8
%

1,357

1,469

(112)

(7.6)
%
Gain on sale of discontinued operations

—

300

(300)

(100.0)
%

—

7,919

(7,919)

(100.0)
%
Net income from discontinued operations

767

124

643

518.5
%

1,357

9,388

(8,031)

(85.5)
%
Net loss of continuing and discontinued operations

(18,266)

(9,268)

(8,998)

(97.1)
%

(35,629)

(14,587)

(21,042)

(144.3)
%
Net income (loss) attributable to non-controlling interests

(4,601)

164

(4,765)

(2905.5)
%

(10,379)

2,539

(12,918)

(508.8)
%
Net loss attributable to the Partnership

$
(13,665)

$
(9,432)

$
(4,233)

(44.9)
%
$
(25,250)

$
(17,126)

$
(8,124)

(47.4)
%


	Three Months
	Ended March 31,
	2023
Operating expenses (income):
Selling, general and administrative expenses	$	5,718
Managerial assistance fee, related party		3,028
Income from equity method investments		(3,464)
Total net operating expenses		5,282
Operating loss		(5,282)
Other income:
Interest income		3,319
Other income		119
Total other income		3,438
Net loss from continuing operations		(1,844)
Income from discontinued operations		1,068
Income tax expense, discontinued operations		(211)
Net income from discontinued operations		857
Net loss from continuing and discontinued operations		(987)
Net income attributable to non-controlling interests		244
Net loss attributable to the Partnership	$	(1,231)

~~Table of Contents~~

~~SEGMENT OPERATING RESULTS~~

~~Technology-Enabled Services Segment~~

~~Comparison of Operating Results for the three and nine months ended September 30, 2023 and 2022:~~

~~Comparison of the three months ended September 30, 2023 and 2022~~

~~Revenues~~

For the three months ended September 30, 2023 and 2022, the Technology-Enabled Services segment generated revenues of $34.1 million and $31.4 million, respectively. This represents an increase of approximately $2.7 million, or 8.6%. The increase in revenue was primarily due to additional revenues of $5.7 million of medical billing services related to HPI’s acquisition of ALN in January 2023. This increase was partially offset by a decrease of $1.2 million in software maintenance revenue from existing Halo customers, a reduction of $1.1 million from legacy customers at legacy HPI customers and a $0.5 million decrease in service revenue due to the sale of Experience Care in August 2023.

~~Table of Contents~~

~~Cost of Revenues~~

For the three months ended September 30, 2023 and 2022, overall cost of revenues was $19.4 million and $15.5 million, respectively. This represents an increase of approximately $3.9 million, or 24.9%, primarily due to an increase of $4.0 million in cost of revenue related to HPI’s acquisition of ALN in January 2023, an increase of $0.3 million related to increased license expenses at Halo, partially offset by a decrease of $0.7 million in costs related to legacy customers at HPI.

~~Gross Profit~~

For the three months ended September 30, 2023 and 2022, our gross profit was $14.7 million and $15.8 million, our gross margin percentage was 43.1% and 50.5%, respectively. This represents a decrease of $1.2 million, or 7.4%. This decrease was primarily due to the decreased revenue at Halo combined with the effect of the acquisition of the ALN line of business which has a lower gross profit margin percentage than the legacy HPI business.

~~Total Net Operating Expenses~~

For the three months ended September 30, 2023 and 2022, operating expenses were $7.0 million and $19.1 million, respectively. This represents a decrease of $12.1 million, or 63.3%. This decrease is primarily due to a $7.7 million gain on the sale of Experience Care in August 2023, and a $5.1 million impairment of HIS during the three months ended September 30, 2022 with no such impairment in 2023, partially offset by an increase of $0.5 million in depreciation expense due to the ALN acquisition.

~~Operating Income~~

For the three months ended September 30, 2023, operating income was $7.7 million compared to an operating loss of $3.3 million for the three months ended September 30, 2022. This was due to a combination of the above described changes in revenues, cost of revenues, gross profit and operating expenses.

~~Comparison of the nine months ended September 30, 2023 and 2022~~

~~Revenues~~

For the nine months ended September 30, 2023 and 2022, the Technology-Enabled Services segment generated revenues of $106.9 million and $95.0 million, respectively. This represents an increase of approximately $11.9 million, or 13%. The increase in revenue was primarily due to additional service revenues of $16.8 million related to HPI’s acquisition of ALN in January 2023, partially offset by a decrease of $3.6 million of service revenue from legacy customers at HPI, a decrease of $1.2 million in software maintenance revenue from existing Halo customers and a decrease of $0.5 million due to the sale of Experience Care in August 2023.

~~Cost of Revenues~~

For the nine months ended September 30, 2023 and 2022, overall cost of revenues was $59.8 million and $52.4 million, respectively. This represents an increase of approximately $7.4 million, or 14% primarily due to $12.7 million in cost of revenue related to HPI’s acquisition of ALN in January 2023, partially offset by a decrease of $1.0 million in costs at Halo, and by decreases of $4.2 million at legacy HPI customers.

~~Gross Profit~~

For the nine months ended September 30, 2023 and 2022, gross profit was $47.1 million and $42.6 million, respectively and gross margin percentage was 43.9% and 44.8%, respectively. This represents an increase of $4.5 million, or 11%. This increase was primarily due to the increases in revenue of $16.8 million and cost of revenue of 12.7 million as a result of HPI’s acquisition of ALN.

~~Total Net Operating Expenses~~

For the nine months ended September 30, 2023 and 2022, operating expenses were $30.6 million and $43.9 million, respectively. This represents a decrease of $13.2 million, or 30%. This decrease is primarily due to a $7.7 gain on the sale of Experience Care in August 2023, a $5.9 million gain on settlement of contingent liabilities, a $5.1 million impairment of HIS during the three months ended

~~Table of Contents~~

September 30, 2022 with no such impairment in 2023, and a decrease in rent of $0.8 million, partially offset by an increase in acquisition costs of $1.8 million at HPI, increases in expenses of $2.5 million due to the acquisition of ALN and an increase of $1.5 million in depreciation due to the acquisition.

~~Operating Income (Loss)~~

For the nine months ended September 30, 2023, operating income was $16.5 million as compared to an operating loss of $1.3 million at September 30, 2022. This was due to a combination of the above described changes in revenues, cost of revenues, gross profit and operating expenses.

~~Energy Segment~~

~~Comparison of Operating Results for the three and nine months ended September 30, 2023 and 2022:~~

~~Comparison of the three months ended September 30, 2023 and 2022~~

~~Revenues~~

For the three months ended September 30, 2023 and 2022, the Energy segment generated revenues of $4.8 million and $24.9 million, respectively. This represents a decrease of approximately $20.1 million or 80.8%. The decrease in revenue was primarily due to a decrease in the number of projects combined with a decrease in the number of jobs receiving “permission to operate” driven partially by an increase in the time needed to complete jobs and higher borrowing costs for the consumer and an increase in the cancellation rate.

~~Cost of Revenues~~

For the three months ended September 30, 2023 and 2022, overall cost of revenues was $7.7 million and $10.7 million, respectively. This represents a decrease of $3.0 million, or 27.7%, primarily due to a decrease in the number of projects and jobs receiving “permission to operate” partially offset by an increase in the average cost of materials and labor per job as well as a $3.4 million write-off of material and inventory as a result of the estimated realizable value.

~~Gross Profit~~

For the three months ended September 30, 2023 and 2022, gross profit was $3.0 million and $14.2 million, respectively and gross margin percentage was a negative 61.6% and 57.1%, respectively. The percentage decrease was due to the increase in per job material and labor costs as well as the write-off of material and inventory as a result of the estimated realizable value.

~~Table of Contents~~

~~Total Net Operating Expenses~~

For the three months ended September 30, 2023 and 2022, operating expenses were $17.7 million and $14.0 million, respectively. This represents a increase of $3.7 million, or 26.2%. This increase was primarily due to an $8.6 million impairment recorded on the equity method investment in Quantum during the third quarter of 2023 compared to a $2.9 million impairment recorded during the third quarter 2022, a net increase of $1.0 million in commissions and an increase of $0.4 million in bad debt expenses partially offset by decreases of $3.2 million in sales and marketing payroll costs due to the closure of sales channels, and a decrease of $0.5 million in marketing expenses.

~~Operating (Loss) Income~~

For the three months ended September 30, 2023 and 2022, operating loss was $20.6 million as compared to an operating income of $0.2 million at September 30, 2022. This change is the result of the above described changes in revenues, cost of revenues, gross profit and operating expenses.

~~Comparison of the nine months ended September 30, 2023 and 2022~~

~~Revenues~~

For the nine months ended September 30, 2023 and 2022, the Energy segment generated revenues of $25.4 million and $54.1 million, respectively. This represents a decrease of approximately $28.6 million or 53.0%. The decrease in revenue was primarily due to a decrease in the number of projects combined with a decrease in the number of jobs receiving “permission to operate” driven partially by an increase in the time needed to complete jobs and higher borrowing costs for the consumer and an increase in the cancellation rate.

~~Cost of Revenues~~

For the nine months ended September 30, 2023 and 2022, overall cost of revenues was $19.2 million and $26.0 million, respectively. This represents a decrease of $6.8 million, or 26.1%, primarily due to a decrease in the number of projects and jobs receiving “permission to operate,” partially offset by an increase in the average cost of materials and labor per job as well as a $3.4 million write-off of material and inventory as a result of the estimated realizable value.

~~Gross Profit~~

For the nine months ended September 30, 2023 and 2022, our gross profit was $6.2 million and $28.1 million, respectively and our gross margin percentage was 24.5% and 52.0%, respectively. The percentage decrease was due to the increase in per job material and labor costs as well as the write-off of material and inventory as a result of the estimated realizable value.

~~Total Net Operating Expenses~~

For the nine months ended September 30, 2023 and 2022, operating expenses were $39.4 million and $25.0 million, respectively. This represents an increase of $14.3 million, or 57.3%. This increase was primarily due to the impairment of Erus goodwill and intangible assets of $15.0 million in the second quarter of 2023, the absence in 2023 of the $4.4 million gain on sale of Greenwave on January 1, 2022, an increase of $2.4 million in loss from the equity method investment in Quantum, net of the $8.6 million impairment, and an increase in rent of $0.4 million partially offset by decreases in dealer commissions of $2.9 million and sales and marketing payroll cost of $4.7 million due to the closure of sales channels.

~~Operating (Loss) Income~~

For the nine months ended September 30, 2023, operating loss was $33.2 million compared to operating income of $3.0 million for the nine months ended September 30, 2022. This change is the result of the above described changes in revenues, cost of revenues, gross profit and operating expenses.

~~Table of Contents~~

~~Corporate and Other Segment~~

~~Comparison of Operating Results for the three and nine months ended September 30, 2023 and 2022:~~

~~Comparison of the three months ended September 30, 2023 and 2022~~

~~Revenues~~

~~For the three months ended September 30, 2023 and 2022, revenue was $0.3 million and $0.2 million, respectively.~~

~~Total Net Operating Expenses~~

For the three months ended September 30, 2023 and 2022, operating expenses were $10.5 million and $7.2 million, respectively. This represents an increase of $3.2 million, or 44.8%, primarily due to a $3.2 million increase in legal fees.

~~Operating Loss~~

For the three months ended September 30, 2023 and 2022, operating loss was $10.2 million and $7.1 million, respectively. This represents an increase of approximately $3.1 million or 43.3%. This change can be explained as a combination of the above described changes in operating expenses.

~~Income from Discontinued Operations~~

For the three months ended September 30, 2023 and 2022, net income from discontinued operations was $0.8 million and $0.1 million, respectively. This represents an increase of $0.6 million or 518.5%. Income from discontinued operations is from the disposed

~~Table of Contents~~

~~automotive retail business. The 2022 gain on sale of discontinued operations represents a $0.3 million income payment which was contingent on the future sales of a portfolio company sold in 2020.~~

~~Comparison of the nine months ended September 30, 2023 and 2022~~

~~Revenues~~

~~For the nine months ended September 30, 2023 and 2022, revenue was $0.3 million and $0.4 million, respectively.~~

~~Total Net Operating Expenses~~

For the nine months ended September 30, 2023 and 2022, operating expenses were $28.6 million and $19.1 million, respectively. This represents an increase of $9.6 million, or 50.1%, primarily due to an $8.0 million increase in legal fees and the absence of a gain of $2.3 million for the nine months ended September 30, 2023 from Middleneck which was sold in March, 2022, partially offset by a $1.0 million decrease in other professional fees.

~~Operating Loss~~

For the nine months ended September 30, 2023 and 2022, operating loss was $28.3 million and $18.7 million, respectively. This represents an increase of approximately $9.6 million or 51.1%. This change can be explained as a combination of the above described changes in operating expenses.

~~Income from Discontinued Operations~~

For the nine months ended September 30, 2023, net income from discontinued operations was $1.4 million and $9.4 million, respectively. This represents a decrease of $8.0 million or 85.5%. Income from discontinued operations is from the disposed automotive retail business. The 2022 gain on sale of discontinued operations represents a $7.6 million income payment which was contingent on the future sales of a portfolio company sold in 2020.

LIQUIDITY AND CAPITAL RESOURCES

The ~~following table summarizes the components of working capital as of September 30, 2023 and December 31, 2022:~~

September 30,

December 31,
(Dollars in thousands)

2023

2022
Cash and cash equivalents

$
50,706

$
334,427
Investment securities

297,847

—
Total current assets

422,883

423,632
Total current liabilities

50,366

53,876
Working capital

372,517

369,756
Total assets

$
564,901

$
602,175

~~Table of Contents~~

~~Debt obligations are summarized below as of September 30, 2023 and December 31, 2022:~~

September 30,

December 31,
(Dollars in thousands)

2023

2022
Promissory notes

$
3,958

$
—
Lines of credit

1,521

1,624
Installment notes

50

125
Total long-term debt

5,529

1,749
Less: current maturities

(4,175)

(1,724)
Total long-term debt, net of current portion

$
1,354

$
25
Finance lease liabilities

$
132

$
383
Less: current portion

(132)

(224)
Finance lease liabilities, net of current portion

$
—

$
159

Operating lease liabilities

$
5,285

$
6,031
Less: current portion

(2,507)

(2,533)
Operating lease liabilities, net of current portion

$
2,778

$
3,498

~~The Partnership’s~~Partnership has historically relied primarily on cash on hand, investment securities, cash flows from ~~operating, investing~~operations, borrowings under our credit facilities, and ~~financing activities~~lines of credit as the main sources for liquidity. We used those funds to invest in capital improvements and additions and to satisfy contractual obligations. Since the ~~nine months ended September 30, 2023~~adoption of our Plan of Liquidation, our ability to meet our obligations is contingent upon the disposal of our assets in accordance with the Plan of Liquidation. All significant non-cash assets except for Quantum, HIS, and ~~2022 were as follows:~~

September 30,

September 30,
(Dollars in thousands)

2023

2022
Cash provided by (used in):




Operating activities

$
(14,595)

$
(1,901)
Investing activities

(284,079)

53,469
Financing activities

(3,269)

(74,008)
Effect of exchange rate changes on cash

(5)

(44)
Net decrease in cash and cash equivalents

$
(301,948)

$
(22,484)

~~Total cash, cash equivalents and investment securities on hand at September 30, 2023 and December~~the Riverwalk promissory note receivable have been liquidated. As of March 31, ~~2022 was $348.6~~2024, we had $17.7 million ~~and $334.4 million, respectively. In addition to this amount, there was a total of restricted cash of nil and $18.2 million, respectively, as of September 30, 2023 and December 31, 2022. Included~~ in cash on hand ~~was $30.8~~and $497.2 million and $22.6 million as of September 30, 2023 and December 31, 2022, respectively, held by certain subsidiaries of the Partnership. As of September 30, 2023 and December 31, 2022, the Partnership had working capital (current assets less current liabilities) of $372.5 million and $369.8 million, respectively. Working capital as of September 30, 2023 and December 31, 2022 is inclusive of approximately $4.2 million and $1.7 million, respectively, in ~~current maturities of long-term debt.~~

~~The Partnership has incurred losses from continuing operations and has used~~Treasury Bills. We expect that this cash to finance its operating activities. The Partnership incurred a net loss from continuing operations of $37.0 million and used cash in operating activities of $14.6 million for the nine months ended September 30, 2023. The Partnership recorded net income of $1.4 million from discontinued operations during the nine months ended September 30, 2023. We may continue to generate operating losses and use cash in our operating activities for the foreseeable future.

As discussed in “Item 1. Legal Proceedings” in Part II, the Partnership, our General Partner and our portfolio companies are involved in a number of regulatory, litigation, arbitration and other proceedings, many of which expose the Partnership to potential financial loss. However, any liability originating from such contingencies which would require an outflow of cash would most likely not be charged to the Partnership, and if such payments were to occur, any such payments would most likely not occur until the second half of 2024 at the earliest, and are not estimable at this time. Based on the complexity of these issues, the Partnership anticipates that the resolution of these matters will likely take substantial time. In many of the cases, there is still significant discovery and/or investigation to be completed. When combined with lengthy motion practice and possible trial and appeals, coupled with the slowdown due to the lingering effects of the pandemic, some or all of these matters may not be resolved for several years.

~~Table of Contents~~

In addition, the Partnership is indemnifying officers and directors, as well as GPB, its principals, representatives, and affiliates, for any costs they may incur in connection with such disputes as required by various agreements or governing law. This indemnification does not cover any potential future outcomes or settlements that result from these disputes.

In determining its ability to meet its obligations, the Partnership takes into consideration the amount of cash on hand, working capital requirements, availability and repayment requirements of outstanding credit facilities, commitments for capital improvements to the business and to acquire additional businesses, and contingencies likely to arise from disputes and litigation. Proceeds from the sale of businesses are considered when such transactions have occurred or are considered probable of occurring.

The Partnership does not presently have a ready mechanism for raising additional financing or capital. The Partnership intends to pursue any additional financing or capital as needs arise. However, no assurances can be made that the Partnership will be ~~successful in obtaining such financing or capital at all, or in amounts or on terms and conditions acceptable to us.~~

~~We believe we will have sufficient liquidity~~adequate to meet our obligations, ~~as they come due~~pursuant to our Plan of Liquidation.

CONTRACTUAL PAYMENT OBLIGATIONS

As of March 31, 2024, there have been no material changes to the contractual payment obligations table included in the ~~normal course~~Annual Report on Form 10-K filed with the SEC on March 28, 2024 (the “Form 10-K”).

OFF BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of ~~business for a period of at least twelve months from the date of issuance of these Condensed Consolidated Financial Statements.~~

See also “Item 1. Legal Proceedings” in Part II for discussion of the role of the Monitor with respect to the Partnership’s use of cash including regarding distributions to investors and indemnification obligations to GPB.

~~Nine months ended September 30, 2023 compared to September 30, 2022~~

Net cash used in operating activities was $14.6 million for the nine months ended September 30, 2023 compared to $1.9 million for the nine months ended September 30, 2022. This change of approximately $12.7 million was primarily due to an increase in net loss adjusted for non-cash items and an increase in cash generated by working capital in part due to increases in asset impairment of $15.0 million, income from equity method investments of $2.3 million, amounts due to related parties of $4.4 million gain on reduction of contingent liability of $5.9 million, and bad debt expense of $2.3 million partially offset by decreases in customer deposits of $7.3 million, contract assets of $13.9 million, accounts payable and accrued expenses of $5.9 million, gain on disposal of business of $0.7 million, accounts receivable of $2.5 million, loss on extinguishment of debt of $4.5 million, and depreciation and amortization of $2.0 million.

Net cash used in investing activities was $284.1 million for the nine months ended September 30, 2023 compared to net cash provided by investing activities of $53.5 million for the nine months ended September 30, 2022. Cash flows from investing activities primarily related to acquisitions,operations, liquidity, capital expenditures and divestitures. The change of approximately $337.5 million was primarily due to the net purchase and sales of short term U.S. Treasury Bills investments of $297.1 million, the sale of Experience Care during the nine months ended September 30, 2023 of $12.7 million, the purchase of ALN during the nine months ended September 30, 2023 of $11.7 million compared to the sale of Greenwave during the three months ended September 30, 2022 for $14.3 million, a decrease of $24.9 million in distributions received from investees and a decrease of $2.1 million in proceed from the sale of debt investments.or capital resources.

Net cash used in financing activities was $3.3 million for the nine months ended September 30, 2023 compared to $74.0 million for the nine months ended September 30, 2022. The change of approximately $70.7 million was primarily due to a decrease in the repayment of loans payable of $56.2 million, a decrease of $6.5 million in the repayment of notes payable - related party, a decrease in distributions to partners of $5.5 million and a decrease in distributions to non-controlling interests of $3.9 million, partially offset by a purchase of non-controlling interests of $1.5 million.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to the critical accounting policies and use of estimates since the filing of our ~~Annual Report filed on~~ Form ~~10-K filed with the SEC on March 31, 2023.~~

~~OFF BALANCE SHEET ARRANGEMENTS~~

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

~~Table of Contents~~

~~CONTRACTUAL PAYMENT OBLIGATIONS~~

~~We are party to contracts associated with ongoing business and financing activities, which will result in cash payments to counterparties in future periods.~~

The following table summarizes our payment obligations under certain contracts on September 30, 2023. The amounts presented are based upon, among other things, the terms of any relevant agreements. Future events that may occur related to payment obligations could cause actual payments to differ significantly from these amounts.

(Dollars in thousands)

2024

2025-2026

2027-2028

2029+

Total
Contractual obligations










Debt obligations

4,175

1,354

—

—

5,529
Interest on debt and notes payable

363

38

—

—

401
Operating and finance leases, including imputed interest

2,874

2,037

565

400

5,876
Total

$
7,412

$
3,429

$
565

$
400

$
11,806

10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our reported market risks or risk management policies since the filing of our ~~Annual report on~~ Form ~~10-K filed with the SEC on March 31, 2023.~~10-K.

Table of Contents

Item 4. Controls and Procedures

The Partnership’s management, with the participation of Rob Chmiel, the Chief Executive Officer and Chief Financial Officer of GPB, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September 30, 2023.~~March 31, 2024. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that at ~~September 30, 2023,~~March 31, 2024, due to the existence of the material weaknesses in the Partnership’s internal controls over financial reporting (“ICFR”) described below, the Partnership’s disclosure controls and procedures were not effective.

Notwithstanding such material weakness in the Partnership’s ICFR, our management concluded that our Condensed Consolidated Financial Statements in this Form 10-Q present fairly, in all material respects, the Partnership’s financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with U.S. GAAP for interim financial information ~~reporting purposes~~ and in accordance with the rules and regulations of the SEC.

Internal Controls over Financial Reporting

Material Weaknesses

~~There~~We have concluded that there are material weaknesses in our system of ICFR, which if not remediated could materially and adversely affect our ability to timely and accurately report our results of ~~operations~~operation and financial condition.

We have identified deficiencies, or a combination of deficiencies, relating to ~~our control environment,~~ risk assessment, ~~information and communication,~~ control activities and monitoring ~~activities~~of the Partnership’s control environment that have been determined to be ~~pervasive~~ material weaknesses in our internal controls. ~~Specifically, our material~~These identified weaknesses ~~result from inadequate resources,~~are attributed, in part, to insufficient and ineffective controls within our financial close and reporting ~~process, and weaknesses in reaching and documenting accounting conclusions.~~

49process.

~~Table of Contents~~

Remediation Plan

Our management is committed to maintaining a strong internal control environment and implementing measures designed to help ensure ~~that~~the financial statements are free of material error. To remediate the material weaknesses, ~~are remediated. With respect to~~management believes the material weakness pertaining to risk assessment, control activities and monitoring of the control environment components of the Internal Control - Integrated Framework (2013) issued by COSO, management developed and is implementingfollowing remediation plans would have to ~~address these material weaknesses. Such plans~~be developed, implemented and ~~measures include, among other things:~~tested:

●

establishing a hierarchy of review with the appropriate complement of management employees, and

●

implementing intensive review policies and procedures to be performed at an appropriate level of precision.

While management believes the measures described above, and others that may be implemented, should remediate the material weaknesses that we have identified, management does not expect to fully remediate these material weaknesses in the near term. AsOur management ~~continues~~is currently determining the extent and timing of its remediation efforts including rationalizing the level of investment necessary to ~~evaluate and improve ICFR, we~~mitigate the level of risk brought on by our material weaknesses, in light of the Plan of Liquidation. We may decide to take additional measures to address control deficiencies or determine to modify, ~~certain~~or, in appropriate circumstances, not to complete such actions due to the timing of carrying out the ~~remediation measures described above.~~Plan of Liquidation.

Changes in Internal ~~Control~~Controls over Financial Reporting

There were no changes in our ~~internal control over financial reporting~~ICFR during the three months ended ~~September 30, 2023~~March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our ICFR.

5030

Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

~~We, our General Partner,~~The information in “Note 5. Commitments and our portfolio companies are involved in a number of regulatory, litigation, arbitration and other proceedings or investigations, many of which expose us to potential financial loss. We are advancing funds, pursuant to indemnification clauses in the LPA, to officers and directors, as well as GPB, its principals, representatives, and affiliates, for any costs they may incur in connection with their legal defense of such disputes as required by various agreements or governing law. This advancing of funds does not cover any potential future outcomes or settlements that result from these disputes.

We establish reserves or escrows for legal actions when potential losses associated with the actions become probable and the costs can be reasonably estimated. The actual costs of resolving legal actions may be substantially higher or lower than the amounts reserved or placed in escrow for those actions. Distributions may be delayed or withheld until such reserves are no longer needed or the escrow period expires. If liabilities exceed the amounts reserved or placed in escrow, Limited Partners may need to fund the difference by refunding some or all distributions previously received. For the three and nine months ended September 30, 2023, the Partnership accrued $4.9 million and $12.1 million, respectively, and $2.1 million and $2.4 million for the three and nine months ended September 30, 2022, respectively of legal indemnification expenses recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

~~Regulatory and Governmental Matters~~

~~Appointment of Monitor and Application for Receivership~~

~~On February 11, 2021, the EDNY Court in the SEC Action appointed the Monitor over GPB until further order~~Contingencies” of the ~~EDNY Court. The EDNY Court appointed the Monitor in response~~notes to a request from the SEC, which asserted that the Monitor was necessary to protect investors in light of the alleged misconduct of GPB Capital’s former CEO, David Gentile. In its February 4, 2021 Complaint in the SEC Action, the SEC alleged that Mr. Gentile, as the owner and then-CEO of GPB Capital, along with Jeffry Schneider, the owner of Ascendant, GPB’s placement agent, lied to investors about the source of money used to make 8% annualized distribution payments to investors. According to the SEC, Mr. Gentile and others allegedly told investors that the distribution payments were paid exclusively with monies generated by GPB portfolio companies, but as alleged, GPB actually used investor money to pay portions of the annualized 8% distributions. The Complaint further contains allegations that Mr. Gentile and others manipulated financial statements of certain limited partnership funds that GPB manages to perpetuate the deception by giving the false appearance that the funds’ income was closer to generating sufficient income to cover the distribution payments than it actually was. Moreover, the Complaint alleges that Mr. Gentile engaged in undisclosed self-dealing, including by omitting from investor communications certain conflicts of interest and fees and other compensation that he received, totaling approximately $8.0 million.

In support of the Order, the SEC contended that the Monitor would provide assurances to investors, GPB’s counterparties, and the public that an unbiased and qualified person, who was not beholden to Mr. Gentile, was vetting any significant transactions and decisions, and looking out for the interests of investors. Accordingly, pursuant to the Order, GPB shall (i) grant the Monitor access to all non-privileged books, records and account statements for the GPB-managed funds, including the Partnership, as well as their portfolio companies; and (ii) cooperate fully with requests by the Monitor reasonably calculated to fulfill the Monitor’s duties. As noted below, the Order was amended on April 14, 2021.

~~Table of Contents~~

~~On April 14, 2021, the EDNY Court entered an Amended Order, providing that, in addition to the SEC and GPB, certain State regulators will receive access to the periodic reports filed~~is incorporated herein by ~~the Monitor pursuant to the Order.~~reference.

On May 31, 2022, Mr. Gentile filed a motion in the SEC Action to modify the Amended Order pursuant to Rule 60(b) of the Federal Rules of Civil Procedure. In his Rule 60(b) Motion, Mr. Gentile is seeking a court order to, among other things, (i) narrow the scope of the Monitor’s responsibilities; and (ii) direct the Monitor to ensure that GPB does not sell or otherwise dispose of assets or portfolio companies that the Partnership owns before the completion of a “strategic assessment” to be conducted by three managers Mr. Gentile purportedly appointed to GPB on May 27, 2022. On that same day, May 31, 2022, the Monitor notified Mr. Gentile and GPB that Mr. Gentile’s purported appointment of three new managers to GPB without Monitor approval was, amongst other things, in violation of the Amended Order. Mr. Gentile and GPB were, at that time, given ten (10) business days to cure the violation of the Amended Order. The cure period expired without any steps having been taken to comply with the Monitor’s notification of violation of the Amended Order.

On June 13, 2022, the SEC filed by order to show cause in the SEC Action an application and order to (i) convert the existing Monitorship over GPB and the GPB-managed funds to a Receivership, and appoint the previously-appointed Monitor, Joseph T. Gardemal III, as Receiver; and (ii) impose a litigation injunction on cases filed against GPB and the GPB-managed funds. The Receivership Application and the Proposed Order were filed with the EDNY Court with consent of GPB’s management.

The Receivership Application seeks appointment of Mr. Gardemal as Receiver in order to, in part, streamline the process by which GPB and the GPB-managed funds liquidate remaining portfolio company assets and distribute money to Limited Partners, subject to the EDNY Court’s supervision. The Proposed Order would grant to Mr. Gardemal, generally, all powers and authorities previously possessed by the entities subject to the Proposed Order, as well as the powers possessed by the officers, directors, managers and others previously in charge of those entities, and permits him to, among other things, take all such actions necessary to preserve receivership assets.

Additionally, the Receivership Application includes a proposed stay of all Federal and State actions (as well as any arbitrations) presently pending against GPB and the GPB-managed funds, and provides for a centralized claims process for GPB’s Limited Partners, in the EDNY Court, to prevent potentially disparate actions in different courts that could negatively impact the assets proposed to be subject to the EDNY Court’s jurisdiction and control.

On July 28, 2023, an Eastern District of New York Magistrate Judge issued a Report and Recommendation, recommending that the EDNY Court grant the SEC’s Receivership Application (i.e., convert the monitorship to a receivership), including the imposition of a litigation injunction. The Magistrate Judge further recommended that Mr. Gentile’s Rule 60(b) Motion be denied as moot, or alternatively, that it be denied as procedurally improper.

~~Federal Matters~~

On February 4, 2021, the SEC Action was filed against GPB, Ascendant, AAS, David Gentile, Jeffry Schneider and Jeffrey Lash in the EDNY Court. No GPB-managed partnership is a named defendant in the SEC Action. The SEC Action alleges several violations of the federal securities laws, including securities fraud. The SEC is seeking disgorgement and civil monetary penalties, among other remedies.

Also on February 4, 2021, the USAO brought the Criminal Case against Mr. Gentile, Mr. Schneider, and Mr. Lash. The indictment in the Criminal Case alleges conspiracy to commit securities fraud, conspiracy to commit wire fraud, and securities fraud against all three individuals. Mr. Gentile and Mr. Lash were also charged with two counts of wire fraud. We understand that the USAO intends to seek

~~Table of Contents~~

criminal forfeiture. Mr. Gentile resigned from all management and board positions with GPB and Highline, and the GPB-managed funds, including the Partnership, and subsidiaries of the Partnership, promptly following his indictment. In a status conference held on April 17, 2023, the Judge in the Criminal Case scheduled the trial for June 3, 2024. On June 6, 2023, Mr. Lash pled guilty to one count of wire fraud in the Criminal Case pursuant to a plea agreement. Mr. Lash’s sentencing is currently scheduled for April 4, 2024.

~~State Matters~~

On May 27, 2020, Massachusetts filed an Administrative Complaint against GPB for alleged violations of the Massachusetts Uniform Securities Act. No GPB-managed fund is a named defendant. The complaint alleges, among other things, that the offering documents for several GPB-managed funds, including the Partnership, included material misstatements or omissions. Massachusetts is seeking both monetary and administrative relief, including disgorgement and rescission to Massachusetts residents who purchased the GPB-managed funds. This matter is currently stayed, pending resolution of the Criminal Case.

On February 4, 2021, seven state securities regulators (from Alabama, Georgia, Illinois, Missouri, New Jersey, New York, and South Carolina, collectively the “States”) each filed suit against GPB. No GPB-managed fund is a named defendant in any of the suits. Several of the suits also named Ascendant, AAS, Mr. Gentile, Mr. Schneider, and Mr. Lash as defendants. The States’ lawsuits allege, among other things, that the offering documents for several GPB-managed funds, including the Partnership, included material misstatements and omissions. The States are seeking both monetary and administrative relief, including disgorgement and rescission. The cases brought by the States have been stayed pending the conclusion of the related Criminal Case. The State of New Jersey has voluntarily dismissed its case, without prejudice to re-file it following the conclusion of the Criminal Case.

~~Actions Asserted Against GPB and Others, Not Including the Partnership~~

~~Ismo J. Ranssi, derivatively on behalf of Armada Waste Management, LP, v. GPB Capital Holdings, LLC, et al. (New York Supreme Court, New York County, Index No. 654059/2020)~~

~~Galen G. Miller and E. Ruth Miller, derivatively on behalf of GPB Holdings II, LP, v. GPB Capital Holdings, LLC, et al. (New York Supreme Court, New York County, Index No. 656982/2019)~~

In November 2019, plaintiffs filed a derivative action against GPB, Ascendant, AAS, Axiom, Michael Cohn, Steven Frangioni, David Gentile, William Jacoby, Minchung Kgil, Mark D. Martino, and Jeffry Schneider in New York Supreme Court, New York County. The Partnership was named only as a nominal defendant. An Amended Complaint was filed on or about March 2, 2020, alleging, among other things, that the offering documents for certain GPB-managed funds include material misstatements and omissions. The Amended Complaint alleges causes of action for breach of fiduciary duty against all defendants; aiding and abetting breach of fiduciary duty against Ascendant, AAS, Axiom and Mr. Martino; breach of contract against GPB; unjust enrichment against all defendants; and an equitable accounting against GPB. The plaintiffs are seeking disgorgement of alleged unjust enrichment, unspecified damages as a result of alleged wrongful acts, costs of the action, and an equitable accounting. Any potential losses associated with this matter cannot be estimated at this time.

~~Actions Asserted Against GPB and Others, Including the Partnership~~

For all matters below in which the Partnership is a defendant and where the partnership disagrees with the allegations against, we intend to vigorously defend against the allegations, however no assurances can be given that we will be successful.

~~Table of Contents~~

Michael Peirce, derivatively on behalf of GPB Automotive Portfolio, LP v. GPB Capital Holdings, LLC, Ascendant Capital, LLC, Ascendant Alternative Strategies, LLC, Axiom Capital Management, Inc., Steven Frangioni, David Gentile, William Jacoby, Minchung Kgil, Mark D. ~~Martino~~ ~~and Jeffry Schneider, -and- GPB Automotive Portfolio, LP, Nominal Defendant (New York Supreme Court, New York County, Case No. 652858/2020)~~

In July 2020, plaintiff filed a derivative action in New York Supreme Court against GPB, Ascendant, AAS, Axiom, Steve Frangioni, David Gentile, William Jacoby, Minchung Kgil, Mark Martino, and Jeffry Schneider. The Complaint alleges various breaches of fiduciary duty and/or aiding and abetting the breaches of fiduciary duty against all defendants, breach of contract against GPB, unjust enrichment, and an equitable accounting. Plaintiffs are seeking declaratory relief, disgorgement, restitution, an equitable accounting, and unspecified damages. Any potential losses associated with this matter cannot be estimated at this time.

~~Alfredo J. Martinez, et al. v. GPB Capital Holdings, LLC (Delaware Chancery Court, Case No. 2019-1005)~~

~~Alfredo J. Martinez and HighTower Advisors v. GPB Capital Holdings, LLC, et al. (Delaware Chancery Court, Case No. 2020-0545)~~

~~In re: GPB Capital Holdings, LLC Litigation (formerly, Adam Younker, Dennis and Cheryl Schneider, Elizabeth Plaza, and Plaza Professional Center Inc. PFT Sharing v.~~ ~~GPB~~ Capital Holdings, LLC, et al. and Peter G. Golder, individually and on behalf of all others similarly situated, v. GPB Capital Holdings, LLC, et al. (New York Supreme Court, New York County, Case No. 157679/2019)

~~Table of Contents~~

~~Phillip J. Cadez, et al. v. GPB Capital Holdings, LLC, et al. (Delaware Chancery Court, Case No. 2020-0402)~~

~~Jeff Lipman and Carol Lipman, derivatively on behalf of GPB Holdings II, LP and GPB Automotive Portfolio, LP v. GPB Capital Holdings, LLC, et al. (Delaware Chancery Court, Case No. 2020-0054)~~

~~Mary Purcell, et al. v. GPB Holdings II, LP, et al. (Cal.~~ ~~Supreme~~ ~~Court, Orange County, Case No. 30-2019-01115653-CU-FR-CJC)~~

~~Barbara Deluca and Drew R. Naylor, on behalf of themselves and other similarly situated Limited Partners, v. GPB Automotive Portfolio, LP et al. (S.D.N.Y., Case No. 19-CV-10498)~~

~~Kinnie Ma Individual Retirement Account, et al., individually and on behalf of all others similarly situated, v. Ascendant Capital, LLC, et al. (W.D. Texas, Case No. 19-CV-01050)~~

~~Table of Contents~~

On June 1, 2022, the Western District of Texas Court consolidated this matter with Barasch v. GPB Capital, et al. (19-cv-01079); only the Kinnie Ma case continues, including the claims at issue in the Barasch v. GPB Capital matter and Loretta Dehay (as described below), which were consolidated under the Kinnie Ma docket number. On June 23, 2022, the Court denied Defendants David Gentile and Jeffry Schneider’s motion to stay the case pending the resolution of the criminal case, U.S. v. Gentile, et al., No. 1:21-CR-54-DG (E.D.N.Y. Jan. 29, 2021). Plaintiffs filed a consolidated complaint on July 1, 2022, and defendants filed answers thereafter. On August 21, 2023, the Court granted the indicted defendants’ May 2023 motion to stay proceedings pending resolution of the related criminal case. Plaintiffs have filed their objection to and appeal of the Court’s decision.

~~Concorde Investment Services, LLC v. GPB Capital Holdings, LLC, et~~ al~~. (New York Supreme Court, New York County, Index No. 650928/2021)~~

In February 2021, Concorde Investment Services, LLC filed suit in New York State Supreme Court, New York County against GPB, certain limited partnerships for which GPB is the General Partner, and others. The Complaint alleges breaches of contract, fraudulent inducement, negligence, interference with contract, interference with existing economic relations, interference with prospective economic advantage, indemnity, and declaratory relief, and includes a demand for arbitration. Plaintiff’s demands include compensatory damages of at least $5.0 million, punitive damages, and a declaration that Concorde is contractually indemnified by the Defendants.

~~Concorde Investment Services, LLC v. GPB Capital Holdings, LLC, GPB Holdings, LP, GPB Automotive Portfolio, LP, GPB Waste Management, LP (American Arbitration Association, Case No. 01-21-0018-1470)~~

In December 2021, claimant Concorde Investment Services, LLC (“Concorde”, the Plaintiff in the New York case set forth above) filed a Demand for Arbitration with the American Arbitration Association (AAA). The arbitration, however, was dormant while certain issues in the New York case were litigated. In January 2023, Concorde sought the appointment of an arbitration panel to proceed against GPB Capital and the GPB-managed funds (the “GPB Funds”). Concorde seeks indemnification related to lawsuits and arbitrations brought against Concorde by its clients with respect to the limited partnership interests Concorde sold in GPB Funds, and based upon the so-called “dealer agreements” entered into between Concorde and the GPB Funds. On request of Concorde, a three-member arbitration panel has been appointed. On or about April 25, 2023, the panel denied the Respondents’ request to file either a motion to dismiss the arbitration, or to stay the arbitration pending the resolution of the related Criminal Case. On October 3, 2023, Respondents requested a conference before the panel regarding Respondents’ request to stay the arbitration until a decision is issued by the EDNY Court on the appointment of a Receiver over GPB Capital. Any potential losses associated with this action cannot be estimated at this time.

~~Jeffry Schneider v. GPB Capital Holdings, LLC et al., Case No. 2021-0963 (Court of Chancery, DE)~~

In November 2021, Plaintiff, a former affiliate of GPB Capital Holdings, LLC, filed a Complaint in Chancery Court in Delaware against GPB Capital Holdings, LLC and each of the funds it manages, including the Partnership, seeking a ruling that he is contractually entitled to mandatory advancement of legal fees by GPB Capital with respect to several lawsuits in which Plaintiff is named. On March 24, 2022, the Chancery Court issued a bench ruling, finding that Plaintiff was entitled to advancement of his legal fees from GPB Capital.

~~David Gentile v. GPB Capital Holdings, LLC et al., Case No. 2021-1102-SG (Court of Chancery, DE)~~

On or about December 20, 2021, Plaintiff David Gentile, founder and former Chief Executive Officer of GPB Capital Holdings, LLC, filed a Complaint in Chancery Court in Delaware against GPB Capital Holdings, LLC and each of the funds it manages, including the Partnership, seeking entry of an Order governing his contractual entitlement to advancement of legal fees by GPB Capital with respect to several lawsuits in which Plaintiff is named. On April 12, 2022, the Chancery Court entered the parties’ Stipulation and Advancement Order governing Plaintiff’s entitlement to advancement of attorneys’ fees and expenses. Any potential losses associated with this action cannot be estimated at this time.

~~Table of Contents~~

~~Actions asserted by GPB~~

~~GPB Capital Holdings, LLC et al. v. Patrick Dibre (New York Supreme Court, Nassau County, Case No. 606417/2017)~~

In July 2017, GPB, the Partnership, GPB Holdings I, LP, GPB Holdings Automotive, LLC, and GPB Portfolio Automotive, LLC filed suit in New York State Supreme Court, Nassau County, against Patrick Dibre, one of their former operating partners, for breach of contract, breach of fiduciary duty, fraud and conversion arising out of the Defendant’s sale of certain automobile dealerships to the GPB Plaintiffs. Mr. Dibre answered GPB’s Complaint, and asserted counterclaims alleging breach of contract and unjust enrichment. Plaintiffs have since filed amended complaints, narrowing the prior claims to focus on certain specific provisions in the documents governing the sale of the dealerships at issue. The plaintiffs seek damages based on the value of the subject dealerships related to the alleged breach, and also seek an order of specific performance compelling Mr. Dibre to fulfill other obligations under the governing documents. Any potential losses associated with this matter cannot be estimated at this time.

~~GPB Capital Holdings, LLC et al. v. Patrick Dibre and 2150 Aventura Realty LLC (11th Judicial Circuit Ct, Miami-Dade County, Case No. 2023-021013-CA-01)~~

In August 2023, GPB and several of its partnerships, including the Partnership, filed suit in Florida State Court against Patrick Dibre and an entity under Dibre’s control, seeking, among other things, declaratory relief preventing Dibre from transferring the real estate underlying one of the automotive dealerships at issue in the litigation pending against Dibre in New York Supreme Court (as set forth above). GPB at the same time recorded a Notice of Lis Pendens on the real property at issue, which is located in Miami-Dade County, Florida, making a formal legal record of GPB and the other Plaintiffs’ enforceable and legally cognizable equitable interests in and to the property at issue. Neither Dibre nor 2150 Aventura Realty LLC has appeared in the case. Accordingly, on or about September 29, 2023, the Court granted Plaintiffs’ motion for a default against 2150 Aventura Realty LLC, and on or about October 18, 2023, the Court granted Plaintiffs’ motion for a default against Dibre. Any potential ruling in favor of the Partnership cannot be determined at this time.

~~Portfolio Company Litigation~~

~~Doctor’s Emergency Service, P.A. v. Professional Management, Inc. and AdvantEdge Healthcare Solutions, Inc. (Circuit Court for Baltimore City, No. 24-C-23-001840 CN)~~

Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable a loss will be incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, if any, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgement is required to determine both the likelihood of there being and the estimated amount of a loss related to such matters. We continue to evaluate these legal matters and potential future losses in accordance with FASB ASC 450, Contingencies.

~~Actions Settled During Periods Presented~~

~~AMR Auto Holdings – SM, LLC d/b/a Prime Subaru Manchester v. Subaru of New England, Inc. (New Hampshire Motor Vehicle Industry Board, Case No. 2021-01)~~

~~Table of Contents~~

the transfer to Group 1; SNE refused to approve the transfer (the “Turndown”). On December 10, 2021, Prime Subaru Manchester, as Protestor, filed a Protest action against SNE, as Respondent, with the New Hampshire Motor Vehicle Industry Board (the “NHMVIB”) (Case No. 2021-01), claiming that the Turndown by SNE breached the Subaru Dealer Agreement and New Hampshire law, and seeking a ruling from the NHMVIB, that SNE unreasonably and in violation of law withheld its consent to the proposed transfer of the assets of Prime Subaru Manchester to Group 1, as well as awarding costs and attorney’s fees to Prime Subaru Manchester.

~~Subaru of New England, Inc. v. AMR Auto Holdings–SM LLC d/b/a Prime Subaru Manchester (Hillsborough Superior Court Northern District, New Hampshire, 216-2022-CV-00786)~~

~~On September 15, 2023, Prime Subaru Manchester and Group 1 agreed with SNE to settle the litigation first filed in Superior Court and later appealed to the New Hampshire Supreme Court.All litigation has been discontinued.Following the parties’ settlement agreement, ownership of the Subaru Manchester dealership transferred to Group 1 on October 16, 2023.~~

In May 2020, plaintiffs filed a civil action in New York Supreme Court, Nassau County against GPB, Automile Holdings LLC d/b/a Prime Automotive Group, David Gentile, David Rosenberg, Philip Delzotta, Joseph Delzotta, and other related entities. The complaint alleged that defendants engaged in fraudulent and discriminatory schemes against customers and engaged in retaliatory actions against plaintiffs, who were employed by Garden City Nissan from August until October 2019. The plaintiffs sought damages pursuant to New York Labor Law Section 740 and Executive Law Section 296. In May 2023, the parties agreed to settle the action. No costs associated with the settlement were charged to the Partnership.

~~Table of Contents~~

individuals. The complaint alleged deceptive and misleading business practices of the named defendants with respect to the marketing, sale, and/or leasing of automobiles and the financial and credit products related to the same. Plaintiff alleged defendants’ collection of fraudulent rebates exceeded $1.0 million, and sought class-wide injunctive relief, along with monetary and punitive damages and costs and fees. In May 2023, the parties agreed to settle the action. No costs associated with the settlement were charged to the Partnership.

~~GPB Lender, LLC v. GPB Capital Holdings, LLC (New York Supreme Court, Nassau County, Index No. 604887/2022)~~

~~Cient LLC v. GPB Capital Holdings, LLC (New York Supreme Court, Nassau County, Index No. 604886/2022)~~

~~Plymouth Rock Holding LLC v. GPB Capital Holdings, LLC (New York Supreme Court, Nassau County, Index No. 604873/2022)~~

~~Tom Alberto, et al. v. GPB Capital Holdings, LLC,~~ et ~~al. (American Arbitration Association, Case Number: 01-22-0001-5433)~~

~~Table of Contents~~

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in the Form 10-K, under “Risk Factors” in Item 1A, since the filing with the SEC on March ~~31, 2023,~~28, 2024, which are incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ~~and Issuer Purchases of Equity Securities~~

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

~~None.~~During the fiscal quarter ended March 31, 2024, no director or officer of the Registrant adopted or terminated a "Rule 10-b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

6031

Table of Contents

Item 6. Exhibits


Exhibit Number		Exhibit Description
3.1		Certificate of Limited Partnership of GPB Holdings II, LP (Incorporated by reference to Form 10/A filed on July 25, 2022).
3.2		Fourth Amended and Restated Agreement of Limited Partnership of GPB Holdings II, LP, dated April 26, 2018 ~~(Incorporated by reference to Form 10/A filed on July 25, 2022).~~
~~10.1~~		Second Amended and Restated Management Services Agreement, by and between GPB Capital Holdings, LLC, and Highline Management Inc., dated August 1, 2021 (Incorporated by reference to Form 10/A filed on July 25, 2022).
~~10.2~~		Purchase Agreement by and among Group 1 Automotive, Inc., GPB Portfolio Automotive, LLC, Capstone Automotive Group, LLC, Capstone Automotive Group II, LLC, Automile Parent Holdings, LLC, Automile TY Holdings, LLC and Prime Real Estate Holdings, LLC, dated September 12, 2021 (Incorporated by reference to Form 10/A filed on July 25, 2022).
~~10.3~~		Credit and Guaranty Agreement dated as of September 30, 2021 among HPI Holdco, LLC, as Borrower HPI Holdings, LLC, as Holdings certain subsidiaries of Holdings, as Guarantors, various lenders, and Crestline Direct Finance, L.P. as Administrative Agent, Collateral Agent and Sole Lead Arranger (Incorporated by reference to Form 10/A filed on July 25, 2022).
~~10.4~~		Agreement and Plan of Merger by and among HPI Holdings, LLC, AHS Granite Merger Sub, Inc., Shareholder Representative Services, LLC (as Stockholders’ Representative) and AdvantEdge Healthcare Holdings, Inc., dated September 30, 2021 (Incorporated by reference to Form 10/A filed on July 25, 2022).
~~10.5~~		Interest Purchase Agreement by and among GPB Holdings II, LP, Alliance Physical Therapy Partners, LLC and Alliance PT Buyer, Inc., dated November 15, 2021 (Incorporated by reference to Form 10/A filed on July 25, 2022).
~~10.6~~		~~Asset Purchase Agreement by and between Greenwave Energy, LLC and United Energy Trading, LLC, dated January 1, 2022 (Incorporated by reference to Form 10/A filed on July 25, 2022).~~
21		~~Subsidiaries of GPB Holdings II, LP~~ (Incorporated by reference to Form 10/A filed on July 25, 2022).
31.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1**		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2**		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS		XBRL Instance Document.
101.SCG		XBRL Taxonomy Extension Schema.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase.
101.DEF		XBRL Taxonomy Extension Definition Linkbase.
101.LAB		XBRL Taxonomy Extension Label Linkbase.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase.

*Filed herewith

**Furnished herewith

6132

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on behalf by the undersigned, thereunto duly authorized.


		GPB Holdings II, LP
		(Registrant)

	By:	/s/Robert Chmiel
		Robert Chmiel
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Evan Cutler
		Evan Cutler
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Date: ~~November 14, 2023~~May 9, 2024

6233


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	50,706	$	334,427
Restricted cash		—		18,227
Investment securities, current portion		297,847		—
Accounts receivable, net		27,070		26,909
Inventories		868		1,097
Prepaid expenses		4,832		5,649
Contract assets		653		15,740
Assets held for sale, continuing operations		29,357		—
Assets held for sale, discontinued operations		11,550		21,583
Total current assets		422,883		423,632
Non-current assets:
Property and equipment, net		8,951		8,245
Investment securities, net of current portion		734		729
Equity method investments		8,830		15,467
Right-of-use assets operating		5,551		6,535
Goodwill		71,549		78,895
Intangible assets, net		45,684		67,973
Other non-current assets		719		699
Total non-current assets		142,018		178,543
Total assets	$	564,901	$	602,175


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Product revenue	$	5,035	$	25,790	$	26,261	$	56,171
Service revenue		33,803		30,493		106,049		92,899
Debt investment interest income		79		77		236		248
Gain on sale of investment securities		—		—		29		—
Unrealized gain on investment securities		231		76		63		76
Other revenue		—		—		—		67
Total revenues		39,148		56,436		132,638		149,461
Cost of revenues:
Cost of goods sold		8,010		10,920		20,175		26,321
Cost of services		19,102		15,302		58,823		52,108
Total cost of revenues		27,112		26,222		78,998		78,429
Gross profit		12,036		30,214		53,640		71,032
Operating expenses (income):
Selling, general and administrative expenses		25,924		25,047		67,838		65,106
Managerial assistance fee, related party		3,089		2,939		9,205		8,315
Rent expense		863		1,054		2,873		3,319
Loss from equity method investments		8,235		7,596		4,287		6,572
Gain on disposal of businesses		(7,460)		—		(7,460)		(6,723)
Loss (gain) on changes in contingent liability		400		—		(5,891)		—
Impairment of goodwill and intangibles		—		—		15,004		—
Depreciation and amortization		4,128		3,715		12,768		11,393
Total net operating expenses		35,179		40,351		98,624		87,982
Operating loss		(23,143)		(10,137)		(44,984)		(16,950)
Other income (expense):
Interest expense		(79)		(36)		(338)		(2,787)
Interest expenses, related parties		—		(1)		—		(400)
Interest income		4,658		1,322		10,718		1,707
Loss on extinguishment of debt		—		—		—		(4,502)
Other expense		(374)		(345)		(1,820)		(493)
Total other income (expense)		4,205		940		8,560		(6,475)
Loss from continuing operations, before tax		(18,938)		(9,197)		(36,424)		(23,425)
Income tax expense		(95)		(195)		(562)		(550)
Net loss from continuing operations		(19,033)		(9,392)		(36,986)		(23,975)
Net income (loss) from discontinued operations		767		(176)		1,357		1,469
Gain on sale of discontinued operations		—		300		—		7,919
Net income from discontinued operations		767		124		1,357		9,388
Net loss of continuing and discontinued operations		(18,266)		(9,268)		(35,629)		(14,587)
Net income (loss) attributable to non-controlling interests		(4,601)		164		(10,379)		2,539
Net loss attributable to the Partnership	$	(13,665)	$	(9,432)	$	(25,250)	$	(17,126)


	Technology -
	Enabled
(Dollars in thousands)	Services		Energy		Total
Three Months Ended September 30, 2023
Product revenue	$	247	$	4,788	$	5,035
Service revenue		33,803		—		33,803

Revenue Stream
Software licenses	$	247	$	—	$	247
Software maintenance and support		3,847		—		3,847
Professional services		5,159		—		5,159
Medical billing and services		24,797		—		24,797
Solar panel sales		—		4,788		4,788

Timing of Revenue Recognition
Products and services transferred at a point in time	$	247	$	4,788	$	5,035
Products and services transferred over time		33,803		—		33,803


(Dollars in thousands)
Current assets	$	5,392
Operating lease assets		1,131
Other current assets		683
Property and equipment		1,255
Intangible assets		6,800
Goodwill		19,337
Debt		(5,208)
Operating lease liabilities		(1,120)
Current liabilities		(1,557)
Total net assets	$	26,713


(Dollars in thousands)			Useful Lives
Customer relationships	$	5,200	5 years
Trade name		1,600	5 years
	$	6,800


	Three months ended		Nine months ended
(Dollars in thousands)	September 30, 2022		September 30, 2022
Pro forma revenue	$	62,572	$	169,004
Pro forma net loss from continuing operations		(9,877)		(24,372)


(Dollars in thousands)
Assets
Accounts receivable, net	$	5,267
Prepaid expenses		1,215
Intangible assets		13,087
Goodwill		9,567
Property and equipment, net		71
Other non-current assets		150
Current assets held for sale, continuing operations	$	29,357

Liabilities
Accounts payable	$	942
Accrued expenses		3,199
Customer deposits		3,619
Other current liabilities		145
Current liabilities held for sale, continuing operations	$	7,905


		September 30, 2023				December 31, 2022
		Ownership		Carrying		Ownership		Carrying
(Dollars in thousands)	Segment	Percentage		Amount		Percentage		Amount
Investment
Quantum Energy Holdings, LLC	Energy	50.0	%	$	1,686	50.0	%	$	9,397
Hotel Internet Services, LLC	Technology-Enabled Services	31.0	%		7,144	31.0	%		5,996
Other					—				74
				$	8,830			$	15,467


	Fair value Measurement Using
							Total
(Dollars in Thousands)	Level 1		Level 2		Level 3		Fair Value
September 30, 2023
Assets:
Investment securities:
United States Treasury Bills	$	297,847	$	—	$	—	$	297,847
Other investment securities		—		—		734		734
	$	297,847	$	—	$	734	$	298,581

Liabilities:
Contingent liability ⁽¹⁾	$	—	$	—	$	9,221	$	9,221
Total liabilities	$	—	$	—	$	9,221	$	9,221

December 31, 2022
Assets:
United States Treasury Bills ⁽²⁾	$	304,300	$	—	$	—	$	304,300
Investment securities:
Other investment securities		—		—		729		729
Total assets	$	304,300	$	—	$	729	$	305,029

Liabilities:
Contingent liability ⁽¹⁾	$	—	$	—	$	7,216	$	7,216
Total liabilities	$	—	$	—	$	7,216	$	7,216


	Contingent
	Liability
Balance, December 31, 2022	$	7,216
Add: ALN acquisition		11,140
Less:
Payments		(3,244)
Gain on reduction of liability		(5,891)
Balance, September 30, 2023	$	9,221


									Weighted
	Gross								Average
	Carrying				Accumulated		Net Carrying		Remaining
(Dollars in thousands)	Amount		Impairment		Amortization		Amount		Lives (Years)
September 30, 2023
Customer relationships	$	57,848	$	—	$	(21,451)	$	36,397	4.9
Trademark and trade names ⁽¹⁾		6,460		(710)		(2,923)		2,827	3.3
Software development and platform cost		12,744		—		(6,284)		6,460	2.4
Covenant not to compete		700		—		(700)		—	—
Total	$	77,752	$	(710)	$	(31,358)	$	45,684
December 31, 2022
Customer relationships	$	90,658	$	—	$	(37,993)	$	52,665	5.6
Trademark and trade names ⁽¹⁾		5,760		—		(3,108)		2,652	1.7
Software development and platform cost		38,610		—		(25,954)		12,656	4.1
Covenant not to compete		1,341		—		(1,341)		—	—
Total	$	136,369	$	—	$	(68,396)	$	67,973


	Estimated
(Dollars in thousands)	Amortization Expense
2024	$	10,674
2025		9,489
2026		8,599
2027		5,909
2028		3,109
Thereafter		7,003
Total	$	44,783


	Contractual
(Dollars in thousands)	Amount
2024	$	4,175
2025		1,354
Total	$	5,529


	Technology
	Enabled				Corporate
(Dollars in thousands)	Services		Energy		and Other		Total
Three Months Ended September 30, 2023
Revenue	$	34,050	$	4,788	$	310	$	39,148
(Income) loss from equity method investments		(392)		8,627		—		8,235
Depreciation and amortization		4,026		102		—		4,128
Gain on disposal of businesses		(7,460)		—		—		(7,460)
Loss on change in contingent liability		400		—		—		400
Operating income (loss)		7,671		(20,645)		(10,169)		(23,143)
Income from discontinued operations		—		—		767		767
Expenditures for long-lived assets		(705)		—		—		(705)
Total assets		238,465		8,399		318,037		564,901

Nine Months Ended September 30, 2023
Revenue	$	106,906	$	25,404	$	328	$	132,638
(Income) loss from equity method investments		(1,074)		5,361		—		4,287
Depreciation and amortization		12,433		335		—		12,768
Gain on disposal of businesses		(7,460)		—		—		(7,460)
Gain on reduction of contingent liability		(5,891)		—		—		(5,891)
Asset impairment		—		15,004		—		15,004
Operating income (loss)		16,474		(33,157)		(28,301)		(44,984)
Income from discontinued operations		—		—		1,357		1,357
Expenditures for long-lived assets		(2,199)		(65)		—		(2,264)
Total assets		238,465		8,399		318,037		564,901

Three Months Ended September 30, 2022
Revenue	$	31,350	$	24,933	$	153	$	56,436
(Income) loss from equity method investments		4,780		2,934		(118)		7,596
Depreciation and amortization		3,583		132		—		3,715
Operating income (loss)		(3,254)		215		(7,098)		(10,137)
Net income from discontinued operations		—		—		124		124
Expenditures for long-lived assets		458		277		—		735

Nine Months Ended September 30, 2022
Revenue	$	95,020	$	54,050	$	391	$	149,461
(Income) loss from equity method investments		3,707		2,983		(118)		6,572
Depreciation and amortization		10,996		397		—		11,393
Gain on disposal of businesses		—		(4,424)		(2,299)		(6,723)
Operating income (loss)		(1,270)		3,044		(18,724)		(16,950)
Net income from discontinued operations		—		—		9,388		9,388
Expenditures for long-lived assets		1,037		385		—		1,422


	Three Months Ended September 30,				2023 vs 2022				Nine Months Ended September 30,				2023 vs 2022
					Increase		% Increase						Increase		% Increase
(Dollars in thousands)	2023		2022		(Decrease)		(Decrease)		2023		2022		(Decrease)		(Decrease)
Revenues:
Product revenue	$	5,035	$	25,790	$	(20,755)	(80.5)	%	$	26,261	$	56,171	$	(29,910)	(53.2)	%
Service revenue		33,803		30,493		3,310	10.9	%		106,049		92,899		13,150	14.2	%
Debt investment interest income		79		77		2	2.6	%		236		248		(12)	(4.8)	%
Gain on sale of investment securities		—		—		—	—	%		29		—		29	100.0	%
Unrealized gain on investment securities		231		76		155	203.9	%		63		76		(13)	(17.1)	%
Other revenue		—		—		—	—	%		—		67		(67)	(100.0)	%
Total revenues		39,148		56,436		(17,288)	(30.6)	%		132,638		149,461		(16,823)	(11.3)	%
Cost of revenues:
Cost of goods sold		8,010		10,920		(2,910)	(26.6)	%		20,175		26,321		(6,146)	(23.4)	%
Cost of services		19,102		15,302		3,800	24.8	%		58,823		52,108		6,715	12.9	%
Total cost of revenues		27,112		26,222		890	3.4	%		78,998		78,429		569	0.7	%
Gross profit		12,036		30,214		(18,178)	(60.2)	%		53,640		71,032		(17,392)	(24.5)	%
Operating expenses (income):
Selling, general and administrative expenses		25,924		25,047		877	3.5	%		67,838		65,106		2,732	4.2	%
Managerial assistance fee, related party		3,089		2,939		150	5.1	%		9,205		8,315		890	10.7	%
Rent expense		863		1,054		(191)	(18.1)	%		2,873		3,319		(446)	(13.4)	%
Loss from equity method investments		8,235		7,596		639	8.4	%		4,287		6,572		(2,285)	(34.8)	%
Gain on disposal of businesses		(7,460)		—		(7,460)	(100.0)	%		(7,460)		(6,723)		(737)	11.0	%
Loss (gain) on changes in contingent liability		400		—		400	100.0	%		(5,891)		—		(5,891)	(100.0)	%
Impairment of goodwill and intangibles		—		—		—	—	%		15,004		—		15,004	100.0	%
Depreciation and amortization		4,128		3,715		413	11.1	%		12,768		11,393		1,375	12.1	%
Total net operating expenses		35,179		40,351		(5,172)	(12.8)	%		98,624		87,982		10,642	12.1	%
Operating loss		(23,143)		(10,137)		(13,006)	(128.3)	%		(44,984)		(16,950)		(28,034)	(165.4)	%
Other income (expense):
Interest expense		(79)		(36)		(43)	119.4	%		(338)		(2,787)		2,449	87.9	%
Interest expenses, related parties		—		(1)		1	100.0	%		—		(400)		400	100.0	%
Interest income		4,658		1,322		3,336	252.3	%		10,718		1,707		9,011	527.9	%
Loss on extinguishment of debt		—		—		—	—	%		—		(4,502)		4,502	100.0	%
Other expense		(374)		(345)		(29)	(8.4)	%		(1,820)		(493)		(1,327)	(269.2)	%
Total other income (expense)		4,205		940		3,265	347.3	%		8,560		(6,475)		15,035	232.2	%
Loss from continuing operations, before tax		(18,938)		(9,197)		(9,741)	(105.9)	%		(36,424)		(23,425)		(12,999)	(55.5)	%
Income tax expense		(95)		(195)		100	51.3	%		(562)		(550)		(12)	(2.2)	%
Net loss from continuing operations		(19,033)		(9,392)		(9,641)	(102.7)	%		(36,986)		(23,975)		(13,011)	(54.3)	%
Net income (loss) from discontinued operations		767		(176)		943	535.8	%		1,357		1,469		(112)	(7.6)	%
Gain on sale of discontinued operations		—		300		(300)	(100.0)	%		—		7,919		(7,919)	(100.0)	%
Net income from discontinued operations		767		124		643	518.5	%		1,357		9,388		(8,031)	(85.5)	%
Net loss of continuing and discontinued operations		(18,266)		(9,268)		(8,998)	(97.1)	%		(35,629)		(14,587)		(21,042)	(144.3)	%
Net income (loss) attributable to non-controlling interests		(4,601)		164		(4,765)	(2905.5)	%		(10,379)		2,539		(12,918)	(508.8)	%
Net loss attributable to the Partnership	$	(13,665)	$	(9,432)	$	(4,233)	(44.9)	%	$	(25,250)	$	(17,126)	$	(8,124)	(47.4)	%


(Dollars in thousands)	2024		2025-2026		2027-2028		2029+		Total
Contractual obligations
Debt obligations		4,175		1,354		—		—		5,529
Interest on debt and notes payable		363		38		—		—		401
Operating and finance leases, including imputed interest		2,874		2,037		565		400		5,876
Total	$	7,412	$	3,429	$	565	$	400	$	11,806