Beneficient, a Nevada corporation
11/14/2025 | Press release | Distributed by Public on 11/14/2025 16:19
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with "Cautionary Note Regarding Forward-Looking Statements," and the accompanying consolidated financial statements and notes thereto of Beneficient (f/k/a The Beneficient Company Group, L.P.) set forth in Part I, Item I of this Quarterly Report on Form 10-Q and our March 31, 2025 audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") on September 29, 2025 ("Annual Report"). This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Except as otherwise required by the context, references to the "Company," "Ben," "we," "us," "our," and "our operating subsidiaries," are to Beneficient, a Nevada corporation and its consolidated subsidiaries (but excluding the Customer ExAlt Trusts as defined below). References to "BCG," "Ben," "we," "us," "our," and similar terms, prior to the effective time of the Conversion, refer to the registrant when it was a Delaware limited partnership and such references following the effective time of the Conversion, refer to the registrant in its current corporate form as a Nevada corporation called "Beneficient." All references to "Beneficient" refer solely to Beneficient, a Nevada corporation, "BCG" refer solely to The Beneficient Company Group, L.P., and all references to "BCH" refer solely to Beneficient Company Holdings, L.P., a subsidiary of BCG.
Risk Relating to Forward-Looking Statements
This discussion and analysis contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the fact that they do not strictly relate to historical or current facts. They use words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "outlook," "plan," "potential," "predict," "seek," "should," "will," "would," the negative version of these words, or other comparable words or phrases. Such forward-looking statements are subject to various risks and uncertainties. In particular, these include statements relating to future actions, statements regarding future performance or results and anticipated services or products, sales efforts, expenses, the outcome of contingencies, trends in operations and financial results. Actual results could differ materially from those expressed or implied in the forward-looking statements. See "-Cautionary Note Regarding Forward-Looking Statements."
Overview
We are a technology-enabled financial services company that provides simple, rapid, and cost-effective liquidity solutions and related trustee, custody, and trust administration services to participants in the alternative assets industry. Through our business line operating subsidiaries (each a "Ben Business Unit" and collectively, the "Ben Business Units"), Ben Liquidity, Ben Custody, and Ben Markets, we seek to provide solutions in the alternative asset investment market for individual and institutional investors, general partners and sponsors ("GPs") and the alternative asset funds they manage ("Customers"). Following receipt of regulatory approval, our Ben Business Units are expected to include an additional business line, Ben Insurance Services. Our products and services are designed to meet the unmet needs of mid-to-high net worth ("MHNW") individual investors, small-to-midsize institutional ("STMI") investors, family offices ("FAMOs") and GPs, which collectively are our Customers.
Currently, our primary operations relate to our liquidity, primary capital, trustee, custody and alternative asset trust administration products and services through Ben Liquidity, L.L.C. and its subsidiaries (collectively, "Ben Liquidity") and Ben Custody, L.L.C. and its subsidiaries (collectively, "Ben Custody"), respectively.
Through Ben Liquidity, we finance liquidity and primary capital transactions for our Customers using a proprietary trust structure we implement for our Customers (we refer to such trusts collectively as the "Customer ExAlt Trusts"). The Customer ExAlt Trusts facilitate the exchange of a Customer's alternative assets or to fulfill a Customer's primary capital needs for consideration using a proprietary financing structure (such structure and related process, the "ExAlt PlanTM"). In the ExAlt PlanTMfinancings, a subsidiary of Ben Liquidity, Beneficient Fiduciary Financial, L.L.C. ("BFF"), a Kansas based trust company that provides fiduciary financing (or "fidfin") to fidfin trusts, makes loans (each, an "ExAlt Loan") to certain of the Customer ExAlt Trusts, which in turn employ a portion of the loan proceeds to acquire and deliver agreed upon consideration to the Customer in exchange for their alternative assets or to fulfill their primary capital needs. Since becoming a public company, we have also offered shares of our Class A common stock or convertible preferred stock in financings as consideration for the Customer ExAlt Trusts to meet capital calls or make other capital contributions in alternative asset funds. BFF is chartered as a Kansas Technology Enabled Fiduciary Financial Institution ("TEFFI") under the Technology-Enabled Fiduciary Financial Institution Act (the "TEFFI Act") and regulated by the Kansas Office of the State Bank Commissioner (the "OSBC"). Only BFF, our subsidiary, is regulated by the OSBC. The OSBC does not regulate the entirety of Ben. Ben Liquidity generates interest and fee income earned in connection with the ExAlt Loans, which are collateralized by a portion of the cash flows from the exchanged alternative assets (the "Collateral"). While the ExAlt Loans and the related
interest and fee income and provision for credit losses are eliminated upon consolidation of the Customer ExAlt Trusts solely for financial reporting purposes, such amounts directly impact the allocation of income (loss) to Ben's and BCH's equity holders.
Through Ben Custody, we currently provide an extensive line of trustee and custody services, alternative asset trust administration and data management services to the trustees of the Customer ExAlt Trusts and other Customers through BFF, and other of our subsidiaries, for fees payable quarterly.
Through Ben Markets, we provide broker-dealer services through our subsidiary, AltAccess Securities Company, L.P. ("AltAccess Securities"), a Financial Industry Regulatory Authority, Inc. ("FINRA") member and SEC registered broker-dealer, and transfer agent services through our subsidiary, Beneficient Transfer and Clearing Company, L.L.C. ("Beneficient Transfer"), an SEC registered transfer agent, each in connection with offering our liquidity products.
While Ben's financial products and services are presently primarily offered through Ben Liquidity and Ben Custody, Ben plans to expand its capabilities under Ben Custody and provide additional products and services through Ben Insurance, L.L.C. and its subsidiaries (collectively, "Ben Insurance Services")and Ben Markets L.L.C., including its subsidiaries ("Ben Markets") in the future. Ben Insurance Services plans toprovide insurance products and services to certain "affiliates" (as defined in the Kansas Captive Insurance Act), including the Customer ExAlt Trusts, custody accounts and other trusts for which BFF serves as trustee or custodian, to cover risks attendant to the ownership, management and transfer of alternative assets and financings related to alternative asset transactions. On August 8, 2025, our subsidiary, Beneficient Insurance Company, L.L.C. ("BIC"), voluntarily withdrew its application for an insurance charter with the Commissioner of Insurance of the State of Kansas but intends to refile such application in the future. Additionally, BIC's wholly-owned subsidiary, PEN Indemnity Insurance Company, LTD. ("PEN") has been registered and licensed as a Class 3 insurer with the Bermuda Monetary Authority under the Bermuda Insurance Act of 1978, and Ben Insurance Services may or may not seek approval from the Bermuda authorities for PEN to become operational. Pending approval from the Bermuda authorities, PEN would advise on, retrocede and re-insure policies consistent with those policies underwritten domestically by BIC.
Each of our liquidity, primary capital, custody, trustee, trust administration, transfer agent and broker-dealer products and services are structured to be deliverable to our Customers through our online digital platform, AltAccess. AltAccess serves as the centralizing hub of our business and is an interactive, secure, end-to-end portal through which Customers select among our products and services and complete transactions in a regulated environment. Our internal technology team developed Ben's AltAccess enterprise software systems and managed services, which consist of an integrated array of proprietary and third-party software solutions curated together to power the AltAccess platform enabling our Customers to access our products and services, select those that fit their specific needs and close transactions with Ben. The AltAccess platform is designed to ultimately be provided through a software as a service model to multiple intermediaries, including commercial lenders, and to be accessed through an application programming interface for these intermediaries to deploy in their businesses. Ben AltAccess's online platform is presently no longer publicly accessible as its being re-engineered to better met the needs of our Customers. In the interim, we plan to continue to meet the needs of our Customers seeking liquidity, custody, trust and data services for their alternative assets via other methods.
AltAccess is designed to operate seamlessly across the Ben Business Units, each of which are subject to regulation by various state and federal regulatory agencies. We believe Ben's utilization of a centralized portal as a core capability and tool for our Customer's seamless access to a range of alternative assets products and services is unique in the industry. In conducting its trustee, custodial, fiduciary financing and other authorized operations, BFF is regulated by the OSBC (the OSBC does not regulate the entirety of Beneficient). As a result, our AltAccess platform is periodically examined by the OSBC, and is further assessed by a third-party organization, who issues a System and Organizational Controls ("SOC") 2 type 2 and SOC 3 compliance report for the benefit of our Customer users.
The Customer ExAlt Trusts' distributions on alternative assets support the repayment of the ExAlt Loans plus any related interest and fees. For financial reporting purposes, even though they are not legally owned by Ben, the Customer ExAlt Trusts are required to be consolidated subsidiaries of Ben under accounting principles generally accepted in the United States ("U.S. GAAP"). As a result, Ben Liquidity's ExAlt Loans and related interest and fee income and provision for credit losses and Ben Custody's fee income are eliminated in the presentation of our consolidated financial statements solely for financial reporting purposes; however, such amounts directly impact the allocation of income (loss) to Ben's or BCH's equity holders.
Under the applicable trust and other agreements, certain Texas and Kansas charities are the ultimate beneficiaries of the Customer ExAlt Trusts (which we refer to as "Charities" or "Economic Growth Zones" respectively, and collectively, the "Charitable Beneficiaries"), and their interests are reported as noncontrolling interests in our consolidated financial statements. The TEFFI Act requires that two and a half percent (2.5%) of the cash distributions from alternative assets serving as collateral to Ben Liquidity loans be charitably contributed by certain of the Customer ExAlt Trusts to a designated Kansas Economic Growth Zone. Accordingly, for ExAlt Loans originated on or after December 7, 2021, Economic Growth Zones are paid $0.025 for every $1.00 received by an ExAlt Trust from the corresponding alternative assets. For ExAlt Loans
originated prior to December 7, 2021, in accordance with the terms of the applicable trust and other agreements, the Charitable Beneficiaries of the Customer ExAlt Trusts formed prior to such date, are paid $0.05 for every $0.95 paid to the applicable ExAlt Loan lender. To facilitate the payments to the Economic Growth Zones and Charities, we engage in an effort to deploy assets and cash and may experience costs as a result. As our business expands, we expect that these costs could grow.
Business Units
We offer our products and services through our principal business units, which generally align with our operating subsidiaries, including Ben Liquidity, Ben Custody, and Ben Markets.
•Ben Liquidity is our primary business line and offers Ben's alternative asset liquidity and fiduciary financing products and primary capital products through Ben AltAccess. As noted above, Ben AltAccess's online platform is presently no longer publicly accessible as its being re-engineered to better met the needs of our Customers. In the interim, we plan to continue to meet the needs of our Customers seeking liquidity, custody, trust and data services for their alternative assets via other methods.
•Ben Custodyaddresses the administrative and regulatory burden of holding alternative assets by offering trustee, custody and alternative asset trust administration support services to trustees of the Customer ExAlt Trusts, including BFF, and also offers document custodian services to Customers.
•Ben Marketsprovides broker-dealer and transfer agency services in connection with offering certain of our liquidity products and services.
In connection with our principal business units, we offer products and services through the following business units and operating subsidiaries.
•Ben AltAccess is our primary, customer-facing application serving as the access point through which a Customer accesses our suite of products and services.
•Ben Dataprovides the Customer ExAlt Trusts with certain data collection, evaluation, and analytics products and services.
In the future, we plan to offer additional products and services through Ben Insurance Services. Through Ben Insurance Services, we plan to provide insurance services to certain affiliates (as defined in the Kansas Captive Insurance Laws), including the Customer ExAlt Trusts and other trusts for which BFF serves as the trustee or custodian, to cover risks related to ownership, management, and transfer of alternative assets and the financing related to alternative asset purchases.
Certain of our operating subsidiary products and services involve or are offered to certain of the Customer ExAlt Trusts, which, while not legally owned by Ben, are consolidated subsidiaries of Ben for financial reporting purposes, and therefore transactions between our operating subsidiaries and the Customer ExAlt Trusts are eliminated in the presentation of our consolidated financial statements. However, such amounts are earned by Ben's business lines from the Customer ExAlt Trusts and directly impact the income (loss) allocable to Ben's and BCH's equity holders. Accordingly, the elimination in consolidation of amounts charged by Ben to the Customer ExAlt Trusts, such as interest income and certain fee revenue, has no effect on the net income (loss) attributable to Ben, BCH or to Ben's and BCH's equity holders.
Business Segments
Under U.S. GAAP, we have three reportable business segments: Ben Liquidity, Ben Custody and Customer ExAlt Trusts. Our Ben Liquidity and Ben AltAccess business units comprise the Ben Liquidity operating segment. Our Ben Custody and Ben Data business lines comprise the Ben Custody operating segment.
The Customer ExAlt Trusts, which hold interests in alternative assets and pay interest and principal to Ben Liquidity, transaction fees to Ben Liquidity and Ben Custody in connection with liquidity transactions and fees to Ben Custody for providing full-service trust administration services to the trustees of the Customer ExAlt Trusts, comprise the Customer ExAlt Trusts segment. Such amounts paid to Ben Liquidity and Ben Custody are eliminated in the presentation of our consolidated financial statements but directly impact the allocation of income (loss) to Ben's and BCH's equity holders. The elimination of intercompany transactions are included in "Consolidating Eliminations."
The Corporate/Other category includes unallocated corporate overhead and administrative costs, gains (losses) on changes in the fair value of GWG Holdings, Inc. ("GWG Holdings" or "GWG") common stock and, following the emergence from bankruptcy, interests in the GWG Wind Down Trust (the "GWG Wind Down Trust") held by Ben, interest expenses incurred on corporate-related debt transactions, and the operations of Ben Insurance Services and Ben Markets, which are not considered reportable segments as they do not meet the quantitative criteria to be separately reported.
We have allocated certain expenses to our operating segments, such as salaries, legal expenses, and other general operating
expenses. We have not allocated certain other expenses, including equity compensation and interest expense for certain debt agreements, to our operating segments. We may in the future determine to allocate certain additional expenses to the operating segments, which could have a material impact on the presentation of the results of our operating segments in any future segment presentation.
How We Generate Revenue
On a consolidated basis with the Customer ExAlt Trusts, which are variable interest entities ("VIEs") and not owned directly or indirectly by our equity holders, we primarily recognize revenue through increases or decreases in the fair value of investments held by the Customer ExAlt Trusts. The changes in the fair value of these investments are also the primary source of revenue recognized by the Customer ExAlt Trusts business segment.
As further described under "Recent Developments - Asset Sales Initiative," on each of June 6, 2025, and July 1, 2025, entities held by a Customer ExAlt Trust and managed by an indirect subsidiary of the Company completed the sales of beneficial interests with respect to certain limited partner interests held for the benefit of such Customer ExAlt Trust, pursuant to which, the sellers received aggregate gross proceeds of approximately $25.1 million for the sale of such interests.
Additionally, on August 8, 2025, entities held by a Customer ExAlt Trust and managed by an indirect subsidiary of the Company agreed to sell beneficial interests with respect to certain limited partner interests held for the benefit of such Customer ExAlt Trust, pursuant to which, the sellers received aggregate gross proceeds of approximately $11.6 million for the sale of such interests. Additional sales were completed by these entities on October 1, 2025 and October 7, 2025 for which aggregate gross proceeds of approximately $1.4 million were received. Finally, on October 30, 2025, these entities also sold equity securities they held back to the issuing entity for approximately $8.3 million of proceeds.
Our Ben Liquidity and Ben Custody business segments, which relate to our current operating subsidiaries that are owned by the holders of equity in the Company (including BCH), recognize revenue through (i) interest income on ExAlt Loans made to the Customer ExAlt Trusts in connection with our liquidity transactions for Customers, (ii) fee income billed at closing, but recognized as revenue ratably over the expected life of the alternative asset, for each liquidity transaction with Customers for services including access to and use of the AltAccess platform, transfer of the alternative assets, and delivery of the consideration to the client, and (iii) recurring fee income recognized each period for providing services including trustee, custody, and trust administration of the Customer ExAlt Trusts while they hold investments. Ben Liquidity and Ben Custody revenue recognized for the three and six months ended September 30, 2025 and 2024 is as follows:
a.Ben Liquidity recognized$8.5 million and $12.0 million in interest income during the three months ended September 30, 2025 and 2024, respectively. For the six months ended September 30, 2025 and 2024, Ben Liquidity recognized interest income of $17.3 million and $22.8 million, respectively.
b.Ben Custody recognized $3.1 million and $5.4 million in trust services and administration revenues during the three months ended September 30, 2025 and 2024, respectively, comprised of both the fee income billed at the closing of the transactions that is being amortized into revenue and the recurring fee income billed during the periods. For the six months ended September 30, 2025 and 2024, Ben Custody recognized trust services and administration revenues of $7.3 million and $10.8 million, respectively, comprised of both the fee income billed at the closing of the transactions thatis being amortized into revenue and the recurring fee income billed during the periods.
The majority of such revenues earned by Ben Liquidity and Ben Custody are eliminated in the presentation of our consolidated financial statements; however, the cash flows received upon repayment of the ExAlt Loans and in payment of Ben Custody fees are allocable to our and BCH's equity holders and not the beneficiaries of the Customer ExAlt Trusts.
In addition, Corporate/Other, which also relates to Ben or subsidiaries owned by the holders of equity in the Company (including BCH), may include fee revenue recognized through services provided to Customers or the Customer ExAlt Trusts through business lines not included within Ben Liquidity and Ben Custody.
The following table presents a reconciliation of operating income (loss) of our reportable segments, excluding the Customer ExAlt Trusts, to net income (loss) attributable to Beneficient common shareholders. This reconciliation serves to provide users of our financial statements an understanding and visual aide of the reportable segments that impact net income (loss) attributable to the common shareholder and reiterates that the consolidation of the Customer ExAlt Trusts has no impact on the net income (loss) attributable to Beneficient common shareholders.
| (in thousands) | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
|
Operating income (loss)*
|
||||||||||||||||||||||||||
| Ben Liquidity | $ | (821) | $ | 2,905 | $ | (6,838) | $ | 2,391 | ||||||||||||||||||
| Ben Custody | 2,292 | 4,329 | 5,420 | 5,616 | ||||||||||||||||||||||
| Corporate & Other | (9,555) | (16,426) | (83,102) | 27,665 | ||||||||||||||||||||||
|
Gain on liability resolution
|
- | 23,462 | - | 23,462 | ||||||||||||||||||||||
|
Income tax expense (allocable to Ben and BCH equity holders)
|
(43) | - | (43) | (28) | ||||||||||||||||||||||
|
Net loss attributable to noncontrolling interests - Ben
|
9,191 | 3,067 | 25,175 | 10,254 | ||||||||||||||||||||||
|
Noncontrolling interest guaranteed payment
|
(4,693) | (4,423) | (9,317) | (8,779) | ||||||||||||||||||||||
|
Net income (loss) attributable to common shareholders
|
$ | (3,629) | $ | 12,914 | $ | (68,705) | $ | 60,581 | ||||||||||||||||||
For information concerning the noncontrolling interests in the Customer ExAlt Trusts and in our subsidiary, BCH, see "-Basis of Presentation - Noncontrolling Interests."
Basis of Presentation
Elimination of Fee and Interest Income in Consolidation
Certain of our operating subsidiary products and services involve or are offered to certain of the Customer ExAlt Trusts, which are consolidated subsidiaries of Ben solely for financial reporting purposes, and therefore transactions between our operating subsidiaries and the Customer ExAlt Trusts are eliminated in the presentation of our consolidated financial statements.
As a result, Ben's primary tangible assets reflected on our consolidated statements of financial condition are investments, mainly comprised of alternative assets held by the Customer ExAlt Trusts and the primary sources of revenue reflected on our consolidated statements of comprehensive income (loss) are investment income (loss), net, which represents changes in the net asset value ("NAV") of these investments held by the Customer ExAlt Trusts, and gain (loss) on financial instruments, net, which represents changes in fair value of equity securities, debt securities, a derivative liability, convertible debt recorded at fair value, warrants and put options, primarily held by the Customer ExAlt Trusts. Such investment income (loss), net, and gain (loss) on financial instruments, net, that are held by the Customer ExAlt Trusts, including interests in the GWG Wind Down Trust (formerly debt and equity securities issued by GWG Holdings), is included in the net income (loss) allocated to noncontrolling interests - Customer ExAlt Trusts in the consolidated statements of comprehensive income (loss). The revenues and expenses recognized in these line items for the activities of the Customer ExAlt Trusts do not directly impact net income (loss) attributable to Ben's or BCH's equity holders.
Instead, the interest and fee income earned by Ben Liquidity and Ben Custody from the Customer ExAlt Trusts, which are eliminated in the presentation of our consolidated financial statements, directly impact the share of net income (loss) attributable to Ben's and BCH's equity holders. First, such eliminated amounts are earned from, and funded by, the Customer ExAlt Trusts, which are a noncontrolling interest. As a result, the eliminated amounts earned by Ben Liquidity and Ben Custody from the Customer ExAlt Trusts serve to increase the attributable share of net income (loss) to Ben and BCH equity holders. Second, the terms of the Amended and Restated LPA of BCH (the "BCH A&R LPA") (references to the "BCH A&R LPA" refer to the Amended and Restated Limited Partnership Agreement of BCH currently in effect unless otherwise indicated) provide that certain BCH income constituting the Excluded Amounts (as defined in the BCH A&R LPA) are allocated to certain BCH equity holders that are noncontrolling interests. Excluded Amounts are directly impacted by the interest and/or fee income earned by Ben Liquidity and Ben Custody from the Customer ExAlt Trusts, which are eliminated in the presentation of our consolidated financial statements. Such allocation to these noncontrolling interest holders is expected to grow as we expand our operations.
Additionally, Ben Liquidity's and Ben Custody's provision for credit losses is eliminated in the presentation of our consolidated financial statements but directly impacts the net income (loss) attributable to the various equity securities of Ben
and BCH. Likewise, the amounts expensed by the Customer ExAlt Trusts for interest and fees owed to Ben's operating subsidiaries are eliminated in the presentation of our consolidated financial statements but are recognized for purposes of the allocation of net income (loss) attributable to the beneficial owners of the Customer ExAlt Trusts.
Noncontrolling Interests
The consolidated financial statements of Ben include the accounts of Ben, its wholly-owned and majority-owned subsidiaries, certain VIEs, in which the Company is the primary beneficiary, and certain noncontrolling interests. The noncontrolling interests reflected in our consolidated financial statements represent the portion of BCH's limited partnership interests and interests in the Customer ExAlt Trusts that are held by third parties. Amounts are adjusted by the noncontrolling interest holder's proportionate share of the subsidiaries' earnings or losses each period and for any distributions that are paid. The portion of income allocated to owners other than the Company is included in "net income (loss) attributable to noncontrolling interests" in the consolidated statements of comprehensive income (loss). Our primary noncontrolling interests are described in Part II, Item 7 to our Annual Report.
Recent Developments
New Chairman of the Board of Directors and Chief Executive Officer
On June 30, 2025, Thomas O. Hicks was elected to be the Chairman of the Board of Directors. Effective on July 20, 2025, James G. Silk was named the Interim Chief Executive Officer.
Brad K. Heppner previously served as the CEO and Chairman of the Board of Directors and resigned from both positions on June 19, 2025 following a request from the Company's counsel, acting at the direction of the Audit Committee of the Board of Directors, for Mr. Heppner to sit for a formal interview regarding, among other things, his knowledge of certain documents and information concerning Mr. Heppner's relationship to HCLP provided to the Company's auditors in 2019. The interview request was made after the Company identified credible evidence that Mr. Heppner participated in fabricating and delivering fake documents to the Company regarding his and others' relationships to HCLP, knowing that these documents would be provided to the Company's auditors. The Company is investigating additional information it has learned about other conduct by Mr. Heppner and other persons that purportedly controlled HCLP to determine the extent to which any of that conduct surrounding HCLP was fraudulent. On November 4, 2025, Mr. Heppner was indicted by the United States Southern District of New York charging Mr. Heppner with various counts comprised of securities fraud, wire fraud, conspiracy to commit securities fraud and wire fraud, false statements to auditors, and falsification of records.
Asset Sales Initiative
In an effort to address cash flow restraints the Company has been experiencing primarily relating to delays in distributions and other realization events on the interests in alternative assets held the Customer ExAlt Trusts, the Company has commenced an initiative (the "Asset Sales Initiative") to sell or otherwise monetize a portion of the assets reported on the Company's consolidated balance sheet, including assets and additional investments held by the Customer ExAlt Trusts if, as and when prudent. The proceeds received by the Company following assets sales upon repayment of corresponding loans are expected to be used to satisfy existing obligations of the Company, including, but not limited to, payments owed to creditors, vendors, and to cover operating expenses.
As part of the Asset Sales Initiative, on June 6, 2025 and July 1, 2025, entities ("Sellers") held by a Customer ExAlt Trust and managed by an indirect subsidiary of the Company completed the sale of beneficial interests with respect to certain limited partner interests (the "Interests") held for the benefit of such Customer ExAlt Trust. The Sellers received aggregate gross proceeds of $25.1 million for the sale of the beneficial interests included in this transaction. The Sellers paid an agreed upon brokerage commission and certain transaction costs out of such gross proceeds. The remainder of the proceeds were distributed to the Customer ExAlt Trust, which then used such proceeds as follows: (i) a portion (2.5%) of the proceeds will be distributed to the beneficiaries of the Customer ExAlt Trust and (ii) the remainder was paid to a subsidiary of the Company as payment on outstanding accrued fees (if any) and/or a loan repayment on the outstanding loan issued by BFF to such Customer ExAlt Trust. The proceeds for the fee payment and the loan repayment were then available for use by the Company. The Company was required to pay approximately $11.2 million out of the net proceeds to HH-BDH LLC as a principal and interest payment on the loan previously made by HH-BDH LLC to Beneficient Financing, LLC. HH-BDH LLC is an entity affiliated with Mr. Thomas O. Hicks, who is a member of the Company's board of directors and was named chairman of the board of directors in June 2025.
Additionally, on August 8, 2025, the Sellers agreed to sell additional beneficial interests with respect to certain limited partner interests held for the benefit of such Customer ExAlt Trust. The Sellers received aggregate gross proceeds of approximately $11.6 million for the sale of such interests included in this transaction that closed and funded on various dates during our second quarter of fiscal 2026. The Sellers paid brokerage commissions and certain transaction costs out of such gross proceeds. The remainder of the proceeds were distributed to the Customer ExAlt Trust, which then used such proceeds
as follows: (i) a portion (2.5%) of the proceeds will be distributed to the beneficiaries of the Customer ExAlt Trust and (ii) the remainder was paid to a subsidiary of the Company as payment on outstanding accrued fees (if any) and/or a loan repayment on the outstanding loan issued by BFF to such Customer ExAlt Trust. The proceeds for the fee payment and the loan repayment were then available for use by the Company. The Company was required to pay approximately $3.8 million out of the net proceeds received to date on this transaction to HH-BDH LLC as a principal payment on the loan previously made by HH-BDH LLC to Beneficient Financing, LLC.
On October 1, 2025, and October 7, 2025, the Sellers agreed to sell additional beneficial interests with respect to certain limited partner interests held for the benefit of such Customer ExAlt Trust. The Sellers received aggregate gross proceeds of approximately $1.4 million for the sale of such interests included in this transaction. The Sellers paid brokerage commissions and certain transaction costs out of such gross proceeds. The remainder of the proceeds were distributed to the Customer ExAlt Trust, which then used such proceeds as follows: (i) a portion (2.5%) of the proceeds will be distributed to the beneficiaries of the Customer ExAlt Trust and (ii) the remainder was paid to a subsidiary of the Company as payment on outstanding accrued fees (if any) and/or a loan repayment on the outstanding loan issued by BFF to such Customer ExAlt Trust. The proceeds for the fee payment and the loan repayment were then available for use by the Company. The Company was required to pay approximately $0.7 million out of the net proceeds on these transactions to HH-BDH LLC as a principal payment on the loan previously made by HH-BDH LLC to Beneficient Financing, LLC.
Finally, on October 30, 2025, these entities also sold equity securities they held back to the issuing entity for approximately $8.3 million of proceeds. The Sellers paid certain of its accrued costs out of the gross proceeds. The remainder of the proceeds were distributed to the Customer ExAlt Trust, which then used such proceeds as follows: (i) a portion (2.5%) of the proceeds will be distributed to the beneficiaries of the Customer ExAlt Trust and (ii) the remainder was paid to a subsidiary of the Company as payment on outstanding accrued fees (if any) and/or a loan repayment on the outstanding loan issued by BFF to such Customer ExAlt Trust. The proceeds for the fee payment and the loan repayment were then available for use by the Company. The Company was required to pay approximately $2.1 million out of the net proceeds on this transaction to HH-BDH LLC as a principal payment on the loan previously made by HH-BDH LLC to Beneficient Financing, LLC.
Recent Financings
On April 4, 2025, Ben Liquidity entered into agreements to finance liquidity transactions related to a primary capital transaction with respect to a limited partner interest in an investment fund with a NAV of $9.6 million. Pursuant to such transaction, the Customer ExAlt Trusts acquired the limited partnership, and in exchange for such interest, the customer received 965,576 shares of the Company's Series B-6 Resettable Convertible Preferred Stock, par value $0.001 per share (the "Series B-6 preferred stock"), with such Series B-6 preferred stock being convertible into shares of the Company's Class A common stock. Each share of the Series B-6 preferred stock is convertible at the election of the holder into shares of the Class A common stock initially at a conversion price of $0.3151 per share, and is subject to reset from time to time, subject to a floor of $0.2363 per share. A maximum of 40,862,294 shares of Class A common stock may be issued upon conversion of the Series B-6 preferred stock.
On April 21, 2025, Ben Liquidity entered into agreements to finance liquidity transactions related to a primary capital transaction with respect to a limited partner interest in an investment fund with a NAV of $0.2 million. Pursuant to such transaction, the Customer ExAlt Trusts acquired the limited partnership, and in exchange for such interest, the customer received 23,333 shares of the Company's Series B-7 Resettable Convertible Preferred Stock, par value $0.001 per share (the "Series B-7 preferred stock"), with such Series B-7 preferred stock being convertible into shares of the Company's Class A common stock. Each share of the Series B-7 preferred stock is convertible at the election of the holder into shares of the Class A common stock initially at a conversion price of $0.2979 per share, and is subject to reset from time to time, subject to a floor of $0.2234 per share. A maximum of 1,044,450 shares of Class A common stock may be issued upon conversion of the Series B-7 preferred stock.
On June 17, 2025, Ben Liquidity entered into agreements to finance liquidity transactions related to a primary capital transaction with respect to a limited partner interest in an investment fund with a NAV of $1.9 million. Pursuant to such transaction, the Customer ExAlt Trusts acquired the limited partnership, and in exchange for such interest, the customer received 191,037 shares of the Company's Series B-8 Resettable Convertible Preferred Stock, par value $0.001 per share (the "Series B-8 preferred stock"), with such Series B-8 preferred stock being convertible into shares of the Company's Class A common stock. Each share of the Series B-8 preferred stock is convertible at the election of the holder into shares of the Class A common stock initially at a conversion price of $0.3397 per share, and is subject to reset from time to time, subject to a floor of $0.2548 per share. A maximum of 7,497,528 shares of Class A common stock may be issued upon conversion of the Series B-8 preferred stock.
Recent Equity Issuances
On August 13, 2025, the Company issued 40,000 shares of Class A common stock of the Company to a consultant of the
Company. The issuance of the Class A common stock pursuant to these transactions was not registered under the Securities Act and was issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.
On June 27, 2023, the Company entered into a Standby Equity Purchase Agreement (the "SEPA") with YA II PN, Ltd. ("Yorkville"). On each of April 4, 2025, April 10, 2025, April 21, 2025, June 5, 2025, and June 11, 2025, Yorkville purchased 50,000, 37,504, 46,867, 582,179 and 225,000 shares of Class A common stock for $0.30, $0.29, $0.29, $0.29 and $0.29 per share, respectively, pursuant to the terms of the SEPA. Sales proceeds for these equity sales under the terms of the SEPA were approximately $0.3 million during the period of April 1, 2025 through October 7, 2025. Such issuances were in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.
Limited Conversion of Preferred Series A Subclass 1 Unit Accounts
On October 15, 2025, certain holders of BCH Preferred A-1, that were issued prior to the Company's initial listing on The Nasdaq Stock Market, LLC, elected to convert $52.6 million (based on their capital account balances determined pursuant to Section 704 of the Internal Revenue Code) of such BCH Preferred A-1 for BCH Class S Ordinary Units, which were subsequently contemporaneously exchanged for shares of the Company's Class A common stock, (such transaction, the "Limited Conversion"). The Limited Conversion resulted in the issuance of 101,294,288 shares of Class A common stock, and immediately following the Limited Conversion, there were 110,758,536 shares of Class A common stock outstanding. Thomas O. Hicks, Chairman of our Board of Directors, and James G. Silk, Interim Chief Executive Officer, comprised the holders of the BCH Preferred A-1 that elected to participate in the Limited Conversion.
Nasdaq Continued Listing Standards
On January 13, 2025, we received a letter from the staff of Nasdaq notifying the Company that, for the previous 30 consecutive business days, the closing bid price for the Company's Class A common stock had been below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market under the Bid Price Requirement. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days, or until July 14, 2025, to regain compliance with the Bid Price Requirement. On July 16, 2025, we were notified by Nasdaq that, based upon the Company's continued non-compliance with the Bid Price Requirement as of July 14, 2025, the Company's securities were subject to delisting from Nasdaq unless the Company timely requested a hearing before the Panel, which the Company made such timely request. The Company's hearing before the Panel occurred on August 26, 2025.
Additionally, the July 16, 2025 letter from Nasdaq also notified the Company that its was not in compliance with the periodic reporting requirement set forth in Nasdaq Listing Rule 5250(c)(1) since the Company had not yet filed its Annual Report on Form 10-K and this could serve as a separate and additional basis for delisting (the "Periodic Filing Requirement"). On August 18, 2025, an additional letter from Nasdaq notified the Company that it was not in compliance with the Periodic Filing Requirement set forth in Nasdaq Listing Rule 5250(c)(1) since the Company had not yet filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 and this could serve as a separate and additional basis for delisting.
On September 9, 2025, the Company was notified that the Panel had determined to grant the Company an extension to regain compliance with the Bid Price Requirement and the periodic reporting requirements for its Annual Report on Form 10-K for the year ended March 31, 2025 and for its Quarterly Report on Form 10-Q for the quarter ended June 30, 2025.
The filing of the Annual Report on Form 10-K on September 29, 2025 and the Quarterly Report on Form 10-Q for June 30, 2025 on October 20, 2025 was within the extension period allowed for by the Panel, demonstrating compliance with the Periodic Filing Requirement. On October 29, 2025, the Company received notification from the Panel that the Company had regained compliance with the Periodic Filing Requirement.
On November 6, 2025, the Company filed a Definitive Proxy Statement on Schedule 14A seeking stockholder approval to effect a reverse stock split of its Class A Common Stock and Class B Common Stock. The Company anticipates the reverse stock split of the Common Stock will allow it to demonstrate compliance with the Bid Price Requirement within the extension period granted by the Panel.
Although the Company is taking definitive steps to evidence compliance with all applicable criteria for continued listing on The Nasdaq Capital Market, there can be no assurance that the Company will be able to timely regain compliance with the Bid Price Requirement within the extension period granted by the Panel.
On October 3, 2025, the Company was notified by staff of Nasdaq that because the Company's Form 10-K for the fiscal year ended March 31, 2025 reported a stockholders' equity of $(34.9) million, the Company was in non-compliance with the minimum stockholders' equity requirement set forth in Nasdaq Listing Rule 5550(b)(1) (the "Stockholders' Equity Requirement"), which could also serve as a separate and additional basis for delisting in addition to the matters described above (such letter, the "Additional Determination Letter"). The Additional Determination Letter also provided that the Panel will consider the Additional Determination Letter in their decision regarding the Company's continued listing on Nasdaq. As
a result of the Limited Conversion of Preferred Series A Subclass 1 Unit Accounts described above, the Company was able to demonstrate compliance with an alternative to the Stockholders' Equity Requirement by meeting the Nasdaq minimum of $35 million market value of listed securities requirement (the "MVLS Requirement"). On October 29, 2025, the Company received notification from the Panel that the Company had regained compliance with the MVLS Requirement.
The notices described above have no effect at this time on the Class A Common Stock, which continues to trade on The Nasdaq Capital Market under the symbol "BENF."
Equity Awards Arbitration
On December 16, 2022, a former member of the Board of Directors of Beneficient Management, LLC (the "Claimant") initiated a private arbitration in the International Court of Arbitration of the International Chamber of Commerce, challenging the termination of certain equity awards under two incentive plans by the administrator of the incentive plans. The Claimant sought total damages of $36.3 million plus attorney's fees and punitive damages. On April 23, 2024, the sole arbitrator held that in terminating the Claimant's equity awards, the Company had breached its contractual obligations, and as a result, awarded the Claimant $55.3 millionin compensatory damages, including pre-judgment interest, plus post-judgment interest (the "Arbitration Award"). Neither attorneys' fees nor punitive damages were awarded to the Claimant. The Company was also asked to pay arbitration-related costs in the amount of approximately $0.1 million. The Company recorded a loss related to the Arbitration Award in the year ended March 31, 2024 consolidated statement of comprehensive income (loss) in the amount of $55.0 million.
On July 29, 2024, the Texas State District Court, Dallas County 134th Judicial District (the "Texas District Court") entered an order vacating the Arbitration Award in its entirety. The Texas District Court directed the parties to file motions requesting any further relief that may be available within twenty days of the order. On August 2, 2024, the Claimant filed an appeal to challenge the order vacating the Arbitration Award in the Texas Fifth Court of Appeals. The Claimant filed his opening brief on October 28, 2024, and the Company filed its response brief on January 21, 2025. On February 10, 2025, the Claimant filed his reply brief. The Texas Fifth Court of Appeals heard oral arguments in April 2025. On October 10, 2025, the Texas Fifth Court of Appeals reversed the judgment of the Texas District Court and confirmed the previous Arbitration Award. On November 12, 2025, the Company filed a motion for re-hearing with the Texas Fifth Court of Appeals. The Company will continue to vigorously defend itself in this matter and we are exploring available options with respect to the Arbitration Award, which may include appealing to the Texas Supreme Court or working with the claimant in the arbitration on settlement terms that could reduce the potential near term cash obligations associated with the arbitration.
As a result of the order issued on July 29, 2024,the Company released the liability associated with the Arbitration Award, which resulted in the release of the previously recognized loss contingency accrual in the amount of $55.0 million being reflected in the six months ended September 30, 2024 consolidated statement of comprehensive income (loss). As a result of the order issued on October 10, 2025, the Company recorded a loss contingency associated with the Arbitration Award, including post-judgment interest and fees, which resulted in a loss of $62.8 million being reflected in the six months ended September 30, 2025 consolidated statement of comprehensive income (loss). Additional interest accruing on the Arbitration Award during the three months ended September 30, 2025 totaled $1.7 million and is reflected in the interest expense line item in the consolidated statements of comprehensive income (loss).
Purchase Agreement with Mercantile Bank International Corp.
On December 4, 2024, the Company entered into a Stock Purchase Agreement (the "Purchase Agreement"), by and among the Company, Beneficient Capital Company Holdings, L.P., a subsidiary of the Company ("BCC Holdings"), Mercantile Bank International Corp. ("MBI") and Mercantile Global Holdings, Inc., ("MGH" and, together with MBI, the "Sellers"), pursuant to which, BCC Holdings agreed to purchase from MGH all of the issued and outstanding shares of capital stock of MBI upon the terms and subject to the conditions set forth in the Purchase Agreement.
On June 3, 2025, the Sellers delivered a notice to the Company terminating the Purchase Agreement, effective immediately. The termination of the Purchase Agreement did not cause the Company or BCC Holdings to incur any additional liability.
Proposed Transactions to Revise BCH Liquidation Priority
On December 22, 2024, the Company entered into a Master Agreement, by and among the Company, BCH, Beneficient Company Group, L.L.C. ("Ben LLC"), Beneficient Management Partners, L.P. ("BMP") and Beneficient Holdings, Inc. ("BHI" and such agreement, the "Master Agreement"), pursuant to which the holders of preferred equity of BCH agreed, among other things, to amend the governing documents of BCH to allow the Company's public company stockholders to share in the liquidation priority currently reserved only for the holders of preferred equity.
As of the filing of this Quarterly Report on Form 10-Q, the Company has not completed the proposed transactions to revise BCH Liquidation Priority. As a result of the resignation of Brad K. Heppner, who controls BHI, from his role as Chief Executive Officer and Chairman of the Board of Directors on June 19, 2025, we do not expect the transaction to be
consummated on the terms set forth in the Master Agreement. Accordingly, the Company is exploring available alternative options, including renegotiating terms or not proceeding with the transaction.
Key Factors Affecting Our Business
Our business is affected by a variety of factors, including conditions in the financial markets and economic and political conditions in the markets in which we operate, as well as changes in global economic conditions and regulatory or other governmental policies or actions, which can materially affect the values of the investments held by the Customer ExAlt Trusts, the cash flows of which collateralize Ben Liquidity's ExAlt Loans.
In addition to these macroeconomic trends and market factors, we believe our future performance will be influenced by the following factors:
-Ability to execute on existing and new strategies and products and services to attract Customers. We currently offer or plan to offer a suite of complementary fiduciary and other financial products and services designed to address many of the challenges alternative asset market participants face in connection with their ownership, management, and transfer of alternative assets. These products and services are generally not readily available in the marketplace today. We believe that these new products and services will meet the complex needs of potential Customers on a large scale across our target market.
-The extent to which future investment allocations of potential Customers favor private markets investments.Estimates of future performance of our future liquidity solutions business rely in part on the attractiveness of new capital being deployed by potential Customers to private markets relative to traditional asset classes. We believe that allocation to alternative assets by MHNW individual investors and STMI investors, along with the turnover rate demanded by MHNW individual investors and STMI investors will continue to increase, with annual alternative asset liquidity demands increasing due to the overall growth in the alternative asset market.
-Successful deployment of financing capital into collateral comprised of attractive investments.The successful identification of attractive investments as collateral to the financing transactions executed in our liquidity solutions business will impact future performance. We believe we identify specific investments that provide sufficient collateral to our fiduciary financings and that we have established a repeatable process in order to capitalize on these fiduciary financing opportunities through our underwriting and risk processes culminating in a qualification determination and proposed fiduciary financing terms for our Customers.
-Volatility in the price of our Class A common stock. The price of our Class A common stock may impact our ability to enter into liquidity transactions with our Customers. If our stock price declines, our potential Customers may be less likely to engage with us and accept our Class A common stock, or securities convertible into our Class A common stock, in exchange for their alternative assets. Furthermore, a significant sustained decrease in our stock price has in the past been an indicator, and in the future may indicate, that impairment is present and may require a quantitative impairment assessment of our assets including goodwill and intangible assets. Any such future impairment charges for goodwill may reduce our overall assets and may result in a change in the perceived value of the Company and ultimately may be reflected as a reduction in the market price of our securities. Additionally, we have begun to enter into financings in which the Customer ExAlt Trusts use our Class A common stock or convertible preferred stock as consideration to meet capital calls or make other capital contributions in alternative asset funds, which in turn hold such securities as an investment. Volatility, either positively or negatively, in the price of our Class A common stock may have a compounding effect on our consolidated investment income and cause further decreases in our stock price in the event our securities comprise a significant portion of such alternative asset funds' aggregate assets. We were previously notified by Nasdaq that based on the Company's non-compliance with the Bid Price and the Periodic Filing Requirement, the Company's securities were subject to delisting. As described above, the Panel granted the Company an extension to regain compliance with the Bid Price Requirement and the Periodic Filing Requirement, and the Company has regained compliance with the Periodic Filing Requirement and the MVLS Requirement. Although the Company is taking definitive steps to evidence compliance with all applicable criteria for continued listing on The Nasdaq Capital Market, including the Bid Price Requirement, there can be no assurance that the Company will be able to timely regain compliance with the Bid Price Requirement within the extension period granted by the Panel. See the risk factor titled "We have been notified by Nasdaq of our failure to comply with certain continued listing requirements and, if we are unable to regain compliance with all applicable continued listing requirements and standards of Nasdaq, our Class A common stock could be delisted from Nasdaq" for more information.
-Our ability to maintain our data and regulatory advantage relative to competitors. Our proprietary data and technology platforms, analytical tools and deep industry knowledge allow us to provide our Customers with
customized solutions, including trust custody and administration services, data and analytics products and services, and broker-dealer services in connection with our core liquidity products and services. Our ability to maintain our data advantage is dependent on a number of factors, including our continued access to a broad set of private market information and our ability to grow our relationships with potential Customers and their advisors throughout our distribution network. Additionally, we are or will become subject to extensive regulation under federal, state and international law. These complex regulatory and tax environments could restrict our operations and subject us to increased compliance costs and administrative burdens, as well as restrictions on our business activities.
-Our ability to maintain our competitive position. We believe we have several competitive and structural advantages that position us as a preferred provider of liquidity and other attendant services to the MHNW individual investor and STMI investor segments. We expect these advantages will enable us to provide unique products and services to potential Customers that have traditionally been difficult to access by the MHNW individual investor and STMI investor segments. Our ability to attract and successfully deploy capital in the future is dependent on maintaining our leading competitive positioning in our target markets.
-Unpredictable global macroeconomic conditions. Global economic conditions, including political environments, financial market performance, interest rates, credit spreads or other conditions beyond our control, all of which affect the performance of the assets held by the Customer ExAlt Trusts, are unpredictable and could negatively affect the performance of our portfolio or the ability to raise funds in the future. In addition, the cash flows from these investments, which collateralize the ExAlt Loans, are exposed to the credit risks of the financial institutions at which they are held. Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties, or the financial services industry generally, could lead to market-wide liquidity problems and jeopardize our ability to access existing cash, cash equivalents and investments.
-Our ability to access capital at attractive rates.Our ability to complete, and the costs associated with, future debt transactions depends primarily upon credit market conditions and our then perceived creditworthiness. We have no control over market conditions. Our ability to obtain credit depends upon evaluations of our business practices and plans, including our performance, ability to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities. However, as discussed elsewhere in this Quarterly Report on Form 10-Q, the economic conditions, as well as the impacts of the current, and possibly future, inflationary conditions, volatile interest rates and a possible recession are uncertain and may have various negative consequences on us and our operations including a decline in financing availability and increased costs for financing. Further, such conditions could also disrupt the capital markets generally and limit our access to financing from public sources or on favorable terms, particularly if the global financial markets experience significant disruptions.
Current Events
In October 2023, following a series of attacks by Hamas on Israeli civilian and military targets, Israel declared war on Hamas in Gaza. In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine and as a result, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. The ongoing Russia-Ukraine conflict and Israel-Hamas conflict could have a negative impact on the economy and business activity globally (including in the countries in which the Customer ExAlt Trusts currently holds investments or may hold investments in the future), and therefore, could adversely affect the performance of the Customer ExAlt Trusts' investments.
The extent and impact of any sanctions imposed in connection with the Russia-Ukraine conflict has caused and may continue to cause financial market volatility and impact the global economy. Volatility and disruption in the equity and credit markets can adversely affect the portfolio companies underlying the investments held by the Customer ExAlt Trusts and adversely affect the investment performance. Our ability to manage exposure to market conditions is limited. Market deterioration could cause the Company to experience reduced liquidity, earnings and cash flow, recognize impairment charges, or face challenges in raising capital and making investments on attractive terms. Adverse market conditions can also affect the ability of investment funds held by the Customer ExAlt Trusts to liquidate positions in a timely and efficient manner. As a result, this presents material uncertainty and risk with respect to the performance of the investments held by the Customer ExAlt Trusts, even though the Customer ExAlt Trusts do not hold any investments with material operations in Russia, Ukraine, or Israel. The cash flows from the investments held by the Customer ExAlt Trusts serve as the collateral to the ExAlt Loans and the fees that are paid by the Customer ExAlt Trusts to Ben for administering these trusts, both of which are key determinants in the income allocated to Ben's and BCH's equity holders.
Further, uncertainty in the capital markets, generally due to volatility in interest rates, inflation, changes in regulatory requirements and tariffs and their impact on the economy, may make it challenging to raise additional capital, and such capital may not be available to us on acceptable terms on a timely basis, or at all. If adequate funds are not available, or if the terms of potential funding sources are unfavorable, our business would be harmed.
Further, these events may result in reduced opportunities for future liquidity solution transactions with our customers and make it more difficult for the Customer ExAlt Trusts to exit and realize value from its existing investments, potentially resulting in a decline in the value of the investments held by the Customer ExAlt Trusts. Such a decline could cause our revenue and net income to decline, including the revenues and net income allocated to Ben's and BCH's equity holders.
We continue to evaluate the impact of the ongoing Russia-Ukraine conflict, Israel-Hamas conflict and other items, such as inflation, rising interest rates, changes in regulatory requirements and tariffs, and assess the impact on financial markets and our business. Our future results may be adversely affected by slowdowns in fundraising activity and the pace of new liquidity transactions with our customers.
Factors Affecting the Comparability of Our Financial Condition and Results of Operations
In addition to the items mentioned above in the "Recent Developments" section, our historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward, primarily for the following reasons:
-Vesting of performance based awards. Certain of our restricted equity units were granted with a performance-based condition. The performance condition was met upon public listing in June 2023 and expense for vested units was recognized during the three months ended June 30, 2023. The recognition of the remaining compensation cost will be recognized over the remaining vesting period. Total recognized compensation cost related to these awards was $0.1 million and $0.2 million for the three and sixmonths ended September 30, 2025, respectively. Total recognized compensation cost related to these awards was $0.3 millionand $0.8 million for the three and sixmonths ended September 30, 2024, respectively. Total unrecognized compensation cost related to these awards was approximately $0.2 millionas of September 30, 2025. During the three and sixmonths ended September 30, 2024, approximately $2.4 millionof compensation cost, which is the full grant date fair value of the RSUs,was recognized for awards to threeemployees. The awards do not require continuing employment by the individuals.
-Goodwill Impairment. Goodwill is tested for impairment at least annually and, more frequently between annual tests, whenever events or circumstances make it more likely than not that the fair value of a reporting unit has fallen below its carrying value. Subsequent to the public listing on June 8, 2023, and through March 31, 2025, the Company experienced a significant sustained decline in the price of its Class A common stock and its related market capitalization. We believed that these factors indicated that the fair value of our reporting units had more likely than not fallen below their carrying values during the relevant periods. As a result, during fiscal 2024 and fiscal 2025, we wrote the carrying value of the Ben Liquidity, Ben Custody, Ben Insurance, and Ben Markets reporting units, as applicable, down to their estimated fair values. During the first and second quarters of fiscal 2025, we recognized a non-cash goodwill impairment charge of $3.47million. No non-cash goodwill impairment charge was recorded during the first or second quarters of fiscal 2026. Goodwill impairment charges are reflected in the loss on impairment of goodwill in the consolidated statements of comprehensive income (loss). The cumulative impairment of goodwill through September 30, 2025, is $2.4 billion. Total goodwill remaining as of September 30, 2025 is $9.9 million.
-Accrual (Release) of Equity Awards Arbitration Loss Contingency. During the year ended March 31, 2024, the Company accrued a loss contingency based on the findings of the sole arbitrator that in terminating the equity awards of a former member of the Board of Directors of Beneficient Management, LLC, the Company had breached its contractual obligations, and as a result, the sole arbitrator awarded the former board member the Arbitration Award. During the sixmonthsended September 30, 2024, the Company released the loss contingency accrual based on the Texas State District Court, Dallas County 134th Judicial District entering an order vacating the Arbitration Award in its entirety. On October 10, 2025, the Texas Fifth Court of Appeals reversed the judgment of the Texas District Court and confirmed the previous Arbitration Award. Thus, the Company recorded a loss contingency associated with the Arbitration Award, including post-judgment interest and fees, which resulted in a loss of $62.8 million during the six months ended September 30, 2025. In addition to the loss contingency, we have recordedinterest accruing on the Arbitration Award during the three months ended September 30, 2025 totaling $1.7 million and is reflected in the interest expense line item in the consolidated statements of comprehensive income (loss).Thus, the fiscal year 2025 year-to-date amounts reflect the release of the accrual of the Arbitration Award of $55.0 million while the fiscal year 2026 year-to-date amounts reflect the accrual of the Arbitration Award, plus post-judgment interest and fees, for a total of $64.5 million.
Key Performance Indicators
We use certain non-GAAP financial measures to supplement our consolidated financial statements, which are presented in accordance with U.S. GAAP. These non-GAAP financial measures include adjusted revenue and adjusted operating income (loss). A non-GAAP financial measure is a numerical measure that departs from U.S. GAAP because it includes or excludes amounts that are required under U.S. GAAP. Non-GAAP financial measures are unaudited and should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP, and non-GAAP financial measures as used by Ben may not be comparable to similarly titled measures used by other companies. The presentation of non-GAAP financial measures provides additional information to investors regarding our results of operations that management believes is useful for trending, analyzing and benchmarking the performance of our business. See "-Supplemental Unaudited Presentation of Non-GAAP Financial Information," below, for a reconciliation of adjusted revenue to revenue and adjusted operating income (loss) to operating income (loss), the most comparable U.S. GAAP measures, respectively.
In addition to our U.S. GAAP and non-GAAP financial information, we utilize several key indicators of financial condition and operating performance to assess the various aspects of our business. We monitor the following operating metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. We believe the following key metrics are useful in evaluating our business:
|
(in thousands)
|
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Ben Liquidity | ||||||||||||||||||||||||||
| Loan payments received | $ | 10,531 | $ | 2,392 | $ | 35,140 | $ | 6,638 | ||||||||||||||||||
|
Operating income (loss)
|
(821) | 2,905 | (6,838) | 2,391 | ||||||||||||||||||||||
|
Adjusted operating income (loss)(1)
|
(821) | 2,905 | (6,838) | 2,396 | ||||||||||||||||||||||
| Ben Custody | ||||||||||||||||||||||||||
| Fee payments received | $ | 1,919 | $ | 2,794 | $ | 3,269 | $ | 4,310 | ||||||||||||||||||
|
Operating income (loss)
|
2,292 | 4,329 | 5,420 | 5,616 | ||||||||||||||||||||||
|
Adjusted operating income (loss)(1)
|
2,292 | 4,627 | 5,420 | 9,043 | ||||||||||||||||||||||
|
Consolidated
|
||||||||||||||||||||||||||
| Revenue | $ | (2,763) | $ | 8,561 | $ | (15,386) | $ | 18,607 | ||||||||||||||||||
|
Adjusted revenue(1)
|
(2,759) | 8,734 | (15,381) | 19,145 | ||||||||||||||||||||||
|
Operating income (loss)
|
(17,864) | (13,715) | (110,512) | 30,623 | ||||||||||||||||||||||
|
Adjusted operating income (loss)(1)
|
(12,588) | (6,611) | (37,768) | (11,337) | ||||||||||||||||||||||
(1)Adjusted revenue and adjusted operating income (loss) are non-GAAP financial measures. For a definition and reconciliation to comparable U.S. GAAP metrics, please see the section titled "- Supplemental Unaudited Presentation of Non-GAAP Financial Information."
| (dollars in thousands) | September 30, 2025 | March 31, 2025 | ||||||||||||
| Ben Liquidity | ||||||||||||||
| Loans to Customer ExAlt Trusts, net | $ | 223,129 | $ | 244,070 | ||||||||||
| Allowance to total loans | 61.62 | % | 58.39 | % | ||||||||||
| Nonperforming loans to total loans | 53.87 | % | 50.53 | % | ||||||||||
| Ben Custody | ||||||||||||||
| Fees receivable | $ | 18,946 | $ | 16,890 | ||||||||||
| Deferred revenue | 15,938 | 17,762 | ||||||||||||
| Customer ExAlt Trusts | ||||||||||||||
| Investments, at fair value | $ | 243,978 | $ | 291,371 | ||||||||||
| Distributions to Original Loan Balance | 0.78 | x | 0.75 | x | ||||||||||
| Total Value to Original Loan Balance | 1.04 | x | 1.04 | x | ||||||||||
Adjusted revenue. We define adjusted revenue as revenue adjusted to exclude the effect of mark-to-market adjustments on related party equity securities that were acquired both prior to and in the Collateral Swap (the "Collateral Swap"), which on August 1, 2023, became interests in the GWG Wind Down Trust.
Operating income (loss)represents total revenues less operating expenses prior to the provision for income taxes.
Adjusted operating income (loss). We define adjusted operating income (loss) as operating income (loss), adjusted to exclude the effect of the adjustments to revenue described above, credit losses on related party available-for-sale debt securities acquired in the Collateral Swap, which on August 1, 2023, became interests in the GWG Wind Down Trust, and receivables from a related party that filed for bankruptcy and certain notes receivables originated during our formative transactions, non-cash asset impairment, share-based compensation expense, legal, professional services, and public relations costs related to the GWG Holdings bankruptcy, lawsuits, and certain employee matters, including fees and loss contingency accruals (releases), including post-judgment interest, incurred in arbitration with a former director.
Loan payments receivedrepresents cash received during the respective period from the Customer ExAlt Trusts as payments on the ExAlt Loans.
Fee payments received represents cash received during the respective period from the Customer ExAlt Trusts as payments on the fees receivable from the Customer ExAlt Trusts.
Loans to Customer ExAlt Trusts, net represents the total ExAlt Loan receivable outstanding, net of the allowance for creditlosses. The ExAlt Loans are eliminated solely for financial reporting purposes upon consolidation of the Customer ExAlt Trusts.
Allowance to Total Loans. Allowance to total loans is calculated as total allowance for creditloss divided by total loans.
Nonperforming Loans to Total Loans. Nonperforming loans to total loans is calculated as total nonperforming loans divided by total loans.
Fees receivable, net represents the transaction fees charged to the Customer ExAlt Trusts in connection with liquidity transactions and fees charged for providing full-service trust administration services to the trustees of the Customer ExAlt Trusts. Such amounts are net of any allowance for credit losses associated with these balances. Such fees are eliminated solely for financial reporting purposes upon consolidation of the Customer ExAlt Trusts.
Deferred revenue represents fees charged at the origination of the liquidity transaction that are recognized ratably over the life of the LiquidTrust. Such amount is eliminated solely for financial reporting purposes upon consolidation of the Customer ExAlt Trusts.
Investments, at fair value. Investments held by the Customer ExAlt Trusts include investments in alternative assets, investments in the public equity and debt securities (principally of a related party), and investments in private equity securities. These cash flows from these investments serve as Collateral to the ExAlt Loans.
Distributions to Original Loan Balance, as it relates to the Collateral, is calculated as the total inception-to-date payments from the ExAlt Loans received divided by the initial loan balances of the ExAlt Loans.
Total Value to Original Loan Balanceis calculated as the then-current fair value of the Collateral plus the total inception-to-date payments from the ExAlt Loans received, divided by the initial loan balances of the ExAlt Loans.
Principal Revenue and Expense Items
During the three and six months ended September 30, 2025 and 2024, we earned revenues on a consolidated basis from the following primary sources:
•Investment Income (Loss), net. Investment income (loss), net, includes the change in NAV of the alternative assets held by certain of the Customer ExAlt Trusts.
For the aforementioned periods, our main components of consolidated expense are summarized below:
•Interest Expense. Interest expense includes interest accrued to our senior lender under our amended and restated First Lien Credit Agreement and Second Lien Credit Agreement (as described under "Liquidity and Capital Resources - Amended Credit Agreements"), interest on the borrowings under the HH-BDH Credit Agreement, interest accrued on the ExAlt Trust Loan Payable, and interest accrued on our other debt due to related parties. When we issue debt, we amortize the financing costs (commissions and other fees) associated with such indebtedness over the outstanding term of the financing and classify it as interest expense. Additional interest accruing on the Arbitration Award during the three months ended September 30, 2025 totaling $1.7 million is reflected in the interest expense line.
•Employee Compensation and Benefits. Employee compensation and benefits include salaries, bonuses and other incentives and costs of employee benefits. Also included are significant non-cash expenses related to the share-based compensation.
•Professional Services. Professional services includes legal fees, audit fees, consulting fees, and other services.
Additional components of our consolidated net earnings include:
•Gain (Loss) on Financial Instruments, net. Gain (loss) on financial instruments, net includes the change in fair value of our derivative liability, warrants liability, investments in public equity securities, private equity securities, options, and convertible debt recorded at fair value. Included in our investment in private equity securities and interests is our interest in the GWG Wind Down Trust. Fair value is determined using quoted market prices when available, or other estimates of fair value, when quoted market prices are not available. Any realized gains and losses are recorded on a trade-date basis.
•Interest Income. Interest income includes interest earned on cash held in banks.
•Provision for Credit Losses. Provision for credit losses represents the amount charged to earnings each period for credit losses incurred on available-for-sale debt securities and for allowances taken on financial assets, primarily receivables under the Shared Services Agreement with GWG Holdings and note agreements with other parties originating during our formative transactions in 2018.
•Other Expenses. We recognize and record expenses in our business operations as incurred. Other expenses include software license and maintenance expenses, IT consulting fees, travel and entertainment expenses, other insurance and tax expenses, supplies, costs associated with employee training and dues, transaction expenses, depreciation and amortization expenses, and various other expenses.
•Loss on impairment of goodwill. Goodwill and indefinite-lived intangible assets are assessed for impairment on an annual basis and whenever events and circumstances indicate that these assets may be impaired, including as a result of significant sustained declines in the prevailing prices of our Class A common stock. We compare the fair value of each of our reporting units to its respective carrying value, including goodwill. If the respective carrying value, including goodwill, exceeds the reporting unit's fair value, we will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit's fair value, up to the amount of goodwill associated with the reporting unit.
Our operating subsidiaries, Ben Liquidity and Ben Custody, also earn revenue from interest and fees, which are eliminated in consolidation, on the ExAlt Loans between Ben Liquidity and the Customer ExAlt Trusts and for providing trust services and administration between Ben Custody and the Customer ExAlt Trusts. These sources of intersegment revenues, which ultimately impact the net income (loss) attributable to Ben and BCH equity holders, are summarized below.
•Interest Income. Interest income is generally comprised of contractual interest, which is a computed variable rate or a fixed rate that compounds monthly, interest recognized on certain of the ExAlt Loans through the effective yield method, and an amortized discount that is recognized ratably over the life of the ExAlt Loan. Loans deemed nonperforming no longer accrue interest income. The ExAlt Loans have a maturity of twelve years, and all principal and interest due thereon is payable at maturity. Since we began our operations in 2017, substantially all of our interest income since inception has been non-cash income that has been capitalized onto the outstanding principal of the ExAlt Loans.
Interest income earned by Ben from the Customer ExAlt Trusts is eliminated in the presentation of our consolidated financial statements. However, because the eliminated amounts are earned from, and funded by, noncontrolling interests, on a consolidated basis, our attributable share of the net income from the Customer ExAlt Trusts is increased by the amounts eliminated. Accordingly, the elimination in consolidation of interest income and certain fee revenue (as described below) has no effect on net income (loss) attributable to Ben or BCH or to equity holders of Ben or BCH.
•Trust Services and Administration Revenues.Trust services and administration revenues include trust administration fees and upfront fees. Trust administration fees are earned for providing administrative services to trustees for existing liquidity solution customers. Fees are recognized monthly based upon the beginning of quarter (in advance) NAV plus any remaining unfunded loan commitments and the applicable fee rate of the account as outlined in the agreement. Non-refundable upfront fees are earned for setting up and providing the customer access to the ExAlt PlanTM. Upfront fees are billed at the origination of the liquidity transaction and are based on a percentage of NAV plus any unfunded capital commitments. Upfront fees are deferred upon receipt and are recognized ratably over the period of benefit, which is generally consistent with estimated expected life of LiquidTrusts (typically 7 to 10 years). All such fees and related deferred revenue are eliminated in the presentation of our consolidated financial statements. As described above, the elimination in consolidation of this fee revenue has no effect on net income (loss) attributable to Ben or BCH or to equity holders of Ben or BCH.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (UNAUDITED)
| (in thousands) | Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||
| Ben Liquidity | Ben Custody |
Customer ExAlt Trusts
|
Corporate/Other | Consolidating Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
| External Revenues | ||||||||||||||||||||||||||||||||||||||
|
Investment income (loss), net
|
$ | - | $ | - | $ | (3,162) | $ | - | $ | - | $ | (3,162) | ||||||||||||||||||||||||||
|
Gain (loss) on financial instruments, net
|
- | - | 379 | (168) | - | 211 | ||||||||||||||||||||||||||||||||
|
Interest and dividend income
|
- | - | - | 10 | - | 10 | ||||||||||||||||||||||||||||||||
| Trust services and administration revenues | - | 178 | - | - | - | 178 | ||||||||||||||||||||||||||||||||
| Intersegment revenues | ||||||||||||||||||||||||||||||||||||||
| Interest income | 8,497 | - | - | - | (8,497) | - | ||||||||||||||||||||||||||||||||
| Trust services and administration revenues | - | 2,903 | - | - | (2,903) | - | ||||||||||||||||||||||||||||||||
| Total revenues | 8,497 | 3,081 | (2,783) | (158) | (11,400) | (2,763) | ||||||||||||||||||||||||||||||||
| External expenses | ||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | 248 | 499 | - | 1,682 | - | 2,429 | ||||||||||||||||||||||||||||||||
| Interest expense | 3,169 | - | - | 1,729 | - | 4,898 | ||||||||||||||||||||||||||||||||
| Professional services | 196 | 109 | 622 | 4,404 | - | 5,331 | ||||||||||||||||||||||||||||||||
| Other expenses | 209 | 181 | 471 | 1,582 | - | 2,443 | ||||||||||||||||||||||||||||||||
| Intersegment expenses | ||||||||||||||||||||||||||||||||||||||
| Interest expense | - | - | 37,853 | - | (37,853) | - | ||||||||||||||||||||||||||||||||
|
Provision for creditlosses
|
5,496 | - | - | - | (5,496) | - | ||||||||||||||||||||||||||||||||
| Other expenses | - | - | 2,903 | - | (2,903) | - | ||||||||||||||||||||||||||||||||
| Total expenses | 9,318 | 789 | 41,849 | 9,397 | (46,252) | 15,101 | ||||||||||||||||||||||||||||||||
|
Operating income (loss)
|
$ | (821) | $ | 2,292 | $ | (44,632) | $ | (9,555) | $ | 34,852 | (17,864) | |||||||||||||||||||||||||||
|
Income tax expense
|
43 | |||||||||||||||||||||||||||||||||||||
|
Net income (loss)
|
$ | (17,907) | ||||||||||||||||||||||||||||||||||||
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (UNAUDITED) (cont'd)
| (in thousands) | Three Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||
| Ben Liquidity | Ben Custody |
Customer ExAlt Trusts
|
Corporate/Other | Consolidating Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
| External Revenues | ||||||||||||||||||||||||||||||||||||||
|
Investment income (loss), net
|
$ | - | $ | - | $ | 8,541 | $ | - | $ | - | $ | 8,541 | ||||||||||||||||||||||||||
|
Gain (loss) on financial instruments, net
|
- | - | 571 | (750) | - | (179) | ||||||||||||||||||||||||||||||||
|
Interest and dividend income
|
- | - | - | 12 | - | 12 | ||||||||||||||||||||||||||||||||
| Trust services and administration revenues | - | 187 | - | - | - | 187 | ||||||||||||||||||||||||||||||||
| Intersegment revenues | ||||||||||||||||||||||||||||||||||||||
| Interest income | 11,978 | - | - | - | (11,978) | - | ||||||||||||||||||||||||||||||||
| Trust services and administration revenues | - | 5,199 | - | - | (5,199) | - | ||||||||||||||||||||||||||||||||
| Total revenues | 11,978 | 5,386 | 9,112 | (738) | (17,177) | 8,561 | ||||||||||||||||||||||||||||||||
| External expenses | ||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | 361 | 542 | - | 6,232 | - | 7,135 | ||||||||||||||||||||||||||||||||
| Interest expense | 3,163 | - | - | 1,157 | - | 4,320 | ||||||||||||||||||||||||||||||||
| Professional services | 395 | 30 | 545 | 6,287 | - | 7,257 | ||||||||||||||||||||||||||||||||
|
Loss on impairment of goodwill
|
- | 298 | - | - | - | 298 | ||||||||||||||||||||||||||||||||
|
Provision for credit losses
|
- | - | 476 | - | - | 476 | ||||||||||||||||||||||||||||||||
| Other expenses | 402 | 187 | 189 | 2,012 | - | 2,790 | ||||||||||||||||||||||||||||||||
| Intersegment expenses | ||||||||||||||||||||||||||||||||||||||
| Interest expense | - | - | 36,049 | - | (36,049) | - | ||||||||||||||||||||||||||||||||
|
Provision for credit losses
|
4,752 | - | - | - | (4,752) | - | ||||||||||||||||||||||||||||||||
| Other expenses | - | - | 3,402 | - | (3,402) | - | ||||||||||||||||||||||||||||||||
| Total expenses | 9,073 | 1,057 | 40,661 | 15,688 | (44,203) | 22,276 | ||||||||||||||||||||||||||||||||
|
Operating income (loss)
|
$ | 2,905 | $ | 4,329 | $ | (31,549) | $ | (16,426) | $ | 27,026 | (13,715) | |||||||||||||||||||||||||||
| (Gain) loss on liability resolution | (23,462) | |||||||||||||||||||||||||||||||||||||
|
Net income (loss)
|
$ | 9,747 | ||||||||||||||||||||||||||||||||||||
| (in thousands) | Six Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||
| Ben Liquidity | Ben Custody |
Customer ExAlt Trusts
|
Corporate/Other | Consolidating Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
| External Revenues | ||||||||||||||||||||||||||||||||||||||
|
Investment income (loss), net
|
$ | - | $ | - | $ | (15,938) | $ | - | $ | - | $ | (15,938) | ||||||||||||||||||||||||||
|
Gain (loss) on financial instruments, net
|
- | - | 304 | (138) | - | 166 | ||||||||||||||||||||||||||||||||
|
Interest and dividend income
|
- | - | - | 20 | - | 20 | ||||||||||||||||||||||||||||||||
| Trust services and administration revenues | - | 366 | - | - | - | 366 | ||||||||||||||||||||||||||||||||
| Intersegment revenues | ||||||||||||||||||||||||||||||||||||||
| Interest income | 17,332 | - | - | - | (17,332) | - | ||||||||||||||||||||||||||||||||
| Trust services and administration revenues | - | 6,898 | - | - | (6,898) | - | ||||||||||||||||||||||||||||||||
| Total revenues | 17,332 | 7,264 | (15,634) | (118) | (24,230) | (15,386) | ||||||||||||||||||||||||||||||||
| External expenses | ||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | 632 | 1,146 | - | 3,982 | - | 5,760 | ||||||||||||||||||||||||||||||||
| Interest expense | 6,515 | - | - | 1,798 | - | 8,313 | ||||||||||||||||||||||||||||||||
| Professional services | 810 | 318 | 1,028 | 11,132 | - | 13,288 | ||||||||||||||||||||||||||||||||
|
Accrual (release) of loss contingency related to arbitration award
|
- | - | - | 62,831 | - | 62,831 | ||||||||||||||||||||||||||||||||
| Other expenses | 448 | 380 | 865 | 3,241 | - | 4,934 | ||||||||||||||||||||||||||||||||
| Intersegment expenses | ||||||||||||||||||||||||||||||||||||||
| Interest expense | - | - | 74,998 | - | (74,998) | - | ||||||||||||||||||||||||||||||||
|
Provision for creditlosses
|
15,765 | - | - | - | (15,765) | - | ||||||||||||||||||||||||||||||||
| Other expenses | - | - | 6,083 | - | (6,083) | - | ||||||||||||||||||||||||||||||||
| Total expenses | 24,170 | 1,844 | 82,974 | 82,984 | (96,846) | 95,126 | ||||||||||||||||||||||||||||||||
|
Operating income (loss)
|
$ | (6,838) | $ | 5,420 | $ | (98,608) | $ | (83,102) | $ | 72,616 | (110,512) | |||||||||||||||||||||||||||
|
Income tax expense
|
43 | |||||||||||||||||||||||||||||||||||||
|
Net income (loss)
|
$ | (110,555) | ||||||||||||||||||||||||||||||||||||
| (in thousands) | Six Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||
| Ben Liquidity | Ben Custody |
Customer ExAlt Trusts
|
Corporate/Other | Consolidating Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
| External Revenues | ||||||||||||||||||||||||||||||||||||||
|
Investment income (loss), net
|
$ | - | $ | - | $ | 19,569 | $ | - | $ | - | $ | 19,569 | ||||||||||||||||||||||||||
|
Gain (loss) on financial instruments, net
|
- | - | (604) | (758) | - | (1,362) | ||||||||||||||||||||||||||||||||
| Interest and dividend income | - | - | - | 24 | - | 24 | ||||||||||||||||||||||||||||||||
| Trust services and administration revenues | - | 376 | - | - | - | 376 | ||||||||||||||||||||||||||||||||
| Intersegment revenues | ||||||||||||||||||||||||||||||||||||||
| Interest income | 22,827 | - | - | - | (22,827) | - | ||||||||||||||||||||||||||||||||
| Trust services and administration revenues | - | 10,392 | - | - | (10,392) | - | ||||||||||||||||||||||||||||||||
| Total revenues | 22,827 | 10,768 | 18,965 | (734) | (33,219) | 18,607 | ||||||||||||||||||||||||||||||||
| External expenses | ||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | 791 | 898 | - | 9,296 | - | 10,985 | ||||||||||||||||||||||||||||||||
| Interest expense | 6,244 | - | - | 2,364 | - | 8,608 | ||||||||||||||||||||||||||||||||
| Professional services | 869 | 426 | 1,167 | 10,339 | - | 12,801 | ||||||||||||||||||||||||||||||||
| Provision for credit losses | - | - | 998 | 2 | - | 1,000 | ||||||||||||||||||||||||||||||||
|
Loss on impairment of goodwill
|
- | 3,427 | - | 265 | - | 3,692 | ||||||||||||||||||||||||||||||||
|
Accrual (release) of loss contingency related to arbitration award
|
- | - | - | (54,973) | - | (54,973) | ||||||||||||||||||||||||||||||||
| Other expenses | 853 | 401 | 309 | 4,308 | - | 5,871 | ||||||||||||||||||||||||||||||||
| Intersegment expenses | ||||||||||||||||||||||||||||||||||||||
| Interest expense | - | - | 70,848 | - | (70,848) | - | ||||||||||||||||||||||||||||||||
|
Provision for creditlosses
|
11,679 | - | - | - | (11,679) | - | ||||||||||||||||||||||||||||||||
| Other expenses | - | - | 6,821 | - | (6,821) | - | ||||||||||||||||||||||||||||||||
| Total expenses | 20,436 | 5,152 | 80,143 | (28,399) | (89,348) | (12,016) | ||||||||||||||||||||||||||||||||
|
Operating income (loss)
|
$ | 2,391 | $ | 5,616 | $ | (61,178) | $ | 27,665 | $ | 56,129 | 30,623 | |||||||||||||||||||||||||||
|
(Gain) loss on liability resolution
|
(23,462) | |||||||||||||||||||||||||||||||||||||
|
Income tax expense
|
28 | |||||||||||||||||||||||||||||||||||||
|
Net income (loss)
|
$ | 54,057 | ||||||||||||||||||||||||||||||||||||
CONSOLIDATED
Results of Operations - Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024, and the Six Months Ended September 30, 2025 Compared to the Six Months Ended September 30, 2024 (Unaudited)
Revenues (in thousands)
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
|
Investment income (loss), net
|
$ | (3,162) | $ | 8,541 | $ | (15,938) | $ | 19,569 | ||||||||||||||||||
|
Gain (loss) on financial instruments, net
|
211 | (179) | 166 | (1,362) | ||||||||||||||||||||||
|
Interest and dividend income
|
10 | 12 | 20 | 24 | ||||||||||||||||||||||
| Trust services and administration revenues | 178 | 187 | 366 | 376 | ||||||||||||||||||||||
| Total revenues | $ | (2,763) | $ | 8,561 | $ | (15,386) | $ | 18,607 | ||||||||||||||||||
Three Months Ended September 30, 2025 and 2024
Investment income (loss), net decreased $11.7 million for the three months ended September 30, 2025, compared to the same period of 2024, driven by changes in the NAV of investments in alternative assets held by certain of the Customer ExAlt Trusts or fair value for such investments deemed probable to be sold at an amount that differs from NAV. Investment loss was $3.2 million for the three months ended September 30, 2025, which was driven by $4.7 million of downward adjustments to our relative share of the respective fund's NAV based on updated financial information received from the funds' investment manager or sponsor or the fair value for investments deemed probable to be sold at an amount that differs from NAV and $0.3 million of downward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar partially offset by $1.9 million of upward quoted market price adjustments. Investment income was $8.5 million for the three months ended September 30, 2024, which was driven by $4.8 million of upward quoted market price adjustments, $2.3 million of upward adjustments to our relative share of the respective fund's NAV based on updated financial information received from the funds' investment manager or sponsor, and $1.5 million of upward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar.
Gain (loss) on financial instruments, net increased $0.4 million for the three months ended September 30, 2025, compared to the same period of 2024, driven by the changes in fair value of the financial instruments held during the period. Gain on financial instruments, net for three months ended September 30, 2025, was primarily driven by a $0.4 million increase in the fair value of public equity securities offset by a $0.2 million increase in the fair value of our warrants liability. Losson financial instruments, net for the three months ended September 30, 2024 was primarily driven by an $0.2 million decrease in the value of our interests in the GWG Wind Down Trust and a $0.8 million combined loss in the fair value on the convertible debt, warrants and derivative liability, offset by a $0.7 million increase in the fair value of public equity securities.
Six Months Ended September 30, 2025 and 2024
Investment income (loss), net decreased $35.5 million for the six months ended September 30, 2025, compared to the same period of 2024, driven by changes in the NAV of investments in alternative assets held by certain of the Customer ExAlt Trusts or fair value for such investments deemed probable to be sold at an amount that differs from NAV. Investment loss was $15.9 million for the six months ended September 30, 2025, which was driven by $19.3 million of downward adjustments to our relative share of the respective fund's NAV based on updated financial information received from the funds' investment manager or sponsor offset by $2.7 million of upward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar and $1.1 million of upward quoted market price adjustments. Investment income was $19.6 million for the six months ended September 30, 2024, which was driven by $18.0 million of upward adjustments to our relative share of the respective fund's NAV based on updated financial information received from the funds' investment manager or sponsor, $1.3 million of upward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar offset by $1.1 million of downward quoted market price adjustments.
Gain (loss) on financial instruments, net increased $1.5 million for the six months ended September 30, 2025, compared to the same period of 2024, driven by the changes in fair value of the financial instruments held during the period. Gain on financial instruments, net for the six months ended September 30, 2025 was primarily driven by a $0.3 million increase in the fair value of public equity securities offset by a $0.1 million increase in the fair value of warrants liability.Losson financial instruments, net for the six months ended September 30, 2024 was primarily driven by a $0.5 million decrease in the value of our interests in the GWG Wind Down Trust and a $0.8 million decrease in the fair value of the convertible debt, warrants and
derivative liability.
Interest and Operating Expenses (in thousands)
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Employee compensation and benefits | $ | 2,429 | $ | 7,135 | $ | 5,760 | $ | 10,985 | ||||||||||||||||||
| Interest expense (including amortization of deferred financing costs) | 4,898 | 4,320 | 8,313 | 8,608 | ||||||||||||||||||||||
| Professional services | 5,331 | 7,257 | 13,288 | 12,801 | ||||||||||||||||||||||
|
Provision for credit losses
|
- | 476 | - | 1,000 | ||||||||||||||||||||||
| Loss on impairment of goodwill | - | 298 | - | 3,692 | ||||||||||||||||||||||
|
Accrual (release) of loss contingency related to arbitration award
|
- | - | 62,831 | (54,973) | ||||||||||||||||||||||
| Other expenses | 2,443 | 2,790 | 4,934 | 5,871 | ||||||||||||||||||||||
| Total expenses | $ | 15,101 | $ | 22,276 | $ | 95,126 | $ | (12,016) | ||||||||||||||||||
Three Months Ended September 30, 2025 and 2024
Employee compensation and benefits decreased $4.7 million for the three months ended September 30, 2025, compared to the same period in 2024. The decrease was related to a decrease in equity-based compensation of approximately $2.9 million and a $1.8 million decrease in payroll and other benefit related costs due to a lower headcount in 2025 as compared to 2024.
Interest expense increased $0.6 million for the three months ended September 30, 2025, compared to the same period in 2024, primarily driven by a $1.7 million increase in interest expense related to legal proceedings and by $0.5 million of higher interest expense on the amended and restated First Lien Credit Agreement and Second Lien Credit Agreement due to the purported event of default occurring as of April 14, 2025 offset by a $1.1 million decrease in expense as a result of the resolution of certain liabilities that were accruing interest of approximately $1.0 million per quarter, and a $0.5 million decrease in interest expense recognized on the HH-BDH Credit Agreement as a result of principal paydowns.
Professional services expense decreased $1.9 million for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to a decrease in legal fees. The legal fees recorded in a given period reflect our estimates related to amounts that will be covered under our D&O insurance policies. A substantial portion of our legal activity relates to matters that historically have been eligible for reimbursement from our D&O insurance carriers, however, the recent settlement involving matters related to GWG Holdings, Inc., once final approval is obtained, is expected to utilize substantially all of the amount of insurance coverage available to the Company on certain continuing legal matters. The expense in the current period related to such continuing legal matters that have historically been eligible for reimbursement from our D&O insurance carriers reflects our current estimate of incurred legal expenses expected to be denied by the insurance carriers due to the coverage being fully utilized under the terms of the applicable policies.
Provision for credit losses decreased $0.5 million for the three months ended September 30, 2025, compared to the same period in 2024. Provision for credit losses during the three months ended September 30, 2024, is comprised of a credit related loss on an available-for-sale debt security held by the Customer ExAlt Trusts. No such losses were recognized in the three months ended September 30, 2025.
During the three months ended September 30, 2025, we concluded that an interim impairment test for goodwill was not required as we did not identify a triggering event during the period that would have required such an analysis. During the three months ended September 30, 2024, we did identify a triggering event related to a significant, sustained decline in our Class A common stock price and the Company's related market capitalization, requiring an interim impairment test for goodwill and as a result, recorded a non-cash impairment charge of $0.3 million. See-Critical Accounting Estimatesbelow and Note 6 to the Consolidated Financial Statements in "Part 1, Item 1.-Financial Statements" of this Quarterly Report on Form 10-Q for further information.
Other expenses decreased $0.3 million for the three months ended September 30, 2025, compared to the same period in 2024. The table below provides additional detail regarding our other expenses.
Other Expenses (in thousands)
| Three Months Ended September 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Other expenses | $ | 1,150 | $ | 1,102 | ||||||||||
| Other insurance and taxes | 740 | 673 | ||||||||||||
| Software license and maintenance | 324 | 399 | ||||||||||||
| Depreciation and amortization | 142 | 391 | ||||||||||||
| Occupancy and equipment | 54 | 164 | ||||||||||||
| Travel and entertainment | 33 | 61 | ||||||||||||
| Total other expenses | $ | 2,443 | $ | 2,790 | ||||||||||
Six Months Ended September 30, 2025 and 2024
Employee compensation and benefits decreased $5.2 million for the six months ended September 30, 2025, compared to the same period in 2024. The decrease is principally related to a $3.4 million decrease in equity-based compensation and a $1.8 million decrease in payroll and other benefit related costs due to a lower headcount in 2025 as compared to 2024.
Interest expense decreased $0.3 million due to a $2.2 million decrease in expense as a result of the resolution of certain liabilities that were accruing interest of approximately $1.0 million per quarter, and a $0.7 million decrease in interest expense recognized on the HH-BDH Credit Agreement as a result of principal paydowns, offset partially by a $1.7 million increase in interest expense related to legal proceedings and by a $0.9 million increase in interest expense on the amended and restated First Lien Credit Agreement and Second Lien Credit Agreement due to the purported event of default occurring as of April 14, 2025.
Professional services expenses increased $0.5 million for the six months ended September 30, 2025, compared to the same period in 2024, primarily due to higher legal fees. The legal fees recorded in a given period reflect our estimates related to amounts that will be covered under our D&O insurance policies. As previously disclosed, the legal fees recorded in a given period reflect our estimates related to amounts that will be covered under our D&O insurance policies. A substantial portion of our historic legal activity relates to matters that have been eligible for reimbursement from our D&O insurance carriers. The recent settlement involving matters related to GWG Holdings, Inc., once final approval is obtained, is expected to utilize substantially all of the amount of insurance coverage available to the Company on certain continuing legal matters.
Provision for credit losses decreased $1.0 million for the six months ended September 30, 2025, compared to the same period in 2024. Provision for credit losses for the six months ended September 30, 2024, is comprised of a credit related loss on an available-for-sale debt security held by the Customer ExAlt Trusts. No such losses were recognized in the same period for the six months ended September 30, 2025.
During the six months ended September 30, 2025, we concluded that interim impairment tests for goodwill were not required as we did not identify a triggering event during the period that would have required such an analysis. During the six months ended September 30, 2024 we completed interim impairment tests for goodwill and as a result, recorded non-cash impairment charges totaling $3.7 million. See-Critical Accounting Estimatesbelow and Note 6 to the Consolidated Financial Statements in "Part 1, Item 1.-Financial Statements" of this Quarterly Report on Form 10-Q for further information.
Release of loss contingency related to arbitration award recognized during the six months ended September 30, 2024, relates to the release of a previously recorded loss contingency recorded in our fiscal year ended March 31, 2024 that had been awarded against the Company during arbitration for compensatory damages, including prejudgment interest in a matter pertaining to a former director challenging the termination of certain equity awards under two incentive plans by the administrator of the incentive plans. The release of the loss contingency was based on a Texas District Court order vacating the previously recorded and disclosed arbitration award against Beneficient. Accrual of loss contingency related to Arbitration Award recognized during the six months ended September 30, 2025, relates to the same arbitration involving a former director challenging the termination of certain equity awards under two incentive plans by the administrator of the incentive plans. The loss contingency is based on the Texas Fifth Court of Appeals reversing the judgment of the Texas District Court and confirming the Arbitration Award. The amount reflected during the six months ended September 30, 2025 includes post-judgment interest and fees through June 30, 2025, resulting in a loss of approximately $62.8 million. Ongoing post-judgment interest costs are reflected in interest expense as described above.
Other expenses decreased $0.9 million for the six months ended September 30, 2025, compared to the same period in 2024. The largest decrease relates to approximately $0.4 million of lower depreciation and amortization, lower insurance and taxes
of $0.3 million and $0.2 million of lower costs associated with occupancy and equipment. The table below provides additional detail regarding our other expenses.
Other Expenses (in thousands)
| Six Months Ended September 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Other expenses | $ | 2,231 | $ | 1,943 | ||||||||||
| Other insurance and taxes | 1,434 | 1,767 | ||||||||||||
| Software license and maintenance | 720 | 883 | ||||||||||||
| Depreciation and amortization | 384 | 805 | ||||||||||||
| Occupancy and equipment | 105 | 321 | ||||||||||||
| Travel and entertainment | 60 | 152 | ||||||||||||
| Total other expenses | $ | 4,934 | $ | 5,871 | ||||||||||
BEN LIQUIDITY
Results of Operations - Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024, and the Six Months Ended September 30, 2025 Compared to the Six Months Ended September 30, 2024 (Unaudited)
| (in thousands) | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
|
Revenues
|
||||||||||||||||||||||||||
| Interest income | $ | 8,497 | $ | 11,978 | $ | 17,332 | $ | 22,827 | ||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||
| Employee compensation and benefits | 248 | 361 | 632 | 791 | ||||||||||||||||||||||
| Interest expense (including amortization of deferred financing costs) | 3,169 | 3,163 | 6,515 | 6,244 | ||||||||||||||||||||||
| Professional services | 196 | 395 | 810 | 869 | ||||||||||||||||||||||
|
Provision for creditlosses
|
5,496 | 4,752 | 15,765 | 11,679 | ||||||||||||||||||||||
| Other expenses | 209 | 402 | 448 | 853 | ||||||||||||||||||||||
| Total expenses | 9,318 | 9,073 | 24,170 | 20,436 | ||||||||||||||||||||||
|
Operating income (loss)
|
$ | (821) | $ | 2,905 | $ | (6,838) | $ | 2,391 | ||||||||||||||||||
Three Months Ended September 30, 2025 and 2024
Interest income decreased $3.5 million during the three months ended September 30, 2025 compared to the same period in 2024. The decrease was primarily driven by a higher percentage of loans being placed on nonaccrual status.
Provision for creditlosses was $5.5 million for the three months ended September 30, 2025 as compared to $4.8 million as of the same period in 2024. The provision for the current period increased over the prior period primarily due to interest capitalization outpacing loan paydowns from distributions or disposition proceeds from the collateral and growth in value of the collateral.
Six Months Ended September 30, 2025 and 2024
Interest income decreased $5.5 million during the six months ended September 30, 2025 compared to the same period in 2024. The decrease was primarily driven by higher percentage of loan being placed on nonaccrual status.
Provision for credit losses was $15.8 million for the six months ended September 30, 2025, as compared to $11.7 million as of the same period in 2024. The provision for the current period increased over the prior period primarily due to interest capitalization outpacing loan paydowns from distributions or disposition proceeds from the collateral and growth in value of the collateral.
BEN CUSTODY
Results of Operations - Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024, and the Six Months Ended September 30, 2025 Compared to the Six Months Ended September 30, 2024 (Unaudited)
| (in thousands) | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
| Trust services and administration revenues | $ | 3,081 | $ | 5,386 | $ | 7,264 | $ | 10,768 | ||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||
| Employee compensation and benefits | 499 | 542 | 1,146 | 898 | ||||||||||||||||||||||
| Professional services | 109 | 30 | 318 | 426 | ||||||||||||||||||||||
| Loss on impairment of goodwill | - | 298 | - | 3,427 | ||||||||||||||||||||||
| Other expenses | 181 | 187 | 380 | 401 | ||||||||||||||||||||||
| Total expenses | 789 | 1,057 | 1,844 | 5,152 | ||||||||||||||||||||||
|
Operating income (loss)
|
$ | 2,292 | $ | 4,329 | $ | 5,420 | $ | 5,616 | ||||||||||||||||||
Three Months Ended September 30, 2025 and 2024
Trust services and administration revenues decreased $2.3 million for the three months ended September 30, 2025, compared to the same period in 2024 driven by a decrease in the NAV of the alternative assets held by the Customer ExAlt Trusts, which is an input into the calculation of the recurring trust services revenues.
During the three months ended September 30, 2025, we concluded that an interim impairment test for goodwill was not required as we did not identify a triggering event during the period that would have required such an analysis. During the three months ended September 30, 2024, we did identify a triggering event related to a significant, sustained decline in our Class A common stock price and the Company's related market capitalization, requiring an interim impairment test for goodwill and as a result, we recognized a non-cash impairment charge of $0.3 million for Ben Custody. See-Critical Accounting Estimatesbelow and Note 6 to the Consolidated Financial Statements in "Part 1, Item 1.-Financial Statements" of this Quarterly Report on Form 10-Q for further information.
Six Months Ended September 30, 2025 and 2024
Trust services and administration revenues decreased $3.5 million for the six months ended September 30, 2025, compared to the same period in 2024, driven by a decrease in the NAV of the alternative assets held by the Customer ExAlt Trusts, which is an input into the calculation of the recurring trust services revenues.
During the six months ended September 30, 2025, we concluded that interim impairment tests for goodwill were not required as we did not identify a triggering event during the period that would have required such an analysis. During the six months ended September 30, 2024, we did identify triggering events related to a significant, sustained decline in our Class A common stock price and the Company's related market capitalization, requiring interim impairment tests for goodwill and as a result, we recognized non-cash impairment charges totaling $3.4 million for this reporting unit. See-Critical Accounting Estimatesbelow and Note 6 to the Consolidated Financial Statements in "Part 1, Item 1.-Financial Statements" of this Quarterly Report on Form 10-Q for further information.
CUSTOMER EXALT TRUSTS
Results of Operations - Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024, and the Six Months Ended September 30, 2025 Compared to the Six Months Ended September 30, 2024 (Unaudited)
| (in thousands) | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
|
Investment income (loss), net
|
$ | (3,162) | $ | 8,541 | $ | (15,938) | $ | 19,569 | ||||||||||||||||||
|
Gain (loss) on financial instruments, net
|
379 | 571 | 304 | (604) | ||||||||||||||||||||||
| Total revenues | (2,783) | 9,112 | (15,634) | 18,965 | ||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||
| Interest expense | 37,853 | 36,049 | 74,998 | 70,848 | ||||||||||||||||||||||
| Professional services | 622 | 545 | 1,028 | 1,167 | ||||||||||||||||||||||
| Provision for credit losses | - | 476 | - | 998 | ||||||||||||||||||||||
| Other expenses | 3,374 | 3,591 | 6,948 | 7,130 | ||||||||||||||||||||||
| Total expenses | 41,849 | 40,661 | 82,974 | 80,143 | ||||||||||||||||||||||
|
Operating income (loss)
|
$ | (44,632) | $ | (31,549) | $ | (98,608) | $ | (61,178) | ||||||||||||||||||
Three Months Ended September 30, 2025 and 2024
Investment income (loss), net decreased $11.7 million for the three months ended September 30, 2025, compared to the same period of 2024, driven by changes in the NAV of investments in alternative assets held by certain of the Customer ExAlt Trusts or fair value for such investments deemed probable to be sold at an amount that differs from NAV. Investment loss was $3.2 million for the three months ended September 30, 2025, which was driven by $4.7 million of downward adjustments to our relative share of the respective fund's NAV based on updated financial information received from the funds' investment manager or sponsor or the fair value for investments deemed probable to be sold at an amount that differs from NAV and $0.3 million of downward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar partially offset by $1.9 million of upward quoted market price adjustments. Investment income was $8.5 million for the three months ended September 30, 2024, which was driven by $4.8 million of upward quoted market price adjustments, $2.3 million of upward adjustments to our relative share of the respective fund's NAV based on updated financial information received from the funds' investment manager or sponsor, and $1.5 million of upward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar.
Gain (loss) on financial instruments, net decreased $0.2 million for the three months ended September 30, 2025, compared to the same period of 2024, driven by the changes in fair value of the financial instruments held during the period. Gain on financial instruments, net for three months ended September 30, 2025, was primarily driven by a $0.4 million increase in the fair value of public equity securities. Gain on financial instruments, net for the three months ended September 30, 2024, was primarily driven by a $0.7 million increase in the fair value of public equity securities offset by a $0.2 million decrease in the value of our interests in the GWG Wind Down Trust.
Interest expense increased $1.8 million for the three months ended September 30, 2025, compared to the same period in 2024, which reflects an increase in contractual interest due on the ExAlt Loans, driven by the origination of new liquidity transactions and the compounding of paid-in-kind interest.
Provision for credit losses was $0.5 million for the three months ended September 30, 2024, which is comprised of a credit related loss on an available-for-sale debt security held by the Customer ExAlt Trusts. No such losses were recognized in the current year.
Six Months Ended September 30, 2025 and 2024
Investment income (loss), net decreased $35.5 million for the six months ended September 30, 2025, compared to the same period of 2024, driven by changes in the NAV of investments in alternative assets held by certain of the Customer ExAlt Trusts or fair value for such investments deemed probable to be sold at an amount that differs from NAV. Investment loss was $15.9 million for the six months ended September 30, 2025, which was driven by $19.3 million of downward adjustments to our relative share of the respective fund's NAV based on updated financial information received from the
funds' investment manager or sponsor offset by $2.7 million of upward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar and $1.1 million of upward quoted market price adjustments. Investment income was $19.6 million for the six months ended September 30, 2024, which was driven by $18.0 million of upward adjustments to our relative share of the respective fund's NAV based on updated financial information received from the funds' investment manager or sponsor and $1.3 million of upward adjustments related to foreign currency impacts on investments denominated in currencies other than the U.S. dollar offset by $1.1 million of downward quoted market price adjustments.
Gain (loss) on financial instruments, net improved by $0.9 million for the six months ended September 30, 2025, compared to the same period of 2024, driven by the changes in fair value of the financial instruments held during the period. Gain on financial instruments, net for the six months ended September 30, 2025 related to a $0.3 million increase in the fair value of public equity securities. Loss on financial instruments, net for the six months ended September 30, 2024 was primarily related to a $0.5 million decrease in the value of our interests in the GWG Wind Down Trust.
Interest expense increased $4.2 million for the six months ended September 30, 2025, compared to the same period in 2024, which reflects an increase in contractual interest on the ExAlt Loans, driven by the origination of new liquidity transactions and the compounding of effects of paid-in-kind interest offset by paydowns of the ExAlt Loans from proceeds generated from the underlying collateral comprised of the alternative assets held by the Customer ExAlt Trusts.
Provision for credit losses decreased $1.0 million for the six months ended September 30, 2025, compared to the same period in 2024. Provision for credit losses for the six months ended September 30, 2024, is comprised of a credit related loss on an available-for-sale debt security held by the Customer ExAlt Trusts. No such losses were recognized in the current year.
CORPORATE AND OTHER
Results of Operations - Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024, and the Six Months Ended September 30, 2025 Compared to the Six Months Ended September 30, 2024 (Unaudited)
| (in thousands) | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
|
Gain (loss) on financial instruments, net
|
$ | (168) | $ | (750) | $ | (138) | $ | (758) | ||||||||||||||||||
| Interest income | 10 | 12 | 20 | 24 | ||||||||||||||||||||||
| Total revenues | (158) | (738) | (118) | (734) | ||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||
| Employee compensation and benefits | 1,682 | 6,232 | 3,982 | 9,296 | ||||||||||||||||||||||
| Interest expense (including amortization of deferred financing costs) | 1,729 | 1,157 | 1,798 | 2,364 | ||||||||||||||||||||||
| Professional services | 4,404 | 6,287 | 11,132 | 10,339 | ||||||||||||||||||||||
| Provision for credit losses | - | - | - | 2 | ||||||||||||||||||||||
| Loss on impairment of goodwill | - | - | - | 265 | ||||||||||||||||||||||
|
Accrual (release) of loss contingency related to arbitration award
|
- | - | 62,831 | (54,973) | ||||||||||||||||||||||
| Other expenses | 1,582 | 2,012 | 3,241 | 4,308 | ||||||||||||||||||||||
| Total expenses | 9,397 | 15,688 | 82,984 | (28,399) | ||||||||||||||||||||||
|
Operating income (loss)
|
$ | (9,555) | $ | (16,426) | $ | (83,102) | $ | 27,665 | ||||||||||||||||||
Three Months Ended September 30, 2025 and 2024
Gain (loss) on financial instruments, net decreased $0.6 million for the three months ended September 30, 2025, compared to the same period of 2024, driven by the changes in fair value of the financial instruments held during the period. Loss on financial instruments, net for the three months ended September 30, 2025, included a $0.2 million increase in the fair value of our warrants liability. Loss on financial instruments, net for the three months ended September 30, 2024, included a $0.8 million combined loss in the fair value on the convertible debt, warrants and derivative liability.
Employee compensation and benefits decreased $4.6 million for the three months ended September 30, 2025, compared to the same period in 2024. The decrease was driven by a $2.9 million decrease in equity-based compensation and a $1.6
million decrease in payroll and other benefit-related costs due to a lower headcount in 2025 as compared to 2024.
Interest expense increased $0.6 million during the three months ended September 30, 2025, compared to the same period in 2024, driven by a $1.7 million increase in interest expense related to legal proceedings offset by the resolution of certain liabilities that were accruing interest of approximately $1.0 million per quarter.
Professional services decreased $1.9 million during the three months ended September 30, 2025, compared to the same period in 2024, primarily due to a decrease in legal fees. As previously disclosed, the legal fees recorded in a given period reflect our estimates related to amounts that will be covered under our D&O insurance policies. A substantial portion of our historic legal activity relates to matters that have been eligible for reimbursement from our D&O insurance carriers. The recent settlement involving matters related to GWG Holdings, Inc., once final approval is obtained, is expected to utilize substantially all of the amount of insurance coverage available to the Company on certain continuing legal matters.
Six Months Ended September 30, 2025 and 2024
Gain (loss) on financial instruments, net decreased $0.6 million for the six months ended September 30, 2025, compared to the same period of 2024, driven by the changes in fair value of the financial instruments held during the period. Loss on financial instruments, net for the six months ended September 30, 2025, includes a $0.1 million increase in the fair value of our warrants liability. Loss on financial instruments, net for the six months ended September 30, 2024, included a $0.8 million decrease in the combined fair value of the convertible debt, warrants and derivative liability.
Employee compensation and benefits decreased $5.3 million for the six months ended September 30, 2025, compared to the same period in 2024. The decrease was driven by a $3.4 million decrease in equity-based compensation and $1.9 million decrease in payroll and other benefit-related costs related to lower headcount in 2025 as compared to 2024.
Interest expense decreased $0.6 million during the six months ended September 30, 2025, compared to the same period in 2024, driven by resolution of certain liabilities that were accruing interest of approximately $1.0 million per quarter offset by a $1.7 million increase in interest expense related to legal proceedings.
Professional services increased $0.8 million during the six months ended September 30, 2025, compared to the same period in 2024, primarily due to an increase in legal fees. The legal fees recorded in a given period reflect our estimates related to amounts that will be covered under our D&O insurance policies. A substantial portion of our legal activity relates to matters that historically have been eligible for reimbursement from our D&O insurance carriers, however, the recent settlement involving matters related to GWG Holdings, Inc., once final approval is obtained, is expected to utilize substantially all of the amount of insurance coverage available to the Company on certain continuing legal matters. The expense in the current period related to such continuing legal matters that have historically been eligible for reimbursement from our D&O insurance carriers reflects our current estimate of incurred legal expenses expected to be denied by the insurance carriers due to the coverage being fully utilized under the terms of the applicable policies.
During the six months ended September 30, 2025, we concluded that interim impairment tests for goodwill were not required as we did not identify a triggering event during the period that would have required such an analysis. During the six months ended September 30, 2024, we did identify triggering events related to a significant, sustained decline in our Class A common stock price and the Company's related market capitalization, requiring interim impairment tests for goodwill and as a result, we recorded an aggregate non-cash impairment charge of $0.3 million. See-Critical Accounting Estimatesbelow and Note 6 to the Consolidated Financial Statements in "Part 1, Item 1.-Financial Statements" of this Quarterly Report on Form 10-Q for further information.
Release of loss contingency related to arbitration recognized during the six months ended September 30, 2024,relates to the release of a previously recorded loss contingency recorded in the fiscal year ended March 31, 2024 that had been awarded against the Company during arbitration for compensatory damages, including prejudgment interest in a matter pertaining to a former director challenging the termination of certain equity awards under two incentive plans by the administrator of the incentive plans. The release of the loss contingency was based on aTexas District Court order vacating the previously recorded and disclosed arbitration award against Beneficient. Accrual of loss contingency related to Arbitration Award recognized during the six months ended September 30, 2025, relates to the same arbitration involving a former director challenging the termination of certain equity awards under two incentive plans by the administrator of the incentive plans. The loss contingency is based on the Texas Fifth Court of Appeals reversing the judgment of the Texas District Court and confirming the Arbitration Award. The amount reflected during the three months ended September 30, 2025 includes post-judgment interest and fees through June 30, 2025, resulting in a loss of approximately $62.8 million. Ongoing post-judgment interest costs are reflected in interest expense as described above.
Other expenses decreased $1.1 million for the six months ended September 30, 2025, compared to the same period in 2024, primarily driven by a decrease in various categories, including insurance, depreciation and software licensing expenses.
Supplemental Unaudited Presentation of Non-GAAP Financial Information
Adjusted revenue and adjusted operating income (loss) are non-GAAP financial measures. We present these non-GAAP financial measures because we believe it helps investors understand underlying trends in our business and facilitates an understanding of our operating performance from period to period because it facilitates a comparison of our core business operating results. These non-GAAP financial measures are intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, U.S. GAAP. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of these non-GAAP financial measures may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate such items in the same way.
We define adjusted revenue as revenue adjusted to exclude the effect of mark-to-market adjustments on related party equity securities that were acquired both prior to and during the Collateral Swap, which on August 1, 2023, became interests in the GWG Wind Down Trust.
We define adjusted operating income (loss) as operating income (loss), adjusted to exclude the effect of the adjustments to revenue as described above, credit losses on related party available-for-sale debt securities that were acquired in the Collateral Swap, which on August 1, 2023, became interests in the GWG Wind Down Trust, and receivables from a related party that filed for bankruptcy and certain notes receivables originated during our formative transactions, non-cash asset impairment, share-based compensation expense, and legal, professional services, and public relations costs related to the GWG Holdings bankruptcy, lawsuits, and certain employee matters, including fees and loss contingency accruals (releases), including post-judgment interest, incurred in arbitration with a former director.
These non-GAAP financial measures are not a measure of performance or liquidity calculated in accordance with U.S. GAAP. They are unaudited and should not be considered an alternative to, or more meaningful than, revenue or operating income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in adjusted operating income (loss) include capital expenditures, interest payments, debt principal repayments, and other expenses, which can be significant. As a result, adjusted operating income (loss) should not be considered as a measure of our liquidity.
Because of these limitations, adjusted revenue and adjusted operating income (loss) should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP. We compensate for these limitations by relying primarily on our U.S. GAAP results and using adjusted revenue and adjusted operating income (loss) on a supplemental basis. You should review the reconciliation of revenue to adjusted revenue and operating income (loss) to adjusted operating income (loss) set forth below and not rely on any single financial measure to evaluate our business.
The following tables set forth a reconciliation of adjusted revenue to revenue and adjusted operating income (loss) to operating income (loss), the most directly comparable U.S. GAAP measures, using data derived from our consolidated financial statements for the periods indicated:
| (in thousands) | Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||
| Ben Liquidity | Ben Custody |
Customer ExAlt Trusts
|
Corporate/Other | Consolidating Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
| Total revenues | $ | 8,497 | $ | 3,081 | $ | (2,783) | $ | (158) | $ | (11,400) | $ | (2,763) | ||||||||||||||||||||||||||
|
Mark to market adjustment on interests in the GWG Wind Down Trust
|
- | - | 4 | - | - | 4 | ||||||||||||||||||||||||||||||||
| Adjusted revenues | $ | 8,497 | $ | 3,081 | $ | (2,779) | $ | (158) | $ | (11,400) | $ | (2,759) | ||||||||||||||||||||||||||
| Operating income (loss) | $ | (821) | $ | 2,292 | $ | (44,632) | $ | (9,555) | $ | 34,852 | $ | (17,864) | ||||||||||||||||||||||||||
|
Mark to market adjustment on interests in the GWG Wind Down Trust
|
- | - | 4 | - | - | 4 | ||||||||||||||||||||||||||||||||
|
Intersegment provision for credit losses on collateral comprised of interests in the GWG Wind Down Trust
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Goodwill impairment | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
|
Accrual (release) of loss contingency related to arbitration award, including post-judgment interest
|
- | - | - | 1,656 | - | 1,656 | ||||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | - | 462 | - | 462 | ||||||||||||||||||||||||||||||||
|
Legal and professional fees(1)
|
- | - | - | 3,154 | - | 3,154 | ||||||||||||||||||||||||||||||||
| Adjusted operating income (loss) | $ | (821) | $ | 2,292 | $ | (44,628) | $ | (4,283) | $ | 34,852 | $ | (12,588) | ||||||||||||||||||||||||||
(1)Includes legal and professional fees related to lawsuits.
| (in thousands) | Three Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||
| Ben Liquidity | Ben Custody |
Customer ExAlt Trusts
|
Corporate/Other | Consolidating Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
| Total revenues | $ | 11,978 | $ | 5,386 | $ | 9,112 | $ | (738) | $ | (17,177) | $ | 8,561 | ||||||||||||||||||||||||||
|
Mark to market adjustment on interests in the GWG Wind Down Trust
|
- | - | 173 | - | - | 173 | ||||||||||||||||||||||||||||||||
| Adjusted revenues | $ | 11,978 | $ | 5,386 | $ | 9,285 | $ | (738) | $ | (17,177) | $ | 8,734 | ||||||||||||||||||||||||||
| Operating income (loss) | $ | 2,905 | $ | 4,329 | $ | (31,549) | $ | (16,426) | $ | 27,026 | $ | (13,715) | ||||||||||||||||||||||||||
|
Mark to market adjustment on interests in the GWG Wind Down Trust
|
- | - | 173 | - | - | 173 | ||||||||||||||||||||||||||||||||
|
Intersegment provision for credit losses on collateral comprised of interests in the GWG Wind Down Trust
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Goodwill impairment | - | 298 | - | - | - | 298 | ||||||||||||||||||||||||||||||||
|
Accrual (release) of loss contingency related to arbitration award, including post-judgment interest
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | - | 3,364 | - | 3,364 | ||||||||||||||||||||||||||||||||
|
Legal and professional fees(1)
|
- | - | - | 3,269 | - | 3,269 | ||||||||||||||||||||||||||||||||
| Adjusted operating income (loss) | $ | 2,905 | $ | 4,627 | $ | (31,376) | $ | (9,793) | $ | 27,026 | $ | (6,611) | ||||||||||||||||||||||||||
(1)Includes legal and professional fees related to lawsuits.
| (in thousands) | Six Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||
| Ben Liquidity | Ben Custody |
Customer ExAlt Trusts
|
Corporate/Other | Consolidating Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
| Total revenues | $ | 17,332 | $ | 7,264 | $ | (15,634) | $ | (118) | $ | (24,230) | $ | (15,386) | ||||||||||||||||||||||||||
|
Mark to market adjustment on interests in the GWG Wind Down Trust
|
- | - | 5 | - | - | 5 | ||||||||||||||||||||||||||||||||
|
Adjusted revenues
|
$ | 17,332 | $ | 7,264 | $ | (15,629) | $ | (118) | $ | (24,230) | $ | (15,381) | ||||||||||||||||||||||||||
| Operating income (loss) | $ | (6,838) | $ | 5,420 | $ | (98,608) | $ | (83,102) | $ | 72,616 | $ | (110,512) | ||||||||||||||||||||||||||
|
Mark to market adjustment on interests in the GWG Wind Down Trust
|
- | - | 5 | - | - | 5 | ||||||||||||||||||||||||||||||||
|
Intersegment provision for creditlosses on collateral comprised of interests in the GWG Wind Down Trust
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||
|
Goodwill impairment
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||
|
Accrual (release) of loss contingency related to arbitration award, including post-judgment interest
|
- | - | - | 64,487 | - | 64,487 | ||||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | - | 923 | - | 923 | ||||||||||||||||||||||||||||||||
|
Legal and professional fees(1)
|
- | - | - | 7,329 | - | 7,329 | ||||||||||||||||||||||||||||||||
| Adjusted operating income (loss) | $ | (6,838) | $ | 5,420 | $ | (98,603) | $ | (10,363) | $ | 72,616 | $ | (37,768) | ||||||||||||||||||||||||||
(1)Includes legal and professional fees related to lawsuits.
| (in thousands) | Six Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||
| Ben Liquidity | Ben Custody |
Customer ExAlt Trusts
|
Corporate/Other | Consolidating Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
| Total revenues | $ | 22,827 | $ | 10,768 | $ | 18,965 | $ | (734) | $ | (33,219) | $ | 18,607 | ||||||||||||||||||||||||||
|
Mark to market adjustment on interests in the GWG Wind Down Trust
|
- | - | 531 | 7 | - | 538 | ||||||||||||||||||||||||||||||||
|
Adjusted revenues
|
$ | 22,827 | $ | 10,768 | $ | 19,496 | $ | (727) | $ | (33,219) | $ | 19,145 | ||||||||||||||||||||||||||
| Operating income (loss) | $ | 2,391 | $ | 5,616 | $ | (61,178) | $ | 27,665 | $ | 56,129 | $ | 30,623 | ||||||||||||||||||||||||||
|
Mark to market adjustment on interests in the GWG Wind Down Trust
|
- | - | 531 | 7 | - | 538 | ||||||||||||||||||||||||||||||||
|
Intersegment provision for credit losses on collateral comprised of interests in the GWG Wind Down Trust
|
5 | - | - | - | (5) | - | ||||||||||||||||||||||||||||||||
|
Goodwill impairment
|
- | 3,427 | - | 265 | - | 3,692 | ||||||||||||||||||||||||||||||||
|
Accrual (release) of loss contingency related to arbitration award, including post-judgment interest
|
- | - | - | (54,973) | - | (54,973) | ||||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | - | 4,358 | - | 4,358 | ||||||||||||||||||||||||||||||||
|
Legal and professional fees(1)
|
- | - | - | 4,425 | - | 4,425 | ||||||||||||||||||||||||||||||||
| Adjusted operating income (loss) | $ | 2,396 | $ | 9,043 | $ | (60,647) | $ | (18,253) | $ | 56,124 | $ | (11,337) | ||||||||||||||||||||||||||
(1)Includes legal and professional fees related to lawsuits.
Financial Condition
Ben Liquidity's Loan Portfolio and Customer ExAlt Trusts' Investment in Alternative Assets
Our primary operations currently consist of offering our liquidity and trust administration services to our customers, primarily through certain of our operating subsidiaries, Ben Liquidity and Ben Custody, respectively. Ben Liquidity offers simple, rapid and cost-effective liquidity products to its customers using a proprietary financing and trusts structure, the Customer ExAlt Trusts, which facilitate the exchange of a customer's alternative assets for consideration using a unique financing structure, the ExAlt PlanTM. In ExAlt PlanTMfinancings, a subsidiary of Ben Liquidity, BFF, makes ExAlt Loans to certain of the Customer ExAlt Trusts, which in turn employ a portion of the loan proceeds to acquire and deliver agreed upon consideration to the customer, in exchange for their alternative assets. Ben Liquidity generates interest and fee income earned in connection with such ExAlt Loans to certain of the Customer ExAlt Trusts, which are collateralized by the cash flows from the exchanged alternative assets, or the "Collateral." The Collateral held by the Customer ExAlt Trusts supports the repayment of the loans plus any related interest and fees. In the event that an ExAlt Loan's principal balance is reduced to zero dollars ($0), any remaining Collateral supporting such ExAlt Loan effectively cross-collateralizes other ExAlt Loans, as any such excess cash flows must be applied to pay off the outstanding balances of other ExAlt Loans pursuant to the terms of the trust agreements governing certain of the ExAlt Trusts. Ben Custody provides full-service trust and custody administration services to the trustees of certain of the Customer ExAlt Trusts, including BFF, which own the exchanged alternative asset following a liquidity transaction for fees payable quarterly.
As of September 30, 2025, Ben Liquidity's loan portfolio consisted of ExAlt Loans to the Customer ExAlt Trusts with an aggregate principal amount outstanding of $581.4 million,including accrued interest that has been capitalized on the ExAlt Loans. Ben Liquidity's ExAlt Loans are structured as loans with a maturity date of 12 years that bear contractual interest at a variable rate or fixed rate that compounds monthly. The ExAlt Loans made prior to December 31, 2020 have a variable interest rate established off of a base rate of 14%, and ExAlt Loans made on or after December 31, 2020 have a variable interest rate established off a base rate of 10% or a fixed rate of 5%-10%. Ben Liquidity may make ExAlt Loans in the future with a variable interest rate established off of different base rates. Since the Customer ExAlt Trusts are consolidated, the ExAlt Loans and related interest and fee income earned by Ben Liquidity and Ben Custody from the Customer ExAlt Trusts are eliminated in the presentation of our consolidated financial statements; however, such amounts directly impact the income (loss) allocable to Ben's or BCH's equity holders.
The Customer ExAlt Trusts' investments are the source of the Collateral supporting the ExAlt Loans plus any related interest and fees. These investments, either through direct ownership or through beneficial interests, consist primarily of limited partnership interests in various alternative assets, including private equity funds. These alternative investments are recorded generally at fair value using NAV as a practical expedient. When the sale of an investment in an alternative asset is deemed probable at an amount that differs from NAV, the investment in the alternative asset is recorded at its estimated fair value under FASB ASC 820, Fair Value Measurement.Changes in the fair value (i.e., NAV) of these alternative investments are recorded in investment income (loss), net in our consolidated statements of operations. The Customer ExAlt Trusts' investments in alternative assets and investments in equity and debt securities provide the economic value creating the Collateral to the ExAlt Loans made in connection with each liquidity transaction.
The underlying interests in alternative assets are primarily limited partnership interests. The transfer of the investments in private equity funds generally requires the consent of the corresponding private equity fund manager, and the transfer of certain fund investments is subject to rights of first refusal or other preemptive rights, potentially further limiting the ExAlt PlanTMfrom transferring an investment in a private equity fund. Distributions from funds are received as the underlying investments are liquidated. Timing of liquidation is currently unknown.
The Customer ExAlt Trusts held interests in alternative assets with a NAV of $211.3 million and $259.1 million as of September 30, 2025 and March 31, 2025, respectively. As of September 30, 2025, the Customer ExAlt Trusts' portfolio had exposure to 188 professionally managed alternative investment funds, comprised of 522 underlying investments, 85 percent of which are investments in private companies. Additionally, the Customer ExAlt Trusts directly hold investments in debt and equity securities. The aggregate value of these investments was $32.7 million and $32.3 million as of September 30, 2025 and March 31, 2025, respectively. As part of the Asset Sales Initiative described elsewhere, subsequent to September 30, 2025, entities held by a Customer ExAlt Trust and managed by an indirect subsidiary of the Company completed or agreed to the completion of the sale or equity redemption of beneficial interests with respect to certain limited partner interests held for the benefit of such Customer ExAlt Trust. Aggregate gross proceeds of $9.7 million are received or expected to be received for the sale or equity redemption of the beneficial interests once all transactions are closed. Furthermore, following the completion of these sales of beneficial interests with respect to certain limited partner interests held for the benefit of such Customer ExAlt Trusts after September 30, 2025, on a pro forma basis considering the sales of beneficial interests, the aggregate value of the investments held by the Customer ExAlt Trusts is $235.9 million.
The following sections provide more detailed information for Ben Liquidity's loan portfolio and related allowance for credit
losses and the Customer ExAlt Trusts' investments in alternative assets and other equity and debt securities.
Ben Liquidity
Loans Receivable
The following table provides the carrying value of the loan portfolio by collateral type and classification (in thousands):
| September 30, 2025 | March 31, 2025 | |||||||||||||
| Loans collateralized by interests in alternative assets | $ | 405,327 | $ | 412,095 | ||||||||||
| Loans collateralized by debt and equity securities | 176,028 | 174,435 | ||||||||||||
| Total loans receivable | 581,355 | 586,530 | ||||||||||||
|
Allowance for creditlosses
|
(358,226) | (342,460) | ||||||||||||
| Total loans receivable, net | $ | 223,129 | $ | 244,070 | ||||||||||
The following table provides certain information concerning our loan portfolio by collateral type and maturity as of September 30, 2025 (in thousands):
| Original Principal | Interest Accrued | Aggregate Payments |
Outstanding Balance(1)
|
Allowance | Carrying Value | |||||||||||||||||||||||||||||||||
| Loans collateralized by interests in alternative assets | ||||||||||||||||||||||||||||||||||||||
| Within 5 Years | $ | 416,069 | $ | 263,699 | $ | (358,578) | $ | 168,901 | $ | 80,044 | $ | 88,857 | ||||||||||||||||||||||||||
| After 5 Years Within 10 Years | 240,275 | 96,873 | (113,020) | 224,066 | 123,945 | 100,121 | ||||||||||||||||||||||||||||||||
| After 10 Years | 11,799 | 561 | - | 12,361 | - | 12,361 | ||||||||||||||||||||||||||||||||
| Loans collateralized by debt and equity securities | ||||||||||||||||||||||||||||||||||||||
| Within 5 Years | 162,667 | 129,878 | (13,198) | 149,161 | 147,879 | 1,282 | ||||||||||||||||||||||||||||||||
| After 5 Years Within 10 Years | 17,583 | 9,461 | (178) | 26,866 | 6,358 | 20,508 | ||||||||||||||||||||||||||||||||
| After 10 Years | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Total | $ | 848,393 | $ | 500,472 | $ | (484,974) | $ | 581,355 | $ | 358,226 | $ | 223,129 | ||||||||||||||||||||||||||
(1)This balance includes $282.5 million in unamortized discounts as of September 30, 2025.
Loan to Value Ratio
The loan to value ratio is calculated as the carrying value of loans receivable after any allowance for creditlosses over the Collateral Value of the loan portfolio. The value of the Collateral (the "Collateral Value") is defined as the mutual beneficial interest of the respective Customer ExAlt Trust, which we refer to as the "Collective Trust" that is owned by the Customer ExAlt Trust, which we refer to as the "Funding Trust," that borrows from Ben Liquidity's subsidiary, BFF. The Collateral Value is derived from the expected cash flows from the various alternative assets held by other trusts included within the Customer ExAlt Trust structure. The Collateral is valued using industry standard valuation models, which includes assumptions related to (i) equity market risk premiums, (ii) alternative asset beta to public equities, (iii) NAVs, (iv) volatilities, (v) distribution rates, and (vi) market discount rates. The fair value of the mutual beneficial interests collateralizing the loan portfolio as of September 30, 2025 and March 31, 2025, was $222.2 million and $241.9 million, respectively.
The loan to value ratio for the entire loan portfolio was 1.00 and 1.01 as of September 30, 2025 and March 31, 2025, respectively.
Allowance for Credit Losses
The ExAlt Loans' allowance for credit losses is an input to the allocation of income (loss) to Ben's or BCH's equity holders.
On April 1, 2023, we adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments, Credit Losses(Topic 326) ("CECL"), which requires an estimate of the credit losses expected over the life of a loan (or pool of loans). It replaced the incurred loss approach's threshold that required the recognition of a credit loss when it was probable that a loss event was incurred. The allowance for credit losses is a valuation account that is deducted from, or added to, the loans' amortized cost basis to present the net, lifetime amount expected to be collected on the loans.
Management estimates the allowance using relevant available information from internal and external sources related to past events, current conditions, and reasonable and supportable economic forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Ben currently does not have adequate historical loss data to provide a basis for the long-term loss information associated with its loans. As such, Ben uses alternative, long-term historical average credit loss data from Preqin, Ltd. in establishing the loss history as a proxy.
Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in credit concentrations, collateral values and underwriting standards as well as changes in economic conditions or other relevant factors. Management judgment is required at each point in the measurement process.
Ben uses the discounted cash flow ("DCF") method to estimate expected credit losses for the loan portfolio. Ben generates cash flow projections at the loan level wherein payment expectations are adjusted for changes in market risk premiums, risk free rate, NAV growth rate, and discount rate. The inputs are based on historical data from Preqin, Ltd. and adjusted, if necessary, based on the reasonable and supportable forecast of economic conditions. To adjust, management utilizes externally developed forward-looking macroeconomic factors as indicators of future expected cash flows: S&P 500 Index data and US 3-Month Treasury. The economic forecasts are applied over the cashflow projection period.
The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows ("NPV"). An allowance for credit loss is established for the difference between the instrument's NPV and amortized cost basis.
The DCF model also considers the need to qualitatively adjust expected loss estimates for information not already captured in the quantitative loss estimation process. Qualitative considerations include limitations inherent in the quantitative model; trends experienced in nonperforming loans; changes in value of underlying collateral; changes in underwriting policies and procedures; nature and composition of loans; portfolio concentrations that may affect loss experience across one or more components or the portfolio; and the effect of external factors such as competition, legal and regulatory requirements. These qualitative factor adjustments may increase or decrease Ben's estimate of expected credit losses so that the allowance for credit loss is reflective of the estimate of lifetime losses that exist in the loan portfolio at the balance sheet date.
The following table provides the allowance for credit losses recognized by Ben Liquidity and Ben Custody by collateral type and by classification (in thousands):
| September 30, 2025 | March 31, 2025 | |||||||||||||
| Loans collateralized by interests in alternative assets | $ | 203,989 | $ | 190,072 | ||||||||||
| Loans collateralized by interest in debt and equity securities | 154,237 | 152,388 | ||||||||||||
|
Total allowance for creditlosses
|
$ | 358,226 | $ | 342,460 | ||||||||||
The following table provides a rollforward of the allowance for creditlosses recognized by Ben Liquidity and Ben Custody by collateral type (in thousands):
|
Three Months Ended September 30, 2025 |
Three Months Ended September 30, 2024 |
|||||||||||||||||||||||||
| (unaudited) | Alternative Assets | Debt & Equity Securities | Alternative Assets | Debt & Equity Securities | ||||||||||||||||||||||
| Beginning balance | $ | 199,253 | $ | 153,477 | $ | 159,190 | $ | 151,311 | ||||||||||||||||||
|
Provision for (reversal of) creditlosses
|
4,736 | 760 | 79,957 | (75,205) | ||||||||||||||||||||||
| Ending balance | $ | 203,989 | $ | 154,237 | $ | 239,147 | $ | 76,106 | ||||||||||||||||||
|
Six Months Ended September 30, 2025 |
Six Months Ended September 30, 2024 |
|||||||||||||||||||||||||
| (unaudited) | Alternative Assets | Debt & Equity Securities | Alternative Assets | Debt & Equity Securities | ||||||||||||||||||||||
| Beginning balance | $ | 190,072 | $ | 152,388 | $ | 168,089 | $ | 135,485 | ||||||||||||||||||
|
Provision for (reversal of) creditlosses
|
13,917 | 1,849 | 71,058 | (59,379) | ||||||||||||||||||||||
| Ending balance | $ | 203,989 | $ | 154,237 | $ | 239,147 | $ | 76,106 | ||||||||||||||||||
Credit Quality
The following table presents certain credit quality metrics (dollar amounts in thousands):
| September 30, 2025 | March 31, 2025 | |||||||||||||
| Loans collateralized by alternative assets | ||||||||||||||
| Period-end loans | $ | 405,327 | $ | 412,095 | ||||||||||
| Nonperforming loans | $ | 164,469 | $ | 164,983 | ||||||||||
|
Allowance for creditlosses
|
$ | 203,989 | $ | 190,072 | ||||||||||
|
Allowance/loans
|
50.33 | % | 46.12 | % | ||||||||||
| Nonperforming loans/loans | 40.58 | % | 40.04 | % | ||||||||||
|
Allowance to nonperforming loans
|
1.24x | 1.15x | ||||||||||||
| Loans collateralized by debt and equity securities | ||||||||||||||
| Period-end loans | $ | 176,028 | $ | 174,435 | ||||||||||
|
Nonperforming loans(1)
|
$ | 148,708 | $ | 131,382 | ||||||||||
|
Allowance for creditlosses
|
$ | 154,237 | $ | 152,388 | ||||||||||
| Allowance/loans | 87.62 | % | 87.36 | % | ||||||||||
| Nonperforming loans/loans | 84.48 | % | 75.32 | % | ||||||||||
|
Allowance to nonperforming loans(1)
|
1.04x | 1.16x | ||||||||||||
| Consolidated | ||||||||||||||
| Period-end loans | $ | 581,355 | $ | 586,530 | ||||||||||
|
Nonperforming loans(1)
|
$ | 313,177 | $ | 296,365 | ||||||||||
|
Allowance for creditlosses
|
$ | 358,226 | $ | 342,460 | ||||||||||
|
Allowance/loans
|
61.62 | % | 58.39 | % | ||||||||||
| Nonperforming loans/loans | 53.87 | % | 50.53 | % | ||||||||||
|
Allowance to nonperforming loans(1)
|
1.14x | 1.16x | ||||||||||||
(1) The nonperforming loans collateralized by interests in GWG or the GWG Wind Down Trust was $145.9 million as of September 30, 2025 and March 31, 2025.
Customer ExAlt Trusts - Alternative Asset Portfolio
The portfolio of alternative assets held by the Customer ExAlt Trusts covers the following industry sectors and geographic regions for the periods shown below (dollar amounts in thousands):
| September 30, 2025 | March 31, 2025 | |||||||||||||||||||||||||
| Industry Sector | Value | Percent of Total | Value | Percent of Total | ||||||||||||||||||||||
| Food and Staples Retailing | $ | 63,998 | 30.3 | % | $ | 63,846 | 24.6 | % | ||||||||||||||||||
| Software and Services | 23,365 | 11.1 | 41,460 | 16.0 | ||||||||||||||||||||||
| Diversified Financials | 20,900 | 9.9 | 22,273 | 8.6 | ||||||||||||||||||||||
| Utilities | 19,648 | 9.3 | 15,432 | 6.0 | ||||||||||||||||||||||
| Semiconductors and Semiconductor Equipment | 17,490 | 8.3 | 15,426 | 6.0 | ||||||||||||||||||||||
| Health Care Equipment and Services | 10,660 | 5.0 | 13,464 | 5.2 | ||||||||||||||||||||||
| Capital Goods | 5,100 | 2.4 | 20,532 | 7.9 | ||||||||||||||||||||||
|
Other(1)
|
50,163 | 23.7 | 66,680 | 25.7 | ||||||||||||||||||||||
| Total | $ | 211,324 | 100.0 | % | $ | 259,113 | 100.0 | % | ||||||||||||||||||
| (1) |
Industries in this category each comprise less than 5 percent. Capital Goods is shown separately as it comprised greater than 5 percent in the prior period.
|
||||
| September 30, 2025 | March 31, 2025 | |||||||||||||||||||||||||
| Geography | Value | Percent of Total | Value | Percent of Total | ||||||||||||||||||||||
| North America | $ | 91,089 | 43.1 | % | $ | 135,066 | 52.1 | % | ||||||||||||||||||
| South America | 64,720 | 30.6 | 64,969 | 25.1 | ||||||||||||||||||||||
| Asia | 40,190 | 19.0 | 41,948 | 16.2 | ||||||||||||||||||||||
| Europe | 15,212 | 7.2 | 17,018 | 6.6 | ||||||||||||||||||||||
| Africa | 113 | 0.1 | 112 | - | ||||||||||||||||||||||
| Total | $ | 211,324 | 100.0 | % | $ | 259,113 | 100.0 | % | ||||||||||||||||||
Assets in the portfolio consist primarily of interests in alternative investment vehicles (also referred to as "funds") that are managed by a group of U.S. and non-U.S. based alternative asset management firms that invest in a variety of financial markets and utilize a variety of investment strategies. The vintages of the funds in the portfolio as of September 30, 2025 ranged from 1993 to 2025.
As Ben Liquidity originates additional ExAlt Loans, it monitors the diversity of the portfolio of alternative assets held by the Customer ExAlt Trusts through the use of concentration guidelines. These guidelines were established, and are periodically updated, through a data driven approach based on asset type, fund manager, vintage of fund, industry segment and geography to manage portfolio risk. Ben Liquidity refers to these guidelines when making decisions about new financing opportunities; however, these guidelines do not restrict Ben Liquidity from entering into financing opportunities that would result in Ben Liquidity having exposure outside of its concentration guidelines. In addition, changes to the portfolio of alternative assets held by the Customer ExAlt Trusts may lag changes to the concentration guidelines. As such, the portfolio of alternative assets held by the Customer ExAlt Trusts may, at any given time, have exposures that are outside of Ben Liquidity's concentration guidelines to reflect, among other things, attractive financing opportunities, limited availability of assets, or other business reasons. Given our operating history of relatively few transactions at significant NAV, the portfolio as of September 30, 2025 had exposure to certain alternative investment vehicles and investments in private companies that were outside of those guidelines.
Classifications by industry sector, exposure type and geography reflect classification of investments held in funds or companies held directly in the portfolio. Investments reflect the assets listed by the general partner of a fund as held by the fund and have a positive or negative NAV. Typical assets include portfolio companies, limited partnership interests in other funds, and net other assets, which are a fund's cash and other current assets minus liabilities. The underlying interests in alternative assets are primarily limited partnership interests, and the limited partnership agreements governing those interests generally include restrictions on disclosure of fund-level information, including fund names and company names in the funds.
Industry sector is based on Global Industry Classification Standard (GICS®) Level 2 classification (also known as "Industry Group") of companies held in the portfolio by funds or directly, subject to certain adjustments by us. "Other" classification is not a GICS® classification. "Other" classification reflects companies in the GICS® classification categories of Automobiles & Components, Banks, Commercial & Professional Services, Consumer Durables & Apparel, Consumer Services, Energy, Food, Beverage & Tobacco, Household & Personal Products, Insurance, Materials, Media & Entertainment, Pharmaceuticals, Biotechnology & Life Sciences, Real Estate, Retailing, Technology Hardware & Equipment, Telecommunication Services, and Transportation. "N/A" includes investments assets that we have determined do not have an applicable GICS® Level 2 classification, such as Net Other Assets and investments that are not operating companies.
Geography reflects classifications determined by us based on each underlying investment.
Cash Flow
The following table presents a summary of cash flows from operating, investing and financing activities for periods presented below (in thousands):
|
Six Months Ended September 30, |
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| 2025 | 2024 | |||||||||||||
| Net cash used in operating activities | $ | (25,364) | $ | (19,259) | ||||||||||
| Net cash provided by investing activities | 42,825 | 11,164 | ||||||||||||
|
Net cash (used in) provided by financing activities
|
(13,905) | 4,914 | ||||||||||||
|
Net increase (decrease) in cash and cash equivalents, and restricted cash
|
$ | 3,556 | $ | (3,181) | ||||||||||
Six Months Ended September 30, 2025 and 2024
Net cash used in operating activities was $25.4 million for the six months ended September 30, 2025, largely driven by working capital requirements, including employee compensation and benefits and professional services. Net cash provided by investing activities was $42.8 million for the six months ended September 30, 2025, primarily driven by $7.8 million of distributions as return of investments in alternative assets and $37.2 million from the disposition of certain investments in alternative assets partially offset by $2.0 million in purchases of investments in alternative assets. Net cash used in financing activities was $13.9 million for the six months ended September 30, 2025 resulting from $15.0 million in principal payments on debt obligations, proceeds received from issuance of Class A common shares under the standby equity purchase agreement of approximately $0.3 million, and a total of $0.9 million in proceeds from debt issuances.
Net cash used in operating activities was $19.3 million for the six months ended September 30, 2024, largely driven by working capital requirements, including employee compensation and benefits and professional services. Net cash provided by investing activities was $11.2 million for the six months ended September 30, 2024, primarily driven by $12.5 million of distributions received as return of investments in alternative assets offset by $0.9 million in purchases of premises and equipment. Net cash provided by financing activities was $4.9 million for the six months ended September 30, 2024 resulting from proceeds received from issuance of Class A common shares under the standby equity purchase agreement of approximately $2.6 million, a total of $3.5 million in proceeds from debt issuances, and $0.7 million from other common stock salesoffset by approximately $1.6 millionin payment of deferred issuance costs.
Liquidity and Capital Resources
As of September 30, 2025 and March 31, 2025, we had $4.9 million and $1.3 million, respectively, in combined available unrestricted cash and cash equivalents. We have purported events of default on certain of our related party debt obligations that could make these debts potentially callable by the lender (as further described below). Our obligations including principal and accrued interest under these related party debt instruments as of September 30, 2025 exceeded $126 million, when considering the cross default provisions under the terms of each respective debt agreement. Additionally, on October 10, 2025, the Texas Fifth Court of Appeals reversed the judgment of the Texas District Court and confirmed the previous $55.3 million Arbitration Award. With post-judgment interest, the amount of the Arbitration Award is approximately $64.5 million as of September 30, 2025.
Our business is capital intensive, and we have historically generated net losses and, in aggregate, these net losses have resulted in an accumulated deficit of $2.1 billion as of September 30, 2025.
We currently finance our business through a combination of cash distributions from the Customer ExAlt Trusts' alternative asset portfolio, including proceeds received from the sale of certain alternative assets, receipt of fees for performing trust services, dividends and interest on investments, debt offerings, and equity offerings, including under the SEPA upon filing of a post-effective amendment to the SEPA resale registration statement, and sales of loans extended to the Customer ExAlt Trusts. We have traditionally used proceeds from these sources for cash obligations arising from our initial capitalization and formative transactions, funding liquidity transactions and potential unfunded capital commitments, working capital, debt service payments, and costs associated with potential future products. We have recently completed the sale or equity redemptions of certain beneficial interests in alternative assets, which has resulted in the receipt of gross proceeds of approximately $46.4 million through November 10, 2025, and we may consider the monetization of additional alternative assets as source of funding. BFF is also required to maintain sufficient regulatory capital due to its Kansas charter, though such amount is not significant.
The ability of Ben, BCH, and our operating subsidiaries to access the cash distributions from the Customer ExAlt Trusts' alternative asset portfolio is limited by the terms of the ExAlt Loans from Ben Liquidity to the Customer ExAlt Trusts. Historically, Ben Liquidity has elected to capitalize interest that accrues on the ExAlt Loans and only receives payments on the ExAlt Loans, at the discretion of the applicable trustee, following the Customer ExAlt Trusts' receipt of cash distributions on their alternative asset portfolio. The trustee of the Customer ExAlt Trusts intends to make principal payments on the ExAlt Loans out of the proceeds of the distributions or sale proceeds received from the alternative assets. To the extent the Customer ExAlt Trusts do not receive distributions, such as if the managers of the professionally managed funds comprising the alternative assets determine to delay distributions or transactions, that would result in the distributions to its limited partners, the Customer ExAlt Trusts' ability to repay the ExAlt Loans, and therefore, Ben Liquidity's ability to receive principal and interest payments in cash may be adversely impacted. Additionally, efforts to pursue additional sales of the beneficial interests in the alternative assets may not come to fruition. During the six months ended September 30, 2025, largely as a result of macro-economic conditions, the Customer ExAlt Trusts continued to receive fewer distributions from their alternative assets, excluding the proceeds received from the sales described herein, than was originally anticipated, which adversely impacted the Customer ExAlt Trusts' ability to repay the ExAlt Loans and our liquidity. Such conditions are expected to continue throughout the first half of fiscal year 2026. As described above, in an effort to address cash flow restraints the Company has been experiencing primarily relating to delays in distributions and other realization events on the interests in alternative assets held the Customer ExAlt Trusts, the Company has commenced an initiative (the "Asset Sales Initiative") to sell or otherwise monetize a portion of the assets reported on the Company's consolidated balance sheet, including assets and additional investments held by the Customer ExAlt Trusts if, as and when prudent. Through November 10, 2025, this has resulted in sales or equity redemptions of approximately $46.4 million of limited partner interests by entities held by the Customer ExAlt Trusts. While the Company intends to consider additional sales, there can be no assurances that such additional sales will be available on favorable terms or at all.
We expect that the Company will require additional capital to satisfy our obligations and fund our operations for the next twelve months, which will likely be achieved through the issuance of additional debt or equity, including through the SEPA upon filing of a post-effective amendment to the SEPA resale registration statement, and the monetization of certain of the investments held by the Customer ExAlt Trusts. We continue to evaluate our available options with respect to the Arbitration Award, which may include appealing to the Texas Supreme Court or working with the Claimant in the arbitration on settlement terms that could reduce the potential near term cash obligations associated with the arbitration. We continue to explore raising additional capital through a combination of debt financing and/or equity financing to supplement the Company's capitalization and liquidity. If and as we raise additional funds by incurring loans or by issuing debt securities or preferred stock, these forms of financing have rights, preferences, and privileges senior to those of holders of our Common Stock. The availability and the terms under which we are able to raise additional capital could be disadvantageous, and the terms of debt financing and/or equity financing could place significant restrictions on our operations. Macroeconomic conditions and credit markets are also impacting the availability and cost of potential future debt financing. As we raise capital through the issuance of additional equity, such sales and issuance have and will continue to dilute the ownership interests of the existing holders of Common Stock. There can be no assurances that any additional debt and/or equity financing would be available to us on favorable terms or at all. We expect to continue to incur net losses, comprehensive losses and negative cash flows from operating activities until we meet a certain scale of operations.
As of the date of this Quarterly Report on Form 10-Q, we believe that our anticipated operating cash flows, proceeds on ExAlt Loan payments and fee income derived from distributions on investments held by the Customer ExAlt Trusts or other investments held by Ben, and additional sources of liquidity, are not sufficient to meet our contractual obligations over the next 12 months. Additionally, unless the Arbitration Award is overturned or the Arbitration Award is significantly reduced, the losses incurred in connection with the Arbitration Award would have a material adverse effect on our liquidity and financial condition.
Our contractual obligations over the next 12 months include scheduled maturities of outstanding borrowings of approximately $7.8 millionwith a maturity date of March 31, 2026. Additionally, on April 14, 2025, the HCLP Loan purportedly matured, and on July 30, 2025, we received written notice from HCLP that events of default had occurred with respect to our borrowings under the HCLP Loan Agreement (approximately $94.4 million(including an unamortized premium thereon) of debt outstanding and unpaid interest of $24.0 millionas of September 30, 2025). The debt and accrued interest matured and became due and payable upon such maturity. Due to the Company identifying credible evidence that Mr. Heppner participated in fabricating and delivering fake documents to the Company regarding his and others' relationships to HCLP, among other items, the Company is evaluating the validity of its obligations under the HCLP Loan Agreement and the liens securing the HCLP Loan and is considering all options that it may pursue related to this conduct, including litigation against Mr. Heppner, HCLP and any direct or indirect control parties of HCLP.
While we may refinance some or all of the existing borrowings due prior to their maturity, with either our current lenders or other lenders, continue to seek opportunities to reduce corporate overhead, and intend to raise capital through equity or debt
investments in us by third parties, including through the SEPA upon filing of a post-effective amendment to the SEPA resale registration statement, and the additional monetization of certain of the investments held by the Customer ExAlt Trusts, we cannot conclude these are probable of being implemented or, if probable of being implemented, being in sufficient enough amounts to satisfy our contractual amounts as they presently exist that are coming due over the next 12 months as of the date of filing this Quarterly Report on Form 10-Q.
As further discussed in other sections of this Quarterly Report on Form 10-Q, on June 27, 2023, we entered into the SEPA with Yorkville, whereby we have the right, but not the obligation, to sell to Yorkville up to $250.0 million of shares of the Company's Class A common stock. Through November 10, 2025, the Company had offered and sold 4,911,775 shares of Class A common stock to the Yorkville Investor pursuant to the SEPA for net proceeds of approximately $9.3 million. On June 20, 2024, the Company obtained stockholder approval pursuant to Nasdaq Listing Rule 5635(d) for the issuance of shares of Class A common stock to the Yorkville in excess of the Exchange Cap. As a result, the Company may issue up to an aggregate of approximately $246.1 million worth of shares of Class A common stock following registration with the SEC, on November 12, 2024. As of November 10, 2025, approximately $240.7 millionworth of shares of Class A common stock remains available under the terms of the SEPA. The issuance of additional shares of Class A common stock under the SEPA will dilute the percentage ownership interest of all stockholders, could dilute the book value per share of the Class A common stock and will increase the number of the Company's outstanding shares, which could cause the market price of our Class A common stock to decrease. Additionally, the decision regarding future sale of shares, including those under the SEPA, is subject to market conditions, such as trading volume, price of our Class A Common Stock and other factors beyond our control.
As further discussed in other sections of this Quarterly Report on Form 10-Q, on October 19, 2023, we entered into a three-year $25.0 million term loan with HH-BDH, which was fully drawn upon closing and, the proceeds of which were used to repay certain outstanding obligations, fund development of our products, and provide additional working capital. On August 16, 2024, an amendment to the term loan with HH-BDH was executed to add a subsequent term loan of $1.7 million, which was fully drawn upon the closing, and, the proceeds of which used to provide additional working capital. During the six months ended September 30, 2025, we agreed to an advance, as part of a currently ongoing negotiation to amend the Term Loan with HH-BDH, to add a subsequent term loan of $850 thousand, which has been fully drawn, and, the proceeds of which were used to provide additional working capital. The HH-BDH Credit Agreement contains certain financial maintenance covenants, including a debt service coverage ratio and, beginning on December 31, 2024, a minimum liquidity requirement of $4.0 million, measured on the last day of each month. The Company has at times in late fiscal year 2025 and in subsequent periods been in default on certain of the required payment obligations, financial covenants, and information reporting requirements of the HH-BDH Credit Agreement. The Company is actively working with the lender on waivers related to these defaults along with the amendment to the HH-BDH Credit Agreement. Such negotiations remain in process as of the date of this Quarterly Report on Form 10-Q. The events of default under the HCLP Loan Agreement described above triggered a cross default provision in the HH-BDH Credit Agreement. The Company timely notified HH-BDH of the cross default and, as of the date of this Quarterly Report on Form 10-Q, HH-BDH has not notified the Company that it intends to declare an event of default as its relates to the cross default provision of the HH-BDH Credit Agreement.
If any of these limitations of the HH-BDH Credit Agreement or the HCLP Loan Agreement, for which there are currently existing events of defaults on these related party debt obligations, were to materially impede the flow of cash to us, our ability to service and repay our related party debt would be materially and adversely affected. Notwithstanding the receipt of the proceeds of the borrowings made under the HH-BDH Credit Agreement, as amended, to the extent the Company continues to receive cash distributions that are less than previously projected amounts from its alternative assets, the Company will require additional capital to fund and grow its operations.
We may not be able to refinance our indebtedness or obtain additional financing on terms favorable to the Company, or at all. To the extent that Ben or its subsidiaries raise additional capital through the future sale of equity or debt, the ownership interest of our existing equity holders may be diluted. The terms of these future equity or debt securities may include liquidation or other preferences that adversely affect the rights of our existing equity unitholders or involve negative covenants that restrict Ben's ability to take specific actions, such as incurring additional debt or making additional investments in growing the operations of the Company. If Ben defaults on these borrowings, then the Company will be required to either (i) sell participation or other interests in our loans or other of our assets or (ii) to raise additional capital through the sale of equity and the ownership interest of our equity holders may be diluted. Further, given the number of shares of Class A common stock eligible for resale as a result of various registration statements we have filed with the SEC, our stock price may be further depressed as a result of significant sales of our securities, which could adversely affect our ability to raise equity capital on favorable terms or at all. In addition, because the $920.00 exercise price per share of the outstanding Warrants substantially exceeds the current trading price per share of our Class A common stock ($0.30 per share as of September 30, 2025), there is no assurance that the Warrants will be in the money prior to their expiration and it is unlikely that the Warrant holders will be able to exercise such Warrants in the near future, if at all. Accordingly, we are
unlikely to receive any proceeds from the exercise of the Warrants in the near future, if at all, and the Warrants may not provide any additional capital. Similarly, the Yorkville Warrants have an exercise price ($2.63 per share) that significantly exceeds the current trading price per share of our Class A common stock. In considering our capital requirements and sources of liquidity, we have not assumed or relied on the receipt of proceeds from the exercise of Warrants or Yorkville Warrants. As a result of the foregoing, we may require additional capital resources to execute strategic initiatives to grow our business.
We will utilize our cash flows toward our contractual obligations, to invest in our business, including new product initiatives and growth strategies, including any potential acquisitions, and, if determined by our Board, pay dividends to our equity holders, including guaranteed payments on certain of BCH's preferred equity securities, and fund tax distributions for certain noncontrolling interest holders. Our ability to fund these capital needs will depend on our ongoing ability to generate cash from operations and via the capital markets. We are continuing to evaluate the impact of the ongoing Russia-Ukraine conflict, the Israel-Hamas conflict and other items, such as inflation, rising interest rates and changes in regulatory requirements and tariffs, and assess the impact on financial markets and our business. The Company's future results may be adversely affected by slowdowns in fundraising activity and the pace of new liquidity transactions with our customers due to such events.
While we have concluded that there is substantial doubt about our ability to continue as a going concern, our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty related to the Company's ability to continue as a going concern.
Capital expenditures have historically not been material and we do not anticipate making material capital expenditures through the remainder of fiscal year 2026.
Liquidity Transactions
On April 4, 2025, Ben Liquidity entered into agreements to finance liquidity transactions related to a primary capital transaction with respect to a limited partner interest in an investment fund with a NAV of $9.6 million. Pursuant to such transaction, the Customer ExAlt Trusts acquired the limited partnership, and in exchange for such interest, the customer received 965,576 shares of the Company's Series B-6 Resettable Convertible Preferred Stock, par value $0.001 per share (the "Series B-6 preferred stock"), with such Series B-6 preferred stock being convertible into shares of the Company's Class A common stock. Each share of the Series B-6 preferred stock is convertible at the election of the holder into shares of the Class A common stock initially at a conversion price of $0.3151 per share, and is subject to reset from time to time, subject to a floor of $0.2363 per share. A maximum of 40,862,294 shares of Class A common stock may be issued upon conversion of the Series B-6 preferred stock.
On April 21, 2025, Ben Liquidity entered into agreements to finance liquidity transactions related to a primary capital transaction with respect to a limited partner interest in an investment fund with a NAV of $0.2 million. Pursuant to such transaction, the Customer ExAlt Trusts acquired the limited partnership, and in exchange for such interest, the customer received 23,333 shares of the Company's Series B-7 Resettable Convertible Preferred Stock, par value $0.001 per share (the "Series B-7 preferred stock"), with such Series B-7 preferred stock being convertible into shares of the Company's Class A common stock. Each share of the Series B-7 preferred stock is convertible at the election of the holder into shares of the Class A common stock initially at a conversion price of $0.2979 per share, and is subject to reset from time to time, subject to a floor of $0.2234 per share. A maximum of 1,044,450 shares of Class A common stock may be issued upon conversion of the Series B-7 preferred stock.
On June 17, 2025, Ben Liquidity entered into agreements to finance liquidity transactions related to a primary capital transaction with respect to a limited partner interest in an investment fund with a NAV of $1.9 million. Pursuant to such transaction, the Customer ExAlt Trusts acquired the limited partnership, and in exchange for such interest, the customer received 191,037 shares of the Company's Series B-8 Resettable Convertible Preferred Stock, par value $0.001 per share (the "Series B-8 preferred stock"), with such Series B-8 preferred stock being convertible into shares of the Company's Class A common stock. Each share of the Series B-8 preferred stock is convertible at the election of the holder into shares of the Class A common stock initially at a conversion price of $0.3397 per share, and is subject to reset from time to time, subject to a floor of $0.2548 per share. A maximum of 7,497,528 shares of Class A common stock may be issued upon conversion of the Series B-8 preferred stock.
Recent Equity Issuances
On August 13, 2025, the Company issued 40,000 shares of Class A common stock of the Company to a consultant of the Company.
On each of April 4, 2025, April 10, 2025, April 21, 2025, June 5, 2025, and June 11, 2025, Yorkville purchased 50,000, 37,504, 46,867, 582,179 and 225,000 shares of Class A common stock for $0.30, $0.29, $0.29, $0.29 and $0.29 per share, respectively, pursuant to the terms of the SEPA.
As part of the Limited Conversion described above, on October 15, 2025, certain holders of BCH Preferred A-1, that were issued prior to the Company's initial listing on The Nasdaq Stock Market, LLC, elected to convert $52.6 million (based on their capital account balances determined pursuant to Section 704 of the Internal Revenue Code) of such BCH Preferred A-1 for BCH Class S Ordinary Units, which were subsequently contemporaneously exchanged for shares of the Company's Class A common stock. The Limited Conversion resulted in the issuance of 101,294,288 shares of Class A common stock, and immediately following the Limited Conversion, there were 110,758,536 shares of Class A common stock outstanding.
Amended Credit Agreements
On August 13, 2020, Ben, through its subsidiary BCC, executed the Second Amended and Restated First Lien Credit Agreement ("First Lien Credit Agreement") and the Second Amended and Restated Second Lien Credit Agreement ("Second Lien Credit Agreement") collectively, (the "Second A&R Agreements" or the "HCLP Loan Agreement") with its lender, HCLP Nominees, L.L.C ("HCLP"), to amend its First Lien Credit Agreement and Second Lien Credit Agreement dated September 1, 2017 and December 28, 2018, respectively. The Second A&R Agreements have been further amended from time to time to extend the maturity date and defer principal and interest payments, among other things. In connection with the amendments to the Second A&R Agreements, Ben agreed to pay extension fees on a percentage of the amount outstanding under the credit agreements as of the date of the respective amendment. The interest rate on each loan under the Second A&R Agreements is 1-month LIBOR plus 8.0%, with a maximum interest rate of 9.5%.
On February 15, 2023, Ben executed those certain Amendment No. 5 to Second Amended and Restated Credit Agreement and Consent and Amendment No. 5 to Second Amended and Restated Second Lien Credit Agreement with HCLP, pursuant to which, as required by the prior amendment, certain Ben subsidiaries became subsidiary guarantors and entered into those certain Amended and Restated Security and Pledge Agreement (First Lien) and Amended and Restated Security and Pledge Agreement (Second Lien), that certain first lien Guaranty and that certain second lien Guaranty.
On June 5, 2023, BCH, entered into those certain Consent and Amendment No. 6 to Second Amended and Restated Credit Agreement, which amended the First Lien Credit Agreement, and Consent and Amendment No. 6 to Second Amended and Restated Second Lien Credit Agreement (collectively, the "Sixth Amendments"), which amended the Second Lien Credit Agreement, each among BCH, HCLP and the other parties thereto. Among other things, the Sixth Amendments (i) allowed for the consummation of the Transactions pursuant to the Business Combination Agreement, and effective as June 7, 2023, (ii) amended the definition of "Change of Control" (as defined therein), and (iii) provided that Beneficient will be the "Parent" thereunder.
On July 12, 2023, BCH, entered into (a) that certain Amendment No. 7 to the First Lien Amendment, which amended the First Lien Credit Agreement, and (b) that certain Amendment No. 7 to Second Lien Amendment (together with the First Lien Amendment, the "Seventh Amendments"), which amended the Second Lien Credit Agreement, each among BCH, HCLP and the other parties thereto. Among other things, the Seventh Amendments (i) modified the interest rate to a fixed rate of 9.5% (ii) extended the maturity dates of the First Lien Amendment and the Second Lien Amendment to September 15, 2024 and September 15, 2027, respectively, and (iii) agreed to installment payments on the First Lien Amendment of $5.0 million on each of March 29th, June 28th, September 29th, and December 29thof each year for so long as the obligations remain outstanding, and so long as such payments do not cause a going concern. No payments will be made on the Second Lien Amendment until the obligations on the First Lien Amendment have been fully satisfied. Effective on July 31, 2024, the maturity date of the First Lien Credit Agreement was extended from September 15, 2024 to February 1, 2025, and certain mandatory prepayment obligations thereunder were waived by HCLP until February 1, 2025. On January 31, 2025, these terms were further extended to February 8, 2025 and then on February 8, 2025 the terms were extended to February 15, 2025. Furthermore, effective as of March 1, 2025, the Company's obligations under the First Lien Credit Agreement were waived by HCLP through April 1, 2025, and the maturity date of the First Lien Credit Agreement was extended through April 1, 2025. These terms were then extended through April 7, 2025 and again through April 14, 2025.
On July 30, 2025, we received written notice (the "Notice") from HCLP that events of default occurred with respect to the HCLP Loan Agreement. The Notice provided that, among other thing, (i) with respect to the First Lien Credit Agreement, a default occurred on April 14, 2025, and has been continuing at all times since that date through July 29, 2025, as a result of BCH's failure to pay all outstanding obligations (including all principal and accrued interest on the loan made pursuant to the First Lien Credit Agreement) on April 14, 2025, and that such default constitutes an Event of Default (as defined in the First Lien Credit Agreement) (such default, the "First Lien Event of Default") and (ii) with respect to the Second Lien Credit Agreement, a default also occurred on April 14, 2025, which has been continuing at all times since that date through July 29, 2025, as a result of the First Lien Event of Default, which also constitutes an Event of Default (as defined in the Second Lien Credit Agreement) pursuant to the Second Lien Credit Agreement (the "Second Lien Event of Default," and together with the
First Lien Event of Default, the "Specified Events of Default").
The Notice also provided that, as a result of the Specified Events of Default, the outstanding principal amount of the loans under the HCLP Loan Agreement and all other amounts owing or payable under each credit agreement or under any other loan document was immediately due and payable (including, without limitation, all interest accrued through July 29, 2025, and all amounts owing under Section 9.04(b) of each credit agreement). Furthermore, the Notice also declared that Accrued Interest (as defined in each Credit Agreement), effective as of April 14, 2025, shall accrue on each calendar day on the outstanding amount of the loan under each Credit Agreement, after as well as before judgment, at a rate equal to 11.5% per annum and such accrued interest shall be payable on demand.
As a result of the Specified Events of Default, in accordance with Section 5(c)(i) of each certain security agreements executed in connection with the HCLP Loan Agreements the Notice provides that the pledgors pursuant to such security agreements are prohibited from selling, transferring, exchanging, disposing of, or granting any option with respect to the following collateral and any related proceeds as of July 29, 2025: (i) the equity interests in the underlying investment funds, in each case together with the certificates (or other agreements or instruments), if any, representing such equity interests, and all options and other rights, contractual or otherwise, with respect thereto; (ii) the loans and loan agreements made to the funding trusts; (iii) the acquisition documents; (iv) all other accounts, chattel paper, documents, general intangibles, instruments, investment property, money, deposit accounts, goods, commercial tort claims, letters of credit, letter of credit rights and supporting obligations; (v) all proceeds of the property described in the foregoing clauses (i), (ii), (iii) and (iv); and (vi) all books and records (including computer software and other records) pertaining to any of the foregoing.
Consistent with the assertions contained in the Notice, HCLP delivered certain letters to each of the Company entity guarantors and pledgors (including BCH, Ben Liquidity, and Beneficient USA, among others) requesting various remedies, including demands for payment of the outstanding obligations and the transfer of applicable HCLP loan collateral and any proceeds therefrom, pursuant to purported rights under the HCLP Loan Agreement. Additionally, HCLP delivered certain letters to Delaware Trust Company, as trustee of certain custody trusts (LT-1 - LT-28 Custody Trusts) that hold HCLP loan collateral, requesting various remedies including the transfer of their applicable HCLP loan collateral and any proceeds therefrom, pursuant to purported rights under the HCLP Loan Agreement. The Company has communicated with the non-Company recipients of the HCLP notices to relay the Company's position.
The Company has previously disclosed and continues to disclose HCLP as a related party in its public filings based on its relationship with Brad Heppner, the Company's former CEO and Chairman of the Board of Directors. As previously disclosed, on June 19, 2025, Mr. Heppner resigned following a request from the Company's counsel, acting at the direction of the Audit Committee of the Board of Directors, for Mr. Heppner to sit for a formal interview regarding, among other things, his knowledge of certain documents and information concerning Mr. Heppner's relationship to HCLP provided to the Company's auditors in 2019. The interview request was made after the Company identified credible evidence that Mr. Heppner participated in fabricating and delivering fake documents to the Company regarding his and others' relationships to HCLP, knowing that these documents would be provided to the Company's auditors. The Company is investigating additional information it has learned about other conduct by Mr. Heppner and other persons that purportedly controlled HCLP to determine the extent to which any of that conduct surrounding HCLP was fraudulent. On August 5, 2025, HCLP filed a summons with notice in the Supreme Court of the State of New York seeking a judgment against the Company for amounts owed under the HCLP Loan Agreement in addition to attorney's fees and litigation costs. The summons with notice did not include a complaint and has not been served on the Company. No action is required by the Company until it has been served. In light of these circumstances, the Company is evaluating the validity of its obligations under the HCLP Loan Agreement and the liens securing the HCLP loans and is considering all options that it may pursue related to this conduct, including counter claims and litigation against Mr. Heppner, HCLP and any direct or indirect control parties of HCLP. The Company intends to vigorously pursue its claims regarding the validity of such purported indebtedness.
On October 10, 2025, HCLP brought an action in the Delaware Court of Chancery against Delaware Trust Company ("DTC") individually and as trustee for twenty-five Custody Trusts (the "Custody Trusts"). The Custody Trusts hold collateral against which certain of the Company's ExAlt Loans are made. HCLP purports to be lender to BCH and its affiliates and asserts that the Company owes HCLP approximately $122 million on two loans which it claims are in default. HCLP further alleges that the Custody Trusts guaranteed the loans which are secured by certain pledge agreements. The action seeks to enforce the guarantees and the pledge agreements and prevent any future distributions to the Company. HCLP also filed a motion for a temporary restraining order which seeks to enjoin DTC, in the interim, from selling, transferring, or encumbering the assets held by the Custody Trusts. The parties entered into an agreed form of order which was approved by the court. Under the order, DTC agreed to not transfer, sell, encumber or other dispose of the collateral held by the Custody Trusts and the parties agreed to request a trial date in mid-2026. The Company is not named in either the action or the motion. Due to the Company identifying credible evidence that Mr. Heppner participated in fabricating and delivering fake documents to the Company regarding his and others' relationships to HCLP, among other items, the Company is evaluating the validity of its obligations under the HCLP Loan Agreement and the liens securing the HCLP Loan and is considering all
options that it may pursue related to this conduct, including litigation against Mr. Heppner, HCLP and any direct or indirect control parties of HCLP and their agents.
As part of the Seventh Amendments, Ben agreed to pay fees totaling approximately $0.1 million. During the three and sixmonths ended September 30, 2025 and 2024, no deferred financing costs were paid to HCLP. No payments of principal or interest have been made on the First Lien or Second Lien Credit Agreements since the interest payment made in March 2023. Accrued interest on the First Lien or Second Lien Credit Agreements of $24.0 million as of September 30, 2025and $18.6 million as of March 31, 2025is included in other liabilities in the consolidated statement of financial condition.
In connection with the Second A&R Agreements, Beneficient Holdings, Inc. ("BHI"), which is owned by The Highland Business Holdings Trust, of which Mr. Heppner, our former CEO, is the trustee, and Mr. Heppner and his family are the beneficiaries, owns a majority of the BCH Class S Ordinary Units, Class S Preferred Units of BCH ("BCH Class S Preferred Units"), BCH Preferred A-0, Preferred Series A Subclass 1 Unit Accounts of BCH ("BCH Preferred A-1"), and BCH FLP-1 Unit Accounts, and Subclass 3 FLP Unit Accounts of BCH, will grant certain tax-related concessions to HCLP as may be mutually agreed upon between the parties. In exchange for the tax-related concessions, 5% of BCH Preferred A-1 held by BHI, which will be held by HCLP, may convert to BCH Preferred A-0. In addition, recipients of a grant of BCH Preferred A-1 from BHI will have the right to put an amount of BCH Preferred A-1 to Ben equal to any associated tax liability stemming from any such grant; provided that the aggregated associated tax liability shall not relate to more than $30.0 million of grants of BCH Preferred A-1 from BHI. No such liability existed as of September 30, 2025 or March 31, 2025.
The Second A&R Agreements and ancillary documents contain covenants that (i) prevent Ben from issuing any securities senior to the BCH Preferred A-0 or BCH Preferred A-1; (ii) prevent Ben from incurring additional debt or borrowings greater than $10.0 million, other than trade payable, while the loans are outstanding; and (iii) prevent, without the written consent of HCLP, GWG from selling, transferring, or otherwise disposing of any BCH Preferred A-1 held as of May 15, 2020, other than to its subsidiary GWG DLP Funding V, LLC. GWG no longer holds any BCH Preferred A-1 Unit Accounts. Ben obtained consents for the Second A&R Agreements from HCLP in connection with the HH-BDH Credit Agreement (discussed below).
Ben may be required to pay an additional extension fee to extend the maturity dates of the Second A&R Agreements beyond April 14, 2025 and September 15, 2027 or other fees related to the Notice, depending on the outcome of the Company evaluation of the validity of its obligations under the Second A&R Agreements described above.
Recent Debt Financing
As discussed above, on October 21, 2023, Beneficient Financing, L.L.C. (the "Borrower"), a wholly owned subsidiary the Company, and BCH, as guarantor (the "Guarantor" and together with the Borrower, the "Loan Parties") entered into the HH-BDH Credit Agreement. HH-BDH's sole member is Hicks Holdings. The managing member of Hicks Holdings is Mr. Thomas O. Hicks, a member of the Company's Board. HH-BDH will receive customary fees and expenses in its capacity as a lender and as the administrative agent under the HH-BDH Credit Agreement, as further described below. Hicks Holdings and Mr. Hicks may be deemed to have a direct or indirect material financial interest with respect to the transactions contemplated by the HH-BDH Credit Agreement, as described below. HH-BDH funded the amounts under the HH-BDH Credit Agreement from the Financing.
The HH-BDH Credit Agreement provides for a three-year term loan in the aggregate principal amount of $25.0 million, which was fully drawn on closing (the "Term Loan").
Borrowings under the HH-BDH Credit Agreement bear interest, at the Company's option, calculated according to a base rate, adjusted term SOFR rate, or adjusted daily simple SOFR rate, plus an applicable margin, subject to a Maximum Rate determined by applicable law in the State of New York. The Company elected the adjusted daily simple SOFR rate with a margin of 6.5% for the first two years and 5.5% for the third year. Accrued and unpaid interest is payable monthly, upon prepayment, and at maturity. The Term Loan will mature on October 19, 2026, and all outstanding principal amounts and accrued and unpaid interest thereon shall be due and payable on such date.
On August 16, 2024, the Loan Parties entered into an amendment to the HH-BDH Credit Agreement (the "Amendment" and the HH-BDH Credit Agreement as amended, the "Amended Credit Agreement"), to, among other things, (i) add a subsequent term loan of up to $1,675,000, which was fully drawn upon closing of the Amendment (together with the Term Loan, the "Loans"), and (ii) waive certain events of default resulting from the occurrence of the Acknowledged Defaults (as defined in the Amendment), provided that in the case of the expense reimbursement default, the Borrower must cure the expense reimbursement default upon the earlier of (x) November 1, 2024 and (y) two business days following the effectiveness of Company's registration statement for resale of the shares of Class A common stock, underlying the convertible debentures and warrants issuable pursuant to the Purchase Agreement.
The Amended Credit Agreement also required the Borrower to prepay the outstanding principal balance of the Loans in the amount of $200,000, $200,000, $200,000, $200,000 and $875,000 on each of September 7, 2024, October 7, 2024, November 7, 2024, December 7, 2024 and December 31, 2024, respectively. Furthermore, on each Required Payment Date (as defined in the Amended Credit Agreement), the Borrower shall prepay the outstanding principal balance of the Loans by an amount equal to the lesser of (a) the Total Portfolio Net Receipts (as defined in the Amended Credit Agreement) for the most recently ended period beginning on the 16th day of each month and ending on the 15th day of the immediately following month, and (b) as of each Required Payment Date, an amount equal to the excess, if any, of (x)(i) the number of Required Payment Dates occurring on or prior to such Required Payment Date, multiplied by (ii) $500,000, minus (y) the amount of all Excess Payments (as defined in the Amended Credit Agreement) made prior to such Required Payment Date. Additionally, the Amended Credit Agreement requires the Borrower to make certain minimum monthly payments to prepay the balance of the Loans.
The Amended Credit Agreement also includes, among other things, (i) updates to conditions precedent for the HH-BDH to make the subsequent term loan to the Borrower, (ii) updates to certain representations and warranties, (iii) additional certain affirmative and negative covenants including a minimum liquidity financial covenant of $4.0 million and (iv) additional events that the occurrence of which would constitute an Event of Default (as defined in the Amended Credit Agreement). Except as modified by the Amendment, the terms of the HH-BDH Credit Agreement remain the same.
During the six months ended September 30, 2025, we agreed to an advance, as part of a currently ongoing negotiation to amend the term loan with HH-BDH, to add a subsequent term loan of $850 thousand, which has been fully drawn, and, the proceeds of which used to provide additional working capital. We have also made significant principal payments principally from proceeds received from the Asset Sales Initiative as described elsewhere in this Quarterly Report on Form 10-Q. The Company has at times in late fiscal year 2025 and in subsequent periods been in default on certain of the required payment obligations, financial covenants, and information reporting requirements of the HH-BDH Credit Agreement. The Company is actively working with the lender on waivers related to these defaults along with the amendment to the HH-BDH Credit Agreement. Such negotiations remain in process as of the date of this Quarterly Report on Form 10-Q.
The events of default under the HCLP Loan Agreement triggered a cross default provision in the HH-BDH Credit Agreement. The Company timely notified HH-BDH of the of the cross default and, as of the date of this Quarterly Report on Form 10-Q, HH-BDH has not notified the Company that it intends to declare an event of default as its relates to cross default provision of the HH-BDH Credit Agreement.
Inflation
Changes in inflation do not necessarily correlate with changes in interest rates. We presently do not foresee any material impact of inflation on our results of operations in the periods presented in our consolidated financial statements.
Unfunded Capital Commitments
The Customer ExAlt Trusts had $37.0 million and $41.6 million of potential gross capital commitments as of September 30, 2025, and March 31, 2025, respectively, representing potential limited partner capital funding commitments on the interests in alternative asset funds. The trust holding the interest in the limited partnership for the alternative asset fund is required to fund these limited partner capital commitments per the terms of the limited partnership agreement. Capital funding commitment reserves are maintained by certain of the associated trusts within the ExAlt PlanTMor affiliated entities. To the extent that the associated Customer ExAlt Trust or their affiliated entities cannot pay the capital funding commitment, Ben is obligated to lend sufficient funds to meet the commitment. Any amounts advanced by Ben to the Customer ExAlt Trusts for these limited partner capital funding commitments above the associated capital funding commitment reserves, if any, held by the associated Customer ExAlt Trusts or their affiliated entities are added to the ExAlt Loan balance between Ben and the Customer ExAlt Trusts and are expected to be recouped through the cash distributions from the alternative asset fund that collateralizes such ExAlt Loan.
Capital commitments generally originate from limited partner agreements having fixed or expiring expiration dates. The total limited partner capital funding commitment amounts may not necessarily represent future cash requirements. The majority, or 95%, of our portfolio with an unfunded commitment has a vintage of 2012 and prior. As the vintages continue to age, a cash requirement becomes less likely. We consider the creditworthiness of the investment on a case-by-case basis. As of September 30, 2025 and March 31, 2025, there were no reserves for losses on unused commitments to fund potential limited partner capital funding commitments. In connection with the Asset Sale Initiatives, $0.8 million of unfunded capital commitments as of September 30, 2025 were or will be assigned to, and assumed by, the purchasers in the executed transactions.
Dependence on Related Party Transactions
In the ordinary course of business, we depend on certain transactions with related parties. For example, as discussed above, Ben, through its subsidiaries, is a party to the Second A&R Agreements with HCLP. HCLP is an indirect subsidiary of Highland Consolidated, L.P. Ben's former CEO is a beneficiary and trust investment advisor of the trusts that control, and are the partners of, Highland Consolidated, L.P. As of September 30, 2025, we had approximately $94.4 million (including an unamortized premium thereon) of debt outstanding derived from BCH's secured loans with HCLP. In addition, unpaid interest of $24.0 million was accrued and owed as of September 30, 2025. As described elsewhere, on July 30, 2025, we were notified of events of default under the HCLP Loan Agreement, however, the Company is evaluating the validity of its obligations under the HCLP Loan Agreement and the liens securing the HCLP Loan in light of credible evidence that Mr. Heppner, our former CEO, participated in fabricating and delivering fake documents to the Company regarding his and others' relationships to HCLP, among other items. On November 4, 2025, Mr. Heppner was indicted by the United States Southern District of New York charging Mr. Heppner with various counts comprised of securities fraud, wire fraud, conspiracy to commit securities fraud and wire fraud, false statements to auditors, and falsification of records.
Additionally, effective October 19, 2023, Ben, through its subsidiaries, is a party to the $25.0 million HH-BDH Credit Agreement with HH-BDH. HH-BDH's sole member is Hicks Holdings whose managing member is a member of our Board. On August 16, 2024, Amendment to the HH-BDH Credit Agreement was executed to add a subsequent term loan of $1.7 million. During the six months ended September 30, 2025, we borrowed an additional $850 thousand under the HH-BDH Credit Agreement and primarily with proceeds from the Asset Sales Initiative made principal payments on the loan totaling $15.0 million. We are in the process of negotiating waivers for certain defaults that have occurred under the HH-BDH Credit Agreement related to required payment obligations, financial covenants, and information reporting requirements as part of an amendment to that agreement. Additionally, the events of default under the HCLP Loan Agreement described above triggered a cross default provision in the HH-BDH Credit Agreement. The Company timely notified HH-BDH of the cross default and, as of the date of this Annual Report on Form 10-K, HH-BDH has not notified the Company that it intends to declare an event of default as its relates to the cross default provision of the HH-BDH Credit Agreement. As of September 30, 2025, we had approximately $7.2 million (including an unamortized discount thereon) of debt outstanding derived from the Term Loan with HH-BDH. Subsequent to September 30, 2025, we have made additional principal payments on the loan totaling $4.1million primarily with proceeds from the Asset Sales Initiative through November 10, 2025.
Furthermore, Ben and BCH are parties to a Services Agreement with Bradley Capital Company, L.L.C. ("Bradley Capital") and Beneficient Management Counselors, L.L.C. effective June 1, 2017. Effective as of January 1, 2022, the parties entered into the First Amended and Restated Services Agreement and effective June 7, 2023, the parties entered into the Second Amended and Restated Services Agreement (the "Services Agreement"). Bradley Capital is an entity associated with Ben's former CEO. During the three months ended September 30, 2025 and 2024, Ben recognized expenses totaling $0.7 millionand $0.7 million, respectively, related to this Services Agreement. During the six months ended September 30, 2025 and 2024, Ben recognized expenses totaling $1.4 millionand $1.4 million, respectively, related to this Services Agreement. As of September 30, 2025 and March 31, 2025, $5.3 millionand $3.9 million, respectively, was owed to Bradley Capital related to the Services Agreement.
Critical Accounting Estimates
We have identified certain accounting estimates that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Actual amounts and values as of the balance sheet dates may be materially different than the amounts and values reported due to the inherent uncertainty in the estimation process. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date. The critical accounting estimates that we believe to be the most critical in preparing our consolidated financial statements relate to the fair value determination of investments in alternative assets held by the Customer ExAlt Trusts,the determination of the allowance for credit losses, principally relevant as an input to the allocation of income (loss) to Ben's and BCH's equity holders, the allocation of income (loss) to Ben's and BCH's equity holders, evaluation of potential loss contingencies principally related to ongoing legal matters and evaluation of potential impairment of goodwill and other intangibles. Since March 31, 2025, there have been no changes in critical accounting estimates as further described under "Critical Accounting Estimates" in our Annual Report.
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