美國
證券和交易委員會
華盛頓特區 20549
格式
（標記一）
根據1934年證券交易法第13或15(d)條，本季度報告 |
截至季度結束日期的財務報告
根據1934年證券交易法第13或15（d)條的轉型報告 |
過渡期從 到
委員會文件號 001-40368
(根據其章程規定的註冊人準確名稱)
（國家或其他管轄區的 | （IRS僱主 |
主執行官辦公室的地址，包括郵政編碼
(
(註冊人電話號碼，包括區號)
N/A
（如自上次報告以來發生更改，則包括更名、更改地址及更改財政年度）
根據證券法第12(b)條註冊的證券：
每一類的名稱 |
| 交易 |
| 普通股，每股面值$0.001 |
該 | ||||
The |
請在復交行爲者在過去的12個月（或復交行爲者所需更短期限內）已申報「聯邦證交法」的第13條或第15(d)條規定的所有報告，並自過去90天以來一直要求復交行爲者提交這些申報。
請在覈對勾選標記，以示公司是否在過去12個月內（或公司被要求提交此類文件的較短期間內）已經按照Regulation S-T規則 405條提交了所有所需提交的交互式數據文件。
通過√號表示註冊者是大型高速申報者、高速申報者、非高速申報者、較小報告公司或新興成長公司。請參閱交易所法規120億.2中「大型高速申報者」、「高速申報者」、「較小報告公司」和「新興成長公司」的定義。
大型加速報告人 | ☐ | 加速文件提交人 | ☐ |
☒ | 較小的報告公司 | ||
新興成長公司 |
如果是新興成長型企業，請勾選是否選擇不使用按照《證券交易法》第13(a)條規定的新或修訂財務會計準則的過渡期。
請勾選是否註冊公司是殼公司（根據交易所法規120億.2號定義）：是
2024年11月14日，有
第一部分—財務信息
項目1：財務報表。
BINAH CAPITAL GROUP, INC.
簡化合並基本報表
（以千爲單位，除分享和每分享金額外）
未經審計 |
| |||||
| 2024年9月30日 |
| 2023年12月31日 | |||
資產 | ||||||
資產: | ||||||
現金、現金等價物和受限制的現金 | $ | | $ | | ||
應收款項： |
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應收佣金 |
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應收清算經紀人 |
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其他 |
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物業和設備，淨值 |
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使用權資產 |
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無形資產-淨額 |
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商譽 |
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其他資產 |
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資產總計 | $ | | $ | | ||
負債和股東權益 |
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負債: |
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應付賬款、應計費用及其他負債 | $ | | $ | | ||
應付佣金 |
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經營租賃負債 |
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應付票據，減少未攤銷債務發行成本$ |
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票據-關聯方 |
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由於成員 |
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負債合計 |
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夾層股權： |
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可贖回A系列可轉換優先股，面值$ |
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股東權益和成員權益： |
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系列B可轉換優先股，面值$ | | — | ||||
普通股，每股面值爲 $0.0001； |
| — |
| — | ||
股本溢價 |
| |
| — | ||
累積赤字 |
| ( |
| — | ||
歸屬於傳奇Wentworth管理服務公司的成員權益 |
| — |
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歸屬於Wentworth管理服務公司的總股東權益、夾層權益和成員權益 |
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總負債、夾層資本和股東權益 | $ | | $ | | ||
附註是這些未經審計的基本財務報表的一部分。
1
BINAH CAPITAL GROUP, INC.
簡明綜合經營表
（未經審計）
(單位爲千，除分享和每分享金額外)
| 截至9月30日的三個月 |
| 截至九月三十日的九個月 | |||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
營業收入: | ||||||||||||
與客戶合同的營業收入： |
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佣金 | | | $ | | $ | | ||||||
諮詢費用 |
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與客戶簽訂的總營業收入 |
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利息和其他收入 |
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總營業收入 |
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費用: |
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佣金和費用 |
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員工薪酬福利 |
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租金和佔用費用 |
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專業費用 |
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利息 |
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折舊和攤銷 |
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其他 |
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總支出 |
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收入（損失）在所得稅準備金/(收益)之前 |
| ( |
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所得稅的準備金/(收益) |
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淨利潤（損失） | $ | ( | $ | | $ | ( | $ | | ||||
歸屬於Legacy Wentworth管理服務有限責任公司成員的淨利潤 |
| — |
| | ||||||||
歸屬於Binah Capital Group, Inc.的淨虧損。 | $ | ( | ( | |||||||||
每股基本和攤薄淨虧損 | $ | ( |
| $ | ( | |||||||
加權平均股份：基本和稀釋 |
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附註是這些未經審計的基本財務報表的一部分。
2
BINAH CAPITAL GROUP， INC。
股東權益變動簡明合併財務報表
（未經審計）
（以千爲單位，股份和每股金額除外）
截至2024年9月30日的三個月和九個月
截至2024年9月30日三個月和九個月的財務信息 | ||||||||||||||||||||||||||||
|
| A類可贖回可轉換優先股 | B類可轉換優先股 |
| 普通股 |
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| 總計 | |||||||||||||||||||||||||||
歸屬於會員的權益 | 股東權益 | |||||||||||||||||||||||||||
傳承溫特沃斯 | 股權、中級股權和 | |||||||||||||||||||||||||||
管理服務 | 新增已歸集資本 | 積累 | 會員權益 | |||||||||||||||||||||||||
有限責任公司 |
| 單位 |
| 金額 |
| Units |
| Amount |
| 單位 |
| 金額 |
| 股本 |
| 赤字 |
| 股東權益 | ||||||||||
2024年1月1日的餘額爲 | $ | |
| — | $ | — | — | $ | — |
| — | $ | — | $ | — | $ | — | $ | | |||||||||
分配 |
| ( |
| — |
| — | — | — |
| — |
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| ( | ||||||||||
交易前淨利潤 |
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| — | — | — |
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逆向併購和重組傳統的Wentworth Management Services LLC |
| ( |
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| — | — | — |
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| ( |
| ( | ||||||||||
次級股權 - 與PIPE融資相關的發行股份 |
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彼那資本集團有限公司交易後應歸屬於淨損失 |
| — |
| — |
| — | — | — |
| — |
| — |
| — |
| ( |
| ( | ||||||||||
2024年3月31日餘額 | $ | — |
| | $ | | $ | — | $ | — |
| | $ | — | $ | | $ | ( | $ | | ||||||||
發行A類可贖回可轉換優先股 | — | | | — | — | — | — | — | — | | ||||||||||||||||||
股息 - A類可贖回可轉換優先股 | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||
與行權權證相關的普通股發行 | — | — | — | — | — | | — | | — | | ||||||||||||||||||
淨虧損 | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
2024年6月30日結餘 | — | | $ | | $ | — | $ | — | | $ | — | $ | | $ | ( | $ | | |||||||||||
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發行A類可贖回可轉換優先股 | — | | | — | — | — | — | — | — | | ||||||||||||||||||
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發行B類可轉換優先股 | — | — | — | | | — | — | — | — | | ||||||||||||||||||
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股息 - A類可贖回可轉換優先股 | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||
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淨虧損 | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
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2024年9月30日的餘額 | $ | — | | $ | | | $ | | | $ | — | $ | | $ | ( | $ | | |||||||||||
附註是這些未經審計的基本財務報表的一部分。
3
BINAH CAPITAL GROUP， INC。
未經審計的現金流量綜合表
（未經審計）
（以千爲單位，股份和每股金額除外）
| 截至9月30日九個月的年度 | |||||
2024 |
| 2023 | ||||
經營活動現金流 | ||||||
淨利潤（損失） | $ | ( | $ | | ||
調整爲將淨利潤（損失）調節爲經營活動中的淨現金流量： |
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折舊和攤銷 |
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債務發行成本的攤銷 |
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非現金租賃費用 |
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資本化利息-附屬公司應收款項 |
| — |
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資本化利息-歸屬成員款項 |
| — |
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處置資產和租賃改良的損失 |
| — |
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運營資產和負債的變化： |
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應收清算經紀人 |
| ( |
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應收佣金 |
| ( |
| ( | ||
其他應收款 |
| |
| ( | ||
其他資產 |
| |
| ( | ||
應付賬款、應計費用及其他負債 |
| |
| ( | ||
應付佣金 |
| |
| ( | ||
經營租賃負債 |
| ( |
| ( | ||
經營活動產生的淨現金流量（使用） |
| ( |
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投資活動產生的現金流量 |
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購買物業和設備 |
| ( |
| ( | ||
投資活動使用的淨現金流量 |
| ( |
| ( | ||
籌資活動現金流量 |
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償還-應付票據 |
| ( |
| ( | ||
關聯公司票據償還 |
| ( |
| — | ||
償還來自成員的借款 |
| ( |
| — | ||
會員借款收入 | — | | ||||
反向併購和資本重組的淨支付 |
| ( |
| — | ||
來自B轉換優先股的收益 | |
| — | |||
股利-可贖回可轉換優先股 | ( | — | ||||
行使認購權證募集收入 | | — | ||||
資本分配 |
| ( |
| ( | ||
籌資活動提供的淨現金（使用） |
| |
| ( | ||
現金、現金等價物和受限制的現金淨變化 |
| ( |
| ( | ||
現金、現金等價物及限制性現金 - 期初 | $ | | $ | | ||
現金、現金等價物及限制性現金 - 期末 | $ | | $ | | ||
非現金融資活動的補充披露 | ||||||
截至2024年9月30日止的期間，該公司向A系列可贖回可轉換優先股股東支付了等值股利，金額爲$ | ||||||
期間支付的現金： |
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利息 | $ | | $ | | ||
所得稅 | $ | — | $ | — | ||
附註是這些未經審計的基本財務報表的一部分。
4
BINAH CAPITAL GROUP， INC。
未經審計的財務報表註釋
2024年9月30日
1. | 業務和呈現基礎說明 |
Binah Capital Group, Inc.（「Binah Capital」、「控股公司」或「公司」，代表合併集團。）是一家特拉華州公司，成立於2022年6月27日，作爲其全資子公司的控股公司，這些子公司在零售财富管理業務中運營。
Binah Capital通過其全資子公司Wentworth Management Services LLC（營業名爲Binah Management Services，「bms系統」）在金融服務行業板塊運營多個業務，具體如下：
| ● | PKS Holdings, LLC（「PKSH」）總部位於紐約州奧爾巴尼，在美國各地設有分支機構，包括以下實體（「PKSH實體」）： |
| o | Purshe Kaplan Sterling Investments, Inc.（「PKSI」），在紐約州註冊，是一家獨立的經紀自營商，註冊於證券交易委員會（「SEC」），並且是金融行業監管局（「FINRA」）和證券投資者保護公司（「SIPC」）的成員。 |
| o | PKS Advisory Services, LLC（「PKSA」），一家紐約有限責任公司，是一家獨立的投資顧問公司，註冊於SEC，向客戶提供顧問服務。 |
| o | PKS Financial Services, Inc.（「PKSF」），在紐約州註冊，是一家提供金融服務的保險實體。 |
| o | Representatives Indemnity Company, Inc.（「Repco」），註冊於英屬維爾京群島，持有普通商業保險牌照，以提供附屬實體的專業責任保險保障。 |
| ● | 卡博特證券有限責任公司在紐約州紐約市設有辦公室，並在美國各地設有分支機構，包括以下實體。 |
| o | 卡博特證券有限責任公司（「CLS」），一家特拉華州有限責任公司，是一家註冊於SEC的經紀自營商，也是FINRA和SIPC的成員。 |
| o | CL Wealth Management, LLC（「CLWM」）是一家註冊於SEC的維吉尼亞有限責任公司，是一家投資顧問公司，爲客戶提供顧問服務。 |
| o | Wentworth Financial Partners（「WFP」）（前稱CL General Agency）是一家特拉華有限責任公司，是一家提供財務服務的保險機構。 |
5
| 1. | 業務描述和簡報基礎 （續） |
| ● | 密西根證券公司（MSI）在紐約州奧爾巴尼設有辦事處，旗下包括以下實體： |
| o | MSI（也稱為Broadstone證券公司）成立於密西根州，是一家金融服務公司，是一家根據SEC註冊的經紀商，並且是FINRA的成員。 |
| o | 密西根諮詢公司（MAI）成立於密西根州，曾是一家SEC註冊的投資顧問公司。MAI在2021年9月自行退出了註冊資格。 |
| o | 保險審核機構公司（IAA）成立於密西根州，是一家保險代理公司。 |
| ● | World Equity Group, Inc.（“WEG”）成立於伊利諾伊州，是根據證券交易委員會（SEC）的規定註冊的經紀商和投資顧問，並且是FINRA和SIPC的成員。 WEG在伊利諾伊州的Schaumburg設有辦公室，並在美國各地設有分支機構。 |
報告基礎
反向重组
在2024年3月15日（“結業日期”），Binah Capital完成了經營合併協議和計畫的相關交易，該協議和計畫日期為2022年7月7日（經修改，稱為“合併協議”以及此類交易的完整性為“結業”），各方為Delaware公司的Kingswood Acquisition Corp.（“KWAC”），Binah Capital，Delaware公司的Kingswood Merger Sub, Inc.（“Kingswood Merger Sub”），Delaware有限責任公司的Wentworth Merger Sub, LLC（“Wentworth Merger Sub”）和BMS。 Binah Capital，Kingswood Merger Sub和Wentworth Merger Sub是為了完全進入和完成合併協議中設定的交易而新成立的實體。 Binah Capital是KWAC的全資直接子公司，而Kingswood Merger Sub和Wentworth Merger Sub均是Binah Capital的全資直接子公司。 在結業日期，Kingswood Merger Sub合併並收購KWAC，KWAC作為Binah Capital的全資子公司而繼續運營，而Wentworth Merger Sub與BMS合併，BMS作為Binah Capital的全資子公司繼續存在。 在BMS合併後，KWAC收購了Binah Capital在BMS合併後直接持有的所有BMS普通單位，因此，在Binah Capital的捐贈後，BMS成為KWAC的全資子公司。
儘管根據業務組合協議的法律形式，合併被視為反向資本重組。 根據此會計方法，KWAC有望被視為財務報告目的上的“被收購”公司。 因此，就會計而言，Binah Capital的合併財務報表將代表BMS的合併財務報表的延續，將業務合併視為BMS發行股份以換取KWAC淨資產，並伴隨著資本重組。 KWAC的淨資產將按照歷史成本列示，不會記錄任何商譽或其他無形資產。 業務合併之前的操作將是未來Holdings報表中BMS的業務（見第3條說明 - 合併和資本重組）。
報告基礎
這些未經審計的簡明綜合財務報表（“簡明綜合財務報表”）是根據美利堅合眾國通用會計準則（“GAAP”）編製的，該準則要求公司對無形資產和递延所得稅的估值和減損、信貸損失、可能負擔、以及其他影響簡明綜合財務報表和相關披露的事項進行估計和假設。 簡明綜合財務報表反映了管理層認為必要的所有調整，以公平地表現所呈現的中期運營結果。 根據不同假設，實際結果可能與這些估計有所不同，而這些差異對於簡明財務報表可能具有重大影響。
6
| 1. | 業務描述和演示基礎 (繼續) |
合併原則
隨附的綜合財務報表包括控股及其全資附屬公司的帳目。在合併中消除了重大的公司間交易和餘額。
2. | 重要會計政策摘要 |
估計和假設的使用
根據 GAAP 撰寫合併財務報表時，管理層必須作出影響已報告資產和負債金額的估算和假設，並披露合併財務報表日期的可應資產和負債，以及報告期內報告收入和支出金額。實際結果可能與這些估計不同。重要估算包括無形資產和延期所得稅的估值和減值、信貸損失的補償和應變。
收入認知
當對承諾服務的控制權轉讓給客戶時，與客戶的合約所得的收入會被納入，金額反映公司預期為該等服務獲得的代價。有關其他資訊，請參閱註 4- 與客戶合約的收入。
現金、現金等值及限制現金
現金及現金等價物主要由存款現金和貨幣市場基金組成，其原有到期期為三個月或更少。
限制現金代表本公司貸款人持有與其信貸設施相關的現金。截至二零二四年九月三十日及二零二三年十二月三十一日，限制現金額約為美元
本公司定期維護超過聯邦存款保險公司限額的現金、現金等值和限制現金。本公司沒有遭受任何損失，亦不認為本公司承受現金的任何重大信貸風險。
應收帳款
應收帳款，總額約為 $
金融工具 — 信貸損失. 本公司根據財務會計準則委員會（「FASB」）會計準則編碼（「ASC」）326-20 計算以攤銷成本基礎計算的估計信貸損失及部分資產負債表外信貸風險， 金融工具-信貸損失。FasB ASC 326-20 要求公司根據有關過去事件、當前狀況和合理和可支持的預測的相關信息，估計截至報告日期內的財務資產和某些資產負債表外風險的期望信貸損失。本公司記錄預期信貸損失的估計作為抵免信貸損失。對於以攤銷成本計算的金融資產，信用損失的限額會以財務狀況報表上的估值科目報告，以調整資產的攤銷成本基礎。信貸損失津貼的變更會在信貸損失開支中報告（如適用）。管理層認為目前已記錄的應收帳款損失風險最低，因此，截至 2024 年 9 月 30 日、2023 年 12 月 31 日和 2023 年 1 月 1 日，已記錄信貸損失的減免金額為美元
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| 2. | 重要會計政策概要 （續） |
商譽和其他無形資產
無形資產每年進行損耗測試，或者在出現特定事件表明攜帶金額可能有損耗時進行測試。如果公司使用定性評估，並判斷報告單位的公允價值比其攜帶金額更可能（即超過50%的概率）小，將進行定量減損測試。如果報告單位的攜帶金額超過其公允價值，將認知減損損失，以使其不超過無形資產的總攜帶金額。
被視為有確定壽命的無形資產按其有用壽命分攤，通常範圍為
有
所得稅
在反向合併和資本重組之前，bms系統被視為合夥關係以進行所得稅目的，因此不受聯邦稅的約束。bms系統則需繳納某些州和地方所得稅。此外，kwac被視為公司，需繳納美國聯邦所得稅，以及州和地方所得稅。
翻轉併購和重組後，資產公司的全資子公司KWAC是bms系統的母公司，根據美國聯邦所得稅法，bms系統被視為一個合夥企業。作為一個合夥企業，根據美國現行稅法，bms系統通常不受美國聯邦所得稅的約束，任何應課稅的收入或虧損都將通過並納入其成員（包括KWAC）的應納稅收入或虧損中。KWAC將就其應收取得的純應納稅收入或虧損項目以及bms系統任何相關稅額抵免負上美國聯邦所得稅，並追加州和地方所得稅。此外，作為一家公司的Binah Capital Group, Inc.將負擔美國聯邦所得稅，並追加州和地方所得稅。
KWAC、PKSH Entities、Cabot Entities和WEG是應納聯邦、州和地方所得稅的納稅實體。因此，這些綜合財務報表僅包括納稅實體的所得稅負債。為現有資產和負債的財務報表帳面金額與其相應稅基及淨營運虧損的差異以及淨營運虧損的攜帶順延稅費後果，確認透支稅資產和負債。
透支稅資產和負債是使用預期適用於可望在預計收回或解決這些暫時差異的年份之應納稅收入的生效稅率來衡量。該公司定期評估透支稅資產和淨營運虧損攜帶順延以判斷其可回收性，主要是根據該公司生成未來應納稅收入的能力。如果更有可能而不是不會實現所有或部分此類透支稅資產，可能會設置一筆增加透支稅資產的評價準備。
根據所得稅的資產和負債會計方法，公司應按照所得稅會計的資產和負債方法核算稅收。在此方法下，公司只有在"最有可能"稅務機構檢查後能夠確保稅務立場將獲得支持時，才能認識來自不確定稅務立場的稅務利益，並基於對於最有可能會在最終解決時實現的最大利益來衡量在綜合財務報表中的稅務福利。
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2. | 重要會計政策概要 （續） |
每股淨損失
普通股每股基本盈利是通過將歸屬於公司的凈收入除以同一期間內流通的A類普通股加權平均股份數來計算的。稀釋的普通股每股凈收益是通過將歸屬於公司的凈收入除以已調整以反映可能潛在發生稀釋性證券作用的流通普通股的加權平均股份數來計算的。普通股的潛在股份包括可能在假定行使期權和warrants以及轉換為公司優先股時發行的增加股份。因為合併前的時期未提供每股凈收益（損失），這樣的金額對基本報表的用戶不具有意義，因為股權結構在合併時發生了重大變化。
金融工具
公司不使用衍生工具來對沖現金流量、市場或外貨風險。 公司不持有或發行用於投機或交易目的的金融工具。
由於逆向重組，公司已發行並持有warrants。 公司評估這些warrants，以判斷是否應視為以股份為基礎的補償，根據ASC 718主題，如果不在ASC 718的範圍內，該工具是否屬於衍生品或包含符合內嵌衍生品資格的特徵，根據ASC 480和ASC 815主題。 根據ASC 718，重新評估是否應將該工具分類為以股份為基礎的補償或衍生工具，包括此類工具應該作為負債或股本記錄的判斷，將在每個報告期結束時重新評估。
非員工發行的認股權證（“非員工認股權證”）未被歸類為股份報酬，因為不存在與僱傭有關的條件，證券的授予並不代表報酬。非員工認股權證根據ASC 主題 480或ASC 主題 815歸類為衍生負債。發行給非員工的公開認股權證按照市場方法衡量公平價值，以每個報告期末賓納資本集團公開認股權證的報價市價為基礎。發行給非員工的私募認股權證按照每個期末的類似負債（發行給非員工的公開認股權證）在活躍市場的報價價格基礎上以循環方式衡量公平價值。
潛在負債
公司在存在曝光時承認憂慮的負債，該曝光在進行全面分析時表明潛在損失變得可能且可以合理估計。潛在損失是否可能且可以合理估計基於目前可用信息，並受到重大判斷、各種假設和不確定性的影響。
當潛在損失可能性很大且損失或損失範圍可估計時，公司將在該範圍內按照最有可能的金額計提負債。對於在管理層判斷之下，無法合理估計潛在損失金額的事項，或潛在損失不被確定為可能的事項，不承認負債。
新興成長企業地位
公司是一家“新興成長型企業”，根據1933年證券法第2(a)條的定義，經2012年初創業激勵法生效修改，因此，可以利用對其他非新興成長型企業適用並不適用於新興成長型企業的各種報告要求的某些豁免。
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2. | 重要會計政策概要 （續） |
最近公佈的會計準則
在2023年12月，財務會計準則委員會（"FASB"）發布了會計準則更新（"ASU"）2023-09， 所得税（主题740）：优化所得税披露蘭所得税披露的透明度，要求在税率协调和按司法管辖区细分的所得税支付信息中使用一致的类别和更大的细分。ASU 2023-09还包括某些其他修订，旨在提升所得税披露的效力。ASU 2023-09自2025年1月1日開始的公司財政年度生效，並允許使用前瞻性或追溯性方法。公司計劃採用該標準 以增強有關稅率調整、已支付所得稅的披露以及其他某些披露的透明度。該ASU應採取前瞻性應用，並於2024年12月15日後開始的年度期間生效，允許提前採納。公司目前正在評估對相關披露的影響；不過，它預期此更新不會影響其財務狀況或經營成果。
在2023年11月，FASB發布了ASU 2023-07， 分部報告（主題280）：改善可報告分部披露 為改善可報告細分市場的披露並包含有關可報告細分市場費用的更多詳細信息。此ASU還要求像本公司這樣的公共實體，若只有一個可報告細分市場，則提供所有修訂所要求的披露以及第280章所要求的所有現有披露。ASU應被追溯應用於合併基本報表中所列示的所有以前期間，並自2023年12月15日之後開始的財政年度生效，以及2024年12月15日之後開始的財政年度中的間歇期生效。允許提前採用。本公司目前正在評估對相關披露的影響；然而，它不預期此更新會對其財務狀況或營運成果產生影響。
最近採納的會計準則
在截至2024年9月30日的三個月內，沒有新的會計公告對本公司的簡明合併基本報表及相關披露產生重大影響。
3. | 合併及資本重組 |
在業務組合完成時，(i) KWAC普通股股份的持有者（"KWAC普通股”) 在業務合併的生效時間之前已發行及流通（不包括任何已贖回的股份）將獲得d
此外， 在交割日，持有方與一位投資者簽訂了訂閱協議，為 purchase 的
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3. | MERGER AND RECAPITALIZATION (continued) |
Holdings applied to have the Holdings Common Stock and Holdings Warrants listed on the Nasdaq Global Market (the “Nasdaq”) under the symbols BCG and BCG.W, respectively. Prior to the mergers, the KWAC Class A Common Stock and KWAC Public Warrants were listed on the OTC Exchange under the symbols “KWAC” and “KWAC.WS,” respectively.
On March 26, 2024, Holdings received approval for Holding’s securities to be listed on the Nasdaq Stock Market LLC. Holdings common stock is listed on the Nasdaq Global Market and its warrants will be listed on the Nasdaq Capital Market under the symbols “BCG” and “BCG.W”, respectively.
4. | REVENUES FROM CONTRACTS WITH CUSTOMERS |
Revenues from contracts with customers are recognized when control of the promised services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are analyzed to determine whether the Company is the principal (i.e., reports revenues on a gross basis) or agent (i.e., reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the product or service before control is transferred to a customer. The indicators of which party exercises control include primary responsibility over performance obligations before the good or service is transferred and discretion in establishing the price.
Commissions
Commission revenues represent sales commissions generated by advisors for their clients’ purchases and sales of securities on exchanges and over-the-counter, as well as purchases of other investment products. The Company views the selling, distribution and marketing, or any combination thereof, of investment products to such clients as a single performance obligation to the product sponsors.
The Company is the principal for commission revenues, as it is responsible for the execution of the clients’ purchases and sales and maintains relationships with the product sponsors. Advisors assist the Company in performing its obligations. Accordingly, total commission revenues are reported on a gross basis.
The Company generates two types of commission revenues: sales-based commissions that are recognized at the point of sale on the trade date and trailing commissions that are recognized over time as earned. Sales-based commission revenues vary by investment product and are based on a percentage of an investment product’s current market value at the time of purchase. Trailing commission revenues are generally based on a percentage of the current market value of clients’ investment holdings in trail-eligible assets, and are recognized over the period during which services, such as ongoing support, are performed. As trailing commission revenues are based on the market value of clients’ investment holdings, the consideration is variable, and an estimate of the variable consideration is constrained due to dependence on unpredictable market impacts. The constraint is removed once the investment holdings value can be determined.
Advisory Fees
Advisory fees represent fees charged to advisors’ clients’ accounts on the Company’s corporate advisory platform. The Company provides ongoing investment advice, brokerage and execution services on transactions, and performs administrative services for these accounts. This series of performance obligations transfers control of the services to the client over time as the services are performed. These revenues are recognized ratably over time to match the continued delivery of the performance obligations to the client over the life of the contract. The advisory revenues generated from the Company’s corporate advisory platform are based on a percentage of the market value of the eligible assets in the clients’ advisory accounts. As such, the consideration for these revenues is variable and an estimate of the variable consideration is constrained due to dependence on unpredictable market impacts on client portfolio values. The constraint is removed once the portfolio value can be determined.
The Company provides advisory services to clients on its corporate advisory platform through the advisor. The Company is the principal in these arrangements and recognizes advisory revenues on a gross basis, as the Company is responsible for satisfying the performance obligations and has control over determining the fees.
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4. | 與客戶合同相關的營業收入 （續） |
以下表格列出了截至9月30日的各投資產品的合同營業收入總額 (以千為單位):
截至三個月 | 截至九個月結束 | |||||||||||
九月30日， | 9月30日， | |||||||||||
與客戶訂約之營業收入 |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
變量年金和其他保險佣金 | $ | | $ | | $ | | $ | | ||||
共同基金佣金 |
| |
| |
| |
| | ||||
證券佣金 |
| |
| |
| |
| | ||||
其他投資 |
| |
| |
| |
| | ||||
諮詢費 |
| |
| |
| |
| | ||||
與客戶簽約的總營業收入 | $ | | $ | | $ | | $ | | ||||
以下的表格顯示了截至9月30日各產品類別的基於銷售和後續營業收入。 （以千為單位):
三個月結束 | Nine Months Ended | |||||||||||
九月三十日， | 九月三十日， | |||||||||||
基于銷售（時間點） |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
變量年金及其他保險佣金 | $ | | $ | | $ | | $ | | ||||
共同基金佣金 |
| |
| |
| |
| | ||||
證券委員會 |
| |
| |
| |
| | ||||
其他投資 |
| |
| |
| |
| | ||||
基於銷售額的總收入 | $ | | $ | | $ | | $ | | ||||
三個月結束 | 九個月結束 | |||||||||||
9月30日 | 9月30日 | |||||||||||
追蹤（隨時間進行） |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
變量年金和其他保險佣金 | $ | | $ | | $ | | $ | | ||||
共同基金佣金 |
| |
| |
| |
| | ||||
顧問費用 |
| |
| |
| |
| | ||||
替代性投資 |
| |
| |
| |
| | ||||
總計追踪營業收入 |
| |
| |
| |
| | ||||
與客戶簽訂合同的總營業收入 | $ | | $ | | $ | | $ | | ||||
合約餘額
營業收入認列的時間可能與公司客戶支付的時間不同。當營業收入被認列而尚未收到付款且具有無條件支付權時，公司會記錄應收款項。當公司已認列營業收入但付款條件不僅僅取決於時間流逝時，公司會記錄合同資產。另外，當支付先於提供相關服務時，公司會記錄透過遞延收入（合同負債）直到履行績效義務。截至2024年9月30日及2023年12月31日時，公司從與客戶的合同中有約數百萬美元的應收款項。
利息和其他收入
公司從客戶保證金帳戶和現金等價物中獲得利息收入，此收入並非來自與客戶的合同。此外，公司還收取行銷費用和贊助收入。
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5. | 公平價值 |
公司將公允價值定義為在計量日期市場參與者之間，為了一項資產賣出或為了轉移一項負債而收到的價格或支付的價格。該標準建立了用於公允價值計量的以下層級，並擴大了對於按公允價值計量的資產和負債所要求的披露：
| ● | 第1層級 - 輸入使用在可接觸的活躍市場中針對相同資產或負債的報價未經調整的價格。 |
| ● | 第2層級 - 公允價值計量使用其他可以觀察到的輸入，這些輸入可以是直接的或間接的。這些輸入包括在活躍市場中對於類似資產和負債的報價，以及其他如利率期貨和收益曲線等在通常報價區間內可觀察到的輸入。 |
| ● | 第3級 - 無法觀察的輸入，包括在相關資產或負債的市場活動很少甚至沒有時可獲得的輸入。 用於評估資產和負債的輸入或方法不一定表明與投資這些資產和負債相關的風險。 |
某些金融工具在財務狀況表上以成本計量，由於其短期和高度流動性，本質上接近公允價值。 負債的賬面價值接近其公允價值，因為這些義務上的利率代表當前市場利率。
6. | 債務 |
在2020年4月2日，公司與Oak Street Funding LLC（“Oak Street”）簽訂了一項信貸協議（“信貸協議”），金額為$
在2021年4月25日，本公司與Oak Street簽訂了一份金額為$的額外本票
根據橡樹街票據，公司需遵守協議中定義的某些契約。截止至2024年9月30日和2023年12月31日，公司遵守所有財務相關契約的要求。
截至2024年9月30日，橡樹街票據的最低支付和到期日如下： (以千為單位):
2024 |
| $ | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
其後 |
| | |
總計 | $ | |
與業務合併的結束相關，公司與Oak Street簽訂了信貸協議的修正案，規定了包括同意業務合併，以及某些債務義務的清償和重組在內的事項。此外，所收取的利率將以每年
13
6. | DEBT (continued) |
The amended Credit Agreement also includes a guarantee provision whereby each of the Company, KWAC, Holdings and MHC Securities, LLC are guarantors under the Credit Agreement. Additionally, certain of the members of the Company provide guarantees under the Credit Agreement.
7. | PROMISSORY NOTES – AFFILIATES |
On November 30, 2017, BMS issued subordinated promissory notes in the aggregate principal amount of approximately $
Additionally, in connection with the acquisition of the PKSH Entities, BMS agreed to pay contingent consideration in the amount of $
As of December 31, 2023, the amount of principal and accrued interest related to these promissory notes was approximately $
In connection with the closing of the Business Combination, the Company paid approximately $
8. | DUE TO MEMBERS |
BMS had entered into promissory notes with certain of its members to provide for working capital. As of December 31, 2023, the amount of principal and accrued interest related to these notes were approximately $
In connection with the closing of the Business Combination, the noteholders agreed to satisfy all outstanding obligations, including the payment of principal and interest, in exchange for an amount of cash equal to approximately $
9. | SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK |
On March 15, 2024 (the “Funding Date”), in connection with the consummation of the Business Combination, Holdings and BMS entered into a Subscription Agreement with an investor for the purchase of
Additionally, the Holdings Series A Stock carries a cumulative dividend at a rate of nine percent (
14
9. | SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK (continued) |
The Holdings Series A Stock has liquidation preferences in the event of a voluntary or involuntary liquidation as follows:
| ● | The greater of $ |
| ● | $ |
| ● | $ |
| ● | $ |
Holdings, at its option, may redeem the Series A Stock on any anniversary of the Funding date up to an including the fourth anniversary of the Funding date at the following redemption prices:
| ● | $ |
| ● | $ |
| ● | $ |
| ● | $ |
If the Series A Stock have not previously been redeemed or converted, the Series A Stock will be redeemed by Holdings on the fourth anniversary of the Funding Date.
10. | SERIES B CONVERTIBLE PREFERRED STOCK |
On September 4, 2024, the Company entered into a Subscription Agreement with certain investors for the purchase of
Additionally, the Holdings Series B Stock carries a cumulative dividend at a rate of nine percent (
The Company may, at its option, in whole, or part, redeem the Holdings Series B Stock any time after the first anniversary of the date of the Subscription Agreement at a redemption price equal to the greater of (i) $
15
11. | WARRANTS |
The following table summarizes the warrants outstanding as of September 30, 2024:
Class of Warrants |
| Number Outstanding |
Public warrants |
| |
Private placement warrants |
| |
Total warrants outstanding |
| |
Each whole Warrant entitles the registered holder to purchase
Except as described in this section, the Private Warrants have terms and provisions that are identical to those of the Public Warrants, except the Private Warrants are not subject to redemption, and do not become subject to redemption after transfer to a non-affiliate (a distinction from other private placement warrants issued in connection with SPAC transactions).
The Warrants are classified as derivative liabilities under ASC Topic 480 or ASC Topic 815. At , the fair value of the warrant liabilities is approximately $
12. | INCOME TAXES |
As a result of the Reverse Recapitalization, Binah Capital Group, Inc. is the parent company of KWAC, which is the parent company of BMS. KWAC is a corporation and subject to U.S. federal and certain state and local taxes. BMS is treated as a partnership for U.S. federal income tax purposes.
KWAC, the PKSH Entities, Cabot Entities and WEG are taxable entities and are subject to federal, state, and local income taxes. Therefore, these consolidated financial statements include an income tax provision for the taxable entities only.
The effective tax rate was approximately (
The Company files income tax returns, including returns for its subsidiaries, with federal and state jurisdictions. The Company is generally not subject to examinations for its federal and state returns for any periods prior to the 2019 tax year. The Company is not currently under examination for any tax years.
16
13. | NET LOSS PER SHARE |
The Series A and Series B Preferred Stock does not have similar economic rights to the common stock and management does not consider them to be in substance common shares for earnings per share (“EPS”) purposes. As a result, the weighted average Series A and Series B Preferred Stock outstanding during the period was not included in the calculation of weighted average common stock outstanding. The Public and Private Warrants were considered in diluted EPS under the treasury stock method, if dilutive.
Management determined that EPS was not presented for periods prior to the Merger as it was not considered to be meaningful.
The computation of loss per share and weighted average of the Company’s common stock outstanding for the period from the date of transaction close through September 30, 2024 is as follows (in thousands):
Three months | Nine Months | ||||
ended September 30, | Ended September 30, | ||||
| 2024 |
| 2024 | ||
Net (loss) |
| $ | ( | ( | |
Basic and diluted weighted average shares outstanding, common stock |
| | | ||
Basic and diluted loss per share of common stock | $ | ( | ( | ||
The following table details the securities that have been excluded from the calculation of weighted-average shares for diluted earnings per share for the period presented as they were anti-dilutive (in thousands).
Warrants |
| |
17
14. | COMMITMENTS AND CONTINGENCIES |
Litigation
Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the accompanying consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.
There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
The Company is a defendant or respondent in various pending and threatened arbitrations, administrative proceedings and lawsuits seeking compensatory damages. Claim amounts are infrequently indicative of the actual amounts the Company will be liable for, if any. Many of these claimants also seek, in addition to compensatory damages, punitive or treble damages, and all seek interest, costs and fees. These matters arise in the normal course of business. The Company intends to vigorously defend itself in these actions, and the ultimate outcome of these matters cannot be determined at this time.
In many lawsuits, arbitrations, and regulatory proceedings, it is not possible to determine whether a liability has been incurred or to estimate the amount of that liability until the matter is close to resolution. However, accruals are reviewed regularly and are adjusted to reflect management’s estimates of the impact of developments, rulings, advice of counsel and any other information pertinent to a particular matter.
Because of the inherent difficulty in predicting the ultimate outcome of legal and regulatory actions, management cannot predict with certainty the eventual loss or range of loss related to such matters. The Company believes, based upon current information, that the outcome of any such legal proceeding, claim, dispute, or investigation will not have a material effect on the Company’s financial position, results of operations or cash flows. However, the actual outcomes of such legal proceedings, claims, disputes, or investigations could be material to the Company’s operating results and cash flows for a particular future period as additional information is obtained.
Indemnification
The activities of the Company’s customers are transacted on either a cash or margin basis through the facilities of its clearing broker. In margin transactions, the clearing broker extends credit to the customers, subject to various regulatory and margin requirements, collateralized by cash and securities in the customer’s account. In connection with these activities, the clearing broker may also execute and clear customer transactions involving the sale of securities not yet purchased.
These transactions may expose the Company to significant off-balance sheet risk in the event margin requirements are not sufficient to fully cover losses which the customers may incur. In the event the customers fail to satisfy their obligations to the clearing broker, the Company may be required to compensate the clearing broker for losses incurred on behalf of the customers.
The Company, through its clearing broker, seeks to control the risk associated with its customers’ activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines.
As of September 30, 2024, and December 31, 2023, management of the Company had not been notified by any clearing brokers, nor were they otherwise aware of any potential losses relating to this indemnification.
18
15. | COMMON STOCK, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY |
The Company is authorized to issue
| ● |
| ● |
| ● |
16. | NET CAPITAL REQUIREMENTS |
The Company operates four registered broker-dealers that are subject to the SEC Uniform Net Capital Rule (Rule 15c3-1). This requires the Company to maintain certain minimum net capital requirements. As of and for the periods ended September 30, 2024 and December 31, 2023, all broker-dealers had net capital in excess of the required minimums.
17. | CREDIT RISK AND CONCENTRATIONS |
Financial instruments that subject the Company to credit risk consist principally of receivables and cash and cash equivalents. The Company performs certain credit evaluation procedures and does not require collateral for financial instruments subject to credit risk. The Company believes that credit risk is limited because the Company routinely assesses the financial strength of its counterparties and, based upon factors surrounding the credit risk of its counterparties, establishes an allowance for credit losses and, consequently, believes that its receivables credit risk exposure beyond such allowances is limited.
18. | SUBSEQUENT EVENTS |
The Company evaluated subsequent events that occurred after the balance sheet date up to November 14, 2024.
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. References to the “Company,” “us” or “we” refer to Binah Capital Group, Inc.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Business Overview
Binah Capital Group, Inc., a Delaware corporation (the “Company), is a leading consolidator of retail wealth management businesses that owns and operates ten entities, four of which are broker-dealers, three of which are registered investment advisors, and three of which are insurance entities, that have over 1900 registered individuals working within the financial services industries.
The Company focuses on three critical areas comprised of the hybrid, independent and W2 business models to allow affiliated advisors to choose the operating model that works best for them and run their practices on their own terms. The Company’s platform adds to its flexibility by providing a variety of custody and clearing firm options to accommodate the unique business needs of advisors.
The Merger
On March 15, 2024 (the “Closing Date”), Binah Capital consummated the transactions contemplated by that certain Agreement and Plan of Merger, dated July 7, 2022 (as amended, the “Merger Agreement” and the consummation of such contemplated transactions, the “Closing”), by and among Kingswood Acquisition Corp, a Delaware corporation (“KWAC”), Binah Capital, Kingswood Merger Sub, Inc., a Delaware corporation (“Kingswood Merger Sub”), Wentworth Merger Sub, LLC, a Delaware limited liability company (“Wentworth Merger Sub”), and Wentworth Management Services LLC, a Delaware limited liability company (dba, Binah Management Services, “BMS”). Binah Capital, Kingswood Merger Sub and Wentworth Merger Sub were newly formed entities that were formed for the sole purpose of entering into and consummating the transaction set forth in the Merger Agreement. Binah Capital was a wholly-owned direct subsidiary of KWAC and both Kingswood Merger Sub and Wentworth Merger Sub were wholly-owned direct subsidiaries of Binah Capital. On the Closing Date, Kingswood Merger Sub merged with and into KWAC, with KWAC continuing as the surviving entity as a wholly-owned subsidiary of Binah Capital and Wentworth Merger Sub merged with and into BMS, with BMS continuing as the surviving entity as a wholly-owned subsidiary of Binah Capital. Following the BMS merger, KWAC acquired, and Binah Capital contributed to KWAC all of the common units of BMS directly held by Binah Capital after the Wentworth merger, such that, following the Binah Capital contribution, BMS became a wholly-owned subsidiary of KWAC.
20
Upon the consummation of the Business Combination, (i) the holders of shares of KWAC’s common stock (“KWAC Common Stock”) issued and outstanding immediately prior to the effective time of the Business Combination (other than any redeemed shares) received one share of common stock of Holdings (“Holdings Common Stock”) in exchange for each share of KWAC Common Stock held by them, subject to adjustment as more fully described herein, (ii) 1,100,000 shares of Holdings Common Stock issued to Sponsor was placed by Holdings into an escrow account and will not be released to the Sponsor unless the dollar volume-weighted average price of Holdings Common Stock exceeds $12.00 for 20 trading days within any 30-day trading period during the four-year period following the consummation of the Business Combination, (iii) the holders of each whole warrant to purchase KWAC Class A Common Stock received one warrant to purchase Holdings Common Stock at an exercise price of $11.50 per share, (iv) 12 million shares of Holdings Common Stock, subject to adjustment as more fully described herein, was issued to the equity holders of BMS in proportion to their ownership interests in BMS, (v) an additional 1,100,000 shares of Holdings Common Stock was issued to certain equity holders of BMS, (vi) 3,084,450 KWAC Private Placement Warrants held by Sponsor were forfeited immediately prior to the effective time of the Business Combination, and (vii) 3,084,450 warrants to purchase Holding Common Stock at an exercise price of $11.50 per share were issued to the equity holders of BMS in proportion to their ownership interests in BMS. As a result of the Business Combination, BMS became an indirect, wholly-owned subsidiary of Holdings.
Additionally, on the Closing Date, Holdings entered into a Subscription Agreement with an investor for the purchase of 1,500,000 shares of Holdings’ Series A Redeemable Convertible Preferred Stock (the “Holdings Series A Stock”) in a private placement at $9.60 per share, for an aggregate purchase price of $14,400,000 (the “Series A PIPE”). The Holdings Series A Stock may be converted into shares of Holdings Common Stock after the second anniversary of the closing of the Series A PIPE, which such conversion shall initially be 1.5 shares of Holdings Common Stock for each share of Series A Convertible Preferred Stock, subject to certain adjustments provided in the Certificate of Designations.
Our Sources of Revenue
Our revenue is derived primarily from fees and commissions from products and advisory services offered by our advisors to their clients, a substantial portion of which we pay out to our advisors.
Executive Summary
Financial Highlights
Results for the three and nine-month period ended September 30, 2024 included a net loss of approximately $(1.2) million and $(3.5) million and total revenue of approximately $42.2 million and $124.3 million, respectively, which compares to net income and total revenue of $0.2 million and $ 1.4 million and approximately $42.9 million and $126.7 million, respectively, for the three and nine month period ended September 30, 2023.
Asset Trends
Total advisory and brokerage assets served were $26.9 billion at September 30, 2024, compared to $22.8 billion at September 30, 2023. Total net new assets were $0.4 billion and $(1.8) billion for the three- and nine-month period ended September 30, 2024, compared to $0.5 and $(3.2) billion for the same period in 2023.
Net new advisory assets were $0.0 billion and (0.1) billion for the three and nine-month period ended September 30, 2024, compared to $0.0 billion and $(0.5) billion for the same period in 2023. Advisory assets were $2.5 billion at September 30, 2024, which is an increase of approximately 23% from the the $2.0 billion at September 30, 2023.
Net new brokerage assets were $0.4 and (1.7) billion for the three and nine-month period ended September 30, 2024, compared to $0.5 billion and $(2.7) billion for the same period in 2023. Brokerage assets were $24.5 billion at September 30, 2024, up 17.5% from $20.8 billion at September 30, 2023.
Gross Profit Trend
Gross profit, a non-GAAP financial measure, was $8.4 million and $23.5 million for the three and nine-month period ended September 30, 2024, an increase of approximately 20% and 3% from $7.0 million and $22.8 million for the three and nine-month period ended September 30, 2023. See the “Key Performance Metrics and Non-GAAP Financial Measures” section for additional information on gross profit.
21
Key Performance Metrics and Non-GAAP Financial Measures
We focus on several key metrics in evaluating the success of our business relationships and our resulting financial position and operating performance. Our key metrics of Gross Profit and EBITDA are “non-GAAP financial measures.” Our management periodically uses certain “non-GAAP financial measures,” as such term is defined under the rules of the SEC, to supplement our financial information presented in accordance with GAAP and to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. Management believes that the non-GAAP financial measures of Gross Profit and EBITDA provide investors and analysts useful insight into our financial position and operating performance. Any non-GAAP measure provided should be viewed in addition to, and not as an alternative to, the most directly comparable measure determined in accordance with U.S. GAAP. Further, the calculation of these non-GAAP financial measures may differ from the calculation of similarly titled financial measures presented by other companies and therefore may not be comparable among companies.
Gross profit is defined as total revenue less commissions paid to financial advisors and registered representatives and other fees that generate the revenue. We consider our gross profit amounts to be non-GAAP financial measures that may not be comparable to those of others in our industry. We believe that gross profit amounts can provide investors with useful insight into our core operating performance before other costs that are general and administrative in nature.
EBITDA is a non-GAAP financial measure defined as net income plus interest expense, provision for income taxes, and depreciation and amortization. The Company presents EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations. EBITDA is not a measure of the Company’s financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP.
22
A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP financial measures appears below in the footnotes to the table of our key operating, business and financial metrics.
Our key operating, business and financial metrics are as follows:
As of and for the Three Months Ended September 30, | ||||||
Operating Metric (dollars in billions) |
| 2024 |
| 2023 | ||
Advisory and Brokerage Assets |
|
|
|
| ||
Brokerage assets | $ | 24.5 | $ | 20.8 | ||
Advisory assets |
| 2.5 |
| 2.0 | ||
Total Advisory and Brokerage Assets | $ | 26.9 | $ | 22.8 | ||
Net New Assets |
|
|
|
| ||
Net new brokerage assets | $ | 0.4 | $ | 0.5 | ||
Net new advisory assets |
| 0.0 |
| 0.0 | ||
Total Net New Assets | $ | 0.4 | $ | 0.5 | ||
Financial Metrics (dollars in millions) | ||||||
Total revenue | $ | 42.2 | $ | 42.9 | ||
Net income (loss) | $ | (1.2) | $ | 0.2 | ||
Non-GAAP Financial Metrics (dollars in millions) | ||||||
Gross Profit(1) | $ | 8.4 | $ | 7.0 | ||
EBITDA(2) | $ | 0.4 | $ | 1.6 | ||
As of and for the Nine Months Ended September 30, | ||||||
Operating Metric (dollars in billions) |
| 2024 |
| 2023 | ||
Advisory and Brokerage Assets | ||||||
Brokerage assets |
| $ | 24.5 |
| $ | 20.8 |
Advisory assets | 2.5 | 2.0 | ||||
Total Advisory and Brokerage Assets | $ | 26.9 | $ | 22.8 | ||
Net New Assets | ||||||
Net new brokerage assets | $ | (1.7) | $ | (2.7) | ||
Net new advisory assets | (0.1) | (0.5) | ||||
Total Net New Assets | $ | (1.8) | $ | (3.2) | ||
Financial Metrics (dollars in millions) | ||||||
Total revenue | $ | 124.3 | $ | 126.7 | ||
Net income (loss) | $ | (3.5) | $ | 1.4 | ||
Non-GAAP Financial Metrics (dollars in millions) | ||||||
Gross Profit(1) | $ | 23.5 | $ | 22.8 | ||
EBITDA(2) | $ | 0.9 | $ | 6.5 | ||
(1) | Gross profit is a non-GAAP financial measure defined as total revenue less commissions paid to financial advisors and registered representatives and other fees that generate the revenue. We consider our gross profit amounts to be non-GAAP financial measures that may not be comparable to those of others in our industry. We believe that gross profit amounts can provide investors with useful insight into our core operating performance before other costs that are general and administrative in nature. Below is a calculation of gross profit for the periods presented (in millions): |
For the Three Months Ended September 30, | ||||||
Gross Profit |
| 2024 |
| 2023 | ||
Total revenue | $ | 42.2 | $ | 42.9 | ||
Commission and fees |
| 33.8 |
| 35.9 | ||
Gross Profit | $ | 8.4 | $ | 7.0 | ||
For the Nine Months Ended September 30, | ||||||
Gross Profit |
| 2024 |
| 2023 | ||
Total revenue | $ | 124.3 | $ | 126.7 | ||
Commission and fees |
| 100.8 |
| 103.9 | ||
Gross Profit | $ | 23.5 | $ | 22.8 | ||
23
(2) | EBITDA is a non-GAAP financial measure defined as net income plus interest expense, provision for income taxes, and depreciation and amortization. The Company presents EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations. EBITDA is not a measure of the Company’s financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. Below is a reconciliation of net income to EBITDA for the periods presented (in millions): |
For the Three Months Ended September 30, | ||||||
EBITDA Reconciliation |
| 2024 |
| 2023 | ||
Net income (loss) | $ | (1.2) | $ | 0.2 | ||
Interest expense |
| 0.8 |
| 1.2 | ||
Provision for income taxes |
| 0.5 |
| (0.2) | ||
Depreciation and amortization |
| 0.3 |
| 0.3 | ||
EBITDA | $ | 0.6 | $ | 1.6 | ||
For the Nine Months Ended September 30, | ||||||
EBITDA Reconciliation |
| 2024 |
| 2023 | ||
Net income (loss) | $ | (3.5) | $ | 1.4 | ||
Interest expense |
| 2.6 |
| 3.9 | ||
Provision for income taxes |
| 0.9 |
| 0.3 | ||
Depreciation and amortization |
| 0.9 |
| 0.9 | ||
EBITDA | $ | 0.9 | $ | 6.5 | ||
Economic Overview and Impact of Financial Market Events
Our business is directly and indirectly sensitive to several macroeconomic factors and the state of the United States financial markets.
According to the most recent estimate from the U.S. Bureau of Economic Analysis, the U.S. economy grew at an annualized pace of 2.8% in the third quarter of 2024, after growing at an annualized pace of 1.6% and 2.8% in the first and second quarter of this year, respectively. The U.S. economy added roughly 558,000 jobs in the third quarter of 2024, while the unemployment rate averaged 4.1% in the third quarter of 2024, consistent with the average in the prior quarter.
Our business is also sensitive to current and expected short-term interest rates, which are largely driven by Fed policy. During the third quarter of 2024, Fed policymakers lowered the target range for the federal funds rate to 4.8% to 5.0%. The equity markets surged to new highs resulting in the S&P 500 returning 5.9% during the third quarter of 2024.
Please consult the Factors Affecting Our Financial Condition and Results of Operations, including those described in the section titled “Risk Factors.”
Basis of Presentation
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Currently, we conduct business through one operating segment. The consolidated financial statements have been prepared assuming that we will continue as a going concern. See Note 1 in the accompanying consolidated financial statements for further details.
24
Results of Operations
The following presents an analysis of our results of operations for the three and nine-month periods ended September 30, 2024 and 2023 (in thousands):
For the three months ended September 30, | For the nine months ended September 30, |
| |||||||||||
| 2024 |
| 2023 |
| % Change |
| 2024 |
| 2023 |
| % Change |
| |
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Revenue from Contracts with Customers: |
|
|
|
|
|
|
|
|
| ||||
Commissions |
| 34,780 | 35,469 | -1.9 | % | 102,836 |
| 104,112 |
| -1.2 | % | ||
Advisory Fees |
| 6,247 | 5,448 | 14.7 | % | 18,250 |
| 16,334 |
| 11.7 | % | ||
Total Revenue from Contracts with Customers |
| 41,026 | 40,917 | 0.3 | % | 121,086 |
| 120,446 |
| ||||
Interest and other income |
| 1,170 | 1,933 | -40.3 | % | 3,209 |
| 6,227 |
| -48.5 | % | ||
Total revenues |
| 42,197 | 42,850 | -1.5 | % | 124,295 |
| 126,673 |
| -1.9 | % | ||
For the three months ended September 30, |
| For the nine months ended September 30, |
| |||||||||||||
Expenses: |
| 2024 |
| 2023 |
| % Change |
| 2024 |
| 2023 |
| % Change |
| |||
Commissions and fees |
| 33,832 |
| 35,865 |
| -5.7 | % | 100,839 |
| 103,863 |
| -2.9 | % | |||
Employee compensation and benefits |
| 3,937 |
| 3,088 |
| 27.5 | % | 10,988 |
| 9,875 |
| 11.3 | % | |||
Rent and occupancy |
| 285 |
| 284 |
| 0.2 | % | 870 |
| 900 |
| -3.3 | % | |||
Professional fees |
| 1,120 |
| 697 |
| 60.7 | % | 6,059 |
| 2,412 |
| 151.2 | % | |||
Technology fees |
| 386 |
| 598 |
| -35.4 | % | 1,228 |
| 1,543 |
| -20.4 | % | |||
Interest |
| 775 |
| 1,249 |
| -37.9 | % | 2,632 |
| 3,895 |
| -32.4 | % | |||
Depreciation and amortization |
| 268 |
| 303 |
| -11.8 | % | 862 |
| 913 |
| -5.6 | % | |||
Other |
| 2,207 |
| 766 |
| 188.3 | % | 3,394 |
| 1,539 |
| 120.5 | % | |||
Total expenses |
| 42,810 |
| 42,849 |
| -0.1 | % | 126,872 |
| 124,940 |
| 1.5 | % | |||
|
|
|
| |||||||||||||
Income (loss) before provision (benefit) for income taxes |
| (613) |
| 1 |
| -66941.3 | % | (2,577) |
| 1,733 |
| -248.7 | % | |||
Provision (benefit) for income taxes |
| 537 |
| (242) |
| -321.4 | % | 890 |
| 289 |
| 208.4 | % | |||
Net income (loss) | (1,150) | 243 |
| -572.5 | % | $ | (3,467) | $ | 1,444 |
| -340.0 | % | ||||
Revenues
The Company’s primary source of revenue is from fees and commissions from products and advisory services offered by our advisors to their clients, a substantial portion of which we pay out to our advisors. We also generate interest income in accordance with our agreements with our clearing partners. In accordance with ASC 606, Revenue from Contracts with Customers, we record revenue when control of the promised services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are analyzed to determine whether the Company is the principal (i.e., reports revenues on a gross basis) or agent (i.e., reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the product or service before control is transferred to a customer. The indicators of which party exercises control include primary responsibility over performance obligations, inventory risk before the good or service is transferred and discretion in establishing the price.
Commissions
Commission revenues represent sales commissions generated by advisors for their clients’ purchases and sales of securities on exchanges and over-the-counter, as well as purchases of other investment products.
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The Company generates two types of commission revenues: sales-based commissions that are recognized at the point of sale on the trade date and trailing commissions that are recognized over time as earned. Sales-based commission revenues vary by investment product and are recognized on the trade date or the transaction date, which represents the completion of the Company’s performance obligation because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to/from the customer at a point in time. The rates at which commissions are charged to the customers range from 1% to 7% based on the investment product. Trailing commission revenues which are preliminarily related to the sales of mutual funds and variable annuities held by clients of the Company’s advisors are generally based on a percentage of the current market value of clients’ investment holdings in trail-eligible assets, and are recognized over the time the client owns the investment or holds the contract and is generally based on a fixed rate applied, generally twenty-five to fifty basis points (25-50 bps) of the current market value of the clients’ holdings. Trailing commissions are generally received monthly or quarterly. The ongoing revenue is not recognized at the time of sale because it is variably constrained due to factors outside the Company’s control including market volatility and the client’s investment hold period and the Company does not believe that it can overcome such constraints until the market value of the fund and the investor activities are known. The revenues will not be recognized until it is probable that a significant reversal will not occur.
The Company is principal for the commission revenue, as it is responsible for the execution of the clients’ purchases and sales and maintains relationships with the product sponsors. Advisors assist the Company in performing it obligations. Accordingly, total commission revenue is reported on a gross basis. See Note 4 - Revenues From Contracts with Customers within the notes to the condensed consolidated financial statements for the three and nine-month periods ended September 30, 2024, and 2023 for further details regarding our commission revenue by product category.
The following tables sets forth the components of our commission revenue for the three and nine-month periods ended September 30, 2024 and 2023 (in thousands):
| For the three months ended September 30, |
|
| |||||||||
2024 |
| 2023 |
| $ Change | % Change |
| ||||||
Sales-based | $ | 16,441 | $ | 18,939 |
| $ | (2,498) |
| -13.2 | % | ||
Trailing |
| 18,339 |
| 16,530 |
| $ | 1,807 |
| 10.9 | % | ||
Total commission revenue | $ | 34,780 | $ | 35,469 |
| $ | (691) |
| -1.9 | % | ||
| For the nine months ended September 30, |
|
|
| |||||||
| 2024 |
| 2023 |
| $ Change |
| % Change | ||||
Sales-based | $ | 48,058 | $ | 56,184 |
| (8,126) |
| -14.5 | % | ||
Trailing |
| 54,778 |
| 47,928 |
| 6,850 |
| 14.3 | % | ||
Total commission revenue | $ | 102,836 | $ | 104,112 |
| (1,276) |
| -1.2 | % | ||
Sales-based revenue decreased by approximately $2.5 and $8.1 million or 13.2% and 14.5% for the three and nine-month period ended September 30, 2024, respectively, as compared to 2023. Trailing based revenue increased by approximately $1.8 and $6.8 million or 10.9% and 14.3% for the three and nine-month periods ended September 30, 2024, respectively, as compared to 2023. The decrease in sales-based revenue for the three and nine-month periods ended September 30, 2024 as compared to 2023 is attributable to a decrease in the generation of transactional based products. The increase in the trailing based revenues is primarily due to the positive market performance related to the trail-eligible assets.
Commission revenue is generated from brokerage assets. The following tables summarize the brokerage assets as of September 30, 2024 and 2023 (in billions):
| As of September 30, | |||||
2024 |
| 2023 | ||||
Brokerage Assets | $ | 24.5 | $ | 20.8 | ||
Included in the brokerage assets above are trail-eligible assets as follows (in billions):
| As of September 30, | |||||
| 2024 |
| 2023 | |||
Trail-Eligible Assets | $ | 17.0 | $ | 14.0 | ||
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The following table summarizes activity impacting brokerage assets for the periods ended (in billions):
Three Months Ended September 30, | ||||||
| 2024 | 2023 | ||||
Balance - Beginning of period | $ | 22.8 | $ | 21.1 | ||
Net new brokerage assets(1) | 0.4 | 0.5 | ||||
Market impact(2) | 1.3 | (0.8) | ||||
Balance - End of period | $ | 24.5 | $ | 20.8 | ||
| Nine Months Ended September 30, | |||||
| 2024 | 2023 | ||||
Balance - Beginning of period | $ | 21.8 | $ | 20.1 | ||
Net new brokerage assets(1) | (1.7) | (2.7) | ||||
Market impact(2) | 4.4 | 3.4 | ||||
Balance - End of period | $ | 24.5 | $ | 20.8 | ||
| (1) | Net new brokerage assets consist of total client deposits less client withdrawals from brokerage accounts, plus dividends, plus interest. |
| (2) | Market impact is the difference between the beginning and ending asset balances less the net new asset amounts, representing the implied growth or decline in asset balances due to market change over the same period of time. |
Advisory Fees
Advisory fees represent fees charged to advisors’ clients’ accounts on the Company’s corporate advisory platform. The Company provides ongoing investment advice, brokerage and execution services on transactions, and performs administrative services for these accounts. These fees are recognized ratably over time to match the continued delivery of the performance obligations to the client over the life of the contract. The advisory fees generated from the Company’s corporate advisory platform are based on a percentage of the market value of the eligible assets in the clients’ advisory accounts.
Advisory fees increased by approximately 14.7% and 11.7% for the three and nine-month periods ended September 30, 2024, respectively, as compared to the same periods in September 30, 2023, due to positive returns in the market offset by outflows of advisory assets.
The following tables summarizes the advisory assets as of September 30, 2024 and 2023 (in billions):
| As of September 30, | |||||
2024 |
| 2023 | ||||
Advisory Assets | $ | 2.5 | $ | 2.0 | ||
The following table summarizes activity impacting advisory assets for the periods ended (in billions):
| Three Months Ended September 30, | |||||
| 2024 |
| 2023 | |||
Balance - Beginning of period |
| $ | 2.3 | $ | 2.0 | |
Net new advisory assets(1) |
| 0.0 | 0.1 | |||
Market impact(2) |
| 0.1 | (0.1) | |||
Balance - End of period |
| $ | 2.5 | $ | 2.0 | |
| Nine Months Ended September 30, | |||||
| 2024 |
| 2023 | |||
Balance - Beginning of period |
| $ | 2.1 | $ | 2.1 | |
Net new advisory assets(1) |
| (0.0) | (0.5) | |||
Market impact(2) |
| 0.4 | 0.4 | |||
Balance - End of period |
| $ | 2.5 | $ | 2.0 | |
| (1) | Net new advisory assets consist of total client deposits less client withdrawals from custodial accounts, plus dividends, plus interest, minus advisory fees. |
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| (2) | Market impact is the difference between the beginning and ending asset balances less the net new asset amounts, representing the implied growth or decline in asset balances due to market change over the same period of time. |
Interest and other income
Interest income includes amounts earned on balances held at the Company’s clearing brokers related to cash balances and margin balances. The Company’s clearing agreements include provisions that provide for a sharing of the interest income earned on such balances with the clearing brokers. The rate varies based on the clearing broker.
Other income primarily includes amounts earned by the Company related to marketing and incentives earned from the sales of certain investment products by the financial advisors to its clients, primarily alternative investments, as well as sponsorship income.
The decrease in interest and other income for the period ended September 30, 2024, compared to 2023 is primarily related to a non-recurring income item that was earned in March 2023.
Operating Expenses
Commissions and Fees
Commissions and fees primarily consist of commissions paid to the financial advisors, technology costs associated with the platform for which the financial advisors operate their business, insurance costs and regulatory costs. Certain of the technology, insurance and regulatory costs are passed through to the financial advisors and any excess costs are included as fees within commissions and fees. The commissions and fees paid to the financial advisors are based on the advisory and commission revenue earned on each client’s account. The payout amount is production based, which is the gross revenue produced by the financial advisor, and varies based on the level of such production ranging from 50% to 95% of the revenue generated. The production levels begin at gross revenue of $15,000 up to $4,000,000 and up, and the payout rate starts at 50% and increases to a top payout rate of 94% for annual production of $4,000,000 and up.
The following table sets forth our payout rate, which is a statistical or operating measure and monitored to review that such costs of revenue remain consistent on a period over period basis:
| For the three months ended September 30, |
|
| ||||
2024 |
| 2023 |
| Change |
| ||
Payout range |
| 82.42 | % | 87.65 | % | 5.23 | % |
For the Nine Months ended September 30, |
| ||||||
| 2024 |
| 2023 |
| Change |
| |
Payout range |
| 83.26 | % | 86.23 | % | 2.97 | % |
For the three and nine-month periods ended September 30, 2024, the payout rate decreased as compared to 2023 as a result of in the prior year there was a non-recurring commissionable product that carried a payout at 90%.
Employee compensation and benefits
Employee compensation and benefits includes salaries, wages, benefits and related taxes for our employees.
Employee compensation and benefits for the three-month period ended September 30, 2024 increased as compared to September 30, 2023, by 27.5%, which relates to the addition of personnel costs attributed to the Company now operating as a public company.
Employee compensation and benefits for the nine-month period ended September 30, 2024 increased as compared to September 30, 2023, by 11.3% which relates to the addition of personnel costs attributed to the Company now operating as a public company.
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Rent and occupancy
Rent and occupancy remained relatively consistent for the three-month period ended September 30, 2024 as compared to September 30, 2023 increasing slightly by 0.2%.
Rent and occupancy remained relatively consistent for the nine-month period ended September 30, 2024 as compared to September 30, 2023 decreasing by 3.3%.
Professional fees
Professional fees includes costs incurred related to legal and accounting services. Professional fees for the three and nine-month periods ended September 30, 2024, as compared to 2023 increased by $0.4 million and $3.6 million, respectively, which is directly related to transaction costs associated with the Business Combination and specific costs related to the Company now operating as a public company.
Technology fees
Technology fees primarily represent infrastructure costs that support the Company’s technology and communications costs. Technology fees decreased by $0.2 million and $0.3 million for the three and nine-month periods ended September 30, 2024, respectively, as compared to 2023.
Interest expense
Interest expense primarily includes interest associated with the Company’s credit facility and other debt obligations. Interest expense decreased by $0.5 million and $1.3 million for the three and nine-month periods ended September 30, 2024, respectively, as compared to 2023 resulting from the repayment and restructuring of the related party debt obligations of BMS.
Depreciation and amortization
Depreciation and amortization relates to the use of property, equipment and leasehold improvements. Amortization also includes the amortization related to certain intangible assets.
Other expense
Other expense includes insurance, travel-related expenses, office expenses, marketing and other miscellaneous expenses.
Provision for Income Taxes
Our effective income tax rate was approximately (46)% and (26)% for the three and nine-month periods ended September 30, 2024, as compared to (100)% and 20% for the same periods in 2023, respectively. The decrease in our effective tax rate was related to the transaction expenses related to the Reverse Recapitalization.
Liquidity and capital resources
We have established liquidity policies intended to support the execution of strategic initiatives, while meeting regulatory capital requirements and maintaining ongoing and sufficient liquidity. We believe liquidity is of critical importance to the Company and, in particular, to our broker-dealer subsidiaries, PKSI, CLS, MSI and WEG. The objective of our policies is to ensure that we can meet our strategic, operational and regulatory liquidity and capital requirements under both normal operating conditions and under periods of stress in the financial markets.
Parent Company Liquidity
Binah Capital Group, Inc. through its indirectly wholly owned subsidiary BMS, is the direct holding company of our operating subsidiaries, and considers its primary sources of liquidity to be dividends and management fees from our operating subsidiaries.
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Sources of Liquidity
As of September 30, 2024, we had $19.1 million outstanding under our Senior Credit Facility with Oak Street Funding, LLC, net of debt issuance costs. The associated debt facilities are as follows:
Oak Street Funding, LLC
On April 2, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”) with Oak Street Funding LLC (“Oak Street”) in the amount of $25 million. This note payable bears interest at the prime rate (“Prime”) (8.00% as of September 30, 2024) plus 2.25% and has a 10-year term and a 3-month interest only repayment provision. As of September 30, 2024 and December 31, 2023, the outstanding balance of the Oak Street note, net of unamortized debt issuance costs was $16.2 million and $17.6 million, respectively.
On April 25, 2021, the Company entered into an additional promissory note with Oak Street in the amount of $4.1 million related to the acquisition of WEG (“WEG Note”). This note payable bears interest at Prime plus 2.25% and has a 10-year term. As of September 30, 2024 and December 31, 2023, the outstanding balance of this note, net of unamortized debt issuance costs was $3.0 million and $3.2 million, respectively.
Under the Oak Street notes, the Company is subject to certain covenants as defined in the agreements. As of September 30, 2024 and December 31, 2023, the Company was in compliance with all financial related covenants.
The minimum payments and maturities of the Oak Street notes as of September 30, 2024 were as follows (in thousands):
2024 |
| $ | 598 |
2025 | 2,596 | ||
2026 |
| 2,950 | |
2027 |
| 3,344 | |
2028 |
| 3,788 | |
Thereafter |
| 6,434 | |
Total | $ | 19,710 |
Series A Redeemable Convertible Preferred Stock
On March 15, 2024 (the “Funding Date”) in connection with the consummation of the Business Combination, Holdings and BMS entered into a Subscription Agreement with an investor for the purchase of 1,500,000 shares of Holdings’ Series A Redeemable Convertible Preferred Stock (the “Holdings Series A Stock”) in a private placement at $9.60 per share, for an aggregate purchase price of $14,400,000 (the “Series A PIPE”). The Holdings Series A Stock may be converted into shares of Holdings Common Stock after the second anniversary of the closing of the Series A PIPE, which such conversion shall initially be 1.5 shares of Holdings Common Stock for each share of Series A Convertible Preferred Stock, subject to certain adjustments provided in the Certificate of Designations.
Additionally, the Holdings Series A Stock carries a cumulative dividend at a rate of nine percent (9%) per annum, payable and compounded quarterly on the last day of each quarter. At the discretion of Holdings the payment may be made in cash or up to 50% of the amount due, in duly authorized, validly issued, fully paid and non-assessable share of Holdings Series A Stock at a value of $10 per share.
The Holdings Series A Stock has liquidation preferences in the event of a voluntary or involuntary liquidation as follows:
| ● | The greater of $12.50 per share of Holdings Series A Stock if such liquidation occurs prior to the first anniversary of the Funding Date; |
| ● | $13.00 per share of Holdings Series A Stock if such liquidation occurs prior to the second anniversary of the Funding Date; |
| ● | $15.00 per share of Holdings Series A Stock if such liquidation occurs prior to the third anniversary of the Funding Date; |
| ● | $16.00 per share of Holdings Series A Stock if such liquidation occurs prior to the fourth anniversary of the Funding Date. |
30
Holdings, at its option, may redeem the Series A Stock on any anniversary of the Funding date up to an including the fourth anniversary of the Funding date at the following redemption prices:
| ● | $11.50 per share of Series A Stock on the first anniversary of the Funding Date; |
| ● | $13.00 per share of Series A Stock on the second anniversary of the Funding Date; |
| ● | $15.00 per share of Series A Stock on the third anniversary of the Funding Date; |
| ● | $16.00 per share of Series A Stock on the fourth anniversary of the Funding Date; |
If the Series A Stock have not previously been redeemed or converted, the Series A Stock will be redeemed by Holdings on the fourth anniversary of the Funding Date.
SERIES B Convertible Preferred Stock
On September 4, 2024, the Company entered into a Subscription Agreement with certain investors for the purchase of 150,000 shares of Holdings’ Series B Convertible Preferred Stock (the “Holdings Series B Stock”) in a private placement at $10.00 per share, for an aggregate purchase price of $1,500,000). The Holdings Series B Stock may be converted into shares of Holdings Common Stock, at the option of the investor at a rate equal to the quotient of (i) $10.00 divided, by (ii) the product of (A) .80 multiplied by, (B) the volume weighted average price for the 20 trading days during the 30-day period immediately prior to such conversion, provided that in no event shall the denominator be less than $6.00 per share (the “Conversion Rate”).
Additionally, the Holdings Series B Stock carries a cumulative dividend at a rate of nine percent (7%) per annum, payable and compounded quarterly on the last day of each quarter. At the discretion of Holdings, the payment may be made in cash or up to 50% of the amount due, in duly authorized, validly issued, fully paid and non-assessable share of Holdings Series B Stock at a value of $10 per share.
The Company may, at its option, in whole, or part, redeem the Holdings Series B Stock any time after the first anniversary of the date of the Subscription Agreement at a redemption price equal to the greater of (i) $12.00 per share of Holdings Series B Stock, plus accrued but unpaid dividends or (A) 1.20 multiplied by (B) the volume weighted average price for 20 trading days during the 30-day period immediately prior to the redemption; provided that such price shall not greater than $20.00.
Other promissory notes
On November 30, 2017, BMS issued subordinated promissory notes in the aggregate principal amount of approximately $3.6 million to certain sellers in connection with the acquisition of the PKSH Entities. These notes had a maturity date of May 17, 2023 and accrued interest at a rate of 10% annually. The interest on these notes continued to accrue until such time as these notes were paid or restructured.
Contingent consideration subordinated promissory notes
Additionally, in connection with the acquisition of the PKSH Entities, BMS agreed to pay contingent consideration in the amount of $5.0 million to certain sellers. The conditions related to this contingency were met on November 30, 2018, and thus the notes had been issued to the sellers. These subordinated promissory notes had a maturity date of May 30, 2023, and accrued interest at a rate of 10% annually. The interest on these notes continued to accrue until such time as these notes were paid or restructured.
As of December 31, 2023, the amount of principal and accrued interest related to these promissory notes was approximately $12.2 million. Related interest expense was approximately $0 million and $0.5 million for the periods ended September 30, 2024 and 2023, respectively.
In connection with the closing of the Business Combination, the Company paid approximately $3.5 million on these notes. In addition to the paydown, the noteholders agreed to forgive the remaining accrued but unpaid interest of approximately $3.8 million and entered into new promissory notes in the principal amount of approximately $5.3 million in the aggregate. The terms of these new promissory notes provide for maturity on May 15, 2027 and carries an interest rate of Prime plus 1.00%, but no less than 7.50% per annum.
31
Other commitments
BMS had entered into promissory notes with certain of its members to provide for working capital. As of December 31, 2023, the amount of principal and accrued interest related to these notes were approximately $5.2 million. The notes carried an interest at the rate of 10% and were due on demand.
In connection with the closing of the Business Combination, the noteholders agreed to satisfy all outstanding obligations, including the payment of principal and interest, in exchange for an amount of cash equal to approximately $0.9 million, forgiveness of certain other obligations owed to a noteholder and the issuance of 357,000 shares of Common Stock of Binah Capital Group, Inc.
Cash Flows
The following table sets forth a summary of cash flows for the nine-month period ended September 30, 2024 and 2023:
(in thousands) | 2024 |
| 2023 | |||
Net cash (used in) provided by operating activities | $ | (2,411) | $ | 362 | ||
Net cash used in investing activities |
| (18) |
| (88) | ||
Net cash provided by (used in) financial activities |
| 2,061 |
| (1,851) | ||
Net change in cash flows | $ | (368) | $ | (1,577) | ||
Cash Flows from Operating Activities. Net cash used in operating activities was $2.4 million for the nine-month period ended September 30, 2024, compared to net cash provided by of $0.4 million for the nine-month period ended September 30 2023, representing a decrease of approximately $2.7 million or 766%. The decrease was primarily attributable to the decrease in net income of approximately $4.9 million to a net loss of $(3.5) million.
Cash Flows from Investing Activities. Net cash used in investing activities was $.02 million for the nine-month period ended September 30, 2024, compared to $0.1 million for the nine-month period ended September 30, 2023. The increase was primarily related to a decrease in the purchases of property and equipment.
Cash Flows from Financing Activities. Net cash provided by financing activities was approximately $2.0 million for the nine-month period ended September 30, 2024 compared to cash used in financing activities of approximately $1.9 million for the nine-month period ended September 30, 2023. The change is primarily related to the proceeds received from the Redeemable Convertible Preferred Financing offset by the repayments of the BMS related party debt obligations.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations and other commitments as of September 30, 2024:
| Payments Due by period | ||||||||||||||
Total |
| Less than 1 Year |
| 1-3 Years |
| 3-5 Years |
| More than 5 Years | |||||||
Contractual obligations |
| (in thousands) | |||||||||||||
Long-term debt obligations (1) | $ | 19,710 | $ | 598 | $ | 8,891 | $ | 10,058 | $ | 164 | |||||
Interest payments |
| 8,046 |
| 624 |
| 5,695 |
| 1,724 |
| 3 | |||||
Promissory notes - affiliates (2) |
| 5,313 |
| — |
| 5,313 |
| — |
| — | |||||
Operating lease obligations (3) |
| 4,501 |
| 535 |
| 1,662 |
| 1,764 |
| 540 | |||||
$ | 37,570 | $ | 1,757 | $ | 21,561 | $ | 13,545 | $ | 707 | ||||||
| (1) | Represents principal obligations related to the Oak Street credit facility that was entered into during the years ended December 31, 2020 and 2021. |
| (2) | Represents the obligations under the amounts due to certain sellers of the PKSH entities. |
| (3) | Represents future minimum lease payments as of September 30, 2024, under non-cancelable office leases. |
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on the
32
Company’s knowledge of current events and actions the Company may undertake in the future, actual results could differ from those estimates and assumptions.
We define our critical accounting policies and estimates as those that require us to make subjective judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. We believe the critical accounting policies used in the preparation of our financial statements which require significant estimates and judgments are as follows:
Revenue Recognition
Revenues from contracts with customers are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Management exercises judgment in determining whether the Company is the principal (i.e., reports revenues on a gross basis) or agent (i.e., reports revenue on a net basis). For additional information see Note 4 in the consolidated financial statements as of and for the three and nine-months periods ended September 30, 2024 and 2023.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets are tested annually for impairment or if certain events occur indicating that the carrying amounts may be impaired. We have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test is not required. However, if we conclude otherwise, we are then required to perform the first step of the two-step impairment test. Goodwill impairment is determined by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value, however, further analysis is required to determine the amount of the impairment. Additionally, if the carrying value of a reporting unit is zero or a negative value and it is determined that it is more likely than not the goodwill is impaired, further analysis is required. The estimated fair values of the reporting units are derived based on valuation techniques we believe market participants would use for each of the reporting units.
We performed our goodwill impairment test as of and for the years ended December 31, 2023, and 2022. The estimated fair value of the reporting units were determined using the market approach for each reporting unit, relying specifically on the guideline public company method. Our guideline public company method incorporates revenue and earnings multiples from publicly traded companies with operations and other characteristics similar to each reporting unit. As a result of the 2023 and 2022 annual impairment tests, the fair value of the reporting units was 257% and 266% greater than its carrying value, respectively. Since there have been no events or circumstances which indicated that it was more likely than not the fair value of the reporting units were below their carrying amount, interim goodwill tests were not considered necessary.
The goodwill impairment test requires us to make judgments in determining what assumptions to use in the calculation. Assumptions, judgments, and estimates about future cash flows and discount rates are complex and often subjective. They can be affected by a variety of factors, including, among others, economic trends and market conditions, changes in revenue growth trends or business strategies, unanticipated competition, discount rates, technology, or government regulations. In assessing the fair value of our reporting units, the volatile nature of the securities markets and industry requires us to consider the business and market cycle and assess the stage of the cycle in estimating the timing and extent of future cash flows. In addition to discounted cash flows, we consider other information, such as public market comparable and multiples of recent mergers and acquisitions of similar businesses. Although we believe the assumptions, judgments, and estimates we have made in the past have been reasonable and appropriate, different assumptions, judgments, and estimates could materially affect our reported financial results.
Intangible assets that are deemed to have definite lives are amortized over their useful lives, generally ranging from 5 to 10 years. They are reviewed for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount to the estimated undiscounted future cash flows expected to be generated. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value.
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Contingent Liabilities
The Company recognizes liabilities for contingencies when there is an exposure that, when fully analyzed, indicates potential losses become probable and can be reasonably estimated. Whether a potential loss is probable and can be reasonably estimated is based on currently available information and is subject to significant judgment, a variety of assumptions and uncertainties.
When a potential loss is probable and the loss or range of loss can be estimated, the Company will accrue the most likely amount within that range. No liability is recognized for those matters which, in management’s judgment, the determination of a reasonable estimate of potential loss is not possible, or for which a potential loss is not determined to be probable.
Recently Issued Accounting Pronouncements
Refer to Note 2 - Summary of Significant Accounting Policies, within the notes to the consolidated financial statements for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in market risk from those addressed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 during the three months ended September 30, 2024. See the information set forth in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that as of September 30, 2024, our disclosure controls and procedures were effective.
Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We may be party to various claims and legal proceedings from time to time. We are not subject to any pending material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers or directors in their capacity as such.
From time to time, we have been subjected to and are currently subject to legal and regulatory proceedings arising out of our business operations, including lawsuits, arbitration claims and inquiries, investigations and enforcement proceedings initiated by the SEC, FINRA and state securities regulators, as well as other actions and claims.
Item 1A. Risk Factors.
There have been no material changes to the information previously disclosed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On September 30, 2024, the Company issued 36,400 Series A Preferred Stock to Pollen Street Capital Limited as payment-in-kind issuances in lieu of cash in respect of interest that came due in September 2024.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
Series B Financing
Subscription Agreement
On September 4, 2024 (the “Issuance Date”), the Company entered into a subscription agreement (the “Series B Subscription Agreement”) with certain investors for the purchase of 150,000 shares of Holdings Series B Stock in a private placement at $10.00 per share, for an aggregate purchase price of $1,500,000.
The shares of Holdings Series B Stock issued pursuant to the Series B Subscription Agreement have not been registered under the Securities Act, and were issued in reliance on the availability of an exemption from such registration.
This summary is qualified in its entirety by reference to the text of Series B Subscription Agreement, which is included as Exhibit 10.1 to this Current Report and is incorporated herein by reference.
Series B Certificate of Designations
Ranking
With respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Company, the Holdings Series B Stock will rank (i) junior to the Holdings Series A Stock and any class or series of equity securities of the Company that, by its terms, expressly ranks senior to Holdings Series B Stock; (ii) senior to all other classes or series of Holdings Common Stock and any other class or series of capital stock of the Company that by its terms is not expressly senior to, or on parity with, the Holdings Series B Stock; and (iii) on parity with any class or series of capital stock of the Company hereafter created that expressly ranks pari passu with the Holdings Series B Stock.
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Dividend
Holders of shares of Holdings Series B Stock are entitled to receive, when, as and if authorized by the Board and declared by the Company out of funds legally available for the payment of dividends, a cumulative dividend at a rate of seven percent (7%) per annum, payable and compounded quarterly on the last day of each quarter. At the discretion of the Company, the payment may be made in cash or up to 50% of the amount due, in duly authorized, validly issued, fully paid and non-assessable share of Holdings Series B Stock at a value of $10 per share.
Conversion
The Holdings Series B Stock may be converted into shares of Holdings Common Stock, at the option of the investor at a rate equal to the quotient of (i) $10.00 divided, by (ii) the product of (A) .80 multiplied by, (B) the volume weighted average price for the 20 trading days during the 30-day period immediately prior to such conversion, provided that in no event shall the denominator be less than $6.00 per share.
Optional Redemption
The Company may, at its option, in whole, or part, redeem the Holdings Series B Stock any time after the first anniversary of the date of the Series B Subscription Agreement at a redemption price equal to the greater of (i) $12.00 per share of Holdings Series B Stock, plus accrued but unpaid dividends or (A) 1.20 multiplied by (B) the volume weighted average price for 20 trading days during the 30-day period immediately prior to the redemption; provided that such price shall not greater than $20.00.
Anti-dilution Provisions
The Conversion Rate is subject to customary adjustments in the case of certain actions taken with respect to the Holdings Common Stock, including distributions to holders of Holdings Common Stock in shares, subdivisions, splits or combinations of the Holdings Common Stock, issuances, sales of or distribution of convertible securities, options or any other assets to holders of Holdings Common Stock for which there is no corresponding distribution in respect of the Holdings Series B Stock.
Voting Rights
As long as any shares of Holdings Series B Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of Holdings Series B Stock amend, alter, repeal or otherwise modify any provision of the Holdings’ certificate of incorporation or the Certificate of Designations in a manner that would alter or change the terms or the powers, preferences, rights or privileges of the Holdings Series B Stock as to affect them adversely.
Additionally, holders of the Holdings Series B Stock shall be entitled to one vote per share and entitled to vote together (as a single class) with the holders of Holders’ common stock on all matters submitted to a vote of stockholders of Holdings, except as otherwise provided in the Certificate of Designations or as required by applicable law.
This summary is qualified in its entirety by reference to the text of Series B Certificate of Designations, which is included as Exhibit 4.1 to this Current Report and is incorporated herein by reference.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit |
| Description of Document |
4.1 | ||
10.1 | ||
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101.INS | XBRL Instance Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Filed herewith
** Furnished herewith
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BINAH CAPITAL GROUP, INC. | ||
Date: November 14, 2024 | By: | /s/ Craig Gould |
Name: | Craig Gould | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) | ||
Date: November 14, 2024 | By: | /s/ David Shane |
Name: | David Shane | |
Title: | Chief Financial Officer | |
(Principal Accounting and Financial Officer) | ||
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