GPB Holdings II 10Q 2024 Q2 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2024

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

For the transition period from to

Commission File Number: 000-56442

GPB Holdings II, LP

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	47-3870808 (I.R.S. Employer Identification No.)
c/o Highline Management, Inc. 55 Old Field Point Road, Suite 1 East Greenwich, CT (Address of principal executive offices)	06830 (Zip Code)

(877) 489-8484

Registrant’s telephone number, including area code

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




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

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

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

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


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

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

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

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements:
	Condensed Consolidated Statements of Net Assets in Liquidation as of June 30, 2024 and December 31, 2023	2
	Condensed Consolidated Statements of Changes in Net Assets in Liquidation for the three and six months ended June 30, 2024	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023	4
	Condensed Consolidated Statements of Comprehensive loss for the three and six months ended June 30, 2023	5
	Condensed Consolidated Statements of Changes in Partners’ Capital for the three and six months ended June 30, 2023	6
	Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2023	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Net Assets in Liquidation

(Liquidation Basis)

(Dollars in thousands)

(Unaudited)

Item 1. Unaudited Condensed Consolidated Financial Statements.


	June 30,		December 31,
	2024		2023
Assets
Cash and cash equivalents	$	10,808	$	33,038
Investment securities		503,879		340,196
Escrow receivable		10,392		13,393
Assets held for sale, discontinued operations		—		145,585
Total assets	$	525,079	$	532,212
Liabilities
Liability for estimated costs in excess of estimated receipts during liquidation	$	41,333	$	50,510
Distribution payable for tax withholding		—		1,000
Debt		—		3,333
Due to related parties		248		23
Total liabilities		41,581		54,866
Commitments and Contingencies (See “Note 5. Commitments and Contingencies”)
Net assets in liquidation:
Net assets attributable to the Partnership in liquidation		482,669		464,245
Net assets attributable to the non-controlling interests in liquidation		829		13,101
Total net assets in liquidation	$	483,498	$	477,346

See Notes to Condensed Consolidated Financial Statements.

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Net Assets in Liquidation

(Liquidation Basis)

(Dollars in thousands)

(Unaudited)


	Three Months		Six Months
	Ended June 30,		Ended June 30,
	2024		2024
Net assets in liquidation, beginning of period	$	486,979	$	477,346
Changes in assets and liabilities in liquidation:
Increase (decrease) in investment securities		10		(76)
(Increase) decrease in liability for estimated costs in excess of estimated receipts during liquidation		(3,167)		5,968
Increase in distribution payable for tax withholding		—		(147)
Increase in due to related party		(75)		(225)
Net changes in liquidation value		(3,232)		5,520
Changes in net assets in liquidation resulting from settlement of assets and liabilities:
Proceeds received in excess of assets recorded		250		1,131
Payments made in excess of liabilities recorded		(70)		(70)
Distributions to non-controlling interests		(429)		(429)
Changes in net assets in liquidation		(3,481)		6,152
Net assets in liquidation, end of period	$	483,498	$	483,498

See Notes to Condensed Consolidated Financial Statements.

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Dollars in thousands)

(Unaudited)


	Three Months Ended June 30,		Six Months Ended June 30,
	2023		2023
Operating expenses (income):
Selling, general and administrative expenses	$	6,311	$	12,029
Managerial assistance fee, related party		3,088		6,116
Income from equity method investments		(484)		(3,948)
Total net operating expenses		8,915		14,197
Operating loss		(8,915)		(14,197)
Other income:
Interest income		2,702		6,021
Other (loss) income		(106)		8
Total other income		2,596		6,029
Net loss from continuing operations		(6,319)		(8,168)
Loss from discontinued operations		(9,801)		(8,728)
Income tax expense, discontinued operations		(256)		(467)
Net loss from discontinued operations		(10,057)		(9,195)
Net loss from continuing and discontinued operations		(16,376)		(17,363)
Net loss attributable to non-controlling interests		(6,022)		(5,778)
Net loss attributable to the Partnership	$	(10,354)	$	(11,585)

See Notes to Condensed Consolidated Financial Statements.

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(Dollars in thousands)

(Unaudited)


	Three Months Ended June 30,		Six Months Ended June 30,
	2023		2023
Net loss	$	(16,376)	$	(17,363)
Other comprehensive loss:
Foreign currency translation gain (loss )		7		(125)
Total comprehensive loss		(16,369)		(17,488)
Other comprehensive gain (loss) attributable to non-controlling interests		1		(11)
Net loss attributable to non-controlling interest		(6,022)		(5,778)
Comprehensive loss attributable to the Partnership	$	(10,348)	$	(11,699)

See Notes to Condensed Consolidated Financial Statements.

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Partners’ Capital

(Dollars in thousands)

(Unaudited)


									Partners’
									Capital		Accumulated
	Class A		Class A-1		Class B		Class B-1		Attributable		Other		Non-
	Limited		Limited		Limited		Limited		to GPB		Comprehensive		Controlling
	Partners		Partners		Partners		Partners		Holdings II, LP		Loss		Interests		Total
Partners’ capital - December 31, 2022	$	212,740	$	118,598	$	129,372	$	68,462	$	529,172	$	(2,170)	$	12,766	$	539,768
Transfers		5		(5)		—		—	$	—		—		—	$	—
Tax withholding distributions		(36)		(14)		(19)		(10)		(79)		—		—		(79)
Contribution		—		—		—		—		—		—		3,800		3,800
Net (loss) income		(732)		(291)		(186)		(22)		(1,231)		—		244		(987)
Other comprehensive loss		—		—		—		—		—		(120)		(12)		(132)
Partners’ capital - March 31, 2023	$	211,977	$	118,288	$	129,167	$	68,430	$	527,862	$	(2,290)	$	16,798	$	542,370
Transfers		(17)		17		—		—		—		—		—		—
Purchase of non-controlling interest		(438)		(244)		(267)		(141)		(1,090)		—		(395)		(1,485)
Net loss		(4,281)		(2,414)		(2,412)		(1,247)		(10,354)		—		(6,022)		(16,376)
Other comprehensive income		—		—		—		—		—		6		1		7
Partners’ capital - June 30, 2023	$	207,241	$	115,647	$	126,488	$	67,042	$	516,418	$	(2,284)	$	10,382	$	524,516

See Notes to Condensed Consolidated Financial Statements.

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows

(Dollars in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023
Cash flows from operating activities:
Net loss	$	(17,363)
Adjustments to reconcile net loss to net cash used in operating activities:
Income from equity method investments		(3,948)
Gain on sale of debt investments		(29)
Unrealized loss on investment securities		168
Changes in operating assets and liabilities, net of effects from business combinations and dispositions:
Accounts receivable		10
Prepaid expenses		60
Accrued expenses		(214)
Due to related parties		3,184
Net operating cash flows from discontinued operations		7,957
Net cash used in operating activities		(10,175)

Cash flows from investing activities:
Proceeds from sale of debt investments		87
Purchase of business (net of cash acquired)		(11,673)
Purchase of short term investments		(293,486)
Distribution received from investee		10,040
Net investing cash flows of discontinued operations		(1,366)
Net cash used in investing activities		(296,398)

Cash flows from financing activities:
Tax withholding distributions		(79)
Purchase of non-controlling interest		(1,485)
Net financing cash flows of discontinued operations		(862)
Net cash used in financing activities		(2,426)

Effect of exchange rate changes on cash		(13)

Net decrease in cash and cash equivalents		(309,012)
Cash and cash equivalents and restricted cash - beginning of period		352,654
Cash and cash equivalents and restricted cash - end of period	$	43,642

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

See Notes to Condensed Consolidated Financial Statements.

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization, Basis of Presentation and Other

Organization

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

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

Basis of Presentation

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

Principles of Consolidation

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

Divestiture of Substantially All of the Partnership’s Assets

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

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

The Partnership determined that the Divested Businesses qualified as a component under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-20 Financial Statement Presentation, Discontinued Operations (“ASC 205-20”) because they represented operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the remainder of the Partnership’s operations. Further, the Divested Businesses represent a strategic shift in the Partnership’s business and their disposal will have a major effect on the entity’s operations and financial results. The Partnership also determined that the Divested Businesses met the criteria to be classified as “held for sale” upon entering into the agreements to sell and the filing for Chapter 7 protection. Consequently, the Partnership has classified the assets and liabilities comprising the Divested Businesses as “Assets held for sale, discontinued operations” in the accompanying Condensed Consolidated Statement of Net Assets in Liquidation as of December 31, 2023, and the results of operations and cash flows as discontinued operations in the Condensed Consolidated Statement of Operations and Cash Flows for the three and six months ended June 30, 2023.

Plan of Liquidation

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

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

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

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

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Following the Implementation of the Plan of Liquidation

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

Under the liquidation basis of accounting, the consolidated balance sheet and consolidated statements of operations, equity and cash flows are no longer presented. The liquidation basis of accounting requires a statement of net assets in liquidation, a statement of changes in net assets in liquidation and all disclosures necessary to present relevant information about our expected resources in liquidation. The liquidation basis of accounting may only be applied prospectively from the day liquidation becomes imminent and the initial statement of changes in net assets in liquidation may present only changes in net assets that occurred during the period since that date.

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

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

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

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

Prior to Implementation of the Plan of Liquidation

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

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Nature of Business

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

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

New Accounting Pronouncements

As a result of adopting Liquidation Basis of Accounting, we believe no new accounting pronouncements will have a material impact on our consolidated net assets in liquidation or consolidated changes in net assets in liquidation.

2. Significant Accounting Policies

The significant accounting policies used in preparation of these Condensed Consolidated Financial Statements are disclosed in our Form 10-K, filed with the SEC on March 28, 2024, and there have been no changes to the Partnership’s significant accounting policies during the three and six months ended June 30, 2024.

Cash, Cash Equivalents and Investment Securities

Cash and cash equivalents includes cash on hand, cash in bank accounts without restriction. The Partnership maintains cash balances with financial institutions that, at times, may exceed federally insured limits. Management periodically evaluates the creditworthiness of these institutions and has not experienced any losses on such deposits.

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of June 30, 2024, the standard Federal Deposit Insurance Corporation (the “FDIC”) insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. Any deposit in excess of this insured amount could be lost. As of June 30, 2024, substantially all of the Partnership’s $10.8 million of deposited cash held in banks was in excess of the FDIC coverage limit. The Partnership regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents. However, in March and April 2023, certain U.S. government banking regulators took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened uncertainties in the financial markets. While these and other current events have not had a material direct impact on the Partnership’s Plan of Liquidation, if further liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions of the United States, the Partnership’s ability to access cash may be threatened, which could have a material adverse effect on its net assets in liquidation.

Investment securities include Corporate Stock and Treasury Bills with original maturities on the date of purchase of greater than three months. As of June 30, 2024, $503.9 million was invested in Treasury Bills with original maturities on the date of purchase in excess of three months and is presented as Investment securities in the Condensed Consolidated Statement of Net Assets in Liquidation.

Risks and Uncertainties

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

Under the liquidation basis of accounting, we estimate the liquidation value of our assets and recognize future costs expected to be incurred during the liquidation period. Our estimate of future legal costs is a significant estimate recorded as a component of liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation. These estimates will be periodically reviewed and adjusted as appropriate, any such adjustments may be material. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the timing or the amount of future distributions or our actual dissolution. See “Footnote 1. Organization, Basis of Presentation, and Other” for further information.

Our access to cash, cash equivalents, and investment securities in amounts adequate to finance our operations could be significantly impaired by the financial institutions, with which we have arrangements. Any material decline in our ability to access our cash, cash equivalents and investment securities could adversely impact our ability to meet certain steps in our Plan of Liquidation, pay distributions, among other things. Additionally, given our significant investment in Treasury Bills as of June 30, 2024, changes in interest rates could impact our estimated cash inflows during the liquidation period. These risks and uncertainties could have material adverse impacts on our operations and the amount of total net assets in liquidation.

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

The liquidation basis of accounting requires the estimation of net cash flows from operations and all costs associated with implementing and completing the Plan of Liquidation. These accrued receipts and costs are estimated and are anticipated to be collected and paid out over the liquidation period. We project that we will have estimated costs in excess of estimated receipts during the liquidation period. These amounts can vary significantly due to, among other things, the net realizable value of our remaining assets, estimates of direct costs incurred to complete the sale of such assets, the timing and amounts associated with discharging known and contingent liabilities, the costs associated with the winding up of operations, and other costs that we may incur which are not currently foreseeable. These accrued receipts and costs will be adjusted periodically as projections and assumptions change. Upon transition to the liquidation basis of accounting on December 31, 2023, we accrued receipts to be received and costs expected to be incurred during liquidation which is anticipated to be complete by December 31, 2026, however, no assurances can be provided that this date will be met. The liability for estimated costs in excess of estimated receipts during liquidation at June 30, 2024 and December 31, 2023 was comprised of (in thousands):


	June 30, 2024		December 31, 2023
Total estimated receipts during remaining liquidation period	$	18,862	$	21,769
Total estimated costs of operations:
Selling, general and administrative expenses		(49,780)		(58,596)
Selling, general and administrative expenses - related party		(10,415)		(13,683)
Total estimated costs during remaining liquidation period		(60,195)		(72,279)
Liability for estimated costs in excess of estimated receipts during liquidation	$	(41,333)	$	(50,510)

The change in liability for estimated costs in excess of estimated receipts during liquidation between December 31, 2023 and June 30, 2024, is as follows (in thousands):


					Changes in Estimated
			Net Change in		Future Cash Flows
	December 31, 2023		Working Capital⁽³⁾		During Liquidation ⁽⁴⁾		June 30, 2024
Assets:
Estimated receipts from investments⁽¹⁾	$	21,769	$	(15,381)	$	12,474	$	18,862
Liabilities:
Corporate expenditures⁽²⁾		(72,279)		18,590		(6,506)	$	(60,195)
Liability for estimated costs in excess of estimated receipts during liquidation	$	(50,510)	$	3,209	$	5,968	$	(41,333)

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

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

Net change in working capital represents changes in assets and liabilities for the six months ended June 30, 2024, primarily as a result of actual cash receipts or payments.

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

During the six months ended June 30, 2024, the Partnership accrued interest income expected to be received on the investment securities invested in Treasury Bills of approximately $12.5 million. This resulted in an increase to the total estimated receipts during the remaining liquidation period within the liability for estimated costs in excess of estimated receipts during liquidation.

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During the six months ended June 30, 2024, the Partnership revised its projection for legal and legal indemnification costs, primarily as a result of significantly higher legal costs related to higher-than-expected activity in numerous current and ongoing legal matters, offset by a decrease due to a change in allocation of projected costs during the remaining liquidation period among the GPB-managed funds, resulting in a net increase of $7.7 million in selling, general and administrative expenses - corporate within the liability for estimated costs in excess of estimated receipts during liquidation.

The remaining $1.2 million decrease relates primarily to the change in estimated future costs during liquidation for other professional fees as a result of a change in allocation of projected costs during the remaining liquidation period among the GPB-managed Funds.

4. Disposals, Assets Held for Sale and Discontinued Operations

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

2023 DISPOSITIONS

Technology-Enabled Services

On December 15, 2023, the Partnership entered into an agreement to sell the entirety of the Partnership’s indirect ownership interest in HPI for $190.0 million in net cash proceeds. On January 19, 2024, the Partnership completed the sale of HPI. On January 19, 2024, the Partnership distributed $11.9 million to the non-controlling interest holders of HPI. The assets and liabilities of HPI had been classified as held for sale at their net realizable value as of December 31, 2023.

On October 24, 2023, the Partnership sold 100% of its equity interests in Cantata, for $22.3 million in net cash proceeds. The Partnership recorded a gain of approximately $1.5 million on disposal of the business in October 2023.

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

The Partnership’s investments in HPI, Experience Care and Cantata previously constituted the Technology-Enabled Services Segment.

Summarized operating results for the Technology-Enabled Services segment for the three and six months ended June 30, 2023, respectively, were as follows:


	Three months		Six months
	ended June 30,		ended June 30,
(Dollars in thousands)	2023		2023
Revenues	$	36,696	$	72,856
Cost of revenues		20,300		40,448
Gross profit		16,396		32,408
Operating expenses		9,866		24,287
Operating income		6,530		8,121
Other expense		297		1,606
Income from discontinued operations		6,233		6,515
Income from discontinued operations, before tax		6,233		6,515
Income tax expense		256		467
Net income from discontinued operations		5,977		6,048
Net income attributable to non-controlling interests		619		629
Net income attributable to the Partnership	$	5,358	$	5,419

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Energy

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

Summarized operating results for the Energy segment for the three and six months ended June 30, 2023, respectively, were as follows:


	Three months		Six months
	ended June 30,		ended June 30,
(Dollars in thousands)	2023		2023
Revenues	$	8,055	$	20,616
Cost of revenues		5,011		11,439
Gross profit		3,044		9,177
Operating expenses		19,478		24,956
Operating loss		(16,434)		(15,779)
Other expense		25		54
Loss from discontinued operations		(16,459)		(15,833)
Net loss from discontinued operations		(16,459)		(15,833)
Net loss attributable to non-controlling interests		(6,641)		(6,407)
Net loss attributable to the Partnership	$	(9,818)	$	(9,426)

Automotive Retail

GPB Prime, in which the Partnership continues to hold a 33.5% investment, completed the sale of substantially all of its assets, including real estate, three collision centers and 28 dealerships in 2021. The Partnership also sold its wholly owned dealership, Orangeburg Subaru LLC (“Orangeburg”), in 2021. The carrying value of the Partnership’s remaining investment in GPB Prime of $0.3 million and $3.8 million as of June 30, 2024 and December 31, 2023, respectively, is included in the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation. In April 2024, January 2024 and March 2023, GPB Prime distributed $0.9 million, $2.3 million and $8.0 million, respectively, to the Partnership. Following the completion of the sale, the Partnership has no involvement in the operations of GPB Prime or Orangeburg.

The summarized operating results for the Automotive Retail segment for the three and six months ended June 30, 2023 were inconsequential.

5. Commitments and Contingencies

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

We establish reserves or escrows for legal actions when potential losses associated with the actions become probable and the costs can be reasonably estimated. The actual costs of resolving legal actions may be substantially higher or lower than the amounts reserved or placed in escrow for those actions. Distributions may be delayed or withheld until such reserves are no longer needed or the escrow period expires. If liabilities exceed the amounts reserved or placed in escrow, Limited Partners may need to fund the difference by refunding some or all distributions previously received. During the three and six months ended June 30, 2024, GPB increased the

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estimated legal indemnification costs expected to be paid during the liquidation term resulting in a increase in the liability for estimated costs in excess of estimated receipts during liquidation of $10.3 million and $7.7 million, respectively. During the six months ended June 30, 2024, the Partnership revised its projection for legal and legal indemnification costs, primarily as a result of significantly higher legal costs related to higher-than-expected activity in numerous current and ongoing legal matters. Legal indemnification expenses paid during the three and six months ended June 30, 2024, were $6.1 million and $10.9 million, respectively, and reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount.

For the three and six months ended June 30, 2023, the Partnership paid $3.5 million and $7.1 million, respectively, of legal indemnification expenses recorded in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

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

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

Regulatory and Governmental Matters

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

Federal Matters

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

Also on February 4, 2021, the U.S. Attorney’s Office for the Eastern District of New York (the “USAO”) brought a Criminal indictment against Mr. Gentile, Mr. Schneider, and Mr. Lash (the “Criminal Case”). The indictment in the Criminal Case alleges conspiracy to commit securities fraud, conspiracy to commit wire fraud, and securities fraud against all three individuals. Mr. Gentile and Mr. Lash were also charged with two counts of wire fraud. Promptly following his indictment, Mr. Gentile resigned from all management and board positions with GPB and Highline, the GPB-managed funds, including the Partnership, and subsidiaries of the Partnership. On June 6, 2023, Mr. Lash pled guilty to one count of wire fraud in the Criminal Case pursuant to a plea agreement. On June 10, 2024, the trial in the Criminal Case commenced against Mr. Gentile and Mr. Schneider. The jury in the Criminal Case returned a guilty verdict on

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all counts against Mr. Gentile and Mr. Schneider on August 1, 2024. Sentencing of Mr. Gentile and Mr. Schneider is scheduled for October 24, 2024. Mr. Lash’s sentencing is scheduled for October 31, 2024.

Appointment of Monitor and Application for Receivership

On February 11, 2021, the EDNY Court in the SEC Action appointed Joseph T. Gardemal III as the independent monitor over GPB (the “Monitor”) until further order of the EDNY Court (the “Monitor Order”). The EDNY Court appointed the Monitor in response to a request from the SEC, which asserted that the Monitor was necessary to protect investors in light of the alleged misconduct of GPB Capital’s former CEO, David Gentile. In its February 4, 2021 complaint (“the Complaint”) in the SEC Action, the SEC alleged that Mr. Gentile, as the owner and then-CEO of GPB Capital, along with Jeffry Schneider, the owner of Ascendant, GPB’s placement agent, lied to investors about the source of money used to make 8% annualized distribution payments to investors. According to the SEC, Mr. Gentile and others allegedly told investors that the distribution payments were paid exclusively with monies generated by GPB portfolio companies, but as alleged, GPB actually used investor money to pay portions of the annualized 8% distributions. The Complaint further contains allegations that Mr. Gentile and others manipulated financial statements of certain limited partnership funds that GPB manages to perpetuate the deception by giving the false appearance that the funds’ income was closer to generating sufficient income to cover the distribution payments than it actually was. Moreover, the Complaint alleges that Mr. Gentile engaged in undisclosed self-dealing, including by omitting from investor communications certain conflicts of interest and fees and other compensation that he received, totaling approximately $8.0 million.

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

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

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

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

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

The Receivership Application seeks the appointment of Mr. Gardemal as Receiver in order to, in part, streamline the process by which GPB and the GPB-managed funds liquidate remaining portfolio company assets and distribute money to Limited Partners, subject to the

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EDNY Court’s supervision. The Proposed Order would grant to Mr. Gardemal, generally, all powers and authorities previously possessed by the entities subject to the Proposed Order, as well as the powers possessed by the officers, directors, managers and others previously in charge of those entities, and permits him to, among other things, take all such actions necessary to preserve receivership assets.

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

On July 28, 2023, an Eastern District of New York Magistrate Judge issued a Report and Recommendation (‘R&R”), recommending that the EDNY Court grant the SEC’s Receivership Application (i.e., convert the monitorship to a receivership), including the imposition of a litigation injunction. The Magistrate Judge further recommended that Mr. Gentile’s Rule 60(b) Motion be denied as moot, or alternatively, that it be denied as procedurally improper. Mr. Gentile’s and Mr. Schneider’s objections to the R&R, and all responses thereto, were filed with the EDNY Court as of September 29, 2023.

On December 7, 2023, the EDNY Court issued an Order, granting the SEC’s Receivership Application and adopting the SEC’s Proposed Order (the “Receivership Order”). On December 12, 2023, Mr. Gentile and Mr. Schneider filed notice of appeal with the EDNY Court of the Receivership Order, along with an Application for Order to Show Cause to the EDNY Court to stay the Receivership Order pending resolution of Mr. Gentile’s and Mr. Schneider’s appeal to the United States Court of Appeals for the Second Circuit (the “Second Circuit”). On December 14, 2023, the EDNY Court denied the Order to Show Cause, but exercised its discretion to grant a temporary stay of the Receivership Order to allow Mr. Gentile and Mr. Schneider to seek a stay pending appeal of the Receivership Order from the Second Circuit. On December 21, 2023, Mr. Gentile and Mr. Schneider timely filed their motion for a stay pending appeal with the Second Circuit. The parties to the appeal agreed to an expedited briefing, which was completed on April 12, 2024. If the Receivership Order is affirmed on appeal, the Receiver would assume the power to operate and manage the Partnership but would have the power to authorize or delegate said power to others, including the current management team at GPB. Under the Receivership, we may be subject to, among other things, closer monitoring of our day-to-day activities and books and records than under the current Monitorship. We may also be prohibited from making certain investments or undertaking activities that we would have otherwise pursued, may be required to settle certain disputes (including disputes with creditors), or otherwise may be subject to reorganization. This may also impact our estimates regarding costs expected to be incurred during the liquidation process.

State Matters

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

On February 4, 2021, seven State securities regulators (from Alabama, Georgia, Illinois, Missouri, New Jersey, New York, and South Carolina, collectively the “States”) each filed suit against GPB. No GPB-managed fund is a named defendant in any of the suits. Several of the suits also named Ascendant, AAS, Mr. Gentile, Mr. Schneider, and Mr. Lash as defendants. The States’ lawsuits allege, among other things, that the offering documents for several GPB-managed funds, including the Partnership, included material misstatements and omissions. The States seek both monetary and administrative relief, including disgorgement and rescission. The cases brought by

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the States have been stayed pending the conclusion of the Criminal Case. The State of New Jersey has voluntarily dismissed its case, without prejudice to re-file it following the conclusion of the Criminal Case.

Actions Asserted Against GPB and Others, Not Including the Partnership

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

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

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

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

Actions Asserted Against GPB and Others, Including the Partnership

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

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

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

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

In November 2019, plaintiffs filed a derivative action against GPB, Ascendant, AAS, Axiom, Michael Cohn, Steven Frangioni, David Gentile, William Jacoby, Minchung Kgil, Mark D. Martino, and Jeffry Schneider in New York Supreme Court, New York County. The Partnership was named only as a nominal defendant. An Amended Complaint was filed on or about March 2, 2020, alleging, among other things, that the offering documents for certain GPB-managed funds include material misstatements and omissions. The Amended

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Complaint alleges causes of action for breach of fiduciary duty against all defendants; aiding and abetting breach of fiduciary duty against Ascendant, AAS, Axiom and Mr. Martino; breach of contract against GPB; unjust enrichment against all defendants; and an equitable accounting against GPB. The plaintiffs are seeking disgorgement of alleged unjust enrichment, unspecified damages as a result of alleged wrongful acts, costs of the action, and an equitable accounting. Any potential losses associated with this matter cannot be estimated at this time.

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

In December 2019, plaintiffs filed a civil action in Delaware Court of Chancery to compel inspection books and records from GPB, as General Partner, and from the Partnership, GPB Holdings I, GPB Automotive Portfolio, LP, and GPB Waste Management. In June 2020, the court dismissed plaintiffs’ books and records request, but allowed a contract claim for specific performance to proceed as a plenary action. The plaintiffs are seeking unspecified damages and penalties. Any potential losses associated with this matter cannot be estimated at this time.

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

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

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

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

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

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

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

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

In January 2020, plaintiffs filed a derivative action in Delaware Court of Chancery against GPB, David Gentile, Jeffrey Lash, and Jeffry Schneider. The complaint alleges breaches of fiduciary duty and/or aiding and abetting breaches of fiduciary duty against each of the defendants, and declaratory relief from the Court related to allegations of fraud, gross negligence, and willful misconduct. The plaintiffs

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seek unspecified damages and declaratory forms of relief. Any potential losses associated with this matter cannot be estimated at this time.

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

In December 2019, plaintiffs filed a civil action in Superior Court in Orange County, California against Rodney Potratz, FSC Securities Corporation, GPB Automotive Portfolio, LP, the Partnership, GPB, David Gentile, Roger Anscher, William Jacoby, Jeffrey Lash, Ascendant, Trevor Carney, Jeffry Schneider, and DOES 1 - 15, inclusive. An Amended Complaint was filed on or about June 10, 2020. In the Amended Complaint, Plaintiffs allege breach of contract against GPB Capital and DOES 1-15, inclusive; statutory and common law fraud against all defendants; breach of fiduciary duty against all defendants; and negligence against all defendants. Plaintiffs allege losses in excess of $4.8 million and are seeking rescission, compensatory damages, unspecified equitable relief and punitive damages, and interest and attorneys’ fees in unspecified amounts. Any potential losses associated with this matter cannot be estimated at this time.

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

In November 2019, plaintiffs filed a putative class action complaint in the United States District Court for the Southern District of New York against GPB, GPB Holdings II, LP, the Partnership, David Gentile, Jeffery Lash, AAS, Axiom, Jeffry Schneider, Mark Martino, and Ascendant. The Complaint alleges fraud and material omissions and misrepresentations to induce investment and losses in excess of $1.27 billion. The plaintiffs are seeking disgorgement, compensatory, consequential, and general damages; disgorgement; rescission; restitution; punitive damages; and the establishment of a constructive trust. While the parties to the action stipulated in 2021 to stay this action pending resolution of the Criminal Case against defendants David Gentile and Jeffry Schneider, the Court nevertheless ordered the stay lifted as to the so-called “Auditor Defendants” in January 2023.On June 24, 2024, in response to a June 20, 2024 joint letter request filed by several parties to the case to stay all proceedings pending the preparation of a formal stipulation of settlement, a Magistrate Judge in the case entered an Order that all deadlines and proceedings related to the action are stayed with respect to all parties until further order of the Court. Any potential losses associated with this matter cannot be estimated at this time.

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

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

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

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

In February 2021, Concorde Investment Services, LLC filed suit in New York State Supreme Court, New York County against GPB, certain limited partnerships for which GPB is the General Partner, and others. The Complaint alleges breaches of contract, fraudulent

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GPB HOLDINGS II, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

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

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

In December 2021, claimant Concorde Investment Services, LLC (“Concorde”, the Plaintiff in the New York case set forth above) filed a Demand for Arbitration with the American Arbitration Association (AAA). The arbitration, however, was dormant while certain issues in the New York case were litigated. In January 2023, Concorde successfully sought the appointment of a 3-arbitrator panel to proceed against GPB Capital and the GPB-managed funds (the “GPB Funds”). Concorde seeks indemnification related to lawsuits and arbitrations brought against Concorde by its clients with respect to the limited partnership interests Concorde sold in the GPB Funds, and based upon the so-called “dealer agreements” entered into between Concorde and the GPB Funds. On or about April 25, 2023, the panel denied the Respondents’ request to file either a motion to dismiss the arbitration, or to stay the arbitration pending the resolution of the related Criminal Case. On November 3, 2023, following a telephonic conference with the panel, the panel denied the GPB Respondents’ request to stay the arbitration pending a decision by the EDNY Court on the Receivership Application. Arbitration proceedings commenced on April 29, 2024, and concluded after ten (10) days of hearing on May 10, 2024. The parties will file post-hearing briefs with the panel in fall 2024, after which the panel is expected to render its decision. Any potential losses associated with this action cannot be estimated at this time.

TTA Consideration Holdings, LLC f/k/a ALN Medical Management, LLC v. HPI Holdings, LLC (Case No. 2024-0213-NAC)

On or about March 5, 2024, TTA Consideration Holdings, LLC f/k/a ALN Medical Management (“Plaintiff”), LLC filed suit in Delaware Chancery Court against HPI Holdings, LLC (“HPI”).

Plaintiff alleges that HPI improperly refused to issue to Plaintiff a so-called Synergy Earn Out payment that was required to be made per the terms of the January 1, 2023 Asset Purchase Agreement entered into between ALN (as seller) and Health Prime International (as buyer). Plaintiff contends that HPI is intentionally and wrongfully hindering Plaintiff’s ability to be paid under the applicable agreements between the parties. Plaintiff seeks monetary damages in an amount calculated pursuant to the agreements at issue in the case, pre and post-judgment interest, and attorneys’ fees. HPI denies any wrongdoing in connection with the lawsuit and intends to vigorously defend itself against Plaintiff’s claims. Any potential losses associated with this matter cannot be estimated at this time.

Actions asserted by GPB

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

In July 2017, GPB, the Partnership, GPB Holdings I, LP, GPB Holdings Automotive, LLC, and GPB Portfolio Automotive, LLC filed suit in New York State Supreme Court, Nassau County, against Patrick Dibre, one of their former operating partners, for breach of contract, breach of fiduciary duty, fraud and conversion arising out of the Defendant’s sale of certain automobile dealerships to the GPB Plaintiffs. Mr. Dibre answered GPB’s Complaint, and asserted counterclaims alleging breach of contract and unjust enrichment. Plaintiffs have since filed amended complaints, narrowing the prior claims to focus on certain specific provisions in the documents governing the sale of the dealerships at issue. The plaintiffs seek damages based on the value of the subject dealerships related to the alleged breach, and also seek an order of specific performance compelling Mr. Dibre to fulfill other obligations under the governing

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

documents. Any ruling in favor of the Partnership or potential losses associated with this matter cannot be determined or estimated at this time.

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

In August 2023, GPB and several of its partnerships, including the Partnership, filed suit in Florida State Court against Patrick Dibre and an entity under Dibre’s control, seeking, among other things, declaratory relief preventing Dibre from transferring the real estate underlying one of the automotive dealerships at issue in the litigation pending against Dibre in New York Supreme Court (as set forth above). GPB at the same time recorded a Notice of Lis Pendens on the real property at issue, which is located in Miami-Dade County, Florida, making a formal legal record of GPB and the other Plaintiffs’ enforceable and legally cognizable equitable interests in and to the property at issue. Any potential ruling in favor of the Partnership cannot be determined at this time.

6. Related Party Transactions

FEES AND EXPENSES

The Partnership incurred the following related party fees and expenses:

Managerial Assistance Fee

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

Managerial Assistance Fees paid during the three months and six months ended June 30, 2024 were $1.1 million and $2.9 million, respectively, which reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statement of Net Assets in Liquidation by a corresponding amount. Managerial Assistance Fees charged to managerial assistance fee, related party and included in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2023 was $3.1 million and $6.1 million, respectively.

Partnership Expenses

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

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

general and administrative expenses - corporate in “Note 3. Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation”.

Partnership expenses paid during the three and six months ended June 30, 2024 were $7.0 million and $12.9 million, respectively, which reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount. Partnership expenses included as a component of selling, general and administrative expenses in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2023, were $4.5 million and $8.5 million, respectively.

OTHER RELATED PARTY TRANSACTIONS

GPB’s principals, certain other individuals and entities that have assisted and may in the future assist in our operations are and/or will be members in GPB H2 SLP, LLC, a Delaware limited liability company (the “Special LP”). The Special LP will receive a profit allocation, commonly referred to as “carried interest”, from the Partnership in accordance with the waterfall provisions in the LPA. For the three and six months ended June 30, 2024 and 2023 there have been no profit allocations allocated to the Special LP.

For the three and six months ended June 30, 2023, Erus paid $0.1 million and $0.3 million, respectively, to Reimagine Roofing, Barrier Insulation and Brooks Enterprises, companies affiliated with one of the Erus’ senior executives. These fees are included in net income from discontinued operations in the Condensed Consolidated Statement of Operations.

Erus occasionally sold customer accounts to an entity controlled by a non-controlling interest member of Erus, who is a member of the subsidiary’s management. For the three and six months ended June 30, 2023, the amounts sold were $0.2 million and $0.5 million, respectively, which are included in net income from discontinued operations in the Condensed Consolidated Statement of Operations.

HPI, a subsidiary of the Partnership, entered into sales transactions with a company controlled by a director of the subsidiary. Revenues related to this relationship were $1.6 million and $3.1 million, respectively, for the three and six months ended June 30, 2023. These revenues were included in net income from discontinued operations in the Condensed Consolidated Statement of Operations.

As compensation for the services to be rendered by Highline, the Partnership pays operation service provider fee (“OSP”) fees to Highline for an annual amount agreed to by GPB and Highline, subject to the Board’s approval, following Highline’s delivery of the annual written budget to GPB detailing the fees, costs and expenses that will be incurred by Highline in providing its Services. OSP fees paid for the three and six months ended June 30, 2024 were nil and $0.4 million, respectively. After the OSP fee payment in January 2024, management has suspended the payment of all OSP fees from the Partnership until further notice. The Partnership recorded OSP fees as a component of selling, general and administrative expenses in the Condensed Consolidated Statement of Operations of $0.4 million and $0.8 million, respectively, for the three and six months ended June 30, 2023.

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

Forward Looking Statements

This Quarterly Report on Form 10-Q (“Form 10-Q”), as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. These forward-looking statements, including with regards to our Plan of Liquidation, as defined below, are based on our current, reasonable expectations and assumptions, which expectations and assumptions are subject to risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Form 10-Q. Given these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law.

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

OVERVIEW

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

Also on February 4, 2021, the U.S. Attorney’s Office for the Eastern District of New York (the “USAO”) brought a criminal indictment against Mr. Gentile (GPB’s sole Member), Mr. Schneider, and Mr. Lash (the “Criminal Case”). The indictment in the Criminal Case alleges conspiracy to commit securities fraud, conspiracy to commit wire fraud, and securities fraud against all three individuals. Mr. Gentile and Mr. Lash were also charged with two counts of wire fraud. Promptly following his indictment, Mr. Gentile resigned from all management and board positions with GPB and Highline, the GPB-managed funds, including the Partnership, and subsidiaries of the Partnership. On June 6, 2023, Mr. Lash pled guilty to one count of wire fraud in the Criminal Case pursuant to a plea agreement. On June 10, 2024, the trial in the Criminal Case commenced against Mr. Gentile and Mr. Schneider. The jury in the Criminal Case returned a guilty verdict on all counts against Mr. Gentile and Mr. Schneider on August 1, 2024. Sentencing of Mr. Gentile and Mr. Schneider is scheduled for October 24, 2024. Mr. Lash’s sentencing is scheduled for October 31, 2024.

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

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or a liquidation of assets, or filing for reorganizing in bankruptcy. See “Footnote 5. Commitments and Contingencies” in the Notes to the Financial Statements included in the Form 10-Q for additional information.

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

Our focus was primarily on owning and operating our portfolio companies in our Technology-Enabled Services, Automotive Retail and Energy segments.

Divestiture of Substantially All of the Partnership’s Assets

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

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

The Partnership determined that the Divested Businesses qualified as a component under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-20 Financial Statement Presentation, Discontinued Operations (“ASC 205-20”) because they represented operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the remainder of the Partnership’s operations. Further, the Divested Businesses represent a strategic shift in the Partnership’s business and their disposal will have a major effect on the entity’s operations and financial results. The Partnership also determined that the Divested Businesses met the criteria to be classified as held for sale upon entering into the agreements to sell and the filing for Chapter 7 protection. Consequently, the Partnership has classified the assets and liabilities comprising the Divested Businesses as “Assets held for sale, discontinued operations” in the accompanying Condensed Consolidated Statement of Net Assets in Liquidation as of December 31, 2023, and the results of operations and cash flows as discontinued operations in the Condensed Consolidated Statement of Operations and Cash Flows for the three months ended June 30, 2023.

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

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Plan of Liquidation

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

On May 14, 2024, Tom Lemke resigned from the Board.

Following the Implementation of the Plan of Liquidation

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

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

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

OUR SEGMENTS

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

RESULTS OF OPERATIONS

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

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The following table summarizes the results of our operations for the three and six months ended June 30, 2023, under the going concern basis of accounting.


	Three Months		Six Months
	Ended June 30,		Ended June 30,
	2023		2023
Operating expenses (income):
Selling, general and administrative expenses	$	6,312	$	12,030
Managerial assistance fee, related party		3,088		6,116
Income from equity method investments		(485)		(3,949)
Total net operating expenses		8,915		14,197
Operating loss		(8,915)		(14,197)
Other income:
Interest income		2,702		6,021
Other (loss) income		(106)		8
Total other income		2,596		6,029
Net loss from continuing operations		(6,319)		(8,168)
Loss from discontinued operations		(9,801)		(8,728)
Income tax expense, discontinued operations		(256)		(467)
Net loss from discontinued operations		(10,057)		(9,195)
Net loss from continuing and discontinued operations		(16,376)		(17,363)
Net loss attributable to non-controlling interests		(6,022)		(5,778)
Net loss attributable to the Partnership	$	(10,354)	$	(11,585)

LIQUIDITY AND CAPITAL RESOURCES

The Partnership has historically relied primarily on cash, cash equivalents, and investment securities, cash flows from operations, borrowings under our credit facilities, and lines of credit as the main sources for liquidity. We used those funds to invest in capital improvements and additions, and to satisfy contractual obligations. Since the adoption of our Plan of Liquidation, our ability to meet our obligations is contingent upon the disposal of our assets in accordance with the Plan of Liquidation. All significant non-cash assets except for Quantum, HIS, and the Riverwalk promissory note receivable have been liquidated. As of June 30, 2024, we had $10.8 million in cash and cash equivalents and $503.9 million in Treasury Bills. We expect that this cash, cash equivalents, and investment securities will be adequate to meet our obligations, pursuant to our Plan of Liquidation.

CONTRACTUAL PAYMENT OBLIGATIONS

As of June 30, 2024, there have been no material changes to the contractual payment obligations table included in the Annual Report on Form 10-K filed with the SEC on March 28, 2024 (the “Form 10-K”).

OFF BALANCE SHEET ARRANGEMENTS

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

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to the critical accounting policies and use of estimates since the filing of our Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our reported market risks or risk management policies since the filing of our Form 10-K.

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Item 4. Controls and Procedures

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

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

Internal Controls over Financial Reporting

Material Weaknesses

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

We have identified deficiencies, or a combination of deficiencies, relating to risk assessment, control activities and monitoring of the Partnership’s control environment that have been determined to be material weaknesses in our internal controls. These identified weaknesses are attributed, in part, to insufficient and ineffective controls within our financial close and reporting process.

Remediation Plan

Our management is committed to maintaining a strong internal control environment and implementing measures designed to help ensure the financial statements are free of material error. To remediate the material weaknesses, management believes the following remediation plans would have to be developed, implemented and tested:

●

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

●

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

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

Changes in Internal Controls over Financial Reporting

There were no changes in our ICFR during the three months ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our ICFR.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The information in “Note 5. Commitments and Contingencies” of the notes to the Condensed Consolidated Financial Statements included Part I, Item I of this Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in the Form 10-K, under “Risk Factors” in Item 1A, which are incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

During the fiscal quarter ended June 30, 2024, no director or officer of the Registrant adopted or terminated a “Rule 10-b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits


Exhibit Number		Exhibit Description
3.1		Certificate of Limited Partnership of GPB Holdings II, LP (Incorporated by reference to Form 10/A filed on July 25, 2022).
3.2		Fourth Amended and Restated Agreement of Limited Partnership of GPB Holdings II, LP, dated April 26, 2018 (Incorporated by reference to Form 10/A filed on July 25, 2022).
31.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1**		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2**		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS		XBRL Instance Document.
101.SCG		XBRL Taxonomy Extension Schema.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase.
101.DEF		XBRL Taxonomy Extension Definition Linkbase.
101.LAB		XBRL Taxonomy Extension Label Linkbase.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase.

*Filed herewith

**Furnished herewith

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SIGNATURES

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


		GPB Holdings II, LP
		(Registrant)

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

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

Date: August 6, 2024

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GPB Holdings II 10-Q2024 Q2 Quarterly report

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