Horizon Kinetics Holding Corp: Form 10-Q for the period ended Mar 31, 2025

The following discussion and analysis should be read in conjunction with the historical consolidated financial statements of HKHC and the related notes included elsewhere in this current report. The historical consolidated financial data discussed below reflect its historical results of operations and financial position. The following discussion and analysis contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those included in the section entitled “Risk Factors” contained elsewhere in this current report describing key risks associated with the business, operations and industry of HKHC. Amounts and percentages presented throughout this section may reflect rounding adjustments and consequently totals may not appear to sum. The items discussed below have had significant effects on many items within HKHC’s consolidated financial statements and affect the comparison of the current period’s activity with those of prior periods.

Overview

HKHC is a research driven, fundamentals-oriented asset manager serving institutions, individuals and financial professionals. It provides investment management services through its wholly-owned subsidiary and registered investment adviser, Horizon Kinetics Asset Management LLC. Through this subsidiary, it manages a number of strategies, most of which are focused on publicly-traded equity securities, but also private investments and digital assets. To accommodate different investing preferences, HKHC’s offerings can be accessed in a variety of ways, including through mutual funds, ETFs, a closed end fund, separately managed accounts that can be customized to the unique investment objectives and risk tolerances of individual clients, and, for qualified investors, via private proprietary partnerships typically known as alternative investments. HKHC raises capital for and manages these strategies, and it earns a management fee that varies among products. In certain instances, the fee it earns is tied to the performance of the account. HKHC also produces a number of research reports and compendia that are sold mainly to institutions, as it believes that the discipline required to produce written research encourages thorough qualitative and quantitative analysis. As of March 31, 2025, the Company had regulatory assets under management ("AUM") of $10.8 billion.

HKHC also manages a portfolio of investment securities for its own benefit, which has historically impacted and is expected to impact future results of operations, often significantly so. As of March 31, 2025, we held investment securities (at fair value) of $105.3 million, which represented 5.1% of total assets. In addition, we have devoted capital to a variety of the proprietary alternative investment funds we manage. As of March 31, 2025, HKHC’s investments in these proprietary funds are $254.5 million, however, since some of these proprietary funds are included within these consolidated financial statements this value is not separately presented.

In addition to investment management and research activities, HKHC operates two wholly-owned, limited purpose broker-dealers, KBD Securities LLC and Kinetics Funds Distributor LLC, both of which are only used for the marketing and promotion of its investment products. We pay a portion of the fee it earns to these and other third-party firms who assist it in marketing.

Along with investing on behalf of clients, HKHC also uses its own capital to invest along with its clients in many of its proprietary products and makes direct investments in public and private instruments including digital assets. Certain employees do, from time to time, serve as management or as a member of the board of directors of the companies in which we invest.

Primary Sources of Revenue

Management or advisory fees are our primary source of revenue, most of which are based on a specified percentage of clients’ average assets under management. A majority of our expenses, including most of our compensation expense, vary directly with changes in revenue.

The management fees for separately managed accounts are generally calculated on the basis of a percentage of the value of each client’s assets (assets under management) and are charged using either an average daily balance or monthly or quarterly ending balance, and either in arrears or advance.

The Company also earns management fees in its mutual funds, ETFs, closed-end funds and proprietary partnerships as compensation for internal fund management and advisory services. The management fees for the proprietary funds vary by fund and investment strategy and are typically approximately between 0.25% and 2.00% of the net asset value of the funds’ underlying investments.

The Company is also entitled to receive incentive fees on proprietary partnerships if certain performance returns have been achieved as stipulated in the governing documents of the applicable fund. Incentive fees are generated when certain returns exceed a previously established high water mark. The incentive fees are calculated as a percentage of the gains experienced, typically 20%, based on the agreement with each partner in the respective fund. Incentive fees are not subject to claw back as a result of performance declines in subsequent periods to the most recent measurement date. Incentive fees, if earned, are recognized upon completion of the contractually determined measurement period, which are generally annually, or when a client redeems their interest. Incentive fees are subject to the uncertainty of market volatility, and as a result, the entire amount of the variable consideration related to incentive fees is constrained until the end of each measurement period when the uncertainty has been resolved. Management and incentive fees earned from consolidated investment products are eliminated from revenue upon consolidation, however the economic benefit to the HKHC shareholders’ is retained through lower amounts attributable to the redeemable noncontrolling interests. Unearned incentive fees resulting from the performance of the Company’s proprietary funds for the three months ended March 31, 2025 are approximately $5.4 million. These unearned incentive fees are subject to change based on market prices and generally expected to be resolved during the fourth quarter of 2025 once it is probable that a significant reversal of revenue will not occur.

A small number of clients with certain separately managed accounts may pay incentive fees in addition to or in lieu of management fees, if their portfolio achieves positive investment returns, in certain cases, in excess of an agreed benchmark or hurdle rate. Typically, such fees are paid annually upon crystallization or when a client closes their investment and are not accrued prior to being earned. These unearned performance fees are subject to change based on market prices and generally expected to be resolved during the fourth quarter of 2024 once it is probable that a significant reversal of revenue will not occur.

As a result of our merger transaction in August 2024, the Company also earned revenues of $0.8 million from sales of consumer products during the quarter ended March 31, 2025.

Business Highlights in the first quarter of 2025

Total revenue

• HKHC’s total revenues continued to grow this quarter as a result of increasing AUM at our proprietary funds, separately managed accounts and mutual funds due to their favorable performance. Total revenues were also positively impacted by a quarter of product sales following the acquisition of Scott’s Liquid Gold in August 2024.

Assets under management

• AUM for the three months ended March 31, 2025 increased by approximately $1.0 billion, or 10%, to $10.8 billion, due primarily to market value changes of key holdings across the Company’s mutual funds, ETFs and separately managed accounts (SMAs). The market value of Texas Pacific Land Corporation (“TPL”), which is widely held across HKHC’s proprietary funds and SMAs, increased 20% during the quarter resulting in broad increases in AUM. Those increases were partially offset by declines in Grayscale Bitcoin Trust (“GBTC”), which is also widely held across HKHC’s proprietary funds, of 10% during the first quarter. The Company has also experienced net cash inflows into the various products and strategies and has increased its customer accounts during the quarter

Investment performance

• HKHC maintains a portfolio for investment purposes and has also invested substantial capital in its proprietary funds alongside client investors. For the quarter ended March 31, 2025 there was an increase of $13.7 million in the fair value of this portfolio primarily due to the 20% increase in the TPL securities held directly by HKHC. The increase in the fair value of HKHC’s investments is reported in unrealized gain (loss) on investments, net in the accompanying Consolidated Statement of Operations.
• The Company’s consolidated investment products experienced favorable performance thus far in 2025. Specifically, the Polestar Funds and Horizon Multi-Strategy Fund were the largest contributors for the three months ended March 31, 2025, however they were partially offset by net losses at Horizon Kinetics Equity Opportunity funds.

Results of Operations for the three months ended March 31, 2025

Revenues

Management and advisory fees

The Company’s total management and advisory fees increased approximately $6.9 million, or 58%, for the three months ended March 31, 2025 compared to the prior year. The increase is primarily the result of higher management fees resulting from our mutual funds due to higher AUM during the quarter.

Other income and fees

Other income and fees during the three months ended March 31, 2025 includes primarily revenue from product sales resulting from the August 2024 acquisition of Scott’s Liquid Gold. Other income and fees also includes revenues resulting from the Company’s research services and digital asset mining activities.

Operating Expenses

Compensation, employee benefits, and cost of goods sold

The Company’s operating expenses include employee compensation for investment professionals and other management personnel as well as cost of goods sold for consumer products acquired in the Merger with SLGD. HKHC’s compensation costs for the three months ended March 31, 2025 increased by approximately $3.2 million, or 51%, compared to the prior year, due to higher internal commissions, additional personnel, and $0.5 million of cost of products sold in the current quarter.

Sales, distribution and marketing expenses

For the three months ended March 31, 2025, sales, distribution and marketing expenses increased $2.3 million, or 104%, compared to the prior quarter, as the result of higher amounts of $0.4 million due to FRMO pursuant to its revenue sharing agreement with HKHC, higher platform fees of $0.8 million, incentive fee commissions and other management fee commissions earned due to generally increasing AUM and management fees during the quarter, and fulfillment costs associated with sales of consumer products.

Depreciation and amortization

Depreciation and amortization increased slightly for the three months ended March 31, 2025 as compared to the prior year due to additional amortization expense of intangible assets from the Merger with SLGD.

General and administrative expenses

For the three months ended March 31, 2025, general and administrative expenses increased by $0.2 million, or 9%, compared to the prior quarter. The Company continued to experience certain higher accounting, professional, and legal fees during the three months March 31, 2025 in preparation and as a result of the Merger with SLGD. The Company also began incurring Director fee costs and included a partial quarter of SLGD’s general and administrative expenses subsequent to the Merger date of $0.1 million.

Equity income, net

Equity earnings, net was $3.1 million for the three months ended March 31, 2025 compared to $0.5 million for the prior year. The increase was due primarily to increases in the fair value of holdings at Horizon Kinetics Hard Assets, LLC as compared to the prior year.

Interest and dividend income

Interest and dividend income increased by $0.3 million for the three months ended March 31, 2025 as compared to the prior year due to higher investable cash balances at the Company.

Unrealized loss on digital assets, net

There was an unrealized loss on digital assets, net of $1.8 million for the three months ended March 31, 2025 as compared to a gain of $4.2 million in the comparable prior year period, primarily due to the change in bitcoin’s value during each respective quarter.

Unrealized gain (loss) on investments, net

For the three months ended March 31, 2025, unrealized gains (losses) on investments increased by $9.1 million compared to the prior year. This increase was due primarily to the $8.9 million unrealized gain on TPL stock during the three months ended March 31, 2025 resulting from its approximately 21% increase in its fair value. The increase in unrealized gains during the third quarter of 2024 was higher than the third quarter of 2023 as a result of the higher investment value at the beginning of the quarter due to the KCI contribution as of July 1, 2024 as well as TPL’s 40% increase during the first six months of 2024.

Income tax benefit (expense)

The Company recognizes deferred income taxes related to the tax basis differences for certain assets, principally unrealized gains in various investments, digital assets and indefinite lived intangible assets from the Company’s 2011 merger transaction. Due to primarily to additional unrealized gains of investment securities and proprietary funds during the quarter, the Company recorded tax expense. During the quarter ended March 31, 2024, the Company was an LLC and was generally not subject to federal or state income taxes as its income and losses are included in the tax returns of its members.

Redeemable Non-Controlling Interests

Net income attributable to redeemable non-controlling interests in Consolidated Investment Products represents the income attributable to ownership interests that third parties hold in entities that are consolidated within our consolidated financial statements. During 2025 the amounts attributable to noncontrolling interests increased correspondingly to the performance of our proprietary funds.

Consolidated Investment Products

Consolidated Investment Products represented a significant portion of our AUM as of March 31, 2025. The activity of the consolidated investment products is reflected within the consolidated financial statement line items indicated by reference thereto. The impact of consolidation will typically decrease management fees and incentive fees, if any, reported under GAAP to the extent these amounts are eliminated upon consolidation. The assets and liabilities of our Consolidated Investment Products are held within separate legal entities and, as a result, the liabilities of our consolidated investment products are typically non-recourse to us. Generally, the consolidation of our consolidated investment products has a significant gross-up effect on our assets, liabilities and cash flows but has no net effect on the net income attributable to us or our stockholders’ equity.

The following table presents the results of operations of the consolidated investment products:

The results of operations of the consolidated investment products primarily represent activities from certain funds that we are deemed to control. When a fund is consolidated, we reflect the revenues and expenses of the entity on a gross basis, subject to eliminations from consolidation. Substantially all of our results of operations related to the consolidated investment products are attributable to ownership interests that third parties hold in those funds. The consolidated investment products may not necessarily be the same funds in each year presented due to changes in ownership, changes in limited partners’ rights, and the creation or termination of funds and entities. Accordingly, such amounts may not be comparable for the periods presented, and in any event have no material impact on net income attributable to Horizon Kinetics Holding Corporation.

Segment Analysis

For segment reporting purposes, revenues and expenses are presented before giving effect to the results of our consolidated investment products and the results attributable to non-controlling interests that we consolidate. As a result, segment revenues from management fees, incentive fees and investment income are different than those presented on a consolidated basis in accordance with generally accepted accounting principles. Revenues recognized from consolidated investment products are eliminated in consolidation and those attributable to the non-controlling interests of joint ventures have been excluded by us. Furthermore, expenses and the effects of other income (expense) are different than related amounts presented on a consolidated basis in accordance with GAAP due to the exclusion of the results of consolidated investment products and the non-controlling interests.

Liquidity and Capital Resources

At March 31, 2025, the Company had $34.9 million of cash and cash equivalents. We believe that our cash and cash equivalents at March 31, 2025 will be sufficient to fund operations for at least one year from the date of this report.

The Company also had $105.3 million of investments, at fair value. These investments include $76 million held in a single security, approximately 57,696 shares of TPL. During the three months ended March 31, 2025 the fair value of HKHC’s TPL holdings increased due to the capital contribution on July 1 that included shares of TPL and due to the approximately 19.8% year-to-date increase in the fair value of TPL common shares. The Company may be limited in its ability to sell this security due to our status as an affiliate of TPL.

In the normal course of business, we may engage in off-balance sheet arrangements, including transactions in derivatives, guarantees, commitments, indemnifications, and potential contingent repayment obligations. We do not have any off-financial position arrangements that would require us to fund losses or guarantee target returns to clients.

The Company’s Board of Directors has determined an expected quarterly dividend policy that is based on the Company’s quarterly performance. The Board of Director’s may consider other relevant factors that are relevant to the final determination of a quarterly dividend, if any. On May 13, 2025, the Company's Board of Directors declared a cash dividend of $0.056 per share, payable on June 16, 2025 to shareholders of record as of the close of business on May 26, 2025.

The following table and discussion summarize our Condensed Consolidated Statement of Cash Flows:

Operating cash flows

Net cash provided by operating activities increased by $4.4 million for the three months ended March 31, 2025 compared to the prior year. The increase was primarily the result of earnings, net of working capital changes during the period. The net income (loss) for each of the three month periods were largely offset by non-cash adjustments related to deferred income tax expense related to the Company’s conversion from an LLC to a C-Corp, equity in earnings (losses) of affiliates, and net unrealized gains (losses) on investments or digital assets.

Investing cash flows

Net cash provided by investment activities increased by $24.2 million for the three months ended March 31, 2025 as compared to the prior year as the result of the Company selling certain securities that were received as incentive fee payments related to the 2024 performance. The Company also contributed certain investment securities of $11.5 million to obtain additional equity interests in Horizon Kinetics Hard Assets, LLC (a non-cash investment activity).

Financing cash flows

The Company’s cash flows from financing activities included $2.0 million of dividend payments, as compared to $1.7 million of distributions to members of Horizon Kinetics LLC during the first quarter of 2024. The Company ceased distribution payments subsequent to the closing of the Merger.

Contractual Cash Obligations and Other Commercial Commitments

The Company’s contractual cash obligations and other commercial commitments is limited to certain operating leases for office space as summarized below:

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions that in certain circumstances affect amounts reported in the audited consolidated financial statements. In preparing these financial statements, our estimates and judgments are based on historical experience, information from third-party valuation professionals and various other assumptions, giving due consideration to materiality. We consider the accounting estimates discussed below to be critical to the understanding of our consolidated financial statements. Actual results could differ from our estimates and assumptions, and any such difference could be material to our consolidated financial statements.

Revenue recognition

Horizon Kinetics recognizes revenues when its obligations related to the services are satisfied and it is probable that a significant reversal of the revenue amount would not occur in future periods. Horizon Kinetics enters into contracts that can include multiple services, which are accounted for separately if they are determined to be distinct. Management’s judgment is required in assessing the probability of significant revenue reversal and in identification of distinct services.

Horizon Kinetics derives a substantial portion of its revenue from investment advisory fees which are recognized as the services are performed over time because the customer is receiving and consuming the benefits as they are provided by Horizon Kinetics. Fees are primarily based on agreed-upon percentages of AUM and recognized for services provided during the period, which are distinct from services provided in other periods. Such fees are affected by changes in AUM, including market appreciation or depreciation and net inflows or outflows. AUM represents the broad range of financial assets Horizon Kinetics manages for clients on a discretionary basis pursuant to investment management and trust agreements that are expected to continue for at least 12 months. In general, reported AUM reflects the valuation methodology that corresponds to the basis used for determining revenue (for example, net asset values).

Horizon Kinetics receives investment advisory fees, including incentive allocations from certain actively managed investment funds and certain SMAs. These incentive fees are dependent upon exceeding investment return thresholds, which may vary by product or account, and could include varying measurement periods.

Incentive fees are generated on certain management contracts when performance hurdles are achieved, such as returns exceed a previously established high water mark. Such incentive fees are recognized when the contractual performance criteria have been met and when it is determined that they are no longer probable of significant reversal. Given the unique nature of each fee arrangement, contracts with customers are evaluated on an individual basis to determine the timing of revenue recognition. Significant judgment is involved in making such determination. Incentive fees typically arise from investment management services that began in prior reporting periods. Consequently, a portion of the fees recognized may be partially related to the services performed in prior periods that meet the recognition criteria in the current period. At each reporting date, the Company considers various factors in estimating incentive fees to be recognized. These factors include but are not limited to whether: (1) the amounts are dependent on the financial markets and, thus, are highly susceptible to factors outside Horizon Kinetics’ influence; (2) the ultimate payments have a large number and a broad range of possible amounts; and (3) the funds or SMAs have the ability to (a) invest or reinvest their sales proceeds or (b) distribute their sales proceeds, and determine the timing of such distributions.

Principles of Consolidation

In addition to its wholly-owned subsidiaries, generally accepted accounting principles in the United States of America (“GAAP”) requires that the assets, liabilities and results of operations of a variable interest entity (“VIE”) be consolidated into the financial statements of the enterprise that has a controlling interest in the VIE. The determination as to whether an entity qualifies as a VIE depends on the facts and circumstances surrounding each entity, and therefore certain of the investment vehicles managed by Horizon Kinetics may qualify as VIEs under the variable interest model, whereas others may qualify as voting interest entities (“VOEs”) under the voting interest model.

The determination of whether to consolidate a VIE under US GAAP requires a significant amount of judgment concerning the degree of control over an entity by its holders of variable interests. To make these judgments, we conduct an analysis, on a case-by-case basis, of whether we are the primary beneficiary and are therefore required to consolidate an entity. We continually reconsider whether we should consolidate a VIE. Upon the occurrence of certain events, such as modifications to organizational documents and investment management agreements of our products, we will reconsider our conclusion regarding the status of an entity as a VIE. Our judgment when analyzing the status of an entity and whether we consolidate an entity could have a material impact on individual line items within our consolidated financial statements, as a change in our conclusion would have the effect of grossing up the assets, liabilities, revenues and expenses of the entity being evaluated. In light of certain direct and indirect investments into our products, the likelihood of a reasonable change in our estimation and judgment could result in a change in our conclusions to consolidate or not consolidate any VIEs to which we have exposure.

Fair Value Measurement

GAAP establishes a hierarchical disclosure framework prioritizing the inputs used in measuring financial instruments at fair value into three levels based on their market observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or where fair value can be measured based on actively quoted prices generally have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.

Financial assets and liabilities measured and reported at fair value are classified as follows:

• *Level I—*Unadjusted quoted prices in active markets for identical instruments.
• *Level II—*Unadjusted quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in inactive markets; and model-derived valuations with directly or indirectly observable significant inputs. Level II inputs include prices in markets with few transactions, non-current prices, prices for which little public information exists or prices that vary substantially over time or among brokered market makers. Other inputs include interest rate, yield curve, volatility, prepayment risk, loss severity, credit risk and default rate.
• *Level III—*Valuations that rely on one or more significant unobservable inputs. These inputs reflect the Company’s assessment of the assumptions that market participants would use to value the instrument based on the best information available.

In some instances, an instrument may fall into multiple levels of the fair value hierarchy. In such instances, the instrument’s level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair value measurement. Our assessment of the significance of an input requires judgment and considers factors specific to the instrument. See “Note 5. Fair Value,” within our consolidated financial statements included in this Annual Report on Form 10-K for a summary of our valuation of investments and other financial instruments by fair value hierarchy levels.

Income Taxes

The Company is taxed as corporation for U.S. federal and state income tax purposes. We use the liability method of accounting for deferred income taxes pursuant to GAAP. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the statutory tax rates expected to be applied in the periods in which those temporary differences are settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized during the year the change is enacted. A valuation allowance is recorded on our net deferred tax assets when it is more likely than not that such assets will not be realized or when timing is unknown. When evaluating the realizability of our deferred tax assets, all evidence, both positive and negative, is evaluated. Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax planning strategies and expectations of future earnings.

Under GAAP, the amount of tax benefit to be recognized is the amount of benefit that is more likely than not to be sustained upon examination. We analyze our tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where we are required to file income tax returns, as well as for all open tax years in these jurisdictions. If, based on this analysis, we determine that uncertainties in tax positions exist, a liability is established. As of December 31, 2024, we have not identified any uncertain tax positions.

Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties under GAAP.

Recently Issued Accounting Standards

For information on recently issued accounting standards, see Note 3(l), “Recently Issued Accounting Standards,” to our condensed consolidated financial statements.

Disclosure Controls and Procedures

As of March 31, 2025, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2025 due to the material weaknesses in our internal control over financial reporting described below.

Notwithstanding the material weaknesses, which still existed as of March 31, 2025, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the condensed consolidated financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with accounting principles generally accepted in the United States.

Material Weaknesses

A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s financial statements will not be prevented or detected on a timely basis. The material weakness that was previously reported at Scott’s Liquid Gold was identified as of June 30, 2023 related to our finance department lacking a sufficient number of trained professionals with technical accounting expertise to process and account for complex, non-routine transactions in accordance with GAAP. The material weakness was detailed in Item 4 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. During 2024, management identified a material weakness with respect to the review and consolidation in the financial statements of certain proprietary funds that represent variable interest entities. In addition, Horizon Kinetics has previously identified material weaknesses related to (a) producing timely account reconciliations and valuations of certain significant accounts, including certain intercompany and related party accounts and related elimination entries, (b) a lack of segregation of duties in certain areas of the financial reporting process, including a lack of adequate supervisory review of technical accounting implementations, lack of IT general controls over certain third-party systems, conclusions over critical accounting estimates, and review of the consolidated financial statements, and (c) insufficient supervisory review and approval of key controls over disbursements and accounts payable. These material weaknesses still existed as of March 31, 2025.

During 2024, the Company hired a Chief Financial Officer and other trained professionals to our finance department, who have technical accounting expertise to process and account for complex, non-routine transactions in accordance with GAAP. The process of remediating these material weaknesses will continue until these staff and others operate for a period of time, our controls are tested, and the Company is able to conclude that such internal controls are operating effectively. The Company cannot provide assurance that these procedures will be successful in identifying material errors that may exist in the financial statements. The Company cannot make assurances that it will not identify additional material weaknesses in its internal control over financial reporting in the future.

Changes in Internal Control over Financial Reporting

During the first quarter, management has implemented certain additional review and account reconciliation controls.

In addition to the other information set forth in this Report, including the “Cautionary Note on Forward-Looking Information,” you should carefully consider the factors discussed in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

All of the factors referenced above could materially affect our, or the combined company’s, business, financial condition, or future results.