# Abacus Global Management, Inc. (ABX) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from Abacus Global Management, Inc.'s 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/1814287/000181428725000006/abl-20241231.htm Accession: 0001814287-25-000006 Filing date: 2025-03-28 Report date: 2024-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/ABX/ All MD&A years: /company/ABX/mda/ Previous year: /company/ABX/mda/fy2023/ (FY 2023) Next year: /company/ABX/mda/fy2025/ (FY 2025) Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 37 Table of Contents ABACUS GLOBAL MANAGEMENT, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion provides an analysis of the Company's financial condition, cash flows and results of operations from management's perspective and should be read in conjunction with the consolidated financial statements and notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. Our objective is to provide discussion of events and uncertainties known to management that are reasonably likely to cause the reported financial information not to be indicative of future operating results or of future financial condition and to also offer information that provides an understanding of our financial condition, cash flows and results of operations. This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. The statements contained in this Annual Report on Form 10-K that are not purely historical are forward-looking statements within the meaning of Section27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations, hopes, intentions or strategies regarding the future. In addition to historical financial analysis, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions, as described under the heading “Cautionary Note Regarding Forward-Looking Statements.” All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to: the potential impact of our business relationships, including with our employees, customers and competitors; changes in general economic, business and political conditions, including changes in the financial markets; weakness or adverse changes in the level of activity in our sector or the sectors of our affiliated companies, which may be caused by, among other things, high or increasing interest rates, or a weak U.S. economy; significant competition that our operating subsidiaries face; compliance with extensive government regulation; and other risks detailed in the those set forth under “Risk Factors” or elsewhere in this quarterly statement. Unless the context otherwise requires, references in this “Abacus Global Management, Inc. Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we,” “us,” “our,” and “Company” are intended to mean the business and operations of Abacus Global Management, Inc. Business Overview The Company is a leading vertically integrated alternative asset manager and market maker, specializing in longevity and actuarial technology. The Company operates in five reportable segments. The Company, through its Longevity Market Assets, LLC (“LMA”) subsidiary, directly acquires life insurance policies in a mutual beneficial transaction for both us and the underlying insured. With meaningful support from our proprietary risk rating heat map, we consistently evaluate policies (at origination and throughout the lifecycle) to generate essentially uncorrelated risk adjusted returns. Additionally, we provide a range of services for owners of life settlement assets. Upon acquiring a policy, we have the option to either (i) trade that policy to a third-party institutional investor (i.e., generating a spread on each trade) or (ii) hold that policy on our balance sheet until maturity (i.e., paying the premiums over time and receiving the final claim / payout). This process is predicated on driving the best economics for the Company and we categorize this revenue as “Trading” or “Active management revenue” in our “Active Management” reportable segment. Additionally, the Company, through its LMA subsidiary, provides a wide range of services to owners and purchasers of life settlements assets (i.e., acquired policies). More specifically, the Company provides consulting, valuation, actuarial services, and perform administrative work involved in keeping a policy in force and at the premium level most advantageous to the owner. We have experience servicing a large number of policies for highly sophisticated institutions, including policies for large institutional life settlement funds. We generate revenue on these services by charging a base servicing fee of approximately 0.5% of total asset value of the portfolio or flat rate 38 Table of Contents per policy. We categorize this revenue as “Servicing” or “Portfolio servicing revenue” in our “Portfolio Servicing” reportable segment. The Company, through its Abacus Settlements, LLC (“Abacus Settlements”) subsidiary, originates life insurance policy settlement contracts as a licensed life settlement provider on behalf of third-party institutional investors (“Financing Entities”) and for the Company to invest in the life settlement asset class. Specifically, the Company originates policies through three primary origination channels (Agents, Brokers, and Direct-to-Consumers (“Client Direct”)) and Third-Party Intermediaries, screens them for eligibility by verifying that the policy is in force, obtaining consents and disclosures, and submitting cases for life expectancy estimates. This process is characterized as our origination services, which averages a fee of approximately 2% of the life insurance policy’s face value. We categorize this revenue “Origination Revenue” in our “Originations” reportable segment. Starting in December 2024, the Company’s acquired asset managers manage alternative investment funds and exchange-traded funds (“ETF”). The alternative investment funds primarily invest in insurance policy settlement contracts that cater to investors seeking risk-adjusted returns with low correlation to other asset classes. The ETFs primarily invest in equity securities using a suite of core and thematic free cash flow equity strategies and offers over 50 customizable free cash flow index strategies covering eight global equities allocation categories available in separately managed accounts. Asset Management fees are based on a percentage of total asset value under management. We also realize performance fees based on a percentage of returns over certain hurdle rates for the managed alternative investment funds. We categorize this revenue “Asset Management Fees” in our “Asset Management” reportable segment. Starting in February 2024 with revenue beginning in December 2024, the Company, through its ABL Technologies, LLC (“ABL Tech”) subsidiary, using its proprietary technology based on health and longevity data sets provides services to pension funds, government agencies, insurance-related businesses, as well as other entities that benefit from real-time mortality verification, missing participant verification, and other services specific to the life insurance market. Technology Services fees are based on fixed annual contracts. We categorize this revenue “Technology Services revenue” in our “Technology Services” reportable segment. Results of Operations The following tables set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not indicative of future results: [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023"],["REVENUES:"],["Asset management fees","$","2,841,481","","","$","\u2014"],["Active management","102,819,361","","","61,195,377"],["Origination fees","5,457,147","","","4,203,900"],["Portfolio servicing fees","772,169","","","1,002,174"],["Technology services","33,628","","","\u2014"],["Total revenues","111,923,786","","","66,401,451"],["COST OF REVENUES (excluding depreciation and amortization stated below):"],["Cost of revenue (including stock-based compensation)","11,371,733","","","6,490,377"],["Gross Profit","100,552,053","","","59,911,074"],["OPERATING EXPENSES:"],["Sales and marketing","9,063,384","","","4,905,747"],["General and administrative (including stock-based compensation)","81,734,518","","","26,482,571"],["Loss on change in fair value of debt","4,835,351","","","2,356,058"],["Unrealized loss (gain) on investments","238,012","","","(1,369,112)"],["Realized gain on investments","(2,341,066)","","","\u2014"]] [[/GREPCENT_TABLE]] 39 Table of Contents [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023"],["Depreciation and amortization expense","7,910,158","","","3,409,928"],["Total operating expenses","101,440,357","","","35,785,192"],["Operating (loss) income","(888,304)","","","24,125,882"],["OTHER INCOME (EXPENSE):"],["Loss on change in fair value of warrant liability","(2,702,040)","","","(4,204,360)"],["Interest (expense)","(18,279,686)","","","(9,866,821)"],["Interest income","2,398,691","","","594,764"],["Other income (expense)","38,040","","","(146,443)"],["Total other expense","(18,544,995)","","","(13,622,860)"],["Net (loss) income before provision for income taxes","(19,433,299)","","","10,503,022"],["Income tax expense","5,484,738","","","1,468,535"],["NET (LOSS) INCOME","(24,918,037)","","","9,034,487"],["LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST","(956,987)","","","(482,139)"],["NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS","$","(23,961,050)","","","$","9,516,626"]] [[/GREPCENT_TABLE]] Revenue Asset management revenue Management fees are recognized over time during the periods in which services are performed in accordance with relevant contractual terms. Management fees are generally based on net asset value (“NAV”) of the funds provided in the respective agreements. Performance fees are earned when the performance of the individual shares classes of the managed funds exceeds contractual thresholds. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Asset management fees","$","2,841,481","","","$","\u2014","","","$","2,841,481","","","NM"]] [[/GREPCENT_TABLE]] Asset management revenue is new in 2024 and contributed $2,841,481 in revenue for the year ended December 31, 2024. The increase in asset management revenue is primarily due to the acquisition of two asset management companies at the beginning of December 2024. Active management revenue [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Realized and unrealized gains from life insurance policies held using the fair value method","$","85,048,829","","","$","43,214,390","","","$","41,834,439","","","96.8","%"],["Fee-based services","13,881,208","","","\u2014","","","13,881,208","","","NM"],["Related party realized gains from life insurance policies held using the fair value method","3,312,202","","","\u2014","","","3,312,202","","","NM"]] [[/GREPCENT_TABLE]] 40 Table of Contents [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Investment income from life insurance policies held using the investment method","577,122","","","17,980,987","","","(17,403,865)","","","(96.8)","%"],["Total active management revenue","$","102,819,361","","","$","61,195,377","","","$","41,623,984","","","68.0","%"]] [[/GREPCENT_TABLE]] Total active management revenue increased by $41,623,984, or 68.0%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase in active management revenue was primarily attributable to an increase of $25,897,723 in unrealized gains on held policies accounted under the fair value method due to increase in held policies, $13,881,208 in fee-based revenue, $31,237,924 increase in total realized gains, and offset by $11,989,006 increase in premiums paid, and a decrease of $17,403,865 in trading activity related to policies accounted for under the investment method due to a shift to fair value method election for the year ended December 31, 2024, compared to the year ended December 31, 2023. The aggregate face value of policies accounted for using the investment method is $2,225,000 as of December 31, 2024, with a corresponding carrying value of $1,083,977. Additional information regarding policies accounted for under the investment method is as follows: [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023"],["Investment method:"],["Policies bought","\u2014","","165"],["Policies sold","3","","164"],["Policies matured","1","","2"],["Average realized gain (loss) on policies sold","16%","","19%"],["Number of external counter parties that purchased policies","2","","15"],["Realized gains","$297,378","","$13,980,987"],["Revenue from maturities","$500,000","","$4,000,000"]] [[/GREPCENT_TABLE]] Aggregate face value of policies held at fair value is $1,295,788,355 as of December 31, 2024, with a corresponding fair value of $370,398,447. Additional information regarding policies accounted for under the fair value method is as follows: [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023"],["Fair value method:"],["Policies bought","914","","382"],["Policies sold","466","","196"],["Policies matured","21","","3"],["Average realized gain (loss) on policies sold","24%","","17%"],["Number of external counter parties that purchased policies","26","","10"],["Realized gains, net of premiums paid on sold policies","$45,253,308","","$18,446,897"],["Revenue from maturities","$21,089,421","","$828,226"]] [[/GREPCENT_TABLE]] Origination Revenue Through the origination segment, the Company originates life insurance policy settlement contracts as a licensed life settlement provider on behalf of third-party institutional investors interested in investing in the life settlement asset class. Specifically, the Company originates policies through three primary origination channels (agents/financial advisors, direct-to-consumers, life settlement brokers and third-party intermediaries), screens them for 41 Table of Contents eligibility by verifying that the policy is in force, obtaining consents and disclosures, and submitting cases for life expectancy estimates. The pricing for origination fees based on a percentage of the net death benefit of the policy serviced. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Origination fees","$","5,457,147","","","$","4,203,900","","","$","1,253,247","","","29.8","%"]] [[/GREPCENT_TABLE]] Origination Revenue increased by $1,253,247 or 29.8% from $4,203,900, for the year ended December 31, 2024 compared to the year ended December 31, 2023. Origination Revenue increased due to having a full year worth of revenue in 2024 compared to 2023. Portfolio servicing revenue We enter into service agreements with the owners of life settlement contracts and are responsible for maintaining the policies, managing processing of claims in the event of death of the insured and ensuring timely payment of optimized premiums computed to derive maximum return on maturity of the policy. We neither assume the ownership of the contracts nor undertake the responsibility to make the associated premium payments. The duties that we perform under these arrangements are considered a single performance obligation that is satisfied over time and revenue is recognized for services provided for the corresponding time period. We earn servicing revenue related to policy and administrative services on behalf of the life settlement policy owners as a percent of the net death benefit value. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Portfolio servicing fees","$","772,169","","","$","1,002,174","","","$","(230,005)","","","(23.0)","%"]] [[/GREPCENT_TABLE]] Portfolio servicing revenue decreased by $230,005 or 23.0%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease in portfolio servicing revenue is primarily due to a decrease in policies serviced. Technology services revenue We enter into service agreements with pension funds, government agencies, insurance-related businesses, as well as other entities to provide real-time mortality verification, missing participant verification, and other services specific to the life insurance markets. The duties that we perform under these arrangements are considered a single performance obligation that is satisfied over time and revenue is recognized for services provided for the corresponding time period. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Technology services","$","33,628","","","$","\u2014","","","$","33,628","","","NM"]] [[/GREPCENT_TABLE]] Technology services revenue is new in 2024 and contributed $33,628 in revenue for the year ended December 31, 2024. Cost of Revenues (Including Stock-Based Compensation) and Gross Profit Cost of revenues (excluding depreciation and amortization) primarily consists of servicing fees, commissions expense, escrow fees, servicing and active management payroll costs, stock-based compensation for active 42 Table of Contents management and servicing employees, life expectancy fees, lead generation expenses, and active management consulting expenses. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Cost of revenue (including stock-based compensation)","$","11,371,733","","","$","6,490,377","","","$","4,881,356","","","75.2","%"]] [[/GREPCENT_TABLE]] Cost of revenues (including stock-based compensation) increased by $4,881,356 or 75.2%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase in cost of revenues is primarily due to an increase of payroll expenses related to increased headcount, stock-based compensation expense, and increase of commissions for origination activity related to the increase in insurance policy purchase and trading activity. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Gross Profit","$","100,552,053","","","$","59,911,074","","","$","40,640,979","","","67.8","%"]] [[/GREPCENT_TABLE]] Gross profit increased by $40,640,979, or 67.8%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase in gross profit is primarily due to an increase in active management revenues, offset by an increase in cost of revenues. Operating Expenses Sales and Marketing Expenses Sales and marketing expenses primarily consist of advertising and marketing related expenses as well as payroll related expenses. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Sales and marketing","$","9,063,384","","","$","4,905,747","","","$","4,157,637","","","84.8","%"]] [[/GREPCENT_TABLE]] Sales and marketing expenses increased by $4,157,637, or 84.8%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase in sales and marketing expense was attributable to an increase in television advertising costs related to the increase in life policy purchase activity and increase in related payroll expenses. General and Administrative (Including Stock-Based Compensation), and Other General, administrative, and other primarily consists of payroll and stock-based compensation and benefits related costs associated with our finance, legal, human resources, information technology, and administrative functions. General, administrative and other costs also consist of third-party professional service fees for external legal, accounting and other consulting services, rent and lease charges, insurance costs, and software expense. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["General and administrative (including stock-based compensation)","$","81,734,518","","","$","26,482,571","","","$","55,251,947","","","208.6","%"]] [[/GREPCENT_TABLE]] 43 Table of Contents General, administrative, and other increased by $55,251,947, or 208.6%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase in general, administrative, and other expenses is primarily related to stock-based compensation of $31,404,419 mainly due to early vesting of the CEO’s restricted stock, payroll expense of $11,958,834, accounting and auditing fees of $2,966,488, legal and professional fees of $6,351,601, and an increase in other general and administrative expenses of $2,570,605 due to the increase in active management activity and business acquisitions. Depreciation and amortization expense Depreciation and amortization expense consists primarily of depreciation on property and equipment purchased and leasehold improvements and amortization of intangible assets. The property at the Company currently consists of furniture, fixtures and leasehold improvements for the office and are not directly used to support the servicing or trading of life settlement policies. The intangible assets at the Company consist of customer relationships, internally developed and used technology, and non-compete agreements. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Depreciation and amortization expense","$","7,910,158","","","$","3,409,928","","","$","4,500,230","","","132.0","%"]] [[/GREPCENT_TABLE]] The increase of $4,500,230, or 132.0%, in depreciation and amortization expense is primarily related to amortization of intangible assets. Unrealized and Realized Loss (Gain) on Investments Unrealized and realized investment activity is related to investments for the market-indexed notes and is presented as operating expenses as it is related to the change in value of the market indexed notes. Gains in investments represents a reduction to operating expenses and appears as a negative. Refer to Note 13 Fair Value Measurements and Note 14 Long-Term Debt for additional information. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Unrealized loss (gain) on investments","$","238,012","","","$","(1,369,112)","","","$","1,607,124","","","(117.4)","%"],["Realized gain on investments","$","(2,341,066)","","","$","\u2014","","","$","(2,341,066)","","","NM"]] [[/GREPCENT_TABLE]] Unrealized loss (gain) on investments decreased by $1,607,124 or 117.4% for the year ended December 31, 2024, compared to the year ended December 31, 2023. During the first and third quarters of 2023, the Company, purchased S&P 500 call options through a broker as an economic hedge related to the market-indexed notes described below. The primary cause of this decrease pertains to the change in fair value of those options and the sale of these options during 2024 and is classified as an unrealized loss or gain on investments within the results of operations. During 2024 the Company sold its S&P 500 call options to pay off its market-indexed notes and realized the cumulative change in the value of the options representing an increase of $2,341,066 in realized gain on investment. Loss on Change in Fair Value of Debt 44 Table of Contents [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Loss on change in fair value of debt","$","4,835,351","","","$","2,356,058","","","$","2,479,293","","","105.2","%"]] [[/GREPCENT_TABLE]] The loss in the fair value of debt increased by $2,479,293, or 105.2% for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase is primarily attributable to changes in the risk-free fair value of LMATT Series 2024, Inc. market-indexed notes. Other Income (Expense) Other income (expense) consists mainly of interest expenses, interest income, and change in the value of the warrant liability. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Interest (expense)","$","(18,279,686)","","","$","(9,866,821)","","","$","(8,412,865)","","","85.3","%"],["Interest income","2,398,691","","","594,764","","","1,803,927","","","303.3","%"],["Loss on change in fair value of warrant liability","(2,702,040)","","","(4,204,360)","","","1,502,320","","","(35.7)","%"],["Other income (expense)","$","38,040","","","$","(146,443)","","","$","184,483","","","(126.0)","%"],["Total other expense","$","(18,544,995)","","","$","(13,622,860)","","","$","(4,922,135)","","","36.1","%"]] [[/GREPCENT_TABLE]] Interest expense was $18,279,686 for the year ended December 31, 2024, compared to $9,866,821 for the year ended December 31, 2023. The increase in interest expense is primarily related to additional debt incurred during the year. Interest income was $2,398,691, for the year ended December 31, 2024, compared to $594,764 the year ended December 31, 2023. The increase in interest income is primarily due to money market sweeps during the year. Loss on change in fair value of warrant liability was $2,702,040, for the year ended December 31, 2024, compared to $4,204,360 for the year ended December 31, 2023. The loss is primarily attributable to the increase in the price for the public warrants, which is a determining factor for measuring the fair value of the private warrants. Other income (expense) increased by $184,483, or 126.0%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease is primarily related to financial assistance provided to the Providers. Refer to Note 2 Summary of Significant Accounting Policies and Note 12 Commitments and Contingencies for additional information. Income Tax Expense [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Income tax expense","$","5,484,738","","","$","1,468,535","","","$","4,016,203","","","273.5","%"]] [[/GREPCENT_TABLE]] 45 Table of Contents Income tax expense increased by $4,016,203, or 273.5% for the year ended December 31, 2024 compared to the year ended December 31, 2023. Our effective income tax rate for the years ended December 31, 2024 and 2023, was (28.2)% and 14%, respectively. The income tax expense for the year ended December 31, 2024 differed from the statutory rate of 21% mainly due to restricted stock award deductions limited by IRC 162(m) as well as limitations in permanent differences related to non-deductible business acquisition transaction costs. Results of Operations—Segment Results The Company organizes its business into five reportable segments (1) Asset Management, (2) Active Management, (3) Originations, (4) Portfolio Servicing, and (5) Technology Services, which all generate revenue and incur expenses in different manners. Refer to Note 11 Segment Reporting for additional information. The following tables provides supplemental information of revenue and profitability by operating segment: Asset Management [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Total revenue","$","2,841,481","","","$","\u2014","","","$","2,841,481","","","NM"],["Total cost of revenue","288,599","","","\u2014","","","288,599","","","NM"],["Total gross profit","$","2,552,882","","","$","\u2014","","","$","2,552,882","","","NM"]] [[/GREPCENT_TABLE]] The change in revenue is explained above under Revenue. The composition of cost of revenue is described in Note 2, Summary of Significant Accounting Policies. Cost of revenue for the asset management segment is new in 2024 and contributed $288,599 to total cost of revenue. Active Management [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Total revenue","$","102,819,361","","","$","61,195,377","","","$","41,623,984","","","68.0","%"],["Total cost of revenue","3,869,415","","","2,174,386","","","1,695,029","","","78.0","%"],["Total gross profit","$","98,949,946","","","$","59,020,991","","","$","39,928,955","","","67.7","%"]] [[/GREPCENT_TABLE]] The change in revenue is explained above under Revenue. The composition of cost of revenue is described in Note 2, Summary of Significant Accounting Policies. The increase of $1,695,029 or 78.0% in cost of revenue is mainly due to a increase in trading activity and compensation related expenses. Cost of revenue as a percent of revenue remained mostly flat for the years ended December 31, 2024, and 2023 at 3.8% and 3.6%, respectively. Originations 46 Table of Contents [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Revenue (including intersegment)","$","24,823,130","","","$","19,247,972","","","$","5,575,158","","","29.0","%"],["Intersegment elimination","(19,365,983)","","","(15,044,072)","","","(4,321,911)","","","28.7","%"],["Total revenue","5,457,147","","","4,203,900","","","1,253,247","","","29.8","%"],["Cost of revenue (including intersegment)","16,950,640","","","11,303,244","","","5,647,396","","","50.0","%"],["Intersegment elimination","(11,578,133)","","","(7,711,312)","","","(3,866,821)","","","50.1","%"],["Total cost of revenue","5,372,507","","","3,591,932","","","1,780,575","","","49.6","%"],["Gross profit (including intersegment)","7,872,490","","","7,944,728","","","(72,238)","","","(0.9)","%"],["Intersegment elimination","(7,787,850)","","","(7,332,760)","","","(455,090)","","","6.2","%"],["Total gross profit","$","84,640","","","$","611,968","","","$","(527,328)","","","(86.2)","%"]] [[/GREPCENT_TABLE]] The change in revenue is explained above under Revenue. The composition of cost of revenue is described in Note 2, Summary of Significant Accounting Policies. The increase of $1,780,575 or 49.6% in cost of revenue is mainly due to a increase in origination activity and compensation related expenses. The majority of the activity is related to the eliminated intersegment origination activity related to life policies purchased by the Company. No originations revenue was recorded prior the June 30, 2023 Business Combination. Portfolio Servicing [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Total revenue","$","772,169","","","$","1,002,174","","","$","(230,005)","","","(23.0)","%"],["Total cost of revenue","1,608,220","","","724,059","","","884,161","","","122.1","%"],["Total gross profit","$","(836,051)","","","$","278,115","","","$","(1,114,166)","","","(400.6)","%"]] [[/GREPCENT_TABLE]] The change in revenue is explained above under Revenue. The composition of cost of revenue is described in Note 2, Summary of Significant Accounting Policies. The increase of $884,161 or 122.1% in cost of revenue is mainly due to a increase in compensation related expenses to service the increase in life policies held by the Company. Technology Services 47 Table of Contents [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Total revenue","$","33,628","","","$","\u2014","","","$","33,628","","","NM"],["Total cost of revenue","232,992","","","\u2014","","","232,992","","","NM"],["Total gross profit","$","(199,364)","","","$","\u2014","","","$","(199,364)","","","NM"]] [[/GREPCENT_TABLE]] The change in revenue is explained above under Revenue. The composition of cost of revenue is described in Note 2, Summary of Significant Accounting Policies. Cost of revenue for the technology services segment is new in 2024 and contributed $232,992 to total cost of revenue. Key Business Metrics and Non-GAAP Financial Measures The consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and are prepared in accordance with U.S. GAAP. We monitor key business metrics and non-GAAP financial measures that assist us in evaluating our business, measuring our performance, identifying trends and making strategic decisions. We have presented the following non-GAAP measures, their most directly comparable GAAP measure, and key business metrics: [[GREPCENT_TABLE]] [["Non-GAAP Measure","Comparable GAAP Measure"],["Adjusted Net Income, Adjusted EPS","Net (Loss) Income attributable to Common Stockholders, EPS"],["Adjusted EBITDA","Net (Loss) Income"]] [[/GREPCENT_TABLE]] Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, and Adjusted EBITDA Margin, are not measures of financial performance under GAAP and should not be considered substitutes for GAAP measures, Net (Loss) Income (for Adjusted EBITDA and Adjusted EBITDA Margin), Net (Loss) Income Attributable to Common Stockholders (for Adjusted Net Income) or Earnings per Share (for Adjusted EPS), which are considered to be the most directly comparable GAAP measures. These non-GAAP financial measures have limitations as analytical tools, and when assessing Company’s operating performance, these non-GAAP financial measures should not be considered in isolation or as substitutes for Net (Loss) Income Attributable to Common Stockholders, (Loss) Earnings per Share or other consolidated statements of operations and comprehensive (loss) income data prepared in accordance with GAAP. Adjusted Net Income is presented for the purpose of calculating Adjusted EPS. The Company defines Adjusted Net Income as Net (Loss) Income Attributable to Common Stockholders adjusted for non-controlling interest income, amortization, change in fair value of warrants, business acquisition costs, and non-cash stock-based compensation and the related tax effect. Management believes that Adjusted Net Income is an appropriate measure of operating performance because it eliminates the impact of non-cash expenses or expenses that do not relate to business performance. Adjusted EPS measures our per share earnings and is calculated as Adjusted Net Income divided by adjusted weighted-average shares outstanding. We believe Adjusted EPS is useful to investors because it enables them to better evaluate per share operating performance across reporting periods and management believes that Adjusted EPS is an appropriate measure of operating performance because it eliminates the impact of non-cash expenses or expenses that do not relate to business performance. Adjusted Net Income and Adjusted EPS 48 Table of Contents The following table presents a reconciliation of Adjusted Net Income to the most comparable GAAP financial measure, net income (loss) attributable to Common Stockholders and Adjusted EPS to the most comparable GAAP financial measure, earnings per share, on a historical basis for the periods indicated below: [[GREPCENT_TABLE]] [["","","","Years Ended December 31,"],["","","2024","","","2023"],["NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS","","$","(23,961,050)","","","","$","9,516,626"],["","Net income attributable to non-controlling interests","","(956,987)","","","","(482,139)"],["","Amortization expense","","7,748,269","","","","3,364,167"],["","Stock based compensation","","43,435,215","","","","10,768,024"],["","Business acquisition costs","","8,403,065","","","","\u2014"],["","Loss on change in fair value of warrant liability","","2,702,040","","","","4,204,360"],["","Tax impact [1]","","9,151,161","","","","2,069,993"],["Adjusted Net Income","","$","46,521,713","","","","$","29,441,031"],["","ADJUSTED EARNINGS PER SHARE:"],["Weighted-average shares of Class A common stock outstanding - basic [2]","","70,761,830","","","","56,951,414"],["Weighted-average shares of Class A common stock outstanding - diluted [2]","","70,761,830","","","57,767,898"],["Proforma Adjusted EPS - basic","","$","0.66","","","","$","0.52"],["Proforma Adjusted EPS - diluted","","$","0.66","","","","$","0.51"]] [[/GREPCENT_TABLE]] [1] Tax impact represents the permanent difference in tax expense related to the restricted stock awards granted to the CEO due to IRC 162(m) limitations. [2] The number of shares outstanding have been retrospectively recast for prior period presented to reflect the outstanding stock of Abacus Global Management, Inc. as a result of the Business Combination. Adjusted Net Income for the year ended December 31, 2024 was $46,521,713 compared to $29,441,031 for the year ended December 31, 2023. The increase of $17,080,682 or 58.0% in Adjusted Net Income is primarily due to increases non-cash stock based compensation and related tax effect, business acquisition costs, and acquired intangible asset amortizations. Adjusted basic EPS for the year ended December 31, 2024 was $0.66 compared to $0.52 for the year ended December 31, 2023. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA is net income adjusted for depreciation expense, amortization, interest expense, income tax, business acquisition costs, non-cash expenses, and certain other items that in our judgement significantly impact the period-over-period assessment of performance and operating results that do not directly relate to business performance within the Company's control. These items may include payments made as part of the Company's expense support commitment, (gain) loss on change in fair value of debt, loss on change in fair value of warrant liability, S&P 500 options that were entered into as an economic hedge related to the debt (described as the realized and unrealized loss on investments), non-cash stock based compensation, and other items. Adjusted EBITDA should not be determined as substitution for net (loss) income, cash flows (used in) provided by operating, investing, and financing activities, operating (loss) income, or other metrics prepared in accordance with U.S. GAAP. Management believes the use of Adjusted EBITDA assists investors in understanding the ongoing operating performance by presenting comparable financial results between periods. We believe that by removing the impact of depreciation and amortization and excluding certain non-cash charges, amounts spent on interest and taxes and certain other charges that are variable from year to year, Adjusted EBITDA provides our investors with performance measures that reflect the impact to operations from trends in changes in revenue, policy values and 49 Table of Contents operating expenses, providing a perspective not immediately apparent from net (loss) income and operating (loss) income. The adjustments we make to derive the non-GAAP measure of Adjusted EBITDA exclude items which may cause short-term fluctuations in net income and operating income and which we do not consider to be the fundamental attributes or primary drivers of our business. The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to the most comparable GAAP financial measure, net income (loss), on a historical basis: [[GREPCENT_TABLE]] [["","","Years Ended December 31,"],["","","2024","","2023"],["NET (LOSS) INCOME","","$","(24,918,037)","","","","$","9,034,487"],["","Depreciation and amortization expense","","7,910,158","","","","3,409,928"],["","Income Tax","","5,484,738","","","","1,468,535"],["","Interest (Expense)","","18,279,686","","","","9,866,821"],["","Other Income (Expenses)","","(38,040)","","","","146,443"],["","Interest Income","","(2,398,691)","","","","(594,764)"],["","Loss on change in fair value of warrant liability","","2,702,040","","","","4,204,360"],["","Business acquisition costs","","8,403,065","","","","\u2014"],["","Stock based compensation","","43,435,215","","","","10,768,024"],["","Unrealized loss (gain) on investments","","238,012","","","","(1,369,112)"],["","Realized gain on investments","","(2,341,066)","","","","\u2014"],["","Loss on change in fair value of debt","","4,835,351","","","","2,356,058"],["Adjusted EBITDA","","$","61,592,431","","","","$","39,290,780"],["Total revenues","","111,923,786","","","","66,401,451"],["Adjusted EBITDA Margin","","55.0%","","","59.2%"],["Net Income Margin","","(22.3)%","","","13.6%"]] [[/GREPCENT_TABLE]] Adjusted EBITDA for the year ended December 31, 2024 was $61,592,431 compared to $39,290,780 for the year ended December 31, 2023. The increase of $22,301,651, or 57%, in adjusted EBITDA is primarily due primarily due to increases non-cash stock based compensation, business acquisition costs, interest expense, income tax and acquired intangible asset amortizations, partially offset by increases in operating expenses. We monitor the following key business metrics for asset management revenue: (i) assets under management also referred to as net asset value of funds (“AUM” or “NAV”). AUM drives management fees and performance fees generated by the Company. We monitor the following key business metrics for active management revenue: (i) policies sold and purchased, (ii) realized gains on sold and matured policies, (iii) unrealized gains on held policies, and (iv) face value of policies held. The number of policies sold and purchased helps us measure the level of active management activity for the period that leads to realized and unrealized gains, respectively. Realized gains on sold and matured policies is used to measure the level of profit optimization. Unrealized gains on held policies is used to measure our policy optimization. The face value or net death benefit of policies represents the maximum potential revenue realization on policies held. Refer to the Results from Operations section above for a summary of active management key business metrics for investment and fair value method policies. We monitor the following key business metrics for servicing revenue: (i) number of policies serviced, (ii) value of policies serviced, and (iii) total invested dollars. Servicing revenue involves the provision of services to one affiliate by common ownership and third parties which own life insurance policies. The number of policies and the value of policies serviced represents the volume and dollar value of policies over which the above services are performed. Total invested dollars represent the acquisition cost plus premiums paid by the policy. We use the aforementioned 50 Table of Contents metrics to assess business operations and provide concrete benchmarks that provide a clear snapshot of growth between the periods under consideration. We monitor the following key business metric for origination revenue: the number of policies originated year-over-year in measuring our performance. Origination revenues represent fees negotiated for each purchase and sale of a policy to an investor. The number of policy originations represents the volume of policies over which the above origination services are performed. The number of policy originations directly correlates with origination revenues allowing management to evaluate fees earned upon each transaction. There are no estimates, assumptions, or limitations specific to the number of policy originations. Our key business metrics are summarized below for asset management, portfolio servicing, and origination revenue (active management key business metrics are summarized above): [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Key business metric"],["Assets under management","$","2,594,080,293","","","$","\u2014","","","$","2,594,080,293","","","NM"],["Number of policies serviced [1]","2,105","","","722","","1,383","","191.6%"],["Face value of policies serviced ($) [1]","$","5,474,356,066","","","$","1,143,584,088","","","$","4,330,771,978","","","378.7%"],["Total invested dollars ($) [1]","$","2,263,013,213","","","$","257,129,186","","$","2,005,884,027","","","780.1%"],["Number of policy originations to external parties","124","","","67","","57","","","85.1%"],["Number of policy originations to related parties","\u2014","","","7","","(7)","","","(100.0)%"],["Number of policy originations to subsidiaries eliminated in consolidation","513","","","321","","192","","","59.8%"]] [[/GREPCENT_TABLE]] [1] For the year ended December 31, 2024, LMA and LMA subsidiaries comprised 692 of the policies serviced, $1,256,687,123 face value of the policies serviced, and $301,311,031 of the total invested dollars. For the year ended December 31, 2023, LMA and LMA subsidiaries comprised 288 of the policies serviced, $520,656,936 face value of the policies serviced, and $100,996,409 of the total invested dollars. All servicing revenues related to LMA or LMA subsidiaries are eliminated in consolidation. [[GREPCENT_TABLE]] [["Non-GAAP Measure","Comparable GAAP Measure"],["Proforma Adjusted Net Income, Proforma Adjusted EPS","Net (Loss) Income Attributable to Common Stockholders, EPS"],["Proforma Adjusted EBITDA","Net (Loss) Income for Common Stockholders"]] [[/GREPCENT_TABLE]] Proforma adjusted Net Income and Proforma Adjusted EPS Proforma Adjusted Net Income, Proforma Adjusted EPS, Proforma Adjusted EBITDA and Proforma Adjusted EBITDA Margin, are not measures of financial performance under GAAP and should not be considered substitutes for GAAP measures, Net (Loss) Income for Common Stockholders and Carlisle (for Proforma Adjusted EBITDA and Proforma Adjusted EBITDA Margin), Net (Loss) Income Attributable to Common Stockholders and Net Income for Carlisle and Abacus Settlements (for Proforma Adjusted Net Income) or earnings (loss) per share (for Proforma Adjusted EPS), which are considered to be the most directly comparable GAAP measures. These non-GAAP financial measures have limitations as analytical tools, and when assessing Company’s operating performance, these non-GAAP financial measures should not be considered in isolation or as substitutes for net income (loss) for Common Stockholders, Carlisle, and Abacus Settlements, Net (Loss) Income Attributable to Common Stockholders, Carlisle, and Abacus Settlements, earnings per share or other consolidated statements of operations and comprehensive income data prepared in accordance with GAAP. 51 Table of Contents Proforma Adjusted Net Income is presented for the purpose of calculating Proforma Adjusted EPS. The Company defines Proforma Adjusted Net Income as Net (Loss) Income Attributable to Common Stockholders plus historical net income for Carlisle and Abacus Settlements prior to the business combinations excluding related business combination costs and intangible asset amortizations, adjusted for non-controlling interest, amortization, stock based compensation and related tax effect, and change in fair value of warrants. Management believes that Proforma Adjusted Net Income is an appropriate measure of operating performance because it represents the combined results for the legacy operating companies year-over-year as if the business combination had occurred at the beginning of the years shown and eliminates the impact of non-cash expenses or expenses that do not relate to business performance. The following table presents a reconciliation of Proforma Adjusted Net Income to the most comparable GAAP financial measure, Net (Loss) Income Attributable to Common Stockholders and Net (Loss) Income for Common Stockholders and Proforma Adjusted EPS to the most comparable GAAP financial measure, (Loss) Earnings per Share, on a historical basis for the periods indicated below: [[GREPCENT_TABLE]] [["","","Years Ended December 31,"],["","","2024","2023"],["","NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS","","$","(15,303,922)","","","$","9,516,626"],["","Net income for Carlisle [1]","","3,996,229","","","5,196,037"],["","Net loss for Abacus Settlements [2]","","\u2014","","","(974,901)"],["Proforma net (loss) income available to common stockholders","","(11,307,693)","","","13,737,762"],["","Net income attributable to non-controlling interests","","(956,987)","","(482,139)"],["","Amortization expense","","8,738,141","","","3,724,016"],["","Stock compensation expense","","43,435,215","","","10,768,024"],["","Business acquisition costs","","342,628","","","\u2014"],["","Loss on change in fair value of warrant liability","","2,702,040","","","4,204,360"],["","Tax impact [3]","","9,151,161","","","2,069,993"],["Proforma Adjusted Net Income","","$","52,104,505","","","$","34,022,016"],["Weighted-average shares of Class A common stock outstanding - basic","","70,761,830","","","56,951,414"],["Weighted-average shares of Class A common stock outstanding - diluted","","70,761,830","","","57,767,898"],["Proforma Adjusted EPS - basic","","$","0.74","","","$","0.60"],["Proforma Adjusted EPS - diluted","","$","0.74","","","$","0.59"]] [[/GREPCENT_TABLE]] [1] Net income attributable to Carlisle, includes all 2024 and 2023 activity. [2] Net loss attributable to Abacus Settlements, LLC, includes all of 2023 activity. [3] Tax impact represents the permanent difference in tax expense related to the restricted stock awards granted to certain executives due to IRC 162(m) limitations. Proforma Adjusted Net Income for the year ended December 31, 2024 was $52,104,505 compared to $34,022,016 for the year ended December 31, 2023. The increase of $18,082,489, or 53.1%, in Proforma adjusted Net Income is primarily due to the increase in proforma revenues partially offset by general and administrative expenses. Proforma Adjusted basic EPS for the year ended December 31, 2024 was $0.74 compared to $0.60 for the year ended December 31, 2023. Proforma Adjusted EBITDA Proforma Adjusted EBITDA is net income for Common Stockholders plus historical net income for Carlisle and Abacus Settlements prior to the business combinations excluding related business combination costs and intangible asset amortizations, and adjusted for depreciation expense, amortization expense, interest expense, income tax and 52 Table of Contents other non-cash and other items that in our judgement significantly impact the period-over-period assessment of performance and operating results that do not directly relate to business performance within the Company's control. These items may include payments made as part of the Company's expense support commitment, (gain) loss on change in fair value of debt, loss on change in fair value of warrant liability, change in the fair value of S&P 500 options that were entered into as an economic hedge related to the debt (described as the realized or unrealized loss on investments), non-cash stock based compensation, and other items. Proforma Adjusted EBITDA should not be determined as substitution for net income (loss), cash flows provided (used in) operating, investing, and financing activities, operating income (loss), or other metrics prepared in accordance with U.S. GAAP. Management believes the use of Proforma Adjusted EBITDA assists investors in understanding the ongoing operating performance by presenting comparable financial results between periods and represents the combined results for the legacy operating companies year-over-year as if the business combinations had occurred at the beginning of the years shown. We believe that after removing the impact of depreciation and amortization and excluding certain non-cash charges, amounts spent on interest and taxes and certain other charges that are variable from year to year, Proforma Adjusted EBITDA provides our investors with performance measures that reflect the impact to operations from trends in changes in revenue, policy values and operating expenses, providing a perspective not immediately apparent from net income and operating income. The adjustments we make to derive the non-GAAP measure of Proforma Adjusted EBITDA exclude items which may cause short-term fluctuations in net income (loss) and operating income (loss) and which we do not consider to be the fundamental attributes or primary drivers of our business. The following table presents a reconciliation of Proforma Adjusted EBITDA and Proforma Adjusted EBITDA Margin to the most comparable GAAP financial measure, net income (loss) for Common Stockholders and net income (loss) for Carlisle and Abacus Settlements on a historical basis for the periods indicated below: [[GREPCENT_TABLE]] [["","","Years Ended December 31,"],["","","2024","2023"],["","NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS","","$","(15,303,922)","","","$","9,516,626"],["","Net income for Carlisle [1]","3,996,229","","","5,196,037"],["","Net loss for Abacus Settlements [2]","","\u2014","","","(974,901)"],["Proforma net (loss) income available to common stockholders","","(11,307,693)","","","13,737,762"],["","Depreciation and amortization expense","","8,900,030","","","3,841,023"],["","Interest expense","","21,531,033","","","15,610,754"],["","Interest income","","(2,704,240)","","","(656,895)"],["","Income Tax","","6,354,321","","","2,784,849"],["","Stock compensation","","43,435,215","","","10,768,024"],["","Other (Income) / Expenses","","(855,383)","","","250,531"],["","Loss on change in fair value of warrant liability","","2,702,040","","","4,204,360"],["","Business acquisition costs","","342,628","","","\u2014"],["","Loss on change in fair value of debt","","4,835,351","","","2,356,058"],["","Realized gain on investments","","(2,989,479)","","","\u2014"],["","Unrealized loss (gain) on investments","","(122,021)","","","(1,668,137)"],["Proforma Adjusted EBITDA","","$","70,121,802","","","$","51,228,329"],["Proforma Revenue","","$","137,226,971","","","$","111,356,730"],["Proforma Adjusted EBITDA Margin","","51.10%","","46.00%"],["Proforma Net Income Margin","","(8.2)%","","12.34%"]] [[/GREPCENT_TABLE]] [1] Net income attributable to Carlisle, includes all of 2024 and 2023 activity. 53 Table of Contents [2] Net income attributable to Abacus Settlements, LLC, includes all of 2023 activity. Proforma Adjusted EBITDA for the year ended December 31, 2024 was $70,121,802 compared to $51,228,329 for the year ended December 31, 2023. The increase of $18,893,473 or 36.9%, in proforma adjusted EBITDA is primarily due to the increase in proforma revenue, stock-based compensation, and interest expense, partially offset by increases in operating expenses. While operating expenses also increased, many of these increases in expenses are being reflected as adjustments shown herein as a result of the business combinations. Proforma Segment Revenue Proforma Segment Revenue is not a measure of financial performance under GAAP and should not be considered substitutes for GAAP measures, segment revenue for the Company, Carlisle, and Abacus Settlements, which are considered to be the most directly comparable GAAP measures. This non-GAAP financial measure has limitations as analytical tools, and when assessing Company’s operating performance, this non-GAAP financial measures should not be considered in isolation or as substitutes for segment revenue for the Company, Carlisle, and Abacus Settlements, or other consolidated statements of operations and comprehensive income data prepared in accordance with GAAP. The Company defines Proforma Segment Revenue as segment revenue for the Company plus historical revenue for Carlisle, and Abacus Settlements prior to the business combination adjusted for intersegment activity for policies that Abacus Settlements has originated on behalf of the Company’s subsidiaries. Management believes that Proforma Segment Revenue is an appropriate measure of operating performance because it represents the combined results for the legacy operating companies year-over-year as if the business combinations had occurred at the beginning of the years shown and eliminates intersegment revenue. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023"],["Asset Management","$","28,144,666","","","$","31,767,997"],["Active Management","102,819,361","","","61,195,377"],["Originations","24,823,130","","","32,435,254"],["Portfolio Servicing","772,169","","","1,002,174"],["Technology Services","33,628","","","\u2014"],["Total Proforma Revenue (including intersegment)","156,592,954","","","126,400,802"],["Intersegment elimination","(19,365,983)","","","(15,044,072)"],["Total Proforma Revenue","$","137,226,971","","","$","111,356,730"]] [[/GREPCENT_TABLE]] Liquidity and Capital Resources The Company finances its operations primarily through cash generated from operations and net proceeds from debt or equity financing. The Company has sufficient sources of funds to meet ongoing operating and investing requirements over the next 12 months and beyond. The Company actively manages its working capital and the associated cash requirements when servicing policies while also effectively utilizing cash and other sources of liquidity to purchase additional policies. As of December 31, 2024, our principal source of liquidity was cash totaling $131,944,282. On December 10, 2024 (“Closing Date”) the Company entered into a Credit Agreement (the “SSCF”) and borrowed $100,000,000 under the initial term loan. The Company is able to draw additional $50,000,000 under the optional delayed draw within 180 days after the Closing Date. Refer to Note 14 Long-Term Debt for additional information. The Company is obligated to provide financial support to the Providers as described in Note 2 Summary of Significant Accounting Policies and Note 12 Commitments and Contingencies of the Company’s financial statements. For the year ended December 31, 2024 and 2023, the Company incurred expense of $172,136 and $144,721, respectively, to fund the Providers’ deficits. For the year ended December 31, 2024, the Providers were 54 Table of Contents considered to be VIEs, but were not consolidated in our consolidated financial statements due to a lack of the power criterion or the losses/benefits criterion. Our future capital requirements will depend on many factors, including our revenue growth rate and the expansion of our active management and portfolio activities. The Company may, in the future, enter into arrangements to acquire or invest in complementary businesses, products and technologies. Refer to Note 5 Life Insurance Settlement Policies, Note 14 Long-Term Debt, and Note 20 Leases, for further discussion on rights and obligations that impact liquidity. Cash Flows from our operations The following table summarizes our cash flows for the periods presented: [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2024","","2023"],["Net cash provided/(used) in operating activities","$","(208,810,444)","","","$","(64,044,384)"],["Net cash provided/(used) in investing activities","(4,955,290)","","","2,241,502"],["Net cash provided by financing activities","320,121,348","","","57,338,727"]] [[/GREPCENT_TABLE]] Operating Activities During the year ended December 31, 2024, our operating activities used $208,810,444 of net cash as compared to $64,044,384 of net cash used from operating activities during the year ended December 31, 2023. The increase of $144,766,060 in net cash used from operating activities during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to $107,294,956 net cash used to purchase life settlement policies accounted for at fair value, $14,112,786 change in operating assets and liabilities, and $25,897,723 increase in unrealized gain on policies at fair value, partially offset by $32,667,191 increase in non-cash stock-based compensation and $5,532,995 increase in deferred taxes. Investing Activities During the year ended December 31, 2024, investing activities used $4,955,290 of net cash as compared to 2,241,502 net cash provided during the year ended December 31, 2023. The increase in net cash used of $7,196,792 in investing activities during the year ended December 31, 2024 compared to the year ended December 31, 2023 was related to $3,300,710 repayment to affiliates, $2,430,620 net cash paid for business acquisitions, and $1,000,000 purchase of a convertible note investment. Financing Activities During the year ended December 31, 2024, financing activities generated $320,121,348 of net cash compared to 57,338,727 of net cash generated during the year ended December 31, 2023. The increase of $262,782,621 in net cash generated in financing activities during the year ended December 31, 2024 compared to December 31, 2023 was mainly related to net proceeds of $66,373,569 for the issuance of debt net of issuance costs and debt repayments and $166,889,779 for common stock sales net of related issuance costs. Refer to Note 13 Fair Value Measurements, Note 14 Long-Term Debt, and Note 15 Stockholders’ Equity for additional information related to our financing sources. Contractual Obligations and Commitments Refer to the following notes in our Financial Statements for a list of contractual obligations and commitments: •Note 12, Commitments and Contingencies, for a list of commitments and contingencies. •Note 14, Long-Term Debt, for a list of outstanding debt, related interest rates, and maturity dates. 55 Table of Contents •Note 20, Leases, for our outstanding lease obligations. Recent Accounting Pronouncements Refer to Note 2 Summary of Significant Accounting Policies to our consolidated financial statements for a discussion of recently issued accounting pronouncements, including information about new accounting standards and the future adoption of such standards. Critical Accounting Policies and Estimates The Company prepared its consolidated financial statements in accordance with GAAP. Our preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities and related disclosures at the date of the financial statements, as well as revenue and expense recorded during the reporting periods. The Company evaluates our estimates and judgments on an ongoing basis. The Company bases its estimates on historical experience and or other relevant assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ materially from management’s estimates. Refer to Note 2 Summary of Significant Accounting Policies to our consolidated financial statements for further information related to our critical accounting policies and estimates, which are as follows: Valuation of Life Insurance Policies—including how the Company accounts for its holdings of life insurance settlement policies at fair value in accordance with ASC 325-30, Investments in Insurance Contracts and ASC 820, Fair Value Measurements and Disclosures. The Company's valuation of life settlements are considered Level 3, as there is currently no active market where the Company is able to observe quoted prices for identical assets. The Company’s valuation model incorporates significant inputs that are not observable. Refer to Note 5 Life Insurance Settlement Policies, and Note 13 Fair Value Measurements to the consolidated financial statements for further discussion. Valuation of Goodwill and Other Intangible Assets—including how the Company determines the fair value of goodwill and other intangible assets and reporting units, and how the Company determines when an impairment loss should be recorded. During the fourth quarter of 2024, we conducted our annual goodwill impairment test and did not record any impairment charges. The estimated fair values of our reporting units exceeded their carrying amounts at the date of their most recent estimated fair value determination. During 2024, we evaluated our other intangible assets for impairment and did not record any impairment charges. Refer to Note 1 Description of Business, Note 3 Business Combination, and Note 7 Goodwill and Other Intangible Assets to the consolidated financial statements for further discussion. Stock Repurchase Program On December 11, 2023, our Board of Directors authorized a stock repurchase program under which the Company may purchase shares of our common stock for an aggregate purchase price not to exceed $15 million over a period of up to 18 months. Refer to Note 15 Stockholders’ Equity to the consolidated financial statements for further discussion of our stock repurchase program. ***** 56 Table of Contents ABACUS SETTLEMENTS, LLC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provide information that management believes is relevant to an assessment and understanding of Abacus Settlements, LLC’s financial condition and results of operations. This discussion should be read in conjunction with Abacus Settlements, LLC’s financial statements and related notes thereto that appear elsewhere in this Annual Report on Form 10-K. In addition to historical financial analysis, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions, as described under the heading “Cautionary Note Regarding Forward-Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or elsewhere in this quarterly statement. Unless the context otherwise requires, references in this “Abacus Settlements, LLC Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we,” “us,” “our,” and “Abacus Settlements” are intended to mean the business and operations of Abacus Settlements, LLC. Overview Abacus Settlements originates life insurance policy settlement contracts as a licensed life settlement provider on behalf of third-party institutional investors (“Financing Entities”) interested in investing in the life settlement asset class. Specifically, Abacus Settlements originates policies through three primary origination channels (Agents/Financial Advisors, Direct-to-Consumers, Life Settlement Brokers) and Third-Party Intermediaries. Abacus Settlements screens them for eligibility by verifying that the policy is in force, obtaining consents and disclosures, and submitting cases for life expectancy estimates. This process is characterized as our origination services, which averages a fee of approximately 2% of face value (“Origination Revenue”). Our Business Model As a life settlement provider, Abacus Settlements serves as a purchaser of outstanding life insurance policies. When serving as a purchaser, Abacus Settlements’ primary purpose in the transaction is to connect buyers and sellers through an origination process. The origination process is core to Abacus Settlements’ business and drives its economics. Abacus Settlements averages approximately 2% of face value in origination fees on policies and has developed three high quality origination channels which include agents and Financial Advisors, direct to consumer and Life Settlements Brokers. Abacus Settlements also originates policies with Third-Party Intermediaries. Generally, diversification across multiple origination channels lowers average policy acquisition costs and increases estimated returns. Abacus Settlements finds sellers through its origination channels using strategic marketing practices in its core markets, with the purpose of finding policy owners who want to capitalize on their investments prior to death by extracting value from their policies through the sale of such policies to Financing Entities. Key Factors Affecting Our Performance Our operations and financial performance are impacted by economic factors affecting the industry, including: 57 Table of Contents Opportunities in the Life Settlements Industry Within the life settlements industry, there is significant policy value that lapses on an annual basis. Currently, the life settlements industry only captures a narrow portion of the potential market leaving significant runway for future growth for industry participants. With the anticipation of growth in total face value of life insurance policies, we believe we are well positioned to capitalize on the overall market growth. Abacus Settlements is currently conducting business in 49 states and the District of Columbia. The company holds viatical settlement and or life settlement provider licenses in forty-three (43) of those jurisdictions. Abacus Settlements also conducts business in seven (7) jurisdictions which do not currently have life and or viatical settlement provider licensing requirements. Abacus Settlements conducts business where is it legally allowed to across the United States. The only state Abacus Settlements is not currently conducting business in is Alaska and there are no current plans to procure a license. Our ability to originate policies is essential to scale our business over time. In order to support this expected growth, we continue to invest in our technology and marketing infrastructure. In general, we expect our efforts will continue to focus on driving education and awareness of life settlements. Macroeconomic Changes Global macroeconomic factors, including regulatory policies, unemployment, changes in retirement savings, the cost of healthcare, inflation, and tax rate changes impact demand for our origination services. These factors evolve over time and while these changes have not currently had any significant impact on performance, these trends may shift the timing and volume of transactions, or the number of customers using our origination services. Components of Results of Operations Results of Operations The following tables set forth our results of operations for each of the periods indicated, and we presented and expressed the relationship of certain line items as a percentage of revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results. The following tables set forth our historical results for the periods indicated, and the changes between periods: 58 Table of Contents [[GREPCENT_TABLE]] [["","Six Months Ended June 30, 2023"],["Origination revenue","$","3,252,738"],["Related-party revenue","9,931,938"],["Total revenue","13,184,676"],["Cost of revenue","2,734,949"],["Related party cost of revenue","6,558,354"],["Gross profit","3,891,373"],["Operating expenses"],["General and administrative expenses","4,848,580"],["Depreciation expense","5,597"],["Total operating expenses","4,854,177"],["Income (loss) from operations","(962,804)"],["Other income (expense)"],["Interest income","1,917"],["Interest (expense)","(11,725)"],["Other income","\u2014"],["Total other (expense)","(9,808)"],["Income (loss) before income taxes","(972,612)"],["Provision for income taxes","2,289"],["Net income (loss) and comprehensive income","$","(974,901)"]] [[/GREPCENT_TABLE]] Origination Revenue Abacus Settlements recognizes revenue from origination activities by acting as a provider of life settlements and viatical settlements by representing investors that are interested in purchasing life settlements on the secondary or tertiary market. Revenue from origination services consists of fees negotiated for each purchase and sale of a policy to an investor, which also include any agent and broker commissions received and the reimbursement of transaction costs. [[GREPCENT_TABLE]] [["","Six Months Ended June 30, 2023"],["Origination revenue","$","3,252,738"]] [[/GREPCENT_TABLE]] Revenue for the six months ended June 30, 2023 was $3,252,738 and is comprised of revenue in broker channel based on face values on the policies originated with consistent third party customers, origination fees, services revenue, and transaction fees reimbursements. Related Party Revenue Abacus Settlements has a related party relationship with Nova Trading (US), LLC (“Nova Trading”), a Delaware limited liability company and Nova Holding (US) LP, a Delaware limited partnership (“Nova Holding” and, collectively with Nova Trading, the “Nova Funds”) as the owners of Abacus Settlements jointly own 11% of the Nova Funds. The pricing for origination fees is governed by origination contracts that have been negotiated by both parties and are considered to be arms-length and consistent with origination fees charged to third party customers. For its origination services to the Nova Funds, Abacus Settlements earns origination fees equal to the lesser of (i) 2% of the net death benefit for the policy or (ii) $20,000. 59 Table of Contents [[GREPCENT_TABLE]] [["","Six Months Ended June 30, 2023"],["Related Party Revenue","$","9,931,938"]] [[/GREPCENT_TABLE]] Related party revenue for the six months ended June 30, 2023 was $9,931,938. For six months ended June 30, 2023, Abacus Settlements had originated 72 policies for the Nova Funds with a total value of $96,674,080, and is comprised of origination services and transaction fees reimbursed by the related party. Further, for the six months ended June 30, 2023, Abacus Settlements had originated 103 policies, for LMA with a total value of $192,685,578. Cost of Revenue, Related Party Cost of Revenue, and Gross Margin Cost of revenue is primarily comprised of third-party commissions, which includes third-party sales and marketing commission fees, as well as transaction costs that are reimbursed as part of the origination activity and depreciation and amortization expense. Abacus Settlements receives an origination fee plus any commission to be paid from the purchaser for its part in arranging the life settlement transactions. Out of that fee income, Abacus Settlements pays commissions to the licensed representative of the seller, if one is required. Commission expense is recorded at the same time revenue is recognized and is included within cost of revenue. Depreciation expense consists of depreciation of property and equipment assets, which are computer equipment. Amortization expense consists primarily of amortization of capitalized costs incurred for the development of internal use software. The costs incurred exclusively consist of fees incurred from an external consulting firm during the development stage of the project and is amortized on the straight-line basis over an estimated useful life of three years. [[GREPCENT_TABLE]] [["","Six Months Ended June 30, 2023"],["Cost of revenue","$","2,734,949"],["Related party cost of revenue","6,558,354"],["Gross Profit","$","3,891,373"],["Gross Margin","30","%"]] [[/GREPCENT_TABLE]] Cost of revenue for the six months ended June 30, 2023 was $2,734,949 and is primarily comprised of commissions expense, life expectancy fees, and lead generation expenses. Related party cost of revenue for the six months ended June 30, 2023 was $6,558,354 is comprised of agent commission expenses, originations of policies sold to the Nova Funds, and transaction fees reimbursements. Gross profit for the six months ended June 30, 2023 was $3,891,373. Gross margin for the six months ended June 30, 2023 was 30%. Operating Expenses Operating expenses are comprised of general and administrative expenses as well as depreciation expense. General and administrative expenses include compensation, payroll, advertising, marketing, rent, insurance, recruitment, trade shows, telephone & internet, licenses, and other professional fees. Depreciation expense consists of depreciation of property and equipment assets, which are computer equipment, office furniture and lease improvement. [[GREPCENT_TABLE]] [["","Six Months Ended June 30, 2023"]] [[/GREPCENT_TABLE]] 60 Table of Contents [[GREPCENT_TABLE]] [["General and administrative expenses","$","4,848,580"],["Depreciation expense","5,597"]] [[/GREPCENT_TABLE]] General and administrative expenses for the six months ended June 30, 2023 was $4,848,580, and is comprised of payroll expenses for administration support, sales department, marketing expenses, sponsorships, rent and office expenses. Depreciation expense for the six months ended June 30, 2023 was $5,597. The depreciation expense for both the periods were computed on property and equipment (i.e., computer equipment, office furniture, and leasehold improvements). Other income (expense) Other income (expense) includes interest income, consulting income, and other income. Interest income represents the interest earned on Abacus Settlements’ certificates of deposits. Consulting income represents income earned on various origination consulting services performed. Other income comprises of income from credit card cash rewards. [[GREPCENT_TABLE]] [["","Six Months Ended June 30, 2023"],["Interest income","$","1,917"],["Interest (expense)","(11,725)"],["Other income","\u2014"]] [[/GREPCENT_TABLE]] Interest income for the six months ended June 30, 2023 was $1,917. The interest income for the period represents interest earned on Abacus Settlements certificate of deposit. Interest expense for the six months ended June 30, 2023 was $11,725, and is comprised of amortization of deferred financing fees. Provision for Income Taxes [[GREPCENT_TABLE]] [["","Six Months Ended June 30"],["Provision for income taxes","$","2,289"]] [[/GREPCENT_TABLE]] Provision for income taxes for the six months ended June 30, 2023 was $2,289. The amounts for both the periods are primarily annual report filing fees with various states. Business Segments Operating as a centrally led life insurance policy intermediary, Abacus Settlements’ Chief Executive Officer is the Chief Operating Decision Maker (CODM) who allocates resources and assesses financial performance. As a result of this management approach, Abacus Settlements is organized as a single operating segment. The CODM reviews performance and allocates resources based on the total originations, total corresponding revenue generated for the period, gross profit, and adjusted EBITDA. Key Business Metrics and Non-GAAP Financial Measures Management uses non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (i) monitor and evaluate the performance of our business operations and financial performance; (ii) facilitate internal comparisons of the historical operating performance of our business operations; (iii) review and assess the operating performance of our management team; (iv) analyze and evaluate financial and strategic planning decisions 61 Table of Contents regarding future operating investments; and (v) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments. We monitor the following key business metrics and non-GAAP financial measures that assist us in evaluating our business, measuring our performance, identifying trends and making strategic decisions. As such, we have presented the following non-GAAP measure, their most directly comparable U.S. GAAP measure, and key business metrics: [[GREPCENT_TABLE]] [["Non-GAAP Measure","Comparable U.S. GAAP Measure"],["Adjusted EBITDA","Net (Loss) Income"]] [[/GREPCENT_TABLE]] Adjusted EBITDA is net income adjusted for depreciation expense, provision for income taxes, interest income, and other items that in our judgement significantly impact the period-over-period assessment of performance and operating results. Adjusted EBITDA should not be construed as an indicator of our operating performance, liquidity, or cash flows provided by or used in operating, investing, and financing activities, as there may be significant factors or trends that it fails to address. We caution investors that non-GAAP financial information departs from traditional accounting conventions. Therefore, its use can make it difficult to compare current results with results from other reporting periods and with the results of other companies. Management believes the use of Adjusted EBITDA measures assists investors in understanding the ongoing operating performance by presenting comparable financial results between periods. We believe that after removing the impact of depreciation and amortization, amounts spent on interest and taxes and other income and charges that are variable from year to year, Adjusted EBITDA provides our investors with performance measures that reflect the impact to operations from trends in changes in revenue and operating expenses, providing a perspective not immediately apparent from net income and operating income. The adjustments we make to derive the non-GAAP measure of Adjusted EBITDA exclude items which may cause short-term fluctuations in net income and operating income and which we do not consider to be the fundamental attributes or primary drivers of our business. The following table illustrates the reconciliations from net income to adjusted EBITDA: [[GREPCENT_TABLE]] [["","Six Months Ended June 30, 2023"],["NET LOSS AND COMPREHENSIVE LOSS","$","(974,901)"],["Depreciation expense","5,597"],["Provision for income taxes","2,289"],["Interest income","(1,917)"],["Interest expense","11,725"],["Adjusted EBITDA","$","(957,207)"]] [[/GREPCENT_TABLE]] Adjusted EBITDA for the six months ended June 30, 2023, was $(957,207). We monitor the following key business metrics such as the number of policies originated year-over-year in measuring our performance. Origination revenues represent fees negotiated for each purchase and sale of a policy to an investor. The number of policy originations represents the volume of policies over which the above origination services are performed. The number of policy originations directly correlates with origination revenues allowing management to evaluate fees earned upon each transaction. There are no estimates, assumptions, or limitations specific to the number of policy originations. [[GREPCENT_TABLE]] [["","Six Months Ended June 30, 2023"],["Number of Policy Originations","253"]] [[/GREPCENT_TABLE]] 62 Table of Contents Liquidity and Capital Resources We have financed operations since our inception primarily through customer payments and net proceeds from equity financing in the form of capital contributions from our members. Our principal uses of cash and cash equivalents in recent periods have been funding our operations. As of June 30, 2023, our principal sources of liquidity were cash and cash equivalents of $808,226 and retained earnings of $509,953. During the six months ended June 30, 2023, we had a net loss of $(974,901) and net cash used by operations of $(24,292). We believe our existing cash and cash equivalents as well as proceeds from equity financing will be sufficient to fund anticipated cash requirements for the next twelve months. Our future capital requirements will depend on many factors, including our revenue growth rate, the expansion of our sales and marketing activities, the timing and extent of spending to support product development efforts. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, products and technologies. We may be required to seek additional equity or debt financing. The additional debt financing would result in debt service obligations, and any future instruments governing such debt could provide for operating and financing covenants that could restrict our operations. Cash Flows The following table summarizes our cash flows: [[GREPCENT_TABLE]] [["","Six Months Ended June 30, 2023"],["Net cash used in operating activities","$","(24,292)"],["Net cash used in investing activities","(182,528)"],["Net cash used in financing activities","(443,694)"]] [[/GREPCENT_TABLE]] Operating Activities During the six months ended June 30, 2023, our operating activities used $24,292 in operating activities. Investing Activities During the six months ended June 30, 2023, our investing activities used $182,528. Financing Activities During the six months ended June 30, 2023, our financial activities used $443,694. 63 Table of Contents Contractual Obligations and Commitments Our contractual obligations as of June 30, 2023, which are included as liabilities on our balance sheet, include operating lease obligations of $190,521 with $177,873 due in less than one year and $12,648 due within one to three years, which are comprised of the minimum commitments for our office space. Critical Accounting Policies and Estimates We have prepared our financial statements in accordance with GAAP. Our significant accounting policies are described in more detail in Note 2, Summary of Significant Accounting Policies, to our financial statements included in this annual filing statement. While our preparation of these financial statements requires us to make estimates, assumptions and judgments from time to time that may affect the reported amounts of assets, liabilities and related disclosures, as of the date of these financial statements, we have not identified any estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty which have had or are reasonably likely to have a material impact on the financial condition or results of operations. Related Party Receivables Related party receivables include fees to be reimbursed to Abacus Settlements from life expectancy reports, assisted physician services and escrow services incurred on policies that related party financing entities purchase as part of the origination agreement with Abacus Settlements. Related party receivables are stated at their net realizable value. All of the outstanding receivables of $5,710 as of June 30, 2023 were collected in July, 2023. Abacus Settlements provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. The estimated losses are based upon historical collection experience coupled with a review of the current status of all existing receivables. Account balances are charged off against the allowance for doubtful accounts after all means of collection have been exhausted and the potential for recovery is remote. There is no allowance for doubtful accounts as of June 30, 2023. Intangible Assets Intangible assets are stated at cost, less accumulated amortization, and consist of capitalized costs incurred for the development of internal use software. The costs incurred exclusively consist of fees incurred from an external consulting firm during the development stage of the project and are subject to capitalization under ASC 350-40, Internal-Use Software. The software is amortized on the straight-line basis over an estimated useful life of 3 years. Abacus Settlements reviews definite-lived intangible assets and other long-lived assets for impairment at least annually or whenever an event occurs that indicates the carrying amount of an asset may not be recoverable. No impairment was recorded for the six months ended June 30, 2023. Revenue Recognition Abacus Settlements recognizes revenue from origination activities by acting as a provider of life settlements and viatical settlements representing investors that are interested in purchasing life settlements on the secondary or tertiary market. Revenue from origination services consists of fees negotiated for each purchase and sale of a policy to an investor, which also include any agent and broker commissions received and the reimbursement of transaction costs. 64 Table of Contents Abacus Settlements’ revenue-generating arrangements are within the scope of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Abacus Settlements originates life settlements policies with third parties that include settlement brokers, life insurance agents, and direct consumers or policyholders. Abacus Settlements then provides the administration services needed to initiate the transfer of the life settlement policies to investors in exchange for an origination fee. Such transactions are entirely performed through an escrow agent. In these arrangements, the customer is the investor, and Abacus Settlements has a single performance obligation to originate a life settlement policy for the investor. The consideration transferred upon each policy is negotiated directly with the investor by Abacus Settlements and is dependent upon the policy death benefits held by each life settlement policy. The revenue is recognized when the performance obligation under the terms of the contracts with customers are satisfied. Abacus Settlements recognizes revenue from life settlement transactions when the closing has occurred and any right of rescission under applicable state law has expired (i.e., the customer obtains control over the policy and has the right to use and obtain the benefits from the policy). While rescission periods may vary by state, most states grant the owner the right to rescind the contract before the earlier of 30 calendar days after the execution date of the contract or 15 calendar days after life settlement proceeds have been sent to the owner. Purchase and sale of the policies generally occurs simultaneously, and only the fees received, including any agent and broker commissions and transaction costs reimbursed, are recorded as gross revenue. For agent and broker commissions received and transaction costs reimbursed, Abacus Settlements has determined that they are acting as the principal in the relationship as they maintain control of the services being performed as part of performance obligation prior to facilitating the transfer of the life settlement policy to the investor. While the origination fees are fixed amounts based on the face value of the policy death benefit, there is variable consideration present due to the owner’s rescission right. When variable consideration is present in a contract, Abacus Settlements estimates the amount of variable consideration to which it expects to be entitled at contract inception and again at each reporting period until the amount is known. Abacus Settlements applies the variable consideration constraint so that variable consideration is included in the transaction price only to the extent it is probable that a subsequent change in estimate will not result in a significant revenue reversal. While origination fees are variable due to the rescission periods, given the that the rescission periods are relatively short in nature, Abacus Settlements has concluded that such fees are fully constrained until the rescission period lapses and thus records revenue at a fixed amount based on the face value of the policy death benefit after the rescission period is over. New Accounting Pronouncements Refer to Note 2 Summary of Significant Accounting Policies to our consolidated financial statements.