10-Q 1 ef20015316_10q.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q



(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
or

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

For the transition period from ______ to _____
Commission File Number: 000-56115



Woodbridge Liquidation Trust
(Exact name of registrant as specified in its charter)



Delaware
 
36-7730868
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employment Identification No.)

201 N. Brand Blvd.,
Suite 200
Glendale, California
 
91203
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (310) 765-1550

201 N. Brand Blvd., Suite M, Glendale, CA 91203
(Former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

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

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

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

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

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ☒  No ☐



Woodbridge Liquidation Trust
Form 10-Q
December 31, 2023
Table of Contents

 
PART I. FINANCIAL INFORMATION
 
 
Item 1.
 
   
1
   
2
   
3
   
4
 
Item 2.
20
 
Item 3.
31
 
Item 4.
31
       
 
PART II. OTHER INFORMATION
 
 
Item 1.
32
 
Item 1A.
39
 
Item 2.
39
 
Item 3.
39
 
Item 4.
39
 
Item 5.
39
 
Item 6.
40

PART I.
FINANCIAL INFORMATION
Item 1.
Financial Statements

Woodbridge Liquidation Trust and Subsidiaries
Consolidated Statements of Net Assets in Liquidation
As of December 31, 2023 and June 30, 2023
($ In Thousands)

 
 
12/31/2023
(Unaudited)
   
6/30/2023
 
             
Assets
           
Cash and cash equivalents
 
$
56,024
    $
25,704
 
Restricted cash (Note 3)
   
4,194
      4,473
 
Other assets (Note 4)
   
2,470
     
3,415
 
                 
Total assets
 
$
62,688
   
$
33,592
 
                 
Liabilities
               
Accounts payable and accrued liabilities
 
$
34
   
$
37
 
Distributions payable
   
894
     
1,283
 
Accrued liquidation costs (Note 5)
   
21,941
     
25,499
 
                 
Total liabilities
  $ 22,869     $ 26,819  
                 
Commitments and Contingencies (Note 12)
           
                 
Net Assets in Liquidation
               
Restricted for Qualifying Victims (Note 6)
 
$
3,541
   
$
3,491
 
All Interestholders
   
36,278
     
3,282
 
                 
Total net assets in liquidation
 
$
39,819
   
$
6,773
 

See accompanying notes to unaudited consolidated financial statements.

PART I.
FINANCIAL INFORMATION (CONTINUED)
Item 1.
Financial Statements (Continued)

Woodbridge Liquidation Trust and Subsidiaries
Consolidated Statements of Changes in Net Assets in Liquidation
For the Three Months Ended December 31, 2023 and 2022
(Unaudited, $ in Thousands)

   
Three Months Ended December 31, 2023
   
Three Months Ended December 31, 2022
 
   
Restricted
For Qualifying
Victims
   
All
Interestholders
   
Total
   
Restricted
For Qualifying
Victims
   
All
Interestholders
   
Total
 
                                     
Net Assets in Liquidation as of beginning of period
 
$
3,511
   
$
35,863
   
$
39,374
   
$
3,483
    $ 34,433     $ 37,916  
                                                 
Change in assets and liabilities (Note 7):
                                               
Restricted for Qualifying Victims -
                                               
Change in carrying value of assets and liabilities, net
   
30
   
-
      30    
-
     
-
     
-
 
                                                 
All Interestholders -
                                               
Change in carrying value of assets and liabilities, net
   
-
     
82
   
82
   
-
     
1,236
     
1,236
 
Distributions (declared) reversed, net
   
-
     
333
     
333
     
-
     
-
   
-
Net change in assets and liabilities
   
-
     
415
   
415
   
-
     
1,236
   
1,236
                                                 
Net Assets in Liquidation as of end of period
 
$
3,541
   
$
36,278
   
$
39,819
   
$
3,483
   
$
35,669
   
$
39,152
 

See accompanying notes to unaudited consolidated financial statements.
 
PART I.
FINANCIAL INFORMATION (CONTINUED)
Item 1.
Financial Statements (Continued)

Woodbridge Liquidation Trust and Subsidiaries
Consolidated Statements of Changes in Net Assets in Liquidation
For the Six Months Ended December 31, 2023 and 2022
(Unaudited, $ in Thousands)

   
Six Months Ended December 31, 2023
   
Six Months Ended December 31, 2022
 
                                     
   
Restricted
For Qualifying
Victims
   
All
Interestholders
   
Total
   
Restricted
For Qualifying
Victims
   
All
Interestholders
   
Total
 
                                     
Net Assets in Liquidation as of beginning of period
  $ 3,491    
$
3,282
   
$
6,773
   
$
3,485
    $ 30,910     $ 34,395  
                                                 
Change in assets and liabilities (Note 7):
                                               
Restricted for Qualifying Victims -
                                               
Change in carrying value of assets and liabilities, net
    50      
-
     
50
      (2 )    
-
     
(2
)
                                                 
All Interestholders -
                                               
Change in carrying value of assets and liabilities, net
   
-
     
32,623
     
32,623
     
-
     
2,121
     
2,121
 
Distributions (declared) reversed, net
   
-
     
373
     
373
     
-
     
2,638
     
2,638
 
Net change in assets and liabilities
   
-
     
32,996
     
32,996
     
-
     
4,759
     
4,759
 
                                                 
Net Assets in Liquidation as of end of period
 
$
3,541
    $ 36,278    
$
39,819
   
$
3,483
    $ 35,669     $ 39,152  

See accompanying notes to unaudited consolidated financial statements.

PART I.
FINANCIAL INFORMATION (CONTINUED)
Item 1.
Financial Statements (Continued)

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)


1)
Formation and Description of Business

Formation

Woodbridge Liquidation Trust (the “Trust”) was established (i) for the purpose of collecting, administering, distributing and liquidating the Trust assets for the benefit of the Trust beneficiaries in accordance with the Liquidation Trust Agreement of the Trust and the First Amended Joint Chapter 11 Plan of Liquidation of Woodbridge Group of Companies, LLC and its Affiliated Debtors dated August 22, 2018 (as amended, modified, supplemented or restated from time to time, the “Plan”); (ii) to resolve disputed claims asserted against the Debtors; (iii) to litigate and/or settle causes of action (“Causes of Action”); and (iv) to pay certain allowed claims and statutory fees, as required by the Plan. Woodbridge Group of Companies, LLC and its affiliated debtors are individually referred to herein as a Debtor and collectively as the Debtors. The Trust was formed on February 15, 2019 (the “Plan Effective Date”) as a statutory trust under Delaware law.

On the Plan Effective Date, in accordance with the Plan, (a) the following assets automatically vested in the Trust: (i) an aggregate $5,000,000 in cash from the Debtors for the purpose of funding the Trust’s initial expenses of operation; (ii) certain claims and Causes of Action; (iii) all of the outstanding equity interests of the Wind-Down Entity (as defined below); and (iv) certain other non-real estate related assets, (b) the equity interests of Woodbridge Group of Companies, LLC and Woodbridge Mortgage Investment Fund 1, LLC (together, the “Remaining Debtors”) were cancelled and new equity interests representing all of the newly issued and outstanding equity interests in the Remaining Debtors were issued to the Trust, (c) all of the other Debtors other than the Remaining Debtors were dissolved and (d) the real estate-related assets of the Debtors were automatically vested in the Trust’s wholly-owned subsidiary, Woodbridge Wind-Down Entity LLC (the “Wind-Down Entity”) or one of the Wind-Down Entity’s 43 wholly-owned single member LLCs (the “Wind-Down Subsidiaries”) formed to own the respective real estate assets. The Trust, the Remaining Debtors, the Wind-Down Entity and the Wind-Down Subsidiaries are collectively referred to herein as the “Company.”

As further discussed in Note 8, the Trust has two classes of liquidation trust interests, Class A Liquidation Trust Interests (“Class A Interests”) and Class B Liquidation Trust Interests (“Class B Interests”). The holders of Class A Interests and Class B Interests are collectively referred to as “All Interestholders.”

On December 24, 2019, the Trust’s Registration Statement on Form 10 became effective under the Securities Exchange Act of 1934 (the “Exchange Act”). The trading symbol for the Trust’s Class A Interests is WBQNL. Bid and asked prices for the Trust’s Class A Interests are quoted on the OTC Link ATS, the SEC-registered alternative trading system. The Class A Interests are eligible for the Depository Trust Company’s Direct Registration System (“DRS”) services. The Class B Interests are not registered with the SEC.

The Trust will be terminated upon the first to occur of (i) the making of all distributions required to be made and a determination by the Liquidation Trustee that the pursuit of additional causes of action held by the Trust is not justified or (ii) February 15, 2024, subject to an extension of the term if approved by the Bankruptcy Court as necessary to facilitate or complete the recovery on, and liquidation of, the Trust assets which was approved on December 20, 2023 (see below).

During the year ended June 30, 2023, the Company concluded that its liquidation activities would not be completed by February 15, 2024, which was the original outside termination date of the Trust, for a number of reasons. First, there had been significant delays in certain legal proceedings where the Company is the plaintiff.  Second, a construction defect claim was asserted against one of the Wind-Down Subsidiaries by the buyer of one of the subsidiary’s single-family homes. The subsidiary has tendered the claim to its insurance carriers; however, the carriers have not yet accepted the claim.  At this time, the amount of the liability exposure has not been determined and the subsidiary’s exposure is unknown. The subsidiary is investigating the claim, including the extent and causes of the alleged damage and the identification of other potentially responsible persons. Based on the foregoing, the Company currently projects a revised estimated completion date for the Company’s operations of approximately March 31, 2026.

4

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
The Company filed a motion with the Bankruptcy Court to extend the termination date of the Trust from February 15, 2024 through and including March 31, 2026. On December 20, 2023, the Bankruptcy Court granted the Company’s motion to extend the termination date through and including March 31, 2026, as requested by the Trust.

Description of Business

The Company is required to liquidate its assets and distribute available cash to the Trust beneficiaries. The liquidation activities are carried out by the Trust, the Wind-Down Entity and the Wind-Down Subsidiaries.  As of December 31, 2023, the Company presently estimates that the liquidation activities will be completed by approximately March 31, 2026.

The Trust is prosecuting various Causes of Action acquired by the Trust pursuant to the Plan and is resolving claims asserted against the Debtors. As of December 31, 2023, the Company is the plaintiff in several pending lawsuits. During the three months ended December 31, 2023 and 2022, the Company recorded settlement recoveries of approximately $82,000 and $41,000, respectively, and during the six months ended December 31, 2023 and 2022, the Company recorded settlement recoveries of approximately $34,510,000 and $231,000, respectively, from the settlement of Causes of Action (see Note 11 for additional information). The Company also recorded liabilities of 5% of the settlement recoveries as amounts payable to the Liquidation Trustee. The Company has accrued an estimate of the amount of legal costs to be incurred to pursue the remaining Causes of Action, excluding contingent fees. As more fully discussed in Note 2, the Company’s consolidated financial statements do not include any estimate of future net recoveries from litigation and settlement, since the Company cannot reasonably estimate them.

The Wind-Down Entities’ operations are almost complete. As of December 31, 2023, the Wind-Down Subsidiaries owned one performing secured loan and one single-family home subject to a life estate (see Note 4 for additional information).

As more fully discussed in Note 2, the Company uses the Liquidation Basis of Accounting. The Trust currently operates as one reportable segment. Net assets in liquidation represent the remaining estimated aggregate value available to Trust beneficiaries upon liquidation, with no discount for the timing of proceeds (undiscounted). Net liquidation proceeds, other recoveries and actual liquidation costs may differ materially from the estimated amounts due to the uncertainty in the timing of completing the liquidation activities.

The Trust’s expectations about the amount of any additional distributions, if any, and when they will be paid are subject to risks and uncertainties and are based on certain estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of any additional distributions may differ materially, perhaps in adverse ways, from the Trust estimates. Furthermore, it is not possible to predict the timing of any additional distributions and any such distributions may not be made within the timing referenced, if any, in the consolidated financial statements.

No assurance can be given that total distributions will equal or exceed the estimate of net assets in liquidation presented in the consolidated statements of net assets in liquidation.

2)
Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the consolidated financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. These consolidated financial statements have been presented in accordance with Accounting Standards Codification (“ASC”) Subtopic 205-30, “Liquidation Basis of Accounting,” as amended by Accounting Standards Update (“ASU”) No. 2013-07, “Presentation of Financial Statements (Topic 205), Liquidation Basis of Accounting.” The June 30, 2023 consolidated statement of net assets in liquidation included herein was derived from the audited consolidated financial statements but does not include all disclosures or notes required by U.S. GAAP for complete financial statements.

5

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
All material intercompany accounts and transactions have been eliminated.

Use of Estimates

U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and for the period then ended.  Actual results could differ from these estimates.  Estimates and assumptions are reviewed periodically, and the carrying amounts of assets and liabilities are revised in the period that available information supports a change in the carrying amount.

Liquidation Basis of Accounting

Under the liquidation basis of accounting, all assets are recorded at their estimated net realizable value or liquidation value, which represents the estimated amount of net cash that will be received upon the disposition of the assets (on an undiscounted basis). The measurement of real estate assets was based on current contracts (if any), if contingencies have been removed, estimates and other indications of sales value, net of estimated selling costs.

Liabilities, including estimated costs associated with implementing and completing the Plan, are measured in accordance with U.S. GAAP that otherwise applies to those liabilities. The Company has recorded estimated development costs such as costs to be incurred to prepare the assets for sale, estimated reserves for contingent liabilities including potential construction defect claims and the estimated general and administrative costs to be incurred until the completion of the liquidation of the Company. When estimating development costs, the Company considered estimates of costs to complete punch list items and to address potential construction defect claims and other costs. Projected general and administrative cost estimates take into account operating costs through the completion of the liquidation of the Company, currently estimated to be approximately March 31, 2026, and an accrual for the administration of potential construction defect claims.

These estimated amounts are presented in the accompanying consolidated statements of net assets in liquidation. All changes in the estimated liquidation value of the Company’s real estate or other assets and liabilities are reflected as a change to the Company’s net assets in liquidation.

On a quarterly basis, the Company reviews the estimated net realizable values, liquidation costs and the estimated date of the completion of the liquidation of the Company and records any significant changes. If the Company has a change in its plan for the disposition of an asset, the carrying value will be adjusted to reflect this change in the period that the change is approved. The change in value may include the accrued liquidation costs related to the asset.

Other Assets

The Company recognizes recoveries from the settlement of unresolved Causes of Action when an agreement is executed, final court approval is received (if required), and collectability is reasonably assured. The amount recovered may be material to the Company’s net assets in liquidation.

6

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
An allowance for uncollectible settlement installment receivables is recorded when there is doubt about the collectability of the receivable. The Company records escrow receivables at the amount that is expected to be received when the escrow receivable is released. The Forfeited Assets (Note 6) received from the United States Department of Justice (the “DOJ”), other than cash, have been recorded at their estimated net realizable value. The Company accrues expected interest earnings when it can reasonably estimate the amount to be received.

In addition, the Company recognizes other amounts to be received based on contractual terms or when the amounts to be received are certain.

Accrued Liquidation Costs

The Company accrues estimated liquidation costs to the extent they are reasonably determinable. These costs consist of (a) estimated development costs including the costs to complete punch list items, bond refunds and estimated reserves for contingent liabilities including potential construction defect claims and other costs and (b) estimated general and administrative costs including payroll, legal and other professional fees, trustee and board fees, rent and other office related expenses, and other general and administrative costs to operate the Company and the administration of construction defect claims.

Cash Equivalents

The Company considers short-term investments that have a maturity date of 90 days or less at the time of investment to be a cash equivalent.

Restricted Cash

Restricted cash includes cash that can only be used for certain specified purposes as described in Note 3.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and restricted cash, which are held as deposits in several financial institutions. The deposit balances in any one financial institution may exceed the Federal Deposit Insurance Corporation (the “FDIC”) insurance limits. The Company mitigates this risk by using sweep accounts to reduce deposit balances at any one financial institution consistent with FDIC insurance limits.

Income Taxes

The Trust is intended to be treated as a grantor trust for income tax purposes and, accordingly, is not subject to federal or state income tax on any income earned or gain recognized by the Trust. The Trust’s beneficiaries will be treated as the owner of a pro rata portion of each asset, including cash and each liability received by and held by the Trust. Each beneficiary will be required to report on his or her federal and state income tax return his or her pro rata share of taxable income, including gains and losses recognized by the Trust. Accordingly, there is no provision for federal or state income taxes recorded in the accompanying consolidated financial statements.

The Company regularly analyzes its various federal and state filing positions and only recognizes the income tax effect in the consolidated financial statements when certain criteria regarding uncertain income tax positions have been met. The Company believes that its income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provision for uncertain income tax positions has been recorded in the consolidated financial statements.

Net Assets in Liquidation - Restricted for Qualifying Victims

The Company separately presents the portion of net assets in liquidation that are restricted for Qualifying Victims (see Note 6) from the net assets in liquidation that are available to All Interestholders.

7

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
Reclassifications

The Company has reclassified certain amounts related to its prior period consolidated financial statements to conform to its current period presentation.

3)
Restricted Cash

The Company’s restricted cash as of December 31, 2023 (unaudited), with comparative information as of June 30, 2023, is as follows ($ in thousands):

   
December 31, 2023
   
June 30, 2023
 

           
Forfeited Assets (Note 6)   $ 3,296     $ 3,190  
Distributions restricted by the Company related to unresolved claims, distributions for recently allowed claims, uncashed distribution checks, distributions withheld due to pending avoidance actions and distributions that the Trust is waiting for further beneficiary information
 

898
   

1,283
 
Total restricted cash
  $ 4,194     $ 4,473  

4)
Other Assets

The Company’s other assets as of December 31, 2023 (unaudited), with comparative information as of June 30, 2023, are as follows ($ in thousands):

   
December 31, 2023
   
June 30, 2023
 
             
Accrued interest (a)   $ 1,287     $ 1,574  
Real estate assets, net (b)     469       960  
Forfeited Assets (Note 6) (a)
   
364
      435  
Settlement receivables, net (c)
    199       254  
Escrow receivable (d)
    107
      150
 
Other
   
44
     
42
 
Total other assets
 
$
2,470
    $ 3,415  

(a)
The Company accrues interest in the amount that it estimates it will earn on its cash on deposit during the period from January 1, 2024 through March 31, 2026 and during the period from July 1, 2023 through March 31, 2026, respectively. The accrued interest relating to Forfeited Assets is included in the Forfeited Assets line.

8

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
(b)
Real estate assets at December 31, 2023 consisted of one performing loan secured by a property located in the state of Ohio and one single-family home subject to a life estate located in the state of Florida. Real estate assets at June 30, 2023 consisted of one performing loan secured by a property located in the state of Ohio, one single-family home subject to a life estate located in the state of Florida and one real property located in the state of Hawaii.

During the three and six months ended December 31, 2023, the Company sold the real property located in Hawaii for net proceeds of approximately $500,000. During the three and six months ended December 31, 2022, the Company did not sell any real estate assets.

(c)
The allowance for uncollectible settlement receivables was approximately $63,000 as of December 31, 2023 and June 30, 2023.

(d)
The escrow receivable as of December 31, 2023 and June 30, 2023 relates to one single-family home that was sold during the year ended June 30, 2023. The amount was held back at the close of escrow to cover specific repairs to the property. As repairs are completed, the costs associated with the repairs will be deducted from the escrow receivable.

5)
Accrued Liquidation Costs

The following is a summary of the items included in accrued liquidation costs as of December 31, 2023 (unaudited), with comparative information as of June 30, 2023 ($ in thousands):

   
December 31, 2023
   
June 30, 2023
 
             
Development and holding costs
  $ 4,646     $ 4,757  
                 
General and administrative costs:
               
Legal and other professional fees
   
10,510
     
13,308
 
Directors and officers insurance
    3,442       3,442  
Payroll and payroll-related
   
2,226
     
2,757
 
Board fees and expenses
   
610
     
742
 
Other
   
507
     
493
 
Total general and administrative costs
   
17,295
     
20,742
 
                 
Total accrued liquidation costs
 
$
21,941
   
$
25,499
 

6)
Forfeited Assets - Restricted for Qualifying Victims


The Trust entered into a resolution agreement with the DOJ which provided that the Trust would receive the assets forfeited (“Forfeited Assets”) by Robert and Jeri Shapiro. The agreement provided for the release of specified Forfeited Assets by the DOJ to the Trust and for the Trust to liquidate those assets and distribute the net sale proceeds to Qualifying Victims. Qualifying Victims include the vast majority of Trust beneficiaries (specifically, all former holders of allowed Class 3 and 5 claims and their permitted assigns), but do not include former holders of Class 4 claims. Distributions to Qualifying Victims are to be allocated pro-rata based on their net allowed claims without considering the (i) 5% enhancement for contributing their causes of action and (ii) 72.5% Class 5 coefficient.


9

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
In March 2021, the Trust received certain Forfeited Assets from the DOJ, including cash, wine, jewelry, handbags, clothing, shoes, art, gold and other assets. The Company recorded the total estimated net realizable value of the Forfeited Assets of approximately $3,459,000. During the three and six months ended December 31, 2023, the Company sold the handbags and some of the jewelry and art. During the three and six months ended December 31, 2022, the Company sold the automobile, and some of the jewelry, handbags, clothing, shoes and art. The Forfeited Assets included in the Company’s December 31, 2023 (unaudited) and June 30, 2023 consolidated financial statements are as follows ($ in thousands):

   
December 31, 2023
   
June 30, 2023
 
             
Restricted cash (Note 3)
 
$
3,296
   
$
3,190
 
Other assets (Note 4)
   
364
     
435
 
Accounts payable and accrued liabilities     (6 )     (6 )
Accrued liquidation costs - primarily legal and professional fees
   
(113
)
   
(128
)
Net assets in liquidation - restricted for Qualifying Victims
 
$
3,541
   
$
3,491
 

On February 7, 2023, the Trust was informed that the DOJ had received additional Forfeited Assets from a co-defendant of Robert Shapiro and that the DOJ proposes to transfer these Forfeited Assets to the Trust. On December 12, 2023, the DOJ granted the Trust’s petition for remittance of the additional Forfeited Assets. At this time, the Trust is unable to estimate the precise amount or timing of the transfer of any such Forfeited Assets and, therefore, the above table excludes such future proceeds. The proceeds from any additional Forfeited Assets would be distributed to Qualifying Victims.

7)
Net Change in Assets and Liabilities

Restricted for Qualifying Victims:

The following provides details of the change in the carrying value of assets and liabilities, net during the three months ended December 31, 2023 ($ in thousands) (unaudited):

    Cash     Remeasure-        
   
Activities
   
ment
   
Total
 
                   
Cash and cash equivalents   $ -     $ -     $ -  
Restricted cash
    24       -       24  
Other assets
    (34 )     29       (5 )
Total assets
 
$
(10
)
 
$
29
   
$
19
 
                         
Accounts payable and accrued liabilities
  $ -    
$
-
   
$
-
 
Accrued liquidation costs
    (11 )     -       (11 )
Total liabilities
 
$
(11
)
 
$
-
   
$
(11
)
                         
Change in carrying value of assets and liabilities, net
 
$
1
   
$
29
   
$
30
 

10

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
The following provides details of the change in the carrying value of assets and liabilities, net during the three months ended December 31, 2022 ($ in thousands) (unaudited):

    Cash     Remeasure-        
   
Activities
   
ment
   
Total
 
                   
Cash and cash equivalents   $ -     $ -     $ -  
Restricted cash
    131       -       131  
Other assets
    (136 )     -       (136 )
Total assets
 
$
(5
)
 
$
-
   
$
(5
)
                         
Accounts payable and accrued liabilities
  $ -    
$
-
   
$
-
 
Accrued liquidation costs
    (5 )     -       (5 )
Total liabilities
 
$
(5
)
 
$
-
   
$
(5
)
                         
Change in carrying value of assets and liabilities, net
 
$
-
   
$
-
   
$
-
 

The following provides details of the change in the carrying value of assets and liabilities, net during the six months ended December 31, 2023 ($ in thousands) (unaudited):

   
Cash
   
Remeasure-
       
   
Activities
   
ment
   
Total
 
                   
Cash and cash equivalents
 
$
-
   
$
-
   
$
-
 
Restricted cash
   
106
     
-
     
106
 
Other assets
   
(108
)
   
37
     
(71
)
Total assets
 
$
(2
)
 
$
37
   
$
35
 
                         
Accounts payable and accrued liabilities
 
$
-
   
$
-
   
$
-
 
Accrued liquidation costs
   
(15
)
   
-
     
(15
)
Total liabilities
 
$
(15
)
 
$
-
   
$
(15
)
                         
Change in carrying value of assets and liabilities, net
 
$
13
   
$
37
   
$
50
 


11

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
The following provides details of the change in the carrying value of assets and liabilities, net during the six months ended December 31, 2022 ($ in thousands) (unaudited):


   
Cash
   
Remeasure-
       
   
Activities
   
ment
   
Total
 
                   
Cash and cash equivalents
 
$
-
   
$
-
   
$
-
 
Restricted cash
   
700
     
-
     
700
 
Other assets
   
(716
)
   
-
     
(716
)
Total assets
 
$
(16
)
 
$
-
   
$
(16
)
                         
Accounts payable and accrued liabilities
 
$
-
   
$
-
   
$
-
 
Accrued liquidation costs
   
(14
)
   
-
     
(14
)
Total liabilities
 
$
(14
)
 
$
-
   
$
(14
)
                         
Change in carrying value of assets and liabilities, net
 
$
(2
)
 
$
-
   
$
(2
)

All Interestholders

The following provides details of the change in the carrying value of assets and liabilities, net during the three months ended December 31, 2023 ($ in thousands) (unaudited):

    Cash     Remeasure-        
   
Activities
   
ment
   
Total
 
                   
Cash and cash equivalents
  $ 15,279     $ -     $ 15,279  
Restricted cash
   
-
     
-
     
-
 
Other assets
   
(18,138
)
    158
      (17,980 )
Total assets
 
$
(2,859
)
 
$
158
   
$
(2,701
)
                         
Accounts payable and accrued liabilities
 
$
(1,280
)
 
$
4
   
$
(1,276
)
Accrued liquidation costs
   
(1,617
)
   
110
     
(1,507
)
Total liabilities
 
$
(2,897
)
 
$
114
   
$
(2,783
)
                         
Change in carrying value of assets and liabilities, net
 
$
38
 
$
44
   
$
82
 
 
The following provides details of the distributions (declared) reversed, net during the three months ended December 31, 2023 ($ in thousands) (unaudited):

Distributions declared
 
$
-
Distributions reversed
    333
 
Distributions (declared) reversed, net
 
$
333
 
Distributions payable decreased by approximately $349,000 during the three months ended December 31, 2023.

12

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
The following provides details of the change in the carrying value of assets and liabilities, net during the three months ended December 31, 2022 ($ in thousands) (unaudited):

    Cash     Remeasure-        

 
Activities
   
ment
   
Total
 
                   
Cash and cash equivalents  
$
(3,999
)
 
$
-
   
$
(3,999
)
Restricted cash
   
(1
)
   
-
     
(1
)
Other assets
   
(521
)
   
402
     
(119
)
Total assets
 
$
(4,521
)
 
$
402
   
$
(4,119
)
                         
Accounts payable and accrued liabilities
 
$
(8
)
 
$
118
   
$
110
 
Accrued liquidation costs
   
(4,594
)
   
(871
)
   
(5,465
)
Total liabilities
 
$
(4,602
)
 
$
(753
)
 
$
(5,355
)
                         
Change in carrying value of assets and liabilities, net
 
$
81
   
$
1,155
   
$
1,236
 
 
The following provides details of the distributions (declared) reversed, net during the three months ended December 31, 2022 ($ in thousands) (unaudited):

Distributions declared
 
$
-
Distributions reversed
    -
 
Distributions (declared) reversed, net
 
$
-
 
Distributions payable decreased by approximately $6,000 during the three months ended December 31, 2022.

The following provides details of the change in the carrying value of assets and liabilities, net during the six months ended December 31, 2023 ($ in thousands) (unaudited):

   
Cash
   
Remeasure-
       
   
Activities
   
ment
   
Total
 
                   
Cash and cash equivalents  
$
29,942
   
$
-
   
$
29,942
 
Restricted cash
   
9
     
-
     
9
 
Other assets
   
(18,536
)
    17,677       (859 )
Total assets
 
$
11,415
   
$
17,677
   

29,092
 
                         
Accounts payable and accrued liabilities
 
$
(2,492
)
 
$
2,489
   
$
(3
)
Accrued liquidation costs
   
(3,559
)
   
31
   
(3,528
)
Total liabilities
 
$
(6,051
)
 
$
2,520
   
$
(3,531
)
                         
Change in carrying value of assets and liabilities, net
 
$
17,466
   
$
15,157
   
$
32,623
 
 
13

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
The following provides details of the distributions (declared) reversed, net during the six months ended December 31, 2023 ($ in thousands) (unaudited):

Distributions declared
 
$
-
Distributions reversed
    373
 
Distributions (declared) reversed, net
 
$
373
 
Distributions payable decreased by approximately $389,000 during the six months ended December 31, 2023.

The following provides details of the change in the carrying value of assets and liabilities, net during the six months ended December 31, 2022 ($ in thousands) (unaudited):

    Cash     Remeasure-        
   
Activities
   
ment
   
Total
 
                   
Cash and cash equivalents  
$
(6,539
)
 
$
-
   
$
(6,539
)
Restricted cash
   
1
     
-
     
1
 
Other assets
   
(3,865
)
   
292
     
(3,573
)
Total assets
 
$
(10,403
)
 
$
292
   

(10,111
)
                         
Accounts payable and accrued liabilities
 
$
(33
)
 
$
127
   
$
94
 
Accrued liquidation costs
   
(11,074
)
   
(1,252
)
   
(12,326
)
Total liabilities
 
$
(11,107
)
 
$
(1,125
)
 
$
(12,232
)
                         
Change in carrying value of assets and liabilities, net
 
$
704
   
$
1,417
   
$
2,121
 

The following provides details of the distributions (declared) reversed, net during the six months ended December 31, 2022 ($ in thousands) (unaudited):

Distributions declared
 
$
(12
)
Distributions reversed
    2,650
 
Distributions (declared) reversed, net
 
$
2,638

Distributions payable decreased by approximately $67,547,000 during the six months ended December 31, 2022.

14

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
8)
Liquidation Trust Interests

The following table summarizes the Liquidation Trust Interests (rounded) for the six months ended December 31, 2023 and 2022 (unaudited):

    For the Six Months Ended December 31,  
    2023
    2022
 
Liquidation Trust Interests
 
Class A
   
Class B
   
Class A
   
Class B
 
                         
Outstanding at beginning of period
   
11,515,800
     
675,617
     
11,513,535
     
675,617
 
Allowed claims
   
84
     
-
     
1,348
     
-
 
5% enhancement for certain allowed claims
   
-
     
-
     
67
     
-
 
Settlement of claims by cancelling Liquidation
                               
Trust Interests
   
(1,222
)
   
-
     
(760
)
   
-
 
Outstanding at end of period
   
11,514,662
     
675,617
     
11,514,190
     
675,617
 

Of the 11,514,662 Class A Interests outstanding at December 31, 2023, 11,435,288 are held by Qualifying Victims (see Note 6).

At the Plan Effective Date, certain claims were disputed. As those disputed claims are resolved, additional Class A Interests and (if applicable) Class B Interests are issued on account of allowed claims or Class A Interests and (if applicable) Class B Interests are cancelled. No Class A Interests or Class B Interests are issued on account of disallowed claims.

The following table summarizes the unresolved claims against the Debtors as they relate to Liquidation Trust Interests (rounded) for the six months ended December 31, 2023 and 2022 (unaudited):

   
For the Six Months Ended December 31,
 
    2023     2022  
Liquidation Trust Interests
 
Class A
   
Class B
   
Class A
   
Class B
 
                         
Reserved for unresolved claims at beginning of period
   
13,875
     
333
     
90,793
     
333
 
Allowed claims
   
(84
)
   
-
     
(1,348
)
   
-
 
5% enhancement for certain allowed claims
   
-
     
-
     
-
     
-
 
Disallowed claims
   
(9,000
)
   
-
     
(75,570
)
   
-
 
Reserved for unresolved claims at end of period
   
4,791
     
333
     
13,875
     
333
 

Of the 4,791 Class A Interests relating to unresolved claims at December 31, 2023, 1,880 were for Qualifying Victims (see Note 6).

9)
Distributions

The Plan provides for a distribution waterfall that specifies the priority and manner of distribution of available cash to all Interestholders, excluding distributions of the net sales proceeds from Forfeited Assets (see Note 6). Distributions are to be made (a) to the Class A Interests until they have received distributions of $75.00 per Class A Interest; thereafter (b) to the Class B Interests until they have received distributions of $75.00 per Class B Interest; thereafter (c) to each Liquidation Trust Interest (whether a Class A Interest or Class B Interest) until the aggregate of all distributions made pursuant to this clause equals an amount equivalent to interest, at a per annum fixed rate of 10%, compounded annually, accrued on the aggregate principal amount of all Net Note Claims, Allowed General Unsecured Claims and Net Unit Claims, all as defined in the Plan, treating each distribution pursuant to (a) and (b) above as reductions of such principal amount; and thereafter (d) to the holders of Allowed Subordinated Claims, as defined in the Plan, until such claims are paid in full, including interest, at a per annum fixed rate of 10% or such higher rate as may be agreed to, as provided for in the Plan, compounded annually, accrued on the principal amount of each Allowed Subordinated Claim, as defined.

15

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
On August 3, 2023, at the recommendation of the Liquidation Trustee, the Trust suspended the making of additional distributions pending the results of the Company’s investigation of a construction defect claim against one of the Wind-Down Subsidiaries by the buyer of one of the subsidiary’s single-family homes. There were no distributions declared or paid during the three and six months ended December 31, 2023.

There were no distributions declared or paid during the three months ended December 31, 2022. The following distribution was paid during the six months ended December 31, 2022 relating to the tenth distribution ($ in millions, except for $ per Class A Interest):

             
Six Months Ended December 31, 2022
 
 
Date
Declared


$ per
Class A
Interest


Total
Declared


Paid


Deposit Into
Restricted
Cash
Account
 
                             
Tenth
6/15/2022
(a)
 
$
5.63
   
$
-
   
$
64.19
   
$
0.82
 

(a)  The distribution was declared on June 15, 2022 and was paid on July 15, 2022. The deposit into the restricted cash account with respect to the tenth distribution was made on July 26, 2022.


As claims are resolved, additional Class A Interests may be issued or cancelled. Therefore, the total amount of a distribution declared may change. In addition, distributions may change if Interestholders that were previously deemed to have forfeited their rights to receive Class A Interest distributions subsequently respond and if overpaid distributions are returned.



For every distribution, a deposit is made into a restricted cash account for amounts (a) payable for Class A Interests that may be issued in the future upon the allowance of unresolved claims, (b) in respect of Class A Interests issued on account of recently allowed claims, (c) for holders of Class A Interests who failed to cash distribution checks mailed in respect of prior distributions, (d) for distributions that were withheld due to pending avoidance actions and (e) for holders of Class A Interests for which the Trust is waiting for further beneficiary information.



During the three months ended December 31, 2023 and 2022, as (a) claims were resolved, (b) claims were recently allowed, (c) addresses for holders of uncashed distribution checks were obtained, (d) pending avoidance actions were resolved and (e) further beneficiary information was received, distributions of approximately $15,000 and $6,000, respectively, were paid to holders of Class A Interests from the restricted cash account and distributions payable were reduced by the same amounts. During the six months ended December 31, 2023 and 2022, distributions of approximately $15,000 and $657,000, respectively, were paid to holders of Class A Interests from the restricted cash account and distributions payable were reduced by the same amounts.



During the three months ended December 31, 2023 and 2022, as a result of claims being disallowed or Class A Interests being cancelled, approximately $333,000 and $0, respectively, and during the six months ended December 31, 2023 and 2022, approximately $373,000 and $2,638,000, respectively, were released from the restricted cash account and distributions payable were reduced by the same amounts.


As a result of distribution checks that had not been cashed within 180 days of their issuance, Interestholders were deemed to have forfeited their rights to reserved and future Class A Interest distributions. During the three and six months ended December 31, 2023 and 2022, some Interestholders that had previously been deemed to have forfeited their rights to receive Class A Interest distributions had responded and, therefore, approximately $0 and $12,000, respectively, were added to the restricted cash account and distributions payable were increased by the same amounts.

16

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
10)
Related Party Transactions

Terry Goebel, a member of the Trust Supervisory Board, is president and a principal owner of G3 Group LA (“G3”), a construction firm specializing in the development of high-end luxury residences. G3 is owned by Terry Goebel and his son Kelly Goebel. During the year ended June 30, 2023, the Company completed its contract with G3 for the development of one single-family home in Los Angeles, California. As of December 31, 2023 and June 30, 2023, there were no remaining amounts payable under this contract. During the three months ended December 31, 2023 and 2022, and the six months ended December 31, 2023 and 2022, no payments were paid by the Company to G3 related to this contract.

The Liquidation Trustee of the Trust is entitled to receive 5% of the total gross amount recovered by the Trust from the pursuit of the Causes of Action. During the three months ended December 31, 2023 and 2022, approximately $4,000 and $2,000, respectively, and during the six months ended December 31, 2023 and 2022, approximately $2,484,000 and $9,000, respectively, were accrued as amounts due to the Liquidation Trustee. As of December 31, 2023 and June 30, 2023, approximately $29,000 and $32,000, respectively, were payable to the Liquidation Trustee. These amounts are included in accounts payable and accrued liabilities in the accompanying consolidated statements of net assets in liquidation. During the three months ended December 31, 2023 and 2022, approximately $1,275,000 and $0, respectively, and during the six months ended December 31, 2023 and 2022, approximately $2,487,000 and $0, respectively, were paid to the Liquidation Trustee.

In November 2019, the Trust entered into an arrangement with Akerman LLP, a law firm based in Miami, Florida, of which the Liquidation Trustee is a partner, for the provision, at the option of the Trust on an as-needed basis, of e-discovery and related litigation support services in connection with the Trust’s prosecution of the Causes of Action. Under the arrangement, the Trust is charged for the services at scheduled rates per task which, depending on specific task, include flat rates, rates based on volume of data processed, rates based on the number of data users, the hourly rates of Akerman LLP personnel, or other rates. During the three months ended December 31, 2023 and 2022, approximately $106,000 and $115,000, respectively, and during the six months ended December 31, 2023 and 2022, approximately $212,000 and $268,000, respectively, were paid related to these services and there are no outstanding payables as of December 31, 2023 and June 30, 2023.

The executive officers of the Wind-Down Entity were entitled to a bonus based on the Wind-Down Entity achieving certain specified cumulative amounts of distributions to the Trust. Effective January 1, 2023, there were no remaining bonus arrangements for the executive officers. Accordingly, no amounts are accrued as of December 31, 2023 and June 30, 2023. During the three months ended December 31, 2023 and 2022, $0 and $1,200,000, respectively, and during the six months ended December 31, 2023 and 2022 approximately $0 and $3,273,000, respectively, were paid related to bonuses.

11)
Causes of Action

One of the Trust’s liquidation activities is to litigate and/or settle Causes of Action. The main areas of litigation have involved actions against Comerica Bank, law firms and individual attorneys and avoidance actions. The Company recognizes recoveries from settlements when an agreement is executed, final court approval is received (if required), and collectability is reasonably assured.

In December 2021, the Trust received court approval of its agreement to settle its litigation against Comerica Bank. The Trust has also pursued litigation against nine law firms and 10 individual attorneys.

During the quarter ended December 31, 2023, the Trust and the law firm of Rome McGuigan, P.C. agreed to settle the Trust’s pending litigation against that firm and related defendant for $5,000,000. The settlement is expected to result in proceeds to the Trust of approximately $3,328,000, net of attorney’s fees and other litigation expenses. The settlement has not been recorded in the Company’s December 31, 2023 consolidated financial statements because, as of December 31, 2023, it was subject to the California Superior Court granting a motion by Rome McGuigan, P.C. for a court order finding that the settlement has been made by the parties in good faith. The California Superior Court scheduled the motion to be heard on January 23, 2024. See Note 13 for additional information.

17

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.  Financial Statements (Continued)
 

Woodbridge Liquidation Trust and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended December 31, 2023 and 2022 (Unaudited)
As of December 31, 2023, the cases against seven law firms and eight individual attorneys have been settled or dismissed and litigation against the other two law firms and two individual attorneys are in various stages. See Note 13 for additional information.

The Trust has also filed numerous avoidance actions, most of which have been resolved, resulting in recoveries by or judgments in favor of the Trust. As of December 31, 2023, 34 legal actions remain pending.  Additionally, since February 15, 2019 and as of December 31, 2023, the Trust has obtained default and stipulated judgments related to certain avoidance actions. It is unknown at this time how much, if any, will ultimately be collected on the judgments. Therefore, the Company has not recognized any recoveries from these judgments.


During the three months ended December 31, 2023 and 2022, the Company recorded approximately $82,000 and $41,000, respectively, and during the six months ended December 31, 2023 and 2022, the Company recorded approximately $34,510,000 and $231,000, respectively, from the settlement of Causes of Action. The Company also recorded liabilities of 5% of the settlements as amounts payable to the Liquidation Trustee and an allowance for uncollectible settlement installment receivables. See Note 4 for information about the settlement receivables, net as of December 31, 2023 and June 30, 2023.

12)
Commitments and Contingencies

Since the Company uses the liquidation basis of accounting, the Company has accrued estimated liquidation costs to the extent they are reasonably determinable, which includes the items discussed in this footnote.

The Company has a lease for its office space that expired on January 31, 2024. This lease was not renewed upon expiration. The monthly base rent was approximately $4,000 per month. The amount of rent paid, including common area maintenance and parking charges, during the three months ended December 31, 2023 and 2022, was approximately $14,000 and $13,000, respectively, and during the six months ended December 31, 2023 and 2022, was approximately $29,000 and $25,000, respectively. On December 18, 2023, the Company entered into a new month-to-month lease for office space commencing on January 1, 2024 and can be terminated with no less than one month’s notice from the first day of any calendar month. The monthly rent is approximately $2,000. On December 20, 2023, the Company paid a deposit of approximately $2,000 related to the new office lease.

The Wind-Down Entity has part-time employment agreements with its two executive officers through December 31, 2023. The agreements renewed automatically on January 1, 2024, subject to the right of either party to terminate the agreement at any time and for any reason on thirty days’ advance written notice.

A construction defect claim was asserted against one of the Wind-Down Subsidiaries by the buyer of one of the subsidiary’s single-family homes during the year ended June 30, 2023. The subsidiary has tendered the claim to its insurance carriers; however, the carriers have not yet accepted the claim.  At this time, the amount of the liability exposure has not been determined and the subsidiary’s exposure is unkno