Company: KG
Filing Date: 2025-03-24
Form Type: S-4/A
Source: 0001104659-25-027242
Chunk: 233

Company: Kestrel Group Ltd
Filing Date: 2025-03-24
Form: S-4/A
Chunk 233
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 returns.

Income taxes related to Kestrel Service Corporation are provided for the tax effects of transactions reported in the consolidated financial statements. Deferred tax assets and liabilities, if significant, are recognized for the estimated future tax effects attributed to temporary differences between the book and tax basis of assets and liabilities and carryforward items. The measurement of current and deferred tax assets and liabilities is based on enacted law. Deferred tax assets are reduced, if necessary, by a valuation allowance for the amount of tax benefits that may not be realized. As of December 31, 2024 and 2023, Kestrel has recorded a full valuation allowance for all deferred tax assets.

The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the positions will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. As of December 31, 2024 and 2023, Kestrel has not recognized liabilities for uncertain tax positions or associated interest and penalties.

Kestrel files income tax returns in the U.S. federal jurisdiction and various state jurisdictions and is subject to examinations by tax authorities for years since inception.

#### Net Income (Loss) Per Unit
Kestrel has structured its equity interests into two classes of units: Class A and Class B.

Class A consists of 1,000 units, with an initial capital contribution totaling $10 million. These units represent the primary equity investment in Kestrel.

Class B consists of 63 units, which are subject to a 60% and 80% recoupment percent as of 2024 and 2023, respectively. Additionally, Class B units have a participation hurdle of $10 million. This hurdle must be met before Class B unit holders begin to participate in profit distributions.

Once the recoupment and participation threshold conditions are satisfied, profits will be distributed among all unit holders according to their respective interests. This structure ensures that initial investors are prioritized in profit distributions, while also providing an opportunity for Class B unit holders to participate in Kestrel’s financial success once certain financial milestones are achieved. Kestrel does not have any dilutive equity instruments.

As neither Kestrel’s undistributed or distributed earnings have exceeded the B Units’ hurdles for