XML 27 R12.htm IDEA: XBRL DOCUMENT

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2024

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of B. Riley Financial, Inc. and its wholly owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated upon consolidation.

The Company consolidates all entities that it controls through a majority voting interest. In addition, the Company performs an analysis to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity (“VIE”) including ongoing reassessments of whether it is the primary beneficiary of a VIE. See Note 2(n) for further discussion.

The condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to interim financial reporting guidelines and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the periods presented have been included. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 24, 2024. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.

(b) Use of Estimates

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as valuation of securities, allowance for credit losses, the fair value of loans receivables, intangible assets and goodwill, share based arrangements, contingent consideration, accounting for income tax valuation allowances, and sales returns and allowances. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

Interest expense from securities lending activities is included in operating expenses related to operations in the Capital Markets segment. Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $23,313 and $35,780 during the three months ended June 30, 2024 and 2023, respectively, and $58,696 and $68,204 during the six months ended June 30, 2024 and 2023, respectively.

(d) Concentration of Risk

Revenues in the Capital Markets, Financial Consulting, Wealth Management, and Communications segments are primarily generated in the United States. Revenues in the Auction and Liquidation segment and Consumer Products segment are primarily generated in the United States, Australia, Canada, and Europe.

The Company maintains cash in various federally insured banking institutions. The account balances at each institution periodically exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts in excess of FDIC insurance coverage. The Company has not experienced any losses in such accounts. The Company also has substantial cash balances from proceeds received from auctions and liquidation engagements that are distributed to parties in accordance with the collaborative arrangements.

The Company’s activities in the Auction and Liquidation segment are executed frequently with, and on behalf of, distressed customers and secured creditors. Concentrations of credit risk can be affected by changes in economic, industry, or geographical factors. The Company seeks to control its credit risk and potential risk concentration through risk management activities that limit the Company’s exposure to losses on any one specific liquidation services contract or concentration within any one specific industry. To mitigate the exposure to losses on any one specific liquidations services contract, the Company sometimes conducts operations with third parties through collaborative arrangements.

On December 18, 2023, the Company loaned $108,000 to Conn’s Inc. (“Conn’s”) as more fully described in Note 19 under the Term Loan and Security Agreement, dated as of December 18, 2023 (the “Conn’s Term Loan”), among Conn’s, W.S. Badcock LLC ("WS Badcock"), as borrowers, and an affiliate of the Company, as administrative agent, collateral agent, and lender. On February 14, 2024, the Company collected $15,000 of principal payments which reduced the loan balance to $93,000. This loan combined with two other existing loans receivable with a fair value of $30,389 and $62,808 as of June 30, 2024 and December 31, 2023, respectively, is collateralized by consumer loan receivables of customers of the furniture and electronics retailer. These loans have an aggregate fair value of $112,694 and $167,568 or 49.2% and 31.5% of the loan portfolio as of June 30, 2024 and December 31, 2023, respectively, and are concentrated in the retail industry. The fair value of these loans at June 30, 2024 has been impacted by a deterioration in Conn’s operating results in the second quarter of 2024, which culminated in the Conn's Chapter 11 bankruptcy filing on July 23, 2024 as more fully discussed in Note 2(h) below.

The Company also has a loan receivable with a principal amount of $200,506 as of June 30, 2024 and December 31, 2023. The loan receivable allows for interest to be paid-in-kind, which is capitalized to the loan receivable balance annually on the loan's anniversary date. The interest receivable on the loan was $21,053 and $8,889 as of June 30, 2024 and December 31, 2023, respectively, and is included in prepaid expenses and other assets in the condensed consolidated balance sheets. The loan receivable is secured by a first priority security interest in Freedom equity interests owned by Brian Kahn as more fully described in Note 2(h) below. The fair value of the loan receivable was $32,121 and $200,506 or 14.0% and 37.7% of the total loan portfolio as of June 30, 2024 and December 31, 2023, respectively. Continued deterioration in the collateral, including in the performance of Freedom VCM or delays in the execution of its strategies, including the possible disposition of additional businesses and further de-leveraging of its balance sheet, for the loan receivable may impact the ultimate collection of principal and interest.

At June 30, 2024, the maximum amount of loss that the Company is exposed to loss from loans receivable concentration is an amount equivalent to the fair value of these loans which totaled $144,815. The Company is also exposed to a concentration of risk related to Freedom VCM which totaled $121,622 as of June 30, 2024. The exposure includes the amounts directly related to Freedom VCM from the investment in Freedom VCM that had a fair value of $63,674 and the Freedom VCM Receivables, Inc. loan receivable of $25,827 at June 30, 2024 and additional exposure from the loan receivable in the amount of $32,121 as described above where the primary security includes Freedom VCM equity interests owned by Brian Kahn.

(e) Advertising Expenses

The Company expenses advertising costs, which consist primarily of costs for printed materials, as incurred. Advertising costs totaled $2,736 and $2,969 during the three months ended June 30, 2024 and 2023, respectively, and $5,146 and $5,906 during the six months ended June 30, 2024 and 2023. Advertising expense was included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

(f) Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

(g) Restricted Cash

As of June 30, 2024 and December 31, 2023, restricted cash included $1,728 and $1,875, respectively, primarily consisting of cash collateral for leases.

Cash, cash equivalents and restricted cash consist of the following:


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	236,895	$	231,964
Restricted cash	1,728		1,875
Total cash, cash equivalents and restricted cash	$	238,623	$	233,839

(h) Loans Receivable

Under Accounting Standards Codification (“ASC”) 825 - Financial Instruments, the Company elected the fair value option for all outstanding loans receivable. Management evaluates the performance of the loan portfolio on a fair value basis. Under the fair value option, loans receivables are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the condensed consolidated statements of operations.

Loans receivable, at fair value totaled $229,199 and $532,419 as of June 30, 2024 and December 31, 2023, respectively. The loans have various maturities through August 2033. As of June 30, 2024 and December 31, 2023, the historical cost of loans receivable accounted for under the fair value option was $447,013 and $555,882, respectively, which included principal balances of $451,138 and $563,637 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $4,125 and $7,755, respectively. The principal balance of loans receivable exceeded the fair value of loans by $217,814 and $23,463 as of June 30, 2024 and December 31, 2023, respectively. At the time of origination, the Company's loans are collateralized by the assets of borrowers and other pledged collateral and may have guarantees to provide for protection of the payments due on loans receivable. During the three months ended June 30, 2024 and 2023, the Company recorded net unrealized losses of $175,582 and net unrealized gains of $9,207, respectively, and net unrealized losses of $194,352 and net unrealized gains of $52,666 during the six months ended June 30, 2024 and 2023, respectively, on loans receivable, at fair value, which is included in fair value adjustments on loans on the condensed consolidated statements of operations. Loans receivable, at fair value on non-accrual and 90 days or greater past due was approximately zero as of June 30, 2024. Loans receivable, at fair value on non-accrual and 90 days or greater past due was $41,236, which represents approximately 7.7% of total loans receivable, at fair value as of December 31, 2023. The principal balance of loans receivable on non-accrual and 90 days or greater past due was $43,326 as of December 31, 2023. Interest income for loans on non-accrual and/or 90 days or greater past due is recognized separately from changes in fair value adjustments on loans on the condensed consolidated statements of operations. The amount of gains or (losses) included in earnings attributable to changes in instrument – specific credit risk was $(176,078) and $8,621 during the three months ended June 30, 2024 and 2023, respectively, and $(187,417) and $46,109 during the six months ended June 30, 2024 and 2023, respectively. The gains or losses attributable to changes in instrument – specific risk was determined by management based on an estimate of the fair value change during the period specific to each loan receivable.

The Company may periodically provide limited guarantees to third parties for loans that are made to investment banking and lending clients. As of June 30, 2024, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc. (“B&W”) as further described in Note 16(b). In accordance with the credit loss standard, the Company evaluates the need to record an allowance for credit losses for these loan guarantees since they have off-balance sheet credit exposures. As of June 30, 2024, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure.

On August 21, 2023, one of the Company’s subsidiaries and Vintage Capital Management, LLC (“VCM”), an affiliate of Brian Kahn, amended and restated a promissory note (the “Amended and Restated Note”), pursuant to which VCM owes the Company's subsidiary the aggregate principal amount of $200,506 and bears interest at the rate of 12% per annum payable-in-kind with a maturity date of December 31, 2027. The Amended and Restated Note requires repayments prior to the maturity date from certain proceeds received by VCM, Mr. Kahn or his affiliates from, among other proceeds, distributions or dividends paid by Freedom VCM in amount equal to the greater of (i) 80% of the net after-tax proceeds, and (ii) 50% of gross proceeds. The obligations under the Amended and Restated Note are primarily secured by a first priority perfected security interest in Freedom VCM equity interests owned by Mr. Kahn, the CEO and a board member of Freedom VCM as of December 31, 2023, and his spouse with a value (based on the transaction price in the FRG take-private transaction) of $227,296 as of August 21, 2023. On January 22, 2024, Mr. Kahn resigned as CEO and a member of the board of directors of Freedom VCM. The fair value of the Freedom VCM equity interest owned by Mr. Kahn and his spouse was $51,478 and $232,065 as of June 30, 2024 and December 31, 2023, respectively. Amounts owing under the Amended and Restated Note may be repaid at any time without penalty. On a quarterly basis, the Company will continue to obtain third party appraisals to evaluate the value of the collateral of the loan since the repayment of the loan and accrued interest will be paid primarily from the cash distributions from Freedom VCM or foreclosure on the underlying collateral. In light of Mr. Kahn’s alleged involvement with the alleged misconduct concerning Prophecy Asset Management LP, the Company can provide no assurances that it will not be subject to claims asserting an interest in the Freedom VCM equity interests owned by Mr. Kahn, including those that collateralize the Amended and Restated Note. If a claim were successful, it would diminish the value of the collateral which could impact the carrying value of the loan. If such claims are made, however, the Company believes it has valid defenses from any such claim and any such claim would be without merit. Other factors leading to continued deterioration in the collateral, including in the performance of Freedom VCM or delays in the execution of its strategies, including the possible disposition of additional businesses and further de-leveraging of its balance sheet, for the loan receivable may further impact the ultimate collection of principal and interest. To the extent the loan balance and accrued interest exceed the underlying collateral value of the loan, as was the case as of June 30, 2024, the fair value of the loan has been and will be impacted and has resulted and will result in an unrealized loss being recorded in the condensed consolidated statements of operations. Subsequent to June 30, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024 which impacts the collateral for this loan receivable. The fair value of the underlying collateral for this loan decreased to a fair value of $2,006 at December 20, 2024. The $2,006 is comprised of other public securities.

Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans on the consolidated statements of operations. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Unearned income, discounts, and premiums are amortized to interest income using a level yield methodology.

As of June 30, 2024, loans receivable had an aggregate remaining contractual principal balance of $451,138, an aggregate fair value of $229,199, and the contractual principal balance exceeded the fair value by $221,939. As of December 31, 2023, loans receivable had an aggregate remaining contractual principal balance of $563,637, an aggregate fair value of $532,419, and the contractual principal balance exceeded the fair value by $31,218.

The Company’s has a loan receivable with a principal amount of $93,000 outstanding from Conn’s and two loans with a fair value of $30,389 outstanding which are discussed below, (the Badcock Receivables I and Freedom VCM Receivables loans receivable, each as defined below), which are serviced by Conn’s. These loans were all current in the payment of principal and interest as of June 30, 2024. Of the $30,389 balance at fair value at June 30, 2024, the Company has continued to receive payments of $27,414 subsequent to June 30, 2024 and through December 30, 2024 on the Badcock Receivables I and Freedom VCM Receivables loans receivable. The Company also collected the June 30, 2024 interest payment that was due on the Conn’s $93,000 loan receivable in July 2024. Future collection of the $93,000 Conn’s loan receivable is expected to be paid from the sale of assets and servicing of a pool consumer receivables that serve as collateral for the loan where we have a second lien on these assets. These proceeds are expected to be collected over the next year and will be impacted by Conn’s voluntary petition filing on July 23, 2024 for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The commencement of the Chapter 11 Cases constitutes an event of default that accelerates the repayment obligations under the $93,000 loan receivable to Conn’s. Any efforts to enforce repayment obligations under the Conn’s $93,000 loan receivable are automatically stayed as a result of the Chapter 11 Cases and the Company’s rights of enforcement in respect of this loan are subject to the applicable provisions of the Bankruptcy Code.

Badcock Loan Receivable

On December 20, 2021, the Company entered into a Master Receivables Purchase Agreement (“Badcock Receivables I”) with W.S. Badcock Corporation, a Florida corporation (“WSBC”), which at the time was an indirect wholly owned subsidiary of Franchise Group, Inc., a Delaware corporation (“FRG”), which became a subsidiary of Freedom VCM as a result of the transaction on August 21, 2023. The Company paid $400,000 in cash to WSBC for the purchase of certain consumer credit receivables which are small consumer loans issued by WSBC to consumers for the purchase of merchandise sold at WSBC's stores. On September 23, 2022, the Company's then majority-owned subsidiary, B Riley Receivables II, LLC (“BRRII”), a Delaware limited liability company, entered into a Master Receivables Purchase Agreement (“Badcock Receivables II”) with WSBC. This purchase of $168,363 consumer credit receivables of WSBC was partially financed by a $148,200 term loan discussed in Note 10. During the three months ended March 31, 2023, BRRII entered into Amendment No. 2 and No. 3 to Badcock Receivables II with WSBC for a total of $145,278 in additional consumer credit receivables. The accounting for these transactions resulted in the Company recording a loan receivable from WSBC with the recognition of interest income at an imputed rate based on the cash flows expected to be received from the collection of the consumer receivables that serve as collateral for the loan. The collateral for these loans receivables are the individual consumer credit receivables that were originally issued to WSBC consumers for merchandise sold in WSBC stores and the total amount of collections on these loan receivables is dependent upon their credit performance. These loan receivables are measured at fair value.

On August 21, 2023, all of the equity interests of BRRII were sold to Freedom VCM Receivables, Inc. (“Freedom VCM Receivables”), a subsidiary of Freedom VCM, which resulted in a loss of $78. In connection with the sale, Freedom VCM Receivables assumed the obligations with respect to the Pathlight Credit Agreement as more fully discussed in Note 10 and Freedom VCM Receivables entered into the Freedom Receivables Note (as defined below) in the amount of $58,872, with a stated interest rate of 19.74% and a maturity date of August 21, 2033 with payments of principal and interest on the note limited solely to the performance of certain consumer receivables held by BRRII. This loan receivable is measured at fair value.

In connection with these loans, the Company entered into a Servicing Agreement with WSBC pursuant to which WSBC provides to the Company certain customary servicing and account management services in respect of the receivables purchased by the Company under the Receivables Purchase Agreement. In addition, subject to certain terms and conditions, FRG has agreed to guarantee the performance by WSBC of its obligations under the Master Receivables Purchase Agreements and the Servicing Agreement.

As of June 30, 2024 and December 31, 2023, the Badcock Receivables I loan receivable in the Company's condensed consolidated balance sheets included loans measured at fair value in the amount of $4,562 and $20,624, respectively. As of June 30, 2024 and December 31, 2023, the Freedom Receivables Note was included in the Company's condensed consolidated balance sheets in loans receivable, at fair value in the amount of $25,827 and $42,183, respectively.

Nogin Loan and Loan Commitment

On November 16, 2023, the Company entered into a Chapter 11 Restructuring Support Agreement (as amended, the “RSA”) with Nogin Inc. and certain of its subsidiaries (collectively, “Nogin”), and certain holders of Nogin’s convertible notes (the “Consenting Noteholders”). Pursuant to the RSA, the Company funded $17,530 of debtor-in-possession (“DIP”) financing as of December 31, 2023. The Company funded an additional $15,470 during the three months ended March 31, 2024, which increased the DIP financing to $33,000 at March 31, 2024. This loan receivable had a fair value of $17,980 as of December 31, 2023. An additional $3,000 of DIP financing was funded in the second quarter of 2024, for total DIP financing (inclusive of $1,700 in fees payable in kind) of $37,700, which was extinguished upon the Company's acquisition of Nogin on May 3, 2024. On May 3, 2024, the Company funded an additional $18,670 in cash to complete the acquisition of Nogin of which $15,500 was a payment to the Consenting Noteholders. See Note 3 for more details on the Nogin acquisition.

(i) Securities and Other Investments Owned and Securities Sold Not Yet Purchased

Securities owned consist of equity securities including, common and preferred stocks, warrants, and options; corporate bonds; other fixed income securities including, government and agency bonds; loans receivable valued at fair value; and investments in partnerships. Securities sold, but not yet purchased represent obligations of the Company to deliver the specified security at the contracted price and thereby create a liability to purchase the security in the market at prevailing prices. Changes in the value of these securities are reflected currently in the results of operations.

As of June 30, 2024 and December 31, 2023, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities:


	June 30, 2024		December 31, 2023
Securities and other investments owned:
Equity securities	$	606,225	$	994,634
Corporate bonds	36,915		59,287
Other fixed income securities	5,321		2,989
Partnership interests and other	15,609		35,196
	$	664,070	$	1,092,106

Securities sold not yet purchased:
Equity securities	$	203	$	1,037
Corporate bonds	320		5,971
Other fixed income securities	4,242		1,593
	$	4,765	$	8,601

The Company owns certain equity securities that are accounted for under the fair value option where the Company would otherwise use the equity method of accounting. Investments become subject to the equity method of accounting when the Company possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the Company possesses more than 20% of the voting interests of the investee. However, the Company may have the ability to exercise significant influence over the investee when the Company owns less than 20% of the voting interests of the investee depending on the facts and circumstances that demonstrate that the ability to exercise influence is present, such as when the Company has representation on the board of directors of such investee. In accordance with ASC - 321 Equity Securities unrealized gains (losses) on equity securities held at June 30, 2024, includes unrealized gains (losses) of $(153,027) and $4,318 for the three months ended June 30, 2024 and 2023, respectively, and $(185,519) and $(13,530) for the six months ended June 30, 2024 and 2023, respectively, reported in other income (loss) - realized and unrealized gains (losses) on investments in the condensed consolidated statement of operations.

The Brand Investments

The following tables contain summarized financial information with respect to five of the Company's investments in limited liability companies that primarily license brand names and trademarks through licensing agreements. The Company has an ownership interest in each investee between 10% and 50%. For the 10% ownership interest, the Company is presumed to have the ability to exercise significant influence since the investment is more than minor and the limited liability company is required to maintain specific ownership accounts for each member. The Company has significant influence in the other four investments due to the ownership interest being greater than 20%. The financial information of these five investments has been aggregated and included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of March 31, 2024 and September 30, 2023 correspond to amounts as of June 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and six months ended March 31, 2024 and 2023 correspond to amounts during the three and six months ended June 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:


	March 31,		September 30,
	2024		2023
Current assets	$	51,858	$	51,588
Noncurrent assets	$	264,167	$	269,809
Current liabilities	$	9,080	$	8,594
Noncurrent liabilities	$	780	$	760
Equity attributable to investee	$	303,396	$	309,167
Noncontrolling interest	$	2,769	$	2,876


	For the three months ended March 31,				For the six months ended March 31,
	2024(1)		2023		2024(1)		2023
Revenues	$	40,478	$	16,457	$	74,444	$	44,428
Cost of revenues	$	16,533	$	13,960	$	35,602	$	30,347
Net income attributable to investees	$	24,223	$	10,878	$	39,375	$	22,686

(1) - Financial information for 2024 includes two additional investments as a result of the acquisition of a majority ownership interest in bebe stores, inc (“bebe”) in 2023 and an other investment made in 2023.

As of June 30, 2024 and December 31, 2023, the fair value of these five investments totaled $287,987 and $283,057, respectively, and are included in securities and other investments owned, at fair value in the condensed consolidated balance sheets.

As described in Note 21 – Subsequent Events, on October 25, 2024 the Company entered into a series of transactions which transferred and contributed three of the five Brand Investments (HRLY Brand Management LLC, Justice Brand Management LLC, and S&S Brand Management LLC) and the majority 80% ownership of ownership of BR Brand Holdings LLC into a newly formed subsidiary for the purpose of being a securitization financing vehicle. The Company's majority owned subsidiary bebe also sold the remaining two Brand Investments on October 25, 2024 as fully described in Note 21- Subsequent Events.

Freedom VCM Holdings, LLC Equity Interest and Take-Private Transaction

On August 21, 2023, the Company acquired an equity interest in Freedom VCM for $216,500 in cash in connection with the closing of the acquisition of FRG, by a buyer group that included members of senior management of FRG, led by Mr. Kahn, FRG’s then Chief Executive Officer (the “FRG take-private transaction”). In connection with the closing of the FRG take-private transaction, the Company terminated an investment advisory agreement (the “Advisory Agreement”) with Mr. Kahn. Pursuant to the Advisory Agreement, Mr. Kahn, as financial advisor, had the sole power to vote or dispose of $64,644 of shares of FRG common stock (based on the value of FRG shares in the FRG take-private transaction as of the closing date of such transaction) held of record by B. Riley Securities, Inc. (“BRS”). Upon the termination of the Advisory Agreement, (i) Mr. Kahn’s right to vote or dispose of such FRG shares terminated, (ii) such FRG shares owned by BRS were rolled over into additional equity interests in Freedom VCM in connection with the FRG take-private transaction, and (iii) Mr. Kahn owed a total of $20,911 to the Company under the Advisory Agreement which amount was added to, and included in, the Amended and Restated Note.

Following these transactions, the Company owns an equity interest of $281,144 (based on the transaction price in the FRG take-private transaction) or 31% of the outstanding equity interests in Freedom VCM. Also, in connection with the FRG take-private transaction, on August 21, 2023 all of the equity interests of BRRII, a majority-owned subsidiary of the Company, were sold to a Freedom VCM affiliate, which resulted in a loss of $78. In connection with the sale, the Freedom VCM affiliate assumed the obligations with respect to the Pathlight Credit Agreement, as further discussed in Note 10, and the Company entered into a non-recourse promissory note with another Freedom VCM affiliate in the amount of $58,872, with a stated interest rate of 19.74% and a maturity date of August 21, 2033 (the “Freedom Receivables Note”) with payments of principal and interest on the note limited solely to performance of certain receivables held by BRRII.

On December 18, 2023, a wholly owned subsidiary of Freedom VCM entered into a transaction that resulted in the sale of all of the operations of WS Badcock to Conn’s in exchange for the issuance by Conn’s of 1,000,000 shares of Conn’s preferred stock (the “Preferred Shares”). The Preferred Shares issued by Conn’s to Freedom VCM, subject to the terms set forth in the Certificate of Designation, are nonvoting and are convertible into an aggregate of approximately 24,540,295 shares of non-voting common stock of Conn’s, which represented 49.99% of the issued and outstanding shares of common stock of Conn’s which resulted in consideration received by Freedom VCM of approximately $69,900. As a result of the convertible preferred stock having a conversion feature into 49.99% of the common stock of Conn’s, Freedom VCM is considered to have significant influence over Conn’s in accordance with ASC 323 – Investments – Equity Method and Joint Ventures. On July 23, 2024, Conn’s filed a Chapter 11 Case under the Bankruptcy Code in the Bankruptcy Court as more fully discussed in Note 2(h). The $69,900 of consideration that Freedom VCM received from the WS Badcock is still held by Freedom VCM at June 30, 2024 and is expected to be impaired as a result of Conn’s bankruptcy filing.

The Company has elected to account for this 31% equity investment under the fair value option. The following tables contain summarized financial information with respect to Freedom VCM, included below for purposes of the disclosure a

quarter in arrears (balance sheet amounts as of March 31, 2024 and September 30, 2023 correspond to amounts as of June 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and six months ended March 31, 2024 correspond to amounts during the three and six months ended June 30, 2024 of the Company), which is the period in which the most recent financial information is available:


	March 31, 2024		September 30, 2023
Current assets	$	940,220	$	1,219,682
Noncurrent assets	$	2,995,502	$	3,142,660
Current liabilities	$	615,859	$	749,894
Noncurrent liabilities	$	2,609,036	$	2,695,445
Equity attributable to investee	$	710,827	$	917,003


	For the three months ended March 31,		For the six months ended March 31,
	2024		2024
Revenues	$	809,717	$	1,615,946
Cost of revenues	$	511,723	$	1,011,402
Loss from continuing operations	$	—	$	(1,175)
Net loss attributable to investees	$	(19,256)	$	(188,839)

As of June 30, 2024 and December 31, 2023, the fair value of the investment in Freedom VCM totaled $63,674 and $287,043, respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets. The change in fair value recorded in the income statement was an unrealized loss of $180,964 and $223,369 for the three and six months ended June 30, 2024, respectively. Subsequent to June 30, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024 which impacts the future fair value of the investment in Freedom VCM. The fair value of the investment in Freedom VCM was reduced to zero at September 30, 2024 and a fair value adjustment of $(63,674) was recorded in the quarter ended September 30, 2024.

Babcock and Wilcox Enterprises, Inc, Equity Investment

The Company owns a 30% voting interest in B&W whereby the Company has elected to account for this investment under the fair value option. The following tables contain summarized financial information with respect to B&W included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of March 31, 2024 and September 30, 2023 correspond to amounts as of June 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and six months ended March 31, 2024 and 2023 correspond to amounts during the three and six months ended June 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:


	March 31, 2024		September 30, 2023
Current assets	$	482,223	$	542,300
Noncurrent assets	$	313,300	$	294,979
Current liabilities	$	332,926	$	393,539
Noncurrent liabilities	$	685,064	$	585,430
Equity attributable to investee	$	(223,011)	$	(142,316)
Noncontrolling interest	$	544	$	626


	For the three months ended March 31,				For the six months ended March 31,
	2024		2023		2024		2023
Revenues	$	207,556	$	241,258	$	434,723	$	477,682
Cost of revenues	$	159,075	$	189,329	$	330,627	$	372,089
Loss from continuing operations	$	(15,799)	$	(12,686)	$	(70,065)	$	(14,975)
Net loss	$	(16,791)	$	(12,475)	$	(79,515)	$	(6,815)
Net loss attributable to investees	$	(16,833)	$	(12,496)	$	(83,287)	$	(10,475)

As of June 30, 2024 and December 31, 2023, the fair value of the investment in B&W totaled $39,797 and $40,072, respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets.

Other Public Company Equity Investments

As of June 30, 2024, the Company had a voting interest of 13% in Synchronoss Technologies, Inc. The Company has significant influence due to the equity ownership interest and board representation for this company. The Company has elected to account for this equity investment under the fair value option. The following tables contain summarized financial information with respect to Synchronoss Technologies, Inc., included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of March 31, 2024 and September 30, 2023 correspond to amounts as of June 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and six months ended March 31, 2024 and 2023 correspond to amounts during the three and six months ended June 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:


	Synchronoss Technologies, Inc.
	March 31, 2024		September 30, 2023
Current assets	$	73,896	$	85,903
Noncurrent assets	$	224,607	$	275,304
Current liabilities	$	39,899	$	74,528
Noncurrent liabilities	$	163,344	$	166,673
Equity attributable to investee	$	95,260	$	120,006


	Synchronoss Technologies, Inc.
	For the three months ended March 31,				For the six months ended March 31,
	2024		2023		2024		2023
Revenues	$	42,965	$	41,985	$	84,367	$	83,237
Cost of revenues	$	10,223	$	10,960	$	20,515	$	22,959
Net income (loss) attributable to investees	$	2,341	$	(13,391)	$	(32,660)	$	(29,318)

As of June 30, 2024 and December 31, 2023, the fair value of the equity investment in Synchronoss Technologies, Inc. was $13,149 and $8,780, respectively. These amounts are included in securities and other investments owned in the condensed consolidated balance sheets.

Other Equity Investments

As of June 30, 2024, the Company had other equity investments where the Company is considered to have the ability to exercise influence since the Company has representation on the board of directors or the Company is presumed to have the ability to exercise significant influence since the investment is more than minor and the limited liability company is required to maintain specific ownership accounts for each member. The Company has elected to account for these equity investments under the fair value option. These equity investments are comprised of equity investments in five private companies at June 30, 2024 and six private companies at December 31, 2023. The following table contains summarized financial information for these companies, included below for purposes of the disclosure a quarter in arrears (balance sheet

amounts as of March 31, 2024 and September 30, 2023 correspond to amounts as of June 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and six months ended March 31, 2024 and 2023 correspond to amounts during the three and six months ended June 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:


	March 31, 2024		September 30, 2023
Current assets	$	257,355	$	281,610
Noncurrent assets	$	502,904	$	627,858
Current liabilities	$	214,014	$	150,114
Noncurrent liabilities	$	129,047	$	277,638
Preferred stock	$	—	$	4,500
Equity attributable to investee	$	417,198	$	477,216


	For the three months ended March 31,				For the six months ended March 31,
	2024		2023		2024		2023
Revenues	$	109,929	$	37,512	$	255,903	$	75,435
Cost of revenues	$	79,033	$	19,689	$	206,381	$	52,751
Net (loss) income attributable to investees	$	(5,469)	$	10,728	$	(15,974)	$	(2,886)

As of June 30, 2024 and December 31, 2023, the fair value of these five investments totaled $38,416 and six investments totaled $87,713, respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets.

(j) Fair Value Measurements

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) for identical instruments that are highly liquid, observable, and actively traded in over-the-counter markets. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable and can be corroborated by market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company’s securities and other investments owned and securities sold and not yet purchased are comprised of common and preferred stocks and warrants, corporate bonds, and investments in partnerships. Investments in common stocks that are based on quoted prices in active markets are included in Level 1 of the fair value hierarchy. The Company also holds loans receivable valued at fair value, nonpublic common and preferred stocks and warrants for which there is little or no public market and fair value is determined by management on a consistent basis. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks. These investments are included in Level 3 of the fair value hierarchy. Investments in partnership interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending funds. The Company also invests in priority investment funds and the underlying securities held by these funds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company.

The Company’s partnership and investment fund interests are valued based on the Company’s proportionate share of the net assets of the partnerships and funds; the value for these investments is derived from the most recent statements received from the general partner or fund administrator. These partnership and investment fund interests are valued at net asset value (“NAV”) and are excluded from the fair value hierarchy in the table below in accordance with ASC 820 - Fair Value Measurements. As of June 30, 2024 and December 31, 2023, partnership and investment fund interests valued at NAV of $15,609 and $35,196, respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.

Securities and other investments owned also include investments in nonpublic entities that do not have a readily determinable fair value and do not report NAV per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold. The following table presents, as of June 30, 2024 and December 31, 2023, the carrying value of equity securities measured under the measurement alternative investments and the related adjustments recorded during the periods presented for those securities with observable price changes:


	June 30, 2024		December 31, 2023
Securities and other investments owned, carrying value	$	65,735	$	64,455
Upward carrying value changes	1,289		100
Downward carrying value changes/impairment	(2)		(21,395)

The Company measures certain assets at fair value on a nonrecurring basis. These assets include equity method investments when they are deemed to be other-than-temporarily impaired, investments adjusted to their fair value by applying the measurement alternative, assets acquired and liabilities assumed in an acquisition or in a nonmonetary exchange, and property, plant and equipment and intangible assets that are written down to fair value when they are held for sale or determined to be impaired. The Company did not have any material assets or liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to initial recognition as of June 30, 2024 and December 31, 2023.

The following tables present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of June 30, 2024 and December 31, 2023.


	Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2024 Using
	Fair value as of June 30, 2024		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:

Securities and other investments owned:
Equity securities	$	540,490	$	137,521	$	—	$	402,969
Corporate bonds	36,915		31,287		5,628		—
Other fixed income securities	5,321		—		5,321		—
Total securities and other investments owned	582,726		168,808		10,949		402,969
Loans receivable, at fair value	229,199		—		—		229,199
Total assets measured at fair value	$	811,925	$	168,808	$	10,949	$	632,168

Liabilities:
Securities sold not yet purchased:
Equity securities	$	203	$	203	$	—	$	—
Corporate bonds	320		—		320		—
Other fixed income securities	4,242		—		4,242		—
Total securities sold not yet purchased	4,765		203		4,562		—
Mandatorily redeemable noncontrolling interests issued after November 5, 2003	5,304		—		—		5,304

Contingent consideration	29,303		—		—		29,303
Total liabilities measured at fair value	$	39,372	$	203	$	4,562	$	34,607


	Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2023 Using
	Fair value at December 31, 2023		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:

Securities and other investments owned:
Equity securities	$	930,179	$	194,541	$	—	$	735,638
Corporate bonds	59,287		56,045		3,242		—
Other fixed income securities	2,989		—		2,989		—
Total securities and other investments owned	992,455		250,586		6,231		735,638
Loans receivable, at fair value	532,419		—		—		532,419
Total assets measured at fair value	$	1,524,874	$	250,586	$	6,231	$	1,268,057

Liabilities:
Securities sold not yet purchased:
Equity securities	$	1,037	$	1,037	$	—	$	—
Corporate bonds	5,971		—		5,971		—
Other fixed income securities	1,593		—		1,593		—
Total securities sold not yet purchased	8,601		1,037		7,564		—
Mandatorily redeemable noncontrolling interests issued after November 5, 2003	5,835		—		—		5,835

Contingent consideration	27,985		—		—		27,985
Total liabilities measured at fair value	$	42,421	$	1,037	$	7,564	$	33,820

As of June 30, 2024 and December 31, 2023, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $632,168 and $1,268,057, respectively, or 19.5% and 20.9%, respectively, of the Company’s total assets. In determining the fair value for these Level 3 financial assets, the Company analyzes various financial, performance and market factors to estimate the value, including where applicable, over-the-counter market trading activity.

The following table summarizes the significant unobservable inputs in the fair value measurement of Level 3 financial assets and liabilities by category of investment and valuation technique as of June 30, 2024 and December 31, 2023:


	Fair value at June 30, 2024		Valuation Technique	Unobservable Input	Range	Weighted Average(1)
Assets:
Equity securities	$	393,630	Market approach	Multiple of EBITDA	4.8x - 9.0x	8.2x
				Multiple of Sales	0.7x - 3.5x	1.0x
				Market price of related security	$0.02 - $11.35	$11.20
	9,339		Option pricing model	Annualized volatility	30.0% - 130.0%	83.0%
Loans receivable at fair value	189,182		Discounted cash flow	Market interest rate	13.9% - 61.0%	26.4%
	40,017		Market approach	Market price of related security	$16.57	$16.57
				Multiple of Sales	0.7x	0.7x
Total level 3 assets measured at fair value	$	632,168

Liabilities:
Mandatorily redeemable noncontrolling interests issued after November 5, 2003	$	5,304	Market approach	Operating income multiple	6.0x	6.0x
Contingent consideration	29,303		Discounted cash flow	Asset volatility	69.0%	69.0%
				Market interest rate	8.5%	8.5%
				Revenue volatility	5.0% - 6.3%	5.6%
Total level 3 liabilities measured at fair value	$	34,607

(1) - Unobservable inputs were weighted by the relative fair value of the financial instruments.


	Fair value at December 31, 2023		Valuation Technique	Unobservable Input	Range	Weighted Average(1)
Assets:
Equity securities	$	662,158	Market approach	Multiple of EBITDA	0.7x - 13.5x	7.1x

				Multiple of Sales	0.8x to 3.8x	1.0x
				Market price of related security	$0.04 - $92.51	$12.27
	58,331		Discounted cash flow	Market interest rate	20.2% - 57.0%	24.6%
	15,149		Option pricing model	Annualized volatility	25.0% - 187.0%	75.0%
Loans receivable at fair value	512,522		Discounted cash flow	Market interest rate	10.0% - 41.6%	17.1%
	19,897		Market approach	Market price of related security	$19.87	$19.87
Total level 3 assets measured at fair value	$	1,268,057

Liabilities:
Mandatorily redeemable noncontrolling interests issued after November 5, 2003	$	5,835	Market approach	Operating income multiple	6.0x	6.0x
Contingent consideration	27,985		Discounted cash flow	EBITDA volatility	70.0%	70.0%
				Asset volatility	69.0%	69.0%
				Market interest rate	8.5%	8.5%
				Revenue volatility	5.1%	5.1%
Total level 3 liabilities measured at fair value	$	33,820

(1) - Unobservable inputs were weighted by the relative fair value of the financial instruments.

The changes in Level 3 fair value hierarchy during the three months ended June 30, 2024 and 2023 were as follows:


	Level 3 Balance at Beginning of Period		Level 3 Changes During the Period												Level 3 Balance at End of Period		Change in unrealized gains/(losses) (2)
			Fair Value Adjustments (1)		Relating to Undistributed Earnings		Purchases/ Originations		Sales		Settlements/ Repayments		Transfer in and/or out of Level 3
Three Months Ended June 30, 2024
Equity securities	$	674,679	$	(203,022)	$	8	$	181	$	(68,874)	$	—	$	(3)	$	402,969	$	203,129
Loans receivable at fair value	452,496		(175,582)		1,102		7,129		—		(55,946)		—		229,199		177,060
Mandatorily redeemable noncontrolling interests issued after November 5, 2003	5,601		—		492		—		—		(789)		—		5,304		—
Contingent consideration	29,322		264		—		1,055		—		(1,338)		—		29,303		—


Three Months Ended June 30, 2023
Equity securities	$	359,041	$	17,287	$	12	$	44,923	$	(34,005)	$	—	$	(128)	$	387,130	$	(626)
Loans receivable at fair value	772,085		9,207		(1,281)		48,231		—		(144,165)		(250)		683,827		9,064
Mandatorily redeemable noncontrolling interests issued after November 5, 2003	4,654		—		470		—		—		(772)		—		4,352		—
Contingent consideration	28,884		(1,123)		—		—		—		(37)		—		27,724		—

(1) - Fair value adjustments during the three months ended June 30, 2024 includes the following: $(203,022) of realized and unrealized gains (losses) on equity securities is comprised of $(39,115) of realized and unrealized gains (losses) included in fair value adjustments on loans and $(163,907) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $(175,582) of fair value adjustments on loans included in fair value adjustments on loans, and $264 related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations. Fair value adjustments during the three months ended June 30, 2023 includes the following: $17,287 of realized and unrealized gains (losses) on equity securities is comprised of $13,932 relating to equity securities included in fair value adjustments on loans and $3,355 of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $9,207 of fair value adjustments on loans included in fair value adjustments on loans, and $(1,123) related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations.

(2) - For the three months ended June 30, 2024 and 2023, the change in unrealized gains (losses) is related to financial instruments held at the end of each respective reporting period.

The changes in Level 3 fair value hierarchy during the six months ended June 30, 2024 and 2023 were as follows:


	Level 3 Balance at Beginning of Year		Level 3 Changes During the Period												Level 3 Balance at End of Period		Change in unrealized gains/(losses) (2)
			Fair Value Adjustments (1)		Relating to Undistributed Earnings		Purchases/ Originations		Sales		Settlements/ Repayments		Transfer in and/or out of Level 3
Six Months Ended June 30, 2024
Equity securities	$	735,638	$	(254,031)	$	20	$	616	$	(78,197)	$	—	$	(1,077)	$	402,969	$	257,224
Loans receivable at fair value	532,419		(187,783)		4,262		38,105		(22,785)		(135,019)		—		229,199		196,240
Mandatorily redeemable noncontrolling interests issued after November 5, 2003	5,835		—		785		—		—		(1,316)		—		5,304		—
Contingent consideration	27,985		1,671		—		1,055		—		(1,408)		—		29,303		—


Six Months Ended June 30, 2023
Equity securities	$	368,465	$	8,271	$	12	$	51,447	$	(34,042)	$	—	$	(7,023)	$	387,130	$	(10,009)
Loans receivable at fair value	701,652		52,483		(1,050)		355,546		(7,499)		(417,055)		(250)		683,827		52,522
Mandatorily redeemable noncontrolling interests issued after November 5, 2003	4,648		—		778		—		—		(1,074)		—		4,352		—
Contingent consideration	31,046		(4,570)		—		2,586		—		(1,338)		—		27,724		—

(1) - Fair value adjustments during the six months ended June 30, 2024 includes the following: $(254,031) of realized and unrealized gains (losses) on equity securities is comprised of $(49,505) of realized and unrealized gains (losses) included in fair value adjustments on loans and $(204,526) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $(187,783) of fair value adjustments on loans included in fair value adjustments on loans, and $1,671 related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations. Fair value adjustments during the six months ended June 30, 2023 includes the following: $8,271 of realized and unrealized gains (losses) on equity securities is comprised of $13,920 relating to equity securities included in fair value adjustments on loans and $(5,649) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $52,483 of fair value adjustments on loans included in fair value adjustments on loans, and $(4,570) related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations.

(2) - For the six months ended June 30, 2024 and 2023, the change in unrealized gains (losses) is related to financial instruments held at the end of each respective reporting period.

The amount reported in the table above during the three and six months ended June 30, 2024 and 2023 included the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis. The

carrying amounts reported in the condensed consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value based on the short-term maturity of these instruments.

As of June 30, 2024 and December 31, 2023, the senior notes payable had a carrying amount of $1,528,565 and $1,668,021, respectively, and fair value of $1,124,630 and $1,127,503, respectively. The aggregate carrying amount of the Company's notes payable, revolving credit facility, and term loans of $631,243 and $688,343 as of June 30, 2024 and December 31, 2023, respectively, approximates fair value because the effective yield of such instrument is consistent with current market rates of interest for instruments of comparable credit risk.

The investments in nonpublic entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in realized and unrealized gains (losses) on investments on the condensed consolidated statements of operations. These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer. Further adjustments are not made until another observable transaction occurs. Therefore, the determination of fair values of these investments in nonpublic entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments. Investments in nonpublic entities that do not report NAV are subject to a qualitative assessment for indicators of impairment. If indicators of impairment are present, the Company is required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

The following table presents information on the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of June 30, 2024 and December 31, 2023. These investments were measured due to an observable price change or impairment during the periods below.


	Fair Value Measurement Using
	Total		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
As of June 30, 2024
Investments in nonpublic entities that do not report NAV	$	3,424	$	—	$	3,424	$	—
As of December 31, 2023
Investments in nonpublic entities that do not report NAV	$	1,628	$	—	$	1,602	$	26

(k) Foreign Currency Translation

The Company transacts business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. Transaction gains were $694 and losses were $353 during the three months ended June 30, 2024 and 2023, respectively, and $2,962 gains and losses were $587 during the six months ended June 30, 2024 and 2023, respectively. These amounts were included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

(l) Equity Method Investment

As of June 30, 2024 and December 31, 2023, an equity investment that is accounted for under the equity method of accounting had a carrying value of $2,551 and $2,087, respectively, which is included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets. The Company’s share of earnings or losses from equity method investees included in income (loss) from equity investments was $10 and $143 during the three months ended June

30, 2024 and 2023, respectively, and $6 and $133 during the six months ended June 30, 2024 and 2023, respectively, in the accompanying condensed consolidated statements of operations.

bebe stores, inc.

As of June 30, 2023, the Company owned a 47.5% ownership interest in bebe. This was accounted for under the equity method of accounting and the Company had no income from this equity investment during the three months ended June 30, 2023. On October 6, 2023, the Company purchased an additional 3,700,000 shares of bebe for an aggregate purchase price of $18,500, resulting in an increase in the Company's ownership interest to 76.2%. The purchase of these additional shares resulted in the Company having a majority voting interest in bebe and the consolidation of bebe financial results for periods subsequent to October 6, 2023.

(m) Supplemental Non-cash Disclosures

During the six months ended June 30, 2024, there was non-cash investing activity related to the receipt of a note receivable in the amount of $2,000 related to the sale of certain assets, $42,077 related to a loan receivable, at fair value that converted into equity securities, and DIP loan conversion to purchase consideration equity for the purchase of Nogin in the amount of $37,700. During the six months ended June 30, 2024, there was non-cash financing activity related to the Company's redemption of its 6.375% Senior Notes due 2025 in the aggregate principal amount of $1,130 in exchange for 36,903 shares of its common stock at fair value of $1,011 for a net gain on extinguishment of debt of $120. During the six months ended June 30, 2023, non-cash investing activities included $15,000 of notes receivable that converted into equity securities; $1,190 of loans receivable, at fair value, that was included in consideration paid for the purchase of the Lingo noncontrolling interest; and $2,111 of common stock issued as part of the purchase price consideration for a business acquisition. During the six months ended June 30, 2023, non-cash financing activities also included $7,000 in seller financing related to the purchase of the Lingo noncontrolling interest.

(n) Variable Interest Entities

The Company holds interests in various entities that meet the characteristics of a VIE but are not consolidated as the Company is not the primary beneficiary. Interests in these entities are generally in the form of equity interests, loans receivable, or fee arrangements.

The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties.

The party with a controlling financial interest in a VIE is known as the primary beneficiary and consolidates the VIE. The Company determines whether it is the primary beneficiary of a VIE by performing an analysis that principally considers: (a) which variable interest holder has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; (b) which variable interest holder has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE; (c) the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders; (d) the terms between the VIE and its variable interest holders and other parties involved with the VIE; and (e) related-party relationships with other parties that may also have a variable interest in the VIE.

On August 21, 2023, in connection with the FRG take-private transaction, one of the Company's subsidiaries (the “Lender”) and an affiliate of Mr. Kahn (the “Borrower”) entered into an amended and restated a promissory note as discussed further in Note 2(h) and 2(i) above. The Company was not involved in the design of the Borrower, has no equity financial interest, and has no rights to make decisions or participate in the management of the Borrower that significantly impact the economics of the Borrower. Since the Company does not have the power to direct the activities of the Borrower, the Company is not the primary beneficiary and therefore does not consolidate the Borrower. The promissory note is included in loans receivable, at fair value in the Company’s consolidated financial statements and is a variable interest in accordance with the accounting guidance. As of June 30, 2024 and December 31, 2023, the maximum amount of loss exposure to the VIE on a fair value basis was $53,174 and $209,395, respectively. Subsequent to June 30, 2024, a loss for substantially all of the exposure of $53,174 was recorded in the third quarter ended September 30, 2024 as a result of Freedom VCM's voluntary petition for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024 as discussed in Note 2(h).

The Company has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered variable interest entities under the accounting guidance.

The Company earns fees from the Funds in the form of placement agent fees and carried interest. For placement agent fees, the Company receives a cash fee of generally 7% to 10% of the amount of raised capital for the Funds and the fee is recognized at the time the placement services occurred. The Company receives carried interest as a percentage allocation (8% to 15%) of the profits of the Funds as compensation for asset management services provided to the Funds and it is recognized under the ownership model of ASC 323 - Investments – Equity Method and Joint Ventures as an equity method investment with changes in allocation recorded currently in the results of operations. As the fee arrangements under such agreements are arm’s length and contain customary terms and conditions and represent compensation that is considered fair value for the services provided, the fee arrangements are not considered variable interests and accordingly, the Company does not consolidate such VIEs.

Placement agent fees attributable to such arrangements were $494 and $399 during the three months ended June 30, 2024 and 2023, respectively, and $866 and $399 during the six months ended June 30, 2024 and 2023, respectively, and were included in services and fees in the condensed consolidated statements of operations.

The carrying amounts included in the Company’s condensed consolidated balance sheets related to variable interests in VIEs that were not consolidated is shown below.


	June 30, 2024		December 31, 2023
Securities and other investments owned, at fair value	$	3,728	$	28,573
Loans receivable, at fair value	70,887		250,801
Other assets	24,089		11,418
Maximum exposure to loss	$	98,704	$	290,792

Bicoastal Alliance, LLC (“Bicoastal”)

On May 3, 2024, as part of the acquisition of Nogin, the Company acquired a 50% equity interest in Bicoastal Alliance, LLC (“Bicoastal”) through a wholly owned subsidiary of Nogin. Bicoastal is a holding company designed to manage the investments, including strategy and operations, for two brand apparel operating companies. The Company determined Bicoastal is a variable interest entity as it does not have sufficient resources to carry out its management activities without additional financial support. The Company determined that it has the power to direct the activities that most significantly impact Bicoastal’s economic performance, has more equity capital at risk, and is expected to continue to fund operations. Therefore, the Company determined that it is the primary beneficiary of Bicoastal and has consolidated its results into the Company’s financial statements.

On August 14, 2024, Bicoastal entered into an agreement to acquire the remaining 50% equity interest upon paydown of a $700 note payable to the noncontrolling interest noteholder with a final repayment date and equity ownership interest transfer date of June 30, 2025.

B. Riley Principal 250 Merger Corporation (“BRPM”)

In 2021, the Company along with BRPM 250, a newly formed special purpose acquisition company incorporated as a Delaware corporation, consummated the initial public offering of 17,250,000 units of BRPM 250. Each Unit of BRPM 250 consisted of one share of class A common stock and one-third of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of BRPM 250 class A common stock at an exercise price of $11.50 per share. The BRPM 250 Units were each sold at a price of $10.00 per unit, generating gross proceeds to BRPM 250 of $172,500. These proceeds were deposited in a trust account established for the benefit of the BRPM 250 class A public shareholders and was included in prepaid expenses and other assets in the condensed consolidated balance sheets. These proceeds are invested only in U.S. treasury securities in accordance with the governing documents of BRPM 250. Under the terms of the BRPM 250 initial public offering, BRPM 250 was required to consummate a business combination transaction within 24 months (or 27 months under certain circumstances) of the completion of its initial public offering.

In connection with the completion of the initial public offering of BRPM 250, the Company invested in the private placement units of BRPM 250. BRPM 250 was determined to be a VIE because it did not have enough equity at risk to

finance its activities without additional subordinated financial support. The Company had determined that the class A shareholders of BRPM 250 do not have substantive rights as shareholders of BRPM 250 since these equity interests are determined to be temporary equity. As such, the Company had determined that it is the primary beneficiary of BRPM 250 as it has the right to receive benefits or the obligation to absorb losses, as well as the power to direct a majority of the activities that significantly impact BRPM 250’s economic performance. Since the Company is determined to be the primary beneficiary, BRPM 250 was consolidated into the Company’s financial statements.

On April 21, 2023, the Board of Directors of BRPM 250 approved a plan to redeem all of the outstanding shares of Class A common stock of BRPM 250, effective as of May 4, 2023. The BRPM 250 Class A public shares were deemed cancelled on May 4, 2023, and the funds held in trust were used to fund the corresponding redemption amounts to the BRPM 250 Class A shareholders and BRPM 250 was no longer a VIE.

(o) Contingent Consideration

Contingent consideration is comprised of contractual earnouts or milestones in connection with the Company's purchase of businesses and is initially recorded as purchase consideration in the purchase price allocation with a corresponding liability at the acquisition date measured at fair value with valuation methodologies as described in Note 2(j). Subsequent changes in the fair value of contingent consideration during the reporting period are recognized in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

(p) Recent Accounting Standards

Not yet adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures. The amendments in this update improve income tax disclosure requirements related to the transparency of rate reconciliation and income taxes paid disclosures and the effectiveness and comparability of disclosures of pretax income (or loss) and income tax expense (or benefit). The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The update should be applied on a prospective basis. The Company has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial position and results of operations.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures. The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories included in each reported measure of a segment's profit or loss on an interim and annual basis. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The update should be applied retrospectively to all prior periods presented in the financial statements. The Company has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial position and results of operations.