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Table of Contents

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

FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
Or
o 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 001-37503

B. RILEY FINANCIAL, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware |  | 27-0223495
(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
11100 Santa Monica Blvd., Suite 800 Los Angeles, CA |  | 90025
(Address of Principal Executive Offices) |  | (Zip Code)

(310) 966-1444
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, par value $0.0001 per share |  | RILY |  | Nasdaq Global Market
Depositary Shares, each representing a 1/1000th fractional interest in a 6.875% share of Series A Cumulative Perpetual Preferred Stock |  | RILYP |  | Nasdaq Global Market
Depositary Shares, each representing a 1/1000th fractional interest in a 7.375% share of Series B Cumulative Perpetual Preferred Stock |  | RILYL |  | Nasdaq Global Market
6.375% Senior Notes due 2025 |  | RILYM |  | Nasdaq Global Market
5.00% Senior Notes due 2026 |  | RILYG |  | Nasdaq Global Market
5.50% Senior Notes due 2026 |  | RILYK |  | Nasdaq Global Market
6.50% Senior Notes due 2026 |  | RILYN |  | Nasdaq Global Market
5.25% Senior Notes due 2028 |  | RILYZ |  | Nasdaq Global Market
6.00% Senior Notes due 2028 |  | RILYT |  | Nasdaq Global Market

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 o No x
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 o No x
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 the 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 | x |  | Accelerated filer | o
Non-accelerated filer | o |  | Smaller reporting company | o
Emerging growth company | o |  |  |

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 provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of February 19, 2025, there were 30,497,066 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Table of Contents
B. Riley Financial, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended September 30, 2024
Table of Contents

|  | Page
PART I. FINANCIAL INFORMATION |
Item 1. | Unaudited Condensed Consolidated Financial Statements | 1
| Unaudited Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 | 1
| Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023 | 2
| Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023 | 4
| Unaudited Condensed Consolidated Statements of Equity (Deficit) for the three and nine months ended September 30, 2024 and 2023 | 5
| Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 | 7
| Notes to Unaudited Condensed Consolidated Financial Statements | 9
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 68
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 101
Item 4. | Controls and Procedures | 102
PART II. OTHER INFORMATION |
Item 1. | Legal Proceedings | 105
Item 1A. | Risk Factors | 106
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 107
Item 3. | Defaults Upon Senior Securities | 107
Item 4. | Mine Safety Disclosures | 107
Item 5. | Other Information | 107
Item 6. | Exhibits | 108
SIGNATURES | 111

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands, except par value)

| September 30, 2024 |  | December 31, 2023
| (Unaudited) |  |
ASSETS |  |  |
Assets: |  |  |
Cash and cash equivalents | $ | 159,247 |  |  | $ | 222,690 |
Restricted cash | 1,366 |  |  | 1,875 |
Due from clearing brokers | 31,867 |  |  | 51,334 |
Securities and other investments owned, at fair value | 341,770 |  |  | 809,049 |
Securities borrowed | 64,004 |  |  | 2,870,939 |
Accounts receivable, net of allowance for credit losses of $7,941 and $7,175 as of September 30, 2024 and December 31, 2023, respectively | 91,506 |  |  | 101,036 |
Due from related parties | 189 |  |  | 172 |
Loans receivable, at fair value (includes $98,292 and $378,768 from related parties as of September 30, 2024 and December 31, 2023, respectively) | 151,704 |  |  | 532,419 |
Prepaid expenses and other assets (includes $3,237 and $11,802 from related parties as of September 30, 2024 and December 31, 2023, respectively) | 201,688 |  |  | 241,862 |
Operating lease right-of-use assets | 79,848 |  |  | 87,167 |
Property and equipment, net | 43,422 |  |  | 25,206 |
Goodwill | 498,377 |  |  | 466,638 |
Other intangible assets, net | 187,185 |  |  | 198,245 |
Deferred income taxes | 13,402 |  |  | 33,631 |
Assets of discontinued operations (Note 4) | 291,701 |  |  | 438,341 |
Total assets | $ | 2,157,276 |  |  | $ | 6,080,604 |
LIABILITIES AND EQUITY (DEFICIT) |  |  |
Liabilities: |  |  |
Accounts payable | $ | 54,522 |  |  | $ | 43,992 |
Accrued expenses and other liabilities | 228,698 |  |  | 252,876 |
Deferred revenue | 61,354 |  |  | 70,575 |
Due to related parties and partners | 4,112 |  |  | 2,480 |
Securities sold not yet purchased | 2,450 |  |  | 8,601 |
Securities loaned | 54,814 |  |  | 2,859,306 |
Operating lease liabilities | 90,569 |  |  | 98,088 |
Notes payable | 29,915 |  |  | 19,391 |
Loan participations sold | 3,963 |  |  | — |
Revolving credit facility | 13,681 |  |  | 43,801 |
Term loans, net | 490,650 |  |  | 625,151 |
Senior notes payable, net | 1,529,560 |  |  | 1,668,021 |
Liabilities of discontinued operations (Note 4) | 19,210 |  |  | 28,756 |
Total liabilities | 2,583,498 |  |  | 5,721,038 |
Commitments and contingencies (Note 17) |  |  |
B. Riley Financial, Inc. equity (deficit): |  |  |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 4,563 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively; and liquidation preference of $114,082 as of September 30, 2024 and December 31, 2023 | — |  |  | — |
Common stock, $0.0001 par value; 100,000,000 shares authorized; 30,499,931 and 29,937,067 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | 3 |  |  | 3 |
Additional paid-in capital | 588,048 |  |  | 572,170 |
Accumulated deficit | (1,084,728) |  |  | (281,285) |
Accumulated other comprehensive (loss) income | (906) |  |  | 229 |
Total B. Riley Financial, Inc. stockholders’ equity (deficit) | (497,583) |  |  | 291,117 |
Noncontrolling interests | 71,361 |  |  | 68,449 |
Total equity (deficit) | (426,222) |  |  | 359,566 |
Total liabilities and equity (deficit) | $ | 2,157,276 |  |  | $ | 6,080,604 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1

Table of Contents
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share data)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues: |  |  |  |  |  |  |
Services and fees (includes $2,227 and $3,831 for the three months ended September 30, 2024 and 2023 and $7,802 and $6,481 for the nine months ended September 30, 2024 and 2023 from related parties, respectively) | $ | 198,514 |  |  | $ | 244,096 |  |  | $ | 660,946 |  |  | $ | 662,181 |
Trading (loss) income | (1,238) |  |  | (9,727) |  |  | (50,226) |  |  | 31,723 |
Fair value adjustments on loans (includes $(68,768) and $(4,659) for the three months ended September 30, 2024 and 2023 and $(265,512) and $(6,205) for the nine months ended September 30, 2024 and 2023 from related parties, respectively) | (71,477) |  |  | (860) |  |  | (259,260) |  |  | 51,623 |
Interest income - loans (includes $7,472 and $7,013 for the three months ended September 30, 2024 and 2023 and $34,875 and $12,884 for the nine months ended September 30, 2024 and 2023 from related parties, respectively) | 11,251 |  |  | 27,397 |  |  | 51,894 |  |  | 102,535 |
Interest income - securities lending | 7,007 |  |  | 42,333 |  |  | 69,614 |  |  | 119,580 |
Sale of goods | 55,248 |  |  | 60,029 |  |  | 164,254 |  |  | 184,301 |
Total revenues | 199,305 |  |  | 363,268 |  |  | 637,222 |  |  | 1,151,943 |
Operating expenses: |  |  |  |  |  |  |
Direct cost of services | 49,659 |  |  | 52,616 |  |  | 168,008 |  |  | 156,373 |
Cost of goods sold | 40,312 |  |  | 42,217 |  |  | 118,897 |  |  | 129,490 |
Selling, general and administrative expenses | 184,605 |  |  | 202,321 |  |  | 577,377 |  |  | 579,964 |
Restructuring charge | 116 |  |  | 228 |  |  | 925 |  |  | 949 |
Impairment of goodwill and tradenames | — |  |  | 35,500 |  |  | 27,681 |  |  | 37,233 |
Interest expense - Securities lending and loan participations sold | 6,359 |  |  | 38,368 |  |  | 65,055 |  |  | 106,572 |
Total operating expenses | 281,051 |  |  | 371,250 |  |  | 957,943 |  |  | 1,010,581 |
Operating (loss) income | (81,746) |  |  | (7,982) |  |  | (320,721) |  |  | 141,362 |
Other income (expense): |  |  |  |  |  |  |
Interest income | 1,438 |  |  | 180 |  |  | 2,909 |  |  | 3,455 |
Dividend income | 675 |  |  | 3,373 |  |  | 4,139 |  |  | 9,541 |
Realized and unrealized losses on investments | (22,197) |  |  | (77,287) |  |  | (212,362) |  |  | (77,020) |
Change in fair value of financial instruments and other | 476 |  |  | (4,170) |  |  | 627 |  |  | (3,998) |
Income (loss) from equity investments | 6 |  |  | (308) |  |  | 12 |  |  | (175) |
Interest expense | (32,996) |  |  | (37,493) |  |  | (102,195) |  |  | (118,630) |
Loss from continuing operations before income taxes | (134,344) |  |  | (123,687) |  |  | (627,591) |  |  | (45,465) |
(Provision for) benefit from income taxes | (14,508) |  |  | 23,638 |  |  | (17,915) |  |  | (3,045) |
Loss from continuing operations | (148,852) |  |  | (100,049) |  |  | (645,506) |  |  | (48,510) |
(Loss) income from discontinued operations, net of income taxes | (138,746) |  |  | 23,741 |  |  | (123,827) |  |  | 32,543 |
Net loss | (287,598) |  |  | (76,308) |  |  | (769,333) |  |  | (15,967) |
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests | (3,201) |  |  | (2,485) |  |  | (2,167) |  |  | (5,680) |
Net loss attributable to B. Riley Financial, Inc. | (284,397) |  |  | (73,823) |  |  | (767,166) |  |  | (10,287) |
Preferred stock dividends | 2,015 |  |  | 2,015 |  |  | 6,045 |  |  | 6,042 |
Net loss available to common shareholders | $ | (286,412) |  |  | $ | (75,838) |  |  | $ | (773,211) |  |  | $ | (16,329) |

2

Table of Contents

Basic net (loss) income per common share: |  |  |  |  |  |  |
Continuing operations | $ | (4.97) |  |  | $ | (3.30) |  |  | $ | (21.50) |  |  | $ | (1.61) |
Discontinued operations | (4.42) |  |  | 0.77 |  |  | (4.03) |  |  | 1.05 |
Basic (loss) income per common share | $ | (9.39) |  |  | $ | (2.53) |  |  | $ | (25.53) |  |  | $ | (0.56) |
Diluted net (loss) income per common share: |  |  |  |  |  |  |
Continuing operations | $ | (4.97) |  |  | $ | (3.30) |  |  | $ | (21.50) |  |  | $ | (1.61) |
Discontinued operations | (4.42) |  |  | 0.77 |  |  | (4.03) |  |  | 1.05 |
Diluted (loss) income per common share | $ | (9.39) |  |  | $ | (2.53) |  |  | $ | (25.53) |  |  | $ | (0.56) |
Weighted average basic common shares outstanding | 30,499,931 |  |  | 29,961,068 |  |  | 30,281,324 |  |  | 28,933,546 |
Weighted average diluted common shares outstanding | 30,499,931 |  |  | 29,961,068 |  |  | 30,281,324 |  |  | 28,933,546 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

Table of Contents
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(Dollars in thousands)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Net loss | $ | (287,598) |  |  | $ | (76,308) |  |  | $ | (769,333) |  |  | $ | (15,967) |
Other comprehensive income (loss): |  |  |  |  |  |  |
Change in cumulative translation adjustment | 3,981 |  |  | (4,879) |  |  | (1,135) |  |  | (3,006) |
Other comprehensive income (loss), net of tax | 3,981 |  |  | (4,879) |  |  | (1,135) |  |  | (3,006) |
Total comprehensive loss | (283,617) |  |  | (81,187) |  |  | (770,468) |  |  | (18,973) |
Comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interests | (3,201) |  |  | (2,485) |  |  | (2,167) |  |  | (5,534) |
Comprehensive loss attributable to B. Riley Financial, Inc. | $ | (280,416) |  |  | $ | (78,702) |  |  | $ | (768,301) |  |  | $ | (13,439) |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

Table of Contents
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity (Deficit)
(Unaudited)
(Dollars in thousands, except share data)
For the Three Months Ended September 30, 2024 and 2023

| Preferred Stock |  | Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income (Loss) |  | Noncontrolling Interests |  | Total Equity (Deficit)
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |
Balance, July 1, 2024 | 4,563 |  |  | $ | — |  |  | 30,499,931 |  |  | $ | 3 |  |  | $ | 585,493 |  |  | $ | (798,945) |  |  | $ | (4,887) |  |  | $ | 75,233 |  |  | $ | (143,103) |
Vesting of restricted stock and other, net of shares withheld for employer taxes | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Share based payments | — |  |  | — |  |  | — |  |  | — |  |  | 2,658 |  |  | — |  |  | — |  |  | — |  |  | 2,658 |
Share based payments in equity of subsidiary | — |  |  | — |  |  | — |  |  | — |  |  | 34 |  |  | — |  |  | — |  |  | — |  |  | 34 |
Vesting of shares in equity of subsidiary | — |  |  | — |  |  | — |  |  | — |  |  | (137) |  |  | — |  |  | — |  |  | 137 |  |  | — |
Dividends on common stock, net of forfeitures | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 629 |  |  | — |  |  | — |  |  | 629 |
Dividends on preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,015) |  |  | — |  |  | — |  |  | (2,015) |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (284,397) |  |  | — |  |  | (3,201) |  |  | (287,598) |
Distributions to noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,064) |  |  | (1,064) |
Contributions from noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 256 |  |  | 256 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,981 |  |  | — |  |  | 3,981 |
Balance, September 30, 2024 | 4,563 |  |  | $ | — |  |  | 30,499,931 |  |  | $ | 3 |  |  | $ | 588,048 |  |  | $ | (1,084,728) |  |  | $ | (906) |  |  | $ | 71,361 |  |  | $ | (426,222) |
Balance, July 1, 2023 | 4,563 |  |  | $ | — |  |  | 28,480,870 |  |  | $ | 3 |  |  | $ | 452,254 |  |  | $ | (49,140) |  |  | $ | (597) |  |  | $ | 59,418 |  |  | $ | 461,938 |
Common stock issued, net of offering costs | — |  |  | — |  |  | 2,090,909 |  |  | — |  |  | 114,507 |  |  | — |  |  | — |  |  | — |  |  | 114,507 |
Vesting of restricted stock and other, net of shares withheld for employer taxes | — |  |  | — |  |  | 10,950 |  |  | — |  |  | (277) |  |  | — |  |  | — |  |  | — |  |  | (277) |
Excise taxes | — |  |  | — |  |  | — |  |  | — |  |  | 115 |  |  | — |  |  | — |  |  | — |  |  | 115 |
Share based payments | — |  |  | — |  |  | — |  |  | — |  |  | 10,561 |  |  | — |  |  | — |  |  | — |  |  | 10,561 |
Share based payments in equity of subsidiary | — |  |  | — |  |  | — |  |  | — |  |  | 32 |  |  | — |  |  | — |  |  | — |  |  | 32 |
Vesting of shares in equity of subsidiary | — |  |  | — |  |  | — |  |  | — |  |  | (245) |  |  | — |  |  | — |  |  | 245 |  |  | — |
Dividends on common stock ($1.00 per share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (32,715) |  |  | — |  |  | — |  |  | (32,715) |
Dividends on preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,015) |  |  | — |  |  | — |  |  | (2,015) |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (73,823) |  |  | — |  |  | (2,485) |  |  | (76,308) |
Distributions to noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,527) |  |  | (4,527) |
Contributions from noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 699 |  |  | 699 |
Acquisition of noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 600 |  |  | 600 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,879) |  |  | — |  |  | (4,879) |
Balance, September 30, 2023 | 4,563 |  |  | $ | — |  |  | 30,582,729 |  |  | $ | 3 |  |  | $ | 576,947 |  |  | $ | (157,693) |  |  | $ | (5,476) |  |  | $ | 53,950 |  |  | $ | 467,731 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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For the Nine Months Ended September 30, 2024 and 2023

| Preferred Stock |  | Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income (Loss) |  | Noncontrolling Interests |  | Total Equity (Deficit)
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |
Balance, January 1, 2024 | 4,563 |  |  | $ | — |  |  | 29,937,067 |  |  | $ | 3 |  |  | $ | 572,170 |  |  | $ | (281,285) |  |  | $ | 229 |  |  | $ | 68,449 |  |  | $ | 359,566 |
Vesting of restricted stock and other, net of shares withheld for employer taxes | — |  |  | — |  |  | 325,961 |  |  | — |  |  | (3,136) |  |  | — |  |  | — |  |  | — |  |  | (3,136) |
Common stock issued upon exercise of warrants | — |  |  | — |  |  | 200,000 |  |  | — |  |  | 653 |  |  | — |  |  | — |  |  | — |  |  | 653 |
Common stock issued in extinguishment of senior notes | — |  |  | — |  |  | 36,903 |  |  | — |  |  | 1,011 |  |  | — |  |  | — |  |  | — |  |  | 1,011 |
Share based payments | — |  |  | — |  |  | — |  |  | — |  |  | 17,381 |  |  | — |  |  | — |  |  | — |  |  | 17,381 |
Share based payments in equity of subsidiary | — |  |  | — |  |  | — |  |  | — |  |  | 106 |  |  | — |  |  | — |  |  | — |  |  | 106 |
Vesting of shares in equity of subsidiary | — |  |  | — |  |  | — |  |  | — |  |  | (137) |  |  | — |  |  | — |  |  | 137 |  |  | — |
Dividends on common stock ($1.00 per share), net of forfeitures | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (30,232) |  |  | — |  |  | — |  |  | (30,232) |
Dividends on preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,045) |  |  | — |  |  | — |  |  | (6,045) |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (767,166) |  |  | — |  |  | (2,167) |  |  | (769,333) |
Distributions to noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,921) |  |  | (2,921) |
Contributions from noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,213 |  |  | 3,213 |
Acquisition of noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,650 |  |  | 4,650 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,135) |  |  | — |  |  | (1,135) |
Balance, September 30, 2024 | 4,563 |  |  | $ | — |  |  | 30,499,931 |  |  | $ | 3 |  |  | $ | 588,048 |  |  | $ | (1,084,728) |  |  | $ | (906) |  |  | $ | 71,361 |  |  | $ | (426,222) |
Balance, January 1, 2023 | 4,545 |  |  | $ | — |  |  | 28,523,764 |  |  | $ | 3 |  |  | $ | 494,201 |  |  | $ | (45,220) |  |  | $ | (2,470) |  |  | $ | 59,379 |  |  | $ | 505,893 |
Common stock issued, net of offering costs | — |  |  | — |  |  | 2,090,909 |  |  | — |  |  | 114,507 |  |  | — |  |  | — |  |  | — |  |  | 114,507 |
Preferred stock issued | 18 |  |  | — |  |  | — |  |  | — |  |  | 467 |  |  | — |  |  | — |  |  | — |  |  | 467 |
ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes | — |  |  | — |  |  | 1,368,935 |  |  | — |  |  | (8,619) |  |  | — |  |  | — |  |  | — |  |  | (8,619) |
Common stock repurchased and retired | — |  |  | — |  |  | (1,452,831) |  |  | — |  |  | (53,688) |  |  | — |  |  | — |  |  | — |  |  | (53,688) |
Shares issued for the acquisition of a business | — |  |  | — |  |  | 51,952 |  |  | — |  |  | 2,111 |  |  | — |  |  | — |  |  | — |  |  | 2,111 |
Remeasurement of Lingo redeemable minority interest | — |  |  | — |  |  | — |  |  | — |  |  | (6,483) |  |  | — |  |  | — |  |  | — |  |  | (6,483) |
Share based payments | — |  |  | — |  |  | — |  |  | — |  |  | 34,528 |  |  | — |  |  | — |  |  | — |  |  | 34,528 |
Share based payments in equity of subsidiary | — |  |  | — |  |  | — |  |  | — |  |  | 168 |  |  | — |  |  | — |  |  | — |  |  | 168 |
Vesting of shares in equity of subsidiary | — |  |  | — |  |  | — |  |  | — |  |  | (245) |  |  | — |  |  | — |  |  | 245 |  |  | — |
Dividends on common stock ($3.00 per share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (94,150) |  |  | — |  |  | — |  |  | (94,150) |
Dividends on preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,042) |  |  | — |  |  | — |  |  | (6,042) |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (10,287) |  |  | — |  |  | (5,534) |  |  | (15,821) |
Remeasurement of B. Riley Principal 250 Merger Corporation subsidiary temporary equity | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,994) |  |  | — |  |  | — |  |  | (1,994) |
Distributions to noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (5,987) |  |  | (5,987) |
Contributions from noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,709 |  |  | 4,709 |
Acquisition of noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,138 |  |  | 1,138 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,006) |  |  | — |  |  | (3,006) |
Balance, September 30, 2023 | 4,563 |  |  | $ | — |  |  | 30,582,729 |  |  | $ | 3 |  |  | $ | 576,947 |  |  | $ | (157,693) |  |  | $ | (5,476) |  |  | $ | 53,950 |  |  | $ | 467,731 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)

| Nine Months Ended September 30,
| 2024 |  | 2023
Cash flows from operating activities: |  |  |
Net loss | $ | (769,333) |  |  | $ | (15,967) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |  |
Depreciation and amortization | 34,127 |  |  | 38,102 |
Provision for credit losses | 2,498 |  |  | 5,881 |
Share-based compensation | 17,594 |  |  | 35,264 |
Fair value and remeasurement adjustments, non-cash (includes $265,512 and $7,129 from related parties for 2024 and 2023, respectively) | 261,357 |  |  | (42,819) |
Non-cash interest and other (includes $(2,015) and $(1,821) from related parties for 2024 and 2023, respectively) | (26,307) |  |  | (9,440) |
Depreciation of rental merchandise | 11,718 |  |  | — |
Effect of foreign currency on operations | (297) |  |  | 686 |
Loss (income) from equity investments | (12) |  |  | 175 |
Dividends from equity investments | 111 |  |  | 198 |
Deferred income taxes | 20,455 |  |  | (21,394) |
Impairment of goodwill and tradenames | 27,681 |  |  | 37,233 |
Loss on disposal of discontinued operations | 39,500 |  |  | — |
Gain on sale of business, disposal of fixed assets, and other | (723) |  |  | (9,581) |
Loss on extinguishment of debt | 5,780 |  |  | 5,294 |
Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests | 1,416 |  |  | 1,335 |
Change in operating assets and liabilities: |  |  |
Amounts due to/from clearing brokers | 19,467 |  |  | 3,853 |
Securities and other investments owned | 639,280 |  |  | (43,289) |
Securities borrowed | 2,806,935 |  |  | (438,673) |
Accounts receivable | 7,238 |  |  | 14,121 |
Prepaid expenses and other assets (includes $8,565 and $(2,001) from related parties for 2024 and 2023, respectively) | 23,031 |  |  | 1,282 |
Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities | (34,577) |  |  | (30,024) |
Amounts due to/from related parties and partners | (569) |  |  | (1,235) |
Securities sold, not yet purchased | (6,151) |  |  | 1,223 |
Deferred revenue | (9,433) |  |  | (11,941) |
Securities loaned | (2,804,492) |  |  | 438,759 |
Net cash provided by (used in) operating activities | 266,294 |  |  | (40,957) |
Cash flows from investing activities: |  |  |
Purchases of loans receivable (includes $(16,259) and $(203,878) from related parties for 2024 and 2023, respectively) | (79,913) |  |  | (405,359) |
Repayments of loans receivable (includes $49,876 and $347,279 from related parties for 2024 and 2023, respectively) | 105,331 |  |  | 543,633 |
Sale of loans receivable | 22,785 |  |  | 7,500 |

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Proceeds from loan participations sold | 4,000 |  |  | — |
Acquisition of businesses and minority interest, net of $604 and $772 cash acquired for 2024 and 2023, respectively | (19,142) |  |  | (15,276) |
Sale of business, net of cash sold and other | 258 |  |  | 17,346 |
Purchases of property, equipment and intangible assets | (6,725) |  |  | (5,782) |
Funds received from trust account of subsidiary | — |  |  | 175,763 |
Purchase of equity and other investments | (1,065) |  |  | (4,871) |
Net cash provided by investing activities | 25,529 |  |  | 312,954 |
Cash flows from financing activities: |  |  |
Proceeds from revolving line of credit | 64,101 |  |  | 191,265 |
Repayment of revolving line of credit | (94,221) |  |  | (261,697) |
Proceeds from note payable | 15,000 |  |  | — |
Repayment of notes payable and other | (6,156) |  |  | (11,853) |
Repayment of term loan | (138,574) |  |  | (504,246) |
Proceeds from term loan | — |  |  | 628,187 |
Proceeds from issuance of senior notes | — |  |  | 185 |
Redemption of senior notes | (140,491) |  |  | (58,924) |
Payment of debt issuance and offering costs | (3,484) |  |  | (27,188) |
Payment of contingent consideration | (7,395) |  |  | (1,884) |
ESPP and payment of employment taxes on vesting of restricted stock | (3,136) |  |  | (8,619) |
Common dividends paid | (33,627) |  |  | (110,959) |
Preferred dividends paid | (6,045) |  |  | (6,042) |
Repurchase of common stock | — |  |  | (53,688) |
Distribution to noncontrolling interests | (4,560) |  |  | (4,012) |
Contributions from noncontrolling interests | 3,213 |  |  | 4,312 |
Redemption of subsidiary temporary equity and distributions | — |  |  | (175,763) |
Proceeds from issuance of common stock | — |  |  | 115,000 |
Proceeds from issuance of preferred stock | — |  |  | 467 |
Proceeds from exercise of warrants | 653 |  |  | — |
Net cash used in financing activities | (354,722) |  |  | (285,459) |
Decrease in cash, cash equivalents and restricted cash | (62,899) |  |  | (13,462) |
Effect of foreign currency on cash, cash equivalents and restricted cash | (1,092) |  |  | (3,116) |
Net decrease in cash, cash equivalents and restricted cash | (63,991) |  |  | (16,578) |
Cash, cash equivalents and restricted cash from continuing operations, beginning of period | 224,565 |  |  | 225,981 |
Cash, cash equivalents and restricted cash from discontinued operations, beginning of period | 9,274 |  |  | 44,945 |
Cash, cash equivalents and restricted cash, beginning of year | 233,839 |  |  | 270,926 |
Cash, cash equivalents and restricted cash from continuing operations, end of period | 160,613 |  |  | 226,431 |
Cash, cash equivalents and restricted cash from discontinued operations, end of period | 9,235 |  |  | 27,917 |
Cash, cash equivalents and restricted cash, end of year | $ | 169,848 |  |  | $ | 254,348 |
Supplemental disclosures: |  |  |
Interest paid | $ | 205,421 |  |  | $ | 231,874 |
Taxes paid | $ | 5,818 |  |  | $ | 7,798 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS OPERATIONS
B. Riley Financial, Inc. and its subsidiaries (collectively, the “Company”) provide investment banking, brokerage, wealth management, asset management, direct lending, business advisory, valuation, and asset disposition services to a broad client base spanning public and private companies, financial sponsors, investors, financial institutions, legal and professional services firms, and individuals. The Company also has a portfolio of communication related businesses that provide consumer Internet access and cloud communication services and owns Tiger US Holdings Inc. (“Targus”), which designs and sells laptop and computer accessories.
The Company operates in five reportable operating segments: (i) Capital Markets, through which the Company provides investment banking, corporate finance, securities lending, restructuring, research, sales and trading services to corporate and institutional clients; (ii) Wealth Management, through which the Company provides wealth management and tax services to corporate and high-net-worth clients; (iii) Financial Consulting, through which the Company provides bankruptcy, financial advisory, and forensic accounting services; (iv) Communications, through which the Company provides consumer Internet access and related subscription services, cloud communication services, and mobile phone voice, text, and data services and devices; and (v) Consumer Products, which generates revenue through sales of laptop and computer accessories.
During the quarter ended September 30, 2024, management concluded that certain businesses met the requirements to be classified as held for sale and discontinued operations. The financial results of these businesses whose disposal represent a strategic shift that has, or will have, a major effect on our operations and the financial results are reported as discontinued operations in the accompanying condensed statements of operations, and the assets and liabilities are reflected as amounts held for sale in the accompanying condensed balance sheets. Certain prior-year amounts have also been reclassified to conform to the current-year’s presentation as a result of discontinued operations. The Company's reporting segments have also been changed for the effects of the discontinued operations. For more information, see Note 16. Net (loss) income per share amounts are computed independently for net (loss) income from continuing operations, net (loss) income from discontinued operations and net loss. As a result, the sum of per-share amounts may not equal the total. Unless otherwise indicated, information in these notes to consolidated financial statements relates to continuing operations.
Liquidity
On February 29, 2024, the Company announced that an independent financial advisor was engaged to assist in the review of strategic alternatives for the Appraisal and Valuation Services, and Retail, Wholesale & Industrial Solutions businesses (collectively formerly known as “Great American Group”), which could include a potential sale or other transaction. As part of this process, the Company anticipated that proceeds may be used in a variety of ways including, among other things, de-levering our balance sheet. A solicitation process for the strategic review began in April 2024.
For the nine months ended September 30, 2024, the Company incurred a net loss of $(769,333) which includes fair value adjustments totaling $(509,761) related to the Company’s equity investment in Freedom VCM Holdings, LLC (“Freedom”) and the loan to Vintage Capital Management, LLC which are included in the asset collateral pool securing the Company’s credit facility with Nomura Corporate Funding Americas, LLC (“Nomura”). As more fully described in Note 11 – Terms Loans and Revolving Credit Facility, the Company entered into a loan amendment in September 2024 to the credit facility with Nomura Corporate Funding Americas, LLC, which requires the Company to reduce the principal amount of the term loan to be no greater than $100,000 on or prior to September 30, 2025. In conjunction with the amendment, the Company made a principal payment of $85,146 thereby reducing the outstanding principal balance on the credit facility from $469,750 to $388,127 at September 30, 2024.
After amending the credit facility, the strategic review process continued and in October 2024, the Company entered into a secured financing transaction for it’s brand operations and brand’s equity investments receiving proceeds of $189,331, see Note 22 Subsequent Events. From these proceeds, the Company repaid $171,480 on the Nomura credit facility reducing the outstanding principal balance from $388,127 to $216,647.
In November 2024, the Company also entered into a transaction whereby all of its interests in the Great American Group businesses was contributed to a newly formed subsidiary and issued preferred and common units to an investor for a
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purchase price of approximately $203,000 (the “Great American Group Transaction”), see Note 22 – Subsequent Events. In connection with such transaction, the Company used proceeds to further reduce the outstanding balance on the Nomura credit facility from $216,647 to $125,000. The Company has $145,302 of 6.375% Senior Notes due on February 28, 2025 that mature and will use cash on hand to repay these senior notes.
The Company believes that the current cash and cash equivalents, securities and other investments owned, funds available under our credit facilities, and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying financial statements.
The Company has $217,440 of Senior Notes that are due to mature on March 31, 2026, as more fully discussed in Note 12. The Company is considering a number of additional strategic alternatives to satisfy this obligation; which among other things, includes: existing cash on hand; the sale of a portion of the Company’s traditional (W-2) Wealth Management business (as more further discussed in Note 22); the sale of non-core businesses; and the sale or refinancing of other assets and investments. There can be no assurance that these contemplated transactions will occur and in the event these transactions are not completed it could have a material impact on the Company’s financial condition.
NOTE 2 — 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. Certain prior-year amounts have also been reclassified to conform to the current-year’s presentation as a result of discontinued operations, see Notes 1 and 4.
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 nine months ended September 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.
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(c) Interest Expense — Securities Lending Activities
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 $6,359 and $38,368 during the three months ended September 30, 2024 and 2023, respectively, and $65,055 and $106,572 during the nine months ended September 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 Consumer Products segment are primarily generated in the United States, 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.
On December 18, 2023, the Company loaned $108,000 to Conn’s Inc. (“Conn’s”) as more fully described in Note 20 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. The fair value of the Conn’s loan receivable was $63,705 at September 30, 2024. This loan combined with two other existing loans receivable with a fair value of $12,451 and $62,808 as of September 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 $76,156 and $167,568 or 50.2% and 31.5% of the loan portfolio as of September 30, 2024 and December 31, 2023, respectively, and are concentrated in the retail industry. The fair value of these loans at September 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. On December 17, 2024, the Company entered into an agreement with the first-lien holder banks of the Conn’s loan receivable to assign the first-lien loan receivable to the Company for consideration of $27,738. The Company collected the $27,738 and interest earned on the first-lien loan receivable of $238 for the period from December 17, 2024 through January 24, 2025 when the first-lien loan receivable was paid in full.
The Company also has a loan receivable with a principal amount of $224,968 and $200,506 as of September 30, 2024 and December 31, 2023, respectively. The increase in the loan receivable principal amount at September 30, 2024 in the amount of $24,462 includes interest in-kind interest that was capitalized to the loan receivable balance annually on the loan's anniversary date. 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 and collateral from the security interest in Freedom at September 30, 2024 is impacted by the Freedom VCM filing of voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024. The fair value of the loan receivable was $2,250 and $200,506 or 1.5% and 37.7% of the total loan portfolio as of September 30, 2024 and December 31, 2023, respectively. As a result of the bankruptcy filing on November 3, 2024, the loan receivable at September 30, 2024 is on non-accrual and there is no accrued interest receivable on the loan receivable at September 30, 2024. Interest receivable on the loan in the amount of $8,889 as of December 31, 2023 is included in prepaid expenses and other assets in the condensed consolidated balance sheets. The fair value of the underlying collateral for this loan is primarily comprised of other securities which amounted to $2,250 at September 30, 2024 and has decreased to a fair value of $2,154 at February 7, 2025.
At September 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 $78,406. The Company is also exposed to a concentration of risk related to Freedom VCM which totaled $9,310 as of September 30, 2024 from the Freedom VCM Receivables, Inc. loan receivable and additional exposure from the loan receivable with a fair value of $2,250 as described above where the primary security includes other public equity securities 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 $1,477 and $5,911 during the three months ended September 30, 2024 and 2023, respectively, and $6,155 and $16,462 during the nine months ended September 30, 2024 and 2023. Advertising expense was included as
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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 September 30, 2024 and December 31, 2023, restricted cash included $1,366 and $1,875, respectively, primarily consisting of cash collateral for leases.
Cash, cash equivalents and restricted cash consist of the following:

| September 30, 2024 |  | December 31, 2023
Cash and cash equivalents | $ | 159,247 |  |  | $ | 222,690 |
Restricted cash | 1,366 |  |  | 1,875 |
Total cash, cash equivalents and restricted cash | $ | 160,613 |  |  | $ | 224,565 |

(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 $151,704 and $532,419 as of September 30, 2024 and December 31, 2023, respectively. The loans have various maturities through August 2033. As of September 30, 2024 and December 31, 2023, the historical cost of loans receivable accounted for under the fair value option was $442,880 and $555,882, respectively, which included principal balances of $446,089 and $563,637 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $3,210 and $7,755, respectively. The principal balance of loans receivable exceeded the fair value of loans by $291,176 and $23,463 as of September 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 September 30, 2024 and 2023, the Company recorded net unrealized losses of $73,360 and $859, respectively, and net unrealized losses of $267,713 and net unrealized gains of $51,807 during the nine months ended September 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 $67,274 and $41,236 as of September 30, 2024 and December 31, 2023, respectively, which represented approximately 44.3% and 7.7% of total loans receivable, at fair value as of September 30, 2024 and December 31, 2023, respectively. The principal balance of loans receivable on non-accrual and 90 days or greater past due was $322,792 and $43,326 as of September 30, 2024 and 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 $(71,746) and $(759) during the three months ended September 30, 2024 and 2023, respectively, and $(259,163) and $45,350 during the nine months ended September 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 September 30, 2024, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc. (“B&W”) as further described in Note 17(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 September 30, 2024, the Company has not recorded any provision for credit
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losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure.
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 condensed 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.
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 zero and $232,065 as of September 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 September 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 September 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 adjustment on the VCM loan receivable was $(54,333) and $(222,718) for the three and nine months ended September 30, 2024. The fair value of the underlying collateral for this loan decreased to a fair value of $2,154 at February 7, 2025. The $2,154 is comprised of other public securities.
As of September 30, 2024, loans receivable had an aggregate remaining contractual principal balance of $446,089, an aggregate fair value of $151,704, and the contractual principal balance exceeded the fair value by $294,385. 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 $12,451 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. Accrued interest on the $93,000 Conn’s loan receivable was current as of June 30, 2024. As a result of 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”) this loan receivable with a fair value of $63,705 at September 30, 2024 is included in loans receivable on non-accrual as discussed above. 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 which are expected to be collected over the next year has been 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
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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. The fair value adjustment on the Conn's loan receivable was $(18,600) and $(27,084) for the three and nine months ended September 30, 2024. On December 17, 2024, the Company entered into an agreement with the first-lien holder banks of the Conn’s loan receivable to assign the first-lien loan receivable to the Company for consideration of $27,738. The Company collected the principal of $27,738 and interest on the first-lien loan receivable of $238 for the period from December 17, 2024 through January 24, 2025 when the first-lien loan receivable was paid in full.
The Company has continued to receive payments for the other two loans with a fair value of $12,451 at September 30, 2024 and has received payments of $7,717 subsequent to September 30, 2024 and through February 5, 2025 on the Badcock Receivables I and Freedom VCM Receivable loans receivable.
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 11. 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 11 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 September 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 $3,141 and $20,624, respectively. As of September 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 $9,310 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
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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 September 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:

| September 30, 2024 |  | December 31, 2023
Securities and other investments owned: |  |  |
Equity securities | $ | 289,279 |  |  | $ | 711,577 |
Corporate bonds | 31,496 |  |  | 59,287 |
Other fixed income securities | 4,757 |  |  | 2,989 |
Partnership interests and other | 16,238 |  |  | 35,196 |
| $ | 341,770 |  |  | $ | 809,049 |
Securities sold not yet purchased: |  |  |
Equity securities | $ | 634 |  |  | $ | 1,037 |
Corporate bonds | 509 |  |  | 5,971 |
Other fixed income securities | 1,307 |  |  | 1,593 |
| $ | 2,450 |  |  | $ | 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 September 30, 2024, includes unrealized gains (losses) of $(25,748) and $(72,583) for the three months ended September 30, 2024 and 2023, respectively, and $(217,370) and $(77,710) for the nine months ended September 30, 2024 and 2023, respectively, reported in other income (loss) - realized and unrealized gains (losses) on investments in the condensed consolidated statement of operations.
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
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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 11, 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 original $69,900 of consideration that Freedom VCM received from the sale of WS Badcock to Conn's that is still held by Freedom VCM at September 30, 2024 is impaired and there is expected to be no recovery of any value by Freedom VCM as a result of Conn’s bankruptcy filing. Subsequent to September 30, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024 which reduced the fair value of this equity investment by $(63,674) to zero.
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 June 30, 2024 and September 30, 2023 correspond to amounts as of September 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and nine months ended June 30, 2024 correspond to amounts during the three and nine months ended September 30, 2024 and 2023, respectively of the Company), which is the period in which the most recent financial information is available:

| June 30, 2024 |  | December 31, 2023 |  |
Current assets | $ | 877,471 |  |  | $ | 961,787 |  |  |
Noncurrent assets | $ | 2,936,951 |  |  | $ | 3,131,506 |  |  |
Current liabilities | $ | 571,661 |  |  | $ | 720,510 |  |  |
Noncurrent liabilities | $ | 2,641,119 |  |  | $ | 2,640,805 |  |  |
Equity attributable to investee | $ | 601,642 |  |  | $ | 731,978 |  |  |

| For the three months ended June 30, |  | For the nine months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues | $ | 767,404 |  |  | $ | 1,038,686 |  |  | $ | 2,383,350 |  |  | $ | 3,259,396 |
Cost of revenues | $ | 491,702 |  |  | $ | 632,623 |  |  | $ | 1,503,104 |  |  | $ | 1,288,751 |
Loss from continuing operations | $ | — |  |  | $ | — |  |  | $ | (1,175) |  |  | $ | — |
Net loss attributable to investees | $ | (111,881) |  |  | $ | (50,796) |  |  | $ | (300,720) |  |  | $ | (159,824) |

As of September 30, 2024 and December 31, 2023, the fair value of the investment in Freedom VCM totaled zero and $287,043, respectively, and is included in securities and other investments owned, at fair value in the condensed
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consolidated balance sheets. The change in fair value recorded in the income statement was an unrealized loss of $63,674 and $287,043 for the three and nine months ended September 30, 2024, respectively.
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 June 30, 2024 and September 30, 2023 correspond to amounts as of September 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and nine months ended June 30, 2024 and 2023 correspond to amounts during the three and nine months ended September 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:

| June 30, 2024 |  | December 31, 2023
Current assets | $ | 574,562 |  |  | $ | 497,593 |
Noncurrent assets | $ | 274,560 |  |  | $ | 278,105 |
Current liabilities | $ | 333,890 |  |  | $ | 350,197 |
Noncurrent liabilities | $ | 713,576 |  |  | $ | 625,851 |
Equity attributable to investee | $ | (198,929) |  |  | $ | (200,961) |
Noncontrolling interest | $ | 585 |  |  | $ | 611 |

| For the three months ended June 30, |  | For the nine months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues | $ | 233,642 |  |  | $ | 291,515 |  |  | $ | 668,365 |  |  | $ | 769,197 |
Cost of revenues | $ | 179,152 |  |  | $ | 228,352 |  |  | $ | 509,779 |  |  | $ | 600,441 |
Income (loss) from continuing operations | $ | 25,222 |  |  | $ | 594 |  |  | $ | (44,843) |  |  | $ | (14,381) |
Net income (loss) | $ | 25,364 |  |  | $ | (5,012) |  |  | $ | (54,151) |  |  | $ | (11,827) |
Net income (loss) attributable to investees | $ | 25,315 |  |  | $ | (5,088) |  |  | $ | (57,972) |  |  | $ | (15,563) |

As of September 30, 2024 and December 31, 2023, the fair value of the investment in B&W totaled $55,991 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 September 30, 2024, the Company had a voting interest of 7% 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 June 30, 2024 and September 30, 2023 correspond to amounts as of September 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and nine months
17

ended June 30, 2024 and 2023 correspond to amounts during the three and nine months ended September 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:

| Synchronoss Technologies, Inc.
| June 30, 2024 |  | December 31, 2023
Current assets | $ | 75,520 |  |  | $ | 82,002 |
Noncurrent assets | $ | 220,152 |  |  | $ | 228,335 |
Current liabilities | $ | 42,401 |  |  | $ | 47,697 |
Noncurrent liabilities | $ | 210,152 |  |  | $ | 164,706 |
Equity attributable to investee | $ | 43,119 |  |  | $ | 97,934 |

| Synchronoss Technologies, Inc.
| For the three months ended June 30, |  | For the nine months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues | $ | 43,458 |  |  | $ | 41,019 |  |  | $ | 127,825 |  |  | $ | 124,256 |
Cost of revenues | $ | 10,401 |  |  | $ | 11,488 |  |  | $ | 30,916 |  |  | $ | 34,447 |
Net income (loss) attributable to investees | $ | 78 |  |  | $ | (10,979) |  |  | $ | (32,582) |  |  | $ | (40,297) |

As of September 30, 2024 and December 31, 2023, the fair value of the equity investment in Synchronoss Technologies, Inc. was $11,212 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 September 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 September 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 June 30, 2024 and September 30, 2023 correspond to amounts as of September 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and nine months ended June 30, 2024 and 2023 correspond to amounts during the three and nine months ended September 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:

| June 30, 2024 |  | December 31, 2023
Current assets | $ | 239,004 |  |  | $ | 279,810 |
Noncurrent assets | $ | 563,871 |  |  | $ | 622,632 |
Current liabilities | $ | 222,125 |  |  | $ | 185,925 |
Noncurrent liabilities | $ | 146,226 |  |  | $ | 236,829 |
Preferred stock | $ | — |  |  | $ | 4,500 |
Equity attributable to investee | $ | 434,524 |  |  | $ | 475,188 |

18

| For the three months ended June 30, |  | For the nine months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues | $ | 111,909 |  |  | $ | 36,107 |  |  | $ | 372,418 |  |  | $ | 111,542 |
Cost of revenues | $ | 76,286 |  |  | $ | 20,492 |  |  | $ | 279,426 |  |  | $ | 73,244 |
Net income (loss) attributable to investees | $ | (4,273) |  |  | $ | 6,586 |  |  | $ | (14,229) |  |  | $ | 3,701 |

As of September 30, 2024 and December 31, 2023, the fair value of these five investments totaled $50,595 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 September 30, 2024 and December 31, 2023, partnership and investment fund interests valued at NAV of $16,238 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 September 30, 2024 and December 31, 2023, the carrying value of equity
19

securities measured under the measurement alternative investments and the related adjustments recorded during the periods presented for those securities with observable price changes:

| September 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 September 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 September 30, 2024 and December 31, 2023.

| Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2024 Using
| Fair value as of September 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 | $ | 223,543 |  |  | $ | 161,595 |  |  | $ | — |  |  | $ | 61,948 |
Corporate bonds | 31,496 |  |  | 27,410 |  |  | 4,086 |  |  | — |
Other fixed income securities | 4,757 |  |  | — |  |  | 4,757 |  |  | — |
Total securities and other investments owned | 259,796 |  |  | 189,005 |  |  | 8,843 |  |  | 61,948 |
Loans receivable, at fair value | 151,704 |  |  | — |  |  | — |  |  | 151,704 |
Total assets measured at fair value | $ | 411,500 |  |  | $ | 189,005 |  |  | $ | 8,843 |  |  | $ | 213,652 |
Liabilities: |  |  |  |  |  |  |
Securities sold not yet purchased: |  |  |  |  |  |  |
Equity securities | $ | 634 |  |  | $ | 634 |  |  | $ | — |  |  | $ | — |
Corporate bonds | 509 |  |  | — |  |  | 509 |  |  | — |
Other fixed income securities | 1,307 |  |  | — |  |  | 1,307 |  |  | — |
Total securities sold not yet purchased | 2,450 |  |  | 634 |  |  | 1,816 |  |  | — |
Contingent consideration | 23,702 |  |  | — |  |  | — |  |  | 23,702 |
Total liabilities measured at fair value | $ | 26,152 |  |  | $ | 634 |  |  | $ | 1,816 |  |  | $ | 23,702 |

20

| 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 | $ | 647,122 |  |  | $ | 194,541 |  |  | $ | — |  |  | $ | 452,581 |
Corporate bonds | 59,287 |  |  | 56,045 |  |  | 3,242 |  |  | — |
Other fixed income securities | 2,989 |  |  | — |  |  | 2,989 |  |  | — |
Total securities and other investments owned | 709,398 |  |  | 250,586 |  |  | 6,231 |  |  | 452,581 |
Loans receivable, at fair value | 532,419 |  |  | — |  |  | — |  |  | 532,419 |
Total assets measured at fair value | $ | 1,241,817 |  |  | $ | 250,586 |  |  | $ | 6,231 |  |  | $ | 985,000 |
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 |  |  | — |
Contingent consideration | 27,985 |  |  | — |  |  | — |  |  | 27,985 |
Total liabilities measured at fair value | $ | 36,586 |  |  | $ | 1,037 |  |  | $ | 7,564 |  |  | $ | 27,985 |

As of September 30, 2024 and December 31, 2023, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $213,652 and $985,000, respectively, or 9.9% and 16.2%, 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 September 30, 2024 and December 31, 2023:
21

| Fair value at September 30, 2024 |  | Valuation Technique |  | Unobservable Input |  | Range |  | Weighted Average(1)
Assets: |  |  |  |  |  |  |  |  |
Equity securities | $ | 54,135 |  |  | Market approach |  | Multiple of EBITDA |  | 2.5x - 7.0x |  | 4.3x
|  |  |  |  | Multiple of Sales |  | 0.6x - 3.0x |  | 2.4x
|  |  |  |  | Market price of related security |  | $0.01 - $11.42 |  | $11.13
| 7,813 |  |  | Option pricing model |  | Annualized volatility |  | 47.0% - 170.0% |  | 76.0%
Loans receivable at fair value | 142,239 |  |  | Discounted cash flow |  | Market interest rate |  | 13.6% - 74.7% |  | 24.0%
| 9,465 |  |  | Market approach |  | Market price of related security |  | $14.89-$15.98 |  | $15.68
|  |  |  |  | Multiple of Sales |  | 3.5x |  | 3.5x
Total level 3 assets measured at fair value | $ | 213,652 |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |
Contingent consideration | $ | 23,702 |  |  | 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 | $ | 23,702 |  |  |  |  |  |  |  |  |

(1) - Unobservable inputs were weighted by the relative fair value of the financial instruments.
22

| Fair value at December 31, 2023 |  | Valuation Technique |  | Unobservable Input |  | Range |  | Weighted Average(1)
Assets: |  |  |  |  |  |  |  |  |
Equity securities | $ | 324,279 |  |  | Market approach |  | Multiple of EBITDA |  | 0.7x - 13.5x |  | 8.3x
|  |  |  |  | Multiple of Sales |  | 0.8x to 3.5x |  | 0.9x
|  |  |  |  | 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%
| 69,971 |  |  | Option pricing model |  | Annualized volatility |  | 25.0% - 187.0% |  | 67.0%
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 | $ | 985,000 |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |
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 | $ | 27,985 |  |  |  |  |  |  |  |  |

(1) - Unobservable inputs were weighted by the relative fair value of the financial instruments.
23

The changes in Level 3 fair value hierarchy during the three months ended September 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 September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities | $ | 114,982 |  |  | $ | (66,349) |  |  | $ | — |  |  | $ | 49 |  |  | $ | — |  |  | $ | 13,266 |  |  | $ | — |  |  | $ | 61,948 |  |  | $ | (66,346) |
Loans receivable at fair value | 229,199 |  |  | (71,477) |  |  | 874 |  |  | 27,727 |  |  | — |  |  | (34,619) |  |  | — |  |  | 151,704 |  |  | (71,478) |
Contingent consideration | 29,303 |  |  | 386 |  |  | — |  |  | — |  |  | — |  |  | (5,987) |  |  | — |  |  | 23,702 |  |  | — |
Three Months Ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities | $ | 170,503 |  |  | $ | (13,120) |  |  | $ | (47) |  |  | $ | 301,730 |  |  | $ | (467) |  |  | $ | — |  |  | $ | (535) |  |  | $ | 458,064 |  |  | $ | (13,109) |
Loans receivable at fair value | 683,827 |  |  | (859) |  |  | 2,873 |  |  | 34,337 |  |  | — |  |  | (171,036) |  |  | — |  |  | 549,142 |  |  | (1,646) |
Contingent consideration | 27,724 |  |  | 14 |  |  | — |  |  | 793 |  |  | — |  |  | (544) |  |  | — |  |  | 27,987 |  |  | — |

(1) - Fair value adjustments during the three months ended September 30, 2024 includes the following: $(66,349) of realized and unrealized gains (losses) on equity securities is comprised of $(15,127) of realized and unrealized gains (losses) included in trading (loss) income and $(51,222) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $(71,477) of fair value adjustments on loans included in fair value adjustments on loans, and $386 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 September 30, 2023 includes the following: $(13,120) of realized and unrealized gains (losses) on equity securities is comprised of $(2,348) relating to equity securities included in trading (loss) income and $(10,772) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $(859) of fair value adjustments on loans included in fair value adjustments on loans, and $14 related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations.
(2) - For the three months ended September 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 nine months ended September 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 |  |
Nine Months Ended September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities | $ | 452,581 |  |  | $ | (325,310) |  |  | $ | 20 |  |  | $ | 665 |  |  | $ | (78,197) |  |  | $ | 13,266 |  |  | $ | (1,077) |  |  | $ | 61,948 |  |  | $ | (327,675) |
Loans receivable at fair value | 532,419 |  |  | (259,260) |  |  | 5,136 |  |  | 65,832 |  |  | (22,785) |  |  | (169,638) |  |  | — |  |  | 151,704 |  |  | (267,549) |
Contingent consideration | 27,985 |  |  | 2,057 |  |  | — |  |  | 1,055 |  |  | — |  |  | (7,395) |  |  | — |  |  | 23,702 |  |  | — |
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities | $ | 153,972 |  |  | $ | 5,017 |  |  | $ | (35) |  |  | $ | 341,177 |  |  | $ | (34,509) |  |  | $ | — |  |  | $ | (7,558) |  |  | $ | 458,064 |  |  | $ | (13,749) |
Loans receivable at fair value | 701,652 |  |  | 51,624 |  |  | 1,824 |  |  | 389,883 |  |  | (7,500) |  |  | (588,091) |  |  | (250) |  |  | 549,142 |  |  | 24,030 |
Contingent consideration | 31,046 |  |  | (4,556) |  |  | — |  |  | 3,380 |  |  | — |  |  | (1,883) |  |  | — |  |  | 27,987 |  |  | — |

(1) - Fair value adjustments during the nine months ended September 30, 2024 includes the following: $(325,310) of realized and unrealized gains (losses) on equity securities is comprised of $(64,632) of realized and unrealized gains (losses) included in trading (loss) income and $(260,678) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $(259,260) of fair value adjustments on loans included in fair value adjustments on loans, and $2,057 related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations. Fair value adjustments during the nine months ended September 30, 2023 includes the following: $5,017 of realized and unrealized gains (losses) on equity securities is comprised of $11,573 relating to equity securities included in trading (loss) income and $(6,556) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $51,624 of
24

fair value adjustments on loans included in fair value adjustments on loans, and $(4,556) related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations.
(2) - For the nine months ended September 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 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 September 30, 2024 and December 31, 2023, the senior notes payable had a carrying amount of $1,529,560 and $1,668,021, respectively, and fair value of $727,965 and $1,127,503, respectively. The aggregate carrying amount of the Company's notes payable, revolving credit facility, and term loans of $534,246 and $688,343 as of September 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 September 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 September 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 losses were $1,836 and gains were $322 during the three months ended September 30, 2024 and 2023, respectively, and gains were $231 and losses were $170 during the nine months ended September 30, 2024 and 2023, respectively. These amounts were included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.
25

(l) Equity Method Investment
As of September 30, 2024 and December 31, 2023, an equity investment that is accounted for under the equity method of accounting had a carrying value of $3,053 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 $6 and $(308) during the three months ended September 30, 2024 and 2023, respectively, and $12 and $(175) during the nine months ended September 30, 2024 and 2023, respectively, in the accompanying condensed consolidated statements of operations.
bebe stores, inc.
As of September 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 and nine months ended September 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 nine months ended September 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, DIP loan conversion to purchase consideration equity for the purchase of Nogin in the amount of $37,700, and $11,453 related to a loan receivable, at fair value that converted into equity securities. During the nine months ended September 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 nine months ended September 30, 2023, non-cash activities related to the sale of BRRII and other businesses consisted of: (1) non-cash investing activity for a decrease in loans receivable of $124,397 and receipt of a loan receivable in the amount of $58,872, and (2) non-cash financing activity for a decrease in term loan in the amount of $65,790 and decrease in non-controlling interest related to the distribution of equity of subsidiary of $3,374. Other non-cash investing activities during the nine months ended September 30, 2023 included $24,780 of notes receivable that converted into equity securities;$23,668 of other receivables financed with a loan receivable; $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 nine months ended September 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.
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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 September 30, 2024 and December 31, 2023, the maximum amount of loss exposure to the VIE on a fair value basis was $2,250 and $209,395, respectively.
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 zero and $2,551 during the three months ended September 30, 2024 and 2023, respectively, and $866 and $2,950 during the nine months ended September 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.

| September 30, 2024 |  | December 31, 2023
Securities and other investments owned, at fair value | $ | 3,948 |  |  | $ | 28,573 |
Loans receivable, at fair value | 34,895 |  |  | 250,801 |
Other assets | 3,532 |  |  | 11,418 |
Maximum exposure to loss | $ | 42,375 |  |  | $ | 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
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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 November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. This ASU requires additional expense disclosures by public entities in the notes to the financial statements. The ASU outlines the specific costs that are required to be disclosed which include such costs as: purchases of inventory, employee compensation, depreciation, intangible asset amortization, selling costs, and depreciation, depletion, and amortization related to oil and gas production. It also requires qualitative descriptions of the amounts remaining in the relevant expense income statement captions that are not separately disaggregated quantitatively in the notes to the financial statements and the entity's definition of selling expenses. The disclosures are required for each interim and annual reporting period. In January 2025, the FASB issued ASU 2025-01 which clarified the effective date for entities that do not have an annual reporting period that ends on December 31 st. The guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. 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 December 2023, the FASB issued 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
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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.
(q) Reclassifications
Certain prior period amounts have been reclassified to conform with the current period presentation. Certain amounts reported in Inventory during the year ended December 31, 2023 have been reclassified as rental merchandise, net in the prepaid expenses and other assets note during the year ended September 30, 2024.
NOTE 3 — ACQUISITIONS
2024 Acquisitions
On May 3, 2024, one of the Company’s wholly owned subsidiaries completed the acquisition of Nogin for a total purchase consideration of approximately $56,370, which consisted of $37,700 in DIP financing (see Note 2(h)) and an additional $18,670 in cash consideration. To fund the $18,670 in cash consideration, contemporaneous with the closing, the acquired company issued $15,000 of convertible debt. In accordance with ASC 805, the Company used the acquisition method of accounting for this acquisition. Goodwill of $56,028 and other intangible assets of $17,350 were recorded as a result of the acquisition. The acquisition complements the Company's principal investments strategy and offers potential growth to the Company's portfolio of principal investments.
The assets and liabilities of Nogin, both tangible and intangible, were recorded at their estimated fair values as of the May 3, 2024 acquisition date. Acquisition related costs, such as legal, accounting, valuation and other professional fees related to the acquisition of Nogin, were charged against earnings in the amount of $2,388 and included in selling, general and administrative expenses in the condensed consolidated statements of operations for the nine months ended September 30, 2024. Nogin goodwill recognized subsequent to the acquisition will be non-deductible for tax purposes.
The fair value of acquisition consideration and preliminary purchase price allocation was as follows:

Consideration paid: |  |
Cash |  | $ | 18,670 |
Credit bid - Settlement of DIP Facility |  | 37,700 |
Total Consideration |  | $ | 56,370 |

Assets acquired and liabilities assumed: |  |
Cash and cash equivalents |  | $ | 604 |
Accounts receivable |  | 421 |
Prepaid and other assets |  | 6,826 |
Operating lease right-of-use assets |  | 740 |
Property and equipment |  | 400 |
Other intangible assets |  | 17,350 |
Deferred income taxes |  | 227 |
Accounts payable |  | (9,731) |
Accrued expenses and other liabilities |  | (10,309) |
Deferred revenue |  | (95) |
Operating lease liabilities |  | (740) |
Note payable |  | (700) |
Net tangible assets acquired and assumed |  | 4,993 |
Goodwill |  | 56,028 |
Noncontrolling interest |  | (4,651) |
Total |  | $ | 56,370 |

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During the nine months ended September 30, 2024, goodwill for Nogin increased by $1,636 related to certain purchase price accounting adjustments.
The following is a summary of identifiable intangible assets acquired and the related expected lives for the finite-lived intangible assets:

Category |  | Useful life |  | Fair Value
Customer relationships |  | 9 Years |  | $ | 10,300 |
Internally developed software and other intangibles |  | 8 Years |  | 3,950 |
Trademarks |  | 10 Years |  | 3,100 |
Total |  |  |  | $ | 17,350 |

As described in Note 2(h), the Company had entered into a Chapter 11 RSA with Nogin prior to the acquisition date. As part of Nogin's Chapter 11 restructuring activities, it ceased the sale of brand apparel merchandise and elimination of warehousing and other costs associated with the inventory, among other things. The Company has determined that the preparation of pro forma financial information would be impracticable due to the significant estimates of amounts needed to reflect Nogin's historical financial information with its operations emerging from bankruptcy.
2023 Acquisitions
Freedom VCM Equity Investment Acquisition - Pro Forma Financial Information
On August 21, 2023, the Company acquired approximately 31% equity interest in Freedom VCM for total consideration of $281,144. The equity interest was acquired in connection with Freedom VCM's acquisition of FRG by a buyer group that included members of senior management of FRG, led by Brian Kahn, FRG’s then Chief Executive Officer as part of the FRG take-private transaction.
The unaudited pro-forma financial information for the three and nine months ended September 30, 2023 in the table below summarizes the results of operations of the Company and the equity investment in Freedom VCM as though the acquisition of the approximately 31% equity investment on August 21, 2023 had occurred as of the beginning of the year on January 1, 2023. The pro-forma financial information presented includes the effects of the common stock offering in July 2023 and adjustments related to additional interest expense from borrowings that the Company used to finance the acquisition of the equity interest. The Company has elected to account for the acquisition of the equity investment under the fair value option and any changes in fair value of the equity investment during future periods will be recorded in the condensed consolidated statements of operations.
The pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition of the equity investment had taken place at the beginning of the earliest period presented, nor does it intend to be a projection of future results.

|  | Pro Forma (unaudited)
|  | Three Months Ended September 30, 2023 |  | Nine Months Ended September 30, 2023
Revenues |  | $ | 462,312 |  |  | $ | 1,300,680 |
Net loss attributable to B. Riley Financial, Inc. |  | $ | (75,093) |  |  | $ | (16,127) |
Net loss attributable to common shareholders |  | $ | (77,108) |  |  | $ | (22,169) |
Basic income per share |  | $ | (2.54) |  |  | $ | (0.73) |
Diluted income per share |  | $ | (2.51) |  |  | $ | (0.71) |
Weighted average basic shares outstanding |  | 30,330,025 |  |  | 30,502,179 |
Weighted average diluted shares outstanding |  | 30,745,155 |  |  | 31,173,794 |

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Valuation Assumptions for Purchase Price Allocation
Our valuation assumptions used to value the acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets, inventories, property and equipment, and deferred income taxes. In determining the fair value of intangible assets acquired, the Company must make assumptions about the future performance of the acquired businesses, including among other things, the forecasted revenue growth attributable to the asset groups and projected operating expenses and other benefits expected to be achieved by combining the businesses acquired with the Company. The intangible assets acquired are primarily comprised of customer relationships, trademarks, and developed technology. The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the preliminary purchase price allocations. The estimated fair value of the customer relationships and backlog are determined using the multi-period excess earnings method and the estimated fair value of the trade names and trademarks and developed technology are determined using the relief from royalty method. Both methods require forward looking estimates that are discounted to determine the fair value of the intangible asset using a risk-adjusted discount rate that is reflective of the level of risk associated with future estimates associated with the asset group that could be affected by future economic and market conditions.
NOTE 4 — DISCONTINUED OPERATIONS
The Company presents a disposition of a component, being an operating or reportable segment, business unit, subsidiary or asset group, that represents a strategic shift that has or will have a major effect on the Company’s operations and financial results as discontinued operations when the components meet the criteria to be classified as held for sale. The following operations have been presented as discontinued operations.
Brands Transaction
On October 25, 2024, the Company and its subsidiary bebe stores, inc. (“bebe”) have completed a transaction for their brand assets yielding approximately $235,955 in cash proceeds. At the closing of the transaction, the Company transferred and contributed its interests in the assets and intellectual property related to the licenses of several brands, including Hurley, Justice, Scotch & Soda, Catherine Malandrino, English Laundry, Joan Vass, Kensie, Limited Too and Nanette Lepore to a securitization vehicle, receiving approximately $189,300 in net proceeds in connection with the financing transaction. bebe sold its interests in the assets and intellectual property related to the licenses of the bebe and Brookstone brands (the “Sale”) for approximately $46,624 in net cash proceeds. Upon closing the transaction proceeds of $22,188 was used to pay off the then outstanding balance of the bebe Credit Agreement in full (see Note 11) and $224 of loan related pay off expenses.
The pending brands transaction by bebe at September 30, 2024, which closed on October 25, 2024 resulted in a write down of the fair value in the amount of approximately $(20,043) being recorded at September 30, 2024 for the Sale of the bebe Brands. In addition, upon completion of the Secured Financing of the Brand Interests, the Company will deconsolidate the ownership of the Brand Interests and the Company’s ownership in the Brand Interest will be reported as a non-controlling equity method investment that is estimated to have nominal value as a result of the liquidation preferences and notes that were issued as part of the Secured Financing and upon deconsolidation a loss at September 30, 2024 in the amount of approximately $(133,000) was recorded in the quarter ending September 30, 2024.
The brand assets, which was historically reported within All Other category - generating operating revenues from the Company's majority owned subsidiary that licenses the trademarks and intellectual properties from the six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore. The brand assets also generated other income from dividends the Company received from the equity ownership of investments that range from 10% to 50% in companies that license the trademark and intellectual property of bebe and Brookstone brands (equity ownership of bebe stores, inc., our majority owned subsidiary).
The Company concluded that the brand assets met the criteria to be classified as held-for-sale in September 2024. The Company analyzed the quantitative and qualitative factors relevant to the divestiture of the brand assets, including the fair value adjustments and dividends received from the brand assets significance to the overall net income and earnings per share, and determined that those conditions for discontinued operations presentation had been met. As such, the financial position, results of operations and cash flows of that business are reported as discontinued operations in the accompanying
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condensed consolidated financial statements. Prior period amounts have been adjusted to reflect discontinued operations presentation.
Great American Group
On November 15, 2024, the Company entered into an equity purchase agreement, dated October 13, 2024 (the “Equity Purchase Agreement”), to sell 53% ownership stake in the Appraisal and Valuation Services, Real Estate, and Retail, Wholesale & Industrial Solutions businesses (collectively, the "Great American Group") to Oaktree and/or its affiliates (collectively, “Oaktree”), a global asset manager. Subject to the terms and conditions set forth in, the Equity Purchase Agreement, the Company conducted an internal reorganization and contributed all of the interests in the “Great American Group”), to Great American NewCo. At the Closing, (i) Oaktree received (a) all of the outstanding class A preferred limited liability units of Great American NewCo (which will have a 7.5% cash coupon and a 7.5% payment-in-kind coupon) (the “Class A Preferred Units”) and (b) common limited liability units of Great American NewCo (the “Common Units”) representing 52.6% of the issued and outstanding common limited liability units in Great American NewCo for a purchase price of approximately $203,000 (with an initial liquidation preference of approximately $203,000). The Company retains (a) 93.2% of the issued and outstanding class B preferred limited liability company units of Great American NewCo (which will have a 2.3% payment-in-kind coupon and an initial aggregate liquidation preference of approximately $183,000) (the “Class B Preferred Units”) and (b) 44.2% of the issued and outstanding Common Units. The remaining 6.8% of issued and outstanding Class B Preferred Units and 3.2% of issued and outstanding Common Units will be held by certain minority investors.
Following the completion of the transactions, the Company launched a partnership with Oaktree and contributed all of the interests in the Appraisal and Valuation Services, Retail, Wholesale & Industrial Solutions and Real Estate businesses into Great American Holdings, LLC, a newly formed holding company ("Great American NewCo"). At the closing, the Company received total consideration consisting of approximately $203,000 in cash, subject to certain purchase price adjustments, Class B Preferred Units of Great American NewCo with an initial aggregate liquidation preference of approximately $183,000, and Class A Common Units of Great American NewCo representing approximately 47% of the total outstanding common units. Upon closing the transaction, the Company recognized a gain on the sale of approximately $235,000 in the fourth quarter of 2024.
The Great American Group, which was historically reported within the Auction and Liquidation segment—providing auction and liquidation services to help clients dispose of assets that include multi-location retail inventory, wholesale inventory, trade fixtures, machinery and equipment, intellectual property, and real property—and within the Financial Consulting segment—offering bankruptcy, financial advisory, forensic accounting, real estate consulting, and valuation and appraisal services—will be divested. The Company intends to use the net after-tax proceeds from this transaction to repay certain debt obligations and focus on the core operating subsidiaries.
The Company concluded that the Great American Group met the criteria to be classified as held-for-sale in September 2024. The Company analyzed the quantitative and qualitative factors relevant to the sale of the Great American Group, including the significance of the operating income generated from the appraisal, real estate consulting and auction and liquidation operations to the overall net income (loss), net (loss) income per share, and net assets, and determined that those conditions for discontinued operations presentation had been met. As such, the financial position, results of operations and cash flows of that business are reported as discontinued operations in the accompanying condensed consolidated financial statements. Prior period amounts have been adjusted to reflect discontinued operations presentation.
At the closing of the transaction, the Company entered into a Transition Services Agreement, pursuant to which the Company will provide certain transition services to Great American NewCo relating for the Great American Group for a period of up to one year from the Closing. Additionally, the Company entered into a credit agreement, pursuant to which an affiliate of the Company, as lender, will provide to Great American NewCo, as borrower, a first lien secured revolving credit facility of up to $25,000 for general corporate purposes, subject to the terms and conditions set forth therein, which had an outstanding balance of $1,751 at closing, and (iv)entered into promissory notes which totaled $15,332 related to capital requirements for certain retail liquidation engagements that were ongoing as of closing.
On November 15, 2024, in connection with the GA Group Transaction as described above, the asset based credit facility with Wells Fargo Bank, National Association (the “Credit Agreement”) with a maximum borrowing limit of $200,000 and a maturity date of April 20, 2027, which provided for cash advances and the issuance of letters of credit on retail liquidation engagements under the credit facility was terminated. There were no outstanding balances on this credit facility as of September 30, 2024 and December 31, 2023 or at the time of termination.
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The major classes of assets and liabilities included in discontinued operations were as follows (in thousands):

| Brands Transaction |  | Great American Group |  | Total
| September 30, 2024
ASSETS | (Unaudited)
Cash and cash equivalents | $ | 585 |  |  | $ | 8,650 |  |  | $ | 9,235 |
Securities and other investments owned, at fair value | 174,753 |  |  | — |  |  | 174,753 |
Accounts receivable, net | 2,924 |  |  | 12,038 |  |  | 14,962 |
Prepaid expenses and other assets | 2 |  |  | 2,645 |  |  | 2,647 |
Operating lease right-of-use assets | — |  |  | 235 |  |  | 235 |
Property and equipment, net | — |  |  | 5 |  |  | 5 |
Goodwill | — |  |  | 5,688 |  |  | 5,688 |
Other intangible assets, net | 84,176 |  |  | — |  |  | 84,176 |
Total assets | $ | 262,440 |  |  | $ | 29,261 |  |  | $ | 291,701 |
LIABILITIES |  |  |  |  |
Accounts payable | $ | — |  |  | $ | 1,471 |  |  | $ | 1,471 |
Accrued expenses and other liabilities | 1,308 |  |  | 15,556 |  |  | 16,864 |
Deferred revenue | 546 |  |  | 72 |  |  | 618 |
Operating lease liabilities | — |  |  | 257 |  |  | 257 |
Total liabilities | $ | 1,854 |  |  | $ | 17,356 |  |  | $ | 19,210 |

|  |  |  |  |  |  | Brands Transaction |  | Great American Group |  | Total
|  |  | December 31, 2023
ASSETS |  |  | (Unaudited)
Cash and cash equivalents |  |  |  |  |  |  | $ | 845 |  |  | $ | 8,429 |  |  | $ | 9,274 |
Securities and other investments owned, at fair value |  |  |  |  |  |  | 283,057 |  |  | — |  |  | 283,057 |
Accounts receivable, net |  |  |  |  |  |  | 3,232 |  |  | 11,228 |  |  | 14,460 |
Prepaid expenses and other assets |  |  |  |  |  |  | — |  |  | 1,655 |  |  | 1,655 |
Operating lease right-of-use assets |  |  |  |  |  |  | — |  |  | 438 |  |  | 438 |
Goodwill |  |  |  |  |  |  | — |  |  | 5,688 |  |  | 5,688 |
Other intangible assets, net |  |  |  |  |  |  | 123,769 |  |  | — |  |  | 123,769 |
Total assets |  |  |  |  |  |  | $ | 410,903 |  |  | $ | 27,438 |  |  | $ | 438,341 |
LIABILITIES |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  |  |  |  |  | $ | — |  |  | $ | 558 |  |  | $ | 558 |
Accrued expenses and other liabilities |  |  |  |  |  |  | 1,193 |  |  | 25,350 |  |  | 26,543 |
Due to related parties and partners |  |  |  |  |  |  | — |  |  | 251 |  |  | 251 |
Deferred revenue |  |  |  |  |  |  | 724 |  |  | 205 |  |  | 929 |
Operating lease liabilities |  |  |  |  |  |  | — |  |  | 475 |  |  | 475 |
Total liabilities |  |  |  |  |  |  | $ | 1,917 |  |  | $ | 26,839 |  |  | $ | 28,756 |

Revenues and income (loss) from discontinued operations were as follows (in thousands):
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| Brands Transaction |  | Great American Group |  | Total
| Three Months Ended September 30, |  | Three Months Ended September 30, |  | Three Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues: |  |  |  |  |  |  |  |  |  |  |
Services and fees | $ | 4,136 |  |  | $ | 4,304 |  |  | $ | 33,605 |  |  | $ | 29,623 |  |  | $ | 37,741 |  |  | $ | 33,927 |
Sale of goods | — |  |  | — |  |  | 6,893 |  |  | 65,117 |  |  | 6,893 |  |  | 65,117 |
Total revenues | 4,136 |  |  | 4,304 |  |  | 40,498 |  |  | 94,740 |  |  | 44,634 |  |  | 99,044 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |
Direct cost of services | — |  |  | — |  |  | 13,732 |  |  | 15,234 |  |  | 13,732 |  |  | 15,234 |
Cost of goods sold | — |  |  | — |  |  | 6,558 |  |  | 35,836 |  |  | 6,558 |  |  | 35,836 |
Selling, general and administrative expenses | 950 |  |  | 791 |  |  | 13,288 |  |  | 18,576 |  |  | 14,238 |  |  | 19,367 |
Total operating expenses | 950 |  |  | 791 |  |  | 33,578 |  |  | 69,646 |  |  | 34,528 |  |  | 70,437 |
Operating income | 3,186 |  |  | 3,513 |  |  | 6,920 |  |  | 25,094 |  |  | 10,106 |  |  | 28,607 |
Other income (expense): |  |  |  |  |  |  |  |  |  |  |
Interest income | — |  |  | — |  |  | 2 |  |  | — |  |  | 2 |  |  | — |
Dividend income | 8,899 |  |  | 9,503 |  |  | — |  |  | — |  |  | 8,899 |  |  | 9,503 |
Realized and unrealized gains (losses) on investments | (113,234) |  |  | 1,926 |  |  | — |  |  | — |  |  | (113,234) |  |  | 1,926 |
Loss on disposal | (39,500) |  |  | — |  |  | — |  |  | — |  |  | (39,500) |  |  | — |
Interest expense | (690) |  |  | — |  |  | (8,841) |  |  | (7,736) |  |  | (9,531) |  |  | (7,736) |
(Loss) income from discontinued operations before income taxes | (141,339) |  |  | 14,942 |  |  | (1,919) |  |  | 17,358 |  |  | (143,258) |  |  | 32,300 |
(Provision for) benefit from income taxes | 6,983 |  |  | (4,648) |  |  | (2,471) |  |  | (3,911) |  |  | 4,512 |  |  | (8,559) |
(Loss) income from discontinued operations, net of income taxes | $ | (134,356) |  |  | $ | 10,294 |  |  | $ | (4,390) |  |  | $ | 13,447 |  |  | $ | (138,746) |  |  | $ | 23,741 |

|  |  |  |  |  |  | Brands Transaction |  | Great American Group |  | Total
|  |  |  |  |  |  | Nine Months Ended September 30, |  | Nine Months Ended September 30, |  | Nine Months Ended September 30,
|  |  |  |  |  |  |  |  |  |  |  |  | 2024 |  | 2023 |  | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Services and fees |  |  |  |  |  |  |  |  |  |  |  |  | $ | 13,675 |  |  | $ | 13,654 |  |  | $ | 66,962 |  |  | $ | 68,074 |  |  | $ | 80,637 |  |  | $ | 81,728 |
Sale of goods |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | 17,477 |  |  | 67,009 |  |  | 17,477 |  |  | 67,009 |
Total revenues |  |  |  |  |  |  |  |  |  |  |  |  | 13,675 |  |  | 13,654 |  |  | 84,439 |  |  | 135,083 |  |  | 98,114 |  |  | 148,737 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Direct cost of services |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | 18,060 |  |  | 21,815 |  |  | 18,060 |  |  | 21,815 |
Cost of goods sold |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | 14,306 |  |  | 36,506 |  |  | 14,306 |  |  | 36,506 |
Selling, general and administrative expenses |  |  |  |  |  |  |  |  |  |  |  |  | 2,832 |  |  | 2,721 |  |  | 37,520 |  |  | 40,515 |  |  | 40,352 |  |  | 43,236 |
Total operating expenses |  |  |  |  |  |  |  |  |  |  |  |  | 2,832 |  |  | 2,721 |  |  | 69,886 |  |  | 98,836 |  |  | 72,718 |  |  | 101,557 |
Operating income |  |  |  |  |  |  |  |  |  |  |  |  | 10,843 |  |  | 10,933 |  |  | 14,553 |  |  | 36,247 |  |  | 25,396 |  |  | 47,180 |
Other income (expense): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | 4 |  |  | — |  |  | 4 |  |  | — |
Dividend income |  |  |  |  |  |  |  |  |  |  |  |  | 26,459 |  |  | 26,094 |  |  | — |  |  | — |  |  | 26,459 |  |  | 26,094 |
Realized and unrealized gains (losses) on investments |  |  |  |  |  |  |  |  |  |  |  |  | (108,304) |  |  | (7,940) |  |  | — |  |  | — |  |  | (108,304) |  |  | (7,940) |
Loss on disposal |  |  |  |  |  |  |  |  |  |  |  |  | (39,500) |  |  | — |  |  | — |  |  | — |  |  | (39,500) |  |  | — |
Interest expense |  |  |  |  |  |  |  |  |  |  |  |  | (2,102) |  |  | — |  |  | (25,781) |  |  | (21,492) |  |  | (27,883) |  |  | (21,492) |
(Loss) income from discontinued operations before income taxes |  |  |  |  |  |  |  |  |  |  |  |  | (112,604) |  |  | 29,087 |  |  | (11,224) |  |  | 14,755 |  |  | (123,828) |  |  | 43,842 |
(Provision for) benefit from income taxes |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | (7,388) |  |  | 1 |  |  | (3,911) |  |  | 1 |  |  | (11,299) |
(Loss) income from discontinued operations, net of income taxes |  |  |  |  |  |  |  |  |  |  |  |  | $ | (112,604) |  |  | $ | 21,699 |  |  | $ | (11,223) |  |  | $ | 10,844 |  |  | $ | (123,827) |  |  | $ | 32,543 |

34

Interest expense for discontinued operations is based upon the amount of debt that was required to be repaid as a result of the Brands Transaction and Great American Group transaction described above and amount to $9,531 and $7,736 for the three months ended September 30, 2024 and 2023, respectively, and $27,883 and $21,492 for the nine months ended September 30, 2024 and 2023, respectively.
Cash flows from discontinued operations were as follows (in thousands):

| Nine Months Ended September 30,
| 2024 |  | 2023
Net cash from discontinued operations provided by (used in): |  |  |
Operating activities | $ | 32,707 |  |  | $ | 9,793 |
Investing activities | (5) |  |  | — |
Financing activities | (33,490) |  |  | (25,353) |
Effect of foreign currency on cash | 749 |  |  | (1,383) |
Net decrease in cash and cash equivalents | $ | (39) |  |  | $ | (16,943) |

Supplemental disclosures from cash flows were as follows (in thousands):

| Nine Months Ended September 30,
| 2024 |  | 2023
Interest paid - Continuing Operations | $ | 179,695 |  |  | $ | 219,797 |
Interest paid - Discontinued Operations | 25,726 |  |  | 12,076 |
Interest paid - Total | $ | 205,421 |  |  | $ | 231,874 |
Taxes paid - Continuing Operations | $ | 3,645 |  |  | 7,796 |
Taxes paid - Discontinued Operations | 2,173 |  |  | 2 |
Taxes paid - Total | $ | 5,818 |  |  | $ | 7,798 |

NOTE 5 — RESTRUCTURING CHARGE
During the three and nine months ended September 30, 2024, the Company recognized restructuring charges of $116 and $925, respectively, primarily related to reorganization and consolidation activities in the Communications segment and Consumer Products segment, which consisted of reductions in workforce.
During the three and nine months ended September 30, 2023, the Company recognized restructuring charges of $228 and $949, respectively, primarily related to reorganization and consolidation activities in the Wealth Management segment, Communications segment, and Consumer Products segment, which consisted of reductions in workforce and facility closures.
35

The following tables summarize the changes in accrued restructuring charge during the three and nine months ended September 30, 2024 and 2023:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Balance, beginning of period | $ | 1,047 |  |  | $ | 1,792 |  |  | $ | 2,542 |  |  | $ | 2,335 |
Restructuring charge | 116 |  |  | 228 |  |  | 925 |  |  | 949 |
Cash paid | 68 |  |  | (453) |  |  | (2,189) |  |  | (1,820) |
Non-cash items | (447) |  |  | 61 |  |  | (494) |  |  | 164 |
Balance, end of period | $ | 784 |  |  | $ | 1,628 |  |  | $ | 784 |  |  | $ | 1,628 |

The following table summarizes the restructuring activities by reportable segment during the three months ended September 30, 2024 and 2023.

| Wealth Management |  | Communications |  | Consumer Products |  | Total
Restructuring charges for the three months ended September 30, 2024: |  |  |  |  |  |  |
Employee termination | $ | — |  |  | $ | 116 |  |  | $ | — |  |  | $ | 116 |
Total restructuring charge | $ | — |  |  | $ | 116 |  |  | $ | — |  |  | $ | 116 |
Restructuring charges for the three months ended September 30, 2023: |  |  |  |  |  |  |
Employee termination | $ | — |  |  | $ | 145 |  |  | $ | 83 |  |  | $ | 228 |
Facility closure and consolidation | — |  |  | — |  |  | — |  |  | — |
Total restructuring charge | $ | — |  |  | $ | 145 |  |  | $ | 83 |  |  | $ | 228 |

The following table summarizes the restructuring activities by reportable segment during the nine months ended September 30, 2024 and 2023.

| Wealth Management |  | Communications |  | Consumer Products |  | Total
Restructuring charges for the nine months ended September 30, 2024: |  |  |  |  |  |  |
Employee termination | $ | — |  |  | $ | 379 |  |  | $ | 546 |  |  | $ | 925 |
Total restructuring charge | $ | — |  |  | $ | 379 |  |  | $ | 546 |  |  | $ | 925 |
Restructuring charges for the nine months ended September 30, 2023: |  |  |  |  |  |  |
Employee termination | $ | — |  |  | $ | 402 |  |  | $ | 486 |  |  | $ | 888 |
Facility closure and consolidation | 61 |  |  | — |  |  | — |  |  | 61 |
Total restructuring charge | $ | 61 |  |  | $ | 402 |  |  | $ | 486 |  |  | $ | 949 |

NOTE 6 — SECURITIES LENDING
The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of September 30, 2024 and December 31, 2023:
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| Gross amounts recognized |  | Gross amounts offset in the consolidated balance sheets (1) |  | Net amounts included in the consolidated balance sheets |  | Amounts not offset in the consolidated balance sheets but eligible for offsetting upon counterparty default(2) |  | Net amounts
As of September 30, 2024 |  |  |  |  |  |  |  |  |
Securities borrowed | $ | 64,004 |  |  | $ | — |  |  | $ | 64,004 |  |  | $ | 64,004 |  |  | $ | — |
Securities loaned | $ | 54,814 |  |  | $ | — |  |  | $ | 54,814 |  |  | $ | 54,814 |  |  | $ | — |
As of December 31, 2023 |  |  |  |  |  |  |  |  |
Securities borrowed | $ | 2,870,939 |  |  | $ | — |  |  | $ | 2,870,939 |  |  | $ | 2,870,939 |  |  | $ | — |
Securities loaned | $ | 2,859,306 |  |  | $ | — |  |  | $ | 2,859,306 |  |  | $ | 2,859,306 |  |  | $ | — |

_________________________
(1)Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.
(2)Includes the amount of cash collateral held/posted.
The following table presents the contract value of securities lending transactions accounted for as secured borrowings by the type of collateral provided to counterparties as of September 30, 2024 and December 31, 2023:

|  | September 30, 2024 |  | December 31, 2023
|  | Remaining contractual maturity |  |  |  | Remaining contractual maturity |  |
|  | Overnight and continuous |  | Total |  | Overnight and continuous |  | Total
Securities lending transactions |  |  |  |  |  |  |  |
Corporate securities - fixed income |  | $ | 157 |  |  | $ | 157 |  |  | $ | 283,809 |  |  | $ | 283,809 |
Equity securities |  | 63,847 |  |  | 63,847 |  |  | 2,575,919 |  |  | 2,575,919 |
Non-US sovereign debt |  | — |  |  | — |  |  | 11,211 |  |  | 11,211 |
Total borrowings |  | $ | 64,004 |  |  | $ | 64,004 |  |  | $ | 2,870,939 |  |  | $ | 2,870,939 |

The Company's securities lending transactions require us to pledge collateral based on the terms of each contract which is generally denominated in U.S. dollars and marked to market on a daily basis. If the fair value of the collateral pledged for these transactions declines, the Company could be required to provide additional collateral to the counterparty, therefore decreasing the amount of assets available for other liquidity needs that may arise. The Company's liquidity risk is mitigated by maintaining offsetting securities borrowed transactions in which the Company receives cash from the counterparty which, in general, is equal to or greater than the cash the Company posts on securities lending transactions.
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NOTE 7 — ACCOUNTS RECEIVABLE
The components of accounts receivable, net, include the following:

| September 30, 2024 |  | December 31, 2023
Accounts receivable | $ | 90,951 |  |  | $ | 95,102 |
Investment banking fees, commissions and other receivables | 8,496 |  |  | 13,109 |
Total accounts receivable | 99,447 |  |  | 108,211 |
Allowance for credit losses | (7,941) |  |  | (7,175) |
Accounts receivable, net | $ | 91,506 |  |  | $ | 101,036 |

Additions and changes to the allowance for credit losses consist of the following:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Balance, beginning of period | $ | 6,938 |  |  | $ | 6,100 |  |  | $ | 7,175 |  |  | $ | 3,664 |
Add: Additions to reserve | 1,580 |  |  | 2,079 |  |  | 2,498 |  |  | 5,716 |
Less: Write-offs | (577) |  |  | (1,417) |  |  | (1,732) |  |  | (2,618) |
Less: Recovery | — |  |  | — |  |  | — |  |  | — |
Balance, end of period | $ | 7,941 |  |  | $ | 6,762 |  |  | $ | 7,941 |  |  | $ | 6,762 |

NOTE 8 — PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets consist of the following:

| September 30, 2024 |  | December 31, 2023
Inventory | $ | 80,437 |  |  | $ | 93,674 |
Rental merchandise, net | 14,178 |  |  | 16,629 |
Equity method investments | 3,053 |  |  | 2,087 |
Prepaid expenses | 27,226 |  |  | 29,982 |
Unbilled receivables | 10,195 |  |  | 12,997 |
Other receivables | 38,167 |  |  | 39,001 |
Other assets | 28,432 |  |  | 47,492 |
Prepaid expenses and other assets | $ | 201,688 |  |  | $ | 241,862 |

Unbilled receivables represent the amount of mobile handsets in the Communications segment, and consulting related engagements in the Financial Consulting segment. Other receivables primarily consist of interest receivables on loans and loans receivables that are held at cost. Other assets primarily consist of deposits, real estate held for investment, deferred financing costs, and finance lease assets.
NOTE 9 — GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill was $498,377 and $466,638 as of September 30, 2024 and December 31, 2023, respectively. The increase in goodwill during the nine months ended September 30, 2024 was primarily due to $56,028 from the acquisition of Nogin in the All Other category and $1,431 from an immaterial acquisition in the Financial Consulting segment, partially offset by $26,681 from goodwill impairment in the Consumer Products segment.
38

The changes in the carrying amount of goodwill for the nine months ended September 30, 2024 were as follows:

| Capital Markets Segment |  | Wealth Management Segment |  |  |  | Financial Consulting Segment |  | Communications Segment |  | Consumer Products Segment |  | All Other |  | Total |  |  |  |
Balance as of December 31, 2023 | $ | 162,018 |  |  | $ | 51,195 |  |  |  |  | $ | 29,597 |  |  | $ | 193,867 |  |  | $ | 26,681 |  |  | $ | 3,280 |  |  | $ | 466,638 |  |  |  |  |
Acquisition of other businesses | — |  |  | — |  |  |  |  | 1,431 |  |  | — |  |  | — |  |  | 56,028 |  |  | 57,459 |  |  |  |  |
Goodwill impairment | — |  |  | — |  |  |  |  | — |  |  | — |  |  | (26,681) |  |  | — |  |  | (26,681) |  |  |  |  |
Other | (532) |  |  | — |  |  |  |  | (143) |  |  | — |  |  | — |  |  | 1,636 |  |  | 961 |  |  |  |  |
Balance as of September 30, 2024 | $ | 161,486 |  |  | $ | 51,195 |  |  |  |  | $ | 30,885 |  |  | $ | 193,867 |  |  | $ | — |  |  | $ | 60,944 |  |  | $ | 498,377 |  |  |  |  |

During the nine months ended September 30, 2024, the changes in goodwill included $1,636 of Nogin purchase price accounting adjustments, $(532) related to the sale of certain assets and $(143) of foreign currency translation amounts.
Intangible assets consisted of the following:

|  |  | As of September 30, 2024 |  | As of December 31, 2023
| Estimated Useful Life in Years |  | Gross Carrying Value |  | Accumulated Amortization |  | Intangibles Net |  | Gross Carrying Value |  | Accumulated Amortization |  | Intangibles Net
Amortizable assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships | 1 to 16 |  | $ | 272,330 |  |  | $ | (129,721) |  |  | $ | 142,609 |  |  | $ | 263,721 |  |  | $ | (108,644) |  |  | $ | 155,077 |
Domain names | 7 |  | 175 |  |  | (173) |  |  | 2 |  |  | 185 |  |  | (183) |  |  | 2 |
Advertising relationships | 8 |  | 100 |  |  | (100) |  |  | — |  |  | 100 |  |  | (94) |  |  | 6 |
Internally developed software and other intangibles | 0.5 to 10 |  | 32,935 |  |  | (22,506) |  |  | 10,429 |  |  | 28,985 |  |  | (19,613) |  |  | 9,372 |
Trademarks | 3 to 10 |  | 24,028 |  |  | (9,983) |  |  | 14,045 |  |  | 20,821 |  |  | (8,133) |  |  | 12,688 |
Total |  |  | 329,568 |  |  | (162,483) |  |  | 167,085 |  |  | 313,812 |  |  | (136,667) |  |  | 177,145 |
Non-amortizable assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Tradenames |  |  | 20,100 |  |  | — |  |  | 20,100 |  |  | 21,100 |  |  | — |  |  | 21,100 |
Total intangible assets |  |  | $ | 349,668 |  |  | $ | (162,483) |  |  | $ | 187,185 |  |  | $ | 334,912 |  |  | $ | (136,667) |  |  | $ | 198,245 |

Amortization expense was $8,446 and $10,191 during the three months ended September 30, 2024 and 2023, respectively, and $26,665 and $30,478 during the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, estimated future amortization expense was $8,677, $31,672, $28,922, $26,694, and $23,188 for the years ended December 31, 2024 (remaining three months), 2025, 2026, 2027 and 2028, respectively. The estimated future amortization expense after December 31, 2028 was $47,932.
The Company performs impairment tests for goodwill as of December 31 of each year and between annual impairment tests if an event occurs or circumstances change that would more likely than not reduce the fair values of the Company’s reporting units below their carrying values. As a result of the current financial performance of the Company’s Targus subsidiary which is included in the Consumer Products segment as well as current market conditions that continued to exist in the personal computer market for computers and accessories, the Company updated its long-term forecasts. The Company performed an interim goodwill impairment quantitative assessment as of June 30, 2024, and based on the results of the analysis, the Company recorded a non-cash impairment charge of $27,681 consisting of a goodwill impairment charge of $26,681 and a tradename impairment charge of $1,000, which was recorded in impairment of goodwill and tradenames in the accompanying condensed consolidated statements of operations during the nine months ended September 30, 2024.
39

Goodwill and tradename of the Company’s Targus subsidiary was remeasured at fair value on a nonrecurring basis as of June 30, 2024 which resulted in the fair value of goodwill being reduced to zero and the estimated fair value of tradename was $18,500 as of June 30, 2024. The estimated fair value of the Company’s Targus reporting unit was calculated using a weighted-average of values determined from an income approach and a market approach. The income approach involves estimating the fair value of the reporting unit by discounting its estimated future cash flows using a discount rate that would be consistent with a market participant’s assumption. The market approach bases the fair value measurement on information obtained from observed stock prices of public companies and recent merger and acquisition transaction data of comparable entities. In order to estimate the fair value of goodwill and tradename, management must make certain estimates and assumptions that affect the total fair value of the reporting unit including, among other things, an assessment of market conditions, projected cash flows, discount rates, and growth rates. The inputs for the fair value calculations of the reporting unit included a 4% growth rate to calculate the terminal value, a discount rate of 16%, and with respect to tradenames, a royalty rate of 2%. Management’s estimates of projected cash flows related to the reporting unit include, but are not limited to, future earnings of the reporting unit using revenue growth rates, gross margins, and other cost assumptions consistent with the reporting unit's historical trends, and working capital requirements and future capital expenditures necessary to fund future operations. The assumptions in the fair value measurement reflect the current market environment, industry-specific factors and company-specific factors.
NOTE 10 — NOTES PAYABLE
As of September 30, 2024 and December 31, 2023, the outstanding balance for the other notes payable was $29,915 and $19,391, respectively. On May 3, 2024, upon closing of the acquisition of Nogin, Nogin entered into a secured convertible promissory note agreement with a principal amount of $15,000 with an annual interest rate of 10.0% and a maturity date of May 3, 2027. The remaining notes payable primarily consisted of additional deferred cash consideration owed to the sellers of FocalPoint and a promissory note related to the Lingo minority interest purchase, which was paid in full on January 2, 2024. Interest expense was $536 and $145 during the three months ended September 30, 2024 and 2023, respectively, and $1,081 and $463 during the nine months ended September 30, 2024 and 2023, respectively.
NOTE 11 — TERM LOANS AND REVOLVING CREDIT FACILITY
Targus Credit Agreement
On October 18, 2022, the Company's subsidiary, Tiger US Holdings, Inc. (the “Borrower”), a Delaware corporation, among others, entered into a credit agreement (“Targus Credit Agreement”) with PNC Bank, National Association (“PNC”), as agent and security trustee for a five-year $28,000 term loan and a five-year $85,000 revolver loan, which was used to finance part of the acquisition of Targus. The final maturity date is October 18, 2027.
The Targus Credit Agreement is secured by substantially all Targus assets as collateral defined in the Targus Credit Agreement which totals approximately $204,023. The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. The Targus Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts outstanding under the Targus Credit Agreement. On October 31, 2023 and February 20, 2024, the Company entered into Amendment No. 1 and Amendment No. 2 to the Targus Credit Agreement, which, among other things, modified the fixed charge coverage ratio and the minimum earnings before interest, taxes, depreciation, and amortization (“EBITDA”) requirements which waived the financial covenant breaches for the periods ended September 30, 2023 and December 31, 2023, respectively. Amendment No. 2 also provided, among other things, with a cure right for the Company to provide a capital contribution to Targus in the event of a financial covenant breach. For the period ended September 30, 2023, the Fixed Charge Coverage Ratio “FCCR” covenant was not fulfilled in accordance with the Targus Credit Agreement and for the period ended December 31, 2023, the FCCR and minimum EBITDA covenant was not fulfilled in accordance with the Targus Credit Agreement. However, the amendments to the Targus Credit Agreement and the capital contributions made to the subsidiary cured the covenant breaches. On June 27, 2024 the Company entered into Amendment No. 3 to the Targus Credit Agreement to replace the terminating Canadian benchmark interest rate with the Term CORRA Reference Rate. For the period ended June 30, 2024, the minimum EBITDA covenant was also breached. On August 14, 2024, the Company contributed $1,602 to Targus to cure a minimum EBITDA financial covenant requirement for the period ended June 30, 2024. For the period ended September 30, 2024, the minimum EBITDA covenant was also breached. On November 7, 2024, the Company entered into Amendment No. 4 to the Targus Credit Agreement, which among other things, reduced
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revolving loan sublimits, modified the FCCR covenant, removed the minimum EBITDA requirement, imposed a minimum undrawn availability covenant, and modified the terms of the Keepwell. Amendment No. 4 to the Targus Credit Agreement also waived the September 30, 2024 minimum EBITDA covenant breach. Concurrently with the effectiveness of Amendment No. 4 to the Targus Credit Agreement, the Company repaid the outstanding balance of the term loan in full with $2,100 of revolver loan advances and $7,500 of cash from the Company.
The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus an applicable margin of 5.75%. The revolver loan consists of base rate loans that bear interest on the outstanding principal amount equal to the base rate plus an applicable margin of 3.00% and term rate loans that bear interest on the outstanding principal amount equal to the revolver SOFR rate plus an applicable margin of 4.00%.
Principal outstanding for the term loan under the amended Targus Credit Agreement is due in quarterly installments. Quarterly installments from December 31, 2024 to December 31, 2025 are in the amount of $2,100 per quarter and the remaining principal balance is due on March 31, 2026.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $11,521 (net of unamortized debt issuance costs of $177) and $17,834 (net of unamortized debt issuance costs of $366), respectively, and the outstanding balance on the revolver loan was $13,681 and $43,801, respectively. Interest expense on these loans during the three and nine months ended September 30, 2024 was $987 (including amortization of deferred debt issuance costs of $195 and unused commitment fees of $20) and $3,432 (including amortization of deferred debt issuance costs of $566 and unused commitment fees of $73), respectively. Interest expense on these loans during the three and nine months ended September 30, 2023 was $1,790 (including amortization of deferred debt issuance costs of $111 and unused commitment fees of $18) and $5,547 (including amortization of deferred debt issuance costs of $416 and unused commitment fees of $57), respectively. The interest rate on the term loan was 11.18% and 10.20% and the interest rate on the revolver loan ranged between 8.96% and 11.25% and between 8.45% to 11.25% as of September 30, 2024 and December 31, 2023, respectively. The weighted average interest rate on the revolver loan was 9.04% and 8.53% as of September 30, 2024 and December 31, 2023, respectively.
Pathlight Credit Agreement
On September 23, 2022, the Company's subsidiary, BRRII, entered into a credit agreement (the “Pathlight Credit Agreement”) by and among PLC Agent, LLC in the capacity as administrative agent and Pathlight Capital Fund I LP, Pathlight Capital Fund II LP, and Pathlight Capital Fund III LP as the lenders (collectively, “Pathlight”) for a five-year $148,200 term loan. On January 12, 2023, Amendment No. 2 to the Pathlight Credit Agreement increased the term loan by an additional $78,296. On March 31, 2023, Amendment No. 3 to the Pathlight Credit Agreement increased the term loan by an additional $49,890. On August 21, 2023, in connection with the sale of all of the equity interests in BRRII to Freedom VCM Receivables as more fully described in Note 2(h), the Company was released from all obligations, guarantees and covenants related to the Pathlight Credit Agreement. The Company had been in compliance with all financial covenants in the Pathlight Credit Agreement.
The term loan bore interest on the outstanding principal amount equal to the Term SOFR rate plus an applicable margin of 6.50%. Interest expense on the term loan during the three and nine months ended September 30, 2023 was $2,052 (including amortization of deferred debt issuance costs of $722) and $14,359 (including amortization of deferred debt issuance costs of $4,262), respectively.
Lingo Credit Agreement
On August 16, 2022, the Company's subsidiary, Lingo, a Delaware limited liability company (the “Borrower”), entered into a credit agreement (the “Lingo Credit Agreement”) by and among the Borrower, the Company as the secured guarantor, and Banc of California, N.A. in its capacity as administrative agent and lender, for a five-year $45,000 term loan. This loan was used to finance part of the purchase of Bullseye by Lingo. On September 9, 2022, Lingo entered into the First Amendment to the Lingo Credit Agreement with Grasshopper Bank for an incremental term loan of $7,500, increasing the principal balance of the term loan to $52,500. On November 10, 2022, Lingo entered into the Second Amendment to the Lingo Credit Agreement with KeyBank National Association for an incremental term loan of $20,500, increasing the principal balance of the term loan to $73,000.
The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus a margin of 3.00% to 3.75% per annum, depending on the consolidated total funded debt ratio as defined in the Lingo Credit Agreement, plus
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applicable spread adjustment. As of September 30, 2024 and December 31, 2023, the interest rate on the Lingo Credit Agreement was 8.59% and 8.70%, respectively.
The Lingo Credit Agreement is guaranteed by the Company and Lingo's subsidiaries and secured by certain Lingo assets and equity interests as collateral which totals approximately $230,101 defined in the Lingo Credit Agreement. The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of its businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the Lingo Credit Agreement requires the Borrower to maintain certain financial ratios. The Lingo Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the Lingo Credit Agreement. The Company is in compliance with all financial covenants in the Lingo Credit Agreement as of September 30, 2024.
Principal outstanding is due in quarterly installments. The quarterly installments from September 30, 2024 to December 31, 2024 are in the amount of $2,738 per quarter, quarterly installments from March 31, 2025 to June 30, 2027 are in the amount of $3,650, and the remaining principal balance is due at final maturity on August 16, 2027.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $55,021 (net of unamortized debt issuance costs of $641) and $63,153 (net of unamortized debt issuance costs of $722), respectively. Interest expense on the term loan during the three and nine months ended September 30, 2024 was $1,370 (including amortization of deferred debt issuance costs of $70) and $4,254 (including amortization of deferred debt issuance costs of $213), respectively. Interest expense on the term loan during the three and nine months ended September 30, 2023 was $1,624 (including amortization of deferred debt issuance costs of $73) and $4,811 (including amortization of deferred debt issuance costs of $222), respectively.
On January 6, 2025, as discussed below BRPAC entered into an amended and restated credit agreement (the “BRPAC Amended Credit Agreement”) with the Banc of California, in the capacity as agent and lender and with other lenders party thereto from time to time. A portion of the proceeds from the BRPAC Amended Credit Agreement were used to pay all outstanding principal amounts and accrued interest under the Lingo Credit Agreement and the Lingo Credit Agreement was effectively terminated upon repayment on January 6, 2025.
bebe Credit Agreement
As a result of the Company obtaining a majority ownership interest in bebe on October 6, 2023, bebe's credit agreement with SLR Credit Solutions (the “bebe Credit Agreement”) for a $25,000 five-year term loan with a maturity date of August 24, 2026 is included in the Company's long-term debt. The term loan bears interest on the outstanding principal amount equal to the Term SOFR rate plus a margin of 5.50% to 6.00% per annum, depending on the total fixed charge coverage ratio as defined in the bebe Credit Agreement. As of September 30, 2024 and December 31, 2023, the interest rate on the bebe Credit Agreement was 10.78% and 11.14%, respectively.
The bebe Credit Agreement is collateralized by a first lien on all bebe assets and pledges of capital stock including equity interests which totals approximately $110,916. The agreement contains certain covenants, including those limiting the borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the agreement requires bebe to maintain certain financial ratios. The agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $21,735 (net of unamortized debt issuance costs of $452) and $22,487 (net of unamortized debt issuance costs of $638), respectively. Interest expense on the term loan during the three and nine months ended September 30, 2024 was $691 (including amortization of deferred debt issuance costs of $60) and $2,102 (including amortization of deferred debt issuance costs of $185), respectively. Principal outstanding is due in quarterly installments through June 30, 2026 in the amount of $313 per quarter and the remaining principal balance of $20,000 is due at final maturity on August 24, 2026.
On October 25, 2024, upon the closing of the Brands Transaction as described in Note 4 – Discontinued Operation proceeds of $22,188 was used to pay off the then outstanding balance of the loan in full and $224 of loan payoff expenses.
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Nomura Credit Agreement
The Company, and its wholly owned subsidiaries, BR Financial Holdings, LLC, and BR Advisory & Investments, LLC had entered into a credit agreement dated June 23, 2021 (as amended, the “Prior Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, for a four-year $300,000 secured term loan credit facility (the “Prior Term Loan Facility”) and a four-year $80,000 secured revolving loan credit facility (the “Prior Revolving Credit Facility”) with a maturity date of June 23, 2025.
On August 21, 2023, the Company and its wholly owned subsidiary, BR Financial Holdings, LLC (the “Borrower”), and certain direct and indirect subsidiaries of the Borrower (the “Guarantors”), entered into a credit agreement (the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Computershare Trust Company, N.A., as collateral agent, for a four-year $500,000 secured term loan credit facility (the “New Term Loan Facility”) and a four-year $100,000 secured revolving loan credit facility (the “New Revolving Credit Facility” and together, the “New Credit Facilities”). The purpose of the Credit Agreement was to (i) fund the Freedom VCM equity investment, (ii) prepay in full the Prior Term Loan Facility and Prior Revolving Credit Facility with an aggregate outstanding balance of $347,877, which included $342,000 in principal and $5,877 in interest and fees, (iii) fund a dividend reserve in an amount not less than $65,000, (iv) pay related fees and expenses, and (v) for general corporate purposes. The Company recorded a loss on extinguishment of debt related to the Prior Credit Agreement of $5,408, which was included in selling, general and administrative expenses on the condensed consolidated statements of operations.
SOFR rate loans under the New Credit Facilities accrue interest at the adjusted Term SOFR rate plus an applicable margin of 6.00%. In addition to paying interest on outstanding borrowings under the New Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter.
The Credit Agreement is secured on a first priority basis by a security interest in the equity interests of the Borrower and each of the Borrower’s subsidiaries (subject to certain exclusions) and a security interest in substantially all of the assets of the Borrower and the Guarantors. The borrowing base as defined in the Credit Agreement consists of a collateral pool that includes certain of the Company's loans receivables in the amount of $209,891 (which is included in the total loans receivable, at fair value balance of $151,704 reported in our condensed consolidated balance sheet at September 30, 2024) and $375,814 (which is included in the total loans receivable, at fair value balance of $532,419 reported in our condensed consolidated balance sheet at December 31, 2023) and investments in the amount of $706,711 (which is included in the total securities and other investments owned, at fair value of $341,770 reported in our condensed consolidated balance sheet at September 30, 2024) and $786,714 (which is included in the total securities and other investments owned, at fair value of $809,049 reported in our condensed consolidated balance sheet at December 31, 2023) as of September 30, 2024 and December 31, 2023, respectively. The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit the Company’s and its subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests. The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events. The Company is in compliance with all financial covenants in the Credit Agreement as of September 30, 2024. On September 17, 2024, the Company entered into Amendment No. 4 to its credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Fourth Amendment”). On September 17, 2024, the Company made a payment of $85,857 which consisted of a principal payment of $85,146 and accrued interest of $711. Loan fees incurred in connection with the Fourth Amendment totaled $5,869 of which $3,523 was added to the principal balance of the term loan. After giving effect to these amounts, the outstanding principal balance on the term loan was reduced from $469,750 to $388,127. In connection with the Fourth Amendment, the revolving credit facility in the amount of $100,000 which had no balance outstanding at September 17, 2024 was terminated and the Company is required to reduce the principal amount of the term loan to be no greater than $100,000 on or prior to September 30, 2025. The maturity date of the term loan is August 21, 2027 and all outstanding principal is required to be paid. The Fourth Amendment contains certain provisions related to borrowing base, including specific treatment for certain assets in the calculation of borrowing base and also includes mandatory prepayment provisions regarding asset sales. Interest on the term loan increased to SOFR loans will accrue interest at the adjusted term SOFR plus an applicable margin of 7.00% cash interest or, at the election of the Company, at the adjusted term SOFR determined plus an applicable margin of 6.00% cash interest plus 1.50% paid-in-kind interest; and base rate loans will accrue interest at the base rate plus an applicable margin of 6.00% cash interest or, at the election of the Company, at the adjusted term SOFR determined for such day plus an
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applicable margin of 5.00% cash interest plus 1.50% PIK Interest. On December 9, 2024, the Company entered into Amendment No. 5 to its credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Fifth Amendment”). The Fifth Amendment extended the springing maturity date of the term loans if more than $25,000 aggregate principal amount of the 5.50% 2026 Notes is outstanding to February 3, 2026 and permits under certain conditions an additional $10,000 of telecommunications financing. On January 3, 2025, the Company entered into Amendment No. 6 to its credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Sixth Amendment”). The Sixth Amendment agreed to permit under certain conditions the contribution by BRPI of 100% of the equity interests in Lingo to BRPAC in connection with the entry into the BRPAC Credit Agreement. There was no fee charged in connection with the Sixth Amendment.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $369,497 (net of unamortized debt issuance costs of $18,838) and $475,056 (net of unamortized debt issuance costs of $18,694), respectively. Interest expense on the term loan during the three months ended September 30, 2024 and 2023 was $6,087 (including amortization of deferred debt issuance costs of $1,415) and $11,261 (including amortization of deferred debt issuance costs of $758), respectively, and during the nine months ended September 30, 2024 and 2023 was $18,776 (including amortization of deferred debt issuance costs of $3,567) and $26,105 (including amortization of deferred debt issuance costs of $1,820), respectively. The interest rate on the term loan as of September 30, 2024 and December 31, 2023 was 12.13% and 11.37%, respectively.
The Company had an outstanding balance of zero under the revolving facility as of September 30, 2024 and December 31, 2023. Interest on the revolving facility during the three months ended September 30, 2024 and 2023 was $428 (including unused commitment fees of $204 and amortization of deferred financing costs of $224) and $1,913 (including unused commitment fees of $52 and amortization of deferred financing costs of $195), respectively, and during the nine months ended September 30, 2024 and 2023 was $1,420 (including unused commitment fees of $688 and amortization of deferred financing costs of $732) and $5,396 (including unused commitment fees of $80 and amortization of deferred financing costs of $496), respectively. The interest rate on the Revolving Credit Facility as of September 30, 2024 and December 31, 2023 was 11.37%.
BRPAC Credit Agreement
On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of the Company, in the capacity as borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with the Banc of California, N.A. in the capacity as agent (the “Agent”) and lender and with the other lenders party thereto (the “Closing Date Lenders”). Certain of the Borrowers’ U.S. subsidiaries are guarantors of all obligations under the BRPAC Credit Agreement and are parties to the BRPAC Credit Agreement in such capacity (collectively, the “Secured Guarantors”; and together with the Borrowers, the “Credit Parties”). In addition, the Company and B. Riley Principal Investments, LLC, the parent corporation of BRPAC and a subsidiary of the Company, are guarantors of the obligations under the BRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of BRPAC are pledged as collateral.
The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties which totals approximately $185,012, including a pledge of (a) 100% of the equity interests of the Credit Parties; (b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India; and (c) 65% of the equity interests in magicJack VocalTec Ltd., an Israel corporation. Such security interests are evidenced by pledge, security, and other related agreements.
The BRPAC Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’, ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the BRPAC Credit Agreement requires the Credit Parties to maintain certain financial ratios. The BRPAC Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding BRPAC Credit Agreement. The Company is in compliance with all financial covenants in the BRPAC Credit Agreement as of September 30, 2024.
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Through a series of amendments, including the most recent Fourth Amendment to the BRPAC Credit Agreement (the “Fourth Amendment”) on June 21, 2022, the Borrowers, the Secured Guarantors, the Agent and the Closing Date Lenders agreed to the following, among other things: (i) the Lenders agreed to make a new $75,000 term loan to the Borrowers, the proceeds of which the Borrowers’ used to repay the outstanding principal amount of the existing terms loans and optional loans and will use for other general corporate purposes, (ii) a new applicable margin level of 3.50% was established as set forth from the date of the Fourth Amendment, (iii) Marconi Wireless Holdings, LLC (“Marconi Wireless”) was added to the Borrowers, (iv) the maturity date of the term loan was set to June 30, 2027, and (v) the Borrowers were permitted to make certain distributions to the parent company of the Borrowers.
The borrowings under the amended BRPAC Credit Agreement bear interest equal to the Term SOFR rate plus a margin of 2.75% to 3.50% per annum, depending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement. As of September 30, 2024 and December 31, 2023, the interest rate on the BRPAC Credit Agreement was 8.10% and 8.46%, respectively.
Principal outstanding under the Amended BRPAC Credit Agreement is due in quarterly installments. The quarterly installments from December 31, 2024 to December 31, 2026 are in the amount of $3,169 per quarter, the quarterly installment on March 31, 2027 is in the amount of $2,377, and the remaining principal balance is due at final maturity on June 30, 2027.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $32,876 (net of unamortized debt issuance costs of $399) and $46,621 (net of unamortized debt issuance costs of $429), respectively. Interest expense on the term loan during the three months ended September 30, 2024 and 2023 was $825 (including amortization of deferred debt issuance costs of $61) and $1,243 (including amortization of deferred debt issuance costs of $66), respectively, and during the nine months ended September 30, 2024 and 2023 was $2,800 (including amortization of deferred debt issuance costs of $185) and $4,034 (including amortization of deferred debt issuance costs of $210), respectively.
On January 6, 2025 (the “Closing Date”), BRPAC entered into the BRPAC Amended Credit Agreement with certain subsidiaries of the Company, the Banc of California, in the capacity as agent and lender and with other lenders party thereto from time to time. The Company’s subsidiary Lingo was added as a Borrower to the BRPAC Amended Credit Agreement. Pursuant to the BRPAC Amended Credit Agreement, the lenders made a new five-year $80,000 term loan to the Borrowers, the proceeds of which were used to repay in full the obligations under the original BRPAC Credit Agreement dated December 18, 2018 and the Lingo Credit Agreement. In connection with the BRPAC Amended Credit Agreement, the Borrowers also made certain distributions to the parent company of the Borrowers from existing cash on hand. The BRPAC Amended Credit Agreement also builds in provisions for incremental term loans up to $40,000 allowing certain distributions to the parent company of the Borrowers from the proceeds of such incremental term loans. The Borrowers’ U.S. subsidiaries are guarantors of all obligations under the BRPAC Amended Credit Agreement. The obligations under the BRPAC Amended Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Borrowers, including a pledge of (a) 100% of the equity interests of the Borrowers; (b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India; and (c) 65% of the equity interests in magicJack VocalTec Ltd., an Israel corporation. Such security interests are evidenced by pledge, security, and other related agreements.
The borrowings under the BRPAC Amended Credit Agreement bear interest equal to the Term SOFR rate plus a margin of 2.75% to 3.50% per annum, depending on the Borrowers consolidated total funded debt ratio as defined in the BRPAC Amended Credit Agreement. The interest rate is subject to a margin level of 3.25%. As of the Closing Date, the outstanding principal amount was $80,000 with quarterly installments of principal due in the amount of $4,000, and any remaining principal balance is due at final maturity on January 6, 2030.
The BRPAC Amended Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’, ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the BRPAC Amended Credit Agreement requires the Credit Parties to maintain certain financial ratios. The BRPAC Amended Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of outstanding amounts due under the BRPAC Amended Credit Agreement.
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NOTE 12 — SENIOR NOTES PAYABLE
Senior notes payable, net, are comprised of the following:

| September 30, 2024 |  | December 31, 2023
6.750% Senior notes due May 31, 2024 | $ | — |  |  | $ | 140,492 |
6.375% Senior notes due February 28, 2025 | 145,302 |  |  | 146,432 |
5.500% Senior notes due March 31, 2026 | 217,440 |  |  | 217,440 |
6.500% Senior notes due September 30, 2026 | 180,532 |  |  | 180,532 |
5.000% Senior notes due December 31, 2026 | 324,714 |  |  | 324,714 |
6.000% Senior notes due January 31, 2028 | 266,058 |  |  | 266,058 |
5.250% Senior notes due August 31, 2028 | 405,483 |  |  | 405,483 |
| 1,539,529 |  |  | 1,681,151 |
Less: Unamortized debt issuance costs | (9,969) |  |  | (13,130) |
| $ | 1,529,560 |  |  | $ | 1,668,021 |

The Company issued zero during the three months ended September 30, 2024 and 2023, respectively, and zero and $185 during the nine months ended September 30, 2024 and 2023, respectively, of senior notes. The maturity dates of senior notes ranged from February 2025 to August 2028 pursuant to At the Market Issuance Sales Agreements with B. Riley Securities, Inc. which governs the program of at-the-market sales of the Company’s senior notes. A series of prospectus supplements were filed by the Company with the SEC in respect of the Company’s offerings of these senior notes.
In June 2023, the Company entered into note purchase agreements in connection with the 6.75% Senior Notes due 2024 (“6.75% 2024 Notes”) that were issued for the Targus acquisition. The note purchase agreements had a repurchase date of June 30, 2023 on which date the Company repurchased 2,356,978 shares of its 6.75% 2024 Notes with an aggregate principal amount of $58,924. The repurchase price was equal to the aggregate principal amount, plus accrued and unpaid interest up to, but excluding, the repurchase date. The total repurchase payment included approximately $663 in accrued interest.
On February 29, 2024, the Company redeemed $115,492 aggregate principal amount of its 6.75% Senior Notes due 2024 (the “6.75% 2024 Notes”) pursuant to the seventh supplemental indenture dated December 3, 2021. The redemption price was equal to 100% of the aggregate principal amount, plus accrued and unpaid interest, up to, but excluding, the redemption date. The total redemption payment included approximately $628 in accrued interest.
On May 31, 2024, the Company redeemed the remaining $25,000 aggregate principal amount of the 6.75% 2024 Notes. The redemption price was equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the redemption date. The total redemption payment included approximately $145 in accrued interest. In connection with the full redemption, the 6.75% 2024 Notes, which were listed on NASDAQ under the ticker symbol “RILYO,” were delisted from NASDAQ and ceased trading on the redemption date.
On January 21, 2025, the Company announced that it has called for the full redemption on February 28, 2025 (the "Redemption Date") of all the issued and outstanding 6.375% Senior Notes due February 28, 2025 (the "6.375% 2025 Notes"). The redemption price is equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the Redemption Date. In connection with the full redemption, the 6.375% 2025 Notes, which are listed on NASDAQ under the ticker symbol “RILYM,” will be delisted from NASDAQ and cease trading on the redemption date.
As of September 30, 2024 and December 31, 2023, total senior notes outstanding was $1,529,681 (net of unamortized debt issue costs of $9,969) and $1,668,021 (net of unamortized debt issue costs of $13,130), respectively, with a weighted average interest rate of 5.62% and 5.71%, respectively. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled $22,617 and $25,088 during the three months ended September 30, 2024 and 2023, respectively and $70,032 and $78,091 during the nine months ended September 30, 2024 and 2023, respectively.
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NOTE 13 — ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:

| September 30, 2024 |  | December 31, 2023
Accrued payroll and related expenses | $ | 47,731 |  |  | $ | 68,255 |
Dividends payable | 15,536 |  |  | 18,929 |
Income taxes payable | 4,175 |  |  | 4,353 |
Other tax liabilities | 15,730 |  |  | 13,540 |
Contingent consideration | 23,702 |  |  | 27,986 |
Accrued expenses | 40,804 |  |  | 55,822 |
Other liabilities | 81,020 |  |  | 63,991 |
Accrued expenses and other liabilities | $ | 228,698 |  |  | $ | 252,876 |

Other tax liabilities primarily consist of uncertain tax positions, sales and VAT taxes payable, and other non-income tax liabilities. Accrued expenses primarily consist of accrued trade payables, investment banking payables and legal settlements. Other liabilities primarily consist of interest payables, customer deposits, accrued legal fees and finance lease liabilities.
NOTE 14 — REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue from contracts with customers by the Company's five reportable operating segments and the All Other category during the three and nine months ended September 30, 2024 and 2023 was as follows:
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| Capital Markets Segment |  | Wealth Management Segment |  |  |  | Financial Consulting Segment |  | Communications Segment |  | Consumer Products Segment |  | All Other |  | Total
Revenues for the three months ended September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate finance, consulting and investment banking fees | $ | 21,316 |  |  | $ | — |  |  |  |  | $ | 23,941 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 45,257 |
Wealth and asset management fees | 1,252 |  |  | 45,757 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 47,009 |
Commissions, fees and reimbursed expenses | 5,568 |  |  | 1,618 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7,186 |
Subscription services | — |  |  | — |  |  |  |  | — |  |  | 65,041 |  |  | — |  |  | — |  |  | 65,041 |
Sale of goods | — |  |  | — |  |  |  |  | — |  |  | 1,318 |  |  | 49,793 |  |  | 4,137 |  |  | 55,248 |
Advertising and other | — |  |  | — |  |  |  |  | — |  |  | 1,200 |  |  | — |  |  | 28,506 |  |  | 29,706 |
Total revenues from contracts with customers | 28,136 |  |  | 47,375 |  |  |  |  | 23,941 |  |  | 67,559 |  |  | 49,793 |  |  | 32,643 |  |  | 249,447 |
Trading (loss) income | (1,908) |  |  | 670 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,238) |
Fair value adjustments on loans | (71,477) |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (71,477) |
Interest income - loans | 11,251 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 11,251 |
Interest income - securities lending | 7,007 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7,007 |
Other | 2,301 |  |  | 2,014 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,315 |
Total revenues | $ | (24,690) |  |  | $ | 50,059 |  |  |  |  | $ | 23,941 |  |  | $ | 67,559 |  |  | $ | 49,793 |  |  | $ | 32,643 |  |  | $ | 199,305 |

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| Capital Markets Segment |  | Wealth Management Segment |  |  |  | Financial Consulting Segment |  | Communications Segment |  | Consumer Products Segment |  | All Other |  | Total
Revenues for the three months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate finance, consulting and investment banking fees | $ | 67,429 |  |  | $ | — |  |  |  |  | $ | 20,225 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 87,654 |
Wealth and asset management fees | 1,958 |  |  | 47,333 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 49,291 |
Commissions, fees and reimbursed expenses | 7,495 |  |  | 1,669 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9,164 |
Subscription services | — |  |  | — |  |  |  |  | — |  |  | 80,713 |  |  | — |  |  | — |  |  | 80,713 |
Sale of goods | — |  |  | — |  |  |  |  | — |  |  | 1,638 |  |  | 58,391 |  |  | — |  |  | 60,029 |
Advertising and other | — |  |  | — |  |  |  |  | — |  |  | 1,442 |  |  | — |  |  | 9,928 |  |  | 11,370 |
Total revenues from contracts with customers | 76,882 |  |  | 49,002 |  |  |  |  | 20,225 |  |  | 83,793 |  |  | 58,391 |  |  | 9,928 |  |  | 298,221 |
Trading (loss) income | (10,217) |  |  | 490 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (9,727) |
Fair value adjustments on loans | (860) |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (860) |
Interest income - loans | 27,397 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 27,397 |
Interest income - securities lending | 42,333 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 42,333 |
Other | 4,031 |  |  | 1,873 |  |  |  |  |  |  | — |  |  | — |  |  | — |  |  | 5,904 |
Total revenues | $ | 139,566 |  |  | $ | 51,365 |  |  |  |  | $ | 20,225 |  |  | $ | 83,793 |  |  | $ | 58,391 |  |  | $ | 9,928 |  |  | $ | 363,268 |

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| Capital Markets Segment |  | Wealth Management Segment |  |  |  | Financial Consulting Segment |  | Communications Segment |  | Consumer Products Segment |  | All Other |  | Total
Revenues for the nine months ended September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate finance, consulting and investment banking fees | $ | 111,560 |  |  | $ | — |  |  |  |  | $ | 69,383 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 180,943 |
Wealth and asset management fees | 3,677 |  |  | 137,986 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 141,663 |
Commissions, fees and reimbursed expenses | 18,852 |  |  | 8,236 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 27,088 |
Subscription services | — |  |  | — |  |  |  |  | — |  |  | 221,168 |  |  | — |  |  | — |  |  | 221,168 |
Service contract revenues | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Sale of goods | — |  |  | — |  |  |  |  | — |  |  | 4,079 |  |  | 152,739 |  |  | 7,436 |  |  | 164,254 |
Advertising and other | — |  |  | — |  |  |  |  | — |  |  | 3,887 |  |  | — |  |  | 75,329 |  |  | 79,216 |
Total revenues from contracts with customers | 134,089 |  |  | 146,222 |  |  |  |  | 69,383 |  |  | 229,134 |  |  | 152,739 |  |  | 82,765 |  |  | 814,332 |
Trading (loss) income | (52,787) |  |  | 2,561 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (50,226) |
Fair value adjustments on loans | (259,260) |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (259,260) |
Interest income - loans | 51,894 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 51,894 |
Interest income - securities lending | 69,614 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 69,614 |
Other | 6,937 |  |  | 3,931 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 10,868 |
Total revenues | $ | (49,513) |  |  | $ | 152,714 |  |  |  |  | $ | 69,383 |  |  | $ | 229,134 |  |  | $ | 152,739 |  |  | $ | 82,765 |  |  | $ | 637,222 |

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| Capital Markets Segment |  | Wealth Management Segment |  |  |  | Financial Consulting Segment |  | Communications Segment |  | Consumer Products Segment |  | All Other |  | Total
Revenues for the nine months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate finance, consulting and investment banking fees | $ | 137,305 |  |  | $ | — |  |  |  |  | $ | 52,325 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 189,630 |
Wealth and asset management fees | 3,880 |  |  | 135,092 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 138,972 |
Commissions, fees and reimbursed expenses | 24,659 |  |  | 8,604 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 33,263 |
Subscription services | — |  |  | — |  |  |  |  | — |  |  | 245,903 |  |  | — |  |  | — |  |  | 245,903 |
Sale of goods | — |  |  | — |  |  |  |  | — |  |  | 5,145 |  |  | 179,156 |  |  | — |  |  | 184,301 |
Advertising and other | — |  |  | — |  |  |  |  | — |  |  | 4,620 |  |  | — |  |  | 28,870 |  |  | 33,490 |
Total revenues from contracts with customers | 165,844 |  |  | 143,696 |  |  |  |  | 52,325 |  |  | 255,668 |  |  | 179,156 |  |  | 28,870 |  |  | 825,559 |
Trading (loss) income | 29,488 |  |  | 2,235 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 31,723 |
Fair value adjustments on loans | 51,623 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 51,623 |
Interest income - loans | 102,535 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 102,535 |
Interest income - securities lending | 119,580 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 119,580 |
Other | 17,959 |  |  | 2,964 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 20,923 |
Total revenues | $ | 487,029 |  |  | $ | 148,895 |  |  |  |  | $ | 52,325 |  |  | $ | 255,668 |  |  | $ | 179,156 |  |  | $ | 28,870 |  |  | $ | 1,151,943 |

Contract Balances
The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligation(s) are satisfied. Receivables related to revenues from contracts with customers totaled $91,506 and $101,036 as of September 30, 2024 and December 31, 2023, respectively. The Company had no significant impairments related to these receivables during the three and nine months ended September 30, 2024 and 2023. The Company also has $10,195 and $12,997 of unbilled receivables included in prepaid expenses and other assets as of September 30, 2024 and December 31, 2023, respectively. The Company’s deferred revenue primarily relates to retainer and milestone fees received from corporate finance and investment banking advisory engagements, asset management agreements, financial consulting engagements, subscription services where the performance obligation has not yet been satisfied. Deferred revenue as of September 30, 2024 and December 31, 2023 was $61,354 and $70,575, respectively. The Company expects to recognize the deferred revenue of $61,354 as of September 30, 2024 as service and fee revenues when the performance obligation is met during the years ended December 31, 2024 (remaining three months), 2025, 2026, 2027 and 2028 in the amount of $40,172, $10,104, $4,604, $2,254, and $1,357, respectively. The Company expects to recognize the deferred revenue of $2,863 after December 31, 2028.
During the three months ended September 30, 2024 and 2023, the Company recognized revenue of $6,846 and $9,273, respectively, that was recorded as deferred revenue at the beginning of the respective year. During the nine months ended September 30, 2024 and 2023, the Company recognized revenue of $36,633 and $42,739, respectively, that was recorded as deferred revenue at the beginning of the respective year.
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Contract Costs
Contract costs include: (1) costs to fulfill contracts associated with corporate finance and investment banking engagements are capitalized where the revenue is recognized at a point in time and the costs are determined to be recoverable and; (2) commissions paid to obtain magicJack contracts which are recognized ratably over the contract term and third party support costs for magicJack and related equipment purchased by customers which are recognized ratably over the service period.
The capitalized costs to fulfill a contract were $6,568 and $7,769 as of September 30, 2024 and December 31, 2023, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets. For the three months ended September 30, 2024 and 2023, the Company recognized expenses of $1,140 and $1,180 related to capitalized costs to fulfill a contract, respectively. For the nine months ended September 30, 2024 and 2023, the Company recognized expenses of $3,820 and $3,453 related to capitalized costs to fulfill a contract, respectively. There were no significant impairment charges recognized in relation to these capitalized costs during the three and nine months ended September 30, 2024 and 2023.
Remaining Performance Obligations and Revenue Recognized from Past Performance
The Company does not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material as of September 30, 2024. Corporate finance and investment banking fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded as the fees are considered variable and not included in the transaction price as of September 30, 2024.
NOTE 15 — INCOME TAXES
The Company’s effective income tax rate was a provision of 10.8% for the three months ended September 30, 2024 as compared to a benefit of 19.1% for the three months ended September 30, 2023. The Company’s effective income tax rate was a provision of 2.9% for the nine months ended September 30, 2024, as compared to a provision of 6.7% for the nine months ended September 30, 2023. During the three months ended September 30, 2024, the Company had a provision for income taxes of $14,508 resulting primarily from the impact of recording a valuation allowance on deferred tax assets as of September 30, 2024. The change in the effective tax rate compared to the prior year is primarily due to the impact of the valuation allowance recorded on deferred tax assets as of September 30, 2024. During the nine months ended September 30, 2024, the Company had a provision for income taxes of $17,915 resulting primarily from the impact of a valuation allowance on deferred tax assets.
As of September 30, 2024, the Company had federal net operating loss carryforwards of $46,384 and state net operating loss carryforwards of $64,247, respectively. In addition one of the Company’s majority-owned subsidiaries that is not included in the Company’s consolidated federal income tax return has federal net operating loss carryforwards of $298,416 and state net operating loss carryforwards of $222,585 which have a full valuation allowance as of September 30, 2024. The Company’s federal net operating loss carryforwards will expire in the tax years commencing on December 31, 2033, through December 31, 2038. The state net operating loss carryforwards will expire in the tax years commencing on December 31, 2030.
The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits of operating loss, capital loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382. Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income. As of September 30, 2024, the Company believes that the existing federal and state net operating loss carryforwards will not be fully utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will not be sufficient to realize its deferred tax assets and has provided a valuation allowance in the amount of $16,012 against these deferred tax assets. In addition, the Company does not believe that it is more likely than not that the Company will be able to utilize the benefits related to foreign capital loss carryforwards and has provided a valuation allowance in the amount of $41,751 against these deferred tax assets. During the three months ended September 30, 2024, the Company also performed additional analysis of deferred tax assets that relate to tax benefits
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in future periods from unrealized losses on investments and loans receivable and other debt instruments. The Company believes that it is more-likely-than-not that the Company will not be able to utilize the tax benefits from unrealized losses from these investments and loans receivable and other debt instruments and has provided valuation allowances in the amounts of $70,373 and $87,846, respectively, against these deferred tax assets.
The Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions. The Company is currently under audit by certain federal, state and local, and foreign tax authorities. The audits are in varying stages of completion. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments and closing of statutes of limitations. Such adjustments are reflected in the provision for income taxes, as appropriate. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 2020 to 2023.
Pillar Two
The Pillar Two directive, which was established by the Organization for Economic Co-operation and Development, and which generally provides for a 15% minimum effective tax rate for multinational enterprises, in every jurisdiction in which they operate. While the Company does not anticipate that this will have a material impact on its tax provision or effective tax rate, it will continue to monitor evolving tax legislation in the jurisdictions in which it operates.
NOTE 16 — EARNINGS PER SHARE
Basic earnings per share is calculated by dividing (loss) income from continuing operations, (loss) income from discontinued operations, or net income (loss) by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing (loss) income from continuing operations, (loss) income from discontinued operations, or net income (loss) by the weighted-average number of common shares outstanding, after giving effect to all dilutive potential common shares outstanding during the period. Remeasurements to the carrying value of the redeemable noncontrolling interests in equity of subsidiaries are not deemed to be a dividend. According to ASC 480 - Distinguishing Liabilities from Equity, there is no impact on earnings per share in the computation of basic and diluted earnings per share to common shareholders for changes in the carrying value of the redeemable noncontrolling interests in equity, when such changes in carrying value which in substance approximates fair value.
Potential common shares that were not included in the computation of diluted loss per share because the effect was antidilutive was 2,637,588 as of September 30, 2024. Securities that could potentially dilute basic net income per share in the future that were not included in the computation of diluted net income per share as the effect would be anti-dilutive were 1,169,913 and 1,718,209 during the three and nine months ended September 30, 2023, respectively, because to do so would have been anti-dilutive.
Basic and diluted earnings per share were calculated as follows:
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| Three Months Ended September 30,
| 2024 |  | 2023
| Continuing Operations |  | Discontinued Operations |  | Total |  | Continuing Operations |  | Discontinued Operations |  | Total
Net (loss) income | $ | (148,852) |  |  | $ | (138,746) |  |  | $ | (287,598) |  |  | $ | (100,049) |  |  | $ | 23,741 |  |  | $ | (76,308) |
Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 624 |  |  | (3,825) |  |  | (3,201) |  |  | (3,192) |  |  | 707 |  |  | (2,485) |
Net (loss) income attributable to B. Riley Financial, Inc. | (149,476) |  |  | (134,921) |  |  | (284,397) |  |  | (96,857) |  |  | 23,034 |  |  | (73,823) |
Preferred stock dividends | 2,015 |  |  | — |  |  | 2,015 |  |  | 2,015 |  |  | — |  |  | 2,015 |
Net (loss) income available to common shareholders | $ | (151,491) |  |  | $ | (134,921) |  |  | $ | (286,412) |  |  | $ | (98,872) |  |  | $ | 23,034 |  |  | $ | (75,838) |
| Nine Months Ended September 30,
| 2024 |  | 2023
| Continuing Operations |  | Discontinued Operations |  | Total |  | Continuing Operations |  | Discontinued Operations |  | Total
Net (loss) income | $ | (645,506) |  |  | $ | (123,827) |  |  | $ | (769,333) |  |  | $ | (48,510) |  |  | $ | 32,543 |  |  | $ | (15,967) |
Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests | (397) |  |  | (1,770) |  |  | (2,167) |  |  | (8,049) |  |  | 2,369 |  |  | (5,680) |
Net (loss) income attributable to B. Riley Financial, Inc. | (645,109) |  |  | (122,057) |  |  | (767,166) |  |  | (40,461) |  |  | 30,174 |  |  | (10,287) |
Preferred stock dividends | 6,045 |  |  | — |  |  | 6,045 |  |  | 6,042 |  |  | — |  |  | 6,042 |
Net (loss) income available to common shareholders | $ | (651,154) |  |  | $ | (122,057) |  |  | $ | (773,211) |  |  | $ | (46,503) |  |  | $ | 30,174 |  |  | $ | (16,329) |

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Weighted average common shares outstanding: |  |  |  |  |  |  |
Basic | 30,499,931 |  |  | 29,961,068 |  |  | 30,281,324 |  |  | 28,933,546 |
Effect of dilutive potential common shares: |  |  |  |  |  |  |
Restricted stock units and warrants | — |  |  | — |  |  | — |  |  | — |
Diluted | 30,499,931 |  |  | 29,961,068 |  |  | 30,281,324 |  |  | 28,933,546 |
Basic net (loss) income per common share: |  |  |  |  |  |  |
Continuing operations | $ | (4.97) |  |  | $ | (3.30) |  |  | $ | (21.50) |  |  | $ | (1.61) |
Discontinued operations | (4.42) |  |  | 0.77 |  |  | (4.03) |  |  | 1.05 |
Basic (loss) income per common share | $ | (9.39) |  |  | $ | (2.53) |  |  | $ | (25.53) |  |  | $ | (0.56) |
Diluted net (loss) income per common share: |  |  |  |  |  |  |
Continuing operations | $ | (4.97) |  |  | $ | (3.30) |  |  | $ | (21.50) |  |  | $ | (1.61) |
Discontinued operations | (4.42) |  |  | 0.77 |  |  | (4.03) |  |  | 1.05 |
Diluted (loss) income per common share | $ | (9.39) |  |  | $ | (2.53) |  |  | $ | (25.53) |  |  | $ | (0.56) |

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NOTE 17 — COMMITMENTS AND CONTINGENCIES
(a) Legal Matters
The Company is subject to certain legal and other claims that arise in the ordinary course of its business. In particular, the Company and its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. In addition to such legal and other claims, reviews, investigations, and proceedings, the Company and its subsidiaries are subject to the risk of unasserted claims, including, among others, as it relates to matters related to Mr. Kahn and our investment in Freedom VCM. For example, 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.
On February 14, 2025, a stockholder derivative complaint was filed by Michael Marchner in the Delaware Chancery Court on behalf of the Company and against the members of the Company’s Board of Directors. The complaint alleges that certain of the Company's officers and the board of directors (i) breached their fiduciary duties related to the Company’s involvement with Brian Kahn and subsequent legal issues, (ii) engaged in misconduct, and (iii) wasted corporate assets, including the approval of improper compensation. The Company believes that these claims are meritless and intends to defend this action.
On January 22, 2025, a stockholder derivative complaint was filed by James Smith in the Superior Court for Los Angeles County against the Company, certain of the Company’s executive officers and the members of the Company’s Board of Directors. The complaint alleges that certain of the Company's officers and directors (i) breached their fiduciary duties related to the Company’s involvement with Brian Kahn and subsequent legal issues, (ii) engaged in a waste of corporate assets, and (iii) received unjust enrichment. The Company believes that these claims are meritless and intends to defend this action.
On July 9, 2024, a putative class action was filed by Brian Gale, Mark Noble, Terry Philippas and Lawrence Bass in the Delaware Chancery Court against Freedom VCM, Mr. Kahn, Andrew Laurence, Matthew Avril, and the Company. This complaint alleges that former shareholders of FRG suffered damages due to alleged breaches of fiduciary duties by officers, directors and other participants in the August 2023 management-led take private transaction of FRG and that the Company aided and abetted those alleged breaches of fiduciary duties. The claim seeks an award of unspecified damages, rescissory damages and/or quasi-appraisal damages, disgorgement of profits, attorneys’ fees and expenses, and interest thereon. The Company believes these claims are meritless and intends to defend this action.
On July 3, 2024, each of the Company and Bryant Riley, Chairman and Co-Chief Executive Officer, received a subpoena from the U.S. Securities and Exchange Commission (the "SEC") requesting the production of certain documents and other information primarily related to (i) the Company’s business dealings with Brian Kahn, (ii) certain transactions in an unrelated public company’s securities, and (iii) the communications and related compliance and other policies and procedures of certain of its regulated subsidiaries. On November 22, 2024, each of the Company and Mr. Riley received an additional SEC subpoena requesting the production of certain additional documents and information relating to Franchise Group, Inc. (including its holding company, Freedom VCM Holdings, LLC) as well as Mr. Riley’s personal loan and his pledge of shares of the Company’s common stock as collateral for such loan. As previously disclosed on April 23, 2024, the Audit Committee of the Company’s Board of Directors, with the assistance of Sullivan & Cromwell LLP, the Company’s legal counsel, conducted an internal review, and separately the Audit Committee retained Winston & Strawn LLP, independent legal counsel, to conduct an independent investigation, to review transactions among Mr. Kahn (and his affiliates) and the Company (and its affiliates). The review and the investigation both confirmed that the Company and its executives, including Mr. Riley, had no involvement with, or knowledge of, any alleged misconduct concerning Mr. Kahn or any of his affiliates. The receipt of subpoenas is not an indication that the SEC or its staff has determined that any violations of law have occurred. Both the Company and Mr. Riley are responding to the subpoenas and are fully cooperating with the SEC.
On May 2, 2024, a putative class action was filed by Ted Donaldson in the Superior Court for the State of California, County of Los Angeles on behalf of all persons who acquired the Company’s senior notes pursuant to the shelf registration statement filed with the SEC on Form S-3 dated January 28, 2021, and the prospectuses filed and published on August 4, 2021 and December 2, 2021 (the “Note Offerings”). The action asserts claims under §§ 11, 12, and 15 of the Securities Act
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of 1933, as amended, against the Company, certain of the Company's officers and directors, and the underwriters of the Note Offerings. The complaint alleged that defendants knew or should have known that Mr. Kahn was engaged in illegal activities, including an alleged conspiracy to commit fraud. On September 27, 2024, the plaintiff filed an amended complaint. The amended complaint also asserts claims under §§ 11, 12, and 15 of the Securities Act of 1933, as amended, and alleges that defendants knew or should have known that the risk to the Company from its investments in businesses affiliated with Mr. Kahn and loans to Mr. Kahn and his affiliates was greater than disclosed in the offering documents used in connection with the Note Offerings. The Company believes these claims are meritless and intends to defend this action.
On January 24, 2024, a putative securities class action complaint was filed by Mike Coan in U.S. Federal District Court, Central District of California, against the Company, Mr. Riley, Tom Kelleher and Phillip Ahn (“Defendants”). The purported class includes persons and entities that purchased shares of the Company’s common stock between May 10, 2023 and November 9, 2023. The complaint alleges that (a) the Company failed to disclose to investors that (i) Mr. Kahn, had been implicated in a conspiracy to defraud third party investors, and (ii) the Company financed Mr. Kahn and others in connection with a going private transaction involving FRG, and (b) as a result of the foregoing, the Company engaged in securities fraud in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. A second putative class action lawsuit was filed on March 15, 2024 by the KL Kamholz Joint Revocable Trust (“Kamholz”). This complaint asserts similar allegations as the Coan complaint and covers an alleged class period between February 28, 2022 and November 9, 2023. The Kamholz complaint further alleges that Defendants knew or should have known that Mr. Kahn was engaged in illegal activities, including a conspiracy to commit fraud, and nonetheless proceeded with the FRG going-private transaction. On August 8, 2024, the Court entered an order consolidating the two actions. The Company cannot estimate the amount of potential liability, if any, that could arise from these matters and believes these claims are meritless and intends to defend these actions.
On September 21, 2023, the Company received a demand alleging that certain payments in the aggregate amount of approximately $32,166 made by Sorrento Therapeutics, Inc. (“Sorrento”), a chapter 11 debtor in U.S. Bankruptcy Court, Southern District of Texas, to B. Riley Commercial Capital, LLC (“BRCC”), pursuant to that certain Bridge Loan Agreement dated September 30, 2022 between Sorrento and BRCC, are avoidable as preferential transfers. The parties have entered into a tolling agreement. The Company believes the Sorrento Unsecured Creditors Committee’s preference claims lack merit, and the Company intends to assert its statutory defenses to defeat the claim.
In light of the significant factual issues to be resolved with respect to the asserted claims and other proceedings described above and uncertainties regarding unasserted claims described above, at the present time reasonably possible losses cannot be estimated with respect to the asserted and unasserted claims described in the preceding paragraphs.
(b) Babcock & Wilcox Commitments and Guarantees
On January 18, 2024, the Company entered into a guaranty (the “Axos Guaranty”) in favor of (i) Axos Bank, in its capacity as administrative agent (the “Administrative Agent”) for the secured parties under that certain credit agreement, dated as of January 18, 2024, among Babcock & Wilcox Enterprises, Inc. (“B&W”), the guarantors party thereto, the lenders party thereto and the Administrative Agent (the “B&W Axos Credit Agreement”), and (ii) the secured parties. Subject to the terms and conditions of the Axos Guaranty, the Company has guaranteed certain obligations of B&W (subject to certain limitations) under the B&W Axos Credit Agreement, including the obligation to repay outstanding loans and letters of credit and to pay earned interest, fees costs and expenses of enforcing the Axos Guaranty, provided however, that the Company’s obligations with respect to the principal amount of credit extensions and unreimbursed letter of credit obligations under the B&W Axos Credit Agreement shall not at any time exceed $150,000 in the aggregate, which is the maximum potential amount of future payments under the guaranty. In consideration for the agreements and commitments under the Axos Guaranty and pursuant to a separate fee and reimbursement agreement, B&W has agreed to pay the Company a fee equal to 2.00% of the aggregate revolving commitments (as defined in the B&W Axos Credit Agreement) under the B&W Axos Credit Agreement, payable quarterly and, at B&W’s election, in cash in full or 50% in cash and 50% in the form of penny warrants.
On June 30, 2021, the Company agreed to guaranty (the “Cash Collateral Provider Guaranty”) up to $110,000 of obligations that B&W may owe to providers of cash collateral pledged in connection with a debt financing for B&W. The Cash Collateral Provider Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of B&W’s obligations under a reimbursement agreement with respect to such cash collateral. B&W will pay the Company $935 per annum in connection with the Cash Collateral Provider Guaranty. B&W has agreed to reimburse the Company to the extent the Cash Collateral Provider Guaranty is called upon. As of December 31, 2023, the Cash Collateral Provider Guaranty was in respect of up to $90,000 of B&W obligations after B&W made paydowns of
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$10,000 during the year ended December 31, 2023. As of September 30, 2024, the Cash Collateral Provider Guaranty was up to zero of B&W obligations after B&W made paydowns of $88,350 during the nine months ended September 30, 2024.
On December 22, 2021, the Company entered into a general agreement of indemnity in favor of one of B&W’s sureties. Pursuant to this indemnity agreement, the Company agreed to indemnify the surety in connection with a default by B&W under a €30,000 payment and performance bond issued by the surety in connection with a construction project undertaken by B&W. In consideration for providing the indemnity, B&W paid the Company fees in the amount of $1,694 on January 20, 2022.
On August 10, 2020, the Company entered into a project specific indemnity rider to a general agreement of indemnity made by B&W in favor of one of its sureties. Pursuant to the indemnity rider, the Company agreed to indemnify the surety in connection with a default by B&W under the underlying indemnity agreement relating to a $29,970 payment and performance bond issued by the surety in connection with a construction project undertaken by B&W. In consideration for providing the indemnity rider, B&W paid the Company fees in the amount of $600 on August 26, 2020. During the period ended September 30, 2024 and December 31, 2023, the indemnity rider was reduced to $2,997 and $5,994.
(c) FRG Commitments
On May 10, 2023, the Company entered into certain agreements pursuant to which the Company had, among other things, agreed to provide certain equity funding and other support in connection with the acquisition (the “Acquisition”) by Freedom VCM, Inc., a Delaware corporation (the “Parent”), of FRG. The Company entered into an Equity Commitment Letter with Freedom VCM (“TopCo”), the parent company of the Parent, and the Parent, pursuant to which the Company agreed to provide to TopCo, at or prior to the closing of the Acquisition, an amount equal to up to $560,000 in equity financing. The Company and FRG also entered into a Limited Guarantee in favor of FRG, pursuant to which the Company agreed to guarantee to FRG the due and punctual payment, performance and discharge when required by Parent or its subsidiary to FRG of certain liabilities and obligations of the Parent or such subsidiary. On August 21, 2023, in connection with the completion of the Acquisition and the Company's portion of the equity financing, the Company's obligations pursuant to the Equity Commitment Letter and Limited Guarantee were satisfied and the Company was paid the $16,500 fee pursuant to the Equity Commitment Letter and Limited Guarantee and the Company has no current commitment or guarantees related to FRG.
(d) Other Commitments
In the normal course of business, the Company enters into commitments to its clients in connection with capital raising transactions, such as firm commitment underwritings, equity lines of credit, or other commitments to provide financing on specified terms and conditions. These commitments require the Company to purchase securities at a specified price or otherwise provide debt or equity financing on specified terms. Securities underwriting exposes the Company to market and credit risk, primarily in the event that, for any reason, securities purchased by the Company cannot be distributed at the anticipated price and to balance sheet risk in the event that debt or equity financing commitments cannot be syndicated. With respect to one of the Company’s investments, a wholly owned subsidiary of the Company entered into an agreement whereby the subsidiary may be required, commencing in August 2027 and expiring in August 2028, to purchase additional equity capital at fair value which was originally valued at $15,000.
NOTE 18 — SHARE-BASED PAYMENTS
(a) Employee Stock Incentive Plans
Under the 2021 Stock Incentive Plan (the “2021 Plan”), share-based compensation expense for restricted stock units under the Company’s 2021 Plan was:
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| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Share-based compensation expense for restricted stock units for continuing operations | $ | 2,216 |  |  | $ | 9,849 |  |  | $ | 15,650 |  |  | $ | 32,046 |
Share-based compensation expense for restricted stock units for discontinued operations | 372 |  |  | 580 |  |  | 1,352 |  |  | 1,926 |
Total share-based compensation expense for restricted stock units | $ | 2,588 |  |  | $ | 10,429 |  |  | $ | 17,002 |  |  | $ | 33,972 |

During the nine months ended September 30, 2024, in connection with employee stock incentive plans, the Company granted 1,223,263 restricted stock units with a grant date fair value of $16,181. During the nine months ended September 30, 2023, in connection with employee stock incentive plans, the Company granted 537,168 restricted stock units with a grant date fair value of $20,496. The restricted stock units generally vest over a period of one to five years based on continued service. Performance based restricted stock units generally vest based on both the employee’s continued service and the achievement of a set threshold of the Company’s common stock price, as defined in the grant, during the two to three-year period following the grant. In determining the fair value of restricted stock units on the grant date, the fair value is adjusted for (a) estimated forfeitures, (b) expected dividends based on historical patterns and the Company’s anticipated dividend payments over the expected holding period and (c) the risk-free interest rate based on U.S. Treasuries for a maturity matching the expected holding period.
(b) Employee Stock Purchase Plan
In connection with the Company’s Employee Stock Purchase Plan (the “Purchase Plan”), share based compensation was:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Share-based compensation expense for Employee Stock Purchase Plan for continuing operations | $ | 64 |  |  | $ | 114 |  |  | $ | 340 |  |  | $ | 485 |
Share-based compensation expense for Employee Stock Purchase Plan for discontinued operations | 8 |  |  | 18 |  |  | 39 |  |  | 71 |
Total share-based compensation expense for Employee Stock Purchase Plan | $ | 72 |  |  | $ | 132 |  |  | $ | 379 |  |  | $ | 556 |

As of September 30, 2024 and December 31, 2023, there were 236,949, shares reserved for issuance under the Purchase Plan.
(c) Common Stock
Since October 30, 2018, the Company’s Board of Directors has authorized annual share repurchase programs of up to $50,000 of its outstanding common shares. All share repurchases were effected on the open market at prevailing market prices or in privately negotiated transactions. During the nine months ended September 30, 2024, the Company repurchased zero shares of its common stock. During the nine months ended September 30, 2023, the Company repurchased 1,452,831 shares of its common stock for $53,688, which represents an average price of $36.95 per common share. The shares repurchased under the program are retired. In November 2023, the share repurchase program was reauthorized by the Board of Directors for share repurchases up to $50,000 of the Company's outstanding common shares and the reauthorized program expired in October 2024. Amounts purchased prior to November 2023 relate to the previously authorized share repurchase program. As of September 30, 2024 and December 31, 2023, $34,206 remain available for common share repurchases under the share repurchase program.
On July 28, 2023, the Company issued 2,090,909 shares of common stock through a public offering at a price of $55.00 per share for net proceeds of $114,507 after underwriting fees and costs.
On October 28, 2019, the Company issued 200,000 warrants to purchase common stock of the Company (the “BR Brands Warrants”) in connection with the acquisition of a majority ownership interest in BR Brand Holdings LLC. The BR
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Brands Warrants entitle the holders of the warrants to acquire shares of the Company’s common stock from the Company at an exercise price of $26.24 per share. One-third of the BR Brands Warrants immediately vested and became exercisable upon issuance, and the remaining two-thirds of warrants vested and became exercisable on the second anniversary of the closing, upon the BR Brands’ satisfaction of specified financial performance targets. The BR Brands warrants expire in February 2025. In April 2024, 200,000 shares of the Company's common stock were issued in connection with the exercise of warrants for cash in the amount of $653. As of September 30, 2024 and December 31, 2023, zero and 200,000 BR Brands warrants were outstanding, respectively.
(d) Preferred Stock
During the nine months ended September 30, 2024 and 2023, the Company issued zero depository shares of the Series A Preferred Stock. There were 2,834 shares issued and outstanding as of September 30, 2024 and December 31, 2023. Total liquidation preference for the Series A Preferred Stock as of September 30, 2024 and December 31, 2023 was $70,854. Dividends on the Series A preferred paid during the nine months ended September 30, 2024 and 2023 were $0.4296875 per depository share.
During the nine months ended September 30, 2024 and 2023, the Company issued zero and 18 depository shares of the Series B Preferred Stock, respectively. There were 1,729 shares issued and outstanding as of September 30, 2024 and December 31, 2023. Total liquidation preference for the Series B Preferred Stock as of September 30, 2024 and December 31, 2023 was $43,228. Dividends on the Series B preferred paid during the nine months ended September 30, 2024 and 2023 were $0.4609375 per depository share.
NOTE 19 — NET CAPITAL REQUIREMENTS
BRS and B. Riley Wealth Management (“BRWM”), the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory Authority, Inc. (“FINRA”). The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. As such, they are subject to the minimum net capital requirements promulgated by the SEC. As of September 30, 2024, BRS had net capital of $72,379, which was $69,538 in excess of required minimum net capital of $2,841; and BRWM had net capital of $15,479, which was $13,982 in excess of required minimum net capital of $1,497.
As of December 31, 2023, BRS had net capital of $134,561, which was $130,163 in excess of its required minimum net capital of $4,398; and BRWM had net capital of $12,328, which was $10,431 in excess of its required minimum net capital of $1,897.
NOTE 20 — RELATED PARTY TRANSACTIONS
The Company provides asset management and placement agent services to unconsolidated funds affiliated with the Company (the “Funds”). In connection with these services, the Funds may bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the Funds. Management fees from the Funds during the three months ended September 30, 2024 and 2023 totaled $6 and $1,392, respectively, and during the nine months ended September 30, 2024 and 2023 totaled $149 and $2,086, respectively.
As of September 30, 2024 and December 31, 2023, amounts due from related parties were $189 and $172, respectively, of which $189 and $172, respectively, were due from the Funds for management fees and other operating expenses.
As of September 30, 2024 and December 31, 2023, amounts due to related parties were $4,112 and $2,480, respectively, of which $3,553 and $2,480, respectively, related to bebe’s rent to own stores which are franchised through Freedom VCM and consist of royalty fees, inventory purchases, marketing, and IT services. As of September 30, 2024, $559 were due to certain of the Company's brand investments from Nogin for sales transactions settled by Nogin as part of its e-commerce related services to the Company’s brand investments.
During the three and nine months ended September 30, 2024, royalty fees, marketing, and IT services charged to bebe by Freedom VCM totaled $1,176 and $3,701, respectively, and inventory purchases by bebe from Freedom VCM totaled $3,877 and $10,636, respectively. During the three and nine months ended September 30, 2024, Nogin recognized revenues of $559 and $2,314 from clients that are part of the Company’s brand investments.
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In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P. (“Whitehawk”), a limited partnership controlled by Mr. J. Ahn, who is the brother of Phil Ahn, the Company’s Chief Financial Officer and Chief Operating Officer. Whitehawk has agreed to provide investment advisory services for GACP I, L.P. and GACP II, L.P. During the three months ended September 30, 2024 and 2023, management fees paid for investment advisory services by Whitehawk were zero. During the nine months ended September 30, 2024 and 2023, management fees paid for investment advisory services by Whitehawk were $1,237 and $1,142, respectively. On February 1, 2024, one of the Company's loans receivable with a principal amount of $4,521 was sold to a fund managed by Whitehawk for $4,584.
The Company periodically participates in loans and financing arrangements for which the Company has an equity ownership and representation on the board of directors (or similar governing body). The Company may also provide consulting services or investment banking services to raise capital for these companies. These transactions can be summarized as follows:
Babcock and Wilcox
One of the Company’s wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the Company to serve as the Chief Executive Officer of B&W until November 30, 2020 (the “Executive Consulting Agreement”), unless terminated by either party with thirty days written notice. The agreement was extended through December 31, 2028. Under this agreement, fees for services provided are $750 per annum, paid monthly. In addition, subject to the achievement of certain performance objectives as determined by B&W’s compensation committee of the board, a bonus or bonuses may also be earned and payable to the Company. In March 2022, a $1,000 performance fee was approved in accordance with the Executive Consulting Agreement. On September 20, 2024, Kenny Young resigned from his position as the President of the Company and the Executive Consulting Agreement with B&W was terminated. Mr. Young entered into a one-year consulting agreement concurrently to provide services to the Company, pursuant to which he will be paid an annual fee of $250 paid monthly.
During the three months ended September 30, 2024 and 2023, the Company earned $1,061 and zero, respectively, and during the nine months ended September 30, 2024 and 2023, the Company earned $2,778 and zero, respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.
The Company is also a party to indemnification agreements for the benefit of B&W and the B. Riley Guaranty, each as disclosed above in Note 17 – Commitments and Contingencies.
The Arena Group Holdings, Inc. (fka the Maven, Inc.)
The Company had loans receivable due from The Arena Group Holdings, Inc. (fka the Maven, Inc.) (“Arena”) included in loans receivable, at fair value of $98,729 as of December 31, 2022. On August 31, 2023, the Arena loan was amended for an additional $6,000 loan receivable with interest payable at 10.0% per annum and a maturity date of December 31, 2026. Two of the Company's members of senior management were members of the board of directors of Arena. On December 1, 2023, the Company sold its equity interest in Arena for $16,576 at a gain of $3,315 and its outstanding loans receivable for $78,796 at a loss of $28,919. Following the completion of the sale, two of the Company's members of senior management resigned from the board of directors of Arena and Arena is no longer a related party. Interest income on the loan receivable was $3,100 and $8,971 during the three and nine months ended September 30, 2023, respectively. There were no fees earned from Arena by the Company during the three and nine months ended September 30, 2023.
Applied Digital
On May 20, 2023, the Company entered into a loan agreement with Applied Digital (“APLD”). The chief executive officer of APLD was also a member of senior management of the Company. As of December 31, 2023, APLD had paid off its outstanding loan receivable balance with the Company, and the Company had an unfunded loan commitment with APLD of $5,500. On February 5, 2024, the loan was terminated and no commitments remain.
California Natural Resources Group, LLC.
California Natural Resources Group, LLC (“CalNRG”) was a related party as a result of the Company's approximately 25.0% equity ownership. On May 23, 2024, the Company sold its equity interest in CalNRG for $9,272 resulting in a realized gain of $254, and no commitments remain.
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Freedom VCM Holdings, LLC
On May 10, 2023, the Company entered into certain agreements pursuant to which the Company had, among other things, agreed to provide certain equity funding and other support as part of the FRG take-private transaction as previously discussed in Note 2(i). The Company entered into an Equity Commitment Letter with Freedom VCM, pursuant to which the Company agreed to provide up to $560,000 in equity financing at or prior to the closing of the FRG take-private transaction. On August 21, 2023, in connection with the completion of the FRG take-private transaction, the Company's obligations pursuant to the Equity Commitment Letter and Limited Guarantee were satisfied. Upon closing the acquisition on August 21, 2023, the Company was paid an equity commitment fee of $16,500 which is included in services and fees revenues. At the time of the Company's equity investment on August 21, 2023, the Company's chief executive officer became a member of the board of directors of Freedom VCM.
On August 21, 2023, the Company purchased an equity interest in Freedom VCM for $216,500, which resulted in a total equity interest of $281,144 and a 31% voting interest and representation on the board of directors of Freedom VCM as part of the FRG take-private transaction as previously discussed in Note 2(i). As part of the FRG take-private transaction, certain members of management of Freedom VCM, which are related parties to Freedom VCM, exchanged their equity interest in FRG for a combined 35% voting interest in Freedom VCM, of which Mr. Kahn and his wife and one of Mr. Kahn’s affiliates comprised 32%. The Company has a first priority security interest in a 25% equity interest of Mr. Kahn (who was also CEO and a board member of Freedom VCM) in Freedom VCM to secure the loan to an affiliate of Mr. Kahn as more fully described in Note 2(h). Subsequent to September 30, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024 which impacts the fair value of this equity investment. The change in fair value of the Freedom VCM equity investment was an unrealized loss of $63,674 and $287,043 for the three and nine months ended September 30, 2024.
In connection with the FRG take-private transaction, all of the equity interests of BRRII, a majority-owned subsidiary of the Company, were sold to Freedom VCM Receivables (a subsidiary of Freedom VCM), for a purchase price of $58,872 which resulted in a loss of $78 on August 21, 2023. In connection with the sale, Freedom VCM Receivables assumed the obligations with respect to the Pathlight Credit Agreement as more fully discussed in Note 11 and as consideration for the purchase price, 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. Payments of principal and interest on the note are limited solely to the performance of certain receivables held by BRRII. Principal and interest is payable based on the collateral without recourse to Freedom VCM Receivables, which includes the performance of certain consumer credit receivables. This loan receivable was measured at fair value in the amount of $9,310 and $42,183 as of September 30, 2024 and December 31, 2023. Interest income on the loan receivable was $1,538 and $5,930 during the three and nine months ended September 30, 2024, respectively. Interest income on the loan receivable was $1,173 during the three and nine months ended September 30, 2023. On October 9, 2024, the Promissory Note was cancelled and certain of the receivables owned by BRRII were transferred to BRRI, all in accordance with the terms of that certain amended and restated funding agreement, dated December 18, 2023, by and among Freedom VCM Interco Holdings, Inc., Freedom VCM Receivables, Inc., BRRII, the Company and certain other parties thereto.
As more fully described in Note 2(h), the Company also has a related party loan receivable with a fair value of approximately $3,141 and $20,624 at September 30, 2024 and December 31, 2023 from home-furnishing retailer W.S. Badcock Corporation (“Badcock”) that is collateralized by consumer finance receivables of Badcock. These consumer finance receivables were acquired from Badcock in multiple purchases beginning in December 2021. On December 18, 2023, Badcock was sold by Freedom VCM to Conn’s and the Company loaned Conn’s $108,000 pursuant to the Conn’s Term Loan which bears interest at an aggregate rate per annum equal to the Term SOFR Rate (as defined in the Conn’s Term Loan), subject to a 4.80% floor, plus a margin of 8.00% and matures on February 20, 2027. On February 14, 2024, the Company collected $15,000 of principal payments which reduced the loan balance to $93,000. Badcock now operates as a wholly owned subsidiary of Conn’s. During the three and nine months ended September 30, 2024, interest income on these loans totaled zero and $7,538, respectively. The commencement of the Chapter 11 Cases constitute an event of default that accelerated the obligations under the Conn’s Term Loan. As of the date of the filing of the Chapter 11 Cases, $93,000 in outstanding borrowings existed under the Conn’s Term Loan. Any efforts to enforce payment obligations under the Conn’s Term Loan are automatically stayed as a result of the Chapter 11 Cases and the Company’s rights of enforcement in respect of the Conn’s Term Loan are subject to the applicable provisions of the Bankruptcy Code. These loan receivables are reported as related party loan receivables due to the Company’s related party relationship with Freedom VCM and Freedom VCM’s ability to exercise influence over Conn’s as a result of the equity consideration Freedom VCM received from the sale of Badcock to Conn’s on December 18, 2023.
On June 27, 2024, Conn’s entered into a Consulting Agreement, as subsequently amended on July 19, 2024 (the “Consulting Agreement”), with an affiliate of the Company. Pursuant to the Consulting Agreement, Conn’s engaged the Company to sell merchandise and furniture, fixtures, & equipment (“FF&E”) as well as additional goods at Conn’s and Badcock stores, headquarters, distribution centers, and cross-dock locations. The Company will receive a fee of 1.75% of
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the gross proceeds of merchandise sold where the gross recovery on cost thresholds is below 105% of cost, 2.0% of the gross proceeds of merchandise sold where the gross recovery on cost thresholds is between 105.1% of cost and 109.9% of cost, and 2.25% of the gross proceeds of merchandise sold where the gross recovery on cost thresholds is 110% of cost or more. The Company will also receive a fee equal to 15% of the gross proceeds of FF&E sales and 92.5% of the gross proceeds from the sale of additional goods. In connection with the Chapter 11 Cases, the Consulting Agreement was assumed by the Conn’s debtors on an interim basis, and on August 22, 2024, the Consulting Agreement was assumed by the Conn’s debtors on a final basis.
Vintage Capital Management - Brian Kahn
Simultaneously with the completion of the FRG take-private transaction, one of our subsidiaries and VCM, an affiliate of Brian Kahn, amended and restated a promissory note (the “Amended and Restated Note”), pursuant to which VCM owes our subsidiary the aggregate principal amount of $200,506 and bears interest at the rate of 12.00% 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 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. Interest income was $3,409 and $15,573 during the three and nine months ended September 30, 2024, respectively. Interest income was $2,740 during the three and nine months ended September 30, 2023. The fair value of the Freedom VCM equity interest owned by Mr. Kahn and his spouse was zero and $232,065 as of September 30, 2024 and December 31, 2023, respectively. On November 3, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code which impacts the collateral for this loan receivable. The fair value of the loan $2,250 at September 30, 2024 has been determined based on the underlying collateral for this loan which is primarily comprised of other securities. The fair value adjustment on the VCM loan receivable was $(54,333) and $(222,718) for the three and nine months ended September 30, 2024. The fair value of the underlying collateral for this loan decreased to a fair value of $2,154 at February 7, 2025. The $2,154 is comprised of other public securities. In light of the Company’s determination that the repayment of the Amended and Restated Note will be paid primarily from the cash distributions from Freedom VCM or foreclosure on the underlying collateral provided by Mr. Kahn and his spouse being in Freedom VCM equity interests, the Company has determined that both VCM and Mr. Kahn are related parties as of September 30, 2024 and December 31, 2023.
Torticity, LLC
On November 2, 2023, the Company agreed to lend up to $15,369 to Torticity, LLC, of which $6,690 was drawn upon with $8,679 remaining, with interest payable of 15.0% per annum and a maturity date of November 2, 2026. Interest income was $1,281 and $3,746 during the three and nine months ended September 30, 2024, respectively. One of the Company's members of senior management is on the board of directors of Torticity. The loan receivable had a fair value of $17,986 and $6,791 as of September 30, 2024 and December 31, 2023, respectively, and is included in the Company's loans receivable, at fair value in the condensed consolidated balance sheets.
Kanaci Technologies, LLC
On November 21, 2023, the Company agreed to lend up to $10,000 to Kanaci Technologies, LLC (“Kanaci”), of which $4,000 was drawn upon with $6,000 remaining, with interest payable of 15.0% per annum and a maturity date of June 30, 2026. Interest income was $1,244 and $2,088 during the three and nine months ended September 30, 2024. In June 2023, one of the Company's members of senior management was appointed to the board of directors of Kanaci. The loan receivable in the amount of $11,453 was converted to equity on September 30, 2024. At December 31, 2023, the loan receivable with a fair value of $3,904 is included in loans receivable, at fair value in the condensed consolidated balance sheets.
Other
On March 2, 2021, the Company purchased a $2,400 minority equity interest in Dash Medical Holdings, LLC ("Dash") and one of the Company's members of senior management was appointed to the board of directors of Dash. On June 13, 2024, the Company sold its equity interest in Dash for $2,760, resulting in a realized gain of $360. In December 2024, the Company earned an advisory fee of $2,650 for services in connection with sale of Q-mation, Inc. where one of the board of directors of the Company is the president of Q-mation, Inc.
On March 10, 2023, the Company sold a loan receivable including accrued interest in the amount of $7,600 to two related parties. BRC Partners Opportunity Fund, LP (“BRCPOF”) purchased $3,519 of the loan receivable including accrued interest and 272 Capital L.P. (“272LP”) purchased $4,081 of the loan receivable including accrued interest; both of
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the partnerships are private equity funds managed at the time of the transaction by one of the Company’s subsidiaries. Our executive officers and members of our board of directors have a 58.2% financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 24.9% in the BRCPOF as of September 30, 2024 and December 31, 2023. Our executive officers and members of our board of directors had a 15.3% financial interest in the 272LP as of December 31, 2023. On February 5, 2024, the Company sold its interest in 272LP and 272 Advisors, LLC for a promissory note of $2,000 plus additional revenue sharing up to $4,100, which is based on future management fees earned.
The Company often provides consulting or investment banking services to raise capital for companies in which the Company has significant influence through equity ownership, representation on the board of directors (or similar governing body), or both. During the three months ended September 30, 2024 and 2023, the Company earned $601 and $2,439 of fees related to these services, respectively. During the nine months ended September 30, 2024 and 2023, the Company earned $1,325 and $3,253 of fees related to these services, respectively.
NOTE 21 — BUSINESS SEGMENTS
The Company’s business is classified into five reportable operating segments: the Capital Markets segment, Wealth Management segment, Financial Consulting segment, Communications segment, and Consumer Products segment. These reportable segments are all distinct businesses, each with a different marketing strategy and management structure. During the fourth quarter of 2023, management reassessed the Company's previously reported Consumer segment due to organizational changes and financial information provided to the CODM. These changes resulted in Targus’ operations being reported on a stand alone basis in the Consumer Products segment and the operations related to brand licensing that was previously reported in the Consumer segment being reported in the All Other Category that is reported with Corporate and Other. The Great American Group discontinued operations, as discussed in Note 4, resulted in changes to the Financial Consulting segment and the elimination of the Auction and Liquidation segment as of September 30, 2024.
As a result of the changes discussed above, the Company has recast the financial data for the segments and reporting of the All Other Category for all periods presented. The following is a summary of certain financial data for each of the Company’s reportable segments:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Capital Markets segment: |  |  |  |  |  |  |
Revenues - Services and fees | $ | 30,437 |  |  | $ | 80,913 |  |  | $ | 141,026 |  |  | $ | 183,803 |
Trading (loss) income | (1,908) |  |  | (10,217) |  |  | (52,787) |  |  | 29,488 |
Fair value adjustment on loans | (71,477) |  |  | (860) |  |  | (259,260) |  |  | 51,623 |
Interest income - loans | 11,251 |  |  | 27,397 |  |  | 51,894 |  |  | 102,535 |
Interest income - securities lending | 7,007 |  |  | 42,333 |  |  | 69,614 |  |  | 119,580 |
Total revenues | (24,690) |  |  | 139,566 |  |  | (49,513) |  |  | 487,029 |
Selling, general and administrative expenses | (30,453) |  |  | (62,898) |  |  | (133,483) |  |  | (174,479) |
Impairment of tradenames | — |  |  | — |  |  | — |  |  | (1,733) |
Interest expense - Securities lending and loan participations sold | (6,359) |  |  | (38,368) |  |  | (65,055) |  |  | (106,572) |
Depreciation and amortization | (817) |  |  | (900) |  |  | (2,333) |  |  | (3,149) |
Segment (loss) income | (62,319) |  |  | 37,400 |  |  | (250,384) |  |  | 201,096 |
Wealth Management segment: |  |  |  |  |  |  |
Revenues - Services and fees | 49,389 |  |  | 50,875 |  |  | 150,153 |  |  | 146,660 |
Trading income | 670 |  |  | 490 |  |  | 2,561 |  |  | 2,235 |
Total revenues | 50,059 |  |  | 51,365 |  |  | 152,714 |  |  | 148,895 |
Selling, general and administrative expenses | (48,234) |  |  | (47,891) |  |  | (145,439) |  |  | (143,177) |
Restructuring charge | — |  |  | — |  |  | — |  |  | (61) |
Depreciation and amortization | (1,045) |  |  | (1,075) |  |  | (3,148) |  |  | (3,243) |
Segment income (loss) | 780 |  |  | 2,399 |  |  | 4,127 |  |  | 2,414 |

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Financial Consulting segment: |  |  |  |  |  |  |
Revenues - Services and fees | 23,941 |  |  | 20,225 |  |  | 69,383 |  |  | 52,325 |
Selling, general and administrative expenses | (19,705) |  |  | (17,843) |  |  | (56,277) |  |  | (42,932) |
Depreciation and amortization | (108) |  |  | (82) |  |  | (276) |  |  | (234) |
Segment income | 4,128 |  |  | 2,300 |  |  | 12,830 |  |  | 9,159 |
Communications segment: |  |  |  |  |  |  |
Revenues - Services and fees | 66,241 |  |  | 82,155 |  |  | 225,055 |  |  | 250,523 |
Revenues - Sale of goods | 1,318 |  |  | 1,638 |  |  | 4,079 |  |  | 5,145 |
Total revenues | 67,559 |  |  | 83,793 |  |  | 229,134 |  |  | 255,668 |
Direct cost of services | (36,253) |  |  | (46,012) |  |  | (131,346) |  |  | (136,830) |
Cost of goods sold | (1,350) |  |  | (1,750) |  |  | (4,323) |  |  | (5,964) |
Selling, general and administrative expenses | (16,665) |  |  | (21,655) |  |  | (54,136) |  |  | (64,440) |
Restructuring charge | (116) |  |  | (145) |  |  | (379) |  |  | (402) |
Depreciation and amortization | (4,868) |  |  | (6,739) |  |  | (16,750) |  |  | (19,775) |
Segment income | 8,307 |  |  | 7,492 |  |  | 22,200 |  |  | 28,257 |
Consumer Products segment: |  |  |  |  |  |  |
Revenues - Sale of goods | 49,793 |  |  | 58,391 |  |  | 152,739 |  |  | 179,156 |
Cost of goods sold | (36,406) |  |  | (40,467) |  |  | (109,270) |  |  | (123,526) |
Selling, general and administrative expenses | (14,959) |  |  | (16,214) |  |  | (45,602) |  |  | (51,990) |
Depreciation and amortization | (1,934) |  |  | (2,595) |  |  | (5,862) |  |  | (7,784) |
Restructuring charge | — |  |  | (83) |  |  | (546) |  |  | (486) |
Impairment of goodwill and tradenames | — |  |  | (35,500) |  |  | (27,681) |  |  | (35,500) |
Segment loss | (3,506) |  |  | (36,468) |  |  | (36,222) |  |  | (40,130) |
Consolidated operating (loss) income from reportable segments | (52,610) |  |  | 13,123 |  |  | (247,449) |  |  | 200,796 |
All Other: |  |  |  |  |  |  |
Revenues - Services and fees | 28,506 |  |  | 9,928 |  |  | 75,329 |  |  | 28,870 |
Revenues - Sale of goods | 4,137 |  |  | — |  |  | 7,436 |  |  | — |
Total revenues | 32,643 |  |  | 9,928 |  |  | 82,765 |  |  | 28,870 |
Direct cost of services | (13,406) |  |  | (6,604) |  |  | (36,662) |  |  | (19,543) |
Cost of goods sold | (2,556) |  |  | — |  |  | (5,304) |  |  | — |
Corporate and other expenses | (45,817) |  |  | (24,429) |  |  | (114,071) |  |  | (68,761) |
Interest income | 1,438 |  |  | 180 |  |  | 2,909 |  |  | 3,455 |
Dividend income | 675 |  |  | 3,373 |  |  | 4,139 |  |  | 9,541 |
Realized and unrealized (losses) gains on investments | (22,197) |  |  | (77,287) |  |  | (212,362) |  |  | (77,020) |
Change in fair value of financial instruments and other | 476 |  |  | (4,170) |  |  | 627 |  |  | (3,998) |
Income from equity investments | 6 |  |  | (308) |  |  | 12 |  |  | (175) |
Interest expense | (32,996) |  |  | (37,493) |  |  | (102,195) |  |  | (118,630) |
Loss from continuing operations before income taxes | (134,344) |  |  | (123,687) |  |  | (627,591) |  |  | (45,465) |
Provision for income taxes | (14,508) |  |  | 23,638 |  |  | (17,915) |  |  | (3,045) |
Loss from continuing operations | (148,852) |  |  | (100,049) |  |  | (645,506) |  |  | (48,510) |
(Loss) income from discontinued operations, net of income taxes | (138,746) |  |  | 23,741 |  |  | (123,827) |  |  | 32,543 |
Net loss | (287,598) |  |  | (76,308) |  |  | (769,333) |  |  | (15,967) |
Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | (3,201) |  |  | (2,485) |  |  | (2,167) |  |  | (5,680) |
Net (loss) income attributable to B. Riley Financial, Inc. | (284,397) |  |  | (73,823) |  |  | (767,166) |  |  | (10,287) |

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Preferred stock dividends | 2,015 |  |  | 2,015 |  |  | 6,045 |  |  | 6,042 |
Net (loss) income available to common shareholders | $ | (286,412) |  |  | $ | (75,838) |  |  | $ | (773,211) |  |  | $ | (16,329) |

The following table presents revenues by geographical area:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues |  |  |  |  |  |  |
Services and fees |  |  |  |  |  |  |
North America | $ | 198,514 |  |  | $ | 244,096 |  |  | $ | 660,946 |  |  | $ | 662,181 |
Trading (loss) income |  |  |  |  |  |  |
North America | (1,238) |  |  | (9,727) |  |  | (50,226) |  |  | 31,723 |
Fair value adjustments on loans |  |  |  |  |  |  |
North America | (71,477) |  |  | (860) |  |  | (259,260) |  |  | 51,623 |
Interest income - loans |  |  |  |  |  |  |
North America | 11,251 |  |  | 27,397 |  |  | 51,894 |  |  | 102,535 |
Interest income - securities lending |  |  |  |  |  |  |
North America | 7,007 |  |  | 42,333 |  |  | 69,614 |  |  | 119,580 |
Sale of goods |  |  |  |  |  |  |
North America | 30,218 |  |  | 31,068 |  |  | 87,984 |  |  | 98,422 |
Australia | 2,735 |  |  | 2,394 |  |  | 9,196 |  |  | 9,023 |
Europe, Middle East, and Africa | 14,556 |  |  | 17,162 |  |  | 41,508 |  |  | 49,896 |
Asia | 5,540 |  |  | 7,224 |  |  | 18,674 |  |  | 19,765 |
Latin America | 2,199 |  |  | 2,181 |  |  | 6,892 |  |  | 7,195 |
Total - Sale of goods | 55,248 |  |  | 60,029 |  |  | 164,254 |  |  | 184,301 |
Total Revenues |  |  |  |  |  |  |
North America | 174,275 |  |  | 334,307 |  |  | 560,952 |  |  | 1,066,064 |
Australia | 2,735 |  |  | 2,394 |  |  | 9,196 |  |  | 9,023 |
Europe, Middle East, and Africa | 14,556 |  |  | 17,162 |  |  | 41,508 |  |  | 49,896 |
Asia | 5,540 |  |  | 7,224 |  |  | 18,674 |  |  | 19,765 |
Latin America | 2,199 |  |  | 2,181 |  |  | 6,892 |  |  | 7,195 |
Total Revenues | $ | 199,305 |  |  | $ | 363,268 |  |  | $ | 637,222 |  |  | $ | 1,151,943 |

The following table presents long-lived assets, which consists of property and equipment, net, by geographical area:
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| September 30, 2024 |  | December 31, 2023
Long-lived Assets - Property and Equipment, net: |  |  |
North America | $ | 43,001 |  |  | $ | 24,594 |
Europe | 262 |  |  | 396 |
Asia Pacific | 96 |  |  | 133 |
Australia | 63 |  |  | 83 |
Total | $ | 43,422 |  |  | $ | 25,206 |

Segment assets are not reported to, or used by, the Company’s Chief Operating Decision Maker to allocate resources to, or assess performance of the segments and therefore, total segment assets have not been disclosed.
NOTE 22 — SUBSEQUENT EVENTS
Brands Transaction
On October 25, 2024, our wholly-owned subsidiary, B. Riley Brand Management, entered into a Transfer and Contribution Agreement and Secured Financing, dated October 25, 2024, by and between B. Riley Brand Management (“Holdings”) and BR Funding Holdings 2024-1, LLC, a Delaware limited liability company and, prior to the consummation of the transactions described herein, a wholly-owned subsidiary of Holdings, pursuant to which, among other things, B. Riley Brand Management transferred and contributed its limited liability company interests in (i) BR Brand Holdings LLC, a New York limited liability company, (ii) HRLY Brand Management LLC, a Delaware limited liability company, (iii) Justice Brand Management LLC, a New York limited liability company, and (iv) S&S Brand Management LLC, a New York limited liability company, to BR Funding Holdings 2024-1, LLC.
Additionally, in connection with the Transfer and Contribution Agreement, bebe entered into a membership interest purchase agreement, dated October 25, 2024, by and among bebe, HBN 120, LLC, a Delaware limited liability company (“Buyer”), BB Brand Holdings, and BKST Brand Management, pursuant to which, among other things, bebe sold its limited liability company interests in the bebe Brands to Buyer.
The assets and liabilities related to the brand assets that are a party to the Secured Financing transaction and sale transaction by bebe are included in assets held for sale and liabilities held for sale and the operations of these businesses are included in income (loss) from discontinued operations as more fully described in Note 4.
Great American Group Transaction
On November 15, 2024 the Company and BR Financial, consummated the transactions contemplated by an equity purchase agreement involving the Company’s Appraisal and Valuation Services, Retail, Wholesale & Industrial Solutions and Real Estate businesses, dated October 13, 2024, by and among Investor 1, Investor 2, and Investor 3, Great American NewCo, and certain other parties identified therein, with respect to the ownership of Great American NewCo by the Investors and the Company. The Investors are affiliates of Oaktree Capital Management, L.P. At the Closing, (i) the Investors received (a) all of the outstanding Class A Preferred Units A and (b) Common Units of Great American NewCo representing 52.6% of the issued and outstanding common limited liability units in Great American NewCo.
Upon closing the Equity Purchase Agreement on November 15, 2024, B. Riley will record a gain of approximately $235,000 and the operations of Great American NewCo will be deconsolidated since B. Riley will no longer have control and will a non-controlling equity investment ownership interest of 44.2% of the common units along with the Preferred B units described in Note 4. The assets and liabilities of the Company’s Appraisal and Valuation Services, Retail, Wholesale & Industrial Solutions and Real Estate businesses are included in assets held for sale and liabilities held for sale and the operations of these businesses are included in income (loss) from discontinued operations as more fully described in Note 4.
Wealth Management
On October 31, 2024, the Company signed a definitive agreement to sell a portion of the Company’s traditional (W-2) Wealth Management business to Stifel Financial Corp. ("Stifel") for estimated net consideration of $27,000 to $35,000 in cash. Subject to the terms of the agreement, the final consideration will be based on the number of advisors that join Stifel at closing, among other things. The transaction is expected to include up to 15% of the wealth management advisors, along with the associated customer accounts. The accounts managed by these advisors represents up to $4.5 billion total assets
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under management (AUM) as of September 30, 2024. The transaction has been approved by the Board of Directors of the Company and is subject to the receipt of required regulatory approvals and other customary closing conditions. It is expected to close early in the second quarter of 2025.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “seek,” “likely,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. We are under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report to conform such statements to actual results or to changes in our expectations.
The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report. Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made in Item 1A of Part II of this Quarterly Report under the caption “Risk Factors.”
Risk factors that could cause actual results to differ from those contained in the forward-looking statements include but are not limited to risks related to: volatility in our revenues and results of operations; changing conditions in the financial markets; our ability to generate sufficient revenues to achieve and maintain profitability; our exposure to credit risk; the short term nature of our engagements; the accuracy of our estimates and valuations of inventory or assets in “guarantee” based engagements; failure to successfully compete in any of our businesses; potential losses related to our auction or liquidation engagements; our dependence on communications, information and other systems and third parties; potential losses related to purchase transactions in our auction and liquidations business; the potential loss of financial institution clients; potential losses from or illiquidity of our proprietary investments; changing economic and market conditions, including continuing inflation and any further actions by the Federal Reserve to address inflation and the possibility of recession or an economic downturn; the effects of pandemics or severe public health crises, and other related impacts including supply chain disruptions, labor shortages and increased labor costs; potential liability and harm to our reputation if we were to provide an inaccurate appraisal or valuation; potential mark-downs in inventory in connection with purchase transactions; loss of key personnel; our ability to borrow under our credit facilities or at-the-market offering as necessary; failure to comply with the terms of our credit agreements or senior notes; our ability to meet future capital requirements; our ability to realize the benefits of our completed acquisitions, including our ability to achieve anticipated opportunities and cost savings, and accretion to reported earnings estimated to result from completed and proposed acquisitions in the time frame expected by management or at all; the diversion of management time on acquisition-related issues; the failure of our brand investment portfolio licensees to pay us royalties; the impact of legal proceedings, including those related to the allegations raised against Brian Kahn; the activities of short sellers and their impact on our business and reputation; and the effect of geopolitical instability, including wars, conflicts and terrorist attacks, including the impacts of Russia’s invasion of Ukraine and conflicts in the Middle East. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Except as otherwise required by the context, references in this Quarterly Report to the “Company,” “B. Riley,” “B. Riley Financial,” “we,” “us” or “our” refer to the combined business of B. Riley Financial, Inc. and all of its subsidiaries.
Overview
Description of the Company
B. Riley Financial, Inc. (Nasdaq: RILY) (the “Company”) is a diversified financial services “platform” that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. We operate through several consolidated subsidiaries (collectively, “B. Riley”) that provide investment banking, brokerage, wealth management, asset management, direct lending, and business advisory services to a broad client base spanning public and private companies, financial sponsors, investors, financial institutions, legal and professional services firms, and individuals.
The Company opportunistically invests in and acquires companies or assets with attractive risk-adjusted return profiles to benefit our shareholders. We own and operate several uncorrelated consumer businesses on a principal basis. Our
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approach is focused on high quality companies and assets in industries in which we have extensive knowledge and can benefit from our experience to make operational improvements and maximize free cash flow. Our principal investments often leverage the financial, restructuring, and operational expertise of our professionals who work collaboratively across disciplines.
Our Business Segments
We report our activities in five reportable business segments: Capital Markets, Wealth Management, Financial Consulting, Communications, and Consumer segment. The descriptions below illustrate the businesses that comprise our segments.
We maintain a diverse composition of businesses that operate in five reportable segments. Management evaluates many different financial and non-financial metrics to assess the individual performance of each of these various businesses. However, across most businesses, management primarily assesses each business’s financial performance based upon each of the businesses revenues and operating profits generated excluding non-cash charges and the impact of gains and losses related to securities and other investments held. Management believes that gains and losses on individual investments are generally impacted by individual characteristics specific to each investment and although this has an impact on our overall financial performance the impact of these gains and losses may not be indicative of the overall strength or weakness in each of our business operations. Additionally, in evaluating the financial performance of each of our business, management monitors the increase or decrease in operating results from period to period while factoring in the relative volatility inherent in each industry in which these businesses operate. Management recognizes that some of the Company’s businesses exhibit more volatile results.
Capital Markets – We provide investment banking, equity research and institutional brokerage services to publicly traded and privately held companies, institutional investors, and financial sponsors; fund and asset management services to institutional and high-net-worth individual investors; and direct lending services to middle market companies. We also trade equity securities as a principal for our account, including investments in funds managed by our subsidiaries. We maintain an investment portfolio comprised of public and private equities and debt securities. We also opportunistically provide loans to our clients and we engage in securities-based lending which involves the borrowing and lending of equity and fixed income securities.
Our investment approach is value-oriented and represents a core competency of our capital markets strategy. We act as an advisor to our clients, which at times involves complex transactions consistent with our value-oriented investment philosophy. We often provide consulting, capital raising, or investment banking services for companies in which B. Riley may have significant influence through equity ownership, representation on the board of directors (or similar governing body), or both.
In our Capital Markets segment we have a portfolio of loans receivable that consisted of the following at September 30, 2024 and December 31, 2023:
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|  |  |  |  |  |  |  | Fair Value Adjustments on Loans
|  |  |  | Loans Receivable, at Fair Value |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | Industry or Type of Loan |  | September 30, 2024 |  | December 31, 2023 |  |
|  |  |  |  | 2024 |  | 2023 |  | 2024 |  | 2023
Related Party Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Vintage Capital Management, LLC |  | Retail / consumer |  | $ | 2,250 |  |  | $ | 200,506 |  |  | $ | (54,333) |  |  | $ | — |  |  | $ | (222,718) |  |  | $ | — |
Freedom VCM Receivables, Inc. |  | Consumer receivable portfolio |  | 9,310 |  |  | 42,183 |  |  | 534 |  |  | 419 |  |  | (13,187) |  |  | 419 |
Conn's, Inc. |  | Retail / consumer |  | 63,705 |  |  | 104,760 |  |  | (18,600) |  |  | — |  |  | (27,084) |  |  | — |
W.S. Badcock Corporation |  | Consumer receivable portfolio |  | 3,141 |  |  | 20,624 |  |  | 852 |  |  | (5,185) |  |  | (5,993) |  |  | (5,185) |
Other related party loans |  | Services, Oil & Gas and Industrial |  | 19,886 |  |  | 10,695 |  |  | 2,779 |  |  | 107 |  |  | 3,470 |  |  | (1,439) |
Total related party |  |  |  | 98,292 |  |  | 378,768 |  |  | (68,768) |  |  | (4,659) |  |  | (265,512) |  |  | (6,205) |
Excela Technologies, Inc. |  | Technology |  | 36,609 |  |  | 50,296 |  |  | (221) |  |  | 4,420 |  |  | 47 |  |  | 2,575 |
Core Scientific, Inc. |  | Technology |  | — |  |  | 45,509 |  |  | — |  |  | (757) |  |  | 8,473 |  |  | 34,785 |
Other loans |  | Various |  | 16,803 |  |  | 57,846 |  |  | (2,488) |  |  | 136 |  |  | (2,268) |  |  | 20,468 |
Total |  |  |  | $ | 151,704 |  |  | $ | 532,419 |  |  | $ | (71,477) |  |  | $ | (860) |  |  | $ | (259,260) |  |  | $ | 51,623 |

The fair value adjustments on loans receivable for the three months ended September 30, 2024 and 2023 were $(71.5) million and $(0.9) million, respectively. The fair value adjustments on loans receivable for the nine months ended September 30, 2024 and 2023 was $(259.3) million and $51.6 million, respectively. During the three and nine months ended September 30, 2024, fair value adjustments for loans receivable from related parties totaled $(68.8) million and $(265.5) million as compared to $(4.7) million and $(6.2) million during the three and nine months ended September 30, 2023. During the three and nine months ended September 30, 2024, fair value adjustments for other loans receivable totaled $(2.7) million and $6.3 million as compared to $3.8 million and $57.8 million during the three and nine months ended September 30, 2023.
During the three and nine months ended September 30, 2024, fair value adjustments for the loan receivable for Vintage Capital Management, LLC was $(54.3) million and $(222.7) million, respectively. The fair value adjustments are related primarily to the decline in the equity fair value of Freedom VCM Holdings, LLC (“Freedom VCM”) which, along with certain guarantees, is the primary collateral for this loan. The decline in the equity fair value of Freedom VCM is due to increases in net debt, a decrease in the operational performance of Freedom VCM various business units during 2024, and a decline in the equity value of Freedom VCM’s investment in Conn’s, Inc. common stock which was impacted by Conn’s Inc. 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”). Subsequent to September 30, 2024, the collateral value for the VCM loan receivable was also impacted due to the filing of Freedom VCM’s voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024. These factors resulted in a decrease in the fair value of the Freedom VCM loan receivable to $2.3 million at September 30, 2024.
During the three and nine months ended September 30, 2024, we recorded $0.5 million and $(13.2) million of fair value adjustments to the loan receivable for Freedom VCM Receivables, Inc.. The fair value adjustment of $(13.2) million during the nine months ended September 30, 2024 was primarily due to a fair value adjustment of $12.0 million recorded in the second quarter of 2024 resulting from higher projected charge offs of receivables on the consumer receivable portfolio that are serviced by Conn's, Inc. which was 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”).
During the three and nine months ended September 30, 2024, we recorded $(18.6) million and $(27.1) million of fair value adjustments to the loan receivable for Conn’s, Inc. The Company collected principal payments $104.8 million loan receivable from Conn’s Inc. which reduced the principal balance of the loan to $93.0 million at June 30, 2024. All accrued interest on this loan receivable was paid through June 30, 2024. The fair value of the Conn’s loan receivable was $63.7 million at September 30, 2024. The fair value adjustments of $(18.6) million during the quarter ended September 30, 2024, is primarily related to Conn’s Inc. July 23, 2024 Chapter 11 Cases. The filing of the Chapter 11 Cases impacted the operational performance of the stores operated by Conn’s, Inc. and the additional expenses projected to be incurred in the
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Chapter 11 Cases resulted in a decline in the projected recovery value of the collateral for the Conn’s Inc. loan receivable. The $45.5 million of loans receivable from Core Scientific, Inc. (“Core Scientific”) at December 31, 2023 included a loan in the amount of $42.1 million that was settled in full upon Core Scientific’s exit from Chapter 11 bankruptcy in January 2024.
During the three and nine months ended September 30, 2024, fair value adjustments for the loan receivable from W.S. Badcock Corporation was $0.9 million and $(6.0) million, respectively. During the three and nine months ended September 30, 2023, fair value adjustments for the loan receivable from W.S. Badcock Corporation was $(5.2) million. The fair value adjustment of $(6.0) million during the nine months ended September 30, 2024, was primarily due to fair value adjustments recorded in the second quarter of 2024 related to higher projected charge offs of receivables on the consumer receivable portfolio resulting from Conn’s, Inc. bankruptcy and estimated costs and losses from the projected liquidation of the consumer receivable portfolio.
During the nine months ended September 30, 2024, fair value adjustments for the loan receivable from Core Scientific, Inc. was $8.5 million. In the prior year nine months ended September 30, 2023, fair value adjustments for the loans receivable from Core Scientific, Inc. was $34.8 million. Core Scientific, Inc. provides digital infrastructure for bitcoin mining and high-performance computing. Core Scientific, Inc. filed Chapter 11 bankruptcy in 2022, leading to a significant mark down of the loan receivable in the fourth quarter of 2022. Subsequent to the Chapter 11 restructuring, and during the first quarter of 2023, there was a significant rebound in bitcoin prices resulting in significant growth and value assumptions. As a result, the Core Scientific, Inc. loan receivable had a fair value adjustment of $34.8 million for the nine months ended September 30, 2023.
Wealth Management – We provide retail brokerage, investment management, and insurance, and tax preparation services to individuals and families, small businesses, non-profits, trusts, foundations, endowments, and qualified retirement plans through a boutique private wealth and investment management firm to meet the individual financial needs and goals of our customers. Our experienced financial advisors provide investment management, retirement planning, education planning, wealth transfer and trust coordination, and lending and liquidity solutions. Our investment strategists provide strategies and real-time market views and commentary to help our clients make important and informed financial and investment decisions. Wealth management revenues are comprised of the following:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Brokerage revenues | $ | 23,120 |  |  | $ | 25,018 |  |  | $ | 69,613 |  |  | $ | 68,655 |
Advisory revenues | 19,935 |  |  | 18,915 |  |  | 59,501 |  |  | 55,199 |
Other | 6,334 |  |  | 6,942 |  |  | 21,039 |  |  | 22,806 |
Total | $ | 49,389 |  |  | $ | 50,875 |  |  | $ | 150,153 |  |  | $ | 146,660 |

Total assets under management were approximately $25.7 billion, $25.4 billion, and $24.0 billion at September 30, 2024, December 31, 2023, and September 30, 2023, respectively. Of these amounts, advisory assets under management totaled approximately $8.1 billion at September 30, 2024, and $8.0 billion at December 31, 2023, and $7.5 billion at September 30, 2023. Advisory revenues were 0.24% of average advisory assets under management during the three months ended September 30, 2024 and 2023, respectively, and 0.25% and 0.24% of average advisory assets under management during the nine months ended September 30, 2024 and 2023, respectively. The average revenues earned on advisory assets under management are not expected to fluctuate significantly from period to period as a percentage of advisory assets under management. Broker revenues are primarily comprised of commissions and fees earned from trading activities from brokerage client assets. Other revenues is primarily comprised of tax service fees and management fees earned from comprehensive client focused services performed.
Financial Consulting Segment - We provide a variety of specialized advisory services spanning bankruptcy, restructuring, turnaround management, forensic accounting, crisis and litigation support, and operations management. On November 15, 2024, as more fully described in recent developments, the Company entered into a transaction whereby approximately 52.6% of the common equity interests of a newly formed subsidiary that included the Company’s appraisal and valuation and real estate advisory services operations along with the Company’s auction and liquidations operations was sold to an investment management firm. These operations are included in discontinued operations as discussed in Note 4 to the accompanying condensed consolidated financial statements and are expected to be deconsolidated since B. Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% in the business.
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Communications Segment – We own a number of businesses that comprises our Communications Segment that we have acquired for attractive risk-adjusted investment return characteristics. We may pursue future acquisitions to expand this portfolio of businesses which currently includes: Lingo Management, LLC (“Lingo Management”), a global cloud/unified communications and managed service provider that includes the operations of BullsEye Telecom that was merged into Lingo Management in July 2023, a single source communications and cloud technology provider (collectively “Lingo”); Marconi Wireless Holdings, LLC, a mobile virtual network operator that provides mobile phone voice, text, and data services and devices; magicJack VoIP Services, LLC, a VoIP cloud-based technology and communications provider that offers related devices and subscription services; and United Online, Inc., an Internet access provider that offers dial-up, mobile broadband and digital subscriber line services under the NetZero and Juno brands.
Consumer Products Segment – This segment is comprised of Targus, which is a multinational company that designs, manufactures, and sells consumer and enterprise productivity products with a large business-to-business (B2B) customer client base and global distribution in over 100 countries. The Targus product line includes laptop and tablet cases, backpacks, universal docking stations, and computer accessories that we acquired on October 18, 2022.
Our operating results are primarily comprised of the operations of these businesses within our five reportable operating segments. However, we also generate revenues from other businesses that we may acquire with the goal to expand their operations, drive growth, and create operational efficiencies to improve cash flows to reinvest across other business operations in our platform. These businesses are typically in fragmented markets and include the operations of a regional environmental services business, bebe which operates rent-to-own stores, and a technology company that provides e-commerce platforms, marketing and technology services acting as a merchant for consumer brand companies.
In prior years, we also generated operating revenues from our majority owned subsidiary that licenses the trademarks and intellectual properties from our ownership of six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore and we generated other income from dividends we receive from our equity ownership of investments that range from 10% to 50% in companies that license the trademark and intellectual property of the Hurley, Justice, and Scotch & Soda brands and bebe and Brookstone brands (equity ownership of bebe stores, inc., our majority owned subsidiary). We also reported fair value adjustments from these equity investments since we elected to account for these equity investments using the fair value method of accounting. These operations are included in discontinued operations as discussed in Note 4 to the accompanying condensed consolidated financial statements and are expected to be deconsolidated since B. Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% in the business. These operating results are included in discontinued operations and are expected to be deconsolidated as a result of the Sale by bebe and completion of the Secured Financing of the Brand Interests as discussed in Note 4 to the accompanying condensed consolidated financial statements.
Securities and Other Investments Owned Portfolio – We have a portfolio of securities and other investments owned that consists of public equity securities, private securities that are primarily comprised of our 31% investment in Freedom VCM Holdings, LLC described above, partnership interests and other investments, corporate bonds and other fixed income securities as follows at September 30, 2024 and December 31, 2023:
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|  | September 30, 2024 |  | December 31, 2023
Public Equity Securities: |  |  |  |
Badcock & Wilcox Enterprises, Inc. - common stock |  | $ | 55,991 |  |  | $ | 40,072 |
Badcock & Wilcox Enterprises, Inc. - preferred stock |  | 3,845 |  |  | 6,386 |
Alta Equipment Group, Inc. - common stock |  | — |  |  | 44,653 |
Double Down Interactive Co., Ltd - common stock |  | 66,533 |  |  | 30,439 |
Synchronoss Technologies, Inc. - common stock |  | 11,212 |  |  | 8,780 |
Other public equities |  | 24,014 |  |  | 64,211 |
Total public equity securities |  | 161,595 |  |  | 194,541 |
Private Equity Securities: |  |  |  |
Freedom VCM Holdings, LLC |  | — |  |  | 287,043 |
Other private equities |  | 127,684 |  |  | 229,993 |
Total private equity securities |  | 127,684 |  |  | 517,036 |
Total equity securities |  | 289,279 |  |  | 711,577 |
Corporate bonds |  | 31,496 |  |  | 59,287 |
Other fixed income securities |  | 4,757 |  |  | 2,989 |
Partnership interest and other |  | 16,238 |  |  | 35,196 |
Total securities and other investments owned |  | $ | 341,770 |  |  | $ | 809,049 |

Securities and other investments owned was $341.8 million and $809.0 million as of September 30, 2024 and December 31, 2023. Of this amount, the fair value of equity securities totaled $289.3 million and $711.6 million as of September 30, 2024 and December 31, 2023. Of these amounts, public equity securities totaled $161.6 million and $194.5 million as of September 30, 2024 and December 31, 2023, and private equity securities totaled $127.7 million and $517.0 million as of September 30, 2024 and December 31, 2023.
The fair value of Badcock & Wilcox Enterprises, Inc. - common stock held as of held as of September 30, 2024 and December 31, 2023 was $56.0 million and $40.1 million, respectively. The change in fair value for the nine months ended September 30, 2024 is primarily related to an increase in the public share price during the period.
The fair value of Alta Equipment Group, Inc. common stock held as of December 31, 2023 was $44.7 million, and the Company sold the entire position in the first quarter of 2024 and recorded a loss of $(3.5) million. The sale was executed to raise additional capital to fund operating activities.
The fair value of our Double Down Interactive Co., Ltd common stock held as of September 30, 2024 and December 31, 2023 was $66.5 million and $30.4 million, respectively. The change in fair value for the nine months ended September 30, 2024 is primarily related to an increase in the public share price during the period.
The fair value of our investment in Freedom VCM Holdings, LLC held as of September 30, 2024 and December 31, 2023 was zero and $287.0 million, respectively. During the nine months ended September 30, 2024, we recorded fair value adjustments of $(221.0) million primarily due to increases in net debt, declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc. common stock and impact of Conn's bankruptcy filing on July 23, 2024, and a decrease in the operational performance of Freedom VCM Holdings, LLC’s various business segments. Subsequent to September 30, 2024, the investment in Freedom VCM Holdings, LLC was also impacted due to the filing of Freedom VCM’s voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024.
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|  | Realized and Unrealized Gains (Losses)
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2024 |  | 2023 |  | 2024 |  | 2023
Other income (Expense) - Realized & Unrealized Gains (Losses) |  |  |  |  |  |  |  |
Public Equity Securities: |  |  |  |  |  |  |  |
Babcock & Wilcox Enterprises, Inc. - common stock |  | $ | 7,005 |  |  | $ | (33,537) |  |  | $ | 5,930 |  |  | $ | (29,672) |
Babcock & Wilcox Enterprises, Inc. - preferred stock |  | 2,495 |  |  | (148) |  |  | 2,342 |  |  | 2,621 |
Alta Equipment Group, Inc. - common stock |  | — |  |  | (17,873) |  |  | (3,537) |  |  | 2,743 |
Double Down Interactive Co., Ltd - common stock |  | 13,113 |  |  | (4,220) |  |  | 34,952 |  |  | 38 |
Synchronoss Technologies, Inc. - common stock |  | 6,445 |  |  | (530) |  |  | 9,940 |  |  | (530) |
Other public equities |  | 204 |  |  | (3,244) |  |  | (2,328) |  |  | (16,910) |
Subtotal |  | 29,262 |  |  | (59,552) |  |  | 47,299 |  |  | (41,710) |
Private Equity Securities: |  |  |  |  |  |  |  |
Freedom VCM Holdings, LLC |  | (49,033) |  |  | — |  |  | (221,042) |  |  | — |
Other private equities |  | (1,766) |  |  | (15,581) |  |  | (40,966) |  |  | (21,592) |
Subtotal |  | (50,799) |  |  | (15,581) |  |  | (262,008) |  |  | (21,592) |
Corporate bonds |  | (245) |  |  | 628 |  |  | 1,141 |  |  | 976 |
Partnership interest and other |  | (415) |  |  | (2,782) |  |  | 1,206 |  |  | (14,694) |
Total |  | $ | (22,197) |  |  | $ | (77,287) |  |  | $ | (212,362) |  |  | $ | (77,020) |

During the three and nine months ended September 30, 2024, realized and unrealized losses of $(22.2) million and $(212.4) million were recorded to other income as realized and unrealized losses on investments. These realized and unrealized losses are made up of realized and unrealized gains (losses) recorded to public equity securities, private equity securities, corporate bonds, and partnership interest and other investments. The majority of realized and unrealized (losses) gains on investments during the three and nine months ended September 30, 2024 are related to public equity securities (equity securities that trade on major exchanges), and private equity securities.
During the three and nine months ended September 30, 2024, $29.3 million and $47.3 million of realized and unrealized gains were recorded for public equity securities to other income as realized and unrealized gains on investments. Of these amounts, Double Down Interactive Co., Ltd common stock made up the majority of the balances. During the three and nine months ended September 30, 2024, we recorded $13.1 million and $35.0 million, respectively, to realized and unrealized gains related to Double Down Interactive Co., Ltd. primarily related to public share price movements during these periods.
During the three and nine months ended September 30, 2024, $(50.8) million and $(262.0) million of realized and unrealized losses were recorded for private equity securities to other income as realized and unrealized losses on investments. Of these amounts, our investment in Freedom VCM Holdings, LLC made up the majority of the balances. During the three and nine months ended September 30, 2024, we recorded $(49.0) million and $(221.0) million to realized and unrealized losses related to our investment in Freedom VCM Holdings, LLC. The entirety of the balances were made related to fair value adjustments due primarily to increases in net debt as well as significant declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc., market-related inputs, and overall operational performance.
We are headquartered in Los Angeles, California and maintain offices throughout the U.S. including in New York, Chicago, Metro District of Columbia, Atlanta, Boston, Dallas, Metro Detroit, Houston, Memphis, Miami, San Francisco, Boca Raton, and West Palm Beach, as well as additional offices located in Canada, Europe, Asia, and Australia.
We report our activities in five reportable business segments: Capital Markets, Wealth Management, Financial Consulting, Communications, and Consumer Products segment. These reportable segments are all distinct businesses, each with a different marketing strategy and management structure. During the fourth quarter of 2023, we reassessed our previously reported Consumer segment due to organizational changes and financial information provided to the Chief
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Operating Decision Maker (“CODM”). These changes resulted in Targus’ operations being reported on a stand-alone basis in the Consumer Products segment.
Recent Developments
Great American Group Transaction
On November 15, 2024 the Company and BR Financial Holdings, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“BR Financial”), consummated the transactions contemplated by an equity purchase agreement, dated October 13, 2024 (the “Equity Purchase Agreement”), by and among OCM SSF III Great American PT, L.P., a Delaware limited partnership (“Investor 1”), Opps XII Great American Holdings, LLC, a Delaware limited liability company (“Investor 2”), and VOF Great American Holdings, L.P., a Delaware limited partnership (“Investor 3,” and, together with Investor 1 and Investor 2, the “Investors”), Great American Holdings, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Great American NewCo”), and certain other parties identified therein, with respect to the ownership of Great American NewCo by the Investors and the Company. The Investors are affiliates of Oaktree Capital Management, L.P.
Pursuant to, and subject to the terms and conditions set forth in, the Equity Purchase Agreement, the Company conducted an internal reorganization and contributed all of the interests in the Company’s Appraisal and Valuation Services, Retail, Wholesale & Industrial Solutions and Real Estate businesses (collectively, the “Great American Group”), to Great American NewCo. At the Closing, (i) the Investors received (a) all of the outstanding class A preferred limited liability units of Great American NewCo (which will have a 7.5% cash coupon and a 7.5% payment-in-kind coupon) (the “Class A Preferred Units”) and (b) common limited liability units of Great American NewCo (the “Common Units”) representing 52.6% of the issued and outstanding common limited liability units in Great American NewCo for a purchase price of approximately $203.0 million (which have an initial liquidation preference of approximately $203.0 million). BR Financial retains (a) 93.2% of the issued and outstanding class B preferred limited liability company units of Great American NewCo (which will have a 2.3% payment-in-kind coupon and an initial aggregate liquidation preference of approximately $183.0 million) (the “Class B Preferred Units”) and (b) 44.2% of the issued and outstanding Common Units. The remaining 6.8% of issued and outstanding Class B Preferred Units and 3.2% of issued and outstanding Common Units will be held by certain minority investors. The investors in Great American NewCo will also be entitled to certain quarterly tax distributions pursuant to the Great American NewCo LLCA (defined below).
At the closing, (i) BR Financial, the Investors and the other minority investors entered into an Amended and Restated Limited Liability Company Agreement of Great American NewCo (the “Great American NewCo LLCA”), (ii) BR Financial and Great American NewCo entered into a Transition Services Agreement, pursuant to which BR Financial will provide certain transition services to Great American NewCo relating for the Great American Group for a period of up to one year from the Closing, subject to certain exceptions, and (iii) an affiliate of the Company, Great American NewCo and certain subsidiary guarantors of Great American NewCo entered into a credit agreement, pursuant to which an affiliate of the Company, as lender, will provide to Great American NewCo, as borrower, a first lien secured revolving credit facility of up to $25.0 million for general corporate purposes, subject to the terms and conditions set forth therein., which had an outstanding balance of $1.8 million at closing, and (iv) entered into promissory notes which totaled $15.3 million related to capital requirements for certain retail liquidation engagements that were ongoing as of closing.
Under the Great American NewCo LLCA, Great American NewCo will initially have a five-member board of directors that will oversee the day-to-day management of Great American NewCo, subject to certain approval rights reserved for the Investors and/or BR Financial, as applicable. The Investors will be entitled to appoint a majority of the directors of the board for so long as they collectively hold at least 25% of their combined amount of Common Units owned immediately following the Closing. The Great American NewCo LLCA will also contain certain protections for BR Financial, including, but not limited to, requiring BR Financial approval for certain fundamental actions. The Investors will have certain drag-along rights following the second-year anniversary of the Closing Date and certain call rights exercisable starting on the fifth-year anniversary of the Closing Date. The Great American NewCo LLCA sets forth distribution mechanics pursuant to which Great American NewCo will make distributions in cash and payment-in-kind at any time the board of directors may authorize, with the Class A Preferred Units having priority in any such distribution over Class B Preferred Units. In addition, the Great American NewCo LLCA will contain certain transfer restrictions and other transfer rights and obligations that apply to BR Financial, the Investors and other unitholders, as applicable, in certain circumstances. Upon closing the Equity Purchase Agreement on November 15, 2024, B. Riley will record a gain of approximately $235.0 million and the operations of Great American NewCo will be deconsolidated since B. Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% of the common units
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along with the Preferred B units described above. After the closing of the Equity Purchase Agreement, the Company will account for this equity method investment under the equity method of accounting.
Wealth Management
On October 31, 2024, we signed a definitive agreement to sell a portion of the Company’s traditional (W-2) Wealth Management business to Stifel Financial Corp. (“Stifel”) for estimated net consideration of $27.0 million to $35.0 million in cash. Subject to the terms of the agreement, the final consideration will be based on the number of advisors that join Stifel at closing, among other things. The transaction is expected to include up to 15% of the wealth management advisors, along with the associated customer accounts. The accounts managed by these advisors represents up to $4.5 billion total assets under management (AUM) as of September 30, 2024. The transaction has been approved by the Board of Directors of the Company and is subject to the receipt of required regulatory approvals and other customary closing conditions. It is expected to close early in the second quarter of 2025.
Brands Transaction
On October 25, 2024, our wholly-owned subsidiary, B. Riley Brand Management LLC (“B. Riley Brand Management”), entered into a transfer and contribution agreement, dated October 25, 2024 (the “Transfer and Contribution Agreement”), by and between B. Riley Brand Management and BR Funding Holdings 2024-1, LLC, a Delaware limited liability company and, prior to the consummation of the transactions described herein, wholly-owned subsidiary of B. Riley Brand Management (“Holdings”), pursuant to which, among other things, B. Riley Brand Management transferred and contributed its limited liability company interests in (i) BR Brand Holdings LLC, a New York limited liability company, (ii) HRLY Brand Management LLC, a Delaware limited liability company, (iii) Justice Brand Management LLC, a New York limited liability company, and (iv) S&S Brand Management LLC, a New York limited liability company (such limited liability interests collectively, the “Brands Interests,” and such transfer, the “Transfer”).
In connection with the transactions contemplated by the Transfer and Contribution Agreement, Holdings transferred and contributed the Brand Interests to its subsidiary, BR Funding 2024-1, LLC, a Delaware limited liability company and securitization financing vehicle (“Issuer”) and Issuer issued notes and preferred stock secured by the Brands Interests (the “Secured Financing”) to a third party purchaser, HBN 101, LLC, a Delaware limited liability company (the "Purchaser"), the proceeds of which were used to fund an upfront payment to the Company of approximately $189.3 million.
Additionally, in connection with the Transfer and Contribution Agreement, bebe stores, inc., a California corporation and majority owned subsidiary of the Company (“bebe”), entered into a membership interest purchase agreement, dated October 25, 2024 (the “bebe Purchase Agreement”), by and among bebe, HBN 120, LLC, a Delaware limited liability company (“Buyer”), BB Brand Holdings LLC, a Delaware limited liability company (“BB Brand Holdings”), and BKST Brand Management LLC, a New York limited liability company (“BKST Brand Management” and together with BB Brand Holdings, the “bebe Brands”), pursuant to which, among other things, bebe sold its limited liability company interests in the bebe Brands to Buyer, an affiliate of the Purchaser for approximately $46.6 million in net proceeds (such sale, the “Sale”), with certain of such proceeds applied towards indebtedness related to the bebe holdings. Upon closing of the Sale proceeds of $22.2 million was used to pay off the then outstanding balance of the bebe Credit Agreement in full (see note 11 to the accompanying condensed consolidated financial statements) and $0.2 million of loan related pay off expenses.
The Sale by bebe resulted in a subsequent fair value adjustment at September 30, 2024 in the amount of approximately $(20.0) million that was recorded during the quarter ended September 30, 2024 for the sale of the bebe Brands. In addition, upon completion of the Secured Financing of the Brand Interests, the Company will deconsolidate the ownership of the Brand Interests and the Company’s ownership in the Brand Interest will be reported as a non-controlling equity method investment that is estimated to have nominal value as a result of the liquidation preferences and notes that were issued as part of the Secured Financing and upon deconsolidation a loss at September 30, 2024 in the amount of approximately $(133.0) million was recorded in the quarter ending September 30, 2024.
Take-Private Proposal
On August 16, 2024, the Company’s Board of Directors received an unsolicited preliminary, non-binding letter of proposal from the Company’s Chairman and Co-CEO, Bryant Riley, to acquire the outstanding shares of the Company not currently owned by Mr. Riley, in a transaction to take the Company private, at a proposed purchase price of $7.00 per share. Following receipt of the proposal, the Company’s Board of Directors established a special committee consisting of independent directors, which has engaged its own advisors to evaluate the proposal and determine the appropriate course of
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action and process. There can be no assurance that any definitive offer will be received, that any definitive agreement will be executed relating to the proposal or that this or any other transaction will be approved or consummated.
SEC Subpoena
On July 3, 2024, each of the Company and Bryant Riley, Chairman and Co-Chief Executive Officer, received a subpoena from the U.S. Securities and Exchange Commission (the “SEC”) requesting the production of certain documents and other information primarily related to (i) the Company’s business dealings with Brian Kahn, (ii) certain transactions in an unrelated public company’s securities, and (iii) the communications and related compliance and other policies and procedures of certain of its regulated subsidiaries. On November 22, 2024, each of the Company and Mr. Riley received an additional SEC subpoena requesting the production of certain additional documents and information relating to Franchise Group, Inc. (including its holding company, Freedom VCM Holdings, LLC) as well as Mr. Riley’s personal loan and his pledge of shares of the Company’s common stock as collateral for such loan. As previously disclosed on April 23, 2024, the Audit Committee of the Company’s Board of Directors, with the assistance of Sullivan & Cromwell LLP, the Company’s legal counsel, conducted an internal review, and separately the Audit Committee retained Winston & Strawn LLP, independent legal counsel, to conduct an independent investigation, to review transactions among Mr. Kahn (and his affiliates) and the Company (and its affiliates). The review and the investigation both confirmed that the Company and its executives, including Mr. Riley, had no involvement with, or knowledge of, any alleged misconduct concerning Mr. Kahn or any of his affiliates. The receipt of subpoenas is not an indication that the SEC or its staff has determined that any violations of law have occurred. Both the Company and Mr. Riley are responding to the subpoenas and are fully cooperating with the SEC.
Conn’s and FRG
The Company’s results during the three and nine months ended September 30, 2024 were negatively impacted by a significant non-cash markdown of $(54.3) million and $(222.7) million related to its investment in Freedom VCM Holdings, LLC (“Freedom VCM”), the indirect parent entity for Franchise Group (“FRG”). Freedom VCM’s strategy, which included the potential divestiture or monetization of certain assets, was materially negatively impacted by the unexpected announcement in November 2023 concerning FRG’s former CEO and his alleged involvement in fraudulent schemes despite the fact that these allegations are unrelated to FRG and its businesses. In the meantime, the consumer-facing portion of the U.S. economy has deteriorated. On July 23, 2024, Conn’s, Inc. (“Conn’s”) and certain of its subsidiaries filed voluntary petitions 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”). FRG, pursuant to a transaction consummated in January 2024, acquired a substantial equity investment in Conn’s in exchange for the sale of its Badcock Home Furniture & more business to Conn’s. The commencement of the Chapter 11 Cases constitute an event of default that accelerated the obligations 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, as borrowers, and an affiliate of the Company, as administrative agent, collateral agent, and lender. As of the date of the filing of the Chapter 11 Cases, $93.0 million in outstanding borrowings existed under the Conn’s Term Loan. Any efforts to enforce payment obligations under the Conn’s Term Loan are automatically stayed as a result of the Chapter 11 Cases and the Company’s rights of enforcement in respect of the Conn’s Term Loan are subject to the applicable provisions of the Bankruptcy Code. The fair value adjustment on the Conn’s loan receivable was $(18.6) million and $(27.1) million for the three and nine months ended September 30, 2024.
On November 3, 2024, FRG, its operating businesses, and certain other affiliates, including Freedom VCM, filed voluntary petitions for relief (the “FRG Chapter 11 Cases”) under chapter 11 of the Bankruptcy Code. As a result, on November 4, 2024, we concluded that we are required to record an additional impairment of with respect to the Freedom VCM Investment and the Vintage Loan Receivable. The additional non-cash impairments of the Freedom VCM Investment and the Vintage Loan Receivable are $118.0 million in the aggregate as of November 4, 2024. The fair value adjustment for the Conn’s loan receivable was $(18.6) million for the three months ended September 30, 2024 and $(27.1) million for the nine months ended September 30, 2024. As a result of such additional impairment we have ascribed no value to the Freedom VCM Investment and the Vintage Loan Receivable was valued at $2.3 million at September 30, 2024 which approximates the fair value of the underlying collateral for this loan which is primarily comprised of other securities. Subsequent to September 30, 2024, the fair value of the underlying collateral for this loan, which is comprised of other public securities, decreased to a fair value of $2.2 million at February 7, 2025.
Critical Accounting Estimates
The preparation of our condensed consolidated financial statements in accordance with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities, and reported amounts of revenue and expense during the reporting period. The estimates and assumptions are based on historical experience and on other factors that management
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believes to be reasonable. Actual results may differ from those estimates. Critical accounting estimates represent the areas where more significant judgments and estimates are used in the preparation of our condensed consolidated financial statements. A discussion of such critical accounting estimates, which include fair value measurements, goodwill and other intangible assets, and accounting for income tax valuation allowances can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Results of Operations
The following period to period comparisons of our financial results and our interim results are not necessarily indicative of future results.
Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023
Condensed Consolidated Statements of Operations
(Dollars in thousands)
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| Three Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | Amount |  | %
Revenues: |  |  |  |  |  |  |
Services and fees | $ | 198,514 |  |  | $ | 244,096 |  |  | $ | (45,582) |  |  | (18.7) | %
Trading loss | (1,238) |  |  | (9,727) |  |  | 8,489 |  |  | (87.3) | %
Fair value adjustments on loans | (71,477) |  |  | (860) |  |  | (70,617) |  |  | n/m
Interest income - loans | 11,251 |  |  | 27,397 |  |  | (16,146) |  |  | (58.9) | %
Interest income - securities lending | 7,007 |  |  | 42,333 |  |  | (35,326) |  |  | (83.4) | %
Sale of goods | 55,248 |  |  | 60,029 |  |  | (4,781) |  |  | (8.0) | %
Total revenues | 199,305 |  |  | 363,268 |  |  | (163,963) |  |  | (45.1) | %
Operating expenses: |  |  |  |  |  |  |
Direct cost of services | 49,659 |  |  | 52,616 |  |  | (2,957) |  |  | (5.6) | %
Cost of goods sold | 40,312 |  |  | 42,217 |  |  | (1,905) |  |  | (4.5) | %
Selling, general and administrative expenses | 184,605 |  |  | 202,321 |  |  | (17,716) |  |  | (8.8) | %
Restructuring charge | 116 |  |  | 228 |  |  | (112) |  |  | (49.1) | %
Impairment of goodwill and tradenames | — |  |  | 35,500 |  |  | (35,500) |  |  | (100.0) | %
Interest expense - Securities lending and loan participations sold | 6,359 |  |  | 38,368 |  |  | (32,009) |  |  | (83.4) | %
Total operating expenses | 281,051 |  |  | 371,250 |  |  | (90,199) |  |  | (24.3) | %
Operating loss | (81,746) |  |  | (7,982) |  |  | (73,764) |  |  | n/m
Other income (expense): |  |  |  |  |  |  |
Interest income | 1,438 |  |  | 180 |  |  | 1,258 |  |  | n/m
Dividend income | 675 |  |  | 3,373 |  |  | (2,698) |  |  | (80.0) | %
Realized and unrealized losses on investments | (22,197) |  |  | (77,287) |  |  | 55,090 |  |  | (71.3) | %
Change in fair value of financial instruments and other | 476 |  |  | (4,170) |  |  | 4,646 |  |  | (111.4) | %
Income (loss) from equity investments | 6 |  |  | (308) |  |  | 314 |  |  | (101.9) | %
Interest expense | (32,996) |  |  | (37,493) |  |  | 4,497 |  |  | (12.0) | %
Loss from continuing operations before income taxes | (134,344) |  |  | (123,687) |  |  | (10,657) |  |  | 8.6 | %
(Provision for) benefit from income taxes | (14,508) |  |  | 23,638 |  |  | (38,146) |  |  | (161.4) | %
Loss from continuing operations | (148,852) |  |  | (100,049) |  |  | (48,803) |  |  | 48.8 | %
(Loss) income from discontinued operations, net of income taxes | (138,746) |  |  | 23,741 |  |  | (162,487) |  |  | n/m
Net loss | (287,598) |  |  | (76,308) |  |  | (211,290) |  |  | n/m
Net loss attributable to noncontrolling interests | (3,201) |  |  | (2,485) |  |  | (716) |  |  | 28.8 | %
Net loss attributable to B. Riley Financial, Inc. | (284,397) |  |  | (73,823) |  |  | (210,574) |  |  | n/m
Preferred stock dividends | 2,015 |  |  | 2,015 |  |  | — |  |  | — | %
Net loss available to common shareholders | $ | (286,412) |  |  | $ | (75,838) |  |  | $ | (210,574) |  |  | n/m
n/m - Not applicable or not meaningful. |  |  |  |  |  |  |

Revenues
The table below and the discussion that follows are based on how we analyze our business.
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| Three Months Ended September 30, |  | Change |
| 2024 |  | 2023 |  | Amount |  | % |
Services and fees: |  |  |  |  |  |  |  |
Capital Markets segment | $ | 30,437 |  |  | $ | 80,913 |  |  | $ | (50,476) |  |  | (62.4) | % |
Wealth Management segment | 49,389 |  |  | 50,875 |  |  | (1,486) |  |  | (2.9) | % |
Financial Consulting segment | 23,941 |  |  | 20,225 |  |  | 3,716 |  |  | 18.4 | % |
Communications segment | 66,241 |  |  | 82,155 |  |  | (15,914) |  |  | (19.4) | % |
All Other | 28,506 |  |  | 9,928 |  |  | 18,578 |  |  | 187.1 | % |
Subtotal | 198,514 |  |  | 244,096 |  |  | (45,582) |  |  | (18.7) | % |
Trading (loss) income: |  |  |  |  |  |  |  |
Capital Markets segment | (1,908) |  |  | (10,217) |  |  | 8,309 |  |  | (81.3) | % |
Wealth Management segment | 670 |  |  | 490 |  |  | 180 |  |  | 36.7 | % |
Subtotal | (1,238) |  |  | (9,727) |  |  | 8,489 |  |  | (87.3) | % |
Fair value adjustments on loans: |  |  |  |  |  |  |  |
Capital Markets segment | (71,477) |  |  | (860) |  |  | (70,617) |  |  | n/m |
Interest income - loans: |  |  |  |  |  |  |  |
Capital Markets segment | 11,251 |  |  | 27,397 |  |  | (16,146) |  |  | (58.9) | % |
Interest income - securities lending: |  |  |  |  |  |  |  |
Capital Markets segment | 7,007 |  |  | 42,333 |  |  | (35,326) |  |  | (83.4) | % |
Sale of goods: |  |  |  |  |  |  |  |
Communications segment | 1,318 |  |  | 1,638 |  |  | (320) |  |  | (19.5) | % |
Consumer Products segment | 49,793 |  |  | 58,391 |  |  | (8,598) |  |  | (14.7) | % |
All Other | 4,137 |  |  | — |  |  | 4,137 |  |  | 100.0 | % |
Subtotal | 55,248 |  |  | 60,029 |  |  | (4,781) |  |  | (8.0) | % |
Total revenues | $ | 199,305 |  |  | $ | 363,268 |  |  | $ | (163,963) |  |  | (45.1) | % |

_______________________________________________
n/m - Not applicable or not meaningful.
Total revenues decreased $164.0 million to $199.3 million during the three months ended September 30, 2024 from $363.3 million during the three months ended September 30, 2023. The decrease in revenues during the three months ended September 30, 2024 was primarily due to decreases in fair value adjustments on loans of $70.6 million, revenues from services and fees of $45.6 million, interest income from securities lending of $35.3 million, interest income from loans of $16.1 million, and sale of goods of $4.8 million, partially offset by increases in fair value of the portfolio of securities and other investments owned of $8.5 million. Of the $70.6 million decrease in fair value adjustments related to loans, $54.3 million related to the loan to Vintage Capital Management, LLC (“VCM”), and $18.6 million related to the loan to Conn’s Inc. (“Conn’s”), partially offset by fair value gains of $6.0 million related to the loan to Badcock Receivables I. The decrease in revenue of $45.6 million from services and fees in the three months ended September 30, 2024 consisted of decreases in revenue of $50.5 million in the Capital Markets segment, $15.9 million in the Communications segment, and $1.5 million in the Wealth Management segment, partially offset by increases in revenues of $18.6 million in All Other, and $3.7 million in the Financial Consulting segment.
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Revenues from services and fees in the Capital Markets segment decreased $50.5 million to $30.4 million during the three months ended September 30, 2024 from $80.9 million during the three months ended September 30, 2023 related to a decrease in underwriting engagements. The decrease in revenues was primarily due to decreases of $46.1 million of corporate finance, consulting, and investment banking fees, $1.9 million in commission fees, $1.0 million in dividends, $0.9 million in asset management fees, and $0.8 million of interest income, partially offset by an increase of $0.2 million in other income.
Revenues from services and fees in the Wealth Management segment decreased $1.5 million to $49.4 million during the three months ended September 30, 2024 from $50.9 million during the three months ended September 30, 2023. The decrease in revenues was primarily due to decreases in revenue of $1.6 million from wealth and asset management fees and $0.1 million in commission fees, partially offset by an increase of $0.2 million in other income.
Revenues from services and fees in the Financial Consulting segment increased $3.7 million to $23.9 million during the three months ended September 30, 2024 from $20.2 million during the three months ended September 30, 2023. The increase in revenues was primarily due to an increase of $7.0 million from the bankruptcy and restructuring, forensic and litigation, C&W, Interface Consulting and Farber divisions offset by a decrease in revenues of $3.3 million from the automotive restructuring division.
Revenues from services and fees in the Communications segment decreased $15.9 million to $66.2 million during the three months ended September 30, 2024 from $82.2 million during the three months ended September 30, 2023. The decrease in revenues was primarily due to decreases in subscription revenue of $15.7 million and $0.2 million in advertising and other revenue. We expect UOL, magicJack, and Marconi subscription revenue to continue to decline year-over-year.
Revenues from services and fees in All Other increased $18.6 million to $28.5 million during the three months ended September 30, 2024 from $9.9 million during the three months ended September 30, 2023. These revenues include merchandise rental fees and sales from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, commission fees from Nogin Inc. (“Nogin”) which we acquired in the second quarter of 2024, and the operations of a regional environmental services business and a landscaping business that we acquired in 2022 and sold in the third quarter of 2023. Revenues from services and fees in All Other increased by approximately $12.1 million related to merchandise rental fees from bebe, $5.2 million in commission fees from Nogin, and $4.4 million related to the regional environmental services business, partially offset by a decrease in revenues of $3.1 million due to the sale of the landscaping business in the fourth quarter of 2023.
Trading income (loss) increased approximately $8.5 million to a loss of $1.2 million during the three months ended September 30, 2024 compared to loss of $9.7 million during the three months ended September 30, 2023. The loss of $1.2 million during the three months ended September 30, 2024 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts.
The decrease in fair value adjustment of $70.6 million on our loans receivable during the three months ended September 30, 2024 was primarily due to $54.3 million related to VCM, and $18.6 million related to Conn’s, partially offset by an increase of $6.0 million related to Badcock Receivables I.
Interest income – loans decreased $16.1 million to $11.3 million during the three months ended September 30, 2024 from $27.4 million during the three months ended September 30, 2023 due to a reduction in loan receivable balances from $549.1 million as of September 30, 2023 to $151.7 million as of September 30, 2024.
Interest income – securities lending decreased $35.3 million to $7.0 million during the three months ended September 30, 2024 from $42.3 million during the three months ended September 30, 2023. The decrease was due to a reduction in the securities borrowed balance from $2,782.0 million as of September 30, 2023 to $64.0 million as of September 30, 2024.
Revenues from the sale of goods decreased $4.8 million to $55.2 million during the three months ended September 30, 2024 from $60.0 million during the three months ended September 30, 2023. The decrease was primarily related to a decrease of $8.6 million from the Consumer Products segment due to a decrease in computer and peripheral sales worldwide and a decrease of $0.3 million from the Communications segment, partially offset by an increase of $4.1 million in All Other consisting of $3.7 million in sales of goods from Nogin which we acquired in the second quarter of 2024 and $0.4 million in sales of goods from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023. Cost of goods sold for the three months ended September 30, 2024 decreased approximately $1.9 million to $40.3 million from $42.2 million during the three months ended September 30, 2023. The decrease in cost of goods sold
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was primarily attributable to decreases of $4.1 million in the Consumer Products segment and $0.4 million in the Communications segment, partially offset by an increase of $2.6 million from All Other, primarily from Nogin which we acquired in the second quarter of 2024.
Operating Expenses
Direct Cost of Services
Direct cost of services decreased approximately $3.0 million to $49.7 million during the three months ended September 30, 2024 from $52.6 million during the three months ended September 30, 2023. The decrease in direct cost of services was primarily attributable to a decrease of $9.8 million from the Communications segment, partially offset by an increase of $6.8 million from All Other consisting of $3.7 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $3.0 million from Nogin which we acquired in the second quarter of 2024, and $0.1 million from the regional environmental services business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses during the three months ended September 30, 2024 and 2023 were comprised of the following:

| Three Months Ended September 30, 2024 |  | Three Months Ended September 30, 2023 |  | Change
| Amount |  | % |  | Amount |  | % |  | Amount |  | %
Capital Markets segment | $ | 31,270 |  |  | 16.9 | % |  | $ | 63,798 |  |  | 31.5 | % |  | $ | (32,528) |  |  | (51.0) | %
Wealth Management segment | 49,279 |  | 26.7 | % |  | 48,966 |  |  | 24.2 | % |  | 313 |  |  | 0.6 | %
Financial Consulting segment | 19,813 |  | 10.7 | % |  | 17,925 |  |  | 8.9 | % |  | 1,888 |  |  | 10.5 | %
Communications segment | 21,533 |  | 11.7 | % |  | 28,394 |  |  | 14.0 | % |  | (6,861) |  |  | (24.2) | %
Consumer Products segment | 16,893 |  | 9.2 | % |  | 18,809 |  |  | 9.3 | % |  | (1,916) |  |  | (10.2) | %
Corporate and All Other | 45,817 |  | 24.8 | % |  | 24,429 |  |  | 12.1 | % |  | 21,388 |  |  | 87.6 | %
Total selling, general & administrative expenses | $ | 184,605 |  |  | 100.0 | % |  | $ | 202,321 |  |  | 100.0 | % |  | $ | (17,716) |  |  | (8.8) | %

Total selling, general and administrative expenses decreased by $17.7 million to $184.6 million during the three months ended September 30, 2024 from $202.3 million during the three months ended September 30, 2023. The decrease was primarily due to decreases of $32.5 million in the Capital Markets segment, $6.9 million in the Communications segment, and $1.9 million in the Consumer Products segment, partially offset by increases of $21.4 million in Corporate and All Other, $1.9 million in the Financial Consulting segment, and $0.3 million in the Wealth Management segment.
Capital Markets
Selling, general and administrative expenses in the Capital Markets segment decreased by $32.5 million to $31.3 million during the three months ended September 30, 2024 from $63.8 million during the three months ended September 30, 2023. The decrease was primarily due to decreases of $26.8 million in payroll and related expenses, which primarily related to decreases in commissions paid, share based compensation and other payroll expenses, $4.0 million in consulting expenses of which $2.9 million related to an advisory agreement which ended in August of 2023, $0.8 million in clearing and execution costs, $0.7 million in business development activities, $0.7 million in investment banking deal expenses, $0.6 million in foreign currency fluctuation, and $0.2 million in other expenses, partially offset by an increase of $1.3 million in legal expenses. The advisory agreement was terminated in August 2023 in connection with the FRG take private transaction as more fully described in Note 2(h) of the accompanying condensed consolidated financial statements and there was no expense during the three months ended September 30, 2024 as compared to the prior year when the expense totaled $2.9 million. For any given reporting period in 2023, the advisory agreement would result in an expense being reported in selling, general and administrative expenses when realized and unrealized gains on certain invested balances in the Company’s broker-dealer subsidiary exceeded a minimum return on the invested balances during such period; in addition, a decrease in the invested balance in value during such reporting period would result in the reporting of a credit to selling, general and administrative expense. During the three months ended September 30, 2023, the Company recorded an advisory fee of $2.9 million in accordance with the advisory agreement due to the realized and unrealized gains earned.
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Wealth Management
Selling, general and administrative expenses in the Wealth Management segment increased by $0.3 million to $49.3 million during the three months ended September 30, 2024 from $49.0 million during the three months ended September 30, 2023, primarily due to payroll and related expenses.
Financial Consulting
Selling, general and administrative expenses in the Financial Consulting segment increased by $1.9 million to $19.8 million during the three months ended September 30, 2024 from $17.9 million during the three months ended September 30, 2023. The increase was primarily due to an increase of $1.6 million in payroll and related expenses related to a business acquired in the third quarter of 2023 and an increase in headcount and an increase of $0.3 million in other expenses.
Communications
Selling, general and administrative expenses in the Communications segment decreased $6.9 million to $21.5 million for the three months ended September 30, 2024 from $28.4 million for the three months ended September 30, 2023. The decrease was primarily due to decreases of $2.7 million in payroll and related expenses, $1.9 million in depreciation and amortization expenses, non-recurring receipt of $1.2 million refund of regulatory taxes that were overpaid in the prior year based on estimated billing, $0.8 million in communications expenses, and $0.3 million in other expenses. The decrease in payroll and related expenses and other expenses was primarily due to cost savings in 2024 resulting from the implementation of cost savings programs in second half of 2023 that included a reduction in headcount and other operating expenses and sale of the Lingo carrier business in the third quarter of 2024.
Consumer Products
Selling, general and administrative expenses in the Consumer Products segment decreased $1.9 million to $16.9 million for the three months ended September 30, 2024 from $18.8 million during the three months ended September 30, 2023. The decrease was primarily due to decreases of $0.7 million in payroll and related expenses due to reduced headcount, $0.7 million in depreciation and amortization expense due to items being fully amortized, $0.7 million in currency fluctuation, and $0.6 million in other expenses due to efforts to reduce costs, partially offset by an increase of $0.8 million in professional fees.
Corporate and All Other
Selling, general and administrative expenses for Corporate and All Other increased approximately $21.4 million to $45.8 million during the three months ended September 30, 2024 from $24.4 million during the three months ended September 30, 2023. The increase was primarily due to increases of $9.3 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $9.1 million from Nogin which we acquired in the second quarter of 2024, $3.1 million in legal expenses, $2.8 million in currency fluctuation, $2.0 million from the regional environmental services business, $1.6 million in accounting expenses, $1.0 million in transaction costs, $0.9 million in other expenses, and $0.5 million in consulting expenses, partially offset by decreases of $7.5 million in payroll and related expenses, which primarily related to decreases in share based compensation and other variable compensation, $0.9 million related to the landscaping business that was sold in 2023 and $0.7 million in outside contractor expenses.
Other Income (Expense). Other income included interest income of $1.4 million and $0.2 million during the three months ended September 30, 2024 and 2023, respectively. Dividend income was $0.7 million during the three months ended September 30, 2024 compared to $3.4 million during the three months ended September 30, 2023. Realized and unrealized (losses) gains on investments was a loss of $22.2 million during the three months ended September 30, 2024 compared to a loss of $77.3 million during the three months ended September 30, 2023. The change was primarily due to increases in the valuation of our investments in Babcock & Wilcox Enterprises, Inc. of $43.2 million, Alta Equipment Group, Inc. of $17.9 million, Double Down Interactive Co., Ltd of $17.3 million, partially offset by a decrease in valuation of Freedom VCM Holdings, LLC of $49.0 million. Change in fair value of financial instruments and other was a gain of $0.5 million during the three months ended September 30, 2024 and a loss of $4.2 million during the three months ended September 30, 2023. Interest expense was $33.0 million during the three months ended September 30, 2024 compared to $37.5 million during the three months ended September 30, 2023. The decrease in interest expense was due to lower debt balances during the three months ended September 30, 2024. The decreases in interest expense primarily consisted of $5.4
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million from the Nomura term loan, $2.1 million from the Pathlight term loan, $2.5 million from the issuance of senior notes, $1.5 million from the Nomura revolving credit facility, $0.2 million and $0.6 million from the Targus term loan and revolver, respectively, $0.4 million from the BRPAC term loan, and $0.3 million from the Lingo term loan, partially offset by increases in interest expense of $0.7 million from the bebe term loan, and $0.4 million from the Nogin secured convertible promissory note.
Loss from Continuing Operations Before Income Taxes. Loss from continuing operations before income taxes was $134.3 million during the three months ended September 30, 2024 compared to loss before income taxes of $123.7 million during the three months ended September 30, 2023. The change was due to a decrease in revenue of $164.0 million, an decrease in operating expenses of $90.2 million, and a decrease of $2.7 million in dividend income, partially offset by a change in realized and unrealized (losses) gains on investments of $55.1 million, a decrease in change in fair value of financial instruments and other of $4.6 million, a decrease in interest expense of $4.5 million and an increase of $1.3 million in interest income.
(Provision for) Benefit from Income Taxes. Provision for income taxes was $14.5 million during the three months ended September 30, 2024 compared to a benefit from income taxes of $23.6 million during the three months ended September 30, 2023. The effective income tax rate was 10.8% for the three months ended September 30, 2024 as compared to 19.1% for the three months ended September 30, 2023.
Loss from Continuing Operations. Loss from continuing operations was $148.9 million during the three months ended September 30, 2024 compared to $100.0 million during the three months ended September 30, 2023. The change was due to a decrease of $73.8 million in operating loss, change in income tax benefit to provision of $38.1 million and a decrease of $2.7 million in dividend income, partially offset by a change in realized and unrealized (losses) gains on investments of $55.1 million, a decrease in change in fair value of financial instruments and other of $4.6 million, a decrease in interest expense of $4.5 million and an increase of $1.3 million in interest income.
(Loss) Income from Discontinued Operations, Net of Income Taxes. On October 25, 2024, we and our subsidiary bebe stores, inc. (“bebe”) have completed a transaction for our brand assets yielding approximately $236.0 million in cash proceeds. The results have been presented as discontinued operations for the three months ended September 30, 2024. Loss from discontinued operations, net of tax for Brands Transaction was $134.4 million during the three months ended September 30, 2024 compared to income from discontinued operations of $10.3 million during the three months ended September 30, 2023. The loss from discontinued operations is primarily due to realized and unrealized losses incurred on the brand equity investments during the three months ended September 30, 2024 from the planned securitization transaction and Sale of equity investments by the Company’s majority owned subsidiary bebe, as more fully discussed in Note 4 to the accompanying condensed consolidated financial statements.
On November 15, 2024, we completed the sale of our Great American Group and its results have been presented as discontinued operations for the three months ended September 30, 2024. Loss from discontinued operations, net of tax for Great American Group was $4.4 million for the three months ended September 30, 2024, compared to income from discontinued operations of $13.4 million during the three months ended September 30, 2023. Refer to Note 4 to the accompanying condensed consolidated financial statements for additional information.
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests. Net loss attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net loss generated by membership interests of partnerships that we do not own. The net loss attributable to noncontrolling interests was $3.2 million during the three months ended September 30, 2024 compared to net loss of $2.5 million during the three months ended September 30, 2023.
Net Loss Attributable to the Company. Net loss attributable to the Company was $284.4 million during the three months ended September 30, 2024 compared to net loss attributable to the Company of $73.8 million for the three months ended September 30, 2023. The decrease was due to a change in operating (loss) income of $73.8 million, a change in provision for income taxes of $38.1 million, a change in net loss attributable to noncontrolling interests and redeemable noncontrolling interests of $0.7 million, and a decrease in realized and unrealized (losses) gains on investments of $55.1 million, a decrease of $2.7 million in dividend income, partially offset by a decrease in interest expense of $4.5 million, an increase in change in fair value of financial instruments and other of $4.6 million, and an increase of $1.3 million in interest income.
Preferred Stock Dividends. Preferred stock dividends were $2.0 million for the three months ended September 30, 2024 and 2023. Dividends on the Series A preferred paid during the three months ended September 30, 2024 and 2023
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were $0.4296875 per depository share. Dividends on the Series B preferred paid during the three months ended September 30, 2024 and 2023 were $0.4609375 per depository share.
Net Loss Available to Common Shareholders. Net loss available to common shareholders was $286.4 million during the three months ended September 30, 2024 compared to net loss available to common shareholders $75.8 million during the three months ended September 30, 2023. The decrease was due to a change in operating (loss) income of $73.8 million, a change in provision for income taxes of $38.1 million, a change in net loss attributable to noncontrolling interests and redeemable noncontrolling interests of $0.7 million, and a decrease of $2.7 million in dividend income, partially offset by a decrease in realized and unrealized (losses) gains on investments of $55.1 million, a decrease in interest expense of $4.5 million, an increase in change in fair value of financial instruments and other of $4.6 million, and an increase of $1.3 million in interest income.
Results of Operations
The following period to period comparisons of our financial results and our interim results are not necessarily indicative of future results.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Condensed Consolidated Statements of Operations
(Dollars in thousands)
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| Nine Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | Amount |  | %
Revenues: |  |  |  |  |  |  |
Services and fees | $ | 660,946 |  |  | $ | 662,181 |  |  | $ | (1,235) |  |  | (0.2) | %
Trading (loss) income | (50,226) |  |  | 31,723 |  |  | (81,949) |  |  | n/m
Fair value adjustments on loans | (259,260) |  |  | 51,623 |  |  | (310,883) |  |  | n/m
Interest income - loans | 51,894 |  |  | 102,535 |  |  | (50,641) |  |  | (49.4) | %
Interest income - securities lending | 69,614 |  |  | 119,580 |  |  | (49,966) |  |  | (41.8) | %
Sale of goods | 164,254 |  |  | 184,301 |  |  | (20,047) |  |  | (10.9) | %
Total revenues | 637,222 |  |  | 1,151,943 |  |  | (514,721) |  |  | (44.7) | %
Operating expenses: |  |  |  |  |  |  |
Direct cost of services | 168,008 |  |  | 156,373 |  |  | 11,635 |  |  | 7.4 | %
Cost of goods sold | 118,897 |  |  | 129,490 |  |  | (10,593) |  |  | (8.2) | %
Selling, general and administrative expenses | 577,377 |  |  | 579,964 |  |  | (2,587) |  |  | (0.4) | %
Restructuring charge | 925 |  |  | 949 |  |  | (24) |  |  | (2.5) | %
Impairment of goodwill and tradenames | 27,681 |  |  | 37,233 |  |  | (9,552) |  |  | (25.7) | %
Interest expense - Securities lending and loan participations sold | 65,055 |  |  | 106,572 |  |  | (41,517) |  |  | (39.0) | %
Total operating expenses | 957,943 |  |  | 1,010,581 |  |  | (52,638) |  |  | (5.2) | %
Operating (loss) income | (320,721) |  |  | 141,362 |  |  | (462,083) |  |  | n/m
Other income (expense): |  |  |  |  |  |  |
Interest income | 2,909 |  |  | 3,455 |  |  | (546) |  |  | (15.8) | %
Dividend income | 4,139 |  |  | 9,541 |  |  | (5,402) |  |  | (56.6) | %
Realized and unrealized losses on investments | (212,362) |  |  | (77,020) |  |  | (135,342) |  |  | 175.7 | %
Change in fair value of financial instruments and other | 627 |  |  | (3,998) |  |  | 4,625 |  |  | (115.7) | %
Income (loss) from equity investments | 12 |  |  | (175) |  |  | 187 |  |  | (106.9) | %
Interest expense | (102,195) |  |  | (118,630) |  |  | 16,435 |  |  | (13.9) | %
Loss from continuing operations before income taxes | (627,591) |  |  | (45,465) |  |  | (582,126) |  |  | n/m
Provision for income taxes | (17,915) |  |  | (3,045) |  |  | (14,870) |  |  | n/m
Loss from continuing operations | (645,506) |  |  | (48,510) |  |  | (596,996) |  |  | n/m
(Loss) income from discontinued operations, net of income taxes | (123,827) |  |  | 32,543 |  |  | (156,370) |  |  | n/m
Net loss | (769,333) |  |  | (15,967) |  |  | (753,366) |  |  | n/m
Net loss attributable to noncontrolling interests | (2,167) |  |  | (5,680) |  |  | 3,513 |  |  | (61.8) | %
Net loss attributable to B. Riley Financial, Inc. | (767,166) |  |  | (10,287) |  |  | (756,879) |  |  | n/m
Preferred stock dividends | 6,045 |  |  | 6,042 |  |  | 3 |  |  | — | %
Net loss available to common shareholders | $ | (773,211) |  |  | $ | (16,329) |  |  | $ | (756,882) |  |  | n/m
n/m - Not applicable or not meaningful. |  |  |  |  |  |  |

Revenues
The table below and the discussion that follows are based on how we analyze our business.
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| Nine Months Ended September 30, |  | Change |
| 2024 |  | 2023 |  | Amount |  | % |
Services and fees: |  |  |  |  |  |  |  |
Capital Markets segment | $ | 141,026 |  |  | $ | 183,803 |  |  | $ | (42,777) |  |  | (23.3) | % |
Wealth Management segment | 150,153 |  |  | 146,660 |  |  | 3,493 |  |  | 2.4 | % |
Financial Consulting segment | 69,383 |  |  | 52,325 |  |  | 17,058 |  |  | 32.6 | % |
Communications segment | 225,055 |  |  | 250,523 |  |  | (25,468) |  |  | (10.2) | % |
All Other | 75,329 |  |  | 28,870 |  |  | 46,459 |  |  | 160.9 | % |
Subtotal | 660,946 |  |  | 662,181 |  |  | (1,235) |  |  | (0.2) | % |
Trading (loss) income: |  |  |  |  |  |  |  |
Capital Markets segment | (52,787) |  |  | 29,488 |  |  | (82,275) |  |  | n/m |
Wealth Management segment | 2,561 |  |  | 2,235 |  |  | 326 |  |  | 14.6 | % |
Subtotal | (50,226) |  |  | 31,723 |  |  | (81,949) |  |  | n/m |
Fair value adjustments on loans: |  |  |  |  |  |  |  |
Capital Markets segment | (259,260) |  |  | 51,623 |  |  | (310,883) |  |  | n/m |
Interest income - loans: |  |  |  |  |  |  |  |
Capital Markets segment | 51,894 |  |  | 102,535 |  |  | (50,641) |  |  | (49.4) | % |
Interest income - securities lending: |  |  |  |  |  |  |  |
Capital Markets segment | 69,614 |  |  | 119,580 |  |  | (49,966) |  |  | (41.8) | % |
Sale of goods: |  |  |  |  |  |  |  |
Communications segment | 4,079 |  |  | 5,145 |  |  | (1,066) |  |  | (20.7) | % |
Consumer Products segment | 152,739 |  |  | 179,156 |  |  | (26,417) |  |  | (14.7) | % |
All Other | 7,436 |  |  | — |  |  | 7,436 |  |  | 100.0 | % |
Subtotal | 164,254 |  |  | 184,301 |  |  | (20,047) |  |  | (10.9) | % |
Total revenues | $ | 637,222 |  |  | $ | 1,151,943 |  |  | $ | (514,721) |  |  | (44.7) | % |

_______________________________________________
n/m - Not applicable or not meaningful.
Total revenues decreased $514.7 million to $637.2 million during the nine months ended September 30, 2024 from $1,151.9 million during the nine months ended September 30, 2023. The decrease in revenues during the nine months ended September 30, 2024 was primarily due to decreases in fair value adjustments on loans of $310.9 million, in the fair value of the portfolio of securities and other investments owned of $81.9 million, interest income from loans of $50.6 million, interest income from securities lending of $50.0 million, sale of goods of $20.0 million, and revenues from services and fees of $1.2 million. Of the $310.9 million decrease in fair value adjustments related to loans, $222.7 million related to the loan to VCM, $13.6 million related to the loan to Freedom VCM, $27.1 million related to the loan to Conn’s, and $0.8 million related to the loan to Badcock Receivables I. The decrease in revenue from services and fees in the nine months ended September 30, 2024 consisted of decreases in revenue of $42.8 million in the Capital Markets segment, and $25.5 million in the Communications segment, partially offset by increases in revenue of $46.5 million in All Other, $17.1 million in the Financial Consulting segment, and $3.5 million in the Wealth Management segment.
Revenues from services and fees in the Capital Markets segment decreased $42.8 million to $141.0 million during the nine months ended September 30, 2024 from $183.8 million during the nine months ended September 30, 2023. We were
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the lead manager on fewer underwriting engagements in 2024 than 2023. The decrease in revenues was primarily due to decreases of $25.7 million of corporate finance, consulting, and investment banking fees, $7.0 million in dividends, $5.8 million in commission fees, $2.2 million of interest income, $1.8 million in other income, and $0.2 million in asset management fees.
Revenues from services and fees in the Wealth Management segment increased $3.5 million to $150.2 million during the nine months ended September 30, 2024 from $146.7 million during the nine months ended September 30, 2023. The increase in revenues was primarily due to increases in revenue of $2.9 million from wealth and asset management fees and $1.0 million in other income, partially offset by a decrease of $0.4 million in commission fees.
Revenues from services and fees in the Financial Consulting segment increased $17.1 million to $69.4 million during the nine months ended September 30, 2024 from $52.3 million during the nine months ended September 30, 2023. The increase in revenues was primarily due to an increase of $19.0 million from the bankruptcy and restructuring, forensic and litigation, automotive restructuring, C&W, Interface Consulting and Farber divisions offset by a decrease in revenues of $1.9 million from the risk compliance and finance, valuation and due diligence divisions.
Revenues from services and fees in the Communications segment decreased $25.5 million to $225.1 million during the nine months ended September 30, 2024 from $250.5 million during the nine months ended September 30, 2023. The decrease in revenues was primarily due to decreases in subscription revenue of $24.7 million and $0.8 million in advertising and other revenue. We expect UOL, magicJack, and Marconi subscription revenue to continue to decline year-over-year.
Revenues from services and fees in All Other increased $46.5 million to $75.3 million during the nine months ended September 30, 2024 from $28.9 million during the nine months ended September 30, 2023. These revenues include merchandise rental fees and sales from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, commission fees from Nogin which we acquired in the second quarter of 2024, and the operations of a regional environmental services business and a landscaping business that we acquired in 2022 and sold in the third quarter of 2023. Revenues from services and fees in All Other increased by approximately $39.1 million related to merchandise rental fees from bebe, $8.0 million in commission fees from Nogin, and $7.3 million related to the regional environmental services business, partially offset by a decrease in revenues of $8.0 million due to the sale of the landscaping business in the fourth quarter of 2023.
Trading (loss) income decreased approximately $81.9 million to a loss of $50.2 million during the nine months ended September 30, 2024 compared to income of $31.7 million during the nine months ended September 30, 2023. The loss of $50.2 million during the nine months ended September 30, 2024 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts.
The decrease in the fair value adjustment of $310.9 million on our loans receivable during the nine months ended September 30, 2024 was primarily due to $222.7 million related to VCM, $13.6 million related to the loan to Freedom VCM, $27.1 million related to Conn’s, and $0.8 million related to Badcock Receivables I.
Interest income - loans decreased $50.6 million to $51.9 million during the nine months ended September 30, 2024 from $102.5 million during the nine months ended September 30, 2023. The decrease was due to a reduction in loan receivable balances from $549.1 million as of September 30, 2023 to $151.7 million as of September 30, 2024.
Interest income – securities lending decreased $50.0 million to $69.6 million during the nine months ended September 30, 2024 from $119.6 million during the nine months ended September 30, 2023. The decrease was due to a decrease in the securities borrowed balance from $2,782.0 million as of September 30, 2023 to $64.0 million as of September 30, 2024.
Revenues from the sale of goods decreased $20.0 million to $164.3 million during the nine months ended September 30, 2024 from $184.3 million during the nine months ended September 30, 2023. The decrease in revenues from sale of goods was attributable to a decrease of $26.4 million from the Consumer Products segment due to a decrease in computer and peripheral sales worldwide and a decrease of $1.1 million from the Communications segment, partially offset by an increase of $7.4 million from All Other consisting of $6.0 million in sale of goods from Nogin which we acquired in the second quarter of 2024 and $1.4 million in sale of goods from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023. Cost of goods sold for the nine months ended September 30, 2024 decreased approximately $10.6 million to $118.9 million from $129.5 million during the nine months ended September 30, 2023. The decrease in cost of goods sold was primarily attributable to decreases of $14.3 million in the Consumer Products segment and $1.6 million in the Communications segment, partially offset by increases of $5.3 million from All Other
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consisting of $3.7 million from Nogin which we acquired in the second quarter of 2024 and $1.6 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023.
Operating Expenses
Direct Cost of Services
Direct cost of services increased approximately $11.6 million to $168.0 million during the nine months ended September 30, 2024 from $156.4 million during the nine months ended September 30, 2023. The increase in direct cost of services was primarily attributable to an increase of $17.1 million from All Other consisting of $12.4 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $4.5 million from Nogin which we acquired in the second quarter of 2024, and $0.2 million from the regional environmental services business, partially offset by a decrease of $5.5 million from the Communications segment.
Selling, General and Administrative Expenses
Selling, general and administrative expenses during the nine months ended September 30, 2024 and 2023 were comprised of the following:

| Nine Months Ended September 30, 2024 |  | Nine Months Ended September 30, 2023 |  | Change
| Amount |  | % |  | Amount |  | % |  | Amount |  | %
Capital Markets segment | $ | 135,816 |  |  | 23.5 | % |  | $ | 177,628 |  |  | 30.7 | % |  | $ | (41,812) |  |  | (23.5) | %
Wealth Management segment | 148,587 |  |  | 25.7 | % |  | 146,420 |  |  | 25.2 | % |  | 2,167 |  |  | 1.5 | %
Financial Consulting segment | 56,553 |  |  | 9.8 | % |  | 43,166 |  |  | 7.4 | % |  | 13,387 |  |  | 31.0 | %
Communications segment | 70,886 |  |  | 12.3 | % |  | 84,215 |  |  | 14.5 | % |  | (13,329) |  |  | (15.8) | %
Consumer Products segment | 51,464 |  |  | 8.9 | % |  | 59,774 |  |  | 10.3 | % |  | (8,310) |  |  | (13.9) | %
Corporate and All Other | 114,071 |  |  | 19.8 | % |  | 68,761 |  |  | 11.9 | % |  | 45,310 |  |  | 65.9 | %
Total selling, general & administrative expenses | $ | 577,377 |  |  | 100.0 | % |  | $ | 579,964 |  |  | 100.0 | % |  | $ | (2,587) |  |  | (0.4) | %

Total selling, general and administrative expenses decreased by $2.6 million to $577.4 million during the nine months ended September 30, 2024 from $580.0 million during the nine months ended September 30, 2023. The decrease was primarily due to decreases of $41.8 million in the Capital Markets segment, $13.3 million in the Communications segment, and $8.3 million in the Consumer Products segment, partially offset by increases of $45.3 million in Corporate and All Other, $13.4 million in the Financial Consulting segment, and $2.2 million in the Wealth Management segment.
Capital Markets
Selling, general and administrative expenses in the Capital Markets segment decreased by $41.8 million to $135.8 million during the nine months ended September 30, 2024 from $177.6 million during the nine months ended September 30, 2023. The decrease was primarily due to decreases of $26.0 million in payroll and related expenses, which primarily related to decreases in commissions paid, share based compensation and other payroll expenses, $14.1 million in consulting expenses, of which $12.9 million related to an advisory agreement which ended in August of 2023, $2.2 million in clearing and execution charges, $1.5 million in investment banking deal expenses, $0.8 million in depreciation and amortization expenses, $0.6 million in business development activities and $0.1 million in other expenses, partially offset by an increase of $3.5 million in change in fair value of contingent consideration. The advisory agreement was terminated in August 2023 in connection with the FRG take private transaction as more fully described in Note 2(h) to the accompanying condensed consolidated financial statements and there was no expense during the nine months ended September 30, 2024 as compared to the prior year when the expense totaled $12.9 million. For any given reporting period in 2023, the advisory agreement would result in an expense being reported in selling, general and administrative expenses when realized and unrealized gains on certain invested balances in the Company’s broker-dealer subsidiary exceeded a minimum return on the invested balances during such period; in addition, a decrease in the invested balance in value during such reporting period would result in the reporting of a credit to selling, general and administrative expense. During the nine months ended September 30, 2023, the Company recorded an advisory fee of $12.9 million in accordance with the advisory agreement due to the realized and unrealized gains earned.
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Wealth Management
Selling, general and administrative expenses in the Wealth Management segment increased by $2.2 million to $148.6 million during the nine months ended September 30, 2024 from $146.4 million during the nine months ended September 30, 2023. The increase was primarily due to increases of $4.0 million in payroll and related expenses and $1.4 million in legal settlements, partially offset by decreases of $2.5 million in other expenses and $0.7 million in software and equipment expenses.
Financial Consulting
Selling, general and administrative expenses in the Financial Consulting segment increased by $13.4 million to $56.6 million during the nine months ended September 30, 2024 from $43.2 million during the nine months ended September 30, 2023. The increase was primarily due to increases of $9.6 million in payroll and related expenses related to a business acquired in the third quarter of 2023, an increase in headcount, and an increase in variable compensation, $1.4 million in change in fair value of contingent consideration, $0.9 million in legal settlements, $0.7 million in travel and entertainment expenses, $0.5 million in outside contractor expenses and $0.3 million in other expenses.
Communications
Selling, general and administrative expenses in the Communications segment decreased $13.3 million to $70.9 million for the nine months ended September 30, 2024 from $84.2 million for the nine months ended September 30, 2023. The decrease was primarily due to decreases of $8.1 million in payroll and related expenses due to lower headcount, $3.0 million in depreciation and amortization expenses due to items being fully amortized, $1.6 million in regulatory taxes due to receiving credits, and $0.7 million in software and equipment. The decrease in payroll and related expenses and other expenses was primarily due to cost savings in 2024 resulting from the implementation of cost savings programs in second half of 2023 that included a reduction in headcount and other operating expenses and sale of the Lingo carrier business in the third quarter of 2024.
Consumer Products
Selling, general and administrative expenses in the Consumer Products segment decreased $8.3 million to $51.5 million for the nine months ended September 30, 2024 from $59.8 million during the nine months ended September 30, 2023. The decrease was primarily due to decreases of $1.9 million in depreciation and amortization expense due to items being fully amortized, $1.8 million in other expenses due to efforts to reduce costs, $1.5 million in professional fees partially due to large legal expense in the prior year, $1.2 million in payroll and related expenses due to reduced headcount, $0.6 million in travel and entertainment expenses, and $0.6 million in marketing costs, partially offset by an increase of $0.5 million in share based compensation due to a reversal of performance based shares in the prior year.
Corporate and All Other
Selling, general and administrative expenses for Corporate and All Other increased approximately $45.3 million to $114.1 million during the nine months ended September 30, 2024 from $68.8 million for the nine months ended September 30, 2023. The increase was primarily due to increases of $28.6 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $15.1 million from Nogin which was acquired in the second quarter of 2024, $9.0 million in legal expenses, $5.9 million in accounting expenses, $4.6 million from the regional environmental services business, $2.0 million in legal settlements, and $1.3 million in transaction costs, partially offset by decreases of $17.1 million in payroll and related expenses, which primarily related to decreases in share based compensation and other variable compensation, $2.0 million related to the landscaping business that was sold in 2023, $1.5 million in outside contractor expenses, and $0.4 million in other expenses.
Impairment of goodwill and tradenames. We recognized impairment charges of $27.7 million during the nine months ended September 30, 2024. We performed an interim impairment test as of June 30, 2024, as further discussed in Note 9 of the accompanying condensed consolidated financial statements. Based on the results of the impairment test, we recorded a non-cash impairment charge of $26.7 million related to goodwill and $1.0 million related to tradenames in the Consumer Products segment. We recognized impairment charges of $37.2 million during the nine months ended September 30, 2023 consisting of $8.0 million in impairment of indefinite-lived tradenames and $27.5 million of impairment of goodwill in the Consumer segment and $1.7 million in impairment of tradenames in the Capital Markets segment.
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Other Income (Expense). Other income included interest income of $2.9 million and $3.5 million during the nine months ended September 30, 2024 and 2023, respectively. Dividend income was $4.1 million during the nine months ended September 30, 2024 compared to $9.5 million during the nine months ended September 30, 2023. Realized and unrealized losses on investments was a loss of $212.4 million during the nine months ended September 30, 2024 compared to a loss of $77.0 million during the nine months ended September 30, 2023. The change was primarily due to a decrease in the valuation of our investment in Freedom VCM Holdings, LLC of $221.0 million, partially offset by increases of $35.3 million in Babcock & Wilcox Enterprises, Inc., $34.9 million in Double Down Interactive Co., Ltd and $21.3 million in The Arena Group, Inc. Change in fair value of financial instruments and other was a gain of $0.6 million during the nine months ended September 30, 2024 and a loss of $4.0 million during the nine months ended September 30, 2023. Interest expense was $102.2 million during the nine months ended September 30, 2024 compared to $118.6 million during the nine months ended September 30, 2023. The decrease in interest expense was due to lower debt balances during the nine months ended September 30, 2024. The decreases in interest expense primarily consisted of $14.4 million from the Pathlight term loan, $8.1 million from the issuance of senior notes, $7.5 million from the Nomura term loan, $4.0 million from the Nomura revolving credit facility, $0.4 million and $1.7 million from the Targus term loan and revolver, respectively, and $1.2 million from the BRPAC term loan, partially offset by increases in interest expense of $2.1 million from the bebe term loan, and $0.6 million from the Nogin secured convertible promissory note.
Loss from Continuing Operations Before Income Taxes. Loss from continuing operations before income taxes was $627.6 million during the nine months ended September 30, 2024 compared to loss before income taxes of $45.5 million during the nine months ended September 30, 2023. The change was due to a decrease in revenue of $514.7 million, a change in realized and unrealized losses on investments of $135.3 million, a decrease in operating expenses of $52.6 million, a decrease of $0.5 million in interest income, and a decrease of $5.4 million in dividend income, partially offset by a decrease in interest expense of $16.4 million.
Provision for Income Taxes. Provision for income taxes was $17.9 million during the nine months ended September 30, 2024 compared to a provision for income taxes of $3.0 million during the nine months ended September 30, 2023. The effective income tax rate was 2.9% for the nine months ended September 30, 2024 as compared to 6.7% for the nine months ended September 30, 2023.
Loss from Continuing Operations. Loss from continuing operations was $645.5 million during the nine months ended September 30, 2024 compared to loss of $48.5 million during the nine months ended September 30, 2023. The change was due to a change in operating (loss) income of $462.1 million, a decrease in realized and unrealized losses on investments of $135.3 million, a decrease of $0.5 million in interest income, and a decrease of $5.4 million in dividend income, partially offset by a change in provision for income taxes of $14.9 million and a decrease in interest expense of $16.4 million.
(Loss) Income from Discontinued Operations, Net of Income Taxes. On October 25, 2024, we and our subsidiary bebe stores, inc. (“bebe”) have completed a transaction for our brand assets yielding approximately $236.0 million in cash proceeds. The results have been presented as discontinued operations for the nine months ended September 30, 2024. Loss from discontinued operations, net of tax for Brands Transaction was $112.6 million during the nine months ended September 30, 2024 compared to income from discontinued operations of $21.7 million during the nine months ended September 30, 2023. The loss from discontinued operations is primarily due to realized and unrealized losses incurred on the brand equity investments during the three months ended September 30, 2024 from the planned securitization transaction and Sale of equity investments by the Company’s majority owned subsidiary bebe, as more fully discussed in Note 4 to the accompanying condensed consolidated financial statements.
On November 15, 2024, we completed the sale of our Great American Group and its results have been presented as discontinued operations for the three months ended September 30, 2024. Loss from discontinued operations, net of tax for Great American Group was $11.2 million for the nine months ended September 30, 2023, compared to income from discontinued operations of $10.8 million during the nine months ended September 30, 2023. Refer to Note 4 to the accompanying condensed consolidated financial statements for additional information.
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests. Net loss attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net loss generated by membership interests of partnerships that we do not own. The net loss attributable to noncontrolling interests was $2.2 million during the nine months ended September 30, 2024 compared to net loss of $5.7 million during the nine months ended September 30, 2023.
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Net Loss Attributable to the Company. Net loss attributable to the Company was $767.2 million during the nine months ended September 30, 2024 compared to net loss attributable to the Company of $10.3 million for the nine months ended September 30, 2023. The decrease was due to a change in operating (loss) income of $462.1 million, a decrease in realized and unrealized losses on investments of $135.3 million, a change in net loss attributable to noncontrolling interests and redeemable noncontrolling interests of $3.5 million, a decrease of $0.5 million in interest income, and a decrease of $5.4 million in dividend income, partially offset by a change in provision for income taxes of $14.9 million and a decrease in interest expense of $16.4 million.
Preferred Stock Dividends. Preferred stock dividends were $6.0 million for the nine months ended September 30, 2024 and 2023. Dividends on the Series A preferred paid during the nine months ended September 30, 2024 and 2023 were $0.4296875 per depository share. Dividends on the Series B preferred paid during the nine months ended September 30, 2024 and 2023 were $0.4609375 per depository share.
Net Loss Available to Common Shareholders. Net loss available to common shareholders was $773.2 million during the nine months ended September 30, 2024 compared to net loss available to common shareholders $16.3 million during the nine months ended September 30, 2023. The decrease was due to a change in operating (loss) income of $462.1 million, a decrease in realized and unrealized losses on investments of $135.3 million, a change in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests of $3.5 million, a decrease of $0.5 million in interest income, and a decrease of $5.4 million in dividend income, partially offset by a change in provision for income taxes of $14.9 million and a decrease in interest expense of $16.4 million.
Liquidity and Capital Resources
Our operations are funded through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes payable, term loans and credit facilities, and special purposes financing arrangements. During the nine months ended September 30, 2024 and 2023, we generated net losses of $645.5 million and $48.5 million, respectively. The Company operates a number of businesses in its segments that provide steady cash flows and operating income throughout the year, however, our cash flows and profitability are impacted by capital market engagements.
As of September 30, 2024, we had $159.2 million of unrestricted cash and cash equivalents, $1.4 million of restricted cash, $341.8 million of securities and other investments owned, at fair value, $151.7 million of loans receivable, at fair value, and $2,067.8 million of borrowings outstanding. The borrowings outstanding of $2,067.8 million as of September 30, 2024 included $1,529.6 million from the issuance of series of senior notes that are due at various dates ranging from February 28, 2025 to August 31, 2028 with interest rates ranging from 5.00% to 6.50%, $490.7 million in term loans borrowed pursuant to the Tiger US Holdings Inc. (“Targus”), Lingo Management, LLC (“Lingo Management”), BRPI Acquisition Co LLC (“BRPAC”), Nomura Corporate Fundings Americas, LLC (“Nomura”), and bebe credit agreements discussed below, $13.7 million of revolving credit facility under the Targus credit facility discussed below, and $29.9 million of notes payable.
In November 2024, the Company also entered into a transaction whereby all of its interests in the Great American Group businesses was contributed to a newly formed subsidiary and issued preferred and common units to an investor for a purchase price of approximately $203.0 million referred to as the Great American Transaction above. In connection with such transaction, the Company used proceeds to further reduce the outstanding balance on the Nomura credit facility from $216.6 million to $125.0 million. The Company has $145.3 million of 6.375% Senior Notes due on February 28, 2025 that mature and will use cash on hand to repay these senior notes.
We believe that our current cash and cash equivalents, securities and other investments owned, funds available under our asset based credit facility and funds available under the Targus revolving credit facility and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying financial statements.
The Company also has $217.4 million of the $1,529.6 million of Senior Notes outstanding at September 30, 2024 that are due to mature on March 31, 2026. The Company is considering a number of additional strategic alternatives to satisfy this obligation; which among other things, includes: existing cash on hand; the sale of a portion of the Company’s traditional (W-2) Wealth Management business (as more further discussed above); the sale of non-core businesses; and the sale or refinancing of other assets and investments. There can be no assurance that these contemplated transactions will occur and in the event these transactions are not completed it could have a material impact on the Company’s financial condition.
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Due to the fact that we are no longer a well-known seasoned issued and no longer eligible to file a short form registration statement with the SEC, accessing the capital markets could take longer and cost more than would otherwise be the case. We continue to monitor our financial performance to ensure sufficient liquidity to fund operations and execute on our business plan.
Dividends
From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations. During the nine months ended September 30, 2024, we paid cash dividends on our common stock of $33.6 million. During the year ended December 31, 2023, we paid cash dividends on our common stock of $141.1 million. In August 2024, we announced the suspension of our common stock dividend as we prioritize reducing our debt. The declaration and payment of any future dividends or repurchases of our common stock will be made at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, cash flows, capital expenditures, and other factors that may be deemed relevant by our Board of Directors.
A summary of common stock dividend activity for the nine months ended September 30, 2024 and the year ended December 31, 2023 was as follows:

Date Declared |  | Date Paid |  | Stockholder Record Date |  |  |  |  |  | Amount
May 15, 2024 |  | June 11, 2024 |  | May 27, 2024 |  |  |  |  |  | $ | 0.50 |
February 29, 2024 |  | March 22, 2024 |  | March 11, 2024 |  |  |  |  |  | 0.50 |
November 8, 2023 |  | November 30, 2023 |  | November 20, 2023 |  |  |  |  |  | 1.00 |
July 25, 2023 |  | August 21, 2023 |  | August 11, 2023 |  |  |  |  |  | 1.00 |
May 4, 2023 |  | May 23, 2023 |  | May 16, 2023 |  |  |  |  |  | 1.00 |
February 22, 2023 |  | March 23, 2023 |  | March 10, 2023 |  |  |  |  |  | 1.00 |

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day of January, April, July, and October. As of September 30, 2024, dividends in arrears in respect of the Depositary Shares were $0.8 million. On October 16, 2024, the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on October 31, 2024 to holders of record as of the close of business on October 28, 2024. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Series A Preferred Stock. Unpaid dividends will accrue until paid in full.
Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day of January, April, July, and October. As of September 30, 2024, dividends in arrears in respect of the Depositary Shares were $0.5 million. On October 16, 2024, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on October 31, 2024 to holders of record as of the close of business on October 28, 2024. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Series B Preferred Stock. Unpaid dividends will accrue until paid in full.
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A summary of preferred stock dividend activity for the nine months ended September 30, 2024 and the year ended December 31, 2023 was as follows:

|  |  |  | Stockholder |  | Preferred Dividend per Depositary Share
Date Declared |  | Date Paid |  | Record Date |  | Series A |  | Series B
July 9, 2024 |  | July 31, 2024 |  | July 22, 2024 |  | $ | 0.4296875 |  |  | $ | 0.4609375 |
April 9, 2024 |  | April 30, 2024 |  | April 22, 2024 |  | 0.4296875 |  |  | 0.4609375 |
January 9, 2024 |  | January 31, 2024 |  | January 22, 2024 |  | 0.4296875 |  |  | 0.4609375 |
October 10, 2023 |  | October 31, 2023 |  | October 23, 2023 |  | 0.4296875 |  |  | 0.4609375 |
July 11, 2023 |  | July 31, 2023 |  | July 21, 2023 |  | 0.4296875 |  |  | 0.4609375 |
April 10, 2023 |  | May 1, 2023 |  | April 21, 2023 |  | 0.4296875 |  |  | 0.4609375 |
January 9, 2023 |  | January 31, 2023 |  | January 20, 2023 |  | 0.4296875 |  |  | 0.4609375 |

Our principal sources of liquidity to finance our business are our existing cash on hand, cash flows generated from operating activities, funds available under revolving credit facilities and special purpose financing arrangements.
Cash Flow Summary

| Nine Months Ended September 30,
| 2024 |  | 2023
| (Dollars in thousands)
Net cash provided by (used in): |  |  |
Operating activities | $ | 266,294 |  |  | $ | (40,957) |
Investing activities | 25,529 |  |  | 312,954 |
Financing activities | (354,722) |  |  | (285,459) |
Effect of foreign currency on cash | (1,092) |  |  | (3,116) |
Net decrease in cash, cash equivalents and restricted cash | $ | (63,991) |  |  | $ | (16,578) |

Cash provided by operating activities was $266.3 million during the nine months ended September 30, 2024 compared to cash used in operating activities of $41.0 million during the nine months ended September 30, 2023. Cash provided by operating activities for the nine months ended September 30, 2024 consisted of the impact of net loss of $769.3 million, noncash items of $394.9 million, and changes in operating assets and liabilities of $640.7 million. The positive cash flow impact from noncash items of $394.9 million included fair value adjustments of $261.4 million, loss on disposal of discontinued operations of $39.5 million, depreciation and amortization of $34.1 million, impairment of goodwill and tradenames of $27.7 million, deferred income taxes of $20.5 million, share-based compensation of $17.6 million, depreciation of rental merchandise of $11.7 million, provision for credit losses of $2.5 million, income allocated for mandatorily redeemable noncontrolling interests of $1.4 million, effect of foreign currency of $0.3 million, partially offset by non-cash interest and other of $26.3 million, and gain on sale of business, disposal of fixed assets, and other of $0.7 million. Cash used in operating activities for the nine months ended September 30, 2023 consisted of the impact of net loss of $16.0 million, noncash items of $40.9 million, and changes in operating assets and liabilities of $65.9 million. The positive cash flow impact from noncash items of $40.9 million included depreciation and amortization of $38.1 million, share-based compensation of $35.3 million, provision for credit losses of $5.9 million, impairment of goodwill and tradenames of $37.2 million, loss on extinguishment of debt of $5.3 million, income allocated for mandatorily redeemable noncontrolling interests of $1.3 million, effect of foreign currency of $0.7 million, income from equity investments of $0.2 million and dividends from equity investments of $0.2 million, partially offset by fair value adjustments of $42.8 million, deferred income taxes of $21.4 million, gain on sale of businesses, disposal of fixed assets, and other of $9.6 million, and noncash interest and other of $9.4 million.
Cash provided by investing activities was $25.5 million during the nine months ended September 30, 2024 compared to cash provided by investing activities of $313.0 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, cash provided by investing activities consisted of cash provided by loans receivable
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repayment of $105.3 million, sale of loans receivable of $22.8 million, and proceeds from sale of loan participations of $4.0 million, partially offset by cash used in purchases of loans receivable of $79.9 million, acquisition of businesses and minority interest, net of cash acquired of $19.1 million, purchases of property and equipment of $6.7 million, purchases of equity and other investments of $1.1 million, and sale of business, net of cash sold and other of $0.3 million. During the nine months ended September 30, 2023, cash provided by investing activities consisted of cash received from loans receivable repayment of $543.6 million, funds received from trust account of subsidiary of $175.8 million, proceeds from sale of business, net of cash sold and other of $17.3 million, and sale of loan receivable of $7.5 million, partially offset by cash used for purchases of loans receivable of $405.4 million, acquisition of businesses and minority interest of $15.3 million, purchases of equity and other investments of $4.9 million, and purchases of property and equipment of $5.8 million.
Cash used in financing activities was $354.7 million during the nine months ended September 30, 2024 compared to cash used in financing activities of $285.5 million during the nine months ended September 30, 2023. During the nine months ended September 30, 2024, cash used in financing activities primarily consisted of $140.5 million used to redeem senior notes, $94.2 million used in payment of revolving lines of credit, $138.6 million used in the repayment of term loan, $33.6 million used to pay dividends on our common shares, $6.2 million used to repay our notes payable and other, $6.0 million used to pay dividends on our preferred shares, $7.4 million used to pay contingent consideration, $4.6 million in distributions to noncontrolling interests, $3.5 million used to pay debt issuance and offering costs, and $3.1 million used in payment of ESPP and employment taxes on vesting of restricted stock, partially offset by cash provided by $64.1 million in proceeds from revolving line of credit, $15.0 million in proceeds from notes payable, $3.2 million in contributions from noncontrolling interests, and $0.7 million in proceeds from exercise of warrants. During the nine months ended September 30, 2023, cash used in financing activities primarily consisted of $175.8 million used in redemption of subsidiary temporary equity and distributions, $504.2 million used in the repayment of term loan, $111.0 million used to pay dividends on our common shares, $261.7 million used in repayment of revolving line of credit, $58.9 million used to redeem senior notes, $53.7 million used to repurchase our common shares, $27.2 million used in the payment of debt issuance and offering costs, $11.9 million used to repay our notes payable and other, $8.6 million used in payment of ESPP and employment taxes on vesting of restricted stock, $6.0 million used to pay dividends on our preferred shares, $4.0 million in distributions to noncontrolling interests, and $1.9 million used in the payment of contingent consideration, partially offset by cash provided by $628.2 million in proceeds from term loans, $191.3 million in proceeds from revolving line of credit, $4.3 million in contributions from noncontrolling interests, and $0.5 million in proceeds from issuance of preferred stock.
Credit Agreements
Targus Credit Agreement
On October 18, 2022, our subsidiary, Tiger US Holdings, Inc. (the “Borrower”), a Delaware corporation, among others, entered into a credit agreement (“Targus Credit Agreement”) with PNC Bank, National Association (“PNC”), as agent and security trustee for a five-year $28.0 million term loan and a five-year $85.0 million revolver loan, which was used to finance part of the acquisition of Targus. The final maturity date is October 18, 2027.
The Targus Credit Agreement is secured by substantially all Targus assets as collateral defined in the Targus Credit Agreement which totals approximately $204.0 million. The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. The Targus Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts outstanding under the Targus Credit Agreement. On October 31, 2023 and February 20, 2024, we entered into Amendment No. 1 and Amendment No. 2 to the Targus Credit Agreement, which, among other things, modified the fixed charge coverage ratio and the minimum earnings before interest, taxes, depreciation, and amortization requirements which waived the financial covenant breaches for the periods ended September 30, 2023 and December 31, 2023, respectively. Amendment No. 2 also provided, among other things, with a cure right for us to provide a capital contribution to Targus in the event of a financial covenant breach. For the period ended September 30, 2023, the Fixed Charge Coverage Ratio “FCCR” covenant was not fulfilled in accordance with the Targus Credit Agreement and for the period ended December 31, 2023, the FCCR and minimum EBITDA covenant was not fulfilled in accordance with the Targus Credit Agreement. However, the amendments to the Targus Credit Agreement and the capital contributions made to the subsidiary cured the covenant breaches. On June 27, 2024 we entered into Amendment No. 3 to the Targus Credit Agreement to replace the terminating Canadian
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benchmark interest rate with the Term CORRA Reference Rate. For the period ended June 30, 2024, the minimum EBITDA covenant was also breached. On August 14, 2024, we contributed $1.6 million to Targus to cure a minimum EBITDA financial covenant requirement for the period ended June 30, 2024. For the period ended September 30, 2024, the minimum EBITDA covenant was also breached. On November 7, 2024, we entered into Amendment No. 4 to the Targus Credit Agreement, which among other things, reduced revolving loan sublimits, modified the FCCR covenant, removed the minimum EBITDA requirement, imposed a minimum undrawn availability covenant, and modified the terms of the Keepwell. Amendment No. 4 to the Targus Credit Agreement also waived the September 30, 2024 minimum EBITDA covenant breach. Concurrently with the effectiveness of Amendment No. 4 to the Targus Credit Agreement, the Company repaid the outstanding balance of the term loan in full with $2.1 million of revolver loan advances and $7.5 million of cash from the Company.
The term loan bears interest on the outstanding principal amount equal to the Term Secured Overnight Financing Rate (“SOFR”) rate plus an applicable margin of 5.75%. The revolver loan consists of base rate loans that bear interest on the outstanding principal amount equal to the base rate plus an applicable margin of 3.00% and term rate loans that bear interest on the outstanding principal amount equal to the revolver SOFR rate plus an applicable margin of 4.00%.
Principal outstanding for the term loan under the amended Targus Credit Agreement is due in quarterly installments. Quarterly installments from September 30, 2024 to December 31, 2025 are in the amount of $2.1 million per quarter and the remaining principal balance is due on March 31, 2026.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $11.5 million (net of unamortized debt issuance costs of $0.2 million) and $17.8 million (net of unamortized debt issuance costs of $0.4 million), respectively, and the outstanding balance on the revolver loan was $13.7 million and $43.8 million, respectively. Interest expense on these loans during the three and nine months ended September 30, 2024 was $1.0 million (including amortization of deferred debt issuance costs of $0.2 million and unused commitment fees of $0.02 million) and $3.4 million (including amortization of deferred debt issuance costs of $0.6 million and unused commitment fees of $0.1 million), respectively. Interest expense on these loans during the three and nine months ended September 30, 2023 was $1.8 million (including amortization of deferred debt issuance costs of $0.1 million and unused commitment fees of $0.02 million) and $5.5 million (including amortization of deferred debt issuance costs of $0.4 million and unused commitment fees of $0.06 million), respectively. The interest rate on the term loan was 11.18% and 10.20% and the interest rate on the revolver loan ranged between 8.96% to 11.25% and between 8.45% to 11.25% as of September 30, 2024 and December 31, 2023, respectively. The weighted average interest rate on the revolver loan was 9.04% and 8.53% as of September 30, 2024 and December 31, 2023, respectively.
Lingo Credit Agreement
On August 16, 2022, our subsidiary, Lingo a Delaware limited liability company (the “Borrower”), entered into a credit agreement (the “Lingo Credit Agreement”) by and among the Borrower, the Company as the secured guarantor, and Banc of California, N.A. in its capacity as administrative agent and lender, for a five-year $45.0 million term loan. This loan was used to finance part of the purchase of BullsEye by Lingo. On September 9, 2022, Lingo entered into the First Amendment to the Lingo Credit Agreement with Grasshopper Bank (the “New Lender”) for an incremental term loan of $7.5 million, increasing the principal balance of the term loan to $52.5 million. On November 10, 2022, Lingo entered into the Second Amendment to the Lingo Credit Agreement with KeyBank National Association for an incremental term loan of $20.5 million, increasing the principal balance of the term loan to $73.0 million.
The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus a margin of 3.00% to 3.75% per annum, depending on the consolidated total funded debt ratio as defined in the Lingo Credit Agreement, plus applicable spread adjustment. As of September 30, 2024 and December 31, 2023, the interest rate on the Lingo Credit Agreement was 8.59% and 8.70%, respectively.
The Lingo Credit Agreement is guaranteed by the Company and Lingo's subsidiaries and secured by certain Lingo assets and equity interests as collateral which totals approximately $230.1 million defined in the Lingo Credit Agreement. The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of its businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the Lingo Credit Agreement requires the Borrower to maintain certain financial ratios. The Lingo Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the
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acceleration of amounts due under the Lingo Credit Agreement. We are in compliance with all financial covenants in the Lingo Credit Agreement as of September 30, 2024.
Principal outstanding is due in quarterly installments. The quarterly installments from September 30, 2024 to December 31, 2024 are in the amount of $2.7 million per quarter, quarterly installments from March 31, 2025 to June 30, 2027 are in the amount of $3.7 million, and the remaining principal balance is due at final maturity on August 16, 2027.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $55.0 million (net of unamortized debt issuance costs of $0.6 million) and $63.2 million (net of unamortized debt issuance costs of $0.7 million), respectively. Interest expense on the term loan during the three and nine months ended September 30, 2024 was $1.4 million (including amortization of deferred debt issuance costs of $0.1 million) and $4.3 million (including amortization of deferred debt issuance costs of $0.2 million), respectively. Interest expense on the term loan during the three and nine months ended September 30, 2023 was $1.6 million (including amortization of deferred debt issuance costs of $0.1 million) and $4.8 million (including amortization of deferred debt issuance costs of $0.2 million), respectively.
On January 6, 2025, as discussed below BRPAC entered into an amended and restated credit agreement (the “BRPAC Amended Credit Agreement”) with the Banc of California, in the capacity as agent and lender and with other lenders party thereto from time to time. A portion of the proceeds from the BRPAC Amended Credit Agreement were used to pay all outstanding principal amounts and accrued interest under the Lingo Credit Agreement and the Lingo Credit Agreement was effectively terminated upon repayment on January 6, 2025.
bebe Credit Agreement
As a result of the Company obtaining a majority ownership interest in bebe on October 6, 2023, bebe's credit agreement with SLR Credit Solutions (the “bebe Credit Agreement”) for a $25.0 million five-year term loan with a maturity date of August 24, 2026 is included in the Company's long-term debt. The term loan bears interest on the outstanding principal amount equal to the Term SOFR rate plus a margin of 5.50% to 6.00% per annum, depending on the total fixed charge coverage ratio as defined in the bebe Credit Agreement. As of September 30, 2024 and December 31, 2023, the interest rate on the bebe Credit Agreement was 10.78% and 11.14%, respectively.
The bebe Credit Agreement is collateralized by a first lien on all bebe assets and pledges of capital stock including equity interests which totals approximately $110.9 million. The agreement contains certain covenants, including those limiting the borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the agreement requires bebe to maintain certain financial ratios. The agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $21.7 million (net of unamortized debt issuance costs of $0.5 million) and $22.5 million (net of unamortized debt issuance costs of $0.6 million), respectively. Interest expense on the term loan during the three and nine months ended September 30, 2024 was $0.7 million (including amortization of deferred debt issuance costs of $0.1 million) and $2.1 million (including amortization of deferred debt issuance costs of $0.2 million), respectively. Principal outstanding is due in quarterly installments through June 30, 2026 in the amount of $0.3 million per quarter and the remaining principal balance of $20.0 million is due at final maturity on August 24, 2026.
On October 25, 2024, upon the closing of the Brands Transaction as described in Note 4 – Discontinued Operations of the accompanying condensed consolidated financial statements, proceeds of $22.2 million was used to pay off the then outstanding balance of the loan in full and $0.2 million of loan payoff expenses.
Nomura Credit Agreement
We and our wholly owned subsidiaries, BR Financial Holdings, LLC, and BR Advisory & Investments, LLC had entered into a credit agreement dated June 23, 2021 (as amended, the “Prior Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, for a four-year $300.0 million secured term loan credit facility (the “Prior Term Loan Facility”) and a four-year $80.0 million secured revolving loan credit facility (the “Prior Revolving Credit Facility”) with a maturity date of June 23, 2025.
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On August 21, 2023, we and our wholly owned subsidiary, BR Financial Holdings, LLC (the “Borrower”), and certain direct and indirect subsidiaries of the Borrower (the “Guarantors”), entered into a credit agreement (the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Computershare Trust Company, N.A., as collateral agent, for a four-year $500.0 million secured term loan credit facility (the “New Term Loan Facility”) and a four-year $100.0 million secured revolving loan credit facility (the “New Revolving Credit Facility” and together, the “New Credit Facilities”). The purpose of the Credit Agreement was to (i) fund the Freedom VCM equity investment, (ii) prepay in full the Prior Term Loan Facility and Prior Revolving Credit Facility with an aggregate outstanding balance of $347.9 million, which included $342.0 million in principal and $5.9 million in interest and fees, (iii) fund a dividend reserve in an amount not less than $65.0 million, (iv) pay related fees and expenses, and (v) for general corporate purposes. We recorded a loss on extinguishment of debt related to the Prior Credit Agreement of $5.4 million, which was included in selling, general and administrative expenses on the condensed consolidated statements of operations.
SOFR rate loans under the New Credit Facilities accrue interest at the adjusted term SOFR rate plus an applicable margin of 6.00%. In addition to paying interest on outstanding borrowings under the New Revolving Credit Facility, we are required to pay a quarterly commitment fee based on the unused portion, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter.
The Credit Agreement is secured on a first priority basis by a security interest in the equity interests of the Borrower and each of the Borrower’s subsidiaries (subject to certain exclusions) and a security interest in substantially all of the assets of the Borrower and the Guarantors. The borrowing base as defined in the Credit Agreement consists of a collateral pool that includes certain of the Company's loans receivables in the amount of $209.9 million (which is included in the total loans receivable, at fair value balance of $151.7 million reported in our condensed consolidated balance sheet at September 30, 2024) and $375.8 million (which is included in the total loans receivable, at fair value balance of $532.4 million reported in our condensed consolidated balance sheet at December 31, 2023) and investments in the amount of $706.7 million (which is included in the total securities and other investments owned, at fair value of $341.8 million reported in our condensed consolidated balance sheet at September 30, 2024) and $786.7 million (which is included in the total securities and other investments owned, at fair value of $809.0 million reported in our condensed consolidated balance sheet at December 31, 2023) as of September 30, 2024 and December 31, 2023, respectively. The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit the Company’s and its subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests. The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events. We are in compliance with all financial covenants in the Credit Agreement as of September 30, 2024. On September 17, 2024, we entered into Amendment No. 4 to our credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Fourth Amendment”). On September 17, 2024, we made a payment of $85.9 million which consisted of a principal payment of $85.1 million and accrued interest of $0.7 million. Loan fees incurred in connection with the Fourth Amendment totaled $5.9 million of which $3.5 million was added to the principal balance of the term loan. After giving effect to these amounts, the outstanding principal balance on the term loan was reduced from $469.8 million to $388.1 million. In connection with the Fourth Amendment, the revolving credit facility in the amount of $100.0 million which had no balance outstanding at September 17, 2024 was terminated and we are required to reduce the principal amount of the term loan to be no greater than $100.0 million on or prior to September 30, 2025. The maturity date of the term loan is August 21, 2027 and all outstanding principal is required to be paid. The Fourth Amendment contains certain provisions related to borrowing base, including specific treatment for certain assets in the calculation of borrowing base and also includes mandatory prepayment provisions regarding asset sales. Interest on the term loan increased to: SOFR loans will accrue interest at the adjusted term SOFR plus an applicable margin of 7.00% cash interest or, at the election of the Company, at the adjusted term SOFR determined plus an applicable margin of 6.00% cash interest plus 1.50% paid-in-kind interest; and base rate loans will accrue interest at the base rate plus an applicable margin of 6.00% cash interest or, at the election of the Company, at the adjusted term SOFR determined for such day plus an applicable margin of 5.00% cash interest plus 1.50% PIK Interest. On December 9, 2024, the Company entered into Amendment No. 5 to its credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Fifth Amendment”). The Fifth Amendment extended the springing maturity date of the term loans if more than $25.0 million aggregate principal amount of the 5.50% 2026 Notes is outstanding to February 3, 2026 and permits under certain conditions an additional $10.0 million of telecommunications financing. On January 3, 2025, we entered into Amendment No. 6 to our credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Sixth Amendment”). The
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Sixth Amendment agreed to permit under certain conditions the contribution by BRPI of 100% of the equity interests in Lingo to BRPAC in connection with the entry into the BRPAC Credit Agreement. There was no fee charged in connection with the Sixth Amendment.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $369.5 million (net of unamortized debt issuance costs of $18.8 million) and $475.1 million (net of unamortized debt issuance costs of $18.7 million), respectively. Interest on the term loan during the three months ended September 30, 2024 and 2023 was $6.1 million (including amortization of deferred debt issuance costs of $1.4 million) and $11.3 million (including amortization of deferred debt issuance costs of $0.8 million), respectively, and during the nine months ended September 30, 2024 and 2023 was $18.8 million (including amortization of deferred debt issuance costs of $3.6 million) and $26.1 million (including amortization of deferred debt issuance costs of $1.8 million), respectively. The interest rate on the term loan as of September 30, 2024 and December 31, 2023 was 12.13% and 11.37%, respectively.
We had an outstanding balance of zero under the revolving facility as of September 30, 2024 and December 31, 2023. Interest on the revolving facility during the three months ended September 30, 2024 and 2023 was $0.4 million (including unused commitment fees of $0.2 million and amortization of deferred financing costs of $0.2 million) and $1.9 million (including unused commitment fees of $0.05 million and amortization of deferred financing costs of $0.2 million), respectively, and during the nine months ended September 30, 2024 and 2023 was $1.4 million (including unused commitment fees of $0.7 million and amortization of deferred financing costs of $0.7 million) and $5.4 million (including unused commitment fees of $0.08 million and amortization of deferred financing costs of $0.5 million), respectively. The interest rate on the Revolving Credit Facility as of September 30, 2024 and December 31, 2023 was 11.37%.
BRPAC Credit Agreement
On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of ours, in the capacity as borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with the Banc of California, N.A. in the capacity as agent (the “Agent”) and lender and with the other lenders party thereto (the “Closing Date Lenders”). Certain of the Borrowers’ U.S. subsidiaries are guarantors of all obligations under the BRPAC Credit Agreement and are parties to the BRPAC Credit Agreement in such capacity (collectively, the “Secured Guarantors”; and together with the Borrowers, the “Credit Parties”). In addition, the Company and B. Riley Principal Investments, LLC, the parent corporation of BRPAC and a subsidiary of ours, are guarantors of the obligations under the BRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of BRPAC are pledged as collateral.
The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties which totals approximately $185.0 million, including a pledge of (a) 100% of the equity interests of the Credit Parties; (b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India; and (c) 65% of the equity interests in magicJack VocalTec Ltd., an Israel corporation. Such security interests are evidenced by pledge, security, and other related agreements.
The BRPAC Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’, ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the BRPAC Credit Agreement requires the Credit Parties to maintain certain financial ratios. The BRPAC Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the BRPAC Credit Agreement. We are in compliance with all financial covenants in the BRPAC Credit Agreement as of September 30, 2024.
Through a series of amendments, including the most recent Fourth Amendment to the BRPAC Credit Agreement (the “Fourth Amendment”) on June 21, 2022, the Borrowers, the Secured Guarantors, the Agent and the Closing Date Lenders agreed to the following, among other things: (i) the Lenders agreed to make a new $75.0 million term loan to the Borrowers, the proceeds of which the Borrowers’ used to repay the outstanding principal amount of the existing terms loans and optional loans and will use for other general corporate purposes, (ii) a new applicable margin level of 3.50% was established as set forth from the date of the Fourth Amendment, (iii) Marconi Wireless Holdings, LLC (“Marconi Wireless”) was added to the Borrowers, (iv) the maturity date of the term loan was set to June 30, 2027, and (v) the Borrowers were permitted to make certain distributions to the parent company of the Borrowers.
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The borrowings under the amended BRPAC Credit Agreement bear interest equal to the term SOFR rate plus a margin of 2.75% to 3.50% per annum, depending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement. As of September 30, 2024 and December 31, 2023, the interest rate on the BRPAC Credit Agreement was 8.10% and 8.46%, respectively.
Principal outstanding under the Amended BRPAC Credit Agreement is due in quarterly installments. The quarterly installments from September 30, 2024 to December 31, 2026 are in the amount of $3.2 million per quarter, the quarterly installment on March 31, 2027 is in the amount of $2.4 million, and the remaining principal balance is due at final maturity on June 30, 2027.
As of September 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $32.9 million (net of unamortized debt issuance costs of $0.4 million) and $46.6 million (net of unamortized debt issuance costs of $0.4 million), respectively. Interest expense on the term loan during the three months ended September 30, 2024 and 2023 was $0.8 million (including amortization of deferred debt issuance costs of $0.1 million) and $1.2 million (including amortization of deferred debt issuance costs of $0.1 million), respectively, and during the nine months ended September 30, 2024 and 2023 was $2.8 million (including amortization of deferred debt issuance costs of $0.2 million) and $4.0 million (including amortization of deferred debt issuance costs of $0.2 million), respectively.
On January 6, 2025 (the “Closing Date”), BRPAC entered into the BRPAC Amended Credit Agreement with certain subsidiaries of the Company, the Banc of California, in the capacity as agent and lender and with other lenders party thereto from time to time. Our subsidiary Lingo was added as a Borrower to the BRPAC Amended Credit Agreement. Pursuant to the BRPAC Amended Credit Agreement, the lenders made a new five-year $80.0 million term loan to the Borrowers, the proceeds of which were used to repay in full the obligations under the original BRPAC Credit Agreement dated December 19, 2018 and the Lingo Credit Agreement. In connection with the BRPAC Amended Credit Agreement, the Borrowers also made certain distributions to the parent company of the Borrowers from existing cash on hand. The BRPAC Amended Credit Agreement also builds in provisions for incremental term loans up to $40.0 million allowing certain distributions to the parent company of the Borrowers from the proceeds of such incremental term loans. The Borrowers’ U.S. subsidiaries are guarantors of all obligations under the BRPAC Amended Credit Agreement. The obligations under the BRPAC Amended Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Borrowers, including a pledge of (a) 100% of the equity interests of the Borrowers; (b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India; and (c) 65% of the equity interests in magicJack VocalTec Ltd., an Israel corporation. Such security interests are evidenced by pledge, security, and other related agreements.
The borrowings under the BRPAC Amended Credit Agreement bear interest equal to the Term SOFR rate plus a margin of 2.75% to 3.50% per annum, depending on the Borrowers consolidated total funded debt ratio as defined in the BRPAC Amended Credit Agreement. The interest rate is subject to a margin level of 3.25%. As of the Closing Date, the outstanding principal amount was $80.0 million with quarterly installments of principal due in the amount of $4.0 million, and any remaining principal balance is due at final maturity on January 6, 2030.
The BRPAC Amended Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’, ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the BRPAC Amended Credit Agreement requires the Credit Parties to maintain certain financial ratios. The BRPAC Amended Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of outstanding amounts due under the BRPAC Amended Credit Agreement.
Senior Note Offerings
During the nine months ended September 30, 2024, we did not issue any new senior notes. During the nine months ended September 30, 2023, we issued $0.2 million of senior notes. The maturity dates of outstanding senior notes ranged from February 2025 to August 2028. On February 28, 2025, the maturity date of all of the 6.375% Senior Notes due February 28, 2025 are due and payable which includes $145.3 million of principal amount that will be funded from cash and cash equivalents on hand. All of the senior notes have been issued pursuant to At the Market Issuance Sales Agreements with B. Riley Securities, Inc. which governs the program of at-the-market sales of the Company’s senior notes.
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A series of prospectus supplements were filed by the Company with the SEC in respect of the Company’s offerings of these senior notes.
In June 2023, we entered into note purchase agreements in connection with the 6.75% Senior Notes due 2024 (“6.75% 2024 Notes”) that were issued for the Targus acquisition. The note purchase agreements had a repurchase date of June 30, 2023 on which date we repurchased our 6.75% 2024 Notes with an aggregate principal amount of $58.9 million. The repurchase price was equal to the aggregate principal amount, plus accrued and unpaid interest up to, but excluding, the repurchase date. The total repurchase payment included approximately $0.7 million in accrued interest.
On February 29, 2024, we redeemed $115.5 million aggregate principal amount of our 6.75% Senior Notes due 2024 (the “6.75% 2024 Notes”) pursuant to the seventh supplemental indenture dated December 3, 2021. The redemption price was equal to 100.00% of the aggregate principal amount, plus accrued and unpaid interest, up to, but excluding, the redemption date. The total redemption payment included approximately $0.6 million in accrued interest.
On May 31, 2024, we redeemed the remaining $25.0 million aggregate principal amount of the 6.75% 2024 Notes. The redemption price was equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the redemption date. The total redemption payment included approximately $0.1 million in accrued interest. In connection with the full redemption, the 6.75% 2024 Notes, which were listed on NASDAQ under the ticker symbol “RILYO,” were delisted from NASDAQ and ceased trading on the redemption date.
As of September 30, 2024 and December 31, 2023, the total senior notes outstanding was $1,529.7 million (net of unamortized debt issue costs of $10.0 million) and $1,668.0 million (net of unamortized debt issue costs of $13.1 million), respectively, with a weighted average interest rate of 5.62% and 5.71%, respectively. The Company has $145.3 million of Senior Notes that are due to mature on February 28, 2025, $722.7 million due to mature in 2026, and $671.5 million due to mature in 2028. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled $22.6 million and $25.1 million during the three months ended September 30, 2024 and 2023, respectively and $70.0 million and $78.1 million during the nine months ended September 30, 2024 and 2023, respectively.
Other Notes Payable
As of September 30, 2024 and December 31, 2023, the outstanding balance for the other notes payable was $29.9 million and $19.4 million, respectively. On May 3, 2024, upon closing of the acquisition of Nogin, Nogin entered into a secured convertible promissory note agreement with a principal amount of $15.0 million with an annual interest rate of 10.0% and a maturity date of May 3, 2027. The remaining notes payable primarily consisted of additional deferred cash consideration owed to the sellers of FocalPoint and a promissory note related to the Lingo minority interest purchase, which was paid in full on January 2, 2024. Interest expense was $0.5 million and $0.1 million during the three months ended September 30, 2024 and 2023, respectively, and $1.1 million and $0.5 million during the nine months ended September 30, 2024 and 2023, respectively.
Recent Accounting Standards
See Note 2(p) to the accompanying financial statements for recent accounting standards.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We transact 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 income in the accompanying condensed consolidated balance sheets. Transaction gains (losses) are included in selling, general and administrative expenses in our condensed consolidated statements of operations.
Interest Rate Risk
We have exposure to interest rate risk which primarily relates to changes in cost of borrowings as a result of changes in interest rates. We utilize borrowings under our senior notes payable and credit facilities to fund costs and expenses incurred in connection with our acquisitions and operations. Borrowings under our senior notes payable are at fixed interest rates
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and borrowings under our credit facilities bear interest at a floating rates of interest. As of September 30, 2024, approximately 75% of our debt obligations bore interest at fixed rates and not impacted by changes in interest rates. Our interest expense from variable-rate debt obligations is principally affected by changes in the published SOFR rate in connection with our credit facilities. Our variable-rate debt obligations are principally used to provide financing to our operating businesses which are supported by cash flows from operations for those businesses. The cash flows of such operating businesses are utilized to help to mitigate any increases in interest expense as a result of an increase in interest rates. Our Nomura credit facility is also a variable rate debt obligation which is collateralized by a portfolio of investment assets and certain operating businesses. Increased interest costs on the Nomura facility as a result of a rise in interest rates are partially offset by variable rate investment assets that are securing the facility as well as cash flows from other businesses securing the facility.
Management monitors the composition of debt obligations and debt investments on a periodic basis, as well as projected net interest income, interest coverage, and sensitivity of interest income changes in interest rates. This exposure is also monitored by our risk management group and reviewed periodically in risk committee meetings. If floating rates of interest had increased by 1% during the nine months ended September 30, 2024, the rate increase would have resulted in an increase in interest expense of $4.8 million. If conditions existed in which Management would seek to mitigate potential interest rate risk, Management could elect to take steps such as entering into interest rate hedges, and refinancing debt obligations from floating-rate to fixed-rate.
An objective of our investment activities is to preserve capital for the purpose of funding operations while at the same time maximizing the income that we receive from investments without significantly increasing risk. To achieve these objectives, our investments allow us to maintain a portfolio of cash equivalents, short-term investments through a variety of securities owned that primarily includes common stocks, loans receivable, and investments in partnership interests. Our cash and cash equivalents through September 30, 2024 included amounts in bank checking and liquid money market accounts. We may be exposed to interest rate risk through trading activities in convertible and fixed income securities as well as U.S. Treasury securities, however, based on our daily monitoring of this risk, we believe we currently have limited exposure to interest rate risk in these activities.
Foreign Currency Risk
The majority of our operating activities are conducted in U.S. dollars. Revenues generated from our foreign subsidiaries totaled $100.0 million and $119.0 million during the nine months ended September 30, 2024 and 2023, respectively, or 15.7% and 10.3% of our total revenues of $637.2 million and $1,151.9 million. The financial statements of our foreign subsidiaries are translated into U.S. dollars at period-end rates, with the exception of revenues, costs, and expenses, which are translated at average rates during the reporting period. We include gains and losses resulting from foreign currency transactions in income, while we exclude those resulting from translation of financial statements from income and include them as a component of accumulated other comprehensive income (loss). Transaction gains (losses), which were included in our condensed consolidated statements of operations, amounted to gains of $0.2 million and losses of $0.2 million during the nine months ended September 30, 2024 and 2023, re spectively. We may be exposed to foreign currency risk; however, our operating results during the nine months ended September 30, 2024 and 2023, included $100.0 million and $119.0 million of revenues, respectively, and $17.5 million and $20.9 million of operating expenses from our foreign subsidiaries, respectively, and a 10% appreciation or depreciation of the U.S. dollar relative to the local currency exchange rates would result in an approximately $0.4 million and $0.1 million change in our operating income during the nine months ended September 30, 2024 and 2023, respectively.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that is designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Under the supervision and with the participation of our management, including our Co-Chief Executive Officers and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon the foregoing evaluation, our Co-Chief Executive Officers and our Chief Financial
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Officer concluded that as of September 30, 2024 our disclosure controls and procedures were not effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
Other than as set forth below under “Material Weakness and Remediation,” there have been no changes to our internal control over financial reporting during the fiscal quarter covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Material Weakness and Remediation
The Company previously identified in its 2023 Annual Report the following material weaknesses:
•The Company identified two separate material weaknesses in controls related to information technology general controls (ITGCs) at our Lingo Management, LLC and Tiger US Holdings, Inc. subsidiaries in the areas of user access, program change management, and information technology (IT) operations over IT systems and the reports generated from these systems used in the execution of controls that support the Company’s financial reporting processes. As a result, business-process automated and manual controls that were dependent on the affected ITGCs could have been adversely impacted.
•The Company identified a separate material weakness relating to ITGC issues in one of our B. Riley Advisory Holdings, LLC subsidiaries primarily related to ineffective controls over user access management over a certain business application. As a result, business-process automated and manual controls that were dependent on the affected ITGCs could have been adversely impacted.
•The Company was unable to rely on a System and Organization Controls (“SOC”) 1 Type 2 report associated with the utilization of a third-party service organization's hosted IT solution for the processing of customer sales and billing information in our Marconi Wireless subsidiary. As a result, the internal control processes performed by the third-party service organization were not designed or implemented to operate at a sufficient level of precision. As such, the Company could not rely on the information produced by the system. Business-process automated and manual controls that were dependent on these controls could have been adversely impacted.
•The Company identified a material weakness relating to the operating effectiveness of management's review controls over investment valuations such that management's review procedures were not operating at a level of precision sufficient to prevent or detect a potential material misstatement in the consolidated statements.
•The Company did not have adequate controls in place to properly identify and disclose material related party transactions in accordance with Accounting Standards Codification (“ASC”) 850, Related Party Disclosures, which resulted in a material weakness.
Management continues to implement measures designed to ensure that the control deficiencies contributing to the material weaknesses noted above are remediated, such that the controls are designed, implemented, and operating effectively. The remediation actions include the enhancement of control activity evidence, improvement of the precision level of management review controls, and enhancement to policies and procedures, and, as to the material weakness related to Marconi Wireless, we continue to work with our third-party service organization supporting Marconi Wireless to provide a compliant SOC 1 Type 2 report in 2024.
While we continue to devote significant time and attention to these remediation efforts, the material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that these controls are effective. We expect that the remediation of these material weaknesses will be completed prior to the end of fiscal 2024.
Inherent Limitation on Effectiveness of Controls
Our management, including our Co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well- designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that
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any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is subject to certain legal and other claims that arise in the ordinary course of its business. In particular, the Company and its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. In addition to such legal and other claims, reviews, investigations, and proceedings, the Company and its subsidiaries are subject to the risk of unasserted claims, including, among others, as it relates to matters related to Mr. Kahn and our investment in Freedom VCM. For example, 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.
On February 14, 2025, a stockholder derivative complaint was filed by Michael Marchner in the Delaware Chancery Court on behalf of the Company and against the members of the Company’s Board of Directors. The complaint alleges that certain of the Company's officers and the board of directors (i) breached their fiduciary duties related to the Company’s involvement with Brian Kahn and subsequent legal issues, (ii) engaged in misconduct, and (iii) wasted corporate assets, including the approval of improper compensation. The Company believes that these claims are meritless and intends to defend this action.
On January 22, 2025, a stockholder derivative complaint was filed by James Smith in the Superior Court for Los Angeles County against the Company, certain of the Company’s executive officers and the members of the Company’s Board of Directors. The complaint alleges that certain of the Company's officers and directors (i) breached their fiduciary duties related to the Company’s involvement with Brian Kahn and subsequent legal issues, (ii) engaged in a waste of corporate assets, and (iii) received unjust enrichment. The Company believes that these claims are meritless and intends to defend this action.
On July 9, 2024, a putative class action was filed by Brian Gale, Mark Noble, Terry Philippas and Lawrence Bass in the Delaware Chancery Court against Freedom VCM, Mr. Kahn, Andrew Laurence, Matthew Avril and the Company. This complaint alleges that former shareholders of FRG suffered damages due to alleged breaches of fiduciary duties by officers, directors and other participants in the August 2023 management-led take private transaction of FRG and that the Company aided and abetted those alleged breaches of fiduciary duties. The claim seeks an award of unspecified damages, rescissory damages and/or quasi-appraisal damages, disgorgement of profits, attorneys’ fees and expenses, and interest thereon. The Company believes these claims are meritless and intends to defend this action.
On July 3, 2024, each of the Company and Bryant Riley, Chairman and Co-Chief Executive Officer, received a subpoena from the U.S. Securities and Exchange Commission (the “SEC”) requesting the production of certain documents and other information primarily related to (i) the Company’s business dealings with Brian Kahn, (ii) certain transactions in an unrelated public company’s securities, and (iii) the communications and related compliance and other policies and procedures of certain of its regulated subsidiaries. On November 22, 2024, each of the Company and Mr. Riley received an additional SEC subpoena requesting the production of certain additional documents and information relating to Franchise Group, Inc. (including its holding company, Freedom VCM Holdings, LLC) as well as Mr. Riley’s personal loan and his pledge of shares of the Company’s common stock as collateral for such loan. As previously disclosed on April 23, 2024, the Audit Committee of the Company’s Board of Directors, with the assistance of Sullivan & Cromwell LLP, the Company’s legal counsel, conducted an internal review, and separately the Audit Committee retained Winston & Strawn LLP, independent legal counsel, to conduct an independent investigation, to review transactions among Mr. Kahn (and his affiliates) and the Company (and its affiliates). The review and the investigation both confirmed that the Company and its executives, including Mr. Riley, had no involvement with, or knowledge of, any alleged misconduct concerning Mr. Kahn or any of his affiliates. The receipt of subpoenas is not an indication that the SEC or its staff has determined that any violations of law have occurred. Both the Company and Mr. Riley are responding to the subpoenas and are fully cooperating with the SEC.
On May 2, 2024, a putative class action was filed by Ted Donaldson in the Superior Court for the State of California, County of Los Angeles on behalf of all persons who acquired the Company’s senior notes pursuant to the shelf registration statement filed with the SEC on Form S-3 dated January 28, 2021, and the prospectuses filed and published on August 4,
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2021 and December 2, 2021 (the “Note Offerings”). The action asserts claims under §§ 11, 12, and 15 of the Securities Act of 1933, as amended, against the Company, certain of the Company's officers and directors, and the underwriters of the Note Offerings. The complaint alleged that defendants knew or should have known that Mr. Kahn was engaged in illegal activities, including an alleged conspiracy to commit fraud. On September 27, 2024, the plaintiff filed an amended complaint. The amended complaint also asserts claims under §§ 11, 12, and 15 of the Securities Act of 1933, as amended, and alleges that defendants knew or should have known that the risk to the Company from its investments in businesses affiliated with Mr. Kahn and loans to Mr. Kahn and his affiliates was greater than disclosed in the offering documents used in connection with the Note Offerings. The Company believes these claims are meritless and intends to defend this action.
On January 24, 2024, a putative securities class action complaint was filed by Mike Coan in U.S. Federal District Court, Central District of California, against the Company, Mr. Riley, Tom Kelleher and Phillip Ahn (“Defendants”). The purported class includes persons and entities that purchased shares of the Company’s common stock between May 10, 2023 and November 9, 2023. The complaint alleges that (a) the Company failed to disclose to investors that (i) Mr. Kahn, had been implicated in a conspiracy to defraud third party investors, and (ii) the Company financed Mr. Kahn and others in connection with a going private transaction involving FRG, and (b) as a result of the foregoing, the Company engaged in securities fraud in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. A second putative class action lawsuit was filed on March 15, 2024 by the KL Kamholz Joint Revocable Trust (“Kamholz”). This complaint asserts similar allegations as the Coan complaint and covers an alleged class period between February 28, 2022 and November 9, 2023. The Kamholz complaint further alleges that Defendants knew or should have known that Mr. Kahn was engaged in illegal activities, including a conspiracy to commit fraud, and nonetheless proceeded with the FRG going-private transaction. The Company cannot estimate the amount of potential liability, if any, that could arise from these matters and believes these claims are meritless and intends to defend these actions.
On September 21, 2023, the Company received a demand alleging that certain payments in the aggregate amount of approximately $32,166 made by Sorrento Therapeutics, Inc. (“Sorrento”), a chapter 11 debtor in U.S. Bankruptcy Court, Southern District of Texas, to B. Riley Commercial Capital, LLC (“BRCC”), pursuant to that certain Bridge Loan Agreement dated September 30, 2022 between Sorrento and BRCC, are avoidable as preferential transfers. The parties have entered into a tolling agreement. The Company believes the Sorrento Unsecured Creditors Committee’s preference claims lack merit, and the Company intends to assert its statutory defenses to defeat the claim.
In light of the significant factual issues to be resolved with respect to the asserted claims and other proceedings described above and uncertainties regarding unasserted claims described above, at the present time reasonably possible losses cannot be estimated with respect to the asserted and unasserted claims described in the preceding paragraphs.
Item 1A. Risk Factors.
There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. A detailed discussion of our risk factors was included in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on April 24, 2024. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report on Form 10-Q. Any of the risks described in the Annual Report on Form 10-K for the year ended December 31, 2023, could materially affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. Except as set forth below, there have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2023.
Recent events and developments related to our investment in Freedom VCM and our prior business relationship with Brian Kahn and related to the SEC subpoenas we received may continue to have adverse effects on our business, results of operations, reputation, and stock price.
As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”), we are subject to risks associated with our investment in Freedom VCM and our prior business relationship with Brian Kahn—see “Item 1 – Legal Proceedings”. The Company and members of our Board of Directors have been named in putative class action lawsuits related to these matters, and in July 2024 and November 2024 each of the Company and Mr. Riley received a subpoena from the SEC requesting the production of certain documents. See “Recent Developments – SEC Subpoena”. We expect that the Company may be subject to additional lawsuits and other claims related to these matters.
In addition, in July 2024, Conn’s and certain of its subsidiaries filed voluntary petitions for relief (the “Chapter 11 Cases”) under chapter 11 of the Bankruptcy Code. FRG, pursuant to a transaction consummated in January 2024, acquired a substantial equity investment in Conn’s, and in December 2023, the Company loaned $108.0 million to Conn’s
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subsequently reduced to $93.0 million due to principal repayments. The fair value of this loan receivable is $63.7 million at September 30, 2024.
On November 3, 2024, FRG, its operating businesses, and certain other affiliates, including Freedom VCM, filed voluntary petitions for relief (the “FRG Chapter 11 Cases”) under chapter 11 of the Bankruptcy Code. As a result, on November 4, 2024, we concluded that we were required to record an additional impairment with respect to the Freedom VCM Investment and the Vintage Loan Receivable. The non-cash impairments of the Freedom VCM Investment and the Vintage Loan Receivable are $118.0 million in the aggregate as of November 4, 2024. As a result of such additional impairment we have ascribed no value to the Freedom VCM Investment as of September 30, 2024 and a value of $2.2 million to the Vintage Loan Receivable as of February 7, 2025.
We expect that the Company may be subject to lawsuits and other claims related to the Conn’s Chapter 11 Cases and the FRG Chapter 11 Cases. See “Recent Developments—Conn’s and FRG”. These events and developments have exacerbated, and they and additional similar events and developments including additional litigation and claims will continue to exacerbate, the risk that we will continue to: (i) incur expenses in connection with these matters, which expenses may be material and, in some cases, are not or will not be covered by insurance; (ii) harm our reputation and negatively impact employee morale and retention; (iii) lose customers or negative impact on our ability to attract new customers and increased competition for new clients and business; and (iv) result in additional write-downs, which may be material.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Nasdaq Stock Market LLC letter dated February 19, 2025
On February 19, 2025, B. Riley Financial, Inc. (the “Company”) received a notice from the Nasdaq Stock Market LLC (“Nasdaq”), which indicated that the Company did not meet the terms of the exception granted to file the From 10-Q for the period ended September 30, 2024 by February 17, 2025 to regain compliance with Nasdaq Listing Rule 5250(c)(1) (the “Rule”), which requires Nasdaq-listed companies to timely file all required periodic financial reports with the U.S. Securities and Exchange Commission (the “SEC”).
The Company expects that it will regain compliance with the Rule with the filing of this Form 10-Q for the period ended September 30, 2024.
Other
Certain of our officers have made elections to participate in, and are participating in, our employee stock purchase plan and 401(k) plan and have made, and may from time to time make, elections to have shares withheld upon the vesting of restricted stock units to cover withholding taxes, which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K).
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Item 6. Exhibits.
The exhibits filed as part of this Quarterly Report are listed in the index to exhibits immediately preceding such exhibits, which index to exhibits is incorporated herein by reference.
Exhibit Index

|  |  |  | Incorporated by Reference
Exhibit No. |  | Description |  | Form |  | Exhibit |  | Filing Date
3.1* |  | Series A Certificate of Correction to the Company's Certificate of Designation of 6.875% Series A Preferred Stock |  |  |  |  |  |
3.2* |  | Series B Certificate of Correction to the Company's Certificate of Designation of 7.375% Series B Preferred Stock |  |  |  |  |  |
10.1 |  | Transfer and Contribution Agreement, dated October 25, 2024, between B. Riley Brand Management, LLC and BR Funding Holdings 2024-1, LLC. |  | 8-K |  | 2.1 |  | 10/31/2024
10.2 |  | Membership Interest Purchase Agreement, dated October 25, 2024, by and among bebe stores, inc., HBN 120, LLC, BB Brand Holdings, LLC and BKST Brand Management, LLC. |  | 8-K |  | 2.2 |  | 10/31/2024
10.3 |  | Equity Purchase Agreement, dated October 13, 2024, by and among OCM SSF III Great American PT, L.P., Opps XII Great American Holdings, LLC, VOF Great American Holdings, L.P., BR Financial Holdings, LLC, on behalf of itself and as seller's representative, John Bankert, Ken Bloore, Michael Marchlik, Great American Holdings, LLC, and, solely for purposes of Section 9.14 therein, B. Riley Financial, Inc. |  | 8-K |  | 2.1 |  | 11/21/24
10.4*^ |  | Amendment No. 4 to Nomura Credit Agreement, dated September 17, 2024 |  |  |  |  |  |
10.5*^ |  | Amendment No. 5 to Nomura Credit Agreement, dated December 9, 2024 |  |  |  |  |  |
10.6*^ |  | Amendment No. 6 to Nomura Credit Agreement, dated January 1, 2025 |  |  |  |  |  |
10.7* |  | Second Amendment to Third Amended and Restated Wells Fargo Credit Agreement, dated August 19, 2024 |  |  |  |  |  |
10.8* |  | Third Amendment to Third Amended and Restated Wells Fargo Credit Agreement, dated September 3, 2024 |  |  |  |  |  |
10.9* |  | Fourth Amendment to Third Amended and Restated Wells Fargo Credit Agreement, dated September 13, 2024 |  |  |  |  |  |
10.10* |  | Fifth Amendment to Third Amended and Restated Wells Fargo Credit Agreement, dated September 27, 2024 |  |  |  |  |  |

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10.11* |  | Seventh Amendment to BRPI Acquisition Co LLC and Banc of California Credit Agreement, dated August 22, 2024 |  |  |  |  |  |
10.12* |  | Eighth Amendment to BRPI Acquisition Co LLC. and Banc of California Credit Agreement, dated September 6, 2024 |  |  |  |  |  |
10.13* |  | Ninth Amendment to BRPI Acquisition Co LLC and Banc of California Credit Agreement, dated September 13, 2024 |  |  |  |  |  |
10.14* |  | Tenth Amendment to BRPI Acquisition Co LLC and Banc of California Credit Agreement, dated September 20, 2024 |  |  |  |  |  |
10.15* |  | Eleventh Amendment to BRPI Acquisition Co LLC and Banc of California Credit Agreement, dated September 30, 2024 |  |  |  |  |  |
10.16* |  | Eighth Amendment to Lingo Management LLC and Banc of California Credit Agreement, dated August 22, 2024 |  |  |  |  |  |
10.17* |  | Ninth Amendment to Lingo Management LLC and Banc of California Credit Agreement, dated September 6, 2024 |  |  |  |  |  |
10.18* |  | Tenth Amendment to Lingo Management LLC and Banc of California Credit Agreement, dated September 20, 2024 |  |  |  |  |  |
10.19* |  | Eleventh Amendment to Lingo Management LLC and Banc of California Credit Agreement, dated September 30, 2024 |  |  |  |  |  |
10.20* |  | Kenny Young Consulting Services Agreement, dated September 20, 2024 |  |  |  |  |  |
31.1* |  | Certification of Co-Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934 |  |  |  |  |  |
31.2* |  | Certification of Co-Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934 |  |  |  |  |  |
31.3* |  | Certification of Chief Financial Officer and Chief Operating Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934 |  |  |  |  |  |
32.1** |  | Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |
32.2** |  | Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |

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32.3** |  | Certification of Chief Financial Officer and Chief Operating Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |
101.INS* |  | Inline XBRL Instance Document. |  |  |  |  |  |
101.SCH* |  | Inline XBRL Taxonomy Extension Schema Document. |  |  |  |  |  |
101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |  |  |  |  |  |
101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase Document. |  |  |  |  |  |
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document. |  |  |  |  |  |
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |  |  |  |  |  |
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |  |  |  |  |  |

_______________________________________________
* Filed herewith.
** Furnished herewith.
# Management contract or compensatory plan or arrangement.
^ Certain schedules, annexes or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K, but will be furnished supplementally to the SEC upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| B. Riley Financial, Inc.
Date: February 21, 2025 | By: | /s/ PHILLIP J. AHN
| Name: | Phillip J. Ahn
| Title: | Chief Financial Officer and Chief Operating Officer
|  | (Principal Financial Officer)

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