What changed in this filing

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Item 4. Controls and Procedures

2025-11-18 compared with 2025-02-21 · 35 added, 17 removed, 19 unchanged (73% of the section changed)

3 unchanged sentences

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

Officer concluded that as of September 30, 2024 our disclosure controls and procedures were not effective at the reasonable assurance level.

Based upon the foregoing evaluation, our Co-Chief Executive Officers and our Chief Financial Officer concluded that as of March 31, 2025 our disclosure controls and procedures were not effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

2 unchanged sentences

The Company previously identified in its 2024 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.

• The Company identified two 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.

• The Company identified a material weakness relating to the design and operating effectiveness of management's review controls over the investment valuation of Level 3 investments 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 identified a material weakness relating to the design and operating effectiveness of management’s review controls over the identification and disclosure of material related party transactions in accordance with Accounting Standards Codification (“ASC”) 850, Related Party Disclosures .

Specifically, management’s review procedures were not operating at a level of precision sufficient to prevent or detect a potential material misstatement in the consolidated financial statements.

• The Company identified a material weakness relating to the design and operating effectiveness of management's review controls over the income tax provision such that management's review procedures were not operating at a level of precision to prevent or detect a potential material misstatement in the consolidated statements.

• The Company identified two material weaknesses related to the design and operating effectiveness of management's review controls over goodwill such that management did not adequately evaluate relevant factors and indicators to determine whether it was more likely than not that the fair value of a business segment was less than the carrying amount of goodwill and other intangibles assigned to that reporting unit as well as a lack of appropriate approval in accordance with Company policy over significant decisions involving goodwill.

• The Company identified a material weakness related to the design and operating effectiveness of controls related to journal entry controls.

There was a lack of segregation of duties considerations associated within the journal entry approval workflow.

The workflow in the system did not systemically prevent individuals who can post journal entries to also approve the same entries.

Additionally, the Company did not retain evidence of review of certain journal entries.

• The Company identified material weaknesses in controls related to ITGCs at Bebe Stores Inc.

in the areas of user access, program change management, and 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 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.

Additionally, the Company did not consistently retain evidence of review, further contributing to the material weakness.

• The Company identified a material weakness in controls due to its inability to rely on the SOC 1 Type 2 reports associated with two third-party service organizations that support significant elements of its financial reporting processes over B.

Riley Retail Solutions, LLC.

Specifically, the Company did not have adequate ITGCs in place over the IT systems and related reports at these third-party service providers, which are used in the execution of controls supporting the Company’s financial reporting.

As a result, business process automated and manual controls that were dependent on these ITGCs at the service organizations could have been adversely impacted.

Remediation of Material Weaknesses

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.

The remediation actions for the material weaknesses noted above include:

• Prior to December 31, 2024, the Retail Solutions material weakness was remediated through the divestiture of the business in November 2024.

• Implementation and enhancement of its ITGCs and related policies.

This includes providing resources, training and support to process owners and reviewers with a specific focus on understanding the risks being addressed by the controls they are performing, as well as requirements for sufficient documentation and evidence in the execution of the controls.

• Updating of its IT policies and procedures to enhance user access, change management, and IT operations processes to ensure timely and accurate assignment of access rights and prompt removal of access for terminated employees, and to ensure appropriate restriction of access rights based on job responsibilities.

• Designing of alternative processes and controls to mitigate the risk of the third-party services providers not producing the SOC 1 Type 2 reports.

• Implementation of measures designed to ensure controls are appropriately designed, implemented, and operating effectively as it relates to the material weakness identified in investment valuations, related party transactions, income taxes, goodwill impairment assessment, and journal entries.

The remediation actions include the improvement of the precision level of management review controls, documentation retention and additional resources.

While the foregoing measures are intended to effectively remediate the material weaknesses, it is possible that additional remediation steps will be necessary.

As such, as we continue to evaluate and implement our plan to remediate the material weaknesses, our management may decide to take additional measures to address the material weaknesses or modify the remediation steps described above.

The weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period and management has concluded, through testing, that these controls are operating effectively.

We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that control deficiencies contributing to the material weaknesses are remediated as soon as possible.

Notwithstanding the material weaknesses described above, management has concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP.

Inherent Limitation on Effectiveness of Controls

1 unchanged sentence

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.

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

any design will succeed in achieving its stated goals under all potential future conditions.

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 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.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 4. Controls and Procedures