What changed in this filing

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Item 1. Financial Statements

2023-05-08 compared with 2022-11-04 · 562 added, 531 removed, 782 unchanged (58% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

(Dollars in thousands, except share and per share data)

September 30,

(Dollars in thousands, except par value)

2023 December 31,

6 unchanged sentences

Due from related parties 372 1,081

Loans receivable, at fair value (includes $ 68,575 and $ 167,744 from related parties as of September 30, 2022 and December 31, 2021, respectively)

Loans receivable, at fair value (includes $ 97,062 and $ 98,729 from related parties as of March 31, 2023 and December 31, 2022, respectively)

772,085 701,652

4 unchanged sentences

Other intangible assets, net 366,060 374,098

Deferred tax assets, net 2,845 2,848

Deferred income taxes 2,845 3,978

Total assets $ 6,618,190 $ 6,111,202

3 unchanged sentences

Deferred revenue 84,019 85,441

Deferred tax liabilities, net 10,932 93,055

Deferred income taxes 34,274 29,548

Due to related parties and partners 431 2,210

13 unchanged sentences

1,000,000 shares authorized;

4,535 and 4,512 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively;

and liquidation preference of $ 113,380 and $ 112,790 as of September 30, 2022 and December 31, 2021, respectively

4,563 and 4,545 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively;

and liquidation preference of $ 114,082 and $ 113,615 as of March 31, 2023 and December 31, 2022, respectively

Common stock, $ 0.0001 par value;

100,000,000 shares authorized;

28,300,003 and 27,591,028 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

28,135,636 and 28,523,764 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 445,352 494,201

Retained earnings 46,916 248,862

Accumulated deficit ( 62,566 ) ( 45,220 )

Accumulated other comprehensive loss ( 1,604 ) ( 2,470 )

10 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Services and fees $ 235,559 $ 202,814

Trading income (losses) and fair value adjustments on loans 12,154 18,197 ( 280,163 ) 317,818

Trading income (loss) and fair value adjustments on loans 51,568 ( 19,278 )

Interest income - Loans and securities lending 77,186 61,426

8 unchanged sentences

Total operating expenses 347,167 200,867

Operating income (loss) 103,561 96,746 ( 50,476 ) 579,869

Operating income 84,923 45,973

Other income (expense):

Interest income 2,574 67

Dividend income 13,204 7,861

Realized and unrealized losses on investments ( 28,442 ) ( 49,112 )

Change in fair value of financial instruments and other ( 209 ) 5,981

4 unchanged sentences

Net income (loss) 16,560 ( 9,196 )

Net income attributable to noncontrolling interests and redeemable noncontrolling interests 4,808 1,108 9,245 2,474

Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests ( 595 ) 866

Net income (loss) attributable to B.

13 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income (loss) $ 16,560 $ ( 9,196 )

1 unchanged sentence

Change in cumulative translation adjustment 866 ( 488 )

Other comprehensive loss, net of tax ( 2,842 ) ( 1,029 ) ( 5,646 ) ( 1,384 )

Other comprehensive income (loss), net of tax 866 ( 488 )

Total comprehensive income (loss) 17,426 ( 9,684 )

Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interests 6,187 1,108 10,751 2,474

Comprehensive (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests ( 449 ) 866

Comprehensive income (loss) attributable to B.

5 unchanged sentences

Condensed Consolidated Statements of Equity

(Dollars in thousands, except share and per share data)

For the Three Months Ended September 30, 2022 and 2021

(Dollars in thousands, except share data)

For the Three Months Ended March 31, 2023 and 2022

Preferred Stock Common Stock Additional

Capital Retained

Capital (Accumulated Deficit) Retained

Earnings Accumulated

3 unchanged sentences

Shares Amount Shares Amount

Balance, July 1, 2022 4,535 $ — 28,290,458 $ 3 $ 459,220 $ 32,570 $ ( 3,884 ) $ 55,467 $ 543,376

Vesting of restricted stock and other, net of shares withheld for employer taxes — — 10,116 — ( 293 ) — — — ( 293 )

Stock repurchased and retired — — ( 571 ) — ( 27 ) — — — ( 27 )

Share based payments — — — — 14,498 — — — 14,498

Share based payments in equity of subsidiary — — — — 57 — — — 57

Vesting of shares in equity of subsidiary — — — — ( 35 ) — — 35 —

Dividends on common stock ($ 1.00 per share)

— — — — — ( 31,061 ) — — ( 31,061 )

Dividends on preferred stock — — — — — ( 2,002 ) — — ( 2,002 )

Net income — — — — — 47,837 — 6,187 54,024

Remeasurement of B.

Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity — — — — — ( 428 ) — — ( 428 )

Distributions to noncontrolling interests — — — — — — — ( 431 ) ( 431 )

Contributions from noncontrolling interests — — — — — — — 2,823 2,823

Other comprehensive loss — — — — — — ( 2,842 ) — ( 2,842 )

Balance, September 30, 2022

4,535 $ — 28,300,003 $ 3 $ 473,420 $ 46,916 $ ( 6,726 ) $ 64,081 $ 577,694

Balance, July 1, 2021 4,275 $ — 27,580,300 $ 3 $ 387,084 $ 320,078 $ ( 1,178 ) $ 37,578 $ 743,565

Balance, January 1, 2023 4,545 $ — 28,523,764 $ 3 $ 494,201 $ ( 45,220 ) $ ( 2,470 ) $ 59,379 $ 505,893

Preferred stock issued 18 — — — 467 — — — 467

1 unchanged sentence

Common stock repurchased and retired — — ( 1,452,831 ) — ( 53,803 ) — — — ( 53,803 )

Warrants exercised — — 11,655 — — — — —

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 — — — — 13,678 — — — 13,678

5 unchanged sentences

Contributions from noncontrolling interests — — — — — — — 431 431

Acquisition of noncontrolling interests — — — — — — — 583 583

Other comprehensive loss — — — — — — ( 1,029 ) — ( 1,029 )

Balance, September 30, 2021

4,485 $ — 27,554,664 $ 3 $ 399,349 $ 309,550 $ ( 2,207 ) $ 40,512 $ 747,207

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

For the Nine Months Ended September 30, 2022 and 2021

Preferred Stock Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Loss Noncontrolling

Interests Total

Shares Amount Shares Amount

Balance, January 1, 2022 4,512 $ — 27,591,028 $ 3 $ 413,486 $ 248,862 $ ( 1,080 ) $ 43,930 $ 705,201

Preferred stock issued 23 — — — 639 — — — 639

ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 404,668 — ( 6,733 ) — — — ( 6,733 )

Common stock repurchased and retired — — ( 571 ) — ( 27 ) — — — ( 27 )

Shares issued for the acquisition of FocalPoint — — 304,878 — 20,320 — — — 20,320

Share based payments — — — — 45,713 — — — 45,713

Share based payments in equity of subsidiary — — — — 57 — — — 57

Vesting of shares in equity of subsidiary — — — — ( 35 ) — — 35 —

Dividends on common stock ($ 3.00 per share)

— — — — — ( 93,128 ) — — ( 93,128 )

Dividends on preferred stock — — — — — ( 6,006 ) — — ( 6,006 )

Net income — — — — — ( 102,384 ) — 10,751 ( 91,633 )

Remeasurement of B.

Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity — — — — — ( 428 ) — — ( 428 )

Distributions to noncontrolling interests — — — — — — — ( 2,167 ) ( 2,167 )

Contributions from noncontrolling interests — — — — — — — 11,350 11,350

Acquisition of noncontrolling interests — — — — — — — 182 182

Other comprehensive loss — — — — — — ( 5,646 ) — ( 5,646 )

Balance, September 30, 2022

Riley Principal 250 Merger Corporation subsidiary temporary equity — — — — — ( 1,198 ) — — ( 1,198 )

Acquisition of noncontrolling interest — — — — — — — 538 538

Other comprehensive income — — — — — — 866 — 866

Balance, March 31, 2023

4,563 $ — 28,135,636 $ 3 $ 445,352 $ ( 62,566 ) $ ( 1,604 ) $ 59,179 $ 440,364

Balance, January 1, 2022 4,512 $ — 27,591,028 $ 3 $ 413,486 $ 248,862 $ ( 1,080 ) $ 43,930 $ 705,201

Common stock issued, net of offering costs — — 1,413,045 — 64,713 — — — 64,713

Preferred stock issued 23 — — — 639 — — — 639

ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 396,818 — ( 10,539 ) — — — ( 10,539 )

Common stock repurchased and retired — — ( 44,650 ) — ( 2,656 ) — — — ( 2,656 )

Warrants exercised — — 11,655 — — — — — —

Vesting of restricted stock and other, net of shares withheld for employer taxes — — 32,328 — ( 1,294 ) — — — ( 1,294 )

Shares issued for the acquisition of FocalPoint — — 304,878 — 20,320 — — — 20,320

Share based payments — — — — 17,013 — — — 17,013

2 unchanged sentences

Dividends on preferred stock — — — — — ( 2,002 ) — — ( 2,002 )

Net income — — — — — 380,882 — 2,474 383,356

Remeasurement of B.

Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity — — — — — ( 18,182 ) — — ( 18,182 )

Net loss — — — — — ( 10,062 ) — 866 ( 9,196 )

Distributions to noncontrolling interests — — — — — — — ( 935 ) ( 935 )

2 unchanged sentences

Other comprehensive loss — — — — — — ( 488 ) — ( 488 )

Balance, September 30, 2021

Balance, March 31, 2022

4,535 $ — 27,928,234 $ 3 $ 450,164 $ 205,765 $ ( 1,568 ) $ 45,813 $ 700,177

4 unchanged sentences

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net (loss) income $ ( 93,139 ) $ 383,356

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Net income (loss) $ 16,560 $ ( 9,196 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 13,077 7,848

4 unchanged sentences

Effect of foreign currency on operations 271 ( 34 )

Income from equity investments ( 3,285 ) ( 1,172 )

Loss (income) from equity investments 10 ( 6,775 )

Dividends from equity investments 129 774

Deferred income taxes 5,807 ( 41,900 )

Impairment of intangibles and loss (gain) on disposal of fixed assets 5,537 ( 137 )

Loss on loans receivable and disposal of fixed assets 5 257

Gain on extinguishment of loan — ( 1,102 )

Loss on extinguishment of debt — 4,888

Gain on equity investment ( 6,790 ) ( 3,544 )

De-consolidation of BRPM 150 ( 8,294 ) —

Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests 308 215

3 unchanged sentences

Securities borrowed ( 599,516 ) 461,193

Accounts receivable and advances against customer contracts 3,933 7,031

Accounts receivable 25,083 6,355

Prepaid expenses and other assets ( 25,705 ) 1,701

4 unchanged sentences

Securities loaned 603,951 ( 469,553 )

Net cash used in operating activities ( 72,814 ) ( 166,652 )

Net cash provided by (used in) operating activities 52,617 ( 14,898 )

Cash flows from investing activities:

1 unchanged sentence

Repayments of loans receivable 260,587 101,000

Repayment of loan participations sold — ( 15,216 )

Acquisition of businesses, net of $ 32,135 and $ 34,924 cash acquired for 2022 and 2021, respectively

Sale of loan receivable 7,500 —

Acquisition of businesses and minority interest, net of $ 234 and $ 26,076 cash acquired for 2023 and 2022, respectively

( 12,287 ) ( 40,047 )

Purchases of property, equipment and intangible assets ( 1,696 ) ( 176 )

Proceeds from sale of property, equipment and intangible assets 2 3

Investment of subsidiaries initial public offering proceeds into trust account — ( 345,000 )

Funds received from trust account of subsidiary 172,584 —

Proceeds from sale of property, equipment, intangible assets, and other 1,364 2

Purchase of equity and other investments ( 662 ) ( 2,439 )

Net cash provided by (used in) investing activities 41,746 ( 416,662 )

Net cash used in investing activities ( 57,164 ) ( 35,513 )

Cash flows from financing activities:

Proceeds from revolving line of credit, net — 80,000

Proceeds from revolving line of credit 29,021 —

Repayment of revolving line of credit ( 17,237 ) —

3 unchanged sentences

Proceeds from issuance of senior notes — 20,037

Redemption of senior notes — ( 390,465 )

Payment of debt issuance and offering costs ( 1,957 ) —

4 unchanged sentences

Repurchase of common stock ( 53,803 ) —

Distributions to noncontrolling interests ( 3,408 ) ( 15,742 )

Contributions from noncontrolling interests 11,350 12,732

Redemption of subsidiary temporary equity and distributions ( 172,584 ) —

Proceeds from initial public offering of subsidiaries — 345,000

Proceeds from issuance of common stock — 64,713

Distribution to noncontrolling interests ( 1,023 ) ( 1,051 )

Contribution from noncontrolling interests 431 1,770

Proceeds from issuance of preferred stock 467 639

Net cash (used in) provided by financing activities ( 8,822 ) 859,364

(Decrease) increase in cash, cash equivalents and restricted cash ( 39,890 ) 276,050

Net cash used in financing activities ( 55,337 ) ( 14,441 )

Decrease in cash, cash equivalents and restricted cash ( 59,884 ) ( 64,852 )

Effect of foreign currency on cash, cash equivalents and restricted cash 1,280 ( 496 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 46,477 ) 274,295

Net decrease in cash, cash equivalents and restricted cash ( 58,604 ) ( 65,348 )

Cash, cash equivalents and restricted cash, beginning of period 270,926 279,860

10 unchanged sentences

Riley Financial, Inc.

and its subsidiaries (collectively, the “Company”) provide investment banking and financial services to corporate, institutional and high net worth clients, and asset disposition, financial consulting, appraisal and capital advisory services to a wide range of retail, wholesale and industrial clients, as well as lenders, capital providers, private equity investors and professional services firms throughout the United States, Australia, Canada, and Europe and consumer Internet access and cloud communication services through its wholly-owned subsidiaries United Online, Inc.

(“UOL” or “United Online”), magicJack VocalTec Ltd.

(“magicJack”), and Marconi Wireless ("Marconi"), and majority ownership interest in Lingo Management, LLC (“Lingo”).

The Company also has a majority ownership interest in BR Brands Holding, LLC (“BR Brands” or “Brands”), which provides licensing of trademarks.

The Company operates in six operating segments:

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 consumer related businesses that consist of a brands portfolio, which provides licensing of trademarks and brand investments, and Targus Cayman Holdco Limited (“Targus”), which designs and sells laptop and computer accessories.

The Company operates in six 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, institutional and high net worth clients;

(ii) Wealth Management, through which the Company provides wealth management and tax services to corporate and high-net-worth clients;

(iii) Auction and Liquidation, through which the Company provides 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;

(iv) Financial Consulting, through which the Company provides bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services;

(v) Principal Investments - Communications and Other, through which the Company provides consumer Internet access and related subscription services from United Online, cloud communication services primarily through the magicJack devices, global cloud/unified communications and managed services from Lingo, mobile phone voice, text, and data services and devices through a mobile virtual network operator, and single source communications and cloud technology services from BullsEye Telecom (“BullsEye”);

and (vi) Brands, which is focused on generating revenue through the licensing of trademarks.

On September 23, 2022, the Company's subsidiary, B.

Riley Receivables II, LLC, a Delaware limited liability company, 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 for a five-year $ 148,200 term loan.

The Pathlight Credit Agreement was entered in connection with the purchase of the 2022 Badcock Receivable discussed in Note 2.

On August 25, 2022, certain Company subsidiaries acquired the assets of Atlantic Coast Fibers, LLC (and related businesses), which provides residential and commercial recycling services in the New York City metropolitan area.

The purchase price consideration totaled $ 27,541 , which consisted of $ 14,482 in cash, $ 1,642 in assumed debt, and $ 11,416 in contingent consideration payable over approximately the next two years .

In accordance with Accounting Standards Codification (“ASC”) 805, the Company used the acquisition method of accounting for this acquisition.

Goodwill of $ 3,913 and other intangible assets of $ 13,080 were recorded as a result of the acquisition.

On August 16, 2022, the Company's majority-owned subsidiary, Lingo, acquired BullsEye, a single source communications and cloud technology provider.

The purchase price consideration totaled $ 64,907 , which Lingo partially funded using a $ 52,500 term loan that is discussed in Note 9.

In accordance with ASC 805, the Company used the acquisition method of accounting for this acquisition.

Goodwill of $ 29,284 and other intangible assets of $ 28,700 were recorded as a result of the acquisition.

The acquisition is expected to bring revenue from multi-location enterprise business customers to Lingo, improving scale and flexibility.

On August 16, 2022, Lingo entered into a credit agreement (the “Lingo Credit Agreement”) by and among Lingo, 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.

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 May 31, 2022, the Company's ownership interest in Lingo increased from 40 % to 80 % as a result of the conversion of $ 17,500 of debt owed by Lingo to equity.

As a result of the consolidation of Lingo, the pre-existing equity investment was remeasured at fair value resulting in the recognition of a gain of $ 6,790 , which is included in trading (losses) income and fair value adjustments on loans in the condensed consolidated statement of operations.

In accordance with ASC 805,

the Company used the acquisition method of accounting.

The total fair value of the acquired assets of Lingo was $ 115,538 and the fair value of the 20 % noncontrolling interest was $ 8,021 at May 31, 2022.

Goodwill of $ 33,622 and other intangible assets of $ 63,000 were recorded as a result of the acquisition.

The acquisition is expected to expand the services offered in the Company's Principal Investments - Communications and Other segment.

On January 19, 2022, the Company acquired FocalPoint Securities, LLC (“FocalPoint”), an independent investment bank headquartered in Los Angeles, California.

The purchase price consideration totaled $ 124,479 , which consisted of $ 64,248 in cash, $ 20,320 in issuance of common stock of the Company, and $ 39,911 in deferred cash and contingent consideration payable over the next three years .

The Company used the acquisition method of accounting for this acquisition.

Goodwill of $ 110,512 and other intangible assets of $ 10,780 that were recorded as a result of the acquisition will be deductible for tax purposes.

The acquisition is expected to expand B.

Riley Securities’ mergers and acquisitions (“M&A”) advisory business and enhance its debt capital markets and financial restructuring capabilities.

(v) 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 (vi) Consumer, including brands, which generates revenue through the licensing of trademarks, and Targus, which generates revenue through sales of laptop and computer accessories.

During the fourth quarter of 2022, the Company realigned its segment reporting structure to reflect organizational changes from recent acquisitions and the manner in which capital is allocated.

The Consumer segment includes the previously reported Brands segment and Targus, which the Company acquired in the fourth quarter of 2022.

The Company has also re-aligned its previously reported Principal Investments - Communications and Other segment into the Communications segment and the All Other category that is reported with Corporate and Other.

NOTE 2 — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

In connection with the preparation of the consolidated financial statements for the year ended December 31, 2022, the Company identified a classification error of dividend income and realized and unrealized gains (losses) on certain investments within revenue.

The following tables summarize the effects of the correction of the classification error on the Company’s restated condensed consolidated statements of operations for the three months ended March 31, 2022.

The classification error had no impact on the Company's condensed consolidated balance sheet, condensed consolidated statements of equity, cash flows, net income, or earnings per share.

The following tables present the corrections by financial statement line item within the condensed consolidated statement of operations for all periods presented:

Three Months Ended March 31, 2022

As Previously

Reported Restatement Adjustments Restatement Reference As Restated

Statement of Operations

Services and fees $ 210,675 $ ( 7,861 ) (a) $ 202,814

Trading (loss) income and fair value adjustments on loans ( 68,390 ) 49,112 (b) ( 19,278 )

Interest income - Loans and securities lending 61,426 — 61,426

Sale of goods 1,878 — 1,878

Total revenues 205,589 41,251 246,840

Operating expenses:

Direct cost of services 11,651 — 11,651

Cost of goods sold 2,251 — 2,251

Selling, general and administrative expenses 175,199 — 175,199

Interest expense - Securities lending and loan participations sold 11,766 — 11,766

Total operating expenses 200,867 — 200,867

Operating income 4,722 41,251 45,973

Other income (expense):

Interest income 67 — 67

Dividend income — 7,861 (a) 7,861

Realized and unrealized gains (losses) on investments — ( 49,112 ) (b) ( 49,112 )

Change in fair value of financial instruments and other 5,981 — 5,981

Income from equity method investments 6,775 — 6,775

Interest expense ( 30,436 ) — ( 30,436 )

Loss before income taxes ( 12,891 ) — ( 12,891 )

Provision for income taxes 3,695 — 3,695

Net loss ( 9,196 ) — ( 9,196 )

Net income attributable to noncontrolling interests and redeemable noncontrolling interests 866 — 866

Net loss attributable to B.

Riley Financial, Inc.

( 10,062 ) — ( 10,062 )

Preferred stock dividends 2,002 — 2,002

Net loss available to common shareholders $ ( 12,064 ) $ — $ ( 12,064 )

Basic loss per common share $ ( 0.43 ) $ ( 0.43 )

Diluted loss per common share $ ( 0.43 ) $ ( 0.43 )

Weighted average basic common shares outstanding 27,855,033 27,855,033

Weighted average diluted common shares outstanding 27,855,033 27,855,033

(a) To reclassify dividends received from investments from Services and fees to Dividend income.

(b) To reclassify realized and unrealized gains (losses) on investments from Trading income (loss) and fair value on loans to Realized and unrealized gains (losses) on investments.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

Riley Financial, Inc.

and its wholly-owned and majority-owned subsidiaries.

The condensed consolidated financial statements also include the accounts of Great American Global Partners, LLC, which is controlled by the Company as a result of its ownership of a 50 % member interest, appointment of two of the three executive officers and significant influence over the funding of operations.

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.

Applicable accounting guidance requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity;

to require ongoing reassessments of whether an enterprise is the primary beneficiary of a Variable Interest Entity (“VIE”);

to eliminate the solely quantitative approach previously required for determining the primary beneficiary of a VIE;

to add an additional reconsideration event for determining whether an entity is a VIE when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance;

and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a VIE.

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 3(o) 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 accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

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, 2021, filed with the SEC on February 28, 2022.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.

The results of operations for the three months ended March 31, 2023 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 doubtful accounts, the fair value of loans receivables, intangible assets and goodwill, share based arrangements, contingent consideration, accounting for income tax valuation allowances, recovery of contract assets, and sales returns and allowances.

Estimates are used when accounting for certain items such as valuation of securities, allowance for doubtful accounts, the fair value of loans receivables, intangible assets and goodwill, share based arrangements, contingent consideration, and accounting for income tax valuation allowances, recovery of contract assets and sales returns and allowances.

Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances.

2 unchanged sentences

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 $ 17,447 and $ 9,945 during the three months ended September 30, 2022 and 2021, respectively, and $ 43,757 and $ 39,391 during the nine months ended September 30, 2022 and 2021, respectively.

Interest expense from loan participations sold totaled $ 152 and $ 878 during the three and nine months ended September 30, 2021, respectively.

Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $ 32,424 and $ 11,766 during the three months ended March 31, 2023 and 2022, respectively.

(d) Concentration of Risk

Revenues in the Capital Markets, Financial Consulting, Wealth Management, Brands and Principal Investments — Communications and Other segments are currently primarily generated in the United States.

Revenues in the Auction and Liquidation segment are primarily generated in the United States, Canada, and Europe.

Revenues in the Capital Markets, Financial Consulting, Wealth Management, and Communications segments are primarily generated in the United States.

Revenues in the Auction and Liquidation segment and Consumer segment are primarily generated in the United States, Australia, Canada, and Europe.

The Company maintains cash in various federally insured banking institutions.

2 unchanged sentences

The Company also has substantial cash balances from proceeds received from auctions and liquidation engagements that are distributed to parties in accordance with the collaborative arrangements.

The Company’s activities in the Auction and Liquidation segment are executed frequently with, and on behalf of, distressed customers and secured creditors.

Concentrations of credit risk can be affected by changes in economic, industry, or geographical factors.

The Company seeks to control its credit risk and potential risk concentration through risk management activities that limit the Company’s exposure to losses on any one specific liquidation services contract or concentration within any one specific industry.

To mitigate the exposure to losses on any one specific liquidations services contract, the Company sometimes conducts operations with third parties through collaborative arrangements.

(e) Advertising Expenses

The Company expenses advertising costs, which consist primarily of costs for printed materials, as incurred.

Advertising costs totaled $ 1,584 and $ 808 during the three months ended September 30, 2022 and 2021, respectively, and $ 5,941 and $ 1,964 during the nine months ended September 30, 2022 and 2021, respectively.

Advertising costs totaled $ 5,121 and $ 1,763 during the three months ended March 31, 2023 and 2022, respectively.

Advertising expense was included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

(f) Share-Based Compensation

The Company’s share-based payment awards principally consist of grants of restricted stock, restricted stock units and costs associated with the Company’s employee stock purchase plan.

In accordance with the applicable accounting guidance, share-based payment awards are classified as either equity or liabilities.

For equity-classified awards, the Company measures compensation cost for the grant of membership interests at fair value on the date of grant and recognizes compensation expense in the condensed consolidated statements of operations over the requisite service or performance period the award is expected to vest.

In June 2018, the Company adopted the 2018 Employee Stock Purchase Plan (“Purchase Plan”) which allows eligible employees to purchase common stock through payroll deductions at a price that is 85 % of the market value of the common stock on the last day of the offering period.

In accordance with the provisions of ASC 718 - Compensation — Stock Compensation (“ASC 718”), the Company is required to recognize compensation expense relating to shares offered under the Purchase Plan.

During the three months ended September 30, 2022 and 2021, the Company recognized compensation expense of $ 120 and $ 132 , respectively, related to the Purchase Plan.

During the nine months ended September 30, 2022 and 2021, the Company recognized compensation expense of $ 316 and $ 474 , respectively, related to the Purchase Plan.

(g) Income Taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the condensed consolidated financial statements or tax returns.

Deferred tax liabilities and assets are determined based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction.

A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods.

Tax benefits of operating loss carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances.

If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements.

The Company accrues interest on unrecognized tax benefits as a component of income tax expense.

Penalties, if incurred, would be recognized as a component of income tax expense.

(h) Cash and Cash Equivalents

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

(i) Restricted Cash

As of September 30, 2022 and December 31, 2021, restricted cash included $ 1,578 and $ 927 of cash collateral for leases, respectively.

(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 March 31, 2023 and December 31, 2022, restricted cash included $ 2,351 and $ 2,308 of cash collateral for leases, respectively.

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

September 30,

2023 December 31,

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Total cash, cash equivalents and restricted cash $ 212,322 $ 270,926

(j) Securities Borrowed and Securities Loaned

Securities borrowed and securities loaned are recorded based upon the amount of cash advanced or received.

Securities borrowed transactions facilitate the settlement process and require the Company to deposit cash or other collateral with the lender.

With respect to securities loaned, the Company receives collateral in the form of cash.

The amount of collateral required to be deposited for securities borrowed, or received for securities loaned, is an amount generally in excess of the market value of the applicable securities borrowed or loaned.

The Company monitors the market value of the securities borrowed and loaned on a daily basis, with additional collateral obtained, or excess collateral recalled, when deemed appropriate.

The Company accounts for securities lending transactions in accordance with ASC 210 - Balance Sheet , which requires companies to report disclosures of offsetting assets and liabilities.

The Company does not net securities borrowed and securities loaned and these items are presented on a gross basis in the condensed consolidated balance sheets.

(k) Property and Equipment

Property and equipment are stated at cost.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

Property and equipment held under finance leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset.

Depreciation expense on property and equipment was $ 1,327 and $ 986 during the three months ended September 30, 2022 and 2021, respectively, and $ 3,380 and $ 2,890 during the nine months ended September 30, 2022 and 2021, respectively.

(l) Loans Receivable

Under ASC 326 - Financial Instruments – Credit Losses , the Company elected the fair value option for all outstanding loans receivable.

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 consolidated statements of operations.

Loans receivable, at fair value totaled $ 814,715 and $ 873,186 as of September 30, 2022 and December 31, 2021, respectively.

(h) Loans Receivable

Under ASC 326 - Financial Instruments – Credit Losses , the Company elected the irrevocable fair value option for all outstanding loans receivable that were previously measured at amortized cost.

These loans are no longer subject to evaluation for impairment through an allowance for loan loss as such losses will be captured through fair value changes.

Loans receivable, at fair value totaled $ 772,085 and $ 701,652 as of March 31, 2023 and December 31, 2022, respectively.

The loans have various maturities through March 2027.

As of September 30, 2022 and December 31, 2021, the historical cost of loans receivable accounted for under the fair value option was $ 846,933 and $ 877,527 , respectively, which included principal balances of $ 851,689 and $ 886,831 respectively, and unamortized costs, origination fees,

premiums and discounts, totaling $ 4,756 and $ 9,304 , respectively.

During the three months ended September 30, 2022 and 2021, the Company recorded net unrealized loss of $ 19,158 and $ 1,317 , respectively, and during the nine months ended September 30, 2022 and 2021, the Company recorded a net unrealized loss of $ 19,287 and net unrealized gain of $ 8,729 , respectively, on the loans receivable at fair value, which was included in trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations.

As of March 31, 2023 and December 31, 2022, the historical cost of loans receivable accounted for under the fair value option was $ 795,996 and $ 769,022 , respectively, which included principal balances of $ 799,616 and $ 772,873 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $ 3,620 and $ 3,851 , respectively.

During the three months ended March 31, 2023 and 2022, the Company recorded net unrealized gains of $ 43,459 and $ 10,937 , respectively, on the loans receivable at fair value, which was included in trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations.

Loans receivable, at fair value on non-accrual was $ 39,552 and $ 7,153 as of March 31, 2023 and December 31, 2022, respectively, which represented approximately 5.1 % and 1.0 % of total loans receivable, at fair value as of March 31, 2023 and December 31, 2022, respectively.

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, 2022, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc.

As of March 31, 2023, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc.

(“B&W”) as further described in Note 17.

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, 2022, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure.

In accordance with the new 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 March 31, 2023, the Company has not recorded any provision for credit

losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure.

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 and securities lending on the condensed consolidated statements of operations.

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Unearned income, discounts and premiums are amortized to interest income using a level yield methodology.

Badcock Loans Receivable

On September 23, 2022, the Company's subsidiary, B Riley Receivables II, LLC, a Delaware limited liability company, entered into a Master Receivables Purchase Agreement (“Receivables Purchase Agreement II”) with W.S.

Badcock Loan Receivable

On December 20, 2021, the Company entered into a Master Receivables Purchase Agreement with W.S.

Badcock Corporation, a Florida corporation (“WSBC”), an indirect wholly owned subsidiary of Franchise Group, Inc., a Delaware corporation (“FRG”).

This purchase of $ 168,363 consumer credit receivables of WSBC (“2022 Badcock Receivable”) was partially financed by a $ 148,200 term loan discussed in Note 9.

As of September 30, 2022, the principal outstanding for the 2022 Badcock Receivable was $ 168,363 and included in loans receivable, at fair value on the condensed consolidated balance sheets.

On December 20, 2021, the Company entered into a Master Receivables Purchase Agreement (“Receivables Purchase Agreement”) with WSBC.

The Company paid $ 400,000 in cash to WSBC for the purchase of certain consumer credit receivables of WSBC (“2021 Badcock Receivable”), which was collateralized by the performance of the consumer credit receivables of WSBC.

In connection with the Receivables Purchase Agreement, the Company entered into a Servicing Agreement (the “Servicing Agreement”) with WSBC pursuant to which WSBC will provide 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 Receivables Purchase Agreement and the Servicing Agreement.

As of September 30, 2022 and December 31, 2021, the principal outstanding for the 2021 Badcock Receivable was $ 212,551 and $ 400,000 , respectively, and included in loans receivable, at fair value on the condensed consolidated balance sheets.

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

The Company paid $ 400,000 in cash to WSBC for the purchase of certain consumer credit receivables of WSBC.

On September 23, 2022, the Company's subsidiary, B Riley Receivables II, LLC (“BRRII”), a Delaware limited liability company, entered into a Master Receivables Purchase Agreement (“2022 Badcock Receivable”) 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.

3 to the 2022 Badcock Receivable 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 loan receivable was measured at fair value on the condensed consolidated balance sheets.

In connection with these loans, the Company entered into a Servicing Agreement with WSBC pursuant to which WSBC will provide 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 March 31, 2023 and December 31, 2022, loans receivable to WSBC in the Company's condensed consolidated balance sheets included loans measured at fair value in the amount of $ 324,328 and $ 318,109 , respectively.

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

Securities and other investments owned consist of marketable securities and investments in partnership interests and other securities recorded at fair value.

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Changes in the value of these securities are reflected currently in the results of operations.

As of September 30, 2022 and December 31, 2021, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities:

September 30,

As of March 31, 2023 and December 31, 2022, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities:

2023 December 31,

10 unchanged sentences

$ 7,806 $ 5,897

(n) Fair Value Measurements

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.

The following tables contain summarized financial information with respect to two of the Company's individually greater than 20% investments, where the Company has a voting interest in each investee of 41 % and 43 %, respectively, which has been aggregated and included below for purposes of the disclosure a quarter in arrears (for balance sheet information the period ended December 31, 2022 and September 30, 2022 correspond to the period ended March 31, 2023 and December 31, 2022, respectively, of the Company and for income statement information the three months ended December 31, 2022 and 2021 correspond to the three months ended March 31, 2023 and 2022, respectively, of the Company), which is the period in which the most recent financial information is available:

December 31, 2022 September 30, 2022

Total assets $ 197,101 $ 202,520

Total liabilities $ 6,789 $ 5,737

Equity attributable to investee $ 190,312 $ 196,783

For the three months ended December 31,

Revenues $ 27,971 $ 27,209

Net income (loss) attributable to investees $ 11,808 $ 12,882

The following tables contain summarized financial information with respect to B&W, where the Company owns a 31 % voting interest, included below for purposes of the disclosure a quarter in arrears (for balance sheet information the period ended December 31, 2022 and September 30, 2022 correspond to the period ended March 31, 2023 and December 31, 2022, respectively, of the Company and for income statement information the three months ended December 31, 2022 and 2021 correspond to the three months ended March 31, 2023 and 2022, respectively, of the Company), which is the period in which the most recent financial information is available:

2022 September 30,

Total assets $ 942,655 $ 881,567

Total liabilities $ 944,744 $ 898,695

Equity attributable to investee $ ( 2,089 ) $ ( 17,128 )

For the three months ended December 31,

Revenues $ 249,877 $ 192,295

Net income attributable to investees $ 2,021 $ 25,874

As of March 31, 2023 and December 31, 2022, the fair value of these equity securities totaled $ 370,502 and $ 371,948 , respectively, and are 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.

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These partnership and investment fund interests are valued at net asset value (“NAV”) in accordance with ASC 820 - Fair Value Measurements.

As of September 30, 2022 and December 31, 2021, partnership and investment fund interests valued at NAV of $ 82,475 and $ 77,383 , respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.

As of March 31, 2023 and December 31, 2022, partnership and investment fund interests valued at NAV of $ 48,930 and $ 70,063 , 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.

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.

Any investments adjusted to their fair value by applying the measurement alternative are disclosed as nonrecurring fair value measurements, including the level in the fair value hierarchy that was used.

As of September 30, 2022 and December 31, 2021, investments in nonpublic entities valued using a measurement alternative of $ 84,280 and $ 59,745 , respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.

Funds held in trust represents U.S.

treasury bills that were purchased with funds raised through the initial public offering of B.

Riley Principal 250 Merger Corporation (“BRPM 250”), a consolidated special purpose acquisition corporation (“SPAC”).

As of March 31, 2023 and December 31, 2022, investments in nonpublic entities valued using a measurement alternative of $ 86,920 and $ 94,109 , respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.

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 March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December 31, 2022, funds held in trust represents amounts invested in a mutual fund that invests in U.S.

Treasury securities that were purchased with funds raised through the initial public offering of B.

Riley Principal 250 Merger Corporation (“BRPM 250”), which is a consolidated special purpose acquisition corporation (“SPAC”).

As of March 31, 2023 and December 31, 2022, the Company had $ 176,182 and $ 174,437 , respectively, of funds held in trust related to the SPAC.

The funds raised are held in a trust account that is restricted for use and may only be used for purposes of completing an initial business combination or redemption of the class A public common shares of the SPAC as set forth in the trust agreement.

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The warrants are accounted for as liabilities in accordance with ASC 815 - Derivatives and Hedging and are measured at fair value at inception and on a recurring basis using quoted prices in over-the-counter markets.

Warrant liabilities are included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets in the amount of $ 633 for BRPM 250 and $ 12,938 for B.

Riley Principal 150 Merger Corporation (“BRPM 150”) and BRPM 250 as of September 30, 2022 and December 31, 2021, respectively.

Changes in fair value of warrants are included within change in fair value of financial instruments and other as part of other income (expense) in the condensed consolidated statements of operations.

Warrant liabilities are included in Level 1 of the fair value hierarchy and included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets in the amount of $ 381 and $ 173 for BRPM 250 as of March 31, 2023 and December 31, 2022, respectively.

Changes in fair value of warrants are included within change in fair value of financial instruments and other as part of other income (expense) in the consolidated statements of operations.

The fair value of mandatorily redeemable noncontrolling interests is determined based on the issuance of similar interests for cash, references to industry comparables, and relied, in part, on information obtained from appraisal reports and internal valuation models.

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, 2022 and December 31, 2021.

The following tables present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of March 31, 2023 and December 31, 2022.

Financial Assets and Liabilities Measured at Fair Value on a

Recurring Basis as of September 30, 2022 Using

Fair value as of September 30, 2022

Recurring Basis as of March 31, 2023 Using

Fair value as of March 31, 2023

Quoted prices in active markets

41 unchanged sentences

Warrant liabilities 173 173 — —

Contingent consideration 31,046 — — 31,046

Total liabilities measured at fair value $ 41,764 $ 4,639 $ 1,431 $ 35,694

As of September 30, 2022 and December 31, 2021, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $ 1,154,071 and $ 1,250,735 , respectively, or 20.0 % and 21.4 %, respectively, of the Company’s total assets.

As of March 31, 2023 and December 31, 2022, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $ 1,131,126 and $ 1,070,117 , respectively, or 17.1 % and 17.5 %, 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, 2022:

Fair value at

September 30, 2022

March 31, 2023

Technique Unobservable

5 unchanged sentences

3,931 Option pricing model Annualized volatility 30.0 % - 510.0 %

Loans receivable at fair value 814,715 Discounted cash flow/Market approach Market interest rate/Market price of related security 6.0 % - 33.5 %

Loans receivable at fair value 744,018 Discounted cash flow Market interest rate 9.7 % - 35.6 %

28,067 Market approach Market price of related security $ 13.25 $ 13.25

Total level 3 assets measured at fair value $ 1,131,126

Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,322 Market approach Operating income multiple 6.0 x 6.0 x

Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,654 Market approach Operating income multiple 6.0 x

Contingent consideration 28,884 Discounted cash flow EBITDA volatility 75 % 75 %

Asset volatility 69.0 % 69.0 %

Market interest rate 8.5 % 8.5 %

Revenue volatility 5.1 % 5.1 %

Total level 3 liabilities measured at fair value $ 33,538

The changes in Level 3 fair value hierarchy during the nine months ended September 30, 2022 and 2021 were as follows:

Fair value at December 31,

2022 Valuation Technique Unobservable Input Range Weighted

Equity securities $ 304,172 Market approach Multiple of EBITDA 1.5 x - 10.5 x

Multiple of Sales 3.0 x

Market price of related security $ 10.01 - $ 18.88

57,267 Discounted cash flow Market interest rate 23.8 % 23.8 %

7,026 Option pricing model Annualized volatility 0.3 % - 26.1 %

Loans receivable at fair value 694,499 Discounted cash flow Market interest rate 6.0 % - 83.5 %

7,153 Market approach Multiple of EBITDA 4.5 x

Total level 3 assets measured at fair value $ 1,070,117

Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,648 Market approach Operating income multiple 6.0 x

Contingent consideration 31,046 Discounted cash flow EBITDA volatility 80.0 % 80.0 %

Asset volatility 69.0 % 69.0 %

Market interest rate 8.5 % 8.5 %

Total level 3 liabilities measured at fair value $ 35,694

The changes in Level 3 fair value hierarchy during the three months ended March 31, 2023 and 2022 were as follows:

Year Level 3 Changes During the Period Level 3

3 unchanged sentences

Settlements Transfer in

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Equity securities $ 368,465 $ ( 9,016 ) $ — $ 6,487 $ ( 6,895 ) $ 359,041

2 unchanged sentences

Contingent consideration 31,046 ( 3,447 ) — 1,285 — 28,884

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Equity securities $ 377,549 $ ( 4,543 ) $ — $ 19,912 $ ( 4,254 ) $ 388,664

1 unchanged sentence

Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,506 — 247 ( 251 ) — 4,502

Warrant liabilities — — — 10,466 ( 10,466 ) —

The amount reported in the table above during the nine months ended September 30, 2022 and 2021 included the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis.

Contingent consideration — — — 22,464 — 22,464

The amount reported in the table above as of March 31, 2023 and December 31, 2022 included the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis.

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

As of September 30, 2022 and December 31, 2021, the senior notes payable had a carrying amount of $ 1,661,191 and $ 1,606,560 , respectively, and fair value of $ 1,539,876 and $ 1,661,189 , respectively.

As of March 31, 2023 and December 31, 2022, the senior notes payable had a carrying amount of $ 1,722,977 and $ 1,721,751 , respectively, and fair value of $ 1,258,532 and $ 1,431,787 , respectively.

The carrying amount of the term loans approximates fair value because the effective yield of such instruments are consistent with current market rates of interest for instruments of comparable credit risk.

5 unchanged sentences

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, 2022.

These investments were measured due to an observable price change or impairment during the nine months ended September 30, 2022.

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 March 31, 2023 and December 31, 2022.

These investments were measured due to an observable price change or impairment during the periods below.

Fair Value Measurement Using

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(Level 2) Significant unobservable inputs

As of September 30, 2022

As of March 31, 2023

Investments in nonpublic entities that do not report NAV $ 4,271 $ — $ — $ 4,271

(o) Derivative and Foreign Currency Translation

As of December 31, 2022

Investments in nonpublic entities that do not report NAV $ 20,251 $ — $ 18,659 $ 1,592

(k) Derivative and Foreign Currency Translation

The Company periodically uses derivative instruments, which primarily consist of the purchase of forward exchange contracts, for certain loans receivable and Auction and Liquidation engagements with operations outside the United States.

As of September 30, 2022, there were no forward exchange contracts outstanding.

As of December 31, 2021, € 6,000 forward exchange contracts were outstanding.

As of March 31, 2023 and December 31, 2022, there were no forward exchange contracts outstanding.

The forward exchange contracts were entered into to improve the predictability of cash flows related to a retail store liquidation engagement and a loan receivable.

The net gain from forward exchange contracts was zero and $ 248 during the three months ended September 30, 2022 and 2021, respectively, and $ 68 and $ 921 during the nine months ended September 30, 2022 and 2021, respectively.

The net gain from forward exchange contracts was zero and $ 68 during the three months ended March 31, 2023 and 2022, respectively.

This amount was reported as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

2 unchanged sentences

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 gain was $ 783 and $ 689 during the three months ended September 30, 2022 and 2021, respectively, and gain was $ 1,913 and $ 855 during the nine months ended September 30, 2022 and 2021, respectively.

Transaction losses were $ 234 and gains were $ 296 during the three months ended March 31, 2023 and 2022, respectively.

These amounts were included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

As disclosed in Note 2(s) below, the Company consolidated a VIE, BRPM 250, which has outstanding warrants that were issued in its initial public offering.

The warrants were recorded as a liability since the warrants contain a provision to be settled in cash in the event of a qualifying cash tender offer for BRPM 250, which is outside the control of the Company.

As disclosed in Note 3(o) below, the Company has consolidated a VIE, BRPM 250, which has outstanding warrants that were issued in its initial public offerings.

The warrants have been recorded as a liability since the warrants contain a provision to be settled in cash in the event of a qualifying cash tender offer for BRPM 250, which is outside the control of the Company.

The outstanding warrants are considered derivative instruments with the warrant liability measured at fair value at each reporting date until exercised or upon expiration, with changes in fair value reported in other income in the condensed consolidated statements of operations.

As of September 30, 2022 and December 31, 2021, the warrant liability for BRPM 250 totaled $ 633 and BRPM 150 and BRPM 250 totaled $ 12,938 , respectively, which was included in accrued expenses and other liabilities in the condensed consolidated balance sheet.

(p) Redeemable Noncontrolling Interests in Equity of Subsidiaries

As of March 31, 2023 and December 31, 2022, the warrant liability for BRPM 250 totaled $ 381 and $ 173 , respectively, which was included in accrued expenses and other liabilities in the condensed consolidated balance sheet.

(l) Redeemable Noncontrolling Interests in Equity of Subsidiaries

The Company records redeemable noncontrolling interests in equity of subsidiaries to reflect the economic interests of the class A ordinary shareholders in the BRPM 250 sponsored SPAC and the 20 % noncontrolling interest of Lingo Management, LLC (“Lingo”), which on February 24, 2023, the Company acquired, increasing its ownership interest in Lingo to 100 %.

These interests are presented as redeemable noncontrolling interests in equity of subsidiaries within the condensed consolidated balance sheet, outside of the permanent equity section.

The class A ordinary shareholders of BRPM 250 have redemption rights that are considered to be outside of the Company’s control.

Remeasurements to the redemption value of the redeemable noncontrolling interest in equity of subsidiaries are recorded within retained earnings.

Remeasurements to the redemption value of the redeemable noncontrolling interest in equity of subsidiaries are recorded within retained earnings (accumulated deficit).

The operating agreement with Lingo has provisions which result in the noncontrolling interest being accounted for as temporary equity.

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Changes to redeemable noncontrolling interest consist of the following:

Nine Months Ended September 30, 2022

Balance, January 1, 2022 $ 345,000

Three Months Ended March 31, 2023

Balance, December 31, 2022 $ 178,622

Net loss ( 146 )

De-consolidation of BRPM 150 ( 172,584 )

Contributions 8,021

Distributions ( 600 )

Balance, September 30, 2022 $ 178,759

(q) Equity Investments

As of September 30, 2022 and December 31, 2021, equity investments of $ 42,560 and $ 39,190 , respectively, were accounted for under the equity method of accounting and included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.

Purchase of Lingo minority interest ( 11,190 )

Remeasurement adjustments for Lingo and BRPM 250 7,681

Balance, March 31, 2023 $ 174,967

(m) Equity Investment

As of March 31, 2023 and December 31, 2022, equity investments of $ 41,816 and $ 41,298 , respectively, were 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 was included in income from equity investments in the accompanying condensed consolidated statements of operations.

bebe stores, inc.

As of September 30, 2022 and December 31, 2021, the Company had a 40.1 % ownership interest in bebe stores, inc.

In December 2021, the Company purchased an additional 71,970 shares of newly issued common stock of bebe for $ 612 and increased its ownership interest from 39.5 % to 40.1 %.

As of March 31, 2023 and December 31, 2022, the Company had a 41.3 % and 40.1 % ownership interest in bebe stores, inc.

(“bebe”), respectively.

The equity ownership in bebe was accounted for under the equity method of accounting and was included in prepaid expenses and other assets in the condensed consolidated balance sheets.

As of September 30, 2022, the carrying value of the Company’s equity investment in bebe exceeded the fair value based on the quoted market prices.

The common stock of bebe is publicly traded.

The fair value of bebe as of March 31, 2023 and December 31, 2022 was $ 22,573 and $ 25,423 , respectively.

The carrying value of the investment in bebe as of March 31, 2023 and December 31, 2022 was $ 40,937 and $ 40,383 , respectively.

As of March 31, 2023, the carrying value of the Company’s equity method investment in bebe exceeded the fair value based on the quoted market prices.

In consideration of these facts, the Company evaluated its investment for other than temporary impairment under ASC 323.

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However, the Company will continue to monitor the investment and it is possible that impairment losses will be recorded in earnings in future periods based on changes in facts and circumstances or intentions.

(r) Supplemental Non-cash Disclosures

During the nine months ended September 30, 2022, non-cash investing activities included $ 20,320 in issuance of the Company's common stock as part of the purchase price consideration from the FocalPoint acquisition and $ 22,661 in seller financing for deferred cash consideration, the conversion of $ 17,500 of debt owed by Lingo to equity, and the repayment of loans receivable in the amount of $ 850 with equity securities.

During the nine months ended September 30, 2021, non-cash investing activities included the repayment of a loan receivable in full in the amount of $ 133,453 with equity securities, a $ 51,000 note receivable issued for the sale of equity securities to a third party, $ 35,000 of loans receivable were exchanged for $ 35,000 of newly issued debt securities, the repayment of a loan receivable in full in the amount of $ 2,800 with equity securities, and a $ 200 note receivable was issued for the sale of equity securities to a third party.

(s) Variable Interest Entities

Other Equity Investments

The Company had other equity method investments over which the Company exercises significant influence but that did not meet the requirements for consolidation, the largest ownership interest being a 40 % ownership interest in Lingo, which was acquired in November 2020.

On May 31, 2022, the Company's ownership increased to 80 % and Lingo's operating results were consolidated with the Company.

On February 24, 2023, the Company acquired the remaining 20 % ownership in Lingo, increasing the Company's ownership interest from 80 % to 100 %.

The equity ownership in these other investments was accounted for at the applicable times under the equity method of accounting and was included in prepaid expenses and other assets in the condensed consolidated balance sheets.

(n) Supplemental Non-cash Disclosures

During the three months ended March 31, 2023, non-cash investing activities included $ 15,000 of a convertible note receivable which was included in loans receivable, at fair value, that converted into an equity security, $ 1,190 of loans receivable, at fair value, was credited to the 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 three months ended March 31, 2023, non-cash financing activities included $ 7,000 in seller financing related to the purchase of the Lingo noncontrolling interest.

During the three months ended March 31, 2022, non-cash investing activities included $ 20,320 in issuance of the Company's common stock as part of the purchase price consideration from the FocalPoint acquisition and $ 22,661 in seller financing for deferred cash consideration.

(o) 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.

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however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed.

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

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.

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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 during the three months ended September 30, 2022 and 2021 were $ 349 and $ 26,732 , respectively, and for the nine months ended September 30, 2022 and 2021 were $ 12,437 and $ 52,114 , respectively, and are included in services and fees in the condensed consolidated statements of operations.

Placement agent fees attributable to such arrangements during the three months ended March 31, 2023 and 2022 were zero and $ 12,051 , respectively, and were included in services and fees in the condensed consolidated statements of operations.

The carrying value of the Company’s investments in the VIEs that were not consolidated is shown below.

September 30,

2023 December 31,

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Riley Principal 150 and 250 Merger Corporations

In 2021, the Company along with B.

Riley Principal 150 Merger Corporation (“BRPM 150”) and BRPM 250, both special purpose acquisition companies incorporated as Delaware corporations, consummated the initial public offerings of 17,250,000 units of BRPM 150 and 17,250,000 units of BRPM 250.

In 2021, the Company along with BRPM 150 and BRPM 250, both newly formed special purpose acquisition companies incorporated as Delaware corporations, consummated the initial public offerings of 17,250,000 units of BRPM 150 and 17,250,000 units of BRPM 250.

Each Unit of BRPM 150 and BRPM 250 consisted of one share of class A common stock and one-third of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of BRPM 150 or BRPM 250 class A common stock at an exercise price of $ 11.50 per share.

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Both BRPM 150 and BRPM 250 are determined to be VIE’s because each of the entities do not have enough equity at risk to finance their activities without additional subordinated financial support.

The Company has determined that the class A shareholders of BRPM 150 and BRPM 250 do not have substantive rights as shareholders of BRPM 150 and BRPM 250 since these equity interests are determined to be temporary equity.

The Company has determined that the class A shareholders of BRPM 150 and BRPM 250 do not have

substantive rights as shareholders of BRPM 150 and BRPM 250 since these equity interests are determined to be temporary equity.

As such, the Company has determined that it is the primary beneficiary of BRPM 150 and BRPM 250 as it has the right to receive benefits or the obligation to absorb losses of each of the entities, as well as the power to direct a majority of the activities that significantly impact BRPM 150 and BRPM 250’s economic performance.

Since the Company is determined to be the primary beneficiary, BRPM 150 and BRPM 250 were consolidated into the Company’s financial statements.

Since the Company is determined to be the primary beneficiary, BRPM 150 and BRPM 250 are consolidated into the Company’s financial statements.

On July 19, 2022, BRPM 150 completed a business combination with FaZeClan Holdings, Inc.

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In connection with the de-consolidation of BRPM 150, among other items, prepaid expenses and other assets decreased by $ 172,584 related to funds held in a trust account and redeemable noncontrolling interests in equity of subsidiaries decreased by $ 172,500 .

During the three and nine months ended September 30, 2022, the Company recognized incentive fees of $ 41,885 included in services and fees in the condensed consolidated statement of operations.

See Note 18 for further discussion.

(t) Recent Accounting Standards

During the year ended December 31, 2022, the Company recognized incentive fees of $ 41,885 , which was included in services and fees in the consolidated statement of operations.

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.

On May 4, 2023, the funds held in trust in the amount of $ 176,182 which is included in prepaid expenses and other assets will be distributed to pay income taxes and redeem the $ 174,967 of the redeemable noncontrolling interest in equity of subsidiaries that is included in the condensed consolidated balance sheet as of March 31, 2023.

(p) Recent Accounting Standards

Not yet adopted

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations to enhance transparency about an entity’s use of supplier finance programs.

Under the ASU, the buyer in a supplier finance program is required to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented.

An entity should also consider whether the existence of a supplier finance program changes the appropriate presentation of the payables in the program from trade payables to borrowings.

The amendments in this update are effective for the Company for fiscal periods beginning after December 15, 2022, including interim periods within those fiscal years, except for the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023, with early adoption permitted.

The Company is currently evaluating the effect of this new standard, which is not expected to have a material impact on its financial position and results of operations.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820).

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Recently adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers to require acquiring entities to apply Topic 606 when recognizing and measuring contract assets and contract liabilities instead of only recognizing such items at fair value on the acquisition date.

The update addressed diversity in practice related to the acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.

The Company early adopted the ASU on January 1, 2022.

The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) , which provided optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”).

The amendments applied only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) , which refined the scope of Topic 848 through optional expedients and exceptions when accounting for derivative contracts and certain

hedging relationships.

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations to enhance transparency about an entity’s use of supplier finance programs.

An entity should also consider whether the existence of a supplier finance program changes the appropriate presentation of the payables in the program from trade payables to borrowings.

The Company adopted the ASU effective January 1, 2023.

The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures.

The ASU had no impact on the consolidated results of operations, cash flows, and financial position and was immaterial to the financial statement disclosures.

NOTE 4 — ACQUISITIONS

2022 Acquisitions

Acquisition of Targus

On October 18, 2022, the Company acquired all of the issued and outstanding shares of Targus in a transaction pursuant to a purchase agreement among Targus, the sellers identified therein, and the other parties thereto.

The purchase price consideration totaled $ 247,546 , which consisted of cash in the amount of $ 112,686 , seller financing of $ 54,000 , the issuance of $ 59,016 in 6.75 % senior notes due 2024, the issuance of $ 15,328 of the Company’s common stock and stock options, and deferred payments of $ 6,515 .

In accordance with ASC 805, the Company used the acquisition method of accounting for this acquisition.

Goodwill of $ 78,519 and other intangible assets of $ 89,000 were recorded as a result of the acquisition.

The acquisition complements the Company’s existing investments and offers potential growth to the Company’s operations in the Consumer segment.

The assets and liabilities of Targus, both tangible and intangible, were recorded at their estimated fair values as of the October 18, 2022 acquisition date.

Acquisition related costs, such as legal, accounting, valuation and other professional fees related to the acquisition of Targus, were charged against earnings in the amount of $ 1,921 and included in selling, general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2022.

Targus 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 $ 112,686

Fair value of seller financing 54,000

Fair value of 2,400,000 RILYO shares issued in senior notes at $ 24.59 per share

Fair value of 227,491 B.

Riley common shares issued at $ 42.11 per share

Fair value of 215,876 stock options attributable to service period prior to acquisition

Fair value of deferred payments 6,515

Total consideration $ 247,546

Assets acquired and liabilities assumed:

Cash and cash equivalents $ 18,810

Accounts receivable 91,039

Prepaid and other assets 90,289

Right-of-use assets 7,665

Property and equipment 8,320

Other intangible assets 89,000

Accounts payable ( 54,553 )

Accrued expenses and other liabilities ( 61,677 )

Deferred income taxes ( 9,989 )

Contingent consideration ( 2,212 )

Lease liability ( 7,665 )

Net tangible assets acquired and liabilities assumed 169,027

Goodwill 78,519

Total $ 247,546

During the three months ended March 31, 2023, goodwill for Targus changed by $ 2,766 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 $ 50,000

Internally developed software and other intangibles 1 to 3 years

Tradenames N/A 35,000

Total $ 89,000

Unaudited Pro Forma Information

Acquisition of Targus

The following unaudited pro forma financial information is presented to illustrate the estimated effects of the acquisition of Targus as if it had occurred on January 1, 2021.

The pro forma amounts include the historical operating results of the Targus prior to the acquisition, with adjustments directly attributable to the acquisition.

The pro forma results include adjustments and consequential tax effects to reflect incremental depreciation and amortization expense to be incurred based on preliminary fair values of the identifiable intangible assets acquired, the incremental interest expense associated with the issuance of debt to finance the acquisition, and the adjustments to exclude acquisition related costs incurred during the year ended December 31, 2022 and to recognize these costs during the year ended December 31, 2021 as if incurred on January 1, 2021.

The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations of the combined company were, nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition.

Pro Forma (unaudited)

Three Months Ended March 31, 2022

Revenues $ 341,287

Net loss $ ( 7,313 )

Net loss attributable to B.

Riley Financial, Inc.

Net loss attributable to common shareholders $ ( 10,181 )

These pro forma results do not necessarily represent the results of operations that would have been achieved if the acquisition had taken place on January 1, 2021, nor are they indicative of the results of operations for future periods.

Other Acquisitions

During the year ended December 31, 2022, the Company converted $ 17,500 of a loan receivable with Lingo into equity and the Company's ownership interest in Lingo increased from 40 % to 80 %.

This resulted in the consolidation of Lingo and the pre-existing equity method investment was remeasured at fair value resulting in the recognition of a gain of $ 6,790 , which is included in trading (losses) income and fair value adjustments on loans in the consolidated statements of operations.

Upon the consolidation of Lingo on May 31, 2022, the total fair value of the assets of Lingo was $ 116,500 and the fair value of the 20 % noncontrolling interest was $ 8,021 .

As part of the acquisition, the Company assumed liabilities in the amount of $ 32,172 and recorded goodwill of $ 34,412 and other intangible assets of $ 63,000 were recorded in the accompanying consolidated balance sheet.

The Company also completed the acquisitions of BullsEye Telecom (“BullsEye”), FocalPoint Securities, LLC (“FocalPoint”), and Atlantic Coast Fibers, LLC (“ACR”) (and related businesses), and other immaterial business.

In accordance with ASC 805, the Company used the acquisition method of accounting for these acquisitions, which were not material to our consolidated financial statements.

The aggregate purchase price consideration consisted of $ 145,987 in cash, $ 20,320 in issuance of common stock of the Company, $ 52,969 in assumed debt and other consideration payable.

The purchase price allocation consisted of $ 151,925 in goodwill, $ 52,860 in intangible assets, and $ 2,522 in net assets acquired.

The results of operations of the acquisitions which were not material have been included in our consolidated financial statements from the date of purchase.

In February 2023, certain working capital holdback provisions in the

BullsEye purchase agreement were finalized resulting in the Company receiving $ 1,101 of cash which reduced goodwill from $ 151,925 to $ 150,824 .

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 inclusive of expected synergies, future cost savings, 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, trade names and trademarks, developed technology, and backlog.

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 5 — RESTRUCTURING CHARGE

The Company recorded $ 8,016 in restructuring charges during the three and nine months ended September 30, 2022.

The Company did no t record any restructuring charges for the three and nine months ended September 30, 2021.

The restructuring charges during the three and nine months ended September 30, 2022 were primarily related to the reorganization and consolidation activities in the Wealth Management segment and the Principal Investments - Communications and Other segment.

Reorganization and consolidation activities consisted of reductions in workforce, facility closures, and related intangible impairments and asset disposals.

The following tables summarize the changes in accrued restructuring charge during the three and nine months ended September 30, 2022 and 2021:

The Company had $ 93 and no restructuring charges during the three months ended March 31, 2023 and 2022, respectively.

The restructuring charges during the three months ended March 31, 2023 were primarily related to reorganization and consolidation activities in the Wealth Management segment and the Communications segment.

Reorganization and consolidation activities consisted of reductions in workforce and facility closures.

The following tables summarize the changes in accrued restructuring charge during the three months ended March 31, 2023 and 2022:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Balance, beginning of period $ 2,335 $ 624

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Balance, end of period $ 1,996 $ 599

The following tables summarize the restructuring activities by reportable segment during the three and nine months ended September 30, 2022.

Wealth Management Principal Investments - Communications and Other Total

Restructuring charge (recovery) for the three and nine months ended September 30, 2022

The following table summarizes the restructuring activities by reportable segment during the three months ended March 31, 2023.

There were no restructuring charges during the three months ended March 31, 2022.

Wealth Management Communications Total

Restructuring charges for the three months ended March 31, 2023:

Employee termination $ — $ 60 $ 60

Impairment of intangibles 2,012 2,162 4,174

Facility closure and consolidation 33 — 33

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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, 2022 and December 31, 2021:

The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of March 31, 2023 and December 31, 2022:

Gross amounts recognized Gross amounts offset in the consolidated balance

Net amounts included in the consolidated balance sheets Amounts not offset in the consolidated balance sheets but eligible for offsetting upon counterparty default (2)

As of September 30, 2022

As of March 31, 2023

Securities borrowed $ 2,942,843 $ — $ 2,942,843 $ 2,942,843 $ —

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The components of accounts receivable, net, include the following:

September 30,

2023 December 31,

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Balance, beginning of period $ 3,664 $ 3,658

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Prepaid expenses and other assets consist of the following:

September 30,

2023 December 31,

Funds held in trust account $ 173,216 $ 345,024

Equity investments 42,560 39,190

Funds held in trust account for BRPM 250 to redeem noncontrolling interests in equity of subsidiaries $ 176,182 $ 174,437

Inventory 113,107 101,675

Equity method investments 41,816 41,298

Prepaid expenses 23,699 17,623

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Prepaid expenses and other assets $ 491,872 $ 460,696

Unbilled receivables represent the amount of contractual reimbursable costs and fees for services performed in connection with fee and service based contracts in the Auction and Liquidation segment, mobile handsets in the Principal Investments – Communications and Other segment, and consulting related engagements in the Financial Consulting segment.

Unbilled receivables represent the amount of contractual reimbursable costs and fees for services performed in connection with fee and service based contracts in the Auction and Liquidation segment, mobile handsets in the Communications segment, and consulting related engagements in the Financial Consulting segment.

NOTE 9 — GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill was $ 429,187 and $ 250,568 as of September 30, 2022 and December 31, 2021, respectively.

The changes in the carrying amount of goodwill during the nine months ended September 30, 2022, resulting primarily from the acquisitions of FocalPoint in the Capital Markets segment and Lingo and BullsEye in the Principal Investments – Communications and Other segment (as previously discussed in Note 1), were as follows:

Capital Markets Segment Wealth Management Segment Auction and Liquidation Segment Financial Consulting Segment Principal Investments- Communications and Other Segment Total

Goodwill was $ 523,997 and $ 512,595 as of March 31, 2023 and December 31, 2022, respectively.

The changes in the carrying amount of goodwill for the three months ended March 31, 2023 were as follows:

Segment Wealth

Segment Auction and

Segment Financial

Segment Communications

Segment Consumer Segment All Other Total

Balance as of December 31, 2022

Goodwill acquired during the period:

Acquisition of other businesses 110,512 — — — 68,107 178,619

Balance as of September 30, 2022

$ 162,018 $ 51,195 $ 1,975 $ 23,680 $ 193,195 $ 75,753 $ 4,779 $ 512,595

Acquisition of other business — — — 7,273 — — 2,428 9,701

Other — — — 36 ( 1,101 ) 2,766 — 1,701

Balance as of March 31, 2023

$ 162,018 $ 51,195 $ 1,975 $ 30,989 $ 192,094 $ 78,519 $ 7,207 $ 523,997

During the three months ended March 31, 2023, the changes in goodwill included $ 36 of foreign currency translation amounts, $( 1,101 ) of working capital settlements as described in Note 4, and $ 2,766 related to certain purchase price accounting adjustments.

Intangible assets consisted of the following:

As of September 30, 2022

As of March 31, 2023

As of December 31, 2022

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Total intangible assets $ 480,899 $ ( 114,839 ) $ 366,060 $ 480,418 $ ( 106,320 ) $ 374,098

Amortization expense was $ 9,390 and $ 5,156 during the three months ended September 30, 2022 and 2021, respectively, and $ 23,146 and $ 16,176 during the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, estimated future amortization expense was $ 9,466 , $ 32,249 , $ 28,169 , $ 23,685 , and $ 20,916 for the years ended December 31, 2022 (remaining three months), 2023, 2024, 2025 and 2026, respectively.

The estimated future amortization expense after December 31, 2026 is $ 56,585 .

Amortization expense was $ 10,473 and $ 6,816 during the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, estimated future amortization expense was $ 23,998 , $ 26,786 , $ 22,198 , $ 18,897 , and $ 26,132 for the three months ended March 31, 2023 (remaining nine months), 2024, 2025, 2026 and 2027, respectively.

The estimated future amortization expense after December 31, 2027 was $ 87,773 .

NOTE 10 — NOTES PAYABLE

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Cash advances and the issuance of letters of credit under the credit facility are made at the lender’s discretion.

The letters of credit issued under this facility are furnished by the lender to third parties for the principal purpose of securing minimum guarantees under liquidation services contracts more fully described in Note 2(d) in the Annual Report on Form 10-K.

The letters of credit issued under this facility are furnished by the lender to third parties for the principal purpose of securing minimum guarantees under liquidation services contracts.

All outstanding loans, letters of credit, and interest are due on the expiration date which is generally within 180 days of funding.

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The credit facility also provides for funding fees in the amount of 0.05 % to 0.20 % of the aggregate principal amount of all credit advances and letters of credit issued in connection with a liquidation sale.

Interest expense totaled $ 18 and $ 109 during the three months ended September 30, 2022 and 2021, respectively, and $ 165 and $ 325 during the nine months ended September 30, 2022 and 2021, respectively.

There was no outstanding balance on this credit facility as of September 30, 2022 and December 31, 2021.

As of September 30, 2022, there were no open letters of credit outstanding.

The Company is in compliance with all financial covenants in the asset based credit facility as of September 30, 2022.

Interest expense totaled $ 18 and $ 108 during the three months ended March 31, 2023 and 2022, respectively.

There was no outstanding balance on this credit facility as of March 31, 2023 and December 31, 2022.

As of March 31, 2023, there were no open letters of credit outstanding.

The Company is in compliance with all financial covenants in the asset based credit facility as of March 31, 2023.

Other Notes Payable

As of September 30, 2022 and December 31, 2021, the outstanding balance for the other notes payable was $ 25,075 and $ 357 , respectively.

Interest expense was $ 298 and $ 4 during the three months ended September 30, 2022 and 2021, respectively, and $ 825 and $ 16 during the nine months ended September 30, 2022 and 2021, respectively.

Notes payable consisted of additional deferred cash consideration owed to the sellers of FocalPoint as of September 30, 2022.

Notes payable to a clearing organization for one of the Company’s broker dealers, which accrued interest at the prime rate plus 2.0 %, matured on January 31, 2022 and was repaid during the nine months ended September 30, 2022.

As of March 31, 2023 and December 31, 2022, the outstanding balance for the other notes payable was $ 19,882 and $ 25,263 , respectively.

Interest expense was $ 174 and $ 232 during the three months ended March 31, 2023 and 2022, respectively.

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 as of March 31, 2023.

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 Targus Credit 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.

The Company is in compliance with all financial covenants in the Targus Credit Agreement as of March 31, 2023.

The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus an applicable margin of 3.75 %.

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 1.00 % to 1.75 % and term rate loans that bear interest on the outstanding principal amount equal to the revolver SOFR rate plus an applicable margin of 2.00 % to 2.75 %.

Principal outstanding is due in quarterly installments starting on December 31, 2022.

Quarterly installments from June 30, 2023 to September 30, 2027 are in the amount of $ 1,400 per quarter and the remaining principal balance is due at final maturity on October 18, 2027.

As of March 31, 2023 and December 31, 2022, the outstanding balance on the term loan was $ 24,678 (net of unamortized debt issuance costs of $ 522 ) and $ 26,021 (net of unamortized debt issuance costs of $ 580 ), respectively, and the outstanding balance on the revolver loan was $ 62,463 and $ 52,978 , respectively.

Interest expense on these loans during the three months ended March 31, 2023 was $ 1,689 (including amortization of deferred debt issuance costs and unused commitment fees of $ 173 ).

The interest rate on the term loan was 8.66 % and 8.43 % and the interest rate on the revolver loan ranged between 6.66 % and 9.75 % and between 6.03 % to 9.25 % as of March 31, 2023 and December 31, 2022, respectively.

Pathlight Credit Agreement

1 unchanged sentence

Riley Receivables II, LLC, a Delaware limited liability company (the “Borrower”), 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.

The Pathlight Credit Agreement was entered in connection with the purchase of the 2022 Badcock Receivable discussed in Note 2.

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 .

The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus an applicable margin of 6.50 %.

As of September 30, 2022, the interest rate on the Pathlight Credit Agreement was 10.00 %.

As of March 31, 2023 and December 31, 2022, the interest rate on the Pathlight Credit Agreement was 11.40 % and 11.01 %, respectively.

The Pathlight Credit 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 Pathlight 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 Pathlight Credit Agreement.

If an event of default occurs, the agent would be

entitled to take various actions, including the acceleration of amounts due under the outstanding Pathlight Credit Agreement.

The Company is in compliance with all financial covenants in the Pathlight Credit Agreement as of March 31, 2023.

Principal outstanding under the Pathlight Credit Agreement is repaid based on collections of the 2022 Badcock Receivable less other application of payments as defined in the Pathlight Credit Agreement and the remaining principal balance is due at final maturity on September 23, 2027.

As of September 30, 2022, the outstanding balance on the term loan was $ 144,584 (net of unamortized debt issuance costs of $ 3,616 ).

Interest expense on the term loan during the three and nine months ended September 30, 2022 was $ 418 (including amortization of deferred debt issuance costs of $ 89 ).

As of March 31, 2023 and December 31, 2022, the outstanding balance on the term loan was $ 184,358 (net of unamortized debt issuance costs of $ 3,837 ) and $ 118,437 (net of unamortized debt issuance costs of $ 2,377 ), respectively.

Interest expense on the term loan during the three months ended March 31, 2023 was $ 6,430 (including amortization of deferred debt issuance costs of $ 1,744 ).

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.

On August 16, 2022, the Company's subsidiary, Lingo (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 (the “New Lender”) 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 applicable spread adjustment.

As of September 30, 2022, the interest rate on the Lingo Credit Agreement was 6.29 %.

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 the Borrower 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.

If an event of

default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding agreement.

Principal outstanding is due in quarterly installments starting on March 31, 2023.

Quarterly installments from March 31, 2023 to December 31, 2023 are in the amount of $ 1,641 per quarter, from March 31, 2024 to December 31, 2024 are in the amount of $ 1,969 per quarter, from March 31, 2025 to June 30, 2027 are in the amount of $ 2,625 , and the remaining principal balance is due at final maturity on August 16, 2027.

As of September 30, 2022, the outstanding balance on the term loan was $ 51,595 (net of unamortized debt issuance costs of $ 905 ).

Interest expense on the term loan during the three and nine months ended September 30, 2022 was $ 403 (including amortization of deferred debt issuance costs of $ 26 ).

As of March 31, 2023 and December 31, 2022, the interest rate on the Lingo Credit Agreement was 8.48 % and 7.89 %, respectively.

The Lingo Credit 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 March 31, 2023.

Principal outstanding is due in quarterly installments.

Quarterly installments from June 30, 2023 to December 31, 2023 are in the amount of $ 2,281 per quarter, from March 31, 2024 to December 31, 2024 are in the amount of $ 2,738 per quarter, 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 March 31, 2023 and December 31, 2022, the outstanding balance on the term loan was $ 69,778 (net of unamortized debt issuance costs of $ 940 ) and $ 71,985 (net of unamortized debt issuance costs of $ 1,016 ), respectively.

Interest expense on the term loan during the three months ended March 31, 2023 was $ 1,561 (including amortization of deferred debt issuance costs of $ 75 ).

Nomura Credit Agreement

On June 23, 2021, the Company, and its wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement (as amended, the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Administrative Agent”), and Wells Fargo Bank, N.A., as collateral agent (the “Collateral Agent”), for a four-year $ 200,000 secured term loan credit facility (the “Term Loan Facility”) and a four-year $ 80,000 secured revolving loan credit facility (the “Revolving Credit Facility”).

On December 17, 2021 (the “Amendment Date”), the Company, the Primary Guarantor, and the Borrower entered into a Second Incremental Amendment to Credit Agreement, pursuant to which the Borrower established an incremental facility in an aggregate principal amount of $ 100,000 (the “Incremental Facility” and the incremental term loans made thereunder, the “Incremental Term Loans”) of secured term loans under the Credit Agreement on terms identical to those applicable to the Term Loan Facility.

the “Incremental Term Loans”) of secured term loans under the Credit Agreement on terms identical to those applicable to the Term Loan Facility.

The Borrower borrowed the full amount of the Incremental Term Loans on the Amendment Date.

The Term Loan Facility, Revolving Credit Facility, and Incremental Facility (together, the “Credit Facilities”), mature on June 23, 2025, subject to acceleration or prepayment.

Eurodollar loans under the Credit Facilities accrue interest at the Eurodollar Rate plus an applicable margin of 4.50 %.

SOFR rate loans under the Credit Facilities accrue interest at the term SOFR rate plus a term SOFR adjustment determined by the selected interest period and an applicable margin of 4.50 %.

Base rate loans accrue interest at the Base Rate plus an applicable margin of 3.50 %.

6 unchanged sentences

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.

Commencing on September 30, 2022, the Term Loan Facility and Incremental Facility will amortize in equal quarterly installments of 1.25 % of the aggregate principal amount of the term loan as of the closing date with the remaining balance due at final maturity.

Quarterly installments from September 30, 2022 to March 31, 2025 are in the amount of $ 3,750 per quarter.

As of September 30, 2022 and December 31, 2021, the outstanding balances on the Term Loan Facility and Incremental Facility were $ 290,448 (net of unamortized debt issuance costs of $ 5,802 ) and $ 292,650 (net of unamortized debt issuance costs of $ 7,350 ), respectively.

Interest on the term loan during the three months ended September 30, 2022 and 2021 was $ 5,720 (including amortization of deferred debt issuance costs of $ 523 ) and $ 2,720 (including amortization of deferred debt issuance costs of $ 350 ), respectively.

Interest on the term loan during the nine months ended September 30, 2022 and 2021 was $ 14,557 (including amortization of deferred debt issuance costs of $ 1,548 ) and $ 2,956 (including amortization of deferred debt issuance costs of $ 380 ), respectively.

The interest rate on the term loan as of September 30, 2022 and December 31, 2021 was 8.10 % and 4.72 %, respectively.

The Company had an outstanding balance of $ 74,700 and $ 80,000 under the Revolving Credit Facility as of September 30, 2022 and December 31, 2021, respectively.

Interest on the revolving facility during the three months ended September 30, 2022 and 2021 was $ 1,410 (including unused commitment fee of $ 6 and amortization of deferred financing costs of $ 146 ) and $ 790 (including unused commitment fee of $ 58 and amortization of deferred financing costs of $ 146 ), respectively.

Interest on the revolving facility during the nine months ended September 30, 2022 and 2021 was $ 3,737 (including unused commitment fee of $ 6 and amortization of deferred financing costs of $ 434 ) and $ 820 (including unused commitment fee of $ 76 and amortization of deferred financing costs of $ 159 ).

The interest rate on the revolving facility as of September 30, 2022 and December 31, 2021 was 7.64 % and 4.67 %, respectively.

The Company is in compliance with all financial covenants in the Credit Agreement as of March 31, 2023.

Commencing on September 30, 2022, the Term Loan Facility and Incremental Facility began to amortize in equal quarterly installments of 1.25 % of the aggregate principal amount of the term loan as of the closing date with the remaining balance due at final maturity on June 23, 2025.

Quarterly installments from June 30, 2023 to March 31, 2025 are in the amount of $ 3,750 per quarter.

As of March 31, 2023 and December 31, 2022, the outstanding balances on the Term Loan Facility and Incremental Facility were $ 283,739 (net of unamortized debt issuance costs of $ 5,011 ) and $ 286,962 (net of unamortized debt issuance costs of $ 5,538 ), respectively.

Interest on the term loan during the three months ended March 31, 2023 and 2022 was $ 7,300 (including amortization of deferred debt issuance costs of $ 527 ) and $ 4,102 (including amortization of deferred debt issuance costs of $ 509 , respectively.

The interest rate on the term loan as of March 31, 2023 and December 31, 2022 was 9.59 % and 9.23 %, respectively.

The Company had an outstanding balance of $ 77,000 and $ 74,700 under the Revolving Credit Facility as of March 31, 2023 and December 31, 2022, respectively.

Interest on the revolving facility during the three months ended March 31, 2023 and 2022 was $ 1,956 (including amortization of deferred financing costs of $ 150 ) and $ 1,100 (including amortization of deferred financing costs of $ 143 ).

The interest rate on the revolving facility as of March 31, 2023 and December 31, 2022 was 9.69 % and 9.23 %, respectively.

BRPAC Credit Agreement

5 unchanged sentences

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, 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;

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.

(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., a limited company organized under the laws of Israel.

3 unchanged sentences

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.

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.

The Company is in compliance with all financial covenants in the BRPAC Credit Agreement as of March 31, 2023.

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 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, 2022 and December 31, 2021, the interest rate on the BRPAC Credit Agreement was 6.04 % and 3.17 %, respectively.

(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 March 31, 2023 and December 31, 2022, the interest rate on the BRPAC Credit Agreement was 8.23 % and 7.65 %, respectively.

Principal outstanding under the Amended BRPAC Credit Agreement is due in quarterly installments.

Quarterly installments on December 31, 2022 are in the amount of $ 2,813 , from March 31, 2023 to December 31, 2023 are in the amount of $ 4,688 per quarter, from March 31, 2024 to December 31, 2026 are in the amount of $ 3,750 per quarter, on March 31, 2027 is in the amount of $ 2,813 , and the remaining principal balance is due at final maturity on June 30, 2027.

As of September 30, 2022 and December 31, 2021, the outstanding balance on the term loan was $ 71,408 (net of unamortized debt issuance costs of $ 779 ) and $ 53,735 (net of unamortized debt issuance costs of $ 582 ), respectively.

Interest expense on the term loan during the three months ended September 30, 2022 and 2021 was $ 1,088 (including amortization of deferred debt issuance costs of $ 81 ) and $ 554 (including amortization of deferred debt issuance costs of $ 72 ), respectively.

Interest expense on the term loan during the nine months ended September 30, 2022 and 2021 was $ 2,168 (including amortization of deferred debt issuance costs of $ 252 ) and $ 1,931 (including amortization of deferred debt issuance costs of $ 229 ), respectively.

Quarterly installments from June 30, 2023 to December 31, 2023 are in the amount of $ 4,688 per quarter, from March 31, 2024 to December 31, 2026 are in the amount of $ 3,750 per quarter, on March 31, 2027 is in the amount of $ 2,813 , and the remaining principal balance is due at final maturity on June 30, 2027.

As of March 31, 2023 and December 31, 2022, the outstanding balance on the term loan was $ 64,061 (net of unamortized debt issuance costs of $ 627 ) and $ 68,674 (net of unamortized debt issuance costs of $ 701 ), respectively.

Interest expense on the term loan during the three months ended March 31, 2023 and 2022 was $ 1,443 (including amortization of deferred debt issuance costs of $ 74 ) and $ 502 (including amortization of deferred debt issuance costs of $ 72 ), respectively.

NOTE 12 — SENIOR NOTES PAYABLE

Senior notes payable, net, are comprised of the following:

September 30,

2023 December 31,

16 unchanged sentences

$ 1,722,977 $ 1,721,751

During the three months ended September 30, 2022 and 2021, the Company issued $ 15,448 and $ 97,715 , respectively, of senior notes, and during the nine months ended September 30, 2022 and 2021, the Company issued $ 51,321 and $ 183,042 , respectively, of senior notes with maturity dates ranging from May 2024 to August 2028 pursuant to At the Market Issuance Sales Agreements with B.

During the three months ended March 31, 2023 and 2022, the Company issued zero and $ 20,073 , respectively, of senior notes with maturity dates ranging from May 2024 to August 2028 pursuant to At the Market Issuance Sales Agreements with B.

Riley Securities, Inc.

1 unchanged sentence

A series of prospectus supplements were filed by the Company with the SEC in respect of the Company’s offerings of these senior notes.

As of September 30, 2022 and December 31, 2021, the total senior notes outstanding was $ 1,661,191 (net of unamortized debt issue costs of $ 18,180 ) and $ 1,606,560 (net of unamortized debt issue costs of $ 21,489 ) with a weighted average interest rate of 5.70 % and 5.69 %, respectively.

As of March 31, 2023 and December 31, 2022, the total senior notes outstanding was $ 1,722,977 (net of unamortized debt issue costs of $ 16,914 ) and $ 1,721,751 (net of unamortized debt issue costs of $ 18,140 ) with a weighted average interest rate of 5.75 % and 5.75 %, respectively.

Interest on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $ 25,149 and $ 21,458 for the three months ended September 30, 2022 and 2021, respectively, and totaled $ 74,221 and $ 60,010 for the nine months ended September 30, 2022 and 2021, respectively.

Interest expense on senior notes totaled $ 26,227 and $ 24,409 during the three months ended March 31, 2023 and 2022, respectively.

Sales Agreement Prospectus to Issue Up to $ 250,000 of Senior Notes

The most recent sales agreement prospectus was filed by the Company with the SEC on January 5, 2022 (the “Sales Agreement Prospectus”) superseding the prospectus filed with the SEC on August 11, 2021, the prospectus filed with the SEC on April 6, 2021, and the prospectus filed with the SEC on January 28, 2021.

The most recent sales agreement prospectus was filed by the Company with the SEC on January 5, 2022 (the “Sales Agreement Prospectus”).

This program provides for the sale by the Company of up to $ 250,000 of certain of the Company’s senior notes.

As of September 30, 2022 and December 31, 2021, the Company had $ 60,590 and $ 111,911 , respectively, remaining availability under the Sales Agreement Prospectus.

As of March 31, 2023 and December 31, 2022, the Company had $ 70 remaining availability under the Sales Agreement Prospectus.

NOTE 13 — ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

September 30,

2023 December 31,

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NOTE 14 — REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue from contracts with customers by reportable segment for the three and nine months ended September 30, 2022 and 2021 was as follows:

Segment Wealth

Segment Auction and

Segment Financial

Segment Principal

Investments -

Communications and Other Segment Brands

Segment Total

Revenues for the three months ended September 30, 2022

Corporate finance, consulting and investment banking fees $ 41,302 $ — $ — $ 12,342 $ — $ — $ 53,644

Wealth and asset management fees 3,280 44,322 — — — — 47,602

Commissions, fees and reimbursed expenses 8,827 1,728 1,949 10,493 — — 22,997

Subscription services — — — — 70,152 — 70,152

Advertising, licensing and other (1)

— — 2,550 — 7,744 5,023 15,317

Total revenues from contracts with customers 53,409 46,050 4,499 22,835 77,896 5,023 209,712

Interest income - Loans and securities lending 55,054 — 2,540 — — — 57,594

Trading gains on investments 15,171 1,027 — — — 16,198

Fair value adjustment on loans ( 4,044 ) — — — — — ( 4,044 )

Other 59,808 1,095 — — — — 60,903

Total revenues $ 179,398 $ 48,172 $ 7,039 $ 22,835 $ 77,896 $ 5,023 $ 340,363

(1) Includes sale of goods of $ 2,550 in Auction and Liquidation and $ 1,580 in Principal Investments - Communications and Other.

Segment Wealth

Segment Auction and

Segment Financial

Segment Principal

Investments -

Communications and Other Segment Brands

Segment Total

Revenues for the three months ended September 30, 2021

Corporate finance, consulting and investment banking fees $ 116,044 $ — $ — $ 12,350 $ — $ — $ 128,394

Wealth and asset management fees 679 86,579 — — — — 87,258

Commissions, fees and reimbursed expenses 10,893 28,379 2,740 8,941 — — 50,953

Subscription services — — — — 16,303 — 16,303

Service contract revenues — — 5 — — — 5

Advertising, licensing and other (1)

— — 34,327 — 2,997 6,372 43,696

Total revenues from contracts with customers 127,616 114,958 37,072 21,291 19,300 6,372 326,609

Interest income - Loans and securities lending 26,869 — — — — — 26,869

Trading gains on investments 18,184 1,262 — — — — 19,446

Fair value adjustment on loans ( 1,249 ) — — — — — ( 1,249 )

Other 7,233 2,614 — — — 9,847

Total revenues $ 178,653 $ 118,834 $ 37,072 $ 21,291 $ 19,300 $ 6,372 $ 381,522

(1) Includes sale of goods of $ 34,327 in Auction and Liquidation and $ 631 in Principal Investments - Communications and Other.

Revenue from contracts with customers by the Company's six reportable operating segments and the All Other category during the three months ended March 31, 2023 and 2022 was as follows:

Segment Wealth

1 unchanged sentence

Segment Financial

Segment Principal

Investments -

Communications and Other Segment Brands

Segment Total

Revenues for the nine months ended September 30, 2022

Segment Communications Segment Consumer

Segment All Other Total

Revenues for the three months ended March 31, 2023

Corporate finance, consulting and investment banking fees $ 39,149 $ — $ — $ 14,515 $ — $ — $ — $ 53,664

2 unchanged sentences

Subscription services — — — — 83,008 — — 83,008

Sale of goods — — 216 — 1,867 65,694 — 67,777

Advertising, licensing and other — — — — 2,044 4,309 9,273 15,626

— — 2,550 — 17,319 14,754 34,623

Total revenues from contracts with customers 49,031 47,238 5,660 25,010 86,919 70,003 9,273 293,134

Interest income - Loans and securities lending 77,186 — — — — — — 77,186

Trading (losses) gains on investments ( 279,172 ) 3,077 — — — — ( 276,095 )

Trading (loss) gain on investments 7,020 1,272 — — — — — 8,292

Fair value adjustment on loans 43,276 — — — — — — 43,276

1 unchanged sentence

Total revenues $ 185,411 $ 49,814 $ 5,660 $ 25,010 $ 86,919 $ 70,003 $ 9,273 $ 432,090

(1) Includes sale of goods of $ 2,550 in Auction and Liquidation and $ 5,345 in Principal Investments - Communications and Other.

Segment Wealth

1 unchanged sentence

Segment Financial

Segment Principal

Investments -

Communications and Other Segment Brands

Segment Total

Revenues for the nine months ended September 30, 2021

Segment Communications Segment Consumer

Segment All Other Total

Revenues for the three months ended March 31, 2022

Corporate finance, consulting and investment banking fees $ 41,673 $ — $ — $ 16,970 $ — $ — $ — $ 58,643

2 unchanged sentences

Subscription services — — — — 27,813 — — 27,813

Service contract revenues — — 1,090 — — — 1,090

Sale of goods — — — — 1,878 — — 1,878

Advertising, licensing and other

2 unchanged sentences

Interest income - Loans and securities lending 61,426 — — — — — — 61,426

Trading (losses) gains on investments 302,539 6,483 — — — — 309,022

Trading (loss) gain on investments ( 30,738 ) 522 — — — — — ( 30,216 )

Fair value adjustment on loans 10,938 — — — — — — 10,938

1 unchanged sentence

Total revenues $ 102,849 $ 77,479 $ 3,355 $ 25,936 $ 31,965 $ 4,557 $ 699 $ 246,840

(1) Includes sale of goods of $ 52,162 in Auction and Liquidation and $ 2,081 in Principal Investments - Communications and Other.

Contract Balances

2 unchanged sentences

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 $ 64,707 and $ 49,673 as of September 30, 2022 and December 31, 2021, respectively.

The Company had no significant impairments related to these receivables during the three and nine months ended September 30, 2022 and 2021.

The Company also had $ 12,483 and $ 12,315 of unbilled receivables included in prepaid expenses and other assets as of September 30, 2022 and December 31, 2021, respectively.

Receivables related to revenues from contracts with customers totaled $ 120,853 and $ 149,110 as of March 31, 2023 and December 31, 2022, respectively.

The Company had no significant impairments related to these receivables during the three months ended March 31, 2023 and 2022.

The Company also has $ 14,857 and $ 14,144 of unbilled receivables included in prepaid expenses and other assets as of March 31, 2023 and December 31, 2022, 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 and license agreements with guaranteed minimum royalty payments and advertising/marketing fees with

additional royalty revenue based on a percentage of defined sales.

Deferred revenue as of September 30, 2022 and December 31, 2021 was $ 89,157 and $ 69,507 , respectively.

The Company expects to recognize the deferred revenue of $ 89,157 as of September 30, 2022 as service and fee revenues when the performance obligation is met during the years December 31, 2022 (remaining three months), 2023, 2024, 2025 and 2026 in the amount of $ 57,058 , $ 13,519 , $ 8,637 , $ 4,496 , and $ 2,105 , respectively.

Deferred revenue as of March 31, 2023 and December 31, 2022 was $ 84,019 and $ 85,441 , respectively.

The Company expects to recognize the deferred revenue of $ 84,019 as of March 31, 2023 as service and fee revenues when the performance obligation is met during the years ended December 31, 2023 (remaining nine months), 2024, 2025, 2026 and 2027 in the amount of $ 54,839 , $ 13,350 , $ 7,449 , $ 3,552 , and $ 1,780 , respectively.

The Company expects to recognize the deferred revenue of $ 3,049 after December 31, 2027.

During the three months ended September 30, 2022 and 2021, the Company recognized revenue of $ 7,293 and $ 4,728 that was recorded as deferred revenue at the beginning of the respective year.

During the nine months ended September 30, 2022 and 2021, the Company recognized revenue of $ 32,287 and $ 31,377 that was recorded as deferred revenue at the beginning of the respective year.

During the three months ended March 31, 2023 and 2022, the Company recognized revenue of $ 22,502 and $ 14,939 that was recorded as deferred revenue at the beginning of the respective year.

Contract Costs

2 unchanged sentences

(2) costs to fulfill Auction and Liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction or liquidation where the revenue is recognized over time when the performance obligation is satisfied;

and (3) commissions paid to obtain magicJack and Lingo 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 $ 5,483 and $ 1,605 as of September 30, 2022 and December 31, 2021, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets.

During the three months ended September 30, 2022 and 2021, the Company recognized expenses of $ 723 and $ 324 related to capitalized costs to fulfill a contract, respectively.

During the nine months ended September 30, 2022 and 2021, the Company recognized expenses of $ 1,813 and $ 433 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, 2022 and 2021.

and (3) 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 $ 7,190 and $ 5,990 as of March 31, 2023 and December 31, 2022, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets.

For the three months ended March 31, 2023 and 2022, the Company recognized expenses of $ 1,015 and $ 915 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 months ended March 31, 2023 and 2022.

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, 2022.

Corporate finance and investment banking fees and retail liquidation engagement 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, 2022.

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 March 31, 2023.

NOTE 15 — INCOME TAXES

The Company’s effective income tax rate was a benefit of 30.0 % and a provision of 26.8 % for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the Company had federal net operating loss carryforwards of $ 48,869 and state net operating loss carryforwards of $ 52,548 .

The Company’s effective income tax rate was a provision of 32.4 % during the three months ended March 31, 2023 and a benefit of 28.7 % during the three months ended March 31, 2022.

As of March 31, 2023, the Company had federal net operating loss carryforwards of $ 55,349 and state net operating loss carryforwards of $ 46,981 , respectively.

The Company’s federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2033 through December 31, 2038.

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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, 2022, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance.

The Company does not believe that

it is more likely than not that the Company will be able to utilize the benefits related to capital loss carryforwards and has provided a valuation allowance in the amount of $ 65,900 against these deferred tax assets.

As of March 31, 2023, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance.

The Company does not believe that it is more likely than not that the Company will be able to utilize the benefits related to capital loss carryforwards and has provided a valuation allowance in the amount of $ 66,308 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.

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The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 2019 to 2022.

Inflation Reduction Act of 2022

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into law.

The IR Act provides for, among other things, a new U.S.

federal excise tax on certain repurchases of stock by publicly traded U.S.

domestic corporations and certain U.S.

domestic subsidiaries of public traded foreign corporations occurring on or after January 1, 2023.

The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased.

The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of repurchase.

However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year.

In addition, certain exceptions apply to the excise tax.

Department of Treasury has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

The Company does not expect the IR Act to have a material impact on its financial position and result of operations.

NOTE 16 — EARNINGS PER SHARE

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Diluted earnings per share is calculated by dividing net income 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 (see Note 2(p)).

Remeasurements to the carrying value of the redeemable noncontrolling interests in equity of subsidiaries are not deemed to be a dividend (see Note 3(l)).

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.

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 were 1,721,132 and 1,069,184 for the three months ended September 30, 2022 and 2021, respectively, and 1,609,425 and 911,302 for the nine months ended September 30, 2022 and 2021, respectively, because to do so would have been anti-dilutive.

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 were 1,999,273 and 1,350,062 for the three months ended March 31, 2023 and 2022, respectively, because to do so would have been anti-dilutive.

Basic and diluted earnings per share were calculated as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income (loss) attributable to B.

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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.

of these claims seek substantial compensatory, punitive, or indeterminate damages.

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.

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Riley Guaranty is called upon.

Riley Guaranty was in respect of up to $ 100,000 of B&W obligations after B&W made paydowns of $ 10,000 during the year ended December 31, 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.

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(a) Employee Stock Incentive Plans

The 2021 Stock Incentive Plan (the “2021 Plan”) replaced the Amended and Restated 2009 Stock Incentive Plan on May 27, 2021.

Share-based compensation expense for restricted stock units under the Company’s 2021 Plan was $ 14,378 and $ 9,243 for the three months ended September 30, 2022 and 2021, respectively, and $ 45,397 and $ 23,035 for the nine months ended September 30, 2022 and 2021, respectively.

During the nine months ended September 30, 2022, in connection with employee stock incentive plans, the Company granted 559,168 restricted stock units with a grant date fair value of $ 31,859 and 65,000 performance based restricted stock units with a grant date fair value of $ 2,329 .

During the nine months ended September 30, 2021, in connection with employee stock incentive plans, the Company granted 423,660 restricted stock units with a grant date fair value of $ 29,439 and 1,100,000 performance based restricted stock units with a grant date fair value of $ 40,876 .

Under the 2021 Stock Incentive Plan (the “2021 Plan”), share-based compensation expense for restricted stock units under the Company’s 2021 Plan was $ 13,312 and $ 16,860 during the three months ended March 31, 2023 and 2022, respectively.

During the three months ended March 31, 2023, in connection with employee stock incentive plans, the Company granted 502,824 restricted stock units with a grant date fair value of $ 19,338 .

During the three months ended March 31, 2022, in connection with employee stock incentive plans, the Company granted 161,559 restricted stock units with a grant date fair value of $ 11,863 and 65,000 performance based restricted stock units with a grant date fair value of $ 2,329 .

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.

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.

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(b) Employee Stock Purchase Plan

In connection with the Company’s Employee Stock Purchase Plan ("Purchase Plan"), share based compensation was $ 120 and $ 132 during the three months ended September 30, 2022 and 2021, respectively, and $ 316 and $ 474 during the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, there were 398,442 and 450,717 shares reserved for issuance under the Purchase Plan, respectively.

In connection with the Company’s Employee Stock Purchase Plan ("Purchase Plan"), share based compensation was $ 298 and $ 153 for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023 and December 31, 2022, there were 362,986 shares reserved for issuance under the Purchase Plan.

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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, 2022 and 2021, the Company repurchased 571 shares of its common stock for $ 27 and 44,650 shares of its common stock for $ 2,656 , respectively.

During the three months ended March 31, 2023 and 2022, 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 and zero shares of its common stock, respectively.

The shares repurchased under the program are retired.

On October 31, 2022, the share repurchase program was reauthorized by the Board of Directors for share repurchases up to $ 50,000 of its outstanding common shares and expires in October 2023.

On October 31, 2022, 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 expires in October 2023.

(d) Preferred Stock

During the nine months ended September 30, 2022 and 2021, the Company issued 19,659 and 207,599 depository shares of the Series A Preferred Stock, respectively.

There were 2,834,144 and 2,814,485 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

Total liquidation preference for the Series A Preferred Stock as of September 30, 2022 and December 31, 2021, was $ 70,854 and $ 70,362 , respectively.

Dividends on the Series A preferred paid during the nine months ended September 30, 2022 and 2021, were $ 0.4296875 per depository share.

During the nine months ended September 30, 2022 and 2021, the Company issued 3,941 and 307,148 depository shares of the Series B Preferred Stock.

There were 1,701,075 and 1,697,134 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

Total liquidation preference for the Series B Preferred Stock as of September 30, 2022 and December 31, 2021, was $ 42,527 and $ 42,428 , respectively.

Dividends on the Series B preferred paid during the nine months ended September 30, 2022 and 2021, were $ 0.4609375 per depository share.

During the three months ended March 31, 2023 and 2022, the Company issued zero and 19 depository shares of the Series A Preferred Stock, respectively.

There were 2,834 shares issued and outstanding as of March 31, 2023 and December 31, 2022.

Total liquidation preference for the Series A Preferred Stock as of March 31, 2023 and December 31, 2022 was $ 70,854 .

Dividends on the Series A preferred paid during the three months ended March 31, 2023 and 2022 were $ 0.4296875 per depository share, respectively.

During the three months ended March 31, 2023 and 2022, the Company issued 18 and 4 depository shares of the Series B Preferred Stock.

There were 1,729 and 1,710 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.

Total liquidation preference for the Series B Preferred Stock as of March 31, 2023 and December 31, 2022 was $ 43,228 and $ 42,761 , respectively.

Dividends on the Series B preferred paid during the three months ended March 31, 2023 and 2022 were $ 0.4609375 per depository share, respectively.

NOTE 19 — NET CAPITAL REQUIREMENTS

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As such, they are subject to the minimum net capital requirements promulgated by the SEC.

As of September 30, 2022, BRS had net capital of $ 153,244 , which was $ 146,718 in excess of required minimum net capital of $ 6,526 , and BRWM had net capital of $ 14,915 , which was $ 12,415 in excess of required minimum net capital of $ 2,500 .

As of December 31, 2021, BRS had net capital of $ 277,611 , which was $ 265,093 in excess of its required minimum net capital of $ 12,518 , and BRWM had net capital of $ 13,833 , which was $ 12,819 in excess of its required minimum net capital of $ 1,014 .

As of March 31, 2023, BRS had net capital of $ 146,827 , which was $ 142,696 in excess of required minimum net capital of $ 4,131 ;

and BRWM had net capital of $ 11,105 , which was $ 8,780 in excess of required minimum net capital of $ 2,325 .

As of December 31, 2022, BRS had net capital of $ 175,503 , which was $ 169,458 in excess of its required minimum net capital of $ 6,045 ;

and BRWM had net capital of $ 11,144 , which was $ 8,615 in excess of its required minimum net capital of $ 2,529 .

NOTE 20 — RELATED PARTY TRANSACTIONS

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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.

As of September 30, 2022, amounts due from related parties of $ 814 were from the Funds for management fees and other operating expenses.

As of December 31, 2021, amounts due from related parties of $ 2,306 included $ 621 from the Funds for management fees and other operating expenses, and $ 1,635 due from CA Global Partners (“CA Global”) for operating expenses related to wholesale and industrial liquidation engagements managed by CA Global on behalf of GA Global Partners.

No interest expense was recorded related to loan participations sold to BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of the Company's subsidiaries, during the three and nine months ended September 30, 2022.

During the three and nine months ended September 30, 2021, the Company recorded interest expense of $ 46 and $ 525 related to loan participations sold to BRCPOF, respectively.

No commission income was recorded from introducing trades on behalf of BRCPOF during the three and nine months ended September 30, 2022, respectively.

The Company recorded commission income of $ 131 and $ 553 from introducing trades on behalf of BRCPOF during the three and nine months ended September 30, 2021, respectively.

Our executive officers and members of our board of directors have a 46.8 % financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 27.8 % in BRCPOF as of September 30, 2022.

As of March 31, 2023 and December 31, 2022, amounts due from related parties of $ 372 and $ 1,081 , respectively, were due from the Funds for management fees and other operating expenses.

In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P.

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and GACP II, L.P.

During the three months ended September 30, 2022 and 2021, management fees paid for investment advisory services by Whitehawk was zero and $ 142 , respectively, and during the nine months ended September 30, 2022 and 2021 management fees paid was $ 1,173 and $ 1,588 , respectively.

During the three months ended March 31, 2023 and 2022, management fees paid for investment advisory services by Whitehawk was $ 1,142 and $ 1,079 , respectively.

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).

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Babcock and Wilcox

During the three months ended September 30, 2022 and 2021, the Company earned $ 65 and $ 401 , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.

During the nine months ended September 30, 2022 and 2021, the Company earned $ 129 and $ 12,749 , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.

During the three months ended March 31, 2023 and 2022, the Company earned zero and $ 53 , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.

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.

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The Company has loans receivable due from the Arena Group Holdings, Inc.

(fka the Maven, Inc.) ("Arena") included in loans receivable, at fair value with a fair value of $ 68,575 and $ 69,835 as of September 30, 2022 and December 31, 2021, respectively.

(fka the Maven, Inc.) ("Arena") included in loans receivable, at fair value of $ 97,062 and $ 98,729 as of March 31, 2023 and December 31, 2022, respectively.

Interest on these loans is payable at 10 % per annum with maturity dates through December 2023.

During the three and nine months ended September 30, 2022, the Company earned zero and $ 2,023 , respectively, in underwriting and financial advisory and other fees from Arena in connection with Arena's capital raising activities.

During the three months ended March 31, 2023 and 2022, the Company earned zero and $ 2,021 underwriting and financial advisory and other fees from Arena in connection with Arena's capital raising activities, respectively.

California Natural Resources Group, LLC

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On July 19, 2022, in connection with the Business Combination, the Company purchased 5,342,500 shares of Faze Holdings Class A common stock for $ 10.00 per share.

During the three months ended September 30, 2022, the Company earned $ 41,885 of incentive fees for the de-consolidation of BRPM 150 and $ 9,632 of underwriting and financial advisory fees from Faze and BRPM 150 in connection with the Business Combination and capital raising activities.

On October 18, 2022, a subsidiary of the Company acquired all of the issued and outstanding shares of Targus Cayman Holdco Limited (“Targus”) in a transaction with an enterprise value of approximately $ 250,000 , pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with Targus, the sellers identified therein, and the other parties thereto.

The purchase price consisted of a combination of cash, 6.75 % senior notes due 2024, shares of common stock of the Company, and seller financing (the “Targus Transaction”).

Mikel Williams, the chief executive officer of Targus and formerly a member of the Company’s board of directors, resigned from the Company’s board upon the closing of the Targus Transaction.

Williams continues to serve as the chief executive officer of Targus.

As of September 30, 2022 and December 31, 2021, the Company had loans receivable due from other related parties in the amount of zero and $ 4,201 , respectively.

During the year ended December 31, 2022, the Company earned $ 41,885 of incentive fees for the de-consolidation of BRPM 150 and $ 9,632 of underwriting and financial advisory fees from Faze and BRPM 150 in connection with the Business Combination and capital raising activities.

On May 31, 2022, the Company converted $ 17,500 of a loan receivable with Lingo into equity and the Company's ownership interest in Lingo increased from 40 % to 80 %.

On February 24, 2023, the Company acquired the remaining 20 % ownership in Lingo, increasing the Company's ownership interest to 100 %.

On October 18, 2022, the Company acquired all of the issued and outstanding shares of Targus for total purchase consideration of $ 247,546 as more fully discussed in Note 4.

At the time of the acquisition, the chief executive officer of Targus was also a member of the Company’s board of directors.

Upon closing the acquisition, the individual resigned from the Company’s board of directors and continues to serve as the chief executive officer of Targus.

During the three months ended March 31, 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 the partnerships are private equity funds managed by one of the Company’s subsidiaries.

Our executive officers and members of our board of directors have 70.4 % financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 41.0 % in the BRCPOF as of March 31, 2023.

Our executive officers and members of our board of directors have a 13.6 % financial interest in the 272LP as of March 31, 2023.

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.

Other than the fees described above, during the three months ended September 30, 2022 and 2021, the Company earned $ 35 and $ 20,868 , respectively, of fees related to these services and during the nine months ended September 30, 2022 and 2021, the Company earned $ 4,071 and $ 25,059 , respectively, of fees related to these services.

During the three months ended March 31, 2023 and 2022, the Company earned $ 784 and $ 1,880 of fees related to these services, respectively.

NOTE 21 — BUSINESS SEGMENTS

The Company’s business is classified into the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment, Principal Investments — Communications and Other segment, and Brands segment.

The Company’s business is classified into six reportable operating segments:

the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment, Communications segment, and Consumer segment.

These reportable segments are all distinct businesses, each with a different marketing strategy and management structure.

In 2022, the segment results in the Capital Markets segment include the operations of FocalPoint and the segment results in the Principal Investments – Communications and Other segment include the operations from Lingo and BullsEye (as previously discussed in Note 1) in each case from the date of acquisition.

During the fourth quarter of 2022, the Company realigned its segment reporting structure to reflect organizational changes from recent acquisitions and the manner in which capital is allocated.

The Consumer segment includes the previously reported Brands segment and Targus, which the Company acquired in the fourth quarter of 2022.

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,

2022 2021 2022 2021

Capital Markets segment:

(As Restated)

Revenues - Services and fees $ 57,929 $ 61,223

5 unchanged sentences

Depreciation and amortization ( 1,256 ) ( 1,893 )

Segment income (loss) 124,104 87,890 ( 20,317 ) 558,880

Segment income 86,020 55,073

Wealth Management segment:

5 unchanged sentences

Depreciation and amortization ( 1,086 ) ( 1,833 )

Segment (loss) income ( 9,497 ) 6,584 ( 26,906 ) 9,878

Segment income (loss) 1,373 ( 10,096 )

Auction and Liquidation segment:

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Revenues - Sale of goods 216 —

Interest income - Loans and securities lending 2,540 — 3,976 —

Total revenues 5,660 3,355

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Selling, general and administrative expenses ( 2,280 ) ( 1,820 )

Segment income 577 6,298 228 10,760

Segment income (loss) 200 ( 800 )

Financial Consulting segment:

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Segment income 3,783 4,912

Principal Investments - Communications and Other segment:

Communications segment:

Revenues - Services and fees 85,052 30,087

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Segment income 10,783 8,969

Brands segment:

Consumer segment:

Revenues - Services and fees 4,309 4,557

Revenues - Sale of goods 65,694 —

Total revenues 70,003 4,557

Cost of goods sold ( 45,406 ) —

Selling, general and administrative expenses ( 20,112 ) ( 756 )

1 unchanged sentence

Segment income 1,646 3,218

Consolidated operating income (loss) from reportable segments 123,393 114,733 ( 6,108 ) 621,876

Consolidated operating income from reportable segments 103,805 61,276

Revenues - Services and fees 9,273 699

Direct cost of services ( 6,536 ) —

Corporate and other expenses ( 21,619 ) ( 16,002 )

Interest income 2,574 67

Dividend income 13,204 7,861

Realized and unrealized losses on investments ( 28,442 ) ( 49,112 )

Change in fair value of financial instruments and other ( 209 ) 5,981

(Loss) income from equity investments ( 91 ) 1,149 3,285 1,172

(Loss) income on equity investments ( 10 ) 6,775

Interest expense ( 47,561 ) ( 30,436 )

2 unchanged sentences

Net income (loss) 16,560 ( 9,196 )

Net income attributable to noncontrolling interests and redeemable noncontrolling interests 4,808 1,108 9,245 2,474

Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests ( 595 ) 866

Net income (loss) attributable to B.

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Three Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

(As Restated)

Revenues - Services and fees:

2 unchanged sentences

Total Revenues - Services and fees 235,559 202,814

Trading income (losses) and fair value adjustments on loans

Trading income (loss) and fair value adjustments on loans

North America 51,568 ( 19,278 )

1 unchanged sentence

North America 37,947 1,878

Europe — 34,328 — 46,075

Australia 3,459 —

Europe, Middle East, and Africa 17,428 —

Latin America 2,719 —

Total Revenues - Sale of goods 67,777 1,878

3 unchanged sentences

North America 401,631 244,887

Europe 4,885 35,485 10,096 48,755

Australia 3,459 —

Europe, Middle East, and Africa 18,057 1,953

Latin America 2,719 —

Total Revenues $ 432,090 $ 246,840

As of September 30, 2022 and December 31, 2021, long-lived assets, which consist of property and equipment and other assets, of $ 16,174 and $ 12,870 , respectively, were located in North America.

The following table presents long-lived assets, which consists of property and equipment, net, by geographical area:

March 31, 2023 December 31, 2022

Long-lived Assets - Property and Equipment, net:

North America $ 26,770 $ 26,276

Europe 532 577

Asia Pacific 165 162

Australia 110 126

Total $ 27,577 $ 27,141

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.

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 1. Financial Statements