What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-24 compared with 2023-03-16 · 335 added, 539 removed, 251 unchanged (78% of the section changed)

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Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements.

Except as required by law we

are under no obligation to update any of the forward-looking statements after the filing of this Annual Report to conform such statements to actual results or to changes in our expectations.

Except as required by law we are under no obligation to update any of the forward-looking statements after the filing of this Annual Report to conform such statements to actual results or to changes in our expectations.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Annual Report.

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potential losses from or illiquidity of our proprietary investments;

changing economic and market conditions, including increasing inflation and actions by the Federal Reserve to address inflation and the possibility of recession or an economic downturn;

the continuing effects of the COVID-19 pandemic, or other pandemics or severe public health crises, and other related impacts including supply chain disruptions, labor shortages and increased labor costs;

changing economic and market conditions, including continuing inflation and any further actions by the Federal Reserve to address inflation and the possibility of recession or an economic downturn;

the effects of pandemics or severe public health crises, and other related impacts including supply chain disruptions, labor shortages and increased labor costs;

potential liability and harm to our reputation if we were to provide an inaccurate appraisal or valuation;

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the failure of our brand investment portfolio licensees to pay us royalties;

and the effect of geopolitical instability, including wars, conflicts and terrorist attacks, including the impacts of Russia’s invasion of Ukraine.

the impact of legal proceedings, including those related to the allegations raised against Brian Kahn;

the activities of short sellers and their impact on our business and reputation;

and the effect of geopolitical instability, including wars, conflicts and terrorist attacks, including the impacts of Russia’s invasion of Ukraine and conflicts in the Middle East.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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and all of its subsidiaries.

Restatement of Previously Issued Consolidated Financial Statements:

We identified a classification error of dividend income and realized and unrealized gains (losses) on certain investments within revenue in our consolidated statement of operations.

The classification error had no impact on our consolidated balance sheet, consolidated statements of equity, and cash flows.

We have restated our previously issued consolidated financial statements contained in this Annual Report on Form 10-K.

Refer to the “Explanatory Note” preceding Item 1, Business, for background on the restatement, the fiscal periods impacted, control considerations, and other information.

In addition, we have restated certain previously reported financial information for the years ended December 31, 2021 and 2020 in this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Results of Operations and Revenue sections.

The classification error had no impact on our consolidated balance sheet, consolidated statements of equity, and cash flows for the years ended December 31, 2021 and 2020.

Note 2 to our consolidated financial statements illustrates the impact of the classification error to our consolidated financial statements for the years ended December 31, 2021 and 2020.

Description of the Company

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We operate through several consolidated subsidiaries (collectively, “B.

Riley”) that 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.

Riley”) that 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 opportunistically invests in and acquires companies or assets with attractive risk-adjusted return profiles to benefit our shareholders.

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Our increasingly diversified platform enables us to invest opportunistically and to deliver strong long-term investment performance throughout a range of economic cycles.

We are headquartered in Los Angeles, California and maintain offices throughout the U.S.

including in New York, Chicago, Metro District of Columbia, Atlanta, Boston, Dallas, Metro Detroit, Houston, Memphis, Miami, San Francisco, Boca Raton, and West Palm Beach.

We are headquartered in Los Angeles, California and maintain offices throughout the U.S., including in New York, Chicago, Metro District of Columbia, Atlanta, Boston, Dallas, Metro Detroit, Houston, Memphis, Miami, San Francisco, Boca Raton, and West Palm Beach as well as additional offices located in Canada, Europe, Asia, and Australia.

We report our activities in six reportable business segments:

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

During the fourth quarter of 2022, we realigned our 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 we acquired in the fourth quarter of 2022.

We have also re-aligned our previously reported Principal Investments - Communications and Other segment into the Communications segment and the All Other category that is reported with Corporate and Other.

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

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

During the fourth quarter of 2023, we reassessed our previously reported Consumer segment due to organizational changes and financial information provided to the Chief Operating Decision Maker (“CODM”).

These changes resulted in Targus’ operations being reported on a stand-alone basis in the Consumer Products segment and the operations related to brand licensing that was previously reported in the Consumer segment being reported in the All Other Category that is reported with Corporate and Other.

Recent Developments

On October 18, 2022, we acquired all of the issued and outstanding shares of Targus in a transaction pursuant to a Securities Purchase Agreement (the “Purchase Agreement”).

The purchase price consideration totaled $247.5 million, which consisted of $112.7 million in cash, $54.0 million in seller financing, $59.0 million in 6.75% senior notes due 2024, $15.3 million in the issuance of the Company's common stock and stock options, and $6.5 million in deferred payments.

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

Goodwill of $75.8 million and other intangible assets of $89.0 million were recorded as a result of the acquisition.

The acquisition offers the potential for accretive growth to our dividend capacity and complements our existing investments in our Consumer segment.

To finance part of the acquisition, on October 18, 2022, we entered into a credit agreement with PNC Bank, National Association (“PNC”), as agent and security trustee for a five-year $28.0 million term loan and a five-year $85.0 million revolver loan.

Our diversified financial platform is affected by a variety of factors including the continuing impact of the COVID-19 pandemic, higher inflation, the actions by the Federal Reserve to address inflation, the possibility of recession or an economic downturn, Russia's invasion of Ukraine, and rising energy prices.

Great American Group Strategic Alternatives Review.

On February 29, 2024, we announced that we had retained Moelis & Company LLC as an independent financial advisor to assist in our review of strategic alternatives for our Appraisal and Valuation Services, and Retail, Wholesale & Industrial Solutions businesses (collectively formerly known as “Great American Group”), which could include a potential sale or other transaction.

If a potential transaction were to be consummated, we anticipate that proceeds may be used in a variety of ways including de-levering our balance sheet, repurchasing shares and bonds in the open market, and investing in the platform and in particular, B.

Riley Securities, Inc.

There can be no assurances that we will complete, or as to the terms of, any such potential transaction.

Audit Committee Review/Investigation .

As previously disclosed, after we learned from news reports in November 2023 that Brian Kahn, the then Chief Executive Officer of Freedom VCM Holdings, LLC (“Freedom VCM”) and the Franchise Group, Inc.

(“FRG”), was identified as an unindicted co-conspirator in SEC allegations and criminal charges of securities fraud against an executive of an unrelated hedge fund, the Audit Committee of the Board retained Sullivan & Cromwell LLP to conduct a thorough, internal review of the transactions among Mr.

Kahn (and his affiliates) and the Company (and its affiliates).

The review confirmed what we previously disclosed:

that the Company and its executives, including Bryant Riley, had no involvement with, or knowledge of, any of the alleged misconduct concerning Brian Kahn or any of his affiliates.

On February 22, 2024, our Board of Directors issued a statement regarding its review of the circumstances associated with our participation in the management-led buyout of FRG and related matters.

Subsequently, the Audit Committee engaged Winston & Strawn LLP as separate, independent counsel to assist the Audit Committee in conducting an investigation of these same matters and related allegations.

As separately disclosed by us on the date of this Annual Report, following receipt of the results of the Audit Committee's independent investigation as assisted by Winston & Strawn LLP, the Board of Directors and the Audit Committee reconfirmed that the Company and its executives, including Bryant R.

Riley, Chairman and Co-Chief Executive Officer, had no involvement with, or knowledge of, any of the alleged misconduct concerning Brian Kahn or any of his affiliates.

FRG Take-Private and Related Transactions.

On August 21, 2023, we acquired an equity interest in Freedom VCM for $216.5 million in cash in connection with the closing of the acquisition of FRG, by a buyer group that included members of senior management of FRG, led by Brian Kahn, FRG’s then Chief Executive Officer (the “FRG take-private transaction”).

In connection with the closing of the FRG take-private transaction, we terminated an investment advisory agreement (the “Advisory Agreement”) with Mr.

Pursuant to the Advisory Agreement, Mr.

Kahn, as financial advisor, had the sole power to vote or dispose of $64.6 million of shares of FRG common stock (based on the value of FRG shares in the FRG take-private transaction as of the closing date of such transaction) held of record by BRS.

Upon the termination of the Advisory Agreement, (i) Mr.

Kahn’s right to vote or dispose of such FRG shares terminated, (ii) such FRG shares owned by BRS were rolled over into additional equity interests in Freedom VCM in connection with the FRG take-private transaction, and (iii) Mr.

Kahn owed a total of $20.9 million to us under the Advisory Agreement which amount was added to, and included in, the Amended and Restated Note (as defined below).

Simultaneously with the completion of the FRG take-private transaction, one of our subsidiaries and Vintage Capital Management, LLC (“VCM”), an affiliate of Mr.

Kahn, amended and restated a promissory note (the “Amended and Restated Note”), pursuant to which VCM owes our subsidiary the aggregate principal amount of $200.5 million and bears interest at the rate of 12% per annum payable-in-kind with a maturity date of December 31, 2027.

The Amended and Restated Note requires repayments prior to the maturity date from certain proceeds received by VCM, Mr.

Kahn or his affiliates from, among other proceeds, distributions or dividends paid by Freedom VCM in amount equal to the greater of (i) 80% of the net after-tax proceeds, and (ii) 50% of gross proceeds.

The obligations under the Amended and Restated Note are primarily secured by a first priority perfected security interest in Freedom VCM equity interests owned by Mr.

Kahn, the CEO and a board member of Freedom VCM as of December 31, 2023, and his spouse with a value (based on the transaction price in the FRG take-private transaction) of $227.3 million as of August 21, 2023.

On January 22, 2024, Mr.

Kahn resigned as CEO and a member of the board of directors of Freedom VCM.

The fair value of the Freedom VCM equity interest owned by Mr.

Kahn and his spouse was $232.1 million as of December 31, 2023.

owing under the Amended and Restated Note may be repaid at any time without penalty.

On a quarterly basis, the Company will continue to obtain third party appraisals to evaluate the value of the collateral of the loan since the repayment of the loan and accrued interest will be paid primarily from the cash distributions from Freedom VCM or foreclosure on the underlying collateral.

Deterioration in the collateral, including in the performance of Freedom VCM or delays in the execution of its strategies, including the possible disposition of additional businesses and further de-leveraging of its balance sheet, for the loan receivable may impact the ultimate collection of principal and interest.

In the event the loan balance and accrued interest exceed the underlying collateral value of the loan, this will impact the fair value of the loan and result in an unrealized loss being recorded in the consolidated statements of operations.

Following these transactions, we own an equity interest of $281.1 million or 31% of the outstanding equity interests in Freedom VCM.

Also in connection with the FRG take-private transaction, on August 21, 2023 all of the equity interests of B.

Riley Receivables II, LLC (“BRRII”), a majority-owned subsidiary of the Company, were sold to a Freedom VCM affiliate, which resulted in a loss of $0.1 million.

In connection with the sale, the Freedom VCM affiliate assumed the obligations with respect to the Pathlight Credit Agreement, as further discussed in Note 12 to our consolidated financial statements, and we entered into a non-recourse promissory note with another Freedom VCM affiliate in the amount of $58.9 million, with a stated interest rate of 19.74% and a maturity date of August 21, 2033 (the “Freedom Receivables Note”) with payments of principal and interest on the note limited solely to performance of certain receivables held by BRRII..

The loan is measured for impairment based on the fair value of the underlying collateral and personal guarantee of Kahn.

Deterioration in the collateral for the loan receivable may impact the ultimate collection of principal and interest and amounts recorded as interest income on the loan.

As of December 31, 2023, the loan balance was $42.2 million.

On December 18, 2023, we made a $108.0 million loan to Conn’s Inc.

(“Conn’s”) a specialty retailer of home goods, pursuant to a second-lien term loan and security agreement (the “Conn’s Term Loan”) in connection with the acquisition by Conn’s of W.S.

Badcock LLC (“Badcock”), a portfolio company of Freedom VCM.

The Conn’s Term Loan bears interest at an aggregate rate per annum equal to the Term SOFR Rate (as defined in the Conn’s Term Loan), subject to a 4.80% floor, plus a margin of 8.00% and matures on February 20, 2027.

The Conn’s Term Loan is secured by liens (subject, in the case of priority, to the liens under Conn’s revolving credit facility with JPMorgan Chase Bank, N.A., as Administrative Agent for the lenders party thereto) on substantially all of the assets of the Conn’s, the other borrowers party thereto and their subsidiaries, subject to customary exceptions.

This loan is reported as a related party loan receivable due to the Company’s related party relationship with Freedom VCM and Freedom VCM’s ability to exercise influence over Conn’s as a result of the equity consideration Freedom VCM received from the sale of Badcock to Conn’s on December 18, 2023.

Our diversified financial platform is affected by a variety of factors including continuing higher inflation, the actions by the Federal Reserve to address inflation, the possibility of recession or an economic downturn, Russia's invasion of Ukraine, the conflicts in the Middle East, and rising energy prices.

These factors create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods.

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Results of Operations

The following period to period comparisons of our financial results and our interim results are not necessarily indicative of future results.

The following period to period comparisons of our financial results are not necessarily indicative of future results.

A discussion of changes in our results of operations during the year ended December 31, 2022 compared to the year ended December 31, 2021 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

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Amount % Amount % Amount %

(As restated)

Services and fees $ 1,002,370 61.1 % $ 895,623 82.9 % $ 106,747 11.9 %

Trading (loss) income and fair value adjustments on loans (202,628) (18.8) % 220,545 14.2 % (423,173) (191.9) %

Trading income (loss) and fair value adjustments on loans 41,828 2.5 % (202,628) (18.8) % 244,456 (120.6) %

Interest income - Loans and securities lending 284,896 17.3 % 245,400 22.7 % 39,496 16.1 %

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Restructuring charge 2,131 0.1 % 9,011 0.8 % (6,880) (76.4) %

Impairment of goodwill and tradenames 70,333 4.3 % — — % 70,333 100.0 %

Interest expense - Securities lending and loan participations sold 145,435 8.8 % 66,495 6.2 % 78,940 118.7 %

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Other income (expense):

Interest income 2,735 0.3 % 229 — % 2,506 n/m

Interest income 3,875 0.2 % 2,735 0.3 % 1,140 41.7 %

Dividend income 47,776 2.9 % 35,874 3.3 % 11,902 33.2 %

Realized and unrealized gains (losses) on investments (201,079) (18.6) % 166,131 10.7 % (367,210) n/m

Realized and unrealized losses on investments (162,589) (9.9) % (201,079) (18.6) % 38,490 (19.1) %

Change in fair value of financial instruments and other (4,748) (0.3) % 10,188 0.9 % (14,936) (146.6) %

Income from equity method investments 3,570 0.3 % 2,801 0.2 % 769 27.5 %

Gain on bargain purchase 15,903 1.0 % — — % 15,903 100.0 %

(Loss) income from equity method investments (181) — % 3,570 0.3 % (3,751) (105.1) %

Interest expense (187,013) (11.4) % (141,186) (13.1) % (45,827) 32.5 %

(Loss) income before income taxes (220,450) (20.4) % 614,762 39.5 % (835,212) (135.9) %

Benefit from (provision for) income taxes 63,856 5.9 % (163,960) (10.5) % 227,816 (138.9) %

Net (loss) income (156,594) (14.5) % 450,802 29.0 % (607,396) (134.7) %

Net income attributable to noncontrolling interests and redeemable noncontrolling interests 3,235 0.3 % 5,748 0.4 % (2,513) (43.7) %

Net (loss) income attributable to B.

Loss before income taxes (142,324) (8.7) % (220,450) (20.4) % 78,126 (35.4) %

Benefit from income taxes 36,693 2.2 % 63,856 5.9 % (27,163) (42.5) %

Net loss (105,631) (6.4) % (156,594) (14.5) % 50,963 (32.5) %

Net (loss) income attributable to noncontrolling interests (5,721) (0.3) % 3,235 0.3 % (8,956) n/m

Net loss attributable to B.

Riley Financial, Inc.

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Preferred stock dividends 8,057 0.4 % 8,008 0.7 % 49 0.6 %

Net (loss) income available to common shareholders $ (167,837) (15.5) % $ 437,597 28.1 % $ (605,434) (138.4) %

Net loss available to common shareholders $ (107,967) (6.6) % $ (167,837) (15.5) % $ 59,870 (35.7) %

n/m - Not applicable or not meaningful.

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Amount % Amount % Amount %

(As Restated)

Revenues - Services and fees

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Communications segment 330,952 20.1 % 228,129 21.1 % 102,823 45.1 %

Consumer segment 18,940 1.8 % 20,308 1.3 % (1,368) (6.7) %

All Other 66,128 4.0 % 32,737 3.0 % 33,391 102.0 %

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Communications segment 6,737 0.4 % 7,526 0.7 % (789) (10.5) %

Consumer segment 77,821 7.2 % — — % 77,821 100.0 %

Consumer Products segment 233,202 14.2 % 77,821 7.2 % 155,381 199.7 %

All Other 364 — % — — % 364 100.0 %

Subtotal 314,506 19.1 % 142,275 13.2 % 172,231 121.1 %

Trading (loss) income and fair value adjustments on loans

Trading income (loss) and fair value adjustments on loans

Capital Markets segment 37,070 2.3 % (206,150) (19.1) % 243,220 (118.0) %

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n/m - Not applicable or not meaningful.

Total revenues decreased approximately $474.0 million to $1,080.7 million during the year ended December 31, 2022 from $1,554.7 million during the year ended December 31, 2021.

The decrease in revenues during the year ended December 31, 2022 was primarily due to decreases in the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $423.2 million and a decrease in revenue from services and fees of $257.6 million, partially offset by an increase in revenue from sale of goods of $84.1 million and an increase in revenue from interest income - loans and securities lending of $122.7 million.

The decrease in the fair value of the portfolio of securities

and other investments owned during the year ended December 31, 2022 was primarily due to the decrease in overall values in the stock market.

The decrease in revenue from services and fees of $257.6 million was primarily due to decreases in revenue of $262.7 million in the Capital Markets segment, $143.6 million in the Wealth Management segment, $7.6 million in the Auction and Liquidation segment, and $1.4 million in the Consumer segment, partially offset by increases of $139.6 million in the Communications segment, $13.8 million in All Other, and $4.2 million in the Financial Consulting segment.

Total revenues increased approximately $562.9 million to $1,643.6 million during the year ended December 31, 2023 from $1,080.7 million during the year ended December 31, 2022.

The increase in revenues during the year ended December 31, 2023 was primarily due to an increase in the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $244.5 million, an increase in revenue from sale of goods of $172.2 million, an increase in revenue from services and fees of $106.7 million, and an increase in revenue from interest income - loans and securities lending of $39.5 million.

The increase in the fair value of the portfolio of securities and other investments owned during the year ended December 31, 2023 was primarily due to the increase in overall values in the stock market.

The increase in revenue from services and fees of $106.7 million was primarily due to increases of $102.8 million in the Communications segment, $35.2 million in the Financial Consulting segment, $33.4 million in All Other, and $16.5

million in the Auction and Liquidation segment, partially offset by decreases in revenue of $43.9 million in the Capital Markets segment and $37.2 million in the Wealth Management segment.

Revenues from services and fees in the Capital Markets segment decreased approximately $43.9 million, to $249.0 million during the year ended December 31, 2023 from $292.9 million during the year ended December 31, 2022.

The decrease in revenues was primarily due to decreases in revenue of $314.3 million from corporate finance, consulting and investment banking fees, partially offset by increases of $43.3 million in asset management fees and $8.0 million which is primarily comprised of interest and other income earned on our investments.

The decrease in revenues was primarily due to decreases in revenue of $40.5 million in incentive fees and $8.9 million in commission fees, partially offset by an increase of $5.6 million in interest income.

The Capital Markets segment faced a more challenging capital markets merger and acquisitions environment in 2023.

Revenues from services and fees in the Wealth Management segment decreased $37.2 million, to $193.5 million during the year ended December 31, 2023 from $230.7 million during the year ended December 31, 2022.

The decrease in revenues was primarily due to decreases in revenue of $83.1 million from wealth and asset management fees, $48.5 million in commission fees, and $11.0 million in other asset management fees.

Revenues from services and fees in the Auction and Liquidation segment decreased $7.6 million, to $12.6 million during the year ended December 31, 2022 from $20.2 million during the year ended December 31, 2021.

The decrease in revenues was primarily due to fewer retail fee liquidation engagements during the year ended December 31, 2022 as compared to prior year.

The decrease in revenues was primarily due to decreases in revenue of $27.5 million from wealth and asset management fees, $9.3 million in commission fees, and $0.4 million in other income.

The restructuring of the Wealth Management segment in Q3 of 2022 resulted in a reduction in financial advisors, and the decrease in revenues of 2023 has the full year impact of these financial advisors no longer being part of our platform.

Revenues from services and fees in the Auction and Liquidation segment increased $16.5 million, to $29.1 million during the year ended December 31, 2023 from $12.6 million during the year ended December 31, 2022.

The increase in revenues was primarily due an increase in the size of retail fee liquidation engagements during the year ended December 31, 2023 as compared to the prior year.

Revenues from services and fees in the Financial Consulting segment increased $35.2 million, to $133.7 million during the year ended December 31, 2023 from $98.5 million during the year ended December 31, 2022.

The increase in revenues was primarily due to increases of $2.4 million within our Real Estate division and $1.8 million within our Advisory Services division.

The increase in revenues was primarily due to an increase of $37.3 million within our Advisory Services division, partially offset by a decrease of $2.1 million within our Real Estate division.

The increase in Advisory Services was primarily due to increases in the number of appraisals, fees from consulting engagements, and the inclusion of other acquisitions completed in 2023.

Revenues from services and fees in the Communications segment increased $102.8 million to $331.0 million during the year ended December 31, 2023 from $228.1 million during the year ended December 31, 2022.

The increase in revenues was primarily due to $66.6 million from the consolidation of Lingo as a result of obtaining a majority interest in the second quarter of 2022, $44.6 million from the acquisition of BullsEye Telecom (“BullsEye”) in the third quarter of 2022, and $36.3 million from the inclusion of a full year of operating results from the acquisition of Marconi Wireless that occurred in the fourth quarter of 2021, partially offset by a decrease in revenues of $7.8 million from UOL and magicJack subscription services.

We expect the Marconi Wireless, UOL and magicJack subscription revenues to continue to decline year over year.

Revenues from services and fees in the Consumer segment decreased approximately $1.4 million, to $18.9 million during the year ended December 31, 2022 from $20.3 million during the year ended December 31, 2021.

The primary source of services and fees revenue included in this segment is the licensing of trademarks.

Revenues from services and fees in All Other, which includes the operations of a regional environmental services business and a landscaping business that we acquired in 2022, was approximately $13.8 million during the year ended December 31, 2022.

Trading income and fair value adjustments on loans decreased $423.2 million to a loss of $202.6 million during the year ended December 31, 2022 compared to income of $220.5 million during the year ended December 31, 2021.

This was primarily due to decreases of $419.1 million in the Capital Markets segment and $4.1 million in the Wealth Management segment.

The loss of $202.6 million during the year ended December 31, 2022 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts of $148.3 million and unrealized losses on the fair value of our loans receivable of $54.3 million.

The increase in revenues was primarily due to an increase of $115.4 million in subscription services from inclusion of a full year of operating results from the acquisition of a controlling interest in Lingo in the second quarter of 2022 and the acquisition of BullsEye in the third quarter of 2022, partially offset by decreases in subscription revenue of $10.0 million and other revenue of $2.6 million for UOL, magicJack and Marconi.

We expect UOL, magicJack and Marconi subscription revenue to continue to decline year over year.

Revenues from services and fees in All Other increased by $33.4 million to $66.1 million during the year ended December 31, 2023 from $32.7 million during the year ended December 31, 2022.

These revenues include the licensing of brand trademarks, merchandise rental fees and sales from bebe stores, inc.

(“bebe”) in which we acquired a controlling interest during the fourth quarter of 2023, and the operations of a regional environmental services business and a landscaping business that we acquired in 2022.

Revenues from services and fees in All Other increased by approximately $18.1 million related to the full year operations of a regional environmental services business (which was acquired in September 2022), $12.0 million related to merchandise rental fees from bebe, which was acquired in October 2023, and $3.3 million related to licensing of brand trademarks and revenues from the landscaping business.

The landscaping business had $8.0 million of revenues in 2023 and was sold in the third quarter of 2023.

Trading income and fair value adjustments on loans increased $244.5 million to income of $41.8 million during the year ended December 31, 2023 compared to a loss of $202.6 million during the year ended December 31, 2022.

This was primarily due to increases of $243.2 million in the Capital Markets segment and $1.2 million in the Wealth Management segment.

The income of $41.8 million during the year ended December 31, 2023 was primarily due to realized and unrealized gains on investments made in our proprietary trading accounts of $21.6 million and realized and unrealized gains on the fair value of our loans receivable of $20.2 million.

Interest income – loans and securities lending increased $39.5 million, to $284.9 million during the year ended December 31, 2023 from $245.4 million during the year ended December 31, 2022.

This was primarily due to increases of $118.1 million in the Capital Markets segment and $4.6 million in the Auction and Liquidation segment.

Interest income from securities lending was $83.1 million and $49.8 million during the year ended December 31, 2022 and 2021, respectively.

Interest income from loans was $162.3 million and $39.5 million during the year ended December 31, 2022

and 2021, respectively.

The increase in interest income on loans was primarily due to $93.1 million in interest from our loan receivable collateralized by the Badcock receivables portfolio, which was first made in December 2021.

Revenues – Sale of Goods

This was primarily due to an increase of $44.1 million in the Capital Markets segment, partially offset by a decrease of $4.6 million in the Auction and Liquidation segment.

Interest income from securities lending was $161.7 million and $83.1 million during the years ended December 31, 2023 and 2022, respectively.

The increase in interest income from securities lending was primarily due to increased interest rates.

Interest income from loans was $123.2 million and $162.3 million during the years ended

December 31, 2023 and 2022, respectively.

The decrease in interest income from loans was primarily due to paydowns in our Badcock Receivables I loan receivable portfolio.

Revenues from the sale of goods increased $172.2 million, to $314.5 million during the year ended December 31, 2023 from $142.3 million during the year ended December 31, 2022.

The increase in revenues from sale of goods was primarily due to increases of $77.8 million from the acquisition of Targus in the fourth quarter of 2022, $3.6 million from the sales of retail goods related to retail liquidation engagements, and $3.2 million in sales of Marconi Wireless devices, partially offset by a decrease of $0.5 million in sales of magicJack devices.

Cost of goods sold during the year ended December 31, 2022 and 2021 was $78.6 million and $27.0 million, respectively, resulting in a gross margin of 44.7% and 53.7%, respectively.

The increase in revenues from sale of goods was primarily due to increases of $155.4 million from the acquisition of Targus in the fourth quarter of 2022 and $17.3 million from the sales of retail goods due to an increase in the number of retail liquidation engagements, partially offset by a decrease in the average size of the engagements.

Cost of goods sold during the year ended December 31, 2023 increased by $134.7 million to $213.4 million, from $78.6 million during the year ended December 31, 2022.

The increase of $134.7 million is primarily comprised of an increase in cost of goods sold in the Consumer Products segment of $112.5 million, which was primarily due to owning Targus for the full year 2023 as compared to 2022 when we acquired Targus in October 2022, and an increase in cost of goods sold in the Auction and Liquidation segment of $22.6 million as a result of cost to purchase original inventory at a higher price for retail liquidation engagements that involved sale of goods in 2023 as opposed to augmenting inventory in 2022.

Operating Expenses

1 unchanged sentence

Direct costs increased $96.3 million, to $238.8 million during the year ended December 31, 2023 from $142.5 million during the year ended December 31, 2022.

Direct costs of services increased $85.0 million in the Communications segment and $9.8 million in All Other, which is from the operations of a regional environmental services business and a landscaping business that we acquired in 2022, partially offset by a decrease of $6.8 million in the Auction and Liquidation segment.

The increase in the Communications segment was primarily due to increases of $45.5 million from the inclusion of Lingo from May 31, 2022 to December 31, 2022 as a result of our acquisition of a majority equity interest in the second quarter of 2022, $14.1 million from the acquisition Marconi Wireless in the fourth quarter of 2021, and $27.9 million from the acquisition of BullsEye in the third quarter of 2022, partially offset by decreases of $1.5 million and $1.2 million in magicJack and UOL, respectively.

The increase in the All Other category consists of other acquisitions made during 2022.

The decrease in the Auction and Liquidation segment was primarily due to a large retail liquidation engagement in Europe in 2021.

The increase in direct costs of services was primarily attributable to increases of $75.3 million in the Communications segment from the acquisitions of a controlling interest in Lingo during the second quarter of 2022 and BullsEye during the third quarter of 2022, $20.2 million in All Other due to other acquisitions made during 2023 and 2022, and $0.8 million in the Auction and Liquidation segment due to the size and number of the fee and asset sale deals.

Selling, General and Administrative Expenses

8 unchanged sentences

Communications segment 109,583 13.2 % 84,001 11.8 % 25,582 30.5 %

Consumer segment 22,737 3.2 % 5,923 0.7 % 16,814 n/m

Corporate and Other 62,876 8.8 % 58,905 6.5 % 3,971 6.7 %

Total selling, general & administrative expenses $ 714,614 100.0 % $ 906,196 100.0 % $ (191,582) (21.1) %

Total selling, general and administrative expenses decreased $191.6 million to $714.6 million during the year ended December 31, 2022 from $906.2 million during the year ended December 31, 2021.

The decrease of $191.6 million in selling, general and administrative expenses was due to decreases of $168.1 million in the Capital Markets segment, $102.4 million in the Wealth Management segment, partially offset by increases of $47.8 million in the Communications segment, $16.8 million in the Consumer segment, $5.6 million in the Auction and Liquidation segment, $4.8 million in the Financial Consulting segment, and $4.0 million in Corporate and Other.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment decreased by $168.1 million to $179.5 million during the year ended December 31, 2022 from $347.6 million during the year ended December 31, 2021.

The decrease was primarily due to decreases of $104.2 million in consulting expenses and $71.5 million in payroll and related expenses, partially offset by an increase in depreciation and amortization of $6.4 million.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment decreased by $102.4 million to $263.6 million during the year ended December 31, 2022 from $366.1 million during the year ended December 31, 2021.

The decrease was primarily due to decreases of $123.4 million in payroll and related expenses, partially offset by increases of $18.8 million in legal settlements and penalties and $1.0 million from the change in fair value change on contingent consideration.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment increased by $5.6 million to $19.7 million during the year ended December 31, 2022 from $14.1 million during the year ended December 31, 2021.

The increase was primarily due to an increase of $5.0 million in other business development activities and an increase of $1.4 million in payroll and related expenses, partially offset by a decrease of $0.5 million in foreign currency fluctuations.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment increased by $4.8 million to $82.2 million during the year ended December 31, 2022 from $77.4 million during the year ended December 31, 2021.

The increase was primarily due to increases of $3.9 million in payroll and related expenses, $1.3 million in travel and entertainment expenses, and $0.9 million in other expenses, partially offset by decreases of $1.6 million in legal expenses.

Communications

Selling, general and administrative expenses in the Communications segment increased by $47.8 million to $84.0 million during the year ended December 31, 2022 from $36.2 million during the year ended December 31, 2021.

The increase was primarily due to increases of $25.0 million from the consolidation of Lingo as a result of obtaining a majority interest in the second quarter of 2022, $14.4 million from the acquisition of BullsEye in the third quarter of 2022, and $9.0 million from the acquisition of Marconi Wireless in the fourth quarter of 2021.

Selling, general and administrative expenses in the Consumer segment increased by $16.8 million to $22.7 million during the year ended December 31, 2022 from $5.9 million during the year ended December 31, 2021.

The increase was primarily due to the acquisition of Targus in the fourth quarter of 2022.

Consumer Products segment 77,147 9.3 % 17,471 2.4 % 59,676 n/m

Corporate and Other 98,160 11.8 % 68,142 9.6 % 30,018 44.1 %

Selling, general and administrative expenses for the Corporate and Other increased $4.0 million to $62.9 million during the year ended December 31, 2022 from $58.9 million during the year ended December 31, 2021.

The increase was primarily due to increases of $8.4 million in payroll and related expenses, $6.6 million of expenses from the operations of a regional environmental services business and a landscaping business that we acquired in 2022, $1.8 million in software and equipment expenses, and $1.1 million in accounting expenses, partially offset by the decrease of $6.5 million in gains on extinguishment of debt, $4.5 million in fair value change on contingent consideration, and $2.6 million in foreign currency fluctuations.

Other Income (Expense).

Other income included interest income of $2.7 million during the year ended December 31, 2022 compared to $0.2 million during the year ended December 31, 2021.

Dividend income was $35.9 million during the year ended December 31, 2022 compared to $19.7 million during the year ended December 31, 2021.

Realized and unrealized gains (losses) on investments was a loss of $201.1 million during the year ended December 31, 2022 compared to gains of $166.1 million during the year ended December 31, 2021.

The decrease was primarily due to a decrease in

overall values of our investments.

Change in fair value of financial instruments and other in the amount of $10.2 million during the year ended December 31, 2022 was primarily due to the change in fair value of warrant liabilities and the forgiveness of a Paycheck Protection Program loan issued to FocalPoint Securities, LLC prior to its acquisition by the Company.

Income on equity method investments was $3.6 million during the year ended December 31, 2022 compared to $2.8 million during the year ended December 31, 2021.

Interest expense was $141.2 million during the year ended December 31, 2022 compared to $92.5 million during the year ended December 31, 2021.

The increase in interest expense was due to additional debt incurred during the year ended December 31, 2022 and higher interest rates due to variable rates on certain of our outstanding debt.

The increases in interest expense primarily consisted of $18.6 million related to the senior notes, $15.4 million related to the Nomura term loan, $5.3 million related to the Pathlight term loan, $3.5 million related to the Nomura revolver, $1.6 million related to the Lingo term loan, $0.8 million related to the Targus revolver, and $0.5 million related to the Targus term loan.

(Loss) Income Before Income Taxes .

Income (loss) before income taxes decreased $835.2 million to a loss of $220.5 million during the year ended December 31, 2022 from income of $614.8 million during the year ended December 31, 2021.

The change was primarily due to a decrease in revenues of approximately $474.0 million, a change to realized and unrealized gains (losses) on investments of $367.2 million, and an increase in interest expense of $48.7 million, partially offset by a a decrease in operating expenses of $28.9 million, an increase in dividend income of $16.1 million, an increase in change in fair value of financial instruments and other of $6.4 million, an increase in interest income of $2.5 million, and an increase in income from equity method investments of $0.8 million.

Benefit from (Provision for) Income Taxes.

Benefit from income taxes was $63.9 million during the year ended December 31, 2022 compared to a provision for income taxes of $164.0 million during the year ended December 31, 2021.

The effective income tax rate was a provision of 29.0% during the year ended December 31, 2022 as compared to a provision of 26.7% during the year ended December 31, 2021.

Net Income Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interests .

Net income attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net income generated by membership interests of partnerships that we do not own.

The net income attributable to noncontrolling interests and redeemable noncontrolling interests was $3.2 million during the year ended December 31, 2022 compared to $5.7 million during the year ended December 31, 2021.

Net (Loss) Income Attributable to the Company .

Net loss attributable to the Company during the year ended December 31, 2022 was $159.8 million compared to net income attributable to the Company of $445.1 million during the year ended December 31, 2021.

The change was primarily due to a decrease in operating income of $445.1 million, a change to realized and unrealized gains (losses) on investments of $367.2 million, and an increase in interest expense of $48.7 million, partially offset by a change from provision for to benefit from income taxes of $227.8 million, an increase in dividend income of $16.1 million, an increase in change in fair value of financial instruments and other of $6.4 million, a decrease in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $2.5 million, an increase in interest income of $2.5 million, and an increase in income from equity method investments of $0.8 million.

Preferred Stock Dividends .

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share).

Dividends are payable quarterly in arrears.

On January 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

On July 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on July 29, 2022 to holders of record as of the close of business on July 19, 2022.

On October 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on October 31, 2022 to holders of record as of the close of business on October 21, 2022.

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends are payable quarterly in arrears.

On January 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

On July 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share,

which was paid on July 29, 2022 to holders of record as of the close of business on July 19, 2022.

On October 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on October 31, 2022 to holders of record as of the close of business on October 21, 2022.

Net (Loss) Income Available to Common Shareholders .

Net loss available to common shareholders during the year ended December 31, 2022 was $167.8 million compared to net income available to common shareholders of $437.6 million during the year ended December 31, 2021.

The change was primarily due to a decrease in operating income of $445.1 million, a change to realized and unrealized gains (losses) on investments of $367.2 million, an increase in interest expense of $48.7 million, and an increase in preferred stock dividends of $0.6 million, partially offset by a change from provision for to benefit from income taxes of $227.8 million, an increase in dividend income of $16.1 million, an increase in change in fair value of financial instruments and other of $6.4 million, a decrease in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $2.5 million, an increase in interest income of $2.5 million, and an increase in income from equity method investments of $0.8 million.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Consolidated Statements of Income

(Dollars in thousands)

(As Restated)

December 31, 2021 Year Ended

December 31, 2020 Change

Amount % Amount % Amount %

Services and fees $ 1,153,225 74.2 % $ 645,906 77.4 % $ 507,319 78.5 %

Trading income and fair value adjustments on loans 220,545 14.2 % 56,677 6.8 % 163,868 n/m

Interest income - Loans and securities lending 122,723 7.9 % 102,499 12.3 % 20,224 19.7 %

Sale of goods 58,205 3.7 % 29,135 3.5 % 29,070 99.8 %

Total revenues 1,554,698 100.0 % 834,217 100.0 % 720,481 86.4 %

Operating expenses:

Direct cost of services 54,390 3.5 % 60,451 7.2 % (6,061) (10.0) %

Cost of goods sold 26,953 1.7 % 12,460 1.5 % 14,493 116.3 %

Selling, general and administrative expenses 906,196 58.3 % 428,537 51.4 % 477,659 111.5 %

Restructuring charge — — % 1,557 0.2 % (1,557) (100.0) %

Impairment of tradenames — — % 12,500 1.5 % (12,500) (100.0) %

Interest expense - Securities lending and loan participations sold 52,631 3.4 % 42,451 5.1 % 10,180 24.0 %

Total operating expenses 1,040,170 66.9 % 557,956 66.9 % 482,214 86.4 %

Operating income 514,528 33.1 % 276,261 33.1 % 238,267 86.2 %

Other income (expense):

Interest income 229 — % 564 0.1 % (335) (59.4) %

Dividend income 19,732 1.3 % 21,163 2.5 % (1,431) (6.8) %

Realized and unrealized gains (losses) on investments 166,131 10.7 % 47,341 5.7 % 118,790 n/m

Change in fair value of financial instruments and other 3,796 0.2 % — — % 3,796 100.0 %

Income (loss) on equity method investments 2,801 0.2 % (623) (0.1) % 3,424 n/m

Interest expense (92,455) (5.9) % (65,249) (7.8) % (27,206) 41.7 %

Income before income taxes 614,762 39.5 % 279,457 33.5 % 335,305 120.0 %

Provision for income taxes (163,960) (10.5) % (75,440) (9.0) % (88,520) 117.3 %

Net income 450,802 29.0 % 204,017 24.5 % 246,785 121.0 %

Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 5,748 0.4 % (1,131) (0.1) % 6,879 n/m

Net income attributable to B.

Riley Financial, Inc.

445,054 28.6 % 205,148 24.6 % 239,906 116.9 %

Preferred stock dividends 7,457 0.5 % 4,710 0.6 % 2,747 58.3 %

Net income available to common shareholders $ 437,597 28.1 % $ 200,438 24.0 % $ 237,159 118.3 %

n/m - Not applicable or not meaningful.

The table below and the discussion that follows are based on how we analyze our business.

(As Restated)

December 31, 2021 Year Ended

December 31, 2020 Change

Amount % Amount % Amount %

Revenues - Services and fees

Capital Markets segment $ 555,585 35.7 % $ 318,714 38.2 % $ 236,871 74.3 %

Wealth Management segment 374,361 24.1 % 72,345 8.7 % 302,016 n/m

Auction and Liquidation segment 20,169 1.3 % 63,101 7.6 % (42,932) (68.0) %

Financial Consulting segment 94,312 6.1 % 91,622 11.0 % 2,690 2.9 %

Communications segment 88,490 5.7 % 83,666 10.0 % 4,824 5.8 %

Consumer segment 20,308 1.3 % 16,458 2.0 % 3,850 23.4 %

Subtotal 1,153,225 74.2 % 645,906 77.4 % 507,319 78.5 %

Revenues - Sale of goods

Auction and Liquidation segment 53,348 3.4 % 25,663 3.1 % 27,685 107.9 %

Communications segment 4,857 0.3 % 3,472 0.4 % 1,385 39.9 %

Subtotal 58,205 3.7 % 29,135 3.5 % 29,070 99.8 %

Trading income and fair value adjustments on loans

Capital Markets segment 212,922 13.7 % 55,873 6.7 % 157,049 n/m

Wealth Management segment 7,623 0.5 % 804 0.1 % 6,819 n/m

Subtotal 220,545 14.2 % 56,677 6.8 % 163,868 n/m

Interest income - Loans and securities lending

Capital Markets segment 122,723 7.9 % 102,499 12.3 % 20,224 19.7 %

Total revenues $ 1,554,698 100.0 % $ 834,217 100.0 % $ 720,481 86.4 %

n/m - Not applicable or not meaningful.

Total revenues increased approximately $720.5 million to $1,554.7 million during the year ended December 31, 2021 from $834.2 million during the year ended December 31, 2020.

The increase in revenues during the year ended December 31, 2021 was primarily due to an increase in revenue from services and fees of $507.3 million, an increase in revenue from trading income and fair value adjustments on loans of $163.9 million, an increase in revenue from sale of goods of $29.1 million, and an increase in revenue from interest income - loans and securities lending of $20.2 million, as further described below.

The increase in revenue from services and fees of $507.3 million was primarily due to increases in revenue of $302.0 million in the Wealth Management segment, $236.9 million in the Capital Markets segment, $4.8 million in the Communications segment, $3.9 million in the Consumer segment, and $2.7 million in the Financial

Consulting segment, partially offset by a decrease of $42.9 million in the Auction and Liquidation segment, as further described below.

Revenues from services and fees in the Capital Markets segment increased approximately $236.9 million, to $555.6 million during the year ended December 31, 2021 from $318.7 million during the year ended December 31, 2020.

The increase in revenues was primarily due to increases in revenue of $203.2 million from corporate finance, consulting and investment banking fees, $26.0 million from the acquisition of National, and $7.9 million primarily related to dividend income and other asset management fees.

Revenues from services and fees in the Wealth Management segment increased $302.0 million, to $374.4 million during the year ended December 31, 2021 from $72.3 million during the year ended December 31, 2020.

The increase in revenues was primarily due to increases in revenue of $280.9 million from the acquisition of National, $20.7 million from wealth and asset management fees, and $0.5 million in other income.

Revenues from services and fees in the Auction and Liquidation segment decreased $42.9 million, to $20.2 million during the year ended December 31, 2021 from $63.1 million during the year ended December 31, 2020.

The decrease in revenues was primarily due to fewer large retail fee liquidation engagements.

Revenues from services and fees in the Financial Consulting segment increased $2.7 million, to $94.3 million during the year ended December 31, 2021 from $91.6 million during the year ended December 31, 2020.

The increase in revenues was primarily due to an increase in revenue of $2.4 million from advisory services.

Revenues from services and fees in the Communications segment increased $4.8 million to $88.5 million during the year ended December 31, 2021 from $83.7 million during the year ended December 31, 2020.

The increase in revenues was primarily due to $12.4 million from the acquisition of a mobile phone services business during Q4 2021, partially offset by a decrease in revenues of $7.6 million from subscription services.

Revenues from services and fees in the Consumer segment increased approximately $3.9 million, to $20.3 million during the year ended December 31, 2021 from $16.5 million during the year ended December 31, 2020.

The primary sources of revenue included in this segment are the licensing of trademarks.

Trading income and fair value adjustments on loans increased $163.9 million to income of $220.5 million during the year ended December 31, 2021 compared to $56.7 million during the year ended December 31, 2020.

This was primarily due to increases of $157.0 million in the Capital Markets segment and $6.8 million in the Wealth Management segment.

The gain of $220.5 million during the year ended December 31, 2021 included realized and unrealized amounts earned on investments made in our proprietary trading accounts of $210.9 million and unrealized amounts on our loans receivable, at fair value of $9.6 million.

Interest income – loans and securities lending increased $20.2 million, to $122.7 million during the year ended December 31, 2021 from $102.5 million during the year ended December 31, 2020.

Interest income from securities lending was $66.1 million and $51.3 million during the year ended December 31, 2021 and 2020, respectively.

Interest income from loans was $56.6 million and $51.2 million during the year ended December 31, 2021 and 2020, respectively.

The increase in interest income on loans was primarily due to the increase in lending activities in our Capital Markets segment which included an increase in loans receivable to $873.2 million as of December 31, 2021 from $390.7 million as of December 31, 2020.

Revenues – Sale of Goods

Revenues from the sale of goods increased $29.1 million, to $58.2 million during the year ended December 31, 2021 from $29.1 million during the year ended December 31, 2020.

Revenues from sale of goods were primarily attributable to $46.1 million of sales of retail goods related to retail liquidation engagements in Europe, $6.1 million of sales of retail goods related to a retail liquidation engagement in the U.S., and $2.7 million in sales of magicJack devices that were sold in connection with VoIP services, partially offset by a decrease of $25.7 million from sales of goods related to multiple liquidation engagements that ended in 2020.

Cost of goods sold during the years ended December 31, 2021 and 2020 was $27.0 million and $12.5 million, respectively, resulting in a gross margin of 53.7% and 57.2%, respectively.

Operating Expenses

Direct Cost of Services

Total direct costs decreased $6.1 million, to $54.4 million during the year ended December 31, 2021 from $60.5 million during the year ended December 31, 2020.

Direct costs of services decreased by $10.0 million in the Auction and Liquidation segment, partially offset by an increase of $4.0 million in the Communications segment.

The decrease in direct costs in the Auction and Liquidation segment was primarily due to a decrease in the number of retail fee type engagements performed during the year ended December 31, 2021, partially offset by an increase of $11.7 million of direct costs incurred on a retail liquidation engagement in Europe, where we purchased inventory for resale and as part of the retail liquidation engagement we incurred costs related to the store operations which primarily related to expenses for occupancy, payroll and other store operating costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the years ended December 31, 2021 and 2020 were comprised of the following:

Selling, General and Administrative Expenses

December 31, 2021 Year Ended

December 31, 2020 Change

Amount % Amount % Amount %

Capital Markets segment $ 347,591 38.4 % $ 201,348 47.0 % $ 146,243 72.6 %

Wealth Management segment 366,050 40.3 % 70,248 16.4 % 295,802 n/m

Auction and Liquidation segment 14,069 1.6 % 12,359 2.9 % 1,710 13.8 %

Financial Consulting segment 77,418 8.5 % 68,579 16.0 % 8,839 12.9 %

Communications segment 36,240 4.0 % 31,363 7.3 % 4,877 15.6 %

Consumer segment 5,923 0.7 % 5,747 1.3 % 176 3.1 %

Corporate and Other segment 58,905 6.5 % 38,893 9.1 % 20,012 51.5 %

Total selling, general & administrative expenses $ 828,903 100.0 % $ 714,614 100.0 % $ 114,289 16.0 %

Total selling, general and administrative expenses increased $114.3 million to $828.9 million during the year ended December 31, 2023 from $714.6 million during the year ended December 31, 2022.

The increase of $477.7 million in selling, general and administrative expenses was due to increases of $146.2 million in the Capital Markets segment, $295.8 million in the Wealth Management segment, $1.7 million in the Auction and Liquidation segment, $8.8 million in the Financial Consulting segment, $4.9 million in the Communications segment, $0.2 million in the Consumer segment, and $20.0 million in the Corporate and Other segment, as described below.

The increase of $114.3 million in selling, general and administrative expenses was due to increases of $59.7 million in the Consumer Products segment, $49.5 million in the Capital Markets segment, $30.0 million in Corporate and Other, $25.6 million in the Communications segment, and $21.1 million in the Financial Consulting segment, partially offset by decreases of $68.5 million in the Wealth Management segment and $3.0 million in the Auction and Liquidation segment.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment increased by $49.5 million to $229.0 million during the year ended December 31, 2023 from $179.5 million during the year ended December 31, 2022.

The increase was primarily due to increases of $85.4 million in payroll and related expenses, $32.1 million in consulting expenses, $18.7 million from the acquisition of National, and $10.3 million in investment banking deal expenses, partially offset by a decrease in depreciation and amortization of $0.3 million.

The increase was primarily due to changes in amounts between years of $77.3 million related to the Advisory Agreement and

$1.7 million in change in fair value of contingent consideration, partially offset by decreases of $21.7 million in payroll and related expenses due to a decrease in fee income in 2023 as compared to 2022 which resulted in lower variable compensation, $4.5 million in depreciation and amortization, $3.3 million in foreign currency fluctuation and other expenses.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment increased by $295.8 million to $366.1 million during the year ended December 31, 2021 from $70.2 million during the year ended December 31, 2020.

The increase was primarily due to increases of $280.8 million from the acquisition of National and $16.7 million in payroll and related expenses, partially offset by decreases of $1.3 million in legal expenses and $0.5 million in other expenses.

Selling, general and administrative expenses in the Wealth Management segment decreased by $68.5 million to $195.1 million during the year ended December 31, 2023 from $263.6 million during the year ended December 31, 2022.

The decrease was primarily due to decreases of $39.1 million in payroll and related expenses, $13.7 million in legal settlements and penalties, $7.1 million in other expenses, $3.2 million in legal fees, $2.2 million in software and equipment expenses, $2.1 million in clearing charges, and $1.2 million in depreciation and amortization.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment increased by $1.7 million to $14.1 million during the year ended December 31, 2021 from $12.4 million during the year ended December 31, 2020.

The increase was primarily due to an increase of $3.5 million in other business development activities, partially offset by decreases of $0.7 million in payroll and related expenses, $0.6 million in outside contractors, and $0.4 million in foreign currency fluctuations.

Selling, general and administrative expenses in the Auction and Liquidation segment decreased by $3.0 million to $16.7 million during the year ended December 31, 2023 from $19.7 million during the year ended December 31, 2022.

The decrease was primarily due to decreases of $3.4 million in business development activities and $0.4 million in payroll and related expenses, partially offset by an increase of $0.8 million in foreign currency fluctuations.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment increased by $21.1 million to $103.3 million during the year ended December 31, 2023 from $82.2 million during the year ended December 31, 2022.

The increase was primarily due to increases of $5.7 million in payroll and related expenses, $1.8 million in legal expenses, $0.7 million in other expenses, $0.6 million in travel and entertainment expenses, and $0.2 million in occupancy expenses.

The increase was primarily due to increases of $15.7 million in payroll and related expenses as a result of an increase in headcount from acquisitions, $3.9 million in other expenses, and $1.5 million in travel and entertainment expenses.

Communications

Selling, general and administrative expenses in the Communications segment increased by $25.6 million to $109.6 million during the year ended December 31, 2023 from $84.0 million during the year ended December 31, 2022.

The increase was primarily due to increases of $1.2 million in communications expenses, $0.9 million in payroll and related expenses, $0.8 million due to a legal settlement accrual release in 2020, $0.8 million in transaction costs, $0.7 million in other expenses, and $0.5 million in other business development activities expenses.

Selling, general and administrative expenses in the Consumer segment increased by $0.2 million to $5.9 million during the year ended December 31, 2021 from $5.7 million during the year ended December 31, 2020.

The increase was primarily due to increases of $33.8 million due to the acquisition of a controlling interest in Lingo during the second quarter of 2022 and from the acquisition of Bullseye during the third quarter of 2022, partially offset by decreases of $3.9 million in payroll and related expenses, $2.7 million in other expenses, $0.9 million in transaction costs, and $0.8 million in marketing expenses.

Consumer Products

Selling, general and administrative expenses in the Consumer Products segment increased by $59.7 million to $77.1 million during the year ended December 31, 2023 from $17.5 million during the year ended December 31, 2022.

The increase was primarily due to the inclusion of the full year of results in the current year after the acquisition of Targus in the fourth quarter of 2022.

Corporate and Other

Selling, general and administrative expenses for the Corporate and Other segment increased $20.0 million to $58.9 million during the year ended December 31, 2021 from $38.9 million during the year ended December 31, 2020.

The increase was primarily due to increases of $18.9 million in payroll and related expenses, $8.0 million in gains on extinguishment of debt, and $4.0 million from the consolidation of special purpose acquisition corporations (“SPACs”), partially offset by decreases of $8.7 million in legal settlement accrual, primarily due to recording a pre-acquisition litigation claim related to one of our acquired subsidiaries, $1.8 million in other expenses, and $0.8 million in legal expenses.

During the year ended December 31, 2021, we repurchased $513.8 million of our senior notes with an aggregate face value of $504.1 million, resulting in a loss net of expenses, premiums paid, and original issue discount of $6.5 million.

The total redemption payments included approximately $6.5 million in accrued interest.

During the year ended December 31, 2020, we repurchased bonds with an aggregate face value of $3.4 million for $1.8 million resulting in a gain net of expenses of $1.6 million.

As part of the repurchase, we paid $0.03 million in interest accrued through the date of each respective repurchase.

Impairment of tradenames .

Due to the impact of the COVID-19 outbreak on economic activity and market volatility, we tested our intangible assets as of March 31, 2020 and June 30, 2020 and made the determination that the indefinite-lived tradenames in the Consumer segment were impaired and the Company recognized impairment charges of $12.5 million during the year ended December 31, 2020.

Selling, general and administrative expenses for the Corporate and Other category increased $30.0 million to $98.2 million during the year ended December 31, 2023 from $68.1 million during the year ended December 31, 2022.

The increase was primarily due to increases of $16.1 million from the inclusion of a full year of results in the current year after the acquisition of other businesses in 2022, $5.4 million loss on extinguishment of debt, $5.2 million in foreign currency fluctuations, and $4.5 million in change in fair value of contingent consideration.

Impairment of goodwill and tradenames.

We recognized impairment charges of $70.3 million during the year ended December 31, 2023.

We performed an interim impairment test as of September 30, 2023 and a year-end impairment test as of December 31, 2023, as further discussed in Note 9 of the consolidated financial statements.

Based on the results of the impairment tests, we recorded a non-cash impairment charge of $68.6 million consisting of a goodwill impairment charge of $53.1 million and a tradename impairment charge of $15.5 million in the Consumer Products segment.

We previously recognized $1.7 million in impairment in the second quarter of 2023 for a tradename in the Capital Markets segment that we no longer use.

There was no impairment recognized during the year ended December 31, 2022.

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Dividend income was $47.8 million during the year ended December 31, 2023 compared to $35.9 million during the year ended December 31, 2022.

Realized and unrealized gains (losses) on investments was a gain of $166.1 million during the year ended December 31, 2021 compared

to a gain of $47.3 million during the year ended December 31, 2020.

The increase was primarily due to an increase in overall values of our investments.

Change in fair value of financial instruments and other in the amount of $3.8 million during the year ended December 31, 2021 was primarily due to a gain of $6.5 million from National PPP loans that were forgiven by the SBA, partially offset by a loss of $2.7 million due to changes in fair value of warrant liabilities.

Income on equity method investments was $2.8 million during the year ended December 31, 2021 compared to a loss of $0.6 million during the year ended December 31, 2020.

Realized and unrealized losses on investments were $162.6 million during the year ended December 31, 2023 compared to $201.1 million during the year ended December 31, 2022.

The change was primarily due to a decrease in overall values of our investments.

Change in fair value of financial instruments and other in the amount of $4.7 million during the year ended December 31, 2023 was primarily due to losses on remeasurement of the bebe equity method investment of $12.9 million recorded in the third quarter of 2023 and remeasurement of mandatorily redeemable noncontrolling interest in an investment of $0.8 million, partially offset by a $9.3 million gain on the sale of certain assets related to our landscaping business in 2023.

Gain on bargain purchase of $15.9 million during the year ended December 31, 2023 was related to the acquisition of a majority interest in bebe in the fourth quarter of 2023.

Income from equity method investments was a loss of $0.2 million during the year ended December 31, 2023 compared to income of $3.6 million during the year ended December 31, 2022.

Interest expense was $187.0 million during the year ended December 31, 2023 compared to $141.2 million during the year ended December 31, 2022.

The increase in interest expense was primarily due to increases in interest expense of $20.2 million from the issuance of senior notes, $5.9 million from the Nomura term loan, and $1.9 million from the Nomura revolver.

Income Before Income Taxes .

Income before income taxes increased $335.3 million to $614.8 million during the year ended December 31, 2021 from $279.5 million during the year ended December 31, 2020.

The increase in income before income taxes was primarily due to increases in revenues of approximately $720.5 million, realized and unrealized gains (losses) on investments of $118.8 million, change in fair value of financial instruments and other of $3.8 million, and income from equity method investments of $3.4 million, partially offset by increases in operating expenses of $482.2 million, interest expense of $27.2 million, a decrease in dividend income of $1.4 million and a decrease in interest income of $0.3 million.

Provision for Income Taxes.

Provision for income taxes was $164.0 million during the year ended December 31, 2021 compared to $75.4 million during the year ended December 31, 2020.

The effective income tax rate was a provision of 26.7% during the year ended December 31, 2021 as compared to a provision of 27.0% during the year ended December 31, 2020.

Net Income (Loss) Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interests .

Net income attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net income (loss) generated by membership interests of partnerships that we do not own.

The net income attributable to noncontrolling interests and redeemable noncontrolling interests was $5.7 million during the year ended December 31, 2021 compared to a net loss of $1.1 million during the year ended December 31, 2020.

Net Income Attributable to the Company .

Net income attributable to the Company during the year ended December 31, 2021 was $445.1 million, an increase of $239.9 million, from net income attributable to the Company of $205.1 million during the year ended December 31, 2020.

The increase was primarily due to increases in operating income of $238.3 million, realized and unrealized gains (losses) on investments of $118.8 million, change in fair value of financial instruments and other of $3.8 million, and income from equity method investments of $3.4 million, partially offset by increases in provision for income taxes of $88.5 million, interest expense of $27.2 million, net income attributable to noncontrolling interests and redeemable noncontrolling interests of $6.9 million, a decrease in dividend income of $1.4 million, and a decrease in interest income of $0.3 million.

The increase in interest expense was due to higher interest rates due to variable rates on certain of our outstanding debt during the year ended December 31, 2023, which also were responsible for higher interest income as discussed above.

The increases in interest expense primarily consisted of $20.4 million related to the Nomura term loan, $9.0 million related to the Pathlight term loan, $4.8 million related to the Lingo term loan, $4.0 million related to the Targus revolver, $3.1 million related to the senior notes, $1.9 million related to the Targus term loan, and $1.7 million related to the BRPI Acquisition Co LLC (“BRPAC”) term loan.

Loss Before Income Taxes .

Loss before income taxes decreased $78.1 million to a loss of $142.3 million during the year ended December 31, 2023 from a loss of $220.5 million during the year ended December 31, 2022.

The change was primarily due to an increase in revenues of approximately $562.9 million, a change in realized and unrealized losses on investments and fair value adjustments of $38.5 million, a gain on bargain purchase of $15.9 million, an increase in dividend income of $11.9 million, and an increase in interest income of $1.1 million, partially offset by an increase in operating expenses of $487.7 million, an increase in interest expense of $45.8 million, a decrease to change in fair value of financial instruments and other of $14.9 million and a decrease in income from equity method investments of $3.8 million.

Benefit from Income Taxes.

Benefit from income taxes was $36.7 million during the year ended December 31, 2023 compared to a benefit from income taxes of $63.9 million during the year ended December 31, 2022.

The effective income tax rate was a benefit of 25.8% during the year ended December 31, 2023 as compared to a benefit of 29.0% during the year ended December 31, 2022.

Net (Loss) Income Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interests .

Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net income generated by membership interests of partnerships that we do not own.

The net loss attributable to noncontrolling interests and redeemable noncontrolling interests was $5.7 million during the year ended December 31, 2023 compared to income of $3.2 million during the year ended December 31, 2022.

Net Loss Attributable to the Company .

Net loss attributable to the Company during the year ended December 31, 2023 was $99.9 million compared to net loss attributable to the Company of $159.8 million during the year ended December 31, 2022.

The change was primarily due to an increase in operating income of $75.2 million, a change in realized and unrealized losses on investments and fair value adjustments of $38.5 million, a gain on bargain purchase of $15.9 million, an increase in dividend income of $11.9 million, a change in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests of $9.0 million, and an increase in interest income of $1.1 million, partially offset by an increase in interest expense of $45.8 million, a decrease in benefit from income taxes of $27.2 million, a decrease in change in fair value of financial instruments and other of $14.9 million, and a decrease in income from equity method investments of $3.8 million.

Preferred Stock Dividends .

Dividends are payable quarterly in arrears.

On January 11, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021.

On July 8, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on August 2, 2021 to holders of record as of the close of business on July 21, 2021.

On October 6, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.

Dividends are payable quarterly in arrears.

On January 11, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021.

On July 8, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on August 2, 2021 to holders of record as of the close of business on July 21, 2021.

On October 6, 2021,

the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.

Net Income Available to Common Shareholders .

Net income available to common shareholders during the year ended December 31, 2021 was $437.6 million, an increase of $237.2 million, from net income available to common shareholders of $200.4 million during the year ended December 31, 2020.

The increase was primarily due to increases in operating income of $238.3 million, realized and unrealized gains (losses) on investments of $118.8 million, change in fair value of financial instruments and other of $3.7 million, and income from equity method investments of $3.4 million, partially offset by increases in provision for income taxes of $88.5 million, interest expense of approximately $27.2 million, net income attributable to noncontrolling interests and redeemable noncontrolling interests of $6.9 million, preferred stock dividends of $2.7 million, a decrease in dividend income of $1.4 million, and a decrease in interest income of $0.3 million.

Preferred stock dividends were $8.0 million during the years ended December 31, 2023 and 2022.

Dividends on the Series A preferred paid during the years ended December 31, 2023 and 2022 were $0.4296875 per depository share.

Dividends on the Series B preferred paid during the years ended December 31, 2023 and 2022 were $0.4609375 per depository share.

Net Loss Available to Common Shareholders .

Net loss available to common shareholders during the year ended December 31, 2023 was $108.0 million compared to net loss available to common shareholders of $167.8 million during the year ended December 31, 2022.

The change was primarily due to an increase in operating income of $75.2 million, a change in realized and unrealized losses on investments of $38.5 million, a gain on bargain purchase of $15.9 million, an

increase in dividend income of $11.9 million, a change in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests of $9.0 million, and an increase in interest income of $1.1 million, partially offset by an increase in interest expense of $45.8 million, a decrease in benefit from income taxes of $27.2 million, a decrease in change in fair value of financial instruments and other of $14.9 million, and a decrease in income from equity method investments of $3.8 million.

Liquidity and Capital Resources

Our operations are funded through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes payable, term loans and credit facilities, and special purpose financing arrangements.

During the years ended December 31, 2022 and 2021, we generated net loss attributable to the Company of $159.8 million and net income attributable to the Company of $445.1 million, respectively.

Our net loss of $156.6 million included $202.6 million of losses that primarily related to a decrease in the fair value of our portfolio of securities and other investments owned during the year ended December 31, 2022.

Our cash flows and profitability are impacted by capital markets engagements performed on a quarterly and annual basis and amounts realized from the sale of our investments in marketable securities.

During the years ended December 31, 2023 and 2022, we generated net loss attributable to the Company of $99.9 million and net loss attributable to the Company of $159.8 million, respectively.

The Company operates a number of businesses in its segments that provide steady cash flows and operating income throughout the year, however, our cash flows and profitability are impacted by capital market engagements and retail liquidation engagements performed on a quarterly and annual basis, which may be episodic in nature, and amounts realized from the sale of our investments in marketable securities.

As of December 31, 2023, we had $232.0 million of unrestricted cash and cash equivalents, $1.9 million of restricted cash, $1,092.1 million of securities and other investments, at fair value, $532.4 million of loans receivable, at fair value, and $2,356.4 million of borrowings outstanding.

The borrowings outstanding of $2,446.8 million as of December 31, 2022 included $1,721.8 million of borrowings from the issuance of the series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $572.1 million in term loans borrowed pursuant to the Targus, Pathlight, Lingo, BRPI Acquisition Co LLC (“BRPAC”), and Nomura credit agreements discussed below, $127.7 million of revolving credit facility under the Targus and Nomura credit facilities discussed below, and $25.3 million of notes payable.

We believe that our current cash and cash equivalents, securities and other investments owned, funds available under our asset based credit facility, funds available under the Targus, Pathlight, Lingo, BRPAC, and Nomura term loans, funds available under the Targus and Nomura revolving credit facilities, and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying financial statements.

The borrowings outstanding of $2,356.4 million as of December 31, 2023 included $1,668.0 million of borrowings from the issuance of the series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $625.2 million in term loans borrowed pursuant to the Targus, Lingo, BRPAC, Nomura, and bebe credit agreements discussed below, $43.8 million of revolving credit facility under the Targus credit facility discussed below, and $19.4 million of notes payable.

We believe that our current cash and cash equivalents, securities and other investments owned, funds available under our asset based credit facility, funds available under the Targus and Nomura revolving credit facilities, and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying financial statements.

Due to the fact that we are no longer a well known seasoned issuer and no longer eligible to file a short form registration statement with the SEC, accessing the capital markets could take longer and cost more than would otherwise be the case.

We continue to monitor our financial performance to ensure sufficient liquidity to fund operations and execute on our business plan.

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A discussion of cash flows during the year ended December 31, 2021 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K during the year ended December 31, 2021, filed with the SEC on February 25, 2022, which is available free of charge on the SEC’s website at www.sec.gov.

Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K during the year ended December 31, 2022, filed with the SEC on March 16, 2023, which is available free of charge on the SEC’s website at www.sec.gov.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

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Effect of foreign currency on cash 3,160 (933)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (8,934) $ 175,023

Net decrease in cash, cash equivalents and restricted cash $ (37,087) $ (8,934)

Cash provided by operating activities was $24.5 million during the year ended December 31, 2023 compared to cash provided by operating activities of $6.7 million during the year ended December 31, 2022.

Cash provided by operating

activities during the year ended December 31, 2023 included a net loss of $105.6 million adjusted for noncash items of $97.5 million and changes in operating assets and liabilities of $32.7 million.

Noncash items of $97.5 million included impairment of goodwill and tradenames of $70.3 million, depreciation and amortization of $49.6 million, share-based compensation of $45.1 million, provision for credit losses of $7.1 million, loss on extinguishment of debt of $5.3 million, depreciation of rental merchandise of $4.1 million, income allocated to and fair value adjustment for mandatorily redeemable noncontrolling interests of $1.8 million, dividends from equity method investments of $0.4 million, and income from equity method investments of $0.2 million, partially offset by deferred income taxes of $40.9 million, gain on bargain purchase of $15.9 million, fair value adjustments of $10.7 million, non-cash interest and other of $9.7 million, and gain on sale of business, disposal of fixed assets, and other of $9.0 million, and effect of foreign currency on operations of $0.3 million.

Cash provided by operating activities during the year ended December 31, 2022 included net loss of $156.6 million adjusted for noncash items of $47.6 million and changes in operating assets and liabilities of $115.6 million.

Noncash items of $47.6 million included share-based compensation of $61.1 million, depreciation and amortization of $40.0 million, fair value adjustments of $34.9 million, impairment of leaseholds, intangibles and lease loss accrual, and gain (loss) on disposal of fixed assets of $4.9 million, provision for doubtful accounts of $4.2 million, dividends from equity method investments of $4.0 million, income allocated for mandatorily redeemable noncontrolling interests of $1.1 million, and effect of foreign currency on operations of $0.8 million, partially offset by deferred income taxes of $80.4 million, SPAC deconsolidation gain of $8.3 million, gain on equity method investments of $6.8 million, income from equity method investments of $3.6 million, non-cash interest and other of $3.2 million, and gain on extinguishment of debt of $1.1 million.

Cash provided by operating activities during the year ended December 31, 2021 included net income of $450.8 million adjusted for noncash items of $91.5 million and changes in operating assets and liabilities of $491.4 million.

Noncash items of $91.5 million included deferred income taxes of $61.8 million, share-based compensation of $36.0 million, depreciation and amortization of $25.9 million, loss on extinguishment of debt of $6.1 million, dividends from equity method investments of $2.1 million, provision for doubtful accounts of $1.5 million, effect of foreign currency on operations of $0.1 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.9 million, partially offset by interest and other of $22.3 million, fair value adjustments of $7.6 million, gain on extinguishment of loans of $6.5 million, gain on equity method investments of $3.5 million, income from equity method investments of $2.8 million, and impairment of leaseholds, intangibles and lease loss accrual and gain on disposal of fixed assets of $0.1 million.

Cash used in investing activities was $32.3 million during the year ended December 31, 2022 compared to used in investing activities of $956.5 million during the year ended December 31, 2021.

Noncash items of $47.6 million included share-based compensation of $61.1 million, depreciation and amortization of $40.0 million, fair value adjustments of $34.9 million, impairment of leaseholds, intangibles and lease loss accrual and gain on disposal of fixed assets of $4.9 million, provision for credit losses of $4.2 million, dividends from equity method investments of $4.0 million, income allocated for mandatorily redeemable noncontrolling interests of $1.1 million, and effect of foreign currency on operations of $0.8 million, partially offset by deferred income taxes of $80.4 million, SPAC deconsolidation gain of $8.3 million, gain on equity method investments of $6.8 million, income from equity method investments of $3.6 million, non-cash interest and other of $3.2 million, and gain on extinguishment of debt of $1.1 million.

Cash provided by investing activities was $301.2 million during the year ended December 31, 2023 compared to cash used in investing activities of $32.3 million during the year ended December 31, 2022.

During the year ended December 31, 2023, cash provided by investing activities consisted of cash received from loans receivable repayment of $606.7 million, funds received from trust account of subsidiary of $175.8 million, sale of loans receivable of $85.0 million, and proceeds from sale of business and other of $17.5 million, partially offset by cash used for purchases of loans receivable of $545.0 million, acquisition of businesses of $26.2 million, purchases of property and equipment and intangible assets of $7.7 million, and purchases of equity method investments of $4.9 million.

During the year ended December 31, 2022, cash used in investing activities consisted of cash used for purchases of loans receivable of $503.1 million, acquisition of businesses of $261.7 million, purchases of equity method investments of $11.0 million, and purchases of property and equipment and intangible assets of $3.9 million, partially offset by cash received from loans receivable repayment of $574.9 million and funds received from trust account of subsidiary of $172.6 million.

During the year ended December 31, 2021, cash used in investing activities consisted of cash used for purchases of loans receivable of $738.9 million, cash of $345.0 million used to fund two trust accounts for the future redemption of our subsidiaries’ redeemable common stock, cash used for acquisition of businesses of $28.3 million, cash used for repayments of loan participations sold of $15.2 million, cash used for purchases of property and equipment and intangible assets of $0.7 million, and purchases of equity method investments of $0.6 million, partially offset by cash received from loans receivable repayment of $172.1 million.

Cash provided by financing activities was $17.6 million during the year ended December 31, 2022 compared to cash provided by financing activities of $1,081.0 million during the year ended December 31, 2021.

During the year ended December 31, 2022, cash provided by financing activities primarily consisted of proceeds from term loans of $324.2 million, proceeds from revolving line of credit of $64.9 million, proceeds from issuance of senior notes of $51.6 million, contributions from noncontrolling interests of $21.1 million, proceeds from our offering of preferred stock of $0.9 million, partially offset by redemption of subsidiary temporary equity and distributions of $172.6 million, payment of dividends on our common shares of $119.5 million, repayment on our term loans of $96.2 million, repayment of our revolving line of credit of $17.2 million, payment of employment taxes on vesting of restricted stock of $10.3 million, payment of dividends on our preferred shares of $8.0 million, payment of debt issuance costs of $8.2 million, repurchase of our common stock of $6.5 million, distribution to noncontrolling interests of $4.2 million, payment for contingent consideration of $1.8 million,

and repayment of our notes payable of $0.5 million.

During the year ended December 31, 2021, cash provided by financing activities primarily consisted of $1,249.1 million proceeds from issuance of senior notes, $345.0 million proceeds from initial public offering of subsidiaries, $300.0 million proceeds from our term loan, $80.0 million proceeds from revolving line of credit, $64.7 million proceeds from our offering of common stock, $13.7 million contributions from noncontrolling interests, $14.7 million proceeds from our offering of preferred stock, partially offset by $507.3 million used to repurchase our senior notes, $347.1 million used to pay dividends on our common shares, $37.6 million used to repay our notes payable, $33.4 million used to pay debt issuance costs, $20.7 million used for repayment on our term loan, $16.5 million distribution to noncontrolling interests, $9.6 million used for payment of employment taxes on vesting of restricted stock, $7.5 million used to pay dividends on our preferred shares, $2.7 million used to repurchase our common stock, and $3.7 million used for payment of participating note payable and contingent consideration.

Cash used in financing activities was $365.9 million during the year ended December 31, 2023 compared to cash provided by financing activities of $17.6 million during the year ended December 31, 2022.

During the year ended December 31, 2023, cash used in financing activities primarily consisted of repayment on our term loans of $520.8 million, repayment of our revolving line of credit of $303.0 million, redemption of subsidiary temporary equity and distributions of $175.8 million, payment of dividends on our common shares of $141.1 million, repurchase of our common stock of $69.5 million, redemption of senior notes of $58.9 million, payment of debt issuance costs of $28.0 million, repayment of our notes payable and other of $13.8 million, payment of dividends on our preferred shares of $8.1 million, payment of employment taxes on vesting of restricted stock of $7.6 million, distributions to noncontrolling interests of $6.5 million, and payment for contingent consideration of $1.9 million, partially offset by proceeds from term loans of $628.2 million, proceeds from revolving line of credit of $219.2 million, proceeds from our offering of common stock of $115.0 million, contributions from noncontrolling interests of $6.1 million, proceeds from our offering of preferred stock of $0.5 million, and proceeds from issuance of senior notes of $0.2 million.

During the year ended December 31, 2022, cash provided by financing activities primarily consisted of proceeds from term loans of $324.2 million, proceeds from revolving line of credit of $64.9 million, proceeds from issuance of senior notes of $51.6 million, contributions from noncontrolling interests of $21.1 million, proceeds from our offering of preferred stock of $0.9 million, partially offset by redemption of subsidiary temporary equity and distributions of $172.6 million, payment of dividends on our common shares of $119.5 million, repayment on our term loans of $96.2 million, repayment of our revolving line of credit of $17.2 million, payment of employment taxes on vesting of restricted stock of $10.3 million, payment of debt issuance costs of $8.2 million, payment of dividends on our preferred shares of $8.0 million, repurchase of our common stock of $6.5 million, distribution to noncontrolling interests of $4.2 million, payment for contingent consideration of $1.8 million, and repayment of our notes payable of $0.5 million.

Credit Agreements

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On October 18, 2022, our subsidiary, Tiger US Holdings, Inc., a Delaware corporation, among others, entered into a credit agreement (“Targus Credit Agreement”) with PNC Bank, National Association (“PNC”), as agent and security trustee for a five-year $28.0 million term loan and a five-year $85.0 million revolver loan, which was used to finance part of the acquisition of Targus.

The 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 is secured by substantially all Targus assets as collateral defined in the Targus Credit Agreement.

The agreement contains certain covenants, including those limiting our ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of our 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.

We are in compliance with all financial covenants in the Targus Credit Agreement as of December 31, 2022.

On October 31, 2023 and February 20, 2024, we entered into Amendment No.

1 and Amendment No.

2 to the Targus Credit Agreement, which, among other things, modified the fixed charge coverage ratio and the minimum earnings before interest, taxes, depreciation, and amortization requirements which waived the financial covenant breaches for the periods ended September 30, 2023 and December 31, 2023, respectively.

We are in compliance with the Targus Credit Agreement and no event of default has occurred.

The term loan bears interest on the outstanding principal amount equal to the Term Secured Overnight Financing Rate (“SOFR”) rate plus an applicable margin of 3.75%.

1 unchanged sentence

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

Quarterly installments from December 31, 2022 to September 30, 2027 are in the amount of $1.4 million per quarter and the remaining principal balance is due at final maturity on October 18, 2027.

Quarterly installments from March 31, 2024 to March 31, 2027 are in the amount of $1.4 million per quarter and the remaining principal balance is due at final maturity on October 18, 2027.

As of December 31, 2023, the outstanding balance on the term loan was $17.8 million (net of unamortized debt issuance costs of $0.4 million) and the outstanding balance on the revolver loan was $43.8 million.

Interest expense on these loans during the year ended December 31, 2022 was $1.3 million (including amortization of deferred debt issuance costs and unused commitment fees of $0.2 million).

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

Pathlight Credit Agreement

On September 23, 2022, our subsidiary, B.

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 $148.2 million term loan.

The Pathlight Credit Agreement was entered in connection with the purchase of the 2022 Badcock Receivable discussed in Note 3 to the consolidated

statements included elsewhere in this Annual Report.

On January 12, 2023, Amendment No.

2 to the Pathlight Credit Agreement increased the term loan by an additional $78.3 million.

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 December 31, 2022, the interest rate on the Pathlight Credit Agreement was 11.0%.

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.

We are in compliance with all financial covenants in the Pathlight Credit Agreement as of December 31, 2022.

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 December 31, 2022, the outstanding balance on the term loan was $118.4 million (net of unamortized debt issuance costs of $2.4 million).

Interest expense on the term loan during the year ended December 31, 2022 was $5.3 million (including amortization of deferred debt issuance costs of $1.3 million).

As of December 31, 2022, the outstanding balance on the term loan was $26.0 million (net of unamortized debt issuance costs of $0.6 million) and the outstanding balance on the revolver loan was $53.0 million.

Interest expense on these loans during the years ended December 31, 2023 and 2022 was $7.3 million (including amortization of deferred debt issuance costs and unused commitment fees of $0.7 million) and $1.3 million (including amortization of deferred debt issuance costs and unused commitment fees of $0.2 million), respectively.

The interest rate on the term loan was 10.20% and 8.43% and the interest rate on the revolver loan ranged between 8.45% to 11.25% and between 6.03% to 9.25% as of December 31, 2023 and 2022, respectively.

The weighted average interest rate on the revolver loan was 8.53% and 6.68% as of December 31, 2023 and 2022, respectively.

Lingo Credit Agreement

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This loan was used to finance part of the purchase of BullsEye by Lingo.

On September 9, 2022, Lingo entered into the First Amendment to the Lingo Credit Agreement with Grasshopper Bank (the “New Lender”) for an incremental term loan of $7.5 million, increasing the principal balance of the term loan to $52.5 million.

On September 9, 2022, Lingo entered into the First Amendment to the Lingo Credit Agreement with Grasshopper Bank for an incremental term loan of $7.5 million, increasing the principal balance of the term loan to $52.5 million.

On November 10, 2022, Lingo entered into the Second Amendment to the Lingo Credit Agreement with KeyBank National Association for an incremental term loan of $20.5 million, increasing the principal balance of the term loan to $73.0 million.

The term loan bears interest on the outstanding principal amount equal to the Term SOFR rate plus a margin of 3.00% to 3.75% per annum, depending on the consolidated total funded debt ratio as defined in the Lingo Credit Agreement, plus applicable spread adjustment.

As of December 31, 2022, the interest rate on the Lingo Credit Agreement was 7.89%.

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.

applicable spread adjustment.

As of December 31, 2023 and 2022, the interest rate on the Lingo Credit Agreement was 8.70% and 7.89%, respectively.

The Lingo Credit Agreement is guaranteed by the Company and Lingo's subsidiaries and secured by certain Lingo assets and equity interests as collateral defined in the Lingo Credit Agreement.

The agreement contains certain covenants, including those limiting our 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 us 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.

1 unchanged sentence

We are in compliance with all financial covenants in the Lingo Credit Agreement as of December 31, 2023.

On March 15, 2024, we received an extension under our credit agreement with Banc of California, N.A.

of the time required to deliver our 2023 audited financial statements, which was extended to April 9, 2024, and on April 9, 2024, we received further extension of the time required to deliver our 2023 audited financial statements to April 29, 2024.

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 $2.3 million per quarter, from March 31, 2024 to December 31, 2024

are in the amount of $2.7 million per quarter, from March 31, 2025 to June 30, 2027 are in the amount of $3.7 million, and the remaining principal balance is due at final maturity on August 16, 2027.

Quarterly installments from March 31, 2024 to December 31, 2024 are in the amount of $2.7 million per quarter, from March 31, 2025 to June 30, 2027 are in the amount of $3.7 million, and the remaining principal balance is due at final maturity on August 16, 2027.

As of December 31, 2023 and 2022, the outstanding balance on the term loan was $63.2 million (net of unamortized debt issuance costs of $0.7 million) and $72.0 million (net of unamortized debt issuance costs of $1.0 million), respectively.

Interest expense on the term loan during the years ended December 31, 2023 was $6.4 million (including amortization of deferred debt issuance costs of $0.3 million) and $1.6 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

bebe Credit Agreement

As a result of the Company obtaining a majority ownership interest in bebe on October 6, 2023, bebe's credit agreement with SLR Credit Solutions (the “bebe Credit Agreement”) for a $25.0 million five-year term loan with a maturity date of August 24, 2026 is included in the Company's long-term debt.

The term loan bears interest on the outstanding principal amount equal to the Term SOFR rate plus a margin of 5.50% to 6.00% per annum, depending on the total fixed charge coverage ratio as defined in the bebe Credit Agreement.

As of December 31, 2023, the interest rate on the bebe Credit Agreement was 11.14%.

The bebe Credit Agreement is collateralized by a first lien on all bebe assets and pledges of capital stock including certain equity interests held by bebe.

The agreement contains certain covenants, including those limiting the borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends.

In addition the agreement requires bebe to maintain certain financial ratios.

We are in compliance with all financial covenants in the bebe Credit Agreement as of December 31, 2023.

Principal outstanding is due in quarterly installments through June 30, 2026 in the amount of $0.3 million per quarter and the remaining principal balance of $20.0 million is due at final maturity on August 24, 2026.

As of December 31, 2023, the outstanding balance on the term loan was $22.5 million (net of unamortized debt issuance costs of $0.6 million).

Interest expense on the term loan during the year ended December 31, 2022 was $1.6 million (including amortization of deferred debt issuance costs of $0.1 million).

Interest expense on the term loan during the period from October 6, 2023 through December 31, 2023 was $0.7 million (including amortization of deferred debt issuance costs of $0.1 million).

Nomura Credit Agreement

On June 23, 2021, we and our wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement (as amended prior to the Second Amendment (as defined below) 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 $200.0 million secured term loan credit facility (the “Term Loan Facility”) and a four-year $80.0 million secured revolving loan credit facility (the “Revolving Credit Facility”).

On December 17, 2021 (the “Amendment Date”), we, the Primary Guarantor, and the Borrower entered into a Second Incremental Amendment to Credit Agreement (the “Second Amendment”), by and among the Company, the Primary Guarantor, the Borrower, each of the subsidiary guarantors signatory thereto, each of the lenders party thereto, the Administrative Agent and the Collateral Agent, pursuant to which the Borrower established an incremental facility in an aggregate principal amount of $100.0 million (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 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, (“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%.

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

In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter.

Subject to certain eligibility requirements, the assets of certain subsidiaries of the Company that hold credit assets, private equity assets, and public equity assets are placed into a borrowing base, which serves to limit the borrowings under the Credit Facilities.

If borrowings under the facilities exceed the borrowing base, the Company is obligated to prepay the loans in an aggregate amount equal to such excess.

The Credit Agreement and the Second Amendment contain certain representations and warranties (subject to certain agreed qualifications) that are customary for financings of this kind.

The Credit Agreement and the Second Amendment contain certain affirmative and negative covenants customary for financings of this type that, among other things, limit our, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests.

In addition, the Credit Agreement and the Second Amendment contain a financial covenant that requires us to maintain Operating EBITDA of at least $135.0 million and the Primary Guarantor to maintain net asset value of at least $1,100.0 million.

The Credit Agreement and the Second Amendment contain customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.

We are in compliance with all financial covenants in the Nomura Credit Agreement as of December 31, 2022.

Commencing on September 30, 2022, the Term Loan Facility and Incremental Facility is amortizing 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 March 31, 2023 to March 31, 2025 are in the amount of $3.8 million per quarter.

As of December 31, 2022 and 2021, the outstanding balance on the Term Loan Facility and Incremental Facility was $287.0 million (net of unamortized debt issuance costs of $5.5 million) and $292.7 million (net of unamortized debt issuance costs of $7.4 million), respectively.

Interest on the term loan during the years ended December 31, 2022 and 2021,

was $21.3 million (including amortization of deferred debt issuance costs of $2.1 million) and $5.9 million (including amortization of deferred debt issuance costs of $0.8 million), respectively.

We and our wholly owned subsidiaries, BR Financial Holdings, LLC, and BR Advisory & Investments, LLC had entered into a credit agreement dated June 23, 2021 (as amended, the “Prior Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, for a four-year $300.0

million secured term loan credit facility (the “Prior Term Loan Facility”) and a four-year $80.0 million secured revolving loan credit facility (the “Prior Revolving Credit Facility”) with a maturity date of June 23, 2025.

On August 21, 2023, we and our wholly owned subsidiary, BR Financial Holdings, LLC (the “Borrower”), and certain direct and indirect subsidiaries of the Borrower (the “Guarantors”), entered into a credit agreement (the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Computershare Trust Company, N.A., as collateral agent, for a four-year $500.0 million secured term loan credit facility (the “New Term Loan Facility”) and a four-year $100.0 million secured revolving loan credit facility (the “New Revolving Credit Facility” and together, the “New Credit Facilities”).

The purpose of the Credit Agreement was to (i) fund the Freedom VCM equity investment, (ii) prepay in full the Prior Term Loan Facility and Prior Revolving Credit Facility with an aggregate outstanding balance of $347.9 million, which included $342.0 million in principal and $5.9 million in interest and fees, (iii) fund a dividend reserve in an amount not less than $65.0 million, (iv) pay related fees and expenses, and (v) for general corporate purposes.

We recorded a loss on extinguishment of debt related to the Prior Credit Agreement of $5.4 million, which was included in selling, general and administrative expenses on the consolidated statements of operations.

SOFR rate loans under the New Credit Facilities accrue interest at the adjusted term SOFR rate plus an applicable margin of 6.00%.

In addition to paying interest on outstanding borrowings under the New Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter.

The Credit Agreement is secured on a first priority basis by a security interest in the equity interests of the Borrower and each of the Borrower’s subsidiaries (subject to certain exclusions) and a security interest in substantially all of the assets of the Borrower and the Guarantors.

The borrowing base as defined in the Credit Agreement consists of a collateral pool that includes certain of the Company's loans receivables in the amount of $375.8 million and investments in the amount of $786.7 million as of December 31, 2023.

The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit the Company’s and its subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests.

The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.

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

On March 26, 2024, the Company received an extension under its existing credit agreement with Nomura Corporate Funding Americas, LLC of the time required to deliver its 2023 audited financial statements, which was extended to April 29, 2024.

Commencing on September 30, 2023, the New Term Loan Facility began to amortize in equal quarterly installments of 0.625% of the principal amount of the term loan as of the closing date with the remaining balance due at final maturity on August 21, 2027.

Quarterly installments from March 31, 2024 to June 30, 2027 are in the amount of $3.1 million per quarter.

As of December 31, 2023 and 2022, the outstanding balance on the term loan was $475.1 million (net of unamortized debt issuance costs of $18.7 million) and $287.0 million (net of unamortized debt issuance costs of $5.5 million), respectively.

Interest on the term loan during the years ended December 31, 2023 and 2022 was $41.7 million (including amortization of deferred debt issuance costs of $2.9 million) and $21.3 million (including amortization of deferred debt issuance costs of $2.1 million), respectively.

The interest rate on the term loan as of December 31, 2023 and 2022 was 11.37% and 9.23%, respectively.

We had an outstanding balance of $74.7 million and $80.0 million under the Revolving Credit Facility as of December 31, 2022 and 2021, respectively.

We had an outstanding balance of zero and $74.7 million under the revolving facility as of December 31, 2023 and 2022, respectively.

Interest on the revolving facility during the years ended December 31, 2023 and 2022 was $5.9 million (including unused commitment fees of $0.3 million and amortization of deferred financing costs of $0.8 million) and $5.4 million (including unused commitment fees of $0.01 million and amortization of deferred financing costs of $0.6 million), respectively.

1 unchanged sentence

Wells Fargo Credit Agreement

We are party to a credit agreement (as amended, the “Credit Agreement”) governing our asset based credit facility with Wells Fargo Bank, National Association (“Wells Fargo Bank”) with a maximum borrowing limit of $200.0 million and a maturity date of April 20, 2027.

maturity date of April 20, 2027.

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

5 unchanged sentences

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 $0.2 million, $0.4 million, and $0.6 million during the years ended December 31, 2022, 2021, and 2020, respectively.

Interest expense totaled $0.1 million and $0.2 million during the years ended December 31, 2023 and 2022, respectively.

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

As of December 31, 2023 and 2022, there were no open letters of credit outstanding.

We are in compliance with all financial covenants in the asset based credit facility as of December 31, 2022.

We are in compliance with all covenants in the asset based credit facility as of December 31, 2023.

On March 28, 2024, the Company received an extension under its existing credit agreement with Wells Fargo Bank of the time required to deliver its 2023 audited financial statements, which was extended to April 29, 2024.

BRPAC Credit Agreement

7 unchanged sentences

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) 100.00% of the equity interests of the Credit Parties, (b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India;

and (c) 65% of the equity interests in magicJack VocalTec LTD., a limited company organized under the laws of Israel.

and (c) 65% of the equity interests in magicJack VoIP Services, LLC, a Delaware corporation.

The BRPAC Credit Agreement contains certain covenants, including those limiting the Credit Parties’ and their subsidiaries’ ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends.

1 unchanged sentence

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 outstanding BRPAC Credit Agreement.

We are in compliance with all financial covenants in the BRPAC Credit Agreement as of December 31, 2023.

On March 15, 2024, we received an extension under our credit agreement with Banc of California, N.A.

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:

3 unchanged sentences

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

Quarterly installments from March 31, 2023 to December 31, 2023 are in the amount of $4.7 million per quarter, from March 31, 2024 to December 31, 2026 are in the amount of $3.8 million per quarter, on March 31, 2027 is in the amount of $2.8 million, and the remaining principal balance is due at final maturity on June 30, 2027.

Quarterly installments from March 31, 2024 to December 31, 2026 are in the amount of $3.5 million per quarter, on March 31, 2027 is in the amount of $2.6 million, and the remaining principal balance is due at final maturity on June 30, 2027.

As of December 31, 2023, and 2022, the outstanding balance on the term loan was $46.6 million (net of unamortized debt issuance costs of $0.4 million) and $68.7 million (net of unamortized debt issuance costs of $0.7 million), respectively.

Interest expense on the term loan during the years ended December 31, 2022, 2021, and 2020, was $3.5 million (including amortization of deferred debt issuance costs of $0.3 million), $2.5 million (including amortization of deferred debt issuance costs of $0.3 million) and $2.4 million (including amortization of deferred debt issuance costs of $0.3 million), respectively.

Interest expense on the term loan during the years ended December 31, 2023 and 2022 was $5.2 million (including amortization of deferred debt issuance costs of $0.3 million) and $3.5 million (including amortization of deferred debt issuance costs of $0.3 million), respectively.

Senior Note Offerings

During the years ended December 31, 2022 and 2021, the Company issued $111.8 million and $233.4 million, 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.

which governs the program of at-the-market sales of the Company’s senior notes.

During the years ended December 31, 2023 and 2022, we issued $0.2 million and $111.8 million, respectively, of senior notes with maturity dates ranging from May 2024 to August 2028 pursuant to At the Market Issuance Sales Agreements with BRS which governs the program of at-the-market sales of our senior notes.

We filed a series of prospectus supplements with the SEC in respect of our offerings of these senior notes.

On November 15, 2022, we issued $60.0 million of senior notes due in May 2024 (“6.75% 2024 Notes”) pursuant to a prospectus supplement.

Interest on the 6.75% 2024 Notes is payable quarterly at 6.75%.

The 6.75% 2024 Notes are unsecured and due and payable in full on May 30, 2024.

In connection with the issuance of the 6.75% 2024 Notes, we received net proceeds of $59.0 million (after underwriting commissions, fees and other issuance costs of $1.0 million)

In June 2023, we entered into note purchase agreements in connection with the 6.75% Senior Notes due 2024 (“6.75% 2024 Notes”) that were issued for the Targus acquisition.

The note purchase agreements had a repurchase date of June 30, 2023 on which date we repurchased our 6.75% 2024 Notes with an aggregate principal amount of $58.9 million.

The repurchase price was equal to the aggregate principal amount, plus accrued and unpaid interest up to, but excluding, the repurchase date.

The total repurchase payment included approximately $0.7 million in accrued interest.

On February 29, 2024, we partially redeemed $115.5 million aggregate principal amount of our 6.75% Senior Notes due 2024 (the “6.75% 2024 Notes”) pursuant to the seventh supplemental indenture dated December 3, 2021.

The redemption price was equal to 100% of the aggregate principal amount, plus accrued and unpaid interest, up to, but excluding, the redemption date.

The total redemption payment included approximately $0.6 million in accrued interest.

As of December 31, 2023 and 2022, the total senior notes outstanding was $1,668.0 million (net of unamortized debt issue costs of $13.1 million) and $1,721.8 million (net of unamortized debt issue costs of $18.1 million) with a weighted average interest rate of 5.71% and 5.75%, respectively.

Interest on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $99.9 million and $81.5 million during the years ended December 31, 2022 and 2021, respectively.

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

This program provides for the sale by us of up to $250.0 million of certain of our senior notes.

As of December 31, 2022 and 2021, we had $69.5 million and $111.9 million, respectively, remaining availability under the January 2022 Sales Agreement.

Interest on the senior notes is payable on a quarterly basis.

Interest expense on the senior notes totaled $103.2 million and $99.9 million during the years ended December 31, 2023 and 2022, respectively.

From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations.

During the years ended December 31, 2022, and 2021, we paid cash dividends on our common stock of

$119.5 million, and $347.1 million, respectively.

During the years ended December 31, 2023, and 2022, we paid cash dividends on our common stock of $141.1 million, and $119.5 million, respectively.

On February 29, 2024, the Company declared a regular quarterly dividend of $0.50 per share, which will be paid on or about March 22, 2024 to stockholders of record as of March 11, 2024.

On October 28, 2021, the Board of Directors announced an increase to the regular quarterly dividend from $0.50 per share to $1.00 per share.

While it is the Board’s current intention to make regular dividend payments of $1.00 per share each quarter and special dividend payments dependent upon exceptional circumstances from time to time, our Board of Directors may reduce or discontinue the payment of dividends at any time for any reason it deems relevant.

While it is the Board’s current intention to make regular dividend payments each quarter and special dividend payments dependent upon exceptional circumstances from time to time, our Board of Directors may reduce or discontinue the payment of dividends at any time for any reason it deems relevant.

The declaration and payment of any future dividends or repurchases of our common stock will be made at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, cash flows, capital expenditures, and other factors that may be deemed relevant by our Board of Directors.

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July 25, 2023 August 21, 2023 August 11, 2023 1.000 — 1.000

April 28, 2022 May 20, 2022 May 11, 2022 1.000 — 1.000

May 4, 2023 May 23, 2023 May 16, 2023 1.000 — 1.000

February 22, 2023 March 23, 2023 March 10, 2023 1.000 — 1.000

October 28, 2021 November 23, 2021 November 9, 2021 1.000 3.000 4.000

November 3, 2022 November 29, 2022 November 15, 2022 1.000 — 1.000

July 28, 2022 August 23, 2022 August 11, 2022 1.000 — 1.000

May 3, 2021 May 28, 2021 May 17, 2021 0.500 2.500 3.000

April 28, 2022 May 20, 2022 May 11, 2022 1.000 — 1.000

February 23, 2022 March 23, 2022 March 9, 2022 1.000 — 1.000

1 unchanged sentence

Dividends are payable quarterly in arrears.

As of December 31, 2022 and 2021, dividends in arrears in respect of the Depositary Shares were $0.8 million and $0.8 million, respectively.

As of December 31, 2023 and 2022, dividends in arrears in respect of the Depositary Shares were $0.8 million.

On January 9, 2024, the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on January 31, 2024 to holders of record as of the close of business on January 22, 2024.

1 unchanged sentence

Dividends are payable quarterly in arrears.

As of December 31, 2022 and 2021, dividends in arrears in respect of the Depositary Shares were $0.5 million and $0.5 million, respectively.

As of December 31, 2023 and 2022, dividends in arrears in respect of the Depositary Shares were $0.5 million.

On January 9, 2024, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on January 31, 2024 to holders of record as of the close of business on January 22, 2024.

4 unchanged sentences

July 11, 2023 July 31, 2023 July 21, 2023 0.4296875 0.4609375

April 7, 2022 April 29, 2022 April 19, 2022 0.4296875 0.4609375

April 10, 2023 May 1, 2023 April 21, 2023 0.4296875 0.4609375

January 9, 2023 January 31, 2023 January 20, 2023 0.4296875 0.4609375

October 6, 2021 November 1, 2021 October 21, 2021 0.4296875 0.4609375

July 8, 2021 August 2, 2021 July 21, 2021 0.4296875 0.4609375

October 10, 2022 October 31, 2022 October 21, 2022 0.4296875 0.4609375

July 7, 2022 July 29, 2022 July 19, 2022 0.4296875 0.4609375

April 7, 2022 April 29, 2022 April 19, 2022 0.4296875 0.4609375

January 10, 2022 January 31, 2022 January 21, 2022 0.4296875 0.4609375

Critical Accounting Policies and Estimates

Our financial statements and the notes thereto contain information that is pertinent to management’s discussion and analysis.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities.

Critical Accounting Estimates

The Company’s accounting estimates are essential to understanding and interpreting the financial results on the consolidated financial statements.

The significant accounting policies used in the preparation of the Company’s consolidated financial statements are summarized in Note 2 to the consolidated financial statements.

Certain of those policies require management to make estimates and assumptions that affect the reported amounts in our consolidated financial statements.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

On a continual basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions.

On a continual basis, management

reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience, and reasonable assumptions.

After such reviews, and if deemed appropriate, management’s estimates are adjusted accordingly.

Actual results may vary from these estimates and assumptions under different and/or future circumstances.

Management considers an accounting estimate to be critical if:

• it requires assumptions to be made that were uncertain at the time the estimate was made;

• changes in the estimate, or the use of different estimating methods that could have been selected, could have a material impact on results of operations or financial condition.

Use of Estimates.

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

Due to the inherent uncertainty involved with estimates, actual results may differ.

These factors create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods.

These developments and the impact on the financial markets and the overall economy continue to be highly uncertain and cannot be predicted.

If the financial markets and/or the overall economy continue to be impacted, our results of operations, financial position, and cash flows may be materially adversely affected.

Our significant accounting policies are described in Note 3 to the consolidated financial statements included elsewhere in this Annual Report.

Management believes that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our financial statements.

Revenue Recognition .

We recognize revenues under Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers.

Revenues are recognized when control of the promised goods or performance obligations for services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for the goods or services.

Revenues from contracts with customers in the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment, Communications segment, Consumer segment and the All Other category are primarily comprised of the following:

Capital Markets Segment - Fees earned from corporate finance and investment banking services are derived from debt, equity and convertible securities offerings in which the Company acted as an underwriter or placement agent.

Fees from underwriting activities are recognized as revenues when the performance obligation for the services related to the underwriting transaction is satisfied under the terms of the engagement and is not subject to any other contingencies.

Fees are also earned from financial advisory and consulting services rendered in connection with client mergers, acquisitions, restructurings, recapitalizations and other strategic transactions.

The performance obligation for financial advisory services is satisfied over time as work progresses on the engagement and services are delivered to the client.

The performance obligation for financial advisory services may also include success and performance-based fees which are recognized as

revenue when the performance obligation is no longer constrained and it is not probable that the revenue recognized would be subject to significant reversal in a future period.

Generally, it is probable that the revenue recognized is no longer subject to significant reversal upon the closing of the investment banking transaction.

Fees from asset management services are recognized over the period the performance obligation for the services are provided.

Asset management fees are primarily comprised of fees for asset management services and are generally based on the dollar amount of the assets being managed.

Revenues from sales and trading are recognized when the performance obligation is satisfied and include commissions resulting from equity securities transactions executed as agent or principal and are recorded on a trade date basis and fees paid for equity research.

Revenues from other sources in the Capital Markets segment is primarily comprised of (i) interest income from loans receivable and securities lending activities, (ii) related net trading gains and losses from market making activities, the commitment of capital to facilitate customer orders, (iii) trading activities of equity and other securities for the Company’s account, and (iv) other income.

Interest income from securities lending activities consists of interest income from equity and fixed income securities that are borrowed from one party and loaned to another.

The Company maintains relationships with a broad group of banks and broker-dealers to facilitate the sourcing, borrowing and lending of equity and fixed income securities in a “matched book” to limit the Company’s exposure to fluctuations in the market value or securities borrowed and securities loaned.

Other revenues include (i) net trading gains and losses from market making activities in our fixed income group, (ii) carried interest from our asset management recognized as earnings from financial assets within the scope of ASC 323 - Investments - Equity Method and Joint Ventures , and therefore will not be in the scope of ASC 606 - Revenue from Contracts with Customers .

In accordance with ASC 323 - Investments - Equity Method and Joint Ventures , the Company records investment income based on the change in our proportionate claim on net assets of the investment fund, including performance-based capital allocations, assuming the investment fund was liquidated as of each reporting date pursuant to each fund’s governing agreements, and (iii) other miscellaneous income.

Wealth Management segment - Fees from wealth management asset advisory services consist primarily of investment advisory fees that are recognized over the period the performance obligation for the services provided.

Investment advisory and asset management fees are primarily comprised of fees for investment services and are generally based on the dollar amount of the assets being managed.

Investment advisory fee revenues as a principal registered investment advisor (“RIA”) are recognized on a gross basis.

Asset management fee revenues as an agent are recognized on a net basis.

Auction and Liquidation segment - Commission and fees earned on the sale of goods at Auction and Liquidation sales are recognized when evidence of a contract or arrangement exists, the transaction price has been determined, and the performance obligation has been satisfied when control of the product and risks of ownership has been transferred to the buyer.

The commission and fees earned for these services are included in revenues in the accompanying consolidated statements of operations.

Under these types of arrangements, revenues also include contractual reimbursable costs.

Revenues earned from Auction and Liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction or liquidation are recognized over time when the performance obligation is satisfied.

We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of services to the customer which occurs as we incur costs on our contracts.

Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred.

Costs to fulfill the contract include labor and other direct costs incurred by the Company related to the contract.

Due to the nature of the guarantees and performance obligations under these contracts, the estimation of revenue that is ultimately earned is complex and subject to many variables and requires significant judgment.

It is common for these contracts to contain provisions that can either increase or decrease the transaction price upon completion of our performance obligations under the contract.

Estimated amounts are included in the transaction price at the most likely amount it is probable that a significant reversal of revenue will not occur.

Our estimates of variable consideration and determination of whether or not to include estimated amounts in the transaction price are based on an assessment of our

anticipated performance under the contract taking into consideration all historical, current and forecasted information that is reasonably available to us.

Costs that directly relate to the contract and expected to be recoverable are capitalized as an asset and included in advances against customer contracts in the accompanying consolidated balance sheets.

These costs are amortized as the services are transferred to the customer over the contract period, which generally does not exceed six months, and the expense is recognized as a component of direct cost of services.

If, during the auction or liquidation sale, the Company determines that the total costs to be incurred on a performance obligation under a contract exceeds the total estimated revenues to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is determined.

If the Company determines that the variable consideration used in the initial determination of the transaction price for the contract is such that the total recoveries from the auction or liquidation will not exceed the guaranteed recovery values or advances made in accordance with the contract, the transaction price will be reduced and a loss or negative revenue could result from the performance obligation.

A provision for the entire loss as negative revenue on the performance obligation is recognized in the period the loss is determined.

Financial Consulting Segment – Revenues in the Financial Consulting segment are primarily comprised of fees earned from providing bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services.

Fees earned from bankruptcy, financial advisory, forensic accounting and real estate consulting services are rendered to clients over time as work progresses on the engagement and services are delivered to the client.

Fees may also include success and performance-based fees which are recognized as revenue when the performance obligation is no longer constrained and it is not probable that the revenue recognized would be subject to significant reversal in a future period.

Revenues for valuation and appraisal services are recognized when the performance obligation is completed and is generally at the point in time upon delivery of the report to the customer.

Revenues in the Financial Consulting segment also include contractual reimbursable costs.

Communications Segment – Revenues in the Communications segment are primarily comprised of subscription services revenues which consist of fees charged to United Online pay accounts;

revenues from the sale of the magicJack access rights;

revenues from access rights renewals and mobile apps;

prepaid minutes revenues;

revenues from access and wholesale charges;

service revenue from unified communication as a service (“UCaaS”) hosting services;

and revenues from mobile phone voice, text, and data services.

Products revenues consist of revenues from the sale of magicJack, mobile phone, and mobile broadband service devices, including the related shipping and handling and installation fees, if applicable.

This segment’s revenues also include advertising revenues which consist primarily of amounts from the Company’s Internet search partner that are generated as a result of users utilizing the partner’s Internet search services and amounts generated from display advertisements.

The Company recognizes such advertising revenues in the period in which the advertisement is displayed or, for performance-based arrangements, when the related performance criteria are met.

Subscription service revenues are recognized over time in the service period in which the transaction price has been determinable and the related performance obligations for services are provided to the customer.

Fees charged to customers in advance are initially recorded in the consolidated balance sheets as deferred revenue and then recognized ratably over the service period as the performance obligations are provided.

Product revenues for hardware and shipping are recognized at the time of delivery.

Revenues from sales of devices and services represent revenues recognized from sales of the magicJack devices to retailers or direct to customers, net of returns, and rights to access the Company’s servers over the period associated with the access right period, and from sales of mobile phones and voice, text, and data services.

The transaction price for devices is allocated between equipment and service based on stand-alone selling prices.

Revenues allocated to devices are recognized upon delivery (when control transfers to the customer), and service revenue is recognized ratably over the service term.

The Company estimates the return of magicJack device direct sales as part of the transaction price using a six month rolling average of historical returns.

Consumer Segment – Revenues in the Consumer segment primarily consists of the global sales of notebook computer carrying cases and computer accessories;

licensing revenues from various licensing agreements that provide revenue based on guaranteed minimum royalty amounts and advertising/marketing fees with additional royalty revenue based on a percentage of defined sales.

Global sales of consumer goods to customers are subject to contracts that contain a single performance obligation and revenue is recognized at a point in time when control of the product transfers to the customer which is generally upon product shipment.

Customers consist primarily of equipment manufacturers, distributors (servicing resellers and corporate

end-customers), and retailers.

Generally, the terms of the contracts for the sale of global goods do not allow for a right of return except for matters related to products with defects or damages.

Licensing revenues include guaranteed minimum royalty amounts that are recognized as revenue on a straight-line basis over the contract term.

Royalty payments exceeding the guaranteed minimum amounts in a specific contract year are recognized only subsequent to when the guaranteed minimum amount has been achieved.

Other licensing fees are recognized at a point in time once the performance obligations have been satisfied.

Payments received as consideration for the grant of a license are recorded as deferred revenue at the time payment is received and recognized ratably as revenue over the term of the license agreement.

Advanced royalty payments are recorded as deferred revenue at the time payment is received and recognized as revenue when earned.

Royalty revenue is not recognized unless collectability is probable.

All Other - Revenue from the All Other category come from a regional environmental services business in the New York metropolitan area and a landscaping business in the southeast United States.

Revenue is recognized when the customer obtains control of the good or the service is provided.

Allowance for Doubtful Accounts.

We maintain an allowance for doubtful accounts for estimated losses inherent in our accounts receivable portfolio.

In establishing the required allowance, management utilizes the expected loss model.

Management also considers historical losses adjusted for current market conditions and the customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The bad debt expense is included as a component of selling, general and administrative expenses in the accompanying consolidated statements of operations.

We consider an accounting estimate to be critical if:

(1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

We believe the following accounting estimates to be critical to our business operations and the understanding of results of operations and affect the more significant judgements and estimates used in the preparation of our consolidated financial statements.

Fair Value Measurements

The fair value of loan receivables, investments which are included in securities and other investments owned, and securities sold, not yet purchased, are accounted for in accordance with the accounting guidance ASC 820 – Fair Value Measurements (“ASC 820”) with gains or losses recognized in our consolidated statement of operations.

The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In determining fair value, the hierarchy under U.S.

generally accepted accounting principles (“U.S.

GAAP”) gives (i) the highest priority to unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities (level 1 inputs), (ii) the next priority to inputs other than level 1 inputs that are observable, either directly or indirectly (level 2 inputs), and (iii) the lowest priority to inputs that cannot be observed in market activity (level 3 inputs).

A significant amount of our assets consist of loan receivables and equity securities for which market quotes are not readily available and a significant degree of judgement is applied to reflect those judgements that a market participant would use in valuing the asset or liability.

Absent evidence to the contrary, financial instruments classified in level 3 of the fair value hierarchy are initially valued at transaction price, which is considered the best initial estimate of fair value.

Subsequent to the transaction date, these financial instruments that are classified in level 3 of the fair value hierarchy are valued using valuation techniques that incorporate one or more significant unobservable inputs, and therefore involve the greatest degree of management judgements.

These judgements include a) determining the appropriate valuation methodology and/or model for each type of level 3 financial instrument;

b) determining model inputs based on an assessment of relevant empirical market data, including prices evidenced in market transactions, interest rates, credit spreads, volatilities, and correlations;

and c) determining the appropriate valuation adjustments to reflect counterparty credit quality, liquidity considerations, and other observations as it pertains to the individual financial instrument.

See Note 2(u), “Fair Value Measurements,” to the consolidated financial statements for further discussion regarding fair value of financial instruments.

Goodwill and Other Intangible Assets

We account for goodwill and intangible assets in accordance with the accounting guidance which requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.

We account for goodwill and intangible assets in accordance with ASC 350 – Intangibles - Goodwill and Other, which requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.

Goodwill includes the excess of the purchase price over the fair value of net assets acquired in business combinations and the acquisition of noncontrolling interests.

The Codification requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment).

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value.

The Company operates six reporting units, which are the same as its reporting segments described in Note 24 to the consolidated financial statements.

Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions.

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment).

Management applies significant judgment when testing goodwill for impairment, which includes the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value.

Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows and determining appropriate discount rates and other assumptions.

Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.

When testing goodwill for impairment, in accordance with ASC 350, the Company made an assessment of qualitative factors on goodwill and other intangible assets and concluded that a positive assertion could be made that it is more likely than not that the fair value of the reporting units exceeded their carrying values.

In performing the analysis, qualitative factors indicated that it could be more likely than not that the carrying value of goodwill in the Wealth Management segment could be impaired as a result of the segment loss incurred during the year ended December 31, 2022.

The Company performed a quantitative goodwill impairment test for its Wealth Management segment and determined the fair value of this reporting segment using the market approach and income approach exceeded the carrying value of goodwill.

The Company concluded there was no impairment of goodwill in the Wealth Management segment.

No impairments of goodwill were identified during the years ended December 31, 2022 and 2021.

The Company reviews the carrying value of its amortizable intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets is measured by comparing the carrying amount of the asset or asset group to the undiscounted cash flows that the asset or asset group is expected to generate.

If the undiscounted cash flows of such assets are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group, if any, exceeds its fair market value.

Fair Value Measurements.

The Company records loans receivable, securities and other investments owned, securities sold not yet purchased, and mandatorily redeemable noncontrolling interests that were issued after November 5, 2003 at fair value with fair value determined in accordance with the Codification.

Our mandatorily redeemable noncontrolling

interests are measured at fair value on a recurring basis and are categorized using the three levels of fair value hierarchy.

In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) for identical instruments that are highly liquid, observable and actively traded in over-the-counter markets.

Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable and can be corroborated by market data.

Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The 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.

Investments in partnership interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending funds.

We also invest in priority investment funds and the underlying securities held by these funds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company.

The Company’s partnership and investment fund interests are valued based on the Company’s proportionate share of the net assets of the partnerships and funds;

the value for these investments is derived from the most recent statements received from the general partner or fund administrator.

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

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

The carrying amounts of the notes payable (including credit lines used to finance liquidation engagements), long-term debt and capital lease obligations approximate fair value because the contractual interest rates or effective yields of such instruments are consistent with current market rates of interest for instruments of comparable credit risk.

Income Taxes.

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the 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 during 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.

In performing the qualitative analysis on an interim basis at September 30, 2023, factors indicated that it could be more likely than not that the carrying value of goodwill in the Company’s Consumer Products segment could be impaired due to the financial performance of the Company’s Targus subsidiary and market conditions that existed in the personal computer market for computers and accessories.

The Company performed an interim quantitative goodwill impairment assessment as

of September 30, 2023 and based on the results of the analysis, the Company recorded a non-cash impairment charge of $35.5 million, consisting of a goodwill impairment charge of $27.5 million and an indefinite-lived tradename impairment charge of $8.0 million.

As part of the annual review of goodwill at December 31, 2023, qualitative factors continued to indicate that it could be more likely than not that the carrying value of goodwill in the Consumer Products segment could be further impaired due to the financial performance of the Company’s Targus subsidiary during the holiday season and the expected recovery in market conditions for the personal computer market for computers and accessories that may be delayed.

The Company performed an annual quantitative goodwill impairment and a year ended assessment as of December 31, 2023, and based on the results of the analysis, the Company recorded an additional non-cash impairment charge of $33.1 million, consisting of a goodwill impairment charge of $25.6 million and an indefinite-lived tradename impairment charge of $7.5 million as of December 31, 2023.

Non-cash impairment charges totaled $68.6 million during the full year ended December 31, 2023 are recorded in impairment of goodwill and tradenames in the accompanying consolidated statements of operations during the year ended December 31, 2023, as more fully discussed in Note 9.

At December 31, 2023, as part of the annual review of goodwill, we identified the Lingo reporting unit in the Communications segment where the fair value of the reporting unit exceeded the carrying value of the reporting unit by approximately 1%.

The reporting unit was comprised of two companies that we acquired in 2022 and these two companies were merged together in July 2023 to create synergies and improve overall profitability of the combined companies.

Operating income and earnings before interest, depreciation and amortization improved as a result of the synergies that were created in the second half of 2023.

The Company determined that this reporting unit is at risk of goodwill impairment in the future due to the narrow margin between fair value and the carrying value and also based on the sensitivity of the potential forecast revisions;

which among other things, includes changes in the strategy in the business.

The resulting cash flow amounts for the reporting unit were discounted using a rate of 15.0% reflecting market participants’ assumptions with a terminal growth rate of 1.0%.

If the Company holds all other assumptions constant, a reduction in the terminal value growth rate by 0.5% or an increase in discount rate by 0.5% would each result in impairment.

The goodwill allocated to this reporting unit was $71.6 million as of December 31, 2023.

In determining the fair value of this reporting unit, the Company used a discounted cash flow analysis and market approach consisting of the guideline company method and applied the following key assumptions:

expected revenue growth and operating profit margins which included cost savings programs and other initiatives that were implemented in the first quarter of 2024 to improve the operating cash flows, market multiples, discount rates, among others.

To the extent future operating performance and cash flows of the reporting unit deteriorate from the current forecast, or if the Company is unable to execute its strategies, this may result in an impairment of goodwill.

See Note 2(t), “Goodwill and Other Intangible Assets,” to the consolidated financial statements for further discussion regarding goodwill impairment.

The Company is subject to the income tax laws of the various jurisdictions in which it operates, including U.S.

federal, state and local, and non-U.S.

jurisdictions.

These laws are often complex and may be subject to different interpretations.

To determine the financial statement impact of accounting for income taxes, including the provision for income tax expense and unrecognized tax benefits, management must make assumptions and judgments about how to interpret and apply these complex tax laws to numerous transactions and business events, as well as make judgments regarding the timing of when certain items may affect taxable income in the U.S.

tax jurisdictions.

The Company’s interpretations of tax laws in the U.S.

jurisdictions are subject to review and examination by the various taxing authorities in the jurisdictions where the Company operates, and disputes may occur regarding its view on a tax position.

Generally, disputes over interpretations with the various taxing authorities may be settled by audit or administrative appeals in the tax jurisdictions in which the Company operates.

The Company regularly reviews whether it may be assessed additional income taxes as a result of the resolution of these matters, and the Company records additional unrecognized tax benefits, as appropriate.

In addition, the Company may revise its estimate of income taxes due to changes in income tax laws, legal interpretations, and business strategies.

It is possible that revisions in the Company’s estimate of income taxes may materially affect the Company’s results of operations in any reporting period.

Deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes.

Deferred tax assets are recognized if, in management’s judgment, their realizability is determined to be more likely than not.

Deferred taxes are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred taxes of a change in tax rates is recognized within the provision for income taxes in the period enacted.

The Firm has also recognized deferred tax assets in connection with certain tax attributes, including net operating loss (“NOL”) carryforwards.

The Company performs regular reviews to ascertain whether its deferred tax assets are realizable.

These reviews include management’s estimates and assumptions regarding future taxable income and may incorporate various tax planning strategies, including strategies that may be available to utilize NOLs before they expire.

In connection with these reviews, if it is determined that a deferred tax asset is not realizable, a valuation allowance is established.

The valuation allowance may be reversed in a subsequent reporting period if the Company determines that, based on revised estimates of future taxable income or changes in tax planning strategies, it is more likely than not that all or part of the deferred tax asset will become realizable.

As of December 31, 2023, management has determined it is more likely than not that the Company will realize its deferred tax assets, net of the existing valuation allowance.

The Company adjusts its unrecognized tax benefits as necessary when new information becomes available, including changes in tax law and regulations and interactions with taxing authorities.

Uncertain tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of benefit to recognize.

An uncertain tax position is measured at an amount of benefit that management believes is more likely than not to be realized upon settlement.

It is possible that the reassessment of unrecognized tax benefits may have a material impact on the Company’s effective income tax rate in the period in which the reassessment occurs.

Although the Company believes that its estimates are reasonable, the final tax amount could be different from the amounts reflected in the Company’s income tax provisions and accruals.

To the extent that the final outcome of these amounts is different than the amounts recorded, such differences will generally impact the Company’s provision for income taxes in the period in which such a determination is made.

The Company’s provision for income taxes is composed of current and deferred taxes.

The current and deferred tax provisions are calculated based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year.

Adjustments based on filed returns are generally recorded in the period when the tax returns are filed and these adjustments could impact the Company’s effective tax rate.

See Note 15, “Income Taxes,” to the consolidated financial statements for further discussion regarding income taxes.

Recent Accounting Standards

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What changed 10-K

Item 7. Management’s Discussion and Analysis