BRC Group Holdings, Inc. 10-Q

Item 1. Financial Statements. B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands, except par value) March 31, 2024 December 31, 2023 (Unaudited) ASSETS Assets: Cash and cash equivalents $ 190,690 $ 231,964 Restricted cash 1,889 1,875 Due from clearing brokers 40,875 51,334 Securities and other investments owned, at fair value 949,868 1,092,106 Securities borrowed 2,050,079 2,870,939 Accounts receivable, net of allowance for credit losses of $ 7,122 and $ 7,339 as of March 31, 2024 and December 31, 2023, respectively 123,797 115,496 Due from related parties 92 172 Loans receivable, at fair value (includes $ 355,287 and $ 387,657 from related parties as of March 31, 2024 and December 31, 2023, respectively) 452,496 532,419 Prepaid expenses and other assets 246,402 237,327 Operating lease right-of-use assets 84,217 87,605 Property and equipment, net 24,146 25,206 Goodwill 471,636 472,326 Other intangible assets, net 311,850 322,014 Deferred income taxes 49,607 33,595 Total assets $ 4,997,644 $ 6,074,378 LIABILITIES AND EQUITY Liabilities: Accounts payable $ 44,791 $ 44,550 Accrued expenses and other liabilities 253,153 273,193 Deferred revenue 68,643 71,504 Due to related parties and partners 1,763 2,731 Securities sold not yet purchased 6,423 8,601 Securities loaned 2,041,169 2,859,306 Operating lease liabilities 95,645 98,563 Notes payable 14,325 19,391 Revolving credit facility 22,197 43,801 Term loans, net 596,262 625,151 Senior notes payable, net 1,553,616 1,668,021 Total liabilities 4,697,987 5,714,812 Commitments and contingencies (Note 16) B. Riley Financial, Inc. equity: Preferred stock, $ 0.0001 par value; 1,000,000 shares authorized; 4,563 shares issued and outstanding as of March 31, 2024 and December 31, 2023; and liquidation preference of $ 114,082 as of March 31, 2024 and December 31, 2023 — — Common stock, $ 0.0001 par value; 100,000,000 shares authorized; 30,095,303 and 29,937,067 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively 3 3 Additional paid-in capital 579,647 572,170 Accumulated deficit ( 347,558 ) ( 281,285 ) Accumulated other comprehensive (loss) income ( 3,643 ) 229 Total B. Riley Financial, Inc. stockholders’ equity 228,449 291,117 Noncontrolling interests 71,208 68,449 Total equity 299,657 359,566 Total liabilities and equity $ 4,997,644 $ 6,074,378 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 Table of Contents B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except share data) Three Months Ended March 31, 2024 2023 Revenues: Services and fees $ 257,303 $ 235,559 Trading (loss) income and fair value adjustments on loans ( 29,868 ) 51,568 Interest income - Loans and securities lending 59,944 77,186 Sale of goods 55,653 67,777 Total revenues 343,032 432,090 Operating expenses: Direct cost of services 61,126 54,397 Cost of goods sold 39,615 47,626 Selling, general and administrative expenses 209,548 212,627 Restructuring charge 789 93 Interest expense - Securities lending and loan participations sold 35,383 32,424 Total operating expenses 346,461 347,167 Operating (loss) income ( 3,429 ) 84,923 Other income (expense): Interest income 669 2,574 Dividend income 11,815 13,204 Realized and unrealized losses on investments ( 29,545 ) ( 28,442 ) Change in fair value of financial instruments and other 314 ( 209 ) Loss from equity investments ( 4 ) ( 10 ) Interest expense ( 44,864 ) ( 47,561 ) (Loss) income before income taxes ( 65,044 ) 24,479 Benefit from (provision for) income taxes 17,090 ( 7,919 ) Net (loss) income ( 47,954 ) 16,560 Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 1,211 ( 595 ) Net (loss) income attributable to B. Riley Financial, Inc. ( 49,165 ) 17,155 Preferred stock dividends 2,015 2,012 Net (loss) income available to common shareholders $ ( 51,180 ) $ 15,143 Basic (loss) income per common share $ ( 1.71 ) $ 0.53 Diluted (loss) income per common share $ ( 1.71 ) $ 0.51 Weighted average basic common shares outstanding 29,989,584 28,585,337 Weighted average diluted common shares outstanding 29,989,584 29,513,435 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Table of Contents B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2024 2023 Net (loss) income $ ( 47,954 ) $ 16,560 Other comprehensive (loss) income: Change in cumulative translation adjustment ( 3,872 ) 866 Other comprehensive (loss) income, net of tax ( 3,872 ) 866 Total comprehensive (loss) income ( 51,826 ) 17,426 Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 1,211 ( 449 ) Comprehensive (loss) income attributable to B. Riley Financial, Inc. $ ( 53,037 ) $ 17,875 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Equity (Unaudited) (Dollars in thousands, except share data) For the Three Months Ended March 31, 2024 and 2023 Preferred Stock Common Stock Additional Paid-in Capital (Accumulated Deficit) Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interests Total Equity Shares Amount Shares Amount Balance, January 1, 2024 4,563 $ — 29,937,067 $ 3 $ 572,170 $ ( 281,285 ) $ 229 $ 68,449 $ 359,566 Vesting of restricted stock and other, net of shares withheld for employer taxes — — 158,236 — ( 1,170 ) — — — ( 1,170 ) Share based payments — — — — 8,611 — — — 8,611 Share based payments in equity of subsidiary — — — — 36 — — — 36 Dividends on common stock ($ 0.50 per share) — — — — — ( 15,093 ) — — ( 15,093 ) Dividends on preferred stock — — — — — ( 2,015 ) — — ( 2,015 ) Net loss — — — — — ( 49,165 ) — 1,211 ( 47,954 ) Distributions to noncontrolling interests — — — — — — — ( 954 ) ( 954 ) Contributions from noncontrolling interests — — — — — — — 2,502 2,502 Other comprehensive loss — — — — — — ( 3,872 ) — ( 3,872 ) Balance, March 31, 2024 4,563 $ — 30,095,303 $ 3 $ 579,647 $ ( 347,558 ) $ ( 3,643 ) $ 71,208 $ 299,657 Balance, January 1, 2023 4,545 $ — 28,523,764 $ 3 $ 494,201 $ ( 45,220 ) $ ( 2,470 ) $ 59,379 $ 505,893 Preferred stock issued 18 — — — 467 — — — 467 Vesting of restricted stock and other, net of shares withheld for employer taxes — — 1,012,751 — ( 4,819 ) — — — ( 4,819 ) Common stock repurchased and retired — — ( 1,452,831 ) — ( 53,803 ) — — — ( 53,803 ) Shares issued for the acquisition of a business — — 51,952 — 2,111 — — — 2,111 Remeasurement of Lingo redeemable minority interest — — — — ( 6,483 ) — — — ( 6,483 ) Share based payments — — — — 13,678 — — — 13,678 Dividends on common stock ($ 1.00 per share) — — — — — ( 31,291 ) — — ( 31,291 ) Dividends on preferred stock — — — — — ( 2,012 ) — — ( 2,012 ) Net income — — — — — 17,155 — ( 449 ) 16,706 Distributions to noncontrolling interests — — — — — — — ( 720 ) ( 720 ) Contributions from noncontrolling interests — — — — — — — 431 431 Remeasurement of B. Riley Principal 250 Merger Corporations subsidiary temporary equity — — — — — ( 1,198 ) — — ( 1,198 ) Acquisition of noncontrolling interests — — — — — — — 538 538 Other comprehensive loss — — — — — — 866 — 866 Balance, March 31, 2023 4,563 $ — 28,135,636 $ 3 $ 445,352 $ ( 62,566 ) $ ( 1,604 ) $ 59,179 $ 440,364 The accompanying notes are an integral part of these condensed consolidated financial statements 4 Table of Contents B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Net (loss) income $ ( 47,954 ) $ 16,560 Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 11,137 13,077 Provision for credit losses 436 3,173 Share-based compensation 8,682 13,746 Fair value and remeasurement adjustments, non-cash 13,651 ( 46,050 ) Non-cash interest and other ( 2,661 ) ( 1,141 ) Depreciation of rental merchandise 4,202 — Effect of foreign currency on operations 271 271 Loss from equity investments 4 10 Dividends from equity investments 37 129 Deferred income taxes ( 16,012 ) 5,807 (Gain) loss on sale of business and disposal of fixed assets ( 203 ) 5 Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests 293 308 Change in operating assets and liabilities: Amounts due to/from clearing brokers 10,460 16,318 Securities and other investments owned 192,639 95,037 Securities borrowed 820,860 ( 599,516 ) Accounts receivable ( 8,739 ) 25,083 Prepaid expenses and other assets ( 6,761 ) ( 25,705 ) Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities ( 21,114 ) ( 67,536 ) Amounts due to/from related parties and partners ( 888 ) ( 1,070 ) Securities sold, not yet purchased ( 2,178 ) 1,909 Deferred revenue ( 2,668 ) ( 1,749 ) Securities loaned ( 818,137 ) 603,951 Net cash provided by operating activities 135,357 52,617 Cash flows from investing activities: Purchases of loans receivable ( 42,903 ) ( 311,970 ) Repayments of loans receivable 39,493 260,587 Sale of loans receivable 22,785 7,500 Acquisition of businesses and minority interest, net of $ 234 cash acquired for 2023 — ( 12,287 ) Sale of business, net of cash sold and other ( 184 ) 1,364 Purchases of property, equipment and intangible assets ( 913 ) ( 1,696 ) Purchase of equity and other investments — ( 662 ) Net cash provided by (used in) investing activities 18,278 ( 57,164 ) Cash flows from financing activities: Proceeds from revolving line of credit 17,738 29,021 5 Table of Contents Repayment of revolving line of credit ( 39,343 ) ( 17,237 ) Repayment of notes payable and other ( 5,361 ) ( 11,510 ) Repayment of term loan ( 30,036 ) ( 72,924 ) Proceeds from term loan — 128,187 Redemption of senior notes ( 115,492 ) — Payment of debt issuance and offering costs ( 191 ) ( 1,957 ) Payment of contingent consideration ( 70 ) ( 1,302 ) Payment of employment taxes on vesting of restricted stock ( 1,170 ) ( 4,819 ) Common dividends paid ( 16,014 ) ( 46,856 ) Preferred dividends paid ( 2,015 ) ( 2,012 ) Repurchase of common stock — ( 53,803 ) Distribution to noncontrolling interests ( 1,481 ) ( 1,023 ) Contributions from noncontrolling interests 2,502 431 Proceeds from issuance of preferred stock — 467 Net cash used in financing activities ( 190,933 ) ( 55,337 ) Decrease in cash, cash equivalents and restricted cash ( 37,298 ) ( 59,884 ) Effect of foreign currency on cash, cash equivalents and restricted cash ( 3,962 ) 1,280 Net decrease in cash, cash equivalents and restricted cash ( 41,260 ) ( 58,604 ) Cash, cash equivalents and restricted cash, beginning of period 233,839 270,926 Cash, cash equivalents and restricted cash, end of period $ 192,579 $ 212,322 Supplemental disclosures: Interest paid $ 81,737 $ 81,423 Taxes paid $ 1,432 $ 2,932 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents B. RILEY FINANCIAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data) NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS OPERATIONS B. Riley Financial, Inc. and its subsidiaries (collectively, the “Company”) provide investment banking, brokerage, wealth management, asset management, direct lending, business advisory, valuation, and asset disposition services to a broad client base spanning public and private companies, financial sponsors, investors, financial institutions, legal and professional services firms, and individuals. The Company also has a portfolio of communication related businesses that provide consumer Internet access and cloud communication services and owns Tiger US Holdings Inc. (“Targus”), which designs and sells laptop and computer accessories. During the fourth quarter of 2023, management reassessed the Company's previously reported Consumer segment due to organizational changes and financial information provided to the Chief Operating Decision Maker (“CODM”). These changes resulted in Targus's operations being reported on a stand-alone basis in the Consumer Products segment and the operations related to brand licensing that were previously reported in the Consumer segment being reported in the All Other Category that is reported with Corporate and Other. As a result of the changes, the Company has recast the financial data for the Consumer Products segment and reporting of the All Other Category for all periods presented. The Company operates in six reportable operating segments: (i) Capital Markets, through which the Company provides investment banking, corporate finance, securities lending, restructuring, research, sales and trading services to corporate and institutional clients; (ii) Wealth Management, through which the Company provides wealth management and tax services to corporate and high-net-worth clients; (iii) Auction and Liquidation, through which the Company provides auction and liquidation services to help clients dispose of assets that include multi-location retail inventory, wholesale inventory, trade fixtures, machinery and equipment, intellectual property and real property; (iv) Financial Consulting, through which the Company provides bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services; (v) Communications, through which the Company provides consumer Internet access and related subscription services, cloud communication services, and mobile phone voice, text, and data services and devices; and (vi) Consumer Products, which generates revenue through sales of laptop and computer accessories. NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( a) Principles of Consolidation and Basis of Presentation The condensed consolidated financial statements include the accounts of B. Riley Financial, Inc. and its wholly owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated upon consolidation. The Company consolidates all entities that it controls through a majority voting interest. In addition, the Company performs an analysis to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity (“VIE”) including ongoing reassessments of whether it is the primary beneficiary of a VIE. See Note 2(n) for further discussion. The condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to interim financial reporting guidelines and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the periods presented have been included. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 24, 2024. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods. 7 (b) Use of Estimates The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as valuation of securities, allowance for credit losses, the fair value of loans receivables, intangible assets and goodwill, share based arrangements, contingent consideration, accounting for income tax valuation allowances, and sales returns and allowances. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ. (c) Interest Expense — Securities Lending Activities Interest expense from securities lending activities is included in operating expenses related to operations in the Capital Markets segment. Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $ 35,383 and $ 32,424 during the three months ended March 31, 2024 and 2023, respectively. (d) Concentration of Risk Revenues in the Capital Markets, Financial Consulting, Wealth Management, and Communications segments are primarily generated in the United States. Revenues in the Auction and Liquidation segment and Consumer Products segment are primarily generated in the United States, Australia, Canada, and Europe. The Company maintains cash in various federally insured banking institutions. The account balances at each institution periodically exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts in excess of FDIC insurance coverage. The Company has not experienced any losses in such accounts. The Company also has substantial cash balances from proceeds received from auctions and liquidation engagements that are distributed to parties in accordance with the collaborative arrangements. The Company’s activities in the Auction and Liquidation segment are executed frequently with, and on behalf of, distressed customers and secured creditors. Concentrations of credit risk can be affected by changes in economic, industry, or geographical factors. The Company seeks to control its credit risk and potential risk concentration through risk management activities that limit the Company’s exposure to losses on any one specific liquidation services contract or concentration within any one specific industry. To mitigate the exposure to losses on any one specific liquidations services contract, the Company sometimes conducts operations with third parties through collaborative arrangements. On December 18, 2023, the Company loaned $ 108,000 to Conn’s Inc. (“Conn’s”) as more fully described in Note 19. On February 14, 2024, the Company collected $ 15,000 of principal payments which reduced the loan balance to $ 93,000 . This loan combined with two other existing loans receivable with an outstanding balance of $ 58,350 and $ 62,808 as of March 31, 2024 and December 31, 2023, respectively, is collateralized by consumer loan receivables of customers of the furniture and electronics retailer. These loans have an aggregate fair value of $ 147,630 and $ 167,568 or 32.6 % and 31.5 % of the loan portfolio as of March 31, 2024 and December 31, 2023, respectively, and are concentrated in the retail industry. In the event there is a recession or economic downturn that would put pressure on the retailer’s customers, this could impact the operations of the retailer and payment patterns of the customers and the overall performance and collectability of these loans. The Company also has a loan receivable with a principal amount of $ 200,506 as of March 31, 2024 and December 31, 2023. The loan receivable allows for interest to be paid-in-kind, which is capitalized to the loan receivable balance annually on the loan's anniversary date. The interest receivable on the loan was $ 14,971 and $ 8,889 as of March 31, 2024 and December 31, 2023, respectively, and is included in prepaid expenses and other assets in the condensed consolidated balance sheets. The loan receivable is secured by a first priority security interest in Freedom VCM Holdings, LLC (“Freedom VCM”) equity interests owned by Brian Kahn as more fully described in Note 2(h) below. The fair value of the loan receivable was $ 183,268 and $ 200,506 or 40.5 % and 37.7 % of the total loan portfolio as of March 31, 2024 and December 31, 2023, respectively. 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. 8 The maximum amount of loss that the Company is exposed to is equivalent to the fair value of these loans which totaled $ 330,898 and $ 368,074 as of March 31, 2024 and December 31, 2023, respectively. (e) Advertising Expenses The Company expenses advertising costs, which consist primarily of costs for printed materials, as incurred. Advertising costs totaled $ 2,410 and $ 2,937 during the three months ended March 31, 2024 and 2023, respectively. Advertising expense was included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. (f) Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. (g) Restricted Cash As of March 31, 2024 and December 31, 2023, restricted cash included $ 1,889 and $ 1,875 , respectively, primarily consisting of cash collateral for leases. Cash, cash equivalents and restricted cash consist of the following: March 31, 2024 December 31, 2023 Cash and cash equivalents $ 190,690 $ 231,964 Restricted cash 1,889 1,875 Total cash, cash equivalents and restricted cash $ 192,579 $ 233,839 (h) Loans Receivable Under ASC 825 - Financial Instruments, the Company elected the fair value option for all outstanding loans receivable. Management evaluates the performance of the loan portfolio on a fair value basis. Under the fair value option, loans receivables are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the condensed consolidated statements of operations. Loans receivable, at fair value totaled $ 452,496 and $ 532,419 as of March 31, 2024 and December 31, 2023, respectively. The loans have various maturities through August 2033. As of March 31, 2024 and December 31, 2023, the historical cost of loans receivable accounted for under the fair value option was $ 494,730 and $ 555,882 , respectively, which included principal balances of $ 499,956 and $ 563,637 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $ 5,226 and $ 7,755 , respectively. The principal balance of loans receivable exceeded the fair value of loans by $ 42,234 and $ 23,463 as of March 31, 2024 and December 31, 2023, respectively. At the time of origination, the Company's loans are collateralized by the assets of borrowers and other pledged collateral and may have guarantees to provide for protection of the payments due on loans receivable. During the three months ended March 31, 2024 and 2023, the Company recorded net unrealized losses of $ 18,771 and net unrealized gains of $ 43,459 , respectively, on loans receivable, at fair value, which is included in trading income (loss) and fair value adjustments on loans on the condensed consolidated statements of operations. Loans receivable, at fair value on non-accrual and 90 days or greater past due was approximately zero as of March 31, 2024. Loans receivable, at fair value on non-accrual and 90 days or greater past due was $ 41,236 , which represents approximately 7.7 % of total loans receivable, at fair value as of December 31, 2023. The principal balance of loans receivable on non-accrual and 90 days or greater past due was $ 43,326 as of December 31, 2023. Interest income for loans on non-accrual and/or 90 days or greater past due is recognized separately from changes in fair value in interest income - loans and securities lending on the condensed consolidated statements of operations. The amount of gains or (losses) included in earnings attributable to changes in instrument – specific credit risk was $( 11,339 ) and $ 37,488 during the three months ended March 31, 2024 and 2023, respectively. The gains or losses attributable to changes in instrument – specific risk was determined by management based on an estimate of the fair value change during the period specific to each loan receivable. 9 The Company may periodically provide limited guarantees to third parties for loans that are made to investment banking and lending clients. As of March 31, 2024, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc. (“B&W”) as further described in Note 16(b). In accordance with the credit loss standard, the Company evaluates the need to record an allowance for credit losses for these loan guarantees since they have off-balance sheet credit exposures. As of March 31, 2024, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure. Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans and securities lending on the condensed consolidated statements of operations. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Unearned income, discounts and premiums are amortized to interest income using a level yield methodology. On August 21, 2023, one of the Company’s subsidiaries and Vintage Capital Management, LLC (“VCM”), an affiliate of Brian Kahn, amended and restated a promissory note (the “Amended and Restated Note”), pursuant to which VCM owes the Company's subsidiary the aggregate principal amount of $ 200,506 and bears interest at the rate of 12 % per annum payable-in-kind with a maturity date of December 31, 2027. The Amended and Restated Note requires repayments prior to the maturity date from certain proceeds received by VCM, Mr. Kahn or his affiliates from, among other proceeds, distributions or dividends paid by Freedom VCM in amount equal to the greater of (i) 80 % of the net after-tax proceeds, and (ii) 50 % of gross proceeds. The obligations under the Amended and Restated Note are primarily secured by a first priority perfected security interest in Freedom VCM equity interests owned by Mr. Kahn, the CEO and a board member of Freedom VCM as of December 31, 2023, and his spouse with a value (based on the transaction price in the FRG take-private transaction) of $ 227,296 as of August 21, 2023. On January 22, 2024, Mr. Kahn resigned as CEO and a member of the board of directors of Freedom VCM. The fair value of the Freedom VCM equity interest owned by Mr. Kahn and his spouse was $ 197,782 and $ 232,065 as of March 31, 2024 and December 31, 2023, respectively. Amounts owing under the Amended and Restated Note may be repaid at any time without penalty. On a quarterly basis, the Company will continue to obtain third party appraisals to evaluate the value of the collateral of the loan since the repayment of the loan and accrued interest will be paid primarily from the cash distributions from Freedom VCM or foreclosure on the underlying collateral. In light of Mr. Kahn’s alleged involvement with the alleged misconduct concerning Prophecy Asset Management LP, the Company can provide no assurances that it will not be subject to claims asserting an interest in the Freedom VCM equity interests owned by Mr. Kahn, including those that collateralize the Amended and Restated Note. If a claim were successful, it would diminish the value of the collateral which could impact the carrying value of the loan. If such claims are made, however, the Company believes it has valid defenses from any such claim and any such claim would be without merit. Other factors leading to a 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 condensed consolidated statements of operations. Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans and securities lending on the consolidated statements of operations. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Unearned income, discounts, and premiums are amortized to interest income using a level yield methodology. As of March 31, 2024, loans receivable had an aggregate remaining contractual principal balance of $ 499,956 , an aggregate fair value of $ 452,496 , and the contractual principal balance exceeded the fair value by $ 47,460 . As of December 31, 2023, loans receivable had an aggregate remaining contractual principal balance of $ 563,637 , an aggregate fair value of $ 532,419 , and the contractual principal balance exceeded the fair value by $ 31,218 . Badcock Loan Receivable On December 20, 2021, the Company entered into a Master Receivables Purchase Agreement (“Badcock Receivables I”) with W.S. Badcock Corporation, a Florida corporation (“WSBC”), which at the time was an indirect wholly owned subsidiary of Franchise Group, Inc., a Delaware corporation (“FRG”), which became a subsidiary of Freedom VCM as a result of the transaction on August 21, 2023. The Company paid $ 400,000 in cash to WSBC for the purchase of certain consumer credit receivables of WSBC. On September 23, 2022, the Company's then majority-owned subsidiary, B Riley 10 Receivables II, LLC (“BRRII”), a Delaware limited liability company, entered into a Master Receivables Purchase Agreement (“Badcock Receivables II”) with WSBC. This purchase of $ 168,363 consumer credit receivables of WSBC was partially financed by a $ 148,200 term loan discussed in Note 10. During the three months ended March 31, 2023, BRRII entered into Amendment No. 2 and No. 3 to Badcock Receivables II with WSBC for a total of $ 145,278 in additional consumer credit receivables. The accounting for these transactions resulted in the Company recording a loan receivable from WSBC with the recognition of interest income at an imputed rate based on the cash flows expected to be received from the collection of the consumer receivables that serve as collateral for the loan. These loan receivables are measured at fair value. On August 21, 2023, all of the equity interests of BRRII were sold to Freedom VCM Receivables, Inc. (“Freedom VCM Receivables”), a subsidiary of Freedom VCM, which resulted in a loss of $ 78 . In connection with the sale, Freedom VCM Receivables assumed the obligations with respect to the Pathlight Credit Agreement as more fully discussed in Note 10 and Freedom VCM Receivables entered into a non-recourse promissory note with another Freedom VCM affiliate in the amount of $ 58,872 , with a stated interest rate of 19.74 % and a maturity date of August 21, 2033 with payments of principal and interest on the note limited solely to the performance of certain consumer receivables held by BRRII. This loan receivable is measured at fair value. In connection with these loans, the Company entered into a Servicing Agreement with WSBC pursuant to which WSBC provides to the Company certain customary servicing and account management services in respect of the receivables purchased by the Company under the Receivables Purchase Agreement. In addition, subject to certain terms and conditions, FRG has agreed to guarantee the performance by WSBC of its obligations under the Master Receivables Purchase Agreements and the Servicing Agreement. As of March 31, 2024 and December 31, 2023, the Badcock Receivables I loan receivable to WSBC in the Company's condensed consolidated balance sheets included loans measured at fair value in the amount of $ 15,868 and $ 20,624 , respectively. As of March 31, 2024 and December 31, 2023, the Freedom VCM Receivables’ loan receivable in connection with the sale of all of the equity interests of BRRII was included in the Company's condensed consolidated balance sheets in loans receivable, at fair value in the amount of $ 42,482 and $ 42,183 , respectively. Nogin Loan and Loan Commitment On November 16, 2023, the Company entered into a Chapter 11 Restructuring Support Agreement (as amended, the “RSA”) with Nogin Inc. and certain of its subsidiaries (collectively, “Nogin”), and certain holders of Nogin’s convertible notes (the “Consenting Noteholders”). Pursuant to the RSA, the Company funded $ 17,530 of debtor-in-possession (“DIP”) financing as of December 31, 2023. The Company funded an additional $ 15,470 during the three months ended March 31, 2024, which increased the DIP financing to $ 33,000 at March 31, 2024. This loan receivable had a fair value of $ 32,673 and $ 17,980 as of March 31, 2024 and December 31, 2023, respectively. An additional $ 3,000 of DIP financing was funded in the second quarter of 2024, for a total DIP financing (inclusive of $ 1,700 in fees payable in kind) of $ 37,700 . On May 3, 2024, the Company funded an additional $ 21,300 in cash to complete the acquisition of Nogin of which $ 15,500 was a payment to the Consenting Noteholders. (i) Securities and Other Investments Owned and Securities Sold Not Yet Purchased Securities owned consist of equity securities including, common and preferred stocks, warrants, and options; corporate bonds; other fixed income securities including, government and agency bonds; loans receivable valued at fair value; and investments in partnerships. Securities sold, but not yet purchased represent obligations of the Company to deliver the specified security at the contracted price and thereby create a liability to purchase the security in the market at prevailing prices. Changes in the value of these securities are reflected currently in the results of operations. As of March 31, 2024 and December 31, 2023, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities: 11 March 31, 2024 December 31, 2023 Securities and other investments owned: Equity securities $ 869,137 $ 994,634 Corporate bonds 56,616 59,287 Other fixed income securities 5,151 2,989 Partnership interests and other 18,964 35,196 $ 949,868 $ 1,092,106 Securities sold not yet purchased: Equity securities $ 2,609 $ 1,037 Corporate bonds 2,592 5,971 Other fixed income securities 1,222 1,593 $ 6,423 $ 8,601 The Company owns certain equity securities that are accounted for under the fair value option where the Company would otherwise use the equity method of accounting. Investments become subject to the equity method of accounting when the Company possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the Company possesses more than 20% of the voting interests of the investee. However, the Company may have the ability to exercise significant influence over the investee when the Company owns less than 20% of the voting interests of the investee depending on the facts and circumstances that demonstrate that the ability to exercise influence is present, such as when the Company has representation on the board of directors of such investee. The Brand Investments The following tables contain summarized financial information with respect to five of the Company's investments in limited liability companies that primarily license brand names and trademarks through licensing agreements. The Company has an ownership interest in each investee between 10 % and 50 %. For the 10 % ownership interest, the Company is presumed to have the ability to exercise significant influence since the investment is more than minor and the limited liability company is required to maintain specific ownership accounts for each member. The Company has significant influence in the other four investments due to the ownership interest being greater than 20 %. The financial information of these five investments has been aggregated and included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of December 31, 2023 and September 30, 2023 correspond to amounts as of March 31, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three months ended December 31, 2023 and 2022 correspond to amounts during the three months ended March 31, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available: December 31, September 30, 2023 2023 Current assets $ 47,356 $ 51,588 Noncurrent assets $ 266,995 $ 269,809 Current liabilities $ 9,524 $ 8,594 Noncurrent liabilities $ 621 $ 760 Equity attributable to investee $ 301,380 $ 309,167 Noncontrolling interest $ 2,826 $ 2,876 12 For the three months ended December 31, 2023 (1) 2022 Revenues $ 33,966 $ 27,971 Cost of revenues $ 19,069 $ 16,387 Net income attributable to investees $ 15,152 $ 11,808 (1) - Financial information for 2023 includes two additional investments as a result of the acquisition of a majority ownership interest in bebe stores, inc (“bebe”) in 2023 and an other investment made in 2023. As of March 31, 2024 and December 31, 2023, the fair value of these five investments totaled $ 288,436 and $ 283,057 , respectively, and are included in securities and other investments owned, at fair value in the condensed consolidated balance sheets. Freedom VCM Holdings, LLC Equity Interest and Take-Private Transaction On August 21, 2023, the Company acquired an equity interest in Freedom VCM for $ 216,500 in cash in connection with the closing of the acquisition of FRG, by a buyer group that included members of senior management of FRG, led by Mr. Kahn, FRG’s then Chief Executive Officer (the “FRG take-private transaction”). In connection with the closing of the FRG take-private transaction, the Company terminated an investment advisory agreement (the “Advisory Agreement”) with Mr. Kahn. Pursuant to the Advisory Agreement, Mr. Kahn, as financial advisor, had the sole power to vote or dispose of $ 64,644 of shares of FRG common stock (based on the value of FRG shares in the FRG take-private transaction as of the closing date of such transaction) held of record by B. Riley Securities, Inc. (“BRS”). Upon the termination of the Advisory Agreement, (i) Mr. Kahn’s right to vote or dispose of such FRG shares terminated, (ii) such FRG shares owned by BRS were rolled over into additional equity interests in Freedom VCM in connection with the FRG take-private transaction, and (iii) Mr. Kahn owed a total of $ 20,911 to the Company under the Advisory Agreement which amount was added to, and included in, the Amended and Restated Note. Following these transactions, the Company owns an equity interest of $ 281,144 or 31 % of the outstanding equity interests in Freedom VCM. Also in connection with the FRG take-private transaction, on August 21, 2023 all of the equity interests of BRRII, a majority-owned subsidiary of the Company, were sold to a Freedom VCM affiliate, which resulted in a loss of $ 78 . In connection with the sale, the Freedom VCM affiliate assumed the obligations with respect to the Pathlight Credit Agreement, as further discussed in Note 10, and the Company entered into a non-recourse promissory note with another Freedom VCM affiliate in the amount of $ 58,872 , with a stated interest rate of 19.74 % and a maturity date of August 21, 2033 (the “Freedom Receivables Note”) with payments of principal and interest on the note limited solely to performance of certain receivables held by BRRII. The Company has elected to account for this 31 % equity investment under the fair value option. The following tables contain summarized financial information with respect to Freedom VCM, included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of December 31, 2023 and September 30, 2023 correspond to amounts as of March 31, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three months ended December 31, 2023 correspond to amounts during the three months ended March 31, 2024 of the Company), which is the period in which the most recent financial information is available: December 31, 2023 September 30, 2023 Current assets $ 961,787 $ 1,219,682 Noncurrent assets $ 3,131,506 $ 3,142,660 Current liabilities $ 720,510 $ 749,894 Noncurrent liabilities $ 2,640,805 $ 2,695,445 Equity attributable to investee $ 731,978 $ 917,003 13 For the three months ended December 31, 2023 Revenues $ 806,229 Cost of revenues $ 499,679 Loss from continuing operations $ ( 1,175 ) Net loss attributable to investees $ ( 169,583 ) As of March 31, 2024 and December 31, 2023, the fair value of the investment in Freedom VCM totaled $ 244,638 and $ 287,043 , respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets. The change in fair value recorded in the income statement was an unrealized loss of $ 42,405 for the three months ended March 31, 2024. The change in fair value recorded in the income statement was an unrealized gain of $ 5,899 for the period from August 21, 2023 (date of the investment) through December 31, 2023. Babcock and Wilcox Enterprises, Inc, Equity Investment The Company owns a 31 % voting interest in B&W whereby the Company has elected to account for this investment under the fair value option. The following tables contain summarized financial information with respect to B&W included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of December 31, 2023 and September 30, 2023 correspond to amounts as of March 31, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three months ended December 31, 2023 and 2022 correspond to amounts during the three months ended March 31, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available: December 31, 2023 September 30, 2023 Current assets $ 497,593 $ 542,300 Noncurrent assets $ 278,105 $ 294,979 Current liabilities $ 350,197 $ 393,539 Noncurrent liabilities $ 625,851 $ 585,430 Equity attributable to investee $ ( 200,961 ) $ ( 142,316 ) Noncontrolling interest $ 611 $ 626 For the three months ended December 31, 2023 2022 Revenues $ 227,167 $ 236,424 Cost of revenues $ 171,552 $ 182,760 Loss from continuing operations $ ( 54,266 ) $ ( 2,289 ) Net (loss) income $ ( 62,724 ) $ 5,660 Net (loss) income attributable to investees $ ( 66,454 ) $ 2,021 As of March 31, 2024 and December 31, 2023, the fair value of the investment in B&W totaled $ 31,015 and $ 40,072 , respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets. Other Public Company Equity Investments As of March 31, 2024, the Company had a voting interest of 14 % in Synchronoss Technologies, Inc. The Company has significant influence due to the equity ownership interest and board representation for this company. The Company has elected to account for this equity investment under the fair value option. The following tables contain summarized financial information with respect to Synchronoss Technologies, Inc., included below for purposes of the disclosure a quarter in 14 arrears (balance sheet amounts as of December 31, 2023 and September 30, 2023 correspond to amounts as of March 31, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three months ended December 31, 2023 and 2022 correspond to amounts during the three months ended March 31, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available: Synchronoss Technologies, Inc. December 31, 2023 September 30, 2023 Current assets $ 82,002 $ 85,903 Noncurrent assets $ 228,335 $ 275,304 Current liabilities $ 47,697 $ 74,528 Noncurrent liabilities $ 164,706 $ 166,673 Equity attributable to investee $ 97,934 $ 120,006 Synchronoss Technologies, Inc. For the three months ended December 31, 2023 2022 Revenues $ 41,402 $ 41,252 Cost of revenues $ 10,292 $ 11,999 Net loss attributable to investees $ ( 35,001 ) $ ( 15,927 ) As of March 31, 2024 and December 31, 2023, the fair value of the equity investment in Synchronoss Technologies, Inc. was $ 11,806 and $ 8,780 , respectively. These amounts are included in securities and other investments owned in the condensed consolidated balance sheets. Other Equity Investments As of March 31, 2024, the Company had other equity investments where the Company is considered to have the ability to exercise influence since the Company has representation on the board of directors or the Company is presumed to have the ability to exercise significant influence since the investment is more than minor and the limited liability company is required to maintain specific ownership accounts for each member. The Company has elected to account for these equity investments under the fair value option. These equity investments are comprised of equity investments in six private companies at March 31, 2024. The following table contains summarized financial information for these companies, included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of December 31, 2023 and September 30, 2023 correspond to amounts as of March 31, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three months ended December 31, 2023 and 2022 correspond to amounts during the 15 three months ended March 31, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available: December 31, 2023 September 30, 2023 Current assets $ 279,810 $ 281,610 Noncurrent assets $ 622,632 $ 627,858 Current liabilities $ 185,925 $ 150,114 Noncurrent liabilities $ 236,829 $ 277,638 Preferred stock $ 4,500 $ 4,500 Equity attributable to investee $ 475,188 $ 477,216 For the three months ended December 31, 2023 2022 Revenues $ 170,034 $ 37,924 Cost of revenues 145,288 $ 33,062 Net loss attributable to investees ( 852 ) $ ( 13,613 ) As of March 31, 2024 and December 31, 2023, the fair value of these six investments totaled $ 72,145 and $ 87,713 , respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets. (j) Fair Value Measurements The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) for identical instruments that are highly liquid, observable, and actively traded in over-the-counter markets. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable and can be corroborated by market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company’s securities and other investments owned and securities sold and not yet purchased are comprised of common and preferred stocks and warrants, corporate bonds, and investments in partnerships. Investments in common stocks that are based on quoted prices in active markets are included in Level 1 of the fair value hierarchy. The Company also holds loans receivable valued at fair value, nonpublic common and preferred stocks and warrants for which there is little or no public market and fair value is determined by management on a consistent basis. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks. These investments are included in Level 3 of the fair value hierarchy. Investments in partnership interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending funds. The Company also invests in priority investment funds and the underlying securities held by these funds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company. The Company’s partnership and investment fund interests are valued based on the Company’s proportionate share of the net assets of the partnerships and funds; the value for these investments is derived from the most recent statements received 16 from the general partner or fund administrator. These partnership and investment fund interests are valued at net asset value (“NAV”) and are excluded from the fair value hierarchy in the table below in accordance with ASC 820 - Fair Value Measurements . As of March 31, 2024 and December 31, 2023, partnership and investment fund interests valued at NAV of $ 18,964 and $ 35,196 , respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets. Securities and other investments owned also include investments in nonpublic entities that do not have a readily determinable fair value and do not report NAV per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold. The following table presents, as of March 31, 2024 and December 31, 2023, the carrying value of equity securities measured under the measurement alternative investments and the related adjustments recorded during the periods presented for those securities with observable price changes: March 31, 2024 December 31, 2023 Securities and other investments owned, carrying value $ 68,135 $ 64,455 Upward carrying value changes 928 100 Downward carrying value changes/impairment ( 2 ) ( 21,395 ) The Company measures certain assets at fair value on a nonrecurring basis. These assets include equity method investments when they are deemed to be other-than-temporarily impaired, investments adjusted to their fair value by applying the measurement alternative, assets acquired and liabilities assumed in an acquisition or in a nonmonetary exchange, and property, plant and equipment and intangible assets that are written down to fair value when they are held for sale or determined to be impaired. The Company did not have any material assets or liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to initial recognition as of March 31, 2024 and December 31, 2023. 17 The following tables present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of March 31, 2024 and December 31, 2023. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2024 Using Fair value as of March 31, 2024 Quoted prices in active markets for identical assets (Level 1) Other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets: Securities and other investments owned: Equity securities $ 801,002 $ 126,323 $ — $ 674,679 Corporate bonds 56,616 51,566 5,050 — Other fixed income securities 5,151 — 5,151 — Total securities and other investments owned 862,769 177,889 10,201 674,679 Loans receivable, at fair value 452,496 — — 452,496 Total assets measured at fair value $ 1,315,265 $ 177,889 $ 10,201 $ 1,127,175 Liabilities: Securities sold not yet purchased: Equity securities $ 2,609 $ 2,609 $ — $ — Corporate bonds 2,592 36 2,556 — Other fixed income securities 1,222 — 1,222 — Total securities sold not yet purchased 6,423 2,645 3,778 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 5,601 — — 5,601 Contingent consideration 29,322 — — 29,322 Total liabilities measured at fair value $ 41,346 $ 2,645 $ 3,778 $ 34,923 18 Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2023 Using Fair value at December 31, 2023 Quoted prices in active markets for identical assets (Level 1) Other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets: Securities and other investments owned: Equity securities $ 930,179 $ 194,541 $ — $ 735,638 Corporate bonds 59,287 56,045 3,242 — Other fixed income securities 2,989 — 2,989 — Total securities and other investments owned 992,455 250,586 6,231 735,638 Loans receivable, at fair value 532,419 — — 532,419 Total assets measured at fair value $ 1,524,874 $ 250,586 $ 6,231 $ 1,268,057 Liabilities: Securities sold not yet purchased: Equity securities $ 1,037 $ 1,037 $ — $ — Corporate bonds 5,971 — 5,971 — Other fixed income securities 1,593 — 1,593 — Total securities sold not yet purchased 8,601 1,037 7,564 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 5,835 — — 5,835 Contingent consideration 27,985 — — 27,985 Total liabilities measured at fair value $ 42,421 $ 1,037 $ 7,564 $ 33,820 As of March 31, 2024 and December 31, 2023, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $ 1,127,175 and $ 1,268,057 , respectively, or 22.6 % and 20.9 %, respectively, of the Company’s total assets. In determining the fair value for these Level 3 financial assets, the Company analyzes various financial, performance and market factors to estimate the value, including where applicable, over-the-counter market trading activity. 19 The following table summarizes the significant unobservable inputs in the fair value measurement of Level 3 financial assets and liabilities by category of investment and valuation technique as of March 31, 2024 and December 31, 2023: Fair value at March 31, 2024 Valuation Technique Unobservable Input Range Weighted Average (1) Assets: Equity securities $ 572,900 Market approach Multiple of EBITDA 2.3 x - 9.0 x 8.1 x Multiple of Sales 0.7 x - 3.8 x 0.9 x Market price of related security $ 0.05 - $ 11.20 $ 10.74 58,579 Discounted cash flow Market interest rate 20.2 % - 21.3 % 21.2 % 43,200 Option pricing model Annualized volatility 25.0 % - 188.0 % 73.0 % Loans receivable at fair value 220,659 Discounted cash flow Market interest rate 13.9 % - 27.2 % 18.4 % 231,837 Market approach Market price of related security $ 17.22 $ 17.22 Multiple of Sales 0.6 x - 0.7 x 0.7 x Total level 3 assets measured at fair value $ 1,127,175 Liabilities: Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 5,601 Market approach Operating income multiple 6.0 x 6.0 x Contingent consideration 29,322 Discounted cash flow EBITDA volatility 70.0 % 70.0 % Asset volatility 69.0 % 69.0 % Market interest rate 8.5 % 8.5 % Total level 3 liabilities measured at fair value $ 34,923 Revenue volatility 5.0 % - 6.3 % 5.6 % (1) - Unobservable inputs were weighted by the relative fair value of the financial instruments. 20 Fair value at December 31, 2023 Valuation Technique Unobservable Input Range Weighted Average (1) Assets: Equity securities $ 662,158 Market approach Multiple of EBITDA 0.7 x - 13.5 x 7.1 x Multiple of Sales 0.8 x to 3.8 x 1.0 x Market price of related security $ 0.04 - $ 92.51 $ 12.27 58,331 Discounted cash flow Market interest rate 20.2 % - 57.0 % 24.6 % 15,149 Option pricing model Annualized volatility 25.0 % - 187.0 % 75.0 % Loans receivable at fair value 512,522 Discounted cash flow Market interest rate 10.0 % - 41.6 % 17.1 % 19,897 Market approach Market price of related security $ 19.87 $ 19.87 Total level 3 assets measured at fair value $ 1,268,057 Liabilities: Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 5,835 Market approach Operating income multiple 6.0 x 6.0 x Contingent consideration 27,985 Discounted cash flow EBITDA volatility 70 % 70 % Asset volatility 69 % 69 % Market interest rate 8.5 % 8.5 % Revenue volatility 5.1 % 5.1 % Total level 3 liabilities measured at fair value $ 33,820 (1) - Unobservable inputs were weighted by the relative fair value of the financial instruments. 21 The changes in Level 3 fair value hierarchy during the three months ended March 31, 2024 and 2023 were as follows: Level 3 Balance at Beginning of Period Level 3 Changes During the Period Level 3 Balance at End of Period Fair Value Adjustments (1) Relating to Undistributed Earnings Purchases, Sales and Settlements Transfer in and/or out of Level 3 Three Months Ended March 31, 2024 Equity securities $ 735,638 $ ( 51,009 ) $ 12 $ ( 8,888 ) $ ( 1,074 ) $ 674,679 Loans receivable at fair value 532,419 ( 12,130 ) 3,089 ( 70,882 ) — 452,496 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 5,835 — 293 ( 527 ) — 5,601 Contingent consideration 27,985 1,407 — ( 70 ) — 29,322 Three Months Ended March 31, 2023 Equity securities $ 368,465 $ ( 9,016 ) $ — $ 6,487 $ ( 6,895 ) $ 359,041 Loans receivable at fair value 701,652 43,459 231 26,743 — 772,085 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,648 — 308 ( 302 ) — 4,654 Contingent consideration 31,046 ( 3,447 ) — 1,285 — 28,884 (1) - Fair value adjustments represent realized and unrealized gains (losses) of which $( 10,390 ) relating to equity securities and $( 12,130 ) relating to loans receivable, at fair value were included in trading income (loss) and fair value adjustments on loans and $( 40,619 ) relating to equity securities were included in realized and unrealized gains (losses) on investments in the condensed consolidated statement of operations during the three months ended March 31, 2024. Fair value adjustments represent realized and unrealized gains (losses) of which $( 12 ) relating to equity securities and $ 43,459 relating to loans receivable, at fair value were included in trading income (loss) and fair value adjustments on loans and $( 9,004 ) relating to equity securities were included in realized and unrealized gains (losses) on investments in the condensed consolidated statement of operations during the three months ended March 31, 2023. The amount reported in the table above during the three months ended March 31, 2024 and 2023 included the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis. The carrying amounts reported in the condensed consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value based on the short-term maturity of these instruments. As of March 31, 2024 and December 31, 2023, the senior notes payable had a carrying amount of $ 1,553,616 and $ 1,668,021 , respectively, and fair value of $ 1,038,272 and $ 1,127,503 , respectively. The aggregate carrying amount of the Company's notes payable, revolving credit facility, and term loans of $ 632,784 and $ 688,343 as of March 31, 2024 and December 31, 2023, respectively, approximates fair value because the effective yield of such instrument is consistent with current market rates of interest for instruments of comparable credit risk. The investments in nonpublic entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in realized and unrealized gains (losses) on investments on the condensed consolidated statements of operations. These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer. Further adjustments are not made until another observable transaction occurs. Therefore, the determination of fair values of these investments in nonpublic entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments. Investments in nonpublic entities that do not report NAV are subject to a qualitative assessment for indicators of impairment. If indicators of impairment are present, the Company is required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value. 22 The following table presents information on the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of March 31, 2024 and December 31, 2023. These investments were measured due to an observable price change or impairment during the periods below. Fair Value Measurement Using Total Quoted prices in active markets for identical assets (Level 1) Other observable inputs (Level 2) Significant unobservable inputs (Level 3) As of March 31, 2024 Investments in nonpublic entities that do not report NAV $ 3,424 $ — $ 3,424 $ — As of December 31, 2023 Investments in nonpublic entities that do not report NAV $ 1,628 $ — $ 1,602 $ 26 (k) Foreign Currency Translation The Company transacts business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. Transaction gains were $ 2,268 and losses were $ 234 during the three months ended March 31, 2024 and 2023, respectively. These amounts were included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. (l) Equity Method Investment As of March 31, 2024 and December 31, 2023, an equity investment that is accounted for under the equity method of accounting had a carrying value of $ 2,046 and $ 2,087 , respectively, which is included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets. The Company’s share of earnings or losses from equity method investees included in income (loss) from equity investments was $( 4 ) and $( 10 ) during the three months ended March 31, 2024 and 2023, respectively, in the accompanying condensed consolidated statements of operations. bebe stores, inc. As of March 31, 2023, the Company owned a 41.3 % ownership interest in bebe. This was accounted for under the equity method of accounting and the Company had no income from this equity investment during the three months ended March 31, 2023. On October 6, 2023, the Company purchased an additional 3,700,000 shares of bebe for an aggregate purchase price of $ 18,500 , resulting in an increase in the Company's ownership interest to 76.2 %. The purchase of these additional shares resulted in the Company having a majority voting interest in bebe and the consolidation of bebe financial results for periods subsequent to October 6, 2023. (m) Supplemental Non-cash Disclosures During the three months ended March 31, 2024, there was non-cash investing activity related to the receipt of a note receivable in the amount of $ 2,000 related to the sale of certain assets and $ 42,077 related to a loan receivable, at fair value that converted into equity securities. During the three months ended March 31, 2023, non-cash investing activities included $ 15,000 of notes receivable that converted into equity securities; $ 1,190 of loans receivable, at fair value, that was included in consideration paid for the purchase of the Lingo noncontrolling interest; and $ 2,111 of common stock issued as part of the purchase price consideration for a business acquisition. During the three months ended months ended March 31, 2023, non-cash financing activities also included $ 7,000 in seller financing related to the purchase of the Lingo noncontrolling interest. 23 (n) Variable Interest Entities The Company holds interests in various entities that meet the characteristics of a VIE but are not consolidated as the Company is not the primary beneficiary. Interests in these entities are generally in the form of equity interests, loans receivable, or fee arrangements. The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties. The party with a controlling financial interest in a VIE is known as the primary beneficiary and consolidates the VIE. The Company determines whether it is the primary beneficiary of a VIE by performing an analysis that principally considers: (a) which variable interest holder has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; (b) which variable interest holder has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE; (c) the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders; (d) the terms between the VIE and its variable interest holders and other parties involved with the VIE; and (e) related-party relationships with other parties that may also have a variable interest in the VIE. On August 21, 2023, in connection with the FRG take-private transaction, one of the Company's subsidiaries (the “Lender”) and an affiliate of Mr. Kahn (the “Borrower”) entered into an amended and restated a promissory note as discussed further in Note 2(h) and 2(i) above. The Company was not involved in the design of the Borrower, has no equity financial interest, and has no rights to make decisions or participate in the management of the Borrower that significantly impact the economics of the Borrower. Since the Company does not have the power to direct the activities of the Borrower, the Company is not the primary beneficiary and therefore does not consolidate the Borrower. The promissory note is included in loans receivable, at fair value in the Company’s consolidated financial statements and is a variable interest in accordance with the accounting guidance. As of March 31, 2024 and December 31, 2023, the maximum amount of loss exposure to the VIE was $ 215,477 and $ 209,395 , respectively. The Company, has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered variable interest entities under the accounting guidance. The Company earns fees from the Funds in the form of placement agent fees and carried interest. For placement agent fees, the Company receives a cash fee of generally 7 % to 10 % of the amount of raised capital for the Funds and the fee is recognized at the time the placement services occurred. The Company receives carried interest as a percentage allocation ( 8 % to 15 %) of the profits of the Funds as compensation for asset management services provided to the Funds and it is recognized under the ownership model of ASC 323 - Investments – Equity Method and Joint Ventures as an equity method investment with changes in allocation recorded currently in the results of operations. As the fee arrangements under such agreements are arm’s length and contain customary terms and conditions and represent compensation that is considered fair value for the services provided, the fee arrangements are not considered variable interests and accordingly, the Company does not consolidate such VIEs. Placement agent fees attributable to such arrangements were $ 372 and zero during the three months ended March 31, 2024 and 2023, respectively, and were included in services and fees in the condensed consolidated statements of operations. The carrying amounts included in the Company’s condensed consolidated balance sheets related to variable interests in VIEs that were not consolidated is shown below. March 31, 2024 December 31, 2023 Securities and other investments owned, at fair value $ 14,538 $ 28,573 Loans receivable, at fair value 247,115 250,801 Other assets 17,594 11,418 Maximum exposure to loss $ 279,247 $ 290,792 24 B. Riley Principal 250 Merger Corporation (“BRPM”) In 2021, the Company along with BRPM 250, a newly formed special purpose acquisition company incorporated as a Delaware corporation, consummated the initial public offering of 17,250,000 units of BRPM 250. Each Unit of BRPM 250 consisted of one share of class A common stock and one-third of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of BRPM 250 class A common stock at an exercise price of $ 11.50 per share. The BRPM 250 Units were each sold at a price of $ 10.00 per unit, generating gross proceeds to BRPM 250 of $ 172,500 . These proceeds were deposited in a trust account established for the benefit of the BRPM 250 class A public shareholders and was included in prepaid expenses and other assets in the condensed consolidated balance sheets. These proceeds are invested only in U.S. treasury securities in accordance with the governing documents of BRPM 250. Under the terms of the BRPM 250 initial public offering, BRPM 250 was required to consummate a business combination transaction within 24 months (or 27 months under certain circumstances) of the completion of its initial public offering. In connection with the completion of the initial public offering of BRPM 250, the Company invested in the private placement units of BRPM 250. BRPM 250 was determined to be a VIE because it did not have enough equity at risk to finance its activities without additional subordinated financial support. The Company had determined that the class A shareholders of BRPM 250 do not have substantive rights as shareholders of BRPM 250 since these equity interests are determined to be temporary equity. As such, the Company had determined that it is the primary beneficiary of BRPM 250 as it has the right to receive benefits or the obligation to absorb losses, as well as the power to direct a majority of the activities that significantly impact BRPM 250’s economic performance. Since the Company is determined to be the primary beneficiary, BRPM 250 was consolidated into the Company’s financial statements. On April 21, 2023, the Board of Directors of BRPM 250 approved a plan to redeem all of the outstanding shares of Class A common stock of BRPM 250, effective as of May 4, 2023. The BRPM 250 Class A public shares were deemed cancelled on May 4, 2023, and the funds held in trust were used to fund the corresponding redemption amounts to the BRPM 250 Class A shareholders and BRPM 250 was no longer a VIE. (o) Recent Accounting Standards Not yet adopted In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures . The amendments in this update improve income tax disclosure requirements related to the transparency of rate reconciliation and income taxes paid disclosures and the effectiveness and comparability of disclosures of pretax income (or loss) and income tax expense (or benefit). The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The update should be applied on a prospective basis. The Company has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial position and results of operations. In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures . The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories included in each reported measure of a segment's profit or loss on an interim and annual basis. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The update should be applied retrospectively to all prior periods presented in the financial statements. The Company has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial position and results of operations. NOTE 3 — ACQUISITIONS 2024 Acquisitions On May 3, 2024, one of the Company’s wholly owned subsidiaries completed the acquisition of Nogin for a total purchase consideration of approximately $ 59,000 , which consisted of $ 37,700 in DIP financing (see Note 2(h)) and an additional $ 21,300 in cash consideration. To fund the $ 21,300 in cash consideration, contemporaneous with the closing, the acquired company issued $ 15,000 of convertible debt. The impact of the consolidation of Nogin’s financial statements is not expected to be material to the Company’s financial position or operating results. Since the controlling interest was acquired subsequent to quarter end, the Company believes the disclosure of pro forma financial information is impracticable because the financial information and valuation reports needed to account for the acquisition and prepare unaudited pro forma financial information has not been made available to the Company as of the reporting date. 25 2023 Acquisitions Freedom VCM Equity Investment Acquisition - Pro Forma Financial Information On August 21, 2023, the Company acquired approximately 31 % equity interest in Freedom VCM for total consideration of $ 281,144 . The equity interest was acquired in connection with Freedom VCM's acquisition of FRG by a buyer group that included members of senior management of FRG, led by Brian Kahn, FRG’s then Chief Executive Officer as part of the FRG take-private transaction. The unaudited pro-forma financial information for the three months ended March 31, 2023 in the table below summarizes the results of operations of the Company and the equity investment in Freedom VCM as though the acquisition of the approximately 31 % equity investment on August 21, 2023 had occurred as of the beginning of the year on January 1, 2023. The pro-forma financial information presented includes the effects of the common stock offering in July 2023 and adjustments related to additional interest expense from borrowings that the Company used to finance the acquisition of the equity interest. The Company has elected to account for the acquisition of the equity investment under the fair value option and any changes in fair value of the equity investment during future periods will be recorded in the consolidated statements of operations. The pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition of the equity investment had taken place at the beginning of the earliest period presented, nor does it intend to be a projection of future results. Pro Forma (unaudited) Three Months Ended March 31, 2023 Revenues $ 432,090 Net income attributable to B. Riley Financial, Inc. $ 14,870 Net income attributable to common shareholders $ 12,858 Basic income per share $ 0.42 Diluted income per share $ 0.41 Weighted average basic shares outstanding 30,676,246 Weighted average diluted shares outstanding 31,604,344 NOTE 4 — RESTRUCTURING CHARGE During the three months ended March 31, 2024, the Company recognized restructuring charges of $ 789 primarily related to reorganization and consolidation activities in the Communications segment and Consumer Products segment, which consisted of reductions in workforce. During the three months ended March 31, 2023, the Company recognized restructuring charges of $ 93 primarily related to reorganization and consolidation activities in the Wealth Management segment and Communications segment, which consisted of reductions in workforce and facility closures. 26 The following tables summarize the changes in accrued restructuring charge during the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Balance, beginning of period $ 2,542 $ 2,335 Restructuring charge 789 93 Cash paid ( 1,835 ) ( 438 ) Non-cash items ( 29 ) 6 Balance, end of period $ 1,467 $ 1,996 The following table summarizes the restructuring activities by reportable segment during the three months ended March 31, 2024 and 2023. Wealth Management Communications Consumer Products Total Restructuring charges for the three months ended March 31, 2024: Employee termination $ — $ 263 $ 526 $ 789 Total restructuring charge $ — $ 263 $ 526 $ 789 Restructuring charges for the three months ended March 31, 2023: Employee termination $ — $ 60 $ — $ 60 Facility closure and consolidation 33 — — 33 Total restructuring charge $ 33 $ 60 $ — $ 93 NOTE 5 — SECURITIES LENDING The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of March 31, 2024 and December 31, 2023: Gross amounts recognized Gross amounts offset in the consolidated balance sheets (1) Net amounts included in the consolidated balance sheets Amounts not offset in the consolidated balance sheets but eligible for offsetting upon counterparty default (2) Net amounts As of March 31, 2024 Securities borrowed $ 2,050,079 $ — $ 2,050,079 $ 2,050,079 $ — Securities loaned $ 2,041,169 $ — $ 2,041,169 $ 2,041,169 $ — As of December 31, 2023 Securities borrowed $ 2,870,939 $ — $ 2,870,939 $ 2,870,939 $ — Securities loaned $ 2,859,306 $ — $ 2,859,306 $ 2,859,306 $ — _________________________ (1) Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred. (2) Includes the amount of cash collateral held/posted. 27 The following table presents the contract value of securities lending transactions accounted for as secured borrowings by the type of collateral provided to counterparties as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Remaining contractual maturity Remaining contractual maturity Overnight and continuous Total Overnight and continuous Total Securities lending transactions Corporate securities - fixed income $ 188,168 $ 188,168 $ 283,809 $ 283,809 Equity securities 1,847,793 1,847,793 2,575,919 2,575,919 Non-US sovereign debt 14,118 14,118 11,211 11,211 Total borrowings $ 2,050,079 $ 2,050,079 $ 2,870,939 $ 2,870,939 The Company's securities lending transactions require us to pledge collateral based on the terms of each contract which is generally denominated in U.S. dollars and marked to market on a daily basis. If the fair value of the collateral pledged for these transactions declines, the Company could be required to provide additional collateral to the counterparty, therefore decreasing the amount of assets available for other liquidity needs that may arise. The Company's liquidity risk is mitigated by maintaining offsetting securities borrowed transactions in which the Company receives cash from the counterparty which, in general, is equal to or greater than the cash the Company posts on securities lending transactions. NOTE 6 — ACCOUNTS RECEIVABLE The components of accounts receivable, net, include the following: March 31, 2024 December 31, 2023 Accounts receivable $ 115,438 $ 109,725 Investment banking fees, commissions and other receivables 15,481 13,110 Total accounts receivable 130,919 122,835 Allowance for credit losses ( 7,122 ) ( 7,339 ) Accounts receivable, net $ 123,797 $ 115,496 Additions and changes to the allowance for credit losses consist of the following: Three Months Ended March 31, 2024 2023 Balance, beginning of period $ 7,339 $ 3,664 Add: Additions to reserve 436 3,173 Less: Write-offs ( 653 ) ( 488 ) Less: Recovery — ( 25 ) Balance, end of period $ 7,122 $ 6,324 28 NOTE 7 — PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other assets consist of the following: March 31, 2024 December 31, 2023 Inventory $ 105,397 $ 110,482 Equity method investments 2,046 2,087 Prepaid expenses 21,041 24,813 Unbilled receivables 16,097 13,402 Other receivables 52,233 39,001 Other assets 49,588 47,542 Prepaid expenses and other assets $ 246,402 $ 237,327 Unbilled receivables represent the amount of contractual reimbursable costs and fees for services performed in connection with fee and service based contracts in the Auction and Liquidation segment, mobile handsets in the Communications segment, and consulting related engagements in the Financial Consulting segment. Other receivables primarily consist of interest receivables on loans and loans receivables that are held at cost. Other assets primarily consist of deposits, real estate held for investment, deferred financing costs, and finance lease assets. NOTE 8 — GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill was $ 471,636 and $ 472,326 as of March 31, 2024 and December 31, 2023, respectively. The changes in the carrying amount of goodwill for the three months ended March 31, 2024 were as follows: Capital Markets Segment Wealth Management Segment Auction and Liquidation Segment Financial Consulting Segment Communications Segment Consumer Products Segment All Other Total Balance as of December 31, 2023 $ 162,018 $ 51,195 $ 1,975 $ 33,310 $ 193,867 $ 26,681 $ 3,280 $ 472,326 Other ( 532 ) — — ( 158 ) — — — ( 690 ) Balance as of March 31, 2024 $ 161,486 $ 51,195 $ 1,975 $ 33,152 $ 193,867 $ 26,681 $ 3,280 $ 471,636 During the three months ended March 31, 2024, the changes in goodwill included $( 158 ) of foreign currency translation amounts and $( 532 ) related to the sale of certain assets. 29 Intangible assets consisted of the following: As of March 31, 2024 As of December 31, 2023 Useful Life Gross Carrying Value Accumulated Amortization Intangibles Net Gross Carrying Value Accumulated Amortization Intangibles Net Amortizable assets: Customer relationships 1.0 to 16 Years $ 270,398 $ ( 123,943 ) $ 146,455 $ 272,399 $ ( 117,228 ) $ 155,171 Domain names 7 years 176 ( 173 ) 3 185 ( 183 ) 2 Advertising relationships 8 years 100 ( 96 ) 4 100 ( 94 ) 6 Internally developed software and other intangibles 0.5 to 10 Years 28,985 ( 20,481 ) 8,504 28,985 ( 19,613 ) 9,372 Trademarks 3 to 10 Years 20,817 ( 8,708 ) 12,109 20,821 ( 8,133 ) 12,688 Total 320,476 ( 153,401 ) 167,075 322,490 ( 145,251 ) 177,239 Non-amortizable assets: Tradenames 144,775 — 144,775 144,775 — 144,775 Total intangible assets $ 465,251 $ ( 153,401 ) $ 311,850 $ 467,265 $ ( 145,251 ) $ 322,014 Amortization expense was $ 8,996 and $ 10,473 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, estimated future amortization expense was $ 24,664 , $ 30,002 , $ 26,874 , $ 24,648 , and $ 21,161 for the years ended December 31, 2024 (remaining nine months), 2025, 2026, 2027 and 2028, respectively. The estimated future amortization expense after December 31, 2028 was $ 39,726 . NOTE 9 — NOTES PAYABLE Asset Based Credit Facility The Company is party to a credit agreement (as amended, the “Credit Agreement”) governing its asset based credit facility with Wells Fargo Bank, National Association (“Wells Fargo Bank”) with a maximum borrowing limit of $ 200,000 and a 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. The letters of credit issued under this facility are furnished by the lender to third parties for the principal purpose of securing minimum guarantees under liquidation services contracts. All outstanding loans, letters of credit, and interest are due on the expiration date which is generally within 180 days of funding. The credit facility is secured by the proceeds received for services rendered in connection with liquidation service contracts pursuant to which any outstanding loan or letters of credit are issued and the assets that are sold at liquidation related to such contract. The interest rate for each revolving credit advance under the Credit Agreement is subject to certain terms and conditions, equal to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 2.25 % to 3.25 % depending on the type of advance and the percentage such advance represents of the related transaction for which such advance is provided. The credit facility provides for success fees in the amount of 1.0 % to 10.0 % of the net profits, if any, earned on the liquidation engagements funded under the Credit Agreement as set forth therein. The credit facility also provides for funding fees in the amount of 0.05 % to 0.20 % of the aggregate principal amount of all credit advances and letters of credit issued in connection with a liquidation sale. Interest expense totaled $ 18 during the three months ended March 31, 2024 and 2023. There was no outstanding balance on this credit facility as of March 31, 2024 and December 31, 2023. As of March 31, 2024, there were no open letters of credit outstanding. The Company is in compliance with all covenants in the asset based credit facility as of March 31, 2024. Other Notes Payable 30 As of March 31, 2024 and December 31, 2023, the outstanding balance for the other notes payable was $ 14,325 and $ 19,391 , respectively. Interest expense was $ 144 and $ 174 during the three months ended March 31, 2024 and 2023, respectively. Notes payable primarily consisted of additional deferred cash consideration owed to the sellers of FocalPoint and a promissory note related to the Lingo minority interest purchase, which was paid in full on January 2, 2024. NOTE 10 — TERM LOANS AND REVOLVING CREDIT FACILITY Targus Credit Agreement On October 18, 2022, the Company's subsidiary, Tiger US Holdings, Inc. (the “Borrower”), a Delaware corporation, among others, entered into a credit agreement (“Targus Credit Agreement”) with PNC Bank, National Association (“PNC”), as agent and security trustee for a five-year $ 28,000 term loan and a five-year $ 85,000 revolver loan, which was used to finance part of the acquisition of Targus. The final maturity date is October 18, 2027. The Targus Credit Agreement is secured by substantially all Targus assets as collateral defined in the Targus Credit Agreement. The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. The Targus Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts outstanding under the Targus Credit Agreement. On October 31, 2023 and February 20, 2024, the Company entered into Amendment No. 1 and Amendment No. 2 to the Targus Credit Agreement, which, among other things, modified the fixed charge coverage ratio and the minimum earnings before interest, taxes, depreciation, and amortization requirements which waived the financial covenant breaches for the periods ended September 30, 2023 and December 31, 2023, respectively. The Company is in compliance with all financial covenants in the Targus Credit Agreement as of March 31, 2024. The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus an applicable margin of 5.75 %. The revolver loan consists of base rate loans that bear interest on the outstanding principal amount equal to the base rate plus an applicable margin of 3.00 % and term rate loans that bear interest on the outstanding principal amount equal to the revolver SOFR rate plus an applicable margin of 4.00 %. Principal outstanding for the term loan under the amended Targus Credit Agreement is due in quarterly installments. The quarterly installment on June 30, 2024 is in the amount of $ 1,400 . Quarterly installments from September 30, 2024 to December 31, 2025 are in the amount of $ 2,100 per quarter and the remaining principal balance is due on March 31, 2026. As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $ 14,356 (net of unamortized debt issuance costs of $ 344 ) and $ 17,834 (net of unamortized debt issuance costs of $ 366 ), respectively, and the outstanding balance on the revolver loan was $ 22,197 and $ 43,801 , respectively. Interest expense on these loans during the three months ended March 31, 2024 and 2023 was $ 1,360 (including amortization of deferred debt issuance costs of $ 184 and unused commitment fees of $ 27 ) and $ 1,843 (including amortization of deferred debt issuance costs of $ 154 and unused commitment fees of $ 19 ), respectively. The interest rate on the term loan was 11.16 % and 10.20 % and the interest rate on the revolver loan ranged between 9.19 % and 11.50 % and between 8.45 % to 11.25 % as of March 31, 2024 and December 31, 2023, respectively. The weighted average interest rate on the revolver loan was 9.77 % and 8.53 % as of March 31, 2024 and December 31, 2023, respectively. Pathlight Credit Agreement On September 23, 2022, the Company's subsidiary, BRRII, entered into a credit agreement (the “Pathlight Credit Agreement”) by and among PLC Agent, LLC in the capacity as administrative agent and Pathlight Capital Fund I LP, Pathlight Capital Fund II LP, and Pathlight Capital Fund III LP as the lenders (collectively, “Pathlight”) for a five-year $ 148,200 term loan. On January 12, 2023, Amendment No. 2 to the Pathlight Credit Agreement increased the term loan by an additional $ 78,296 . On March 31, 2023, Amendment No. 3 to the Pathlight Credit Agreement increased the term loan by an additional $ 49,890 . On August 21, 2023, in connection with the sale of all of the equity interests in BRRII to Freedom VCM Receivables as more fully described in Note 2(h), the Company was released from all obligations, 31 guarantees and covenants related to the Pathlight Credit Agreement. The Company had been in compliance with all financial covenants in the Pathlight Credit Agreement. The term loan bore interest on the outstanding principal amount equal to the Term SOFR rate plus an applicable margin of 6.50 %. Interest expense on the term loan during the three months ended March 31, 2023 was $ 6,430 (including amortization of deferred debt issuance costs of $ 1,744 ). Lingo Credit Agreement On August 16, 2022, the Company's subsidiary, Lingo, a Delaware limited liability company (the “Borrower”), entered into a credit agreement (the “Lingo Credit Agreement”) by and among the Borrower, the Company as the secured guarantor, and Banc of California, N.A. in its capacity as administrative agent and lender, for a five-year $ 45,000 term loan. This loan was used to finance part of the purchase of Bullseye by Lingo. On September 9, 2022, Lingo entered into the First Amendment to the Lingo Credit Agreement with Grasshopper Bank for an incremental term loan of $ 7,500 , increasing the principal balance of the term loan to $ 52,500 . On November 10, 2022, Lingo entered into the Second Amendment to the Lingo Credit Agreement with KeyBank National Association for an incremental term loan of $ 20,500 , increasing the principal balance of the term loan to $ 73,000 . The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus a margin of 3.00 % to 3.75 % per annum, depending on the consolidated total funded debt ratio as defined in the Lingo Credit Agreement, plus applicable spread adjustment. As of March 31, 2024 and December 31, 2023, the interest rate on the Lingo Credit Agreement was 8.69 % and 8.70 %, respectively. The Lingo Credit Agreement is guaranteed by the Company and Lingo's subsidiaries and secured by certain Lingo assets and equity interests as collateral defined in the Lingo Credit Agreement. The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of its businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the Lingo Credit Agreement requires the Borrower to maintain certain financial ratios. The Lingo Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the Lingo Credit Agreement. The Company is in compliance with all financial covenants in the Lingo Credit Agreement as of March 31, 2024. Principal outstanding is due in quarterly installments. The quarterly installments from June 30, 2024 to December 31, 2024 are in the amount of $ 2,738 per quarter, quarterly installments from March 31, 2025 to June 30, 2027 are in the amount of $ 3,650 , and the remaining principal balance is due at final maturity on August 16, 2027. As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $ 60,442 (net of unamortized debt issuance costs of $ 695 ) and $ 63,153 (net of unamortized debt issuance costs of $ 722 ), respectively. Interest expense on the term loan during the three months ended March 31, 2024 was $ 1,472 (including amortization of deferred debt issuance costs of $ 70 ). Interest expense on the term loan during the three months ended March 31, 2023 was $ 1,561 (including amortization of deferred debt issuance costs of $ 75 ). bebe Credit Agreement As a result of the Company obtaining a majority ownership interest in bebe on October 6, 2023, bebe's credit agreement with SLR Credit Solutions (the “bebe Credit Agreement”) for a $ 25,000 five-year term loan with a maturity date of August 24, 2026 is included in the Company's long-term debt. The term loan bears interest on the outstanding principal amount equal to the Term SOFR rate plus a margin of 5.50 % to 6.00 % per annum, depending on the total fixed charge coverage ratio as defined in the bebe Credit Agreement. As of March 31, 2024 and December 31, 2023, the interest rate on the bebe Credit Agreement was 11.10 % and 11.14 %, respectively. The bebe Credit Agreement is collateralized by a first lien on all bebe assets and pledges of capital stock including equity interests. The agreement contains certain covenants, including those limiting the borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the agreement requires bebe to maintain certain financial ratios. The agreement also contains customary representations and warranties, affirmative covenants, and 32 events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. The Company is in compliance with all financial covenants in the bebe Credit Agreement as of March 31, 2024. Principal outstanding is due in quarterly installments through June 30, 2026 in the amount of $ 313 per quarter and the remaining principal balance of $ 20,000 is due at final maturity on August 24, 2026. As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $ 22,240 (net of unamortized debt issuance costs of $ 573 ) and $ 22,487 (net of unamortized debt issuance costs of $ 638 ), respectively. Interest expense on the term loan during the three months ended March 31, 2024 was $ 713 (including amortization of deferred debt issuance costs of $ 65 ). Nomura Credit Agreement The Company, and its wholly owned subsidiaries, BR Financial Holdings, LLC, and BR Advisory & Investments, LLC had entered into a credit agreement dated June 23, 2021 (as amended, the “Prior Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, for a four-year $ 300,000 secured term loan credit facility (the “Prior Term Loan Facility”) and a four-year $ 80,000 secured revolving loan credit facility (the “Prior Revolving Credit Facility”) with a maturity date of June 23, 2025. On August 21, 2023, the Company and its wholly owned subsidiary, BR Financial Holdings, LLC (the “Borrower”), and certain direct and indirect subsidiaries of the Borrower (the “Guarantors”), entered into a credit agreement (the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Computershare Trust Company, N.A., as collateral agent, for a four-year $ 500,000 secured term loan credit facility (the “New Term Loan Facility”) and a four-year $ 100,000 secured revolving loan credit facility (the “New Revolving Credit Facility” and together, the “New Credit Facilities”). The purpose of the Credit Agreement was to (i) fund the Freedom VCM equity investment, (ii) prepay in full the Prior Term Loan Facility and Prior Revolving Credit Facility with an aggregate outstanding balance of $ 347,877 , which included $ 342,000 in principal and $ 5,877 in interest and fees, (iii) fund a dividend reserve in an amount not less than $ 65,000 , (iv) pay related fees and expenses, and (v) for general corporate purposes. The Company recorded a loss on extinguishment of debt related to the Prior Credit Agreement of $ 5,408 , which was included in selling, general and administrative expenses on the condensed consolidated statements of operations. SOFR rate loans under the New Credit Facilities accrue interest at the adjusted Term SOFR rate plus an applicable margin of 6.00 %. In addition to paying interest on outstanding borrowings under the New Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter. The Credit Agreement is secured on a first priority basis by a security interest in the equity interests of the Borrower and each of the Borrower’s subsidiaries (subject to certain exclusions) and a security interest in substantially all of the assets of the Borrower and the Guarantors. The borrowing base as defined in the Credit Agreement consists of a collateral pool that includes certain of the Company's loans receivables in the amount of $ 349,185 and $ 375,814 and investments in the amount of $ 658,627 and $ 786,714 as of March 31, 2024 and December 31, 2023, respectively. The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit the Company’s and its subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests. The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events. The Company is in compliance with all financial covenants in the Credit Agreement as of March 31, 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 June 30, 2024 to June 30, 2027 are in the amount of $ 3,125 per quarter. As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $ 456,121 (net of unamortized debt issuance costs of $ 17,629 ) and $ 475,056 (net of unamortized debt issuance costs of $ 18,694 ), respectively. Interest expense on the term loan during the three months ended March 31, 2024 and 2023 was $ 14,984 (including amortization of deferred debt issuance costs of $ 1,065 ) and $ 7,300 (including amortization of deferred debt 33 issuance costs of $ 527 ), respectively. The interest rate on the term loan as of March 31, 2024 and December 31, 2023 was 11.31 % and 11.37 %, respectively. The Company had an outstanding balance of zero under the revolving facility as of March 31, 2024 and December 31, 2023. Interest on the revolving facility during the three months ended March 31, 2024 and 2023 was $ 497 (including unused commitment fees of $ 245 and amortization of deferred financing costs of $ 252 ) and $ 1,956 (including amortization of deferred financing costs of $ 150 ), respectively. The interest rate on the revolving facility as of March 31, 2024 and December 31, 2023 was 11.37 %. BRPAC Credit Agreement On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of the Company, in the capacity as borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with the Banc of California, N.A. in the capacity as agent (the “Agent”) and lender and with the other lenders party thereto (the “Closing Date Lenders”). Certain of the Borrowers’ U.S. subsidiaries are guarantors of all obligations under the BRPAC Credit Agreement and are parties to the BRPAC Credit Agreement in such capacity (collectively, the “Secured Guarantors”; and together with the Borrowers, the “Credit Parties”). In addition, the Company and B. Riley Principal Investments, LLC, the parent corporation of BRPAC and a subsidiary of the Company, are guarantors of the obligations under the BRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of BRPAC are pledged as collateral. The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties, including a pledge of (a) 100 % of the equity interests of the Credit Parties; (b) 65 % of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India; and (c) 65 % of the equity interests in magicJack VoIP Services, LLC, a Delaware corporation. Such security interests are evidenced by pledge, security, and other related agreements. The BRPAC Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’, ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the BRPAC Credit Agreement requires the Credit Parties to maintain certain financial ratios. The BRPAC Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding BRPAC Credit Agreement. The Company is in compliance with all financial covenants in the BRPAC Credit Agreement as of March 31, 2024. Through a series of amendments, including the most recent Fourth Amendment to the BRPAC Credit Agreement (the “Fourth Amendment”) on June 21, 2022, the Borrowers, the Secured Guarantors, the Agent and the Closing Date Lenders agreed to the following, among other things: (i) the Lenders agreed to make a new $ 75,000 term loan to the Borrowers, the proceeds of which the Borrowers’ used to repay the outstanding principal amount of the existing terms loans and optional loans and will use for other general corporate purposes, (ii) a new applicable margin level of 3.50 % was established as set forth from the date of the Fourth Amendment, (iii) Marconi Wireless Holdings, LLC (“Marconi Wireless”) was added to the Borrowers, (iv) the maturity date of the term loan was set to June 30, 2027, and (v) the Borrowers were permitted to make certain distributions to the parent company of the Borrowers. The borrowings under the amended BRPAC Credit Agreement bear interest equal to the Term SOFR rate plus a margin of 2.75 % to 3.50 % per annum, depending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement. As of March 31, 2024 and December 31, 2023, the interest rate on the BRPAC Credit Agreement was 8.44 % and 8.46 %, respectively. Principal outstanding under the Amended BRPAC Credit Agreement is due in quarterly installments. The quarterly installments from June 30, 2024 to December 31, 2026 are in the amount of $ 3,485 per quarter, the quarterly installment on March 31, 2027 is in the amount of $ 2,614 , and the remaining principal balance is due at final maturity on June 30, 2027. As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $ 43,103 (net of unamortized debt issuance costs of $ 462 ) and $ 46,621 (net of unamortized debt issuance costs of $ 429 ), respectively. 34 Interest expense on the term loan during the three months ended March 31, 2024 and 2023 was $ 1,060 (including amortization of deferred debt issuance costs of $ 57 ) and $ 1,443 (including amortization of deferred debt issuance costs of $ 74 ), respectively. NOTE 11 — SENIOR NOTES PAYABLE Senior notes payable, net, are comprised of the following: March 31, 2024 December 31, 2023 6.750 % Senior notes due May 31, 2024 $ 25,000 $ 140,492 6.375 % Senior notes due February 28, 2025 146,432 146,432 5.500 % Senior notes due March 31, 2026 217,440 217,440 6.500 % Senior notes due September 30, 2026 180,532 180,532 5.000 % Senior notes due December 31, 2026 324,714 324,714 6.000 % Senior notes due January 31, 2028 266,058 266,058 5.250 % Senior notes due August 31, 2028 405,483 405,483 1,565,659 1,681,151 Less: Unamortized debt issuance costs ( 12,043 ) ( 13,130 ) $ 1,553,616 $ 1,668,021 The Company issued no senior notes during the three months ended March 31, 2024 and 2023. The maturity dates of senior notes ranged 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. A series of prospectus supplements were filed by the Company with the SEC in respect of the Company’s offerings of these senior notes. In June 2023, the Company entered into note purchase agreements in connection with the 6.75 % Senior Notes due 2024 (“ 6.75 % 2024 Notes”) that were issued for the Targus acquisition. The note purchase agreements had a repurchase date of June 30, 2023 on which date the Company repurchased 2,356,978 shares of its 6.75 % 2024 Notes with an aggregate principal amount of $ 58,924 . The repurchase price was equal to the aggregate principal amount, plus accrued and unpaid interest up to, but excluding, the repurchase date. The total repurchase payment included approximately $ 663 in accrued interest. On February 29, 2024, the Company partially redeemed $ 115,492 aggregate principal amount of its 6.75 % Senior Notes due 2024 (the “ 6.75 % 2024 Notes”) pursuant to the seventh supplemental indenture dated December 3, 2021. The redemption price was equal to 100 % of the aggregate principal amount, plus accrued and unpaid interest, up to, but excluding, the redemption date. The total redemption payment included approximately $ 628 in accrued interest. On May 1, 2024, the Company announced that it has called for the full redemption equal to $ 25,000 aggregate principal amount of its 6.75 % Senior Notes due 2024 (the “ 6.75 % 2024 Notes”) on May 31, 2024. The redemption price is equal to 100 % of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the Redemption Date, as set forth in each notice of redemption delivered to noteholders on May 1, 2024. As of March 31, 2024 and December 31, 2023, total senior notes outstanding was $ 1,553,616 (net of unamortized debt issue costs of $ 12,043 ) and $ 1,668,021 (net of unamortized debt issue costs of $ 13,130 ), respectively, with a weighted average interest rate of 5.63 % and 5.71 %, respectively. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled $ 24,438 and $ 26,227 during the three months ended March 31, 2024 and 2023, respectively. NOTE 12 — ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consist of the following: 35 March 31, 2024 December 31, 2023 Accrued payroll and related expenses $ 59,883 $ 77,394 Dividends payable 18,012 18,929 Income taxes payable 17 819 Other tax liabilities 13,817 13,941 Contingent consideration 29,322 27,986 Accrued expenses 58,519 63,026 Other liabilities 73,583 71,098 Accrued expenses and other liabilities $ 253,153 $ 273,193 Other tax liabilities primarily consist of uncertain tax positions, sales and VAT taxes payable, and other non-income tax liabilities. Accrued expenses primarily consist of accrued trade payables, investment banking payables and legal settlements. Other liabilities primarily consist of interest payables, customer deposits, accrued legal fees and finance lease liabilities. NOTE 13 — REVENUE FROM CONTRACTS WITH CUSTOMERS Revenue from contracts with customers by the Company's six reportable operating segments and the All Other category during the three months ended March 31, 2024 and 2023 was as follows: 36 Capital Markets Segment Wealth Management Segment Auction and Liquidation Segment Financial Consulting Segment Communications Segment Consumer Products Segment All Other Total Revenues for the three months ended March 31, 2024 Corporate finance, consulting and investment banking fees $ 50,163 $ — $ — $ 22,984 $ — $ — $ — $ 73,147 Wealth and asset management fees 1,056 46,057 — — — — — 47,113 Commissions, fees and reimbursed expenses 6,256 3,887 2,580 12,101 — — — 24,824 Subscription services — — — — 79,738 — — 79,738 Service contract revenues — — 980 — — — — 980 Sale of goods — — 2,220 — 1,296 51,522 615 55,653 Advertising, licensing and other — — — — 1,332 — 26,059 27,391 Total revenues from contracts with customers 57,475 49,944 5,780 35,085 82,366 51,522 26,674 308,846 Interest income - Loans and securities lending 59,944 — — — — — — 59,944 Trading (losses) gains on investments ( 18,267 ) 600 — — — — — ( 17,667 ) Fair value adjustment on loans ( 12,201 ) — — — — — — ( 12,201 ) Other 2,872 1,238 — — — — — 4,110 Total revenues $ 89,823 $ 51,782 $ 5,780 $ 35,085 $ 82,366 $ 51,522 $ 26,674 $ 343,032 37 Capital Markets Segment Wealth Management Segment Auction and Liquidation Segment Financial Consulting Segment Communications Segment Consumer Products Segment All Other Total Revenues for the three months ended March 31, 2023 Corporate finance, consulting and investment banking fees $ 39,149 $ — $ — $ 14,515 $ — $ — $ — $ 53,664 Wealth and asset management fees 664 43,310 — — — — — 43,974 Commissions, fees and reimbursed expenses 9,218 3,928 5,444 10,495 — — — 29,085 Subscription services — — — — 83,008 — — 83,008 Sale of goods — — 216 — 1,867 65,694 — 67,777 Advertising, licensing and other — — — — 2,044 — 13,582 15,626 Total revenues from contracts with customers 49,031 47,238 5,660 25,010 86,919 65,694 13,582 293,134 Interest income - Loans and securities lending 77,186 — — — — — — 77,186 Trading gains on investments 7,020 1,272 — — — — — 8,292 Fair value adjustment on loans 43,276 — — — — — — 43,276 Other 8,898 1,304 — — — — 10,202 Total revenues $ 185,411 $ 49,814 $ 5,660 $ 25,010 $ 86,919 $ 65,694 $ 13,582 $ 432,090 Contract Balances The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligation(s) are satisfied. Receivables related to revenues from contracts with customers totaled $ 123,797 and $ 115,496 as of March 31, 2024 and December 31, 2023, respectively. The Company had no significant impairments related to these receivables during the three months ended March 31, 2024 and 2023. The Company also has $ 16,097 and $ 13,402 of unbilled receivables included in prepaid expenses and other assets as of March 31, 2024 and December 31, 2023, respectively. The Company’s deferred revenue primarily relates to retainer and milestone fees received from corporate finance and investment banking advisory engagements, asset management agreements, financial consulting engagements, subscription services where the performance obligation has not yet been satisfied and license agreements with guaranteed minimum royalty payments and advertising/marketing fees with additional royalty revenue based on a percentage of defined sales. Deferred revenue as of March 31, 2024 and 38 December 31, 2023 was $ 68,643 and $ 71,504 , respectively. The Company expects to recognize the deferred revenue of $ 68,643 as of March 31, 2024 as service and fee revenues when the performance obligation is met during the years ended December 31, 2024 (remaining nine months), 2025, 2026, 2027 and 2028 in the amount of $ 44,986 , $ 11,438 , $ 5,415 , $ 2,452 , and $ 1,431 , respectively. The Company expects to recognize the deferred revenue of $ 2,921 after December 31, 2028. During the three months ended March 31, 2024 and 2023, the Company recognized revenue of $ 21,297 and $ 22,502 that was recorded as deferred revenue at the beginning of the respective year. Contract Costs Contract costs include: (1) costs to fulfill contracts associated with corporate finance and investment banking engagements are capitalized where the revenue is recognized at a point in time and the costs are determined to be recoverable; (2) costs to fulfill Auction and Liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction or liquidation where the revenue is recognized over time when the performance obligation is satisfied; and (3) commissions paid to obtain magicJack contracts which are recognized ratably over the contract term and third party support costs for magicJack and related equipment purchased by customers which are recognized ratably over the service period. The capitalized costs to fulfill a contract were $ 7,338 and $ 8,131 as of March 31, 2024 and December 31, 2023, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets. For the three months ended March 31, 2024 and 2023, the Company recognized expenses of $ 1,537 and $ 1,015 related to capitalized costs to fulfill a contract, respectively. There were no significant impairment charges recognized in relation to these capitalized costs during the three months ended March 31, 2024 and 2023. Remaining Performance Obligations and Revenue Recognized from Past Performance The Company does not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material as of March 31, 2024. Corporate finance and investment banking fees and retail liquidation engagement fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded as the fees are considered variable and not included in the transaction price as of March 31, 2024. NOTE 14 — INCOME TAXES The Company’s effective income tax rate was a benefit of 26.3 % for the three months ended March 31, 2024 as compared to a provision of 32.4 % for the three months ended March 31, 2023. During the three months ended March 31, 2024, the Company had a loss before income taxes of $ 65,044 and a benefit from income taxes of $ 17,090 resulting from the impact of items that are not tax deductible. The change in the effective tax rate compared to the prior year is primarily due to the impact of items that are not tax deductible on the loss of $ 65,044 before income taxes. As of March 31, 2024, the Company had federal net operating loss carryforwards of $ 46,384 and state net operating loss carryforwards of $ 64,247 , respectively. In addition one of the Company’s majority-owned subsidiaries that is not included in the Company’s consolidated federal has federal net operating loss carryforwards of $ 298,416 and state net operating loss carryforwards of $ 225,585 available to utilize against future taxable income of the majority-owner subsidiary. The Company’s federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2033 through December 31, 2038. The state net operating loss carryforwards will expire in the tax years commencing in December 31, 2030. The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits of operating loss, capital loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382. Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income. As of March 31, 2024, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be 39 sufficient to realize its deferred tax assets and has not provided a valuation allowance. The Company does not believe that it is more likely than not that the Company will be able to utilize the benefits related to capital loss carryforwards and has provided a valuation allowance in the amount of $ 41,751 against these deferred tax assets. The Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions. The Company is currently under audit by certain federal, state and local, and foreign tax authorities. The audits are in varying stages of completion. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments and closing of statutes of limitations. Such adjustments are reflected in the provision for income taxes, as appropriate. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 2020 to 2023. Pillar Two The Pillar Two directive, which was established by the Organization for Economic Co-operation and Development, and which generally provides for a 15% minimum effective tax rate for multinational enterprises, in every jurisdiction in which they operate. While the Company does not anticipate that this will have a material impact on its tax provision or effective tax rate, it will continue to monitor evolving tax legislation in the jurisdictions in which it operates. NOTE 15 — EARNINGS PER SHARE Basic earnings per share is calculated by dividing net income (loss) by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding, after giving effect to all dilutive potential common shares outstanding during the period. Remeasurements to the carrying value of the redeemable noncontrolling interests in equity of subsidiaries are not deemed to be a dividend. According to ASC 480 - Distinguishing Liabilities from Equity , there is no impact on earnings per share in the computation of basic and diluted earnings per share to common shareholders for changes in the carrying value of the redeemable noncontrolling interests in equity, when such changes in carrying value which in substance approximates fair value. Securities that could potentially dilute basic net income (loss) per share in the future that were not included in the computation of diluted net income (loss) per share were 3,282,390 and 1,999,273 during the three months ended March 31, 2024 and 2023, respectively, because to do so would have been anti-dilutive. Basic and diluted earnings per share were calculated as follows: Three Months Ended March 31, 2024 2023 Net (loss) income attributable to B. Riley Financial, Inc. $ ( 49,165 ) $ 17,155 Preferred stock dividends ( 2,015 ) ( 2,012 ) Net (loss) income available to common shareholders $ ( 51,180 ) $ 15,143 Weighted average common shares outstanding: Basic 29,989,584 28,585,337 Effect of dilutive potential common shares: Restricted stock units and warrants — 928,098 Diluted 29,989,584 29,513,435 Basic (loss) income per common share $ ( 1.71 ) $ 0.53 Diluted (loss) income per common share $ ( 1.71 ) $ 0.51 40 NOTE 16 — COMMITMENTS AND CONTINGENCIES (a) Legal Matters The Company is subject to certain legal and other claims that arise in the ordinary course of its business. In particular, the Company and its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. In addition to such legal and other claims, reviews, investigations, and proceedings, the Company and its subsidiaries are subject to the risk of unasserted claims, including, among others, as it relates to matters related to Mr. Kahn and our investment in Freedom VCM. For example, in light of Mr. Kahn’s alleged involvement with the alleged misconduct concerning Prophecy Asset Management LP, the Company can provide no assurances that it will not be subject to claims asserting an interest in the Freedom VCM equity interests owned by Mr. Kahn, including those that collateralize the Amended and Restated Note. If a claim were successful, it would diminish the value of the collateral which could impact the carrying value of the loan. If such claims are made, however, the Company believes it has valid defenses from any such claim and any such claim would be without merit. Notwithstanding the uncertainties described in this paragraph, the Company does not believe that the results of these asserted or unasserted claims are likely to have a material effect on its financial statements. On May 2, 2024, a putative class action was filed by Ted Donaldson in the Superior Court for the State of California, County of Los Angeles on behalf of all persons who acquired the Company’s senior notes pursuant to the shelf registration statement filed with the SEC on Form S-3 dated January 28, 2021, and the prospectuses filed and published on August 4, 2021 and December 2, 2021 (the “Note Offerings”). The action asserts claims under §§ 11, 12, and 15 of the Securities Act of 1933, as amended, against the Company, certain of the Company's officers and directors, and the underwriters of the Note Offerings. The complaint alleges that defendants knew or should have known that Brian Kahn was engaged in illegal activities, including an alleged conspiracy to commit fraud. The Company believes these claims are meritless and intends to defend this action. On January 24, 2024, a putative securities class action complaint was filed by Mike Coan in U.S. Federal District Court, Central District of California, against the Company, Bryant Riley, Tom Kelleher and Phillip Ahn (“Defendants”). The purported class includes persons and entities that purchased shares of the Company’s common stock between May 10, 2023 and November 9, 2023. The complaint alleges that (a) the Company failed to disclose to investors that (i) Brian Kahn, had been implicated in a conspiracy to defraud third party investors, and (ii) the Company financed Brian Kahn and others in connection with a going private transaction involving FRG, and (b) as a result of the foregoing, the Company engaged in securities fraud in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. A second putative class action lawsuit was filed on March 15, 2024 by the KL Kamholz Joint Revocable Trust (“Kamholz”). This complaint asserts similar allegations as the Coan complaint and covers an alleged class period between February 28, 2022 and November 9, 2023. The Kamholz complaint further alleges that Defendants knew or should have known that Brian Kahn was engaged in illegal activities, including a conspiracy to commit fraud, and nonetheless proceeded with the FRG going-private transaction. The Company cannot estimate the amount of potential liability, if any, that could arise from these matters and believes these claims are meritless and intends to defend these actions. On September 21, 2023, the Company received a demand alleging that certain payments in the aggregate amount of approximately $ 32,166 made by Sorrento Therapeutics, Inc. (“Sorrento”), a chapter 11 debtor in U.S. Bankruptcy Court, Southern District of Texas, to B. Riley Commercial Capital, LLC (“BRCC”), pursuant to that certain Bridge Loan Agreement dated September 30, 2022 between Sorrento and BRCC, are avoidable as preferential transfers. The Company believes the Sorrento Unsecured Creditors Committee’s preference claims lack merit, and the Company intends to assert its statutory defenses to defeat the claim. (b) Babcock & Wilcox Commitments and Guarantees On January 18, 2024, the Company entered into a guaranty (the “Axos Guaranty”) in favor of (i) Axos Bank, in its capacity as administrative agent (the “Administrative Agent”) for the secured parties under that certain credit agreement, dated as of January 18, 2024, among Babcock & Wilcox Enterprises, Inc. (“B&W”), the guarantors party thereto, the lenders party thereto and the Administrative Agent (the “B&W Axos Credit Agreement”), and (ii) the secured parties. Subject to the terms and conditions of the Axos Guaranty, the Company has guaranteed certain obligations of B&W (subject to certain limitations) under the B&W Axos Credit Agreement, including the obligation to repay outstanding loans and letters of credit and to pay earned interest, fees costs and expenses of enforcing the Axos Guaranty, provided however, that the Company’s obligations with respect to the principal amount of credit extensions and unreimbursed letter of credit 41 obligations under the B&W Axos Credit Agreement shall not at any time exceed $ 150,000 in the aggregate, which is the maximum potential amount of future payments under the guaranty. In consideration for the agreements and commitments under the Axos Guaranty and pursuant to a separate fee and reimbursement agreement, B&W has agreed to pay the Company a fee equal to 2.00 % of the aggregate revolving commitments (as defined in the B&W Axos Credit Agreement) under the B&W Axos Credit Agreement, payable quarterly and, at B&W’s election, in cash in full or 50 % in cash and 50 % in the form of penny warrants. On June 30, 2021, the Company agreed to guaranty (the “Cash Collateral Provider Guaranty”) up to $ 110,000 of obligations that B&W may owe to providers of cash collateral pledged in connection with a debt financing for B&W. The Cash Collateral Provider Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of B&W’s obligations under a reimbursement agreement with respect to such cash collateral. B&W will pay the Company $ 935 per annum in connection with the Cash Collateral Provider Guaranty. B&W has agreed to reimburse the Company to the extent the Cash Collateral Provider Guaranty is called upon. As of December 31, 2023, the Cash Collateral Provider Guaranty was in respect of up to $ 90,000 of B&W obligations after B&W made paydowns of $ 10,000 during the year ended December 31, 2023. As of March 31, 2024, the Cash Collateral Provider Guaranty was in respect of up to $ 67,500 of B&W obligations after B&W made paydowns of $ 22,500 during the three months ended March 31, 2024. On December 22, 2021, the Company entered into a general agreement of indemnity in favor of one of B&W’s sureties. Pursuant to this indemnity agreement, the Company agreed to indemnify the surety in connection with a default by B&W under a € 30,000 payment and performance bond issued by the surety in connection with a construction project undertaken by B&W. In consideration for providing the indemnity, B&W paid the Company fees in the amount of $ 1,694 on January 20, 2022. On August 10, 2020, the Company entered into a project specific indemnity rider to a general agreement of indemnity made by B&W in favor of one of its sureties. Pursuant to the indemnity rider, the Company agreed to indemnify the surety in connection with a default by B&W under the underlying indemnity agreement relating to a $ 29,970 payment and performance bond issued by the surety in connection with a construction project undertaken by B&W. In consideration for providing the indemnity rider, B&W paid the Company fees in the amount of $ 600 on August 26, 2020. During the year ended December 31, 2023, the indemnity rider was reduced to $ 5,994 . (c) FRG Commitments On May 10, 2023, the Company entered into certain agreements pursuant to which the Company had, among other things, agreed to provide certain equity funding and other support in connection with the acquisition (the “Acquisition”) by Freedom VCM, Inc., a Delaware corporation (the “Parent”), of FRG. The Company entered into an Equity Commitment Letter with Freedom VCM (“TopCo”), the parent company of the Parent, and the Parent, pursuant to which the Company agreed to provide to TopCo, at or prior to the closing of the Acquisition, an amount equal to up to $ 560,000 in equity financing. The Company and FRG also entered into a Limited Guarantee in favor of FRG, pursuant to which the Company agreed to guarantee to FRG the due and punctual payment, performance and discharge when required by Parent or its subsidiary to FRG of certain liabilities and obligations of the Parent or such subsidiary. On August 21, 2023, in connection with the completion of the Acquisition and the Company's portion of the equity financing, the Company's obligations pursuant to the Equity Commitment Letter and Limited Guarantee were satisfied and the Company was paid the $ 16,500 fee pursuant to the Equity Commitment Letter and Limited Guarantee. (d) Other Commitments In the normal course of business, the Company enters into commitments to its clients in connection with capital raising transactions, such as firm commitment underwritings, equity lines of credit, or other commitments to provide financing on specified terms and conditions. These commitments require the Company to purchase securities at a specified price or otherwise provide debt or equity financing on specified terms. Securities underwriting exposes the Company to market and credit risk, primarily in the event that, for any reason, securities purchased by the Company cannot be distributed at the anticipated price and to balance sheet risk in the event that debt or equity financing commitments cannot be syndicated. With respect to one of the Company’s investments, a wholly owned subsidiary of the Company entered into an agreement whereby the subsidiary may be required, commencing in August 2027 and expiring in August 2028, to purchase additional equity capital at fair value which was originally valued at $ 15,000 . 42 NOTE 17 — SHARE-BASED PAYMENTS (a) Employee Stock Incentive Plans Under the 2021 Stock Incentive Plan (the “2021 Plan”), share-based compensation expense for restricted stock units under the Company’s 2021 Plan was $ 8,374 and $ 13,312 during the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024, in connection with employee stock incentive plans, the Company granted 1,223,263 restricted stock units with a grant date fair value of $ 16,181 . During the three months ended March 31, 2023, in connection with employee stock incentive plans, the Company granted 502,824 restricted stock units with a grant date fair value of $ 19,338 . The restricted stock units generally vest over a period of one to five years based on continued service. Performance based restricted stock units generally vest based on both the employee’s continued service and the achievement of a set threshold of the Company’s common stock price, as defined in the grant, during the two to three-year period following the grant. In determining the fair value of restricted stock units on the grant date, the fair value is adjusted for (a) estimated forfeitures, (b) expected dividends based on historical patterns and the Company’s anticipated dividend payments over the expected holding period and (c) the risk-free interest rate based on U.S. Treasuries for a maturity matching the expected holding period. (b) Employee Stock Purchase Plan In connection with the Company’s Employee Stock Purchase Plan (the “Purchase Plan”), share based compensation was $ 237 and $ 298 for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, there were 236,949 shares reserved for issuance under the Purchase Plan. (c) Common Stock Since October 30, 2018, the Company’s Board of Directors has authorized annual share repurchase programs of up to $ 50,000 of its outstanding common shares. All share repurchases were effected on the open market at prevailing market prices or in privately negotiated transactions. During the three months ended March 31, 2024, the Company did not repurchase any shares of its common stock. During the three months ended March 31, 2023, the Company repurchased 1,452,831 shares of its common stock for $ 53,688 , which represents an average price of $ 36.95 per common share, respectively. The shares repurchased under the program are retired. In November 2023, the share repurchase program was reauthorized by the Board of Directors for share repurchases up to $ 50,000 of the Company's outstanding common shares and the reauthorized program expires in October 2024. Amounts purchased prior to November 2023 relate to the previously authorized share repurchase program. As of March 31, 2024 and December 31, 2023, $ 34,206 remains available for common share repurchases under the share repurchase program. On July 28, 2023, the Company issued 2,090,909 shares of common stock through a public offering at a price of $ 55.00 per share for net proceeds of $ 114,507 after underwriting fees and costs. On October 28, 2019, the Company issued 200,000 warrants to purchase common stock of the Company (the “BR Brands Warrants”) in connection with the acquisition of a majority ownership interest in BR Brand Holdings LLC. The BR Brands Warrants entitle the holders of the warrants to acquire shares of the Company’s common stock from the Company at an exercise price of $ 26.24 per share. One-third of the BR Brands Warrants immediately vested and became exercisable upon issuance, and the remaining two-thirds of warrants vested and became exercisable on the second anniversary of the closing, upon the BR Brands’ satisfaction of specified financial performance targets. The BR Brands warrants expire in February 2025. As of March 31, 2024 and 2023, 200,000 BR Brands warrants were outstanding. In April 2024, 200,000 shares of the Company's common stock were issued in connection with the exercise of warrants for cash in the amount of $ 653 . (d) Preferred Stock During the three months ended March 31, 2024 and 2023, the Company issued zero depository shares of the Series A Preferred Stock. There were 2,834 shares issued and outstanding as of March 31, 2024 and December 31, 2023. Total liquidation preference for the Series A Preferred Stock as of March 31, 2024 and December 31, 2023 was $ 70,854 . Dividends on the Series A preferred paid during the three months ended March 31, 2024 and 2023 were $ 0.4296875 per depository share. 43 During the three months ended March 31, 2024 and 2023, the Company issued zero and 18 depository shares of the Series B Preferred Stock. There were 1,729 shares issued and outstanding as of March 31, 2024 and December 31, 2023. Total liquidation preference for the Series B Preferred Stock as of March 31, 2024 and December 31, 2023 was $ 43,228 . Dividends on the Series B preferred paid during the three months ended March 31, 2024 and 2023 were $ 0.4609375 per depository share. NOTE 18 — NET CAPITAL REQUIREMENTS BRS and B. Riley Wealth Management (“BRWM”), the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory Authority, Inc. (“FINRA”). The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. As such, they are subject to the minimum net capital requirements promulgated by the SEC. As of March 31, 2024, BRS had net capital of $ 115,953 , which was $ 112,151 in excess of required minimum net capital of $ 3,802 ; and BRWM had net capital of $ 13,996 , which was $ 12,253 in excess of required minimum net capital of $ 1,743 . As of December 31, 2023, BRS had net capital of $ 134,561 , which was $ 130,163 in excess of its required minimum net capital of $ 4,398 ; and BRWM had net capital of $ 12,328 , which was $ 10,431 in excess of its required minimum net capital of $ 1,897 . NOTE 19 — RELATED PARTY TRANSACTIONS The Company provides asset management and placement agent services to unconsolidated funds affiliated with the Company (the “Funds”). In connection with these services, the Funds may bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the Funds. Management fees from the Funds during the three months ended March 31, 2024 and 2023 totaled $ 115 and $ 210 , respectively. As of March 31, 2024 and December 31, 2023, amounts due from related parties of $ 92 and $ 172 , respectively, were due from the Funds for management fees and other operating expenses. As of March 31, 2024 and December 31, 2023, amounts due to related parties were $ 1,763 and $ 2,731 , respectively, of which $ 1,763 and $ 2,480 , respectively, related to bebe’s rent to own stores which are franchised through Freedom VCM and consist of royalty fees, inventory purchases, marketing, and IT services. During the three months ended March 31, 2024, royalty fees, marketing, and IT services charged to bebe by Freedom VCM totaled $ 1,290 and inventory purchases by bebe from Freedom VCM totaled $ 3,539 . In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P. (“Whitehawk”), a limited partnership controlled by Mr. J. Ahn, who is the brother of Phil Ahn, the Company’s Chief Financial Officer and Chief Operating Officer. Whitehawk has agreed to provide investment advisory services for GACP I, L.P. and GACP II, L.P. During the three months ended March 31, 2024 and 2023, management fees paid for investment advisory services by Whitehawk were $ 1,237 and $ 1,142 , respectively. On February 1, 2024, one of the Company's loans receivable with a principal amount of $ 4,521 was sold to a fund managed by Whitehawk for $ 4,584 . The Company periodically participates in loans and financing arrangements for which the Company has an equity ownership and representation on the board of directors (or similar governing body). The Company may also provide consulting services or investment banking services to raise capital for these companies. These transactions can be summarized as follows: Babcock and Wilcox One of the Company’s wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the Company to serve as the Chief Executive Officer of B&W until November 30, 2020 (the “Executive Consulting Agreement”), unless terminated by either party with thirty days written notice. The agreement was extended through December 31, 2028. Under this agreement, fees for services provided are $ 750 per annum, paid monthly. In addition, subject to the achievement of certain performance objectives as determined by B&W’s compensation committee of the board, a bonus or bonuses may also be earned and payable to the Company. In March 2022, a $ 1,000 performance fee was approved in accordance with the Executive Consulting Agreement. During the three months ended March 31, 2024 and 2023, the Company earned $ 610 and zero , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities. 44 The Company is also a party to indemnification agreements for the benefit of B&W and the B. Riley Guaranty, each as disclosed above in Note 16 – Commitments and Contingencies. The Arena Group Holdings, Inc. (fka the Maven, Inc.) The Company had loans receivable due from The Arena Group Holdings, Inc. (fka the Maven, Inc.) (“Arena”) included in loans receivable, at fair value of $ 98,729 as of December 31, 2022. On August 31, 2023, the Arena loan was amended for an additional $ 6,000 loan receivable with interest payable at 10.0 % per annum and a maturity date of December 31, 2026. Two of the Company's members of senior management were members of the board of directors of Arena. On December 1, 2023, the Company sold its equity interest in Arena for $ 16,576 at a gain of $ 3,315 and its outstanding loans receivable for $ 78,796 at a loss of $ 28,919 . Following the completion of the sale, two of the Company's members of senior management resigned from the board of directors of Arena and Arena is no longer a related party. Interest income on the loan receivable was $ 2,829 during the three months ended March 31, 2023. There were no fees earned from Arena by the Company during the three months ended March 31, 2023. Applied Digital On May 20, 2023, the Company entered into a loan agreement with Applied Digital (“APLD”). The chief executive officer of APLD was also a member of senior management of the Company. As of December 31, 2023, APLD had paid off its outstanding loan receivable balance with the Company, and the Company had an unfunded loan commitment with APLD of $ 5,500 . On February 5, 2024, the loan was terminated and no commitments remain. California Natural Resources Group, LLC. California Natural Resources Group, LLC (“CalNRG”) is a related party as a result of the Company's approximately 25.0 % equity ownership. As of March 31, 2024, the Company has guaranteed CalNRG’s obligations, up to $ 3,830 , under the CalNRG Credit Facility. Freedom VCM Holdings, LLC On May 10, 2023, the Company entered into certain agreements pursuant to which the Company had, among other things, agreed to provide certain equity funding and other support as part of the FRG take-private transaction as previously discussed in Note 2(i). The Company entered into an Equity Commitment Letter with Freedom VCM, pursuant to which the Company agreed to provide up to $ 560,000 in equity financing at or prior to the closing of the FRG take-private transaction. On August 21, 2023, in connection with the completion of the FRG take-private transaction, the Company's obligations pursuant to the Equity Commitment Letter and Limited Guarantee were satisfied. Upon closing the acquisition on August 21, 2023, the Company was paid an equity commitment fee of $ 16,500 which is included in services and fees revenues. At the time of the Company's equity investment on August 21, 2023, the Company's chief executive officer became a member of the board of directors of Freedom VCM. On August 21, 2023, the Company purchased an equity interest in Freedom VCM for $ 216,500 , which resulted in a total equity interest of $ 281,144 and a 31 % voting interest and representation on the board of directors of Freedom VCM as part of the FRG take-private transaction as previously discussed in Note 2(i). As part of the FRG take-private transaction, certain members of management of Freedom VCM, which are related parties to Freedom VCM, exchanged their equity interest in FRG for a combined 35 % voting interest in Freedom VCM, of which Mr. Kahn and his wife and one of Mr. Kahn’s affiliates comprised 32 %. The Company has a first priority security interest in a 25 % equity interest of Mr. Kahn (who was also CEO and a board member of Freedom VCM) in Freedom VCM to secure the loan to an affiliate of Mr. Kahn as more fully described in Note 2(h). In connection with the FRG take-private transaction, all of the equity interests of BRRII, a majority-owned subsidiary of the Company, were sold to Freedom VCM Receivables (a subsidiary of Freedom VCM), for a purchase price of $ 58,872 which resulted in a loss of $ 78 on August 21, 2023. In connection with the sale, Freedom VCM Receivables assumed the obligations with respect to the Pathlight Credit Agreement as more fully discussed in Note 10 and as consideration for the purchase price, the Company entered into a non-recourse promissory note with another Freedom VCM affiliate in the amount of $ 58,872 , with a stated interest rate of 19.74 % and a maturity date of August 21, 2033. Payments of principal and interest on the note are limited solely to the performance of certain receivables held by BRRII. Principal and interest is payable based on the collateral without recourse to Freedom VCM Receivables, which includes the performance of certain consumer credit receivables. This loan receivable was measured at fair value in the amount of $ 42,482 and $ 42,183 as of March 31, 2024 and December 31, 2023. Interest income on the loan receivable was $ 2,154 during the three months ended March 31, 2024. 45 As more fully described in Note 2(h), the Company also has a related party loan receivable with a fair value of approximately $ 15,868 and $ 20,624 at March 31, 2024 and December 31, 2023 from home-furnishing retailer W.S. Badcock Corporation (“Badcock”) that is collateralized by consumer finance receivables of Badcock. These consumer finance receivables were acquired from Badcock in multiple purchases beginning in December 2021. On December 18, 2023, Badcock was sold by Freedom VCM to Conn’s and the Company loaned Conn’s $ 108,000 which bears interest at an aggregate rate per annum equal to the Term SOFR Rate (as defined in the Conn’s Term Loan), subject to a 4.80 % floor, plus a margin of 8.00 % and matures on February 20, 2027. On February 14, 2024, the Company collected $ 15,000 of principal payments which reduced the loan balance to $ 93,000 . Badcock now operates as a wholly owned subsidiary of Conn’s. During the three months ended March 31, 2024, interest income on these loans totaled $ 4,151 . These loan receivables are reported as related party loan receivables due to the Company’s related party relationship with Freedom VCM and Freedom VCM’s ability to exercise influence over Conn’s as a result of the equity consideration Freedom VCM received from the sale of Badcock to Conn’s on December 18, 2023. Vintage Capital Management - Brian Kahn Simultaneously with the completion of the FRG take-private transaction, one of our subsidiaries and VCM, an affiliate of Brian Kahn, amended and restated a promissory note (the “Amended and Restated Note”), pursuant to which VCM owes our subsidiary the aggregate principal amount of $ 200,506 and bears interest at the rate of 12.00 % per annum payable-in-kind with a maturity date of December 31, 2027. The Amended and Restated Note requires repayments prior to the maturity date from certain proceeds received by VCM, Mr. Kahn, or his affiliates from, among other proceeds, distributions or dividends paid by Freedom VCM in amount equal to the greater of (i) 80 % of the net after-tax proceeds, and (ii) 50 % of gross proceeds. The obligations under the Amended and Restated Note are primarily secured by a first priority perfected security interest in Freedom VCM equity interests owned by Mr. Kahn and his spouse with a value (based on the transaction price in the FRG take-private transaction) of $ 227,296 as of August 21, 2023. The fair value of the Freedom VCM equity interest owned by Mr. Kahn and his spouse was $ 197,782 and $ 232,065 as of March 31, 2024 and December 31, 2023, respectively. In light of the Company’s determination that the repayment of the Amended and Restated Note will be paid primarily from the cash distributions from Freedom VCM or foreclosure on the underlying collateral provided by Mr. Kahn and his spouse being in Freedom VCM equity interests, the Company has determined that both VCM and Mr. Kahn are related parties as of March 31, 2024 and December 31, 2023. Torticity, LLC On November 2, 2023, the Company loaned $ 15,369 to Torticity, LLC, of which $ 6,690 was drawn upon with $ 8,679 remaining, with interest payable of 15.0 % per annum and a maturity date of November 2, 2026. Interest income was $ 1,209 during the three months ended March 31, 2024. One of the Company's members of senior management is on the board of directors of Torticity. The loan receivable had a fair value of $ 16,475 and $ 6,791 as of March 31, 2024 and December 31, 2023, respectively, and is included in the Company's loans receivable, at fair value in the condensed consolidated balance sheets. Kanaci Technologies, LLC On November 21, 2023, the Company loaned $ 10,000 to Kanaci Technologies, LLC (“Kanaci”), of which $ 4,000 was drawn upon with $ 6,000 remaining, with interest payable of 15.0 % per annum and a maturity date of June 30, 2026. Interest income was $ 368 during the three months ended March 31, 2024. In June 2023, one of the Company's members of senior management was appointed to the board of directors of Kanaci. The loan receivable had a fair value of $ 7,914 and $ 3,904 as of March 31, 2024 and December 31, 2023, respectively, and is included in the Company's loans receivable, at fair value in the condensed consolidated balance sheets. Other On March 10, 2023, the Company sold a loan receivable including accrued interest in the amount of $ 7,600 to two related parties. BRC Partners Opportunity Fund, LP (“BRCPOF”) purchased $ 3,519 of the loan receivable including accrued interest and 272 Capital L.P. (“272LP”) purchased $ 4,081 of the loan receivable including accrued interest; both of the partnerships are private equity funds managed at the time of the transaction by one of the Company’s subsidiaries. Our executive officers and members of our board of directors have 58.2 % financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 24.9 % in the BRCPOF as of March 31, 2024 and December 31, 2023. Our executive officers and members of our board of directors had a 15.3 % financial interest in the 272LP as of December 31, 2023. On February 5, 2024, the Company sold its interest in 272LP and 272 Advisors, LLC for a promissory note of $ 2,000 plus additional revenue sharing up to $ 4,100 , which is based on future management fees earned. 46 The Company often provides consulting or investment banking services to raise capital for companies in which the Company has significant influence through equity ownership, representation on the board of directors (or similar governing body), or both. During the three months ended March 31, 2024 and 2023, the Company earned $ 179 and $ 784 of fees related to these services, respectively. NOTE 20 — BUSINESS SEGMENTS The Company’s business is classified into six reportable operating segments: the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment, Communications segment, and Consumer Products segment. These reportable segments are all distinct businesses, each with a different marketing strategy and management structure. During the fourth quarter of 2023, management reassessed the Company's previously reported Consumer segment due to organizational changes and financial information provided to the CODM. These changes resulted in Targus’ operations being reported on a stand alone basis in the Consumer Products segment and the operations related to brand licensing that was previously reported in the Consumer segment being reported in the All Other Category that is reported with Corporate and Other. As a result of the changes discussed above in the Consumer segment, the Company has recast the financial data for the Consumer Products segment and reporting of the All Other Category for all periods presented. The following is a summary of certain financial data for each of the Company’s reportable segments: Three Months Ended March 31, 2024 2023 Capital Markets segment: Revenues - Services and fees $ 60,347 $ 57,929 Trading (loss) income and fair value adjustments on loans ( 30,468 ) 50,296 Interest income - Loans and securities lending 59,944 77,186 Total revenues 89,823 185,411 Selling, general and administrative expenses ( 53,224 ) ( 65,711 ) Interest expense - Securities lending and loan participations sold ( 35,383 ) ( 32,424 ) Depreciation and amortization ( 771 ) ( 1,256 ) Segment income 445 86,020 Wealth Management segment: Revenues - Services and fees 51,182 48,542 Trading income and fair value adjustments on loans 600 1,272 Total revenues 51,782 49,814 Selling, general and administrative expenses ( 49,048 ) ( 47,322 ) Restructuring charge — ( 33 ) Depreciation and amortization ( 1,055 ) ( 1,086 ) Segment income 1,679 1,373 Auction and Liquidation segment: Revenues - Services and fees 3,560 5,444 Revenues - Sale of goods 2,220 216 Total revenues 5,780 5,660 Direct cost of services ( 1,456 ) ( 3,128 ) Cost of goods sold ( 788 ) ( 52 ) Selling, general and administrative expenses ( 1,508 ) ( 2,280 ) Segment income 2,028 200 Financial Consulting segment: Revenues - Services and fees 35,085 25,010 Selling, general and administrative expenses ( 28,860 ) ( 21,149 ) 47 Depreciation and amortization ( 85 ) ( 78 ) Segment income 6,140 3,783 Communications segment: Revenues - Services and fees 81,070 85,052 Revenues - Sale of goods 1,296 1,867 Total revenues 82,366 86,919 Direct cost of services ( 48,819 ) ( 44,733 ) Cost of goods sold ( 1,359 ) ( 2,168 ) Selling, general and administrative expenses ( 17,918 ) ( 22,544 ) Restructuring charge ( 263 ) ( 60 ) Depreciation and amortization ( 5,957 ) ( 6,631 ) Segment income 8,050 10,783 Consumer Products segment: Revenues - Sale of goods 51,522 65,694 Cost of goods sold ( 36,880 ) ( 45,406 ) Selling, general and administrative expenses ( 15,525 ) ( 19,294 ) Depreciation and amortization ( 1,997 ) ( 2,608 ) Restructuring charge ( 526 ) — Segment loss ( 3,406 ) ( 1,614 ) Consolidated operating income from reportable segments 14,936 100,545 All Other: Revenues - Services and fees 26,059 13,582 Revenues - Sale of goods 615 — Total revenues 26,674 13,582 Direct cost of services ( 10,851 ) ( 6,536 ) Cost of goods sold ( 588 ) — Corporate and other expenses ( 33,600 ) ( 22,668 ) Interest income 669 2,574 Dividend income 11,815 13,204 Realized and unrealized losses on investments ( 29,545 ) ( 28,442 ) Change in fair value of financial instruments and other 314 ( 209 ) Loss on equity investments ( 4 ) ( 10 ) Interest expense ( 44,864 ) ( 47,561 ) (Loss) income before income taxes ( 65,044 ) 24,479 Benefit from (provision for) income taxes 17,090 ( 7,919 ) Net (loss) income ( 47,954 ) 16,560 Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 1,211 ( 595 ) Net (loss) income attributable to B. Riley Financial, Inc. ( 49,165 ) 17,155 Preferred stock dividends 2,015 2,012 Net (loss) income available to common shareholders $ ( 51,180 ) $ 15,143 48 The following table presents revenues by geographical area: Three Months Ended March 31, 2024 2023 Revenues Revenues - Services and fees North America $ 256,730 $ 234,930 Europe 573 629 Total Revenues - Services and fees 257,303 235,559 Trading income and fair value adjustments on loans North America ( 29,868 ) 51,568 Revenues - Sale of goods North America 28,894 37,947 Australia 2,624 3,459 Europe, Middle East, and Africa 16,017 17,428 Asia 6,354 6,224 Latin America 1,764 2,719 Total Revenues - Sale of goods 55,653 67,777 Revenues - Interest income - Loans and securities lending North America 59,944 77,186 Total Revenues North America 315,700 401,631 Australia 2,624 3,459 Europe, Middle East, and Africa 16,590 18,057 Asia 6,354 6,224 Latin America 1,764 2,719 Total Revenues $ 343,032 $ 432,090 The following table presents long-lived assets, which consists of property and equipment, net, by geographical area: March 31, 2024 December 31, 2023 Long-lived Assets - Property and Equipment, net: North America $ 23,596 $ 24,594 Europe 352 396 Asia Pacific 125 133 Australia 73 83 Total $ 24,146 $ 25,206 Segment assets are not reported to, or used by, the Company’s Chief Operating Decision Maker to allocate resources to, or assess performance of the segments and therefore, total segment assets have not been disclosed. 49