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Item 2. Management’s Discussion and Analysis

2025-01-14 compared with 2024-05-15 · 738 added, 199 removed, 251 unchanged (79% of the section changed)

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

Our Business Segments

We report our activities in six reportable business segments:

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

The descriptions below illustrate the businesses that comprise our segments.

We maintain a diverse composition of businesses that operate in six reportable segments.

Management evaluates many different financial and non-financial metrics to assess the individual performance of each of these various businesses.

However, across most businesses, management primarily assesses each business’s financial performance based upon each of the business’s revenues and operating profits generated excluding non-cash charges and the impact of gains and losses related to securities and other investments held.

Management believes that gains and losses on individual investments are generally impacted by individual characteristics specific to each investment and although this has an impact on our overall financial performance the impact of these gains and losses may not be indicative of the overall strength or weakness in each of our business operations.

Additionally, in evaluating the financial performance of each of our businesses, management monitors the increase or decrease in operating results from period to period while factoring in the relative volatility inherent in each industry in which these businesses operate.

Management recognizes that some of the Company’s businesses, such as the Auctions and Liquidations business, exhibit more volatile results due to the nature of the business having substantial revenue associated with a limited number of retail liquidation engagements.

Capital Markets – We provide investment banking, equity research and institutional brokerage services to publicly traded and privately held companies, institutional investors, and financial sponsors;

fund and asset management services to institutional and high-net-worth individual investors;

and direct lending services to middle market companies.

We also trade equity securities as a principal for our account, including investments in funds managed by our subsidiaries.

We maintain an investment portfolio comprised of public and private equities and debt securities.

We also opportunistically provide loans to our clients and we engage in securities-based lending which involves the borrowing and lending of equity and fixed income securities.

Our investment approach is value-oriented and represents a core competency of our capital markets strategy.

We act as an advisor to our clients, which at times involves complex transactions consistent with our value-oriented investment philosophy.

We often provide consulting, capital raising, or investment banking services for companies in which B.

Riley may have significant influence through equity ownership, representation on the board of directors (or similar governing body), or both.

In our Capital Markets segment we have a portfolio of loans receivable that consisted of the following at June 30, 2024 and December 31, 2023:

Loans Receivable, at Fair Value Fair Value Adjustments on Loans

Three Months Ended

June 30, Six Months Ended

Industry or Type of Loan June 30,

2024 December 31, 2023

2024 2023 2024 2023

Related Party Loans:

Vintage Capital Management, LLC Retail / consumer $ 32,121 $ 200,506 $ (151,147) $ — $ (168,385) $ —

Freedom VCM Receivables, Inc.

Consumer receivable portfolio 25,827 42,183 (12,039) — (13,721) —

Retail / consumer 82,305 104,760 (7,230) — (8,484) —

Badcock Corporation Consumer receivable portfolio 4,562 20,624 (7,396) — (6,845) —

Other related party loans Services & Oil & Gas 26,933 10,695 194 226 692 (1,546)

Total related party 171,748 378,768 (177,618) 226 (196,743) (1,546)

Excela Technologies, Inc.

Technology 38,766 50,296 55 6,478 268 12,201

Core Scientific, Inc.

Technology — 45,509 — 3,142 8,473 35,542

Other loans Various 18,685 57,846 1,981 (639) 219 6,286

Total $ 229,199 $ 532,419 $ (175,582) $ 9,207 $ (187,783) $ 52,483

The fair value adjustments on loans receivable for the three months ended June 30, 2024 and 2023 were $(175.6) million and $9.2 million, respectively.

The fair value adjustments on loans receivable for the six months ended June 30, 2024 and 2023 was $(187.8) million and $52.5 million, respectively.

During the three and six months ended June 30, 2024, we recorded $(151.1) million and $(168.4) million of fair value adjustments to the loan receivable from Vintage Capital Management, LLC ("VCM").

The fair value adjustments are related primarily to the decline in the equity fair value of Freedom VCM Holdings, LLC which, along with certain guarantees, is the primary collateral for this loan.

The decline in equity fair value of Freedom VCM Holdings, LLC is primarily due to increases in net debt as well as declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc.

common stock, and a decrease in the operational performance of Freedom VCM Holdings, LLC’s various business units.

Subsequent to June 30, 2024, the collateral value for the VCM loan receivable was impacted due to the filing of Freedom VCM’s voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024.

The fair value of the underlying collateral for this loan subsequently decreased to a fair value of approximately $2.2 million at September 30, 2024.

The $45.5 million of loans receivable from Core Scientific, Inc.

(“Core Scientific”) at December 31, 2023 included a loan in the amount of $42.1 million that was settled in full upon Core Scientific’s exit from Chapter 11 bankruptcy in January 2024.

The Company received common shares of Core Scientific in accordance with the bankruptcy emergence plan which became publicly traded.

The Company received Core Scientific common stock with a fair value of $50.4 million for settlement of the $42.1 million loan receivable.

The fair value of the Core Scientific common stock received was measured using an amount that approximated the share price of Core at emergence from bankruptcy as set forth in Core’s bankruptcy emergence plan and a gain in the amount of $9.1 million was recognized.

During the three and six months ended June 30, 2024, we recorded $(12.0) million and $(13.7) million of fair value adjustments to the loan receivable for Freedom VCM Receivables, Inc..

The fair value adjustments are related to higher projected charge offs of receivables on the consumer receivable portfolio that are currently serviced by Conn's, Inc.

which is expected to be impacted by Conn’s voluntary petition filing on July 23, 2024 for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).

During the three and six months ended June 30, 2024, we recorded $(7.2) million and $(8.5) million of fair value adjustments to the loan receivable for Conn’s, Inc..

The fair value adjustments are related to reduced value of the underlying collateral following Conn’s Inc.

voluntary petition filing on July 23, 2024 of the Chapter 11 Cases under the Bankruptcy Code in the Bankruptcy Court.

During the three and six months ended June 30, 2024, we recorded $(7.4) million and $(6.8) million of fair value adjustments to the loan receivable for W.S.

Badcock Corporation.

The fair value adjustments are related to higher projected charge offs of receivables on the consumer receivable portfolio, that are currently serviced by Conn's, Inc.

which is expected to be impacted by Conn’s voluntary petition filing on July 23, 2024 voluntary petition filing on July 23, 2024 of the Chapter 11 Cases under the Bankruptcy Code in the Bankruptcy Court.

The fair value adjustments on loans receivable were $9.2 million and $52.5 million during the three and six months ended June 30, 2023.

The fair value adjustment to the loan receivable for Core Scientific, Inc.

was $3.1 million and $35.5 million for the three and six months ended June 30, 2023.

Core Scientific, Inc.

provides digital infrastructure for bitcoin mining and high-performance computing.

Core Scientific, Inc.

filed Chapter 11 bankruptcy in 2022, leading to a significant mark down of the loan receivable in the fourth quarter of 2022.

Subsequent to the Chapter 11 restructuring, and during the first quarter of 2023, there was an increase in bitcoin prices resulting in significant growth and value assumptions for the Core Scientific, Inc.

loan receivable.

As a result, the Core Scientific, Inc.

loan receivable received a fair value adjustment of $35.5 million for the six months ended June 30, 2023.

Wealth Management – We provide retail brokerage, investment management, and insurance, and tax preparation services to individuals and families, small businesses, non-profits, trusts, foundations, endowments, and qualified retirement plans through a boutique private wealth and investment management firm to meet the individual financial needs and goals of our customers.

Our experienced financial advisors provide investment management, retirement planning, education planning, wealth transfer and trust coordination, and lending and liquidity solutions.

Our investment strategists provide strategies and real-time market views and commentary to help our clients make important and informed financial and investment decisions.

Wealth management revenues are comprised of the following:

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Brokerage revenues

$ 22,824 $ 22,141 $ 46,493 $ 43,637

Advisory revenues

20,216 18,388 39,566 36,284

6,542 6,714 14,705 15,864

$ 49,582 $ 47,243 $ 100,764 $ 95,785

Total assets under management were approximately $25.6 billion, $25.4 billion, and $24.9 billion at June 30, 2024, December 31, 2023, and June 30, 2023, respectively.

Of these amounts, advisory assets under management totaled approximately $8.0 billion at June 30, 2024, and December 31, 2023, and $7.7 billion at June 30, 2023.

Advisory revenues were 0.25% and 0.24% of average advisory assets under management during the three months ended June 30, 2024 and 2023, respectively, and 0.25% and 0.23% of average advisory assets under management during the six months ended June 30, 2024 and 2023, respectively.

The average revenues earned on advisory assets under management are not expected to fluctuate significantly from period to period as a percentage of advisory assets under management.

Broker revenues are primarily comprised of commissions and fees earned from trading activities from brokerage client assets.

Other revenues is primarily comprised of tax service fees and management fees earned from comprehensive client focused services performed.

On October 31, 2024, we signed a definitive agreement to sell a portion of the Company’s traditional (W-2) Wealth Management business to Stifel Financial Corp.

(“Stifel”) as more fully described in recent developments.

Financial Consulting Segment - We provide a variety of specialized advisory services spanning bankruptcy, restructuring, turnaround management, forensic accounting, crisis and litigation support, appraisal and valuation, real estate, and operations management.

On November 15, 2024, as more fully described in recent developments, the Company entered into a transaction whereby, approximately 52.6% of the common equity interests of a newly formed subsidiary that included the Company’s appraisal and valuation and real estate advisory services operations, along with the Company’s auction and liquidations operations, was sold to an investment management firm.

These operations are expected to be deconsolidated since B.

Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% in the business.

Auction and Liquidation Segment – We provide retail liquidation services that utilize significant industry experience and a scalable network of independent contractors and advisors to help clients quickly and efficiently dispose of under-performing assets and generate cash from excess inventory by conducting or assisting in retail store closings, going out of business sales, bankruptcy sales, and fixture sales.

Financial institutions and other capital providers rely on us to maximize recovery rates in distressed asset sales and in retail bankruptcy situations.

Additionally, we work with healthy, mature retailers that utilize our proven inventory management and strategic disposition solutions to close unproductive stores and dispose of surplus inventory and fixtures as existing stores are updated.

We often conduct large retail liquidations that

entail significant capital requirements through collaborative arrangements with other liquidators and provide services to clients on a fee, guarantee or outright purchase basis.

Our scale and pool of resources allow us to offer our services across North America as well as parts of Europe, Asia, and Australia.

On November 15, 2024, as more fully described in recent developments, the Company entered into a transaction whereby, approximately 52.6% of the common equity interests of a newly formed subsidiary that included the Company’s auction and retail liquidation operations was sold, along with the Company’s appraisal and valuation and real estate advisory services operations, to an investment management firm.

These operations are expected to be deconsolidated since B.

Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% in the business.

Communications Segment – We own a number of businesses that comprises our Communications Segment that we have acquired for attractive risk-adjusted investment return characteristics.

We may pursue future acquisitions to expand this portfolio of businesses which currently includes:

Lingo Management, LLC (“Lingo Management”), a global cloud/unified communications and managed service provider that includes the operations of BullsEye Telecom that was merged into Lingo Management in July 2023, a single source communications and cloud technology provider (collectively “Lingo”);

Marconi Wireless Holdings, LLC, a mobile virtual network operator that provides mobile phone voice, text, and data services and devices;

magicJack VoIP Services, LLC, a VoIP cloud-based technology and communications provider that offers related devices and subscription services;

and United Online, Inc., an Internet access provider that offers dial-up, mobile broadband and digital subscriber line services under the NetZero and Juno brands.

Consumer Products Segment – This segment is comprised of Targus, which is a multinational company that designs, manufactures, and sells consumer and enterprise productivity products with a large business-to-business (B2B) customer client base and global distribution in over 100 countries.

The Targus product line includes laptop and tablet cases, backpacks, universal docking stations, and computer accessories that we acquired on October 18, 2022.

Our operating results are primarily comprised of the operations of these businesses within our six reportable operating segments.

However, we also generate revenues from other businesses that we may acquire with the goal to expand their operations, drive growth, and create operational efficiencies to improve cash flows to reinvest across other business operations in our platform.

These businesses are typically in fragmented markets and include the operations of a regional environmental services business, bebe which operates rent-to-own stores, and a technology company that provides e-commerce platforms, marketing and technology services acting as a merchant for consumer brand companies.

We also generate operating revenues from our majority owned subsidiary that licenses the trademarks and intellectual properties from our ownership of six brands:

Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore.

We also generate other income from dividends we receive from our equity ownership of investments that range from 10% to 50% in companies that license the trademark and intellectual property of the Hurley, Justice, and Scotch & Soda brands and bebe and Brookstone brands (equity ownership of bebe stores, inc., our majority owned subsidiary).

We have elected to account for these equity investments using the fair value method of accounting and the fair value of these investments totaled $288.0 million and $283.1 million at June 30, 2024 and December 31, 2023, respectively.

These investments are in private companies where the fair value at each reporting date is measured using valuation models that require significant estimates made by our management where we use operational data received from each of these individual operating companies that we do not manage.

The changes in fair value for these brand investments could have a material impact on our net income that we report each reporting period.

The change in fair value of these investments include unrealized gains which are reported in other income (expense) – realized and unrealized gains (losses) on investments and totaled $4.9 million and ($9.9) million during the six months ended June 30, 2024 and 2023, respectively.

Dividends from these investments which are reported in other income (expense) – dividend income and totaled $17.6 million and $16.6 million during the six months ended June 30, 2024 and 2023, respectively.

On October 25, 2024, as more fully described below in recent developments, the Company’s majority owned subsidiary bebe stores, inc.

sold its limited liability company interests in the bebe and Brookstone brands and the Company entered into a secured financing transaction for the six brands and the equity interests owned in Hurley, Justice and Scotch & Soda which is expected to result in deconsolidation and be reported as a non-controlling equity method investment that is estimated to have nominal value.

Securities and Other Investments Owned Portfolio – We have a portfolio of securities and other investments owned that consists of public equity securities, private securities that are primarily comprised of our 31% investment in Freedom VCM Holdings, LLC and brand investments described above, partnership interests and other investments, corporate bonds and other fixed income securities as follows at June 30, 2024 and December 31, 2023:

2024 December 31,

Public Equity Securities:

Badcock & Wilcox Enterprises, Inc.

- common stock $ 39,797 $ 40,072

Badcock & Wilcox Enterprises, Inc.

- preferred stock 4,937 6,386

Alta Equipment Group, Inc.

- common stock — 44,653

Double Down Interactive Co., Ltd - common stock 53,536 30,439

Synchronoss Technologies, Inc.

- common stock 13,149 8,780

Other public equities 26,102 64,211

Total public equity securities 137,521 194,541

Private Equity Securities:

Freedom VCM Holdings, LLC 63,674 287,043

Consumer brand investments 287,987 283,057

Other private equities 117,043 229,993

Total private equity securities 468,704 800,093

Total equity securities 606,225 994,634

Other Securities:

Corporate bonds 36,915 59,287

Other fixed income securities 5,321 2,989

Partnership interest and other 15,609 35,196

Total securities and other investments owned $ 664,070 $ 1,092,106

Securities and other investments owned was $664.1 million and $1,092.1 million as of June 30, 2024 and December 31, 2023.

Of this amount, the fair value of equity securities totaled $606.2 million and $994.6 million as of June 30, 2024 and December 31, 2023.

Of these amounts, public equity securities totaled $137.5 million and $194.5 million as of June 30, 2024 and December 31, 2023, and private equity securities totaled $468.7 million and $800.1 million as of June 30, 2024 and December 31, 2023.

The fair value of Alta Equipment Group, Inc.

common stock held as of December 31, 2023 was $44.7 million, and the Company sold the entire position in the first quarter of 2024 and recorded a loss of $(3.5) million.

The sale was executed to raise additional capital to fund operating activities.

The fair value of Double Down Interactive Co., Ltd common stock held as of June 30, 2024 and December 31, 2023 was $53.5 million and $30.4 million, respectively.

The change in fair value for the six months ended June 30, 2024 is primarily related to an increase in the public trading price during the period.

The fair value of the investment in Freedom VCM Holdings, LLC held as of June 30, 2024 and December 31, 2023 was $63.7 million and $287.0 million, respectively.

During the six months ended June 30, 2024, fair value adjustments were recorded in the amount of $(223.3) million primarily due to increases in net debt, declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc.

common stock and impact of Conn's bankruptcy filing on July 23, 2024, and a decrease in the operational performance of Freedom VCM Holdings, LLC’s various business segments.

Subsequent to June 30, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024 which impacts the future fair value of the investment in Freedom VCM.

The fair value of the investment in Freedom VCM was reduced to zero at September 30, 2024 and a fair value adjustment of approximately $(63.7) million was recorded in the quarter ended September 30, 2024.

Realized and Unrealized Gains (Losses)

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Other income (Expense) - Realized & Unrealized Gains (Losses)

Public Equity Securities:

Babcock & Wilcox Enterprises, Inc.

- common stock $ 3,799 $ (560) $ (1,075) $ 3,864

Babcock & Wilcox Enterprises, Inc.

- preferred stock (429) (336) (153) 2,769

Alta Equipment Group, Inc.

- common stock — 7,370 (3,537) 20,616

Double Down Interactive Co., Ltd - common stock 7,691 6,044 21,839 4,258

Synchronoss Technologies, Inc.

- common stock 974 — 3,495 —

The Arena Group, Inc.

- common stock — 1,866 — (20,729)

Other public equities (2,832) 4,599 (2,532) 7,064

Subtotal 9,203 18,983 18,037 17,842

Private Equity Securities:

Freedom VCM Holdings, LLC (139,355) — (172,009) —

Consumer Brand Investments (449) (506) 4,930 (9,866)

Other private equities (24,661) (690) (39,202) (6,010)

Subtotal (164,465) (1,196) (206,281) (15,876)

Other Securities:

Corporate bonds 920 739 1,387 348

Partnership interest and other (1,348) 317 1,622 (11,913)

Total $ (155,690) $ 18,843 $ (185,235) $ (9,599)

During the three and six months ended June 30, 2024, realized and unrealized losses of $(155.7) million and $(185.2) million were recorded to other income as realized and unrealized losses on investments.

These realized and unrealized losses are made up of realized and unrealized gains (losses) recorded to public equity securities, private equity securities, corporate bonds, and partnership interest and other investments.

The majority of realized and unrealized (losses) gains on investments during the three and six months ended June 30, 2024 are related to public equity securities (equity securities that trade on major exchanges), and private equity securities.

During the three and six months ended June 30, 2024, $9.2 million and $18.0 million of realized and unrealized gains were recorded for public equity securities to other income as realized and unrealized gains on investments.

Of these amounts, Double Down Interactive Co., Ltd common stock made up the majority of the gains which amounted to $7.7 million and $21.8 million during the three and six months ended June 30, 2024, which was primarily related to an increase in the public trading share price during the period.

During the three and six months ended June 30, 2024, $(164.5) million and $(206.3) million of realized and unrealized losses were recorded for private equity securities to other income as realized and unrealized losses on investments.

Of these amounts, our investment in Freedom VCM Holdings, LLC made up the majority of the balances.

During the three and six months ended June 30, 2024, we recorded $(139.4) million and $(172.0) million of unrealized losses related to our investment in Freedom VCM Holdings, LLC.

The decrease in fair values was primarily due to increases in net debt, declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc.

common stock, and a decrease in the operational performance of Freedom VCM Holdings, LLC’s various business segments.

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

including in New York, Chicago, Metro District of Columbia, Atlanta, Boston, Dallas, Metro Detroit, Houston, Memphis, Miami, San Francisco, Boca Raton, and West Palm Beach, as well as additional offices located in Canada, Europe, Asia, and Australia.

We report our activities in six reportable business segments:

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

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

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

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

Recent Developments

Great American Group Strategic Alternatives Review.

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

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

Riley Securities, Inc.

Moelis & Company LLC and the Company have started the strategic review process and began a solicitation of interest process in April 2024.

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

Audit Committee Review/Investigation .

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

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

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

The review confirmed what we previously disclosed:

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

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

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

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

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

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

1 unchanged sentence

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

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

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

Recent Developments

Great American Group Transaction

On November 15, 2024 the Company and BR Financial Holdings, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“BR Financial”), consummated the transactions contemplated by an equity purchase agreement, dated October 13, 2024 (the “Equity Purchase Agreement”), by and among OCM SSF III Great American PT, L.P., a Delaware limited partnership (“Investor 1”), Opps XII Great American Holdings, LLC, a Delaware limited liability company (“Investor 2”), and VOF Great American Holdings, L.P., a Delaware limited partnership (“Investor 3,” and, together with Investor 1 and Investor 2, the “Investors”), Great American Holdings, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Great American NewCo”), and certain other parties identified therein, with respect to the ownership of Great American NewCo by the Investors and the Company.

The Investors are affiliates of Oaktree Capital Management, L.P.

Pursuant to, and subject to the terms and conditions set forth in, the Equity Purchase Agreement, the Company conducted an internal reorganization and contributed all of the interests in the Company’s Appraisal and Valuation Services, Retail, Wholesale & Industrial Solutions and Real Estate businesses (collectively, the “Great American Group”), to Great American NewCo.

At the Closing, (i) the Investors received (a) all of the outstanding class A preferred limited liability units of Great American NewCo (which will have a 7.5% cash coupon and a 7.5% payment-in-kind coupon) (the “Class A Preferred Units”) and (b) common limited liability units of Great American NewCo (the “Common Units”) representing 52.6% of the issued and outstanding common limited liability units in Great American NewCo for a purchase price of approximately $203.0 million (which have an initial liquidation preference of approximately $203.0 million).

BR Financial retains (a) 93.2% of the issued and outstanding class B preferred limited liability company units of Great American NewCo (which will have a 2.3% payment-in-kind coupon and an initial aggregate liquidation preference of approximately $183.0 million) (the “Class B Preferred Units”) and (b) 44.2% of the issued and outstanding Common Units.

The remaining 6.8% of issued and outstanding Class B Preferred Units and 3.2% of issued and outstanding Common Units will be held by certain minority investors.

The investors in Great American NewCo will also be entitled to certain quarterly tax distributions pursuant to the Great American NewCo LLCA (defined below).

At the closing, (i) BR Financial, the Investors and the other minority investors entered into an Amended and Restated Limited Liability Company Agreement of Great American NewCo (the “Great American NewCo LLCA”), (ii) BR Financial and Great American NewCo entered into a Transition Services Agreement, pursuant to which BR Financial will provide certain transition services to Great American NewCo relating for the Great American Group for a period of up to one year from the Closing, subject to certain exceptions, and (iii) an affiliate of the Company, Great American NewCo and certain subsidiary guarantors of Great American NewCo entered into a credit agreement, pursuant to which an affiliate of the Company, as lender, will provide to Great American NewCo, as borrower, a first lien secured revolving credit facility of up to $25.0 million for general corporate purposes, subject to the terms and conditions set forth therein., which had an outstanding balance of $1.8 million at closing, and (iv) entered into promissory notes which totaled $15.3 million related to capital requirements for certain retail liquidation engagements that were ongoing as of closing.

Under the Great American NewCo LLCA, Great American NewCo will initially have a five-member board of directors that will oversee the day-to-day management of Great American NewCo, subject to certain approval rights reserved for the Investors and/or BR Financial, as applicable.

The Investors will be entitled to appoint a majority of the directors of the board for so long as they collectively hold at least 25% of their combined amount of Common Units owned immediately following the Closing.

The Great American NewCo LLCA will also contain certain protections for BR

Financial, including, but not limited to, requiring BR Financial approval for certain fundamental actions.

The Investors will have certain drag-along rights following the second-year anniversary of the Closing Date and certain call rights exercisable starting on the fifth-year anniversary of the Closing Date.

The Great American NewCo LLCA sets forth distribution mechanics pursuant to which Great American NewCo will make distributions in cash and payment-in-kind at any time the board of directors may authorize, with the Class A Preferred Units having priority in any such distribution over Class B Preferred Units.

In addition, the Great American NewCo LLCA will contain certain transfer restrictions and other transfer rights and obligations that apply to BR Financial, the Investors and other unitholders, as applicable, in certain circumstances.

Upon closing the Equity Purchase Agreement on November 15, 2024, B.

Riley will record a gain of approximately $235.0 million and the operations of Great American NewCo will be deconsolidated since B.

Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% of the common units along with the Preferred B units described above.

After the closing of the Equity Purchase Agreement, the Company will account for this equity method investment under the equity method of accounting.

Wealth Management

On October 31, 2024, we signed a definitive agreement to sell a portion of the Company’s traditional (W-2) Wealth Management business to Stifel Financial Corp.

(“Stifel”) for estimated net consideration of $27.0 million to $35.0 million in cash.

Subject to the terms of the agreement, the final consideration will be based on the number of advisors that join Stifel at closing, among other things.

The transaction is expected to include up to 15% of the wealth management advisors, along with the associated customer accounts.

The accounts managed by these advisors represents up to $4.5 billion total assets under management (AUM) as of September 30, 2024.

The transaction has been approved by the Board of Directors of the Company and is subject to the receipt of required regulatory approvals and other customary closing conditions.

It is expected to close early in the second quarter of 2025.

Brands Transaction

On October 25, 2024, our wholly-owned subsidiary, B.

Riley Brand Management LLC (“B.

Riley Brand Management”), entered into a transfer and contribution agreement, dated October 25, 2024 (the “Transfer and Contribution Agreement”), by and between B.

Riley Brand Management and BR Funding Holdings 2024-1, LLC, a Delaware limited liability company and, prior to the consummation of the transactions described herein, wholly-owned subsidiary of B.

Riley Brand Management (“Holdings”), pursuant to which, among other things, B.

Riley Brand Management transferred and contributed its limited liability company interests in (i) BR Brand Holdings LLC, a New York limited liability company, (ii) HRLY Brand Management LLC, a Delaware limited liability company, (iii) Justice Brand Management LLC, a New York limited liability company, and (iv) S&S Brand Management LLC, a New York limited liability company (such limited liability interests collectively, the “Brands Interests,” and such transfer, the “Transfer”).

In connection with the transactions contemplated by the Transfer and Contribution Agreement, Holdings transferred and contributed the Brand Interests to its subsidiary, BR Funding 2024-1, LLC, a Delaware limited liability company and securitization financing vehicle (“Issuer”) and Issuer issued notes and preferred stock secured by the Brands Interests (the “Secured Financing”) to a third party purchaser, HBN 101, LLC, a Delaware limited liability company (the "Purchaser"), the proceeds of which were used to fund an upfront payment to the Company of approximately $189.3 million.

Additionally, in connection with the Transfer and Contribution Agreement, bebe stores, inc., a California corporation and majority owned subsidiary of the Company (“bebe”), entered into a membership interest purchase agreement, dated October 25, 2024 (the “bebe Purchase Agreement”), by and among bebe, HBN 120, LLC, a Delaware limited liability company (“Buyer”), BB Brand Holdings LLC, a Delaware limited liability company (“BB Brand Holdings”), and BKST Brand Management LLC, a New York limited liability company (“BKST Brand Management” and together with BB Brand Holdings, the “bebe Brands”), pursuant to which, among other things, bebe sold its limited liability company interests in the bebe Brands to Buyer, an affiliate of the Purchaser for approximately $46.6 million in net proceeds (such sale, the “Sale”), with certain of such proceeds applied towards indebtedness related to the bebe holdings.

Upon closing of the Sale proceeds of $22.2 million was used to pay off the then outstanding balance of the bebe Credit Agreement in full (see note 10) and $0.2 million of loan related pay off expenses.

The Sale by bebe resulted in a subsequent fair value adjustment at September 30, 2024 in the amount of approximately $(20.0) million that was recorded during the quarter ended September 30, 2024 for the sale of the bebe Brands.

In addition, upon completion of the Secured Financing of the Brand Interests, the Company will deconsolidate the ownership of the Brand Interests and the Company’s ownership in the Brand Interest will be reported as a non-controlling equity method investment that is estimated to have nominal value as a result of the liquidation preferences and notes that were issued as

part of the Secured Financing and upon deconsolidation a loss at September 30, 2024 in the amount of approximately $(133.0) million was recorded in the quarter ending September 30, 2024.

Nomura Credit Agreement

On September 17, 2024, we entered into Amendment No.

4 to our credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Fourth Amendment”).

On September 17, 2024, we made a payment of $85.9 million which consisted of a principal payment of $85.1 million and accrued interest of $0.7 million.

Loan fees incurred in connection with the Fourth Amendment totaled $5.9 million of which $3.5 million was added to the principal balance of the term loan.

After giving effect to these amounts, the outstanding principal balance on the term loan was reduced from $469.8 million to $388.1 million.

In connection with the Fourth Amendment, the revolving credit facility in the amount of $100.0 million which had no balance outstanding at September 17, 2024 was terminated and we are required to reduce the principal amount of the term loan to be no greater than $100.0 million on or prior to September 30, 2025.

The maturity date of the term loan is August 21, 2027 and all outstanding principal is required to be paid.

The Fourth Amendment contains certain provisions related to borrowing base, including specific treatment for certain assets in the calculation of borrowing base and also includes mandatory prepayment provisions regarding asset sales.

Interest on the term loan increased to SOFR loans will accrue interest at the adjusted term SOFR plus an applicable margin of 7.00% cash interest or, at the election of the Company, at the adjusted term SOFR determined plus an applicable margin of 6.00% cash interest plus 1.50% paid-in-kind interest;

and base rate loans will accrue interest at the base rate plus an applicable margin of 6.00% cash interest or, at the election of the Company, at the adjusted term SOFR determined for such day plus an applicable margin of 5.00% cash interest plus 1.50% PIK Interest.

On December 9, 2024, the Company entered into Amendment No.

5 to its credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Fifth Amendment”).

The Fifth Amendment extended the springing maturity date of the term loans if more than $25.0 million aggregate principal amount of the 5.50% 2026 Notes is outstanding to February 3, 2026 and permits under certain conditions an additional $10.0 million of telecommunications financing.

Take-Private Proposal

On August 16, 2024, the Company’s Board of Directors received an unsolicited preliminary, non-binding letter of proposal from the Company’s Chairman and Co-CEO, Bryant Riley, to acquire the outstanding shares of the Company not currently owned by Mr.

Riley, in a transaction to take the Company private, at a proposed purchase price of $7.00 per share.

Following receipt of the proposal, the Company’s Board of Directors established a special committee consisting of independent directors, which has engaged its own advisors to evaluate the proposal and determine the appropriate course of action and process.

There can be no assurance that any definitive offer will be received, that any definitive agreement will be executed relating to the proposal or that this or any other transaction will be approved or consummated.

On July 3, 2024, each of the Company and Bryant Riley, Chairman and Co-Chief Executive Officer, received a subpoena from the U.S.

Securities and Exchange Commission (the “SEC”) requesting the production of certain documents and other information primarily related to (i) the Company’s business dealings with Brian Kahn, (ii) certain transactions in an unrelated public company’s securities, and (iii) the communications and related compliance and other policies and procedures of certain of its regulated subsidiaries.

On November 22, 2024, each of the Company and Mr.

Riley received an additional SEC subpoena requesting the production of certain additional documents and information relating to Franchise Group, Inc.

(including its holding company, Freedom VCM Holdings, LLC) as well as Mr.

Riley’s personal loan and his pledge of shares of the Company’s common stock as collateral for such loan.

As previously disclosed on April 23, 2024, the Audit Committee of the Company’s Board of Directors, with the assistance of Sullivan & Cromwell LLP, the Company’s legal counsel, conducted an internal review, and separately the Audit Committee retained Winston & Strawn LLP, independent legal counsel, to conduct an independent investigation, to review transactions among Mr.

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

The review and the investigation both confirmed that the Company and its executives, including Mr.

Riley, had no involvement with, or knowledge of, any alleged misconduct concerning Mr.

Kahn or any of his affiliates.

The receipt of subpoenas is not an indication that the SEC or its staff has determined that any violations of law have occurred.

Both the Company and Mr.

Riley are responding to the subpoenas and are fully cooperating with the SEC.

Conn’s and FRG

The Company’s second quarter results were negatively impacted by a significant non-cash markdown of $181.0 million related to its investment in Freedom VCM Holdings, LLC (“Freedom VCM”), the indirect parent entity for Franchise Group (“FRG”).

Freedom VCM’s strategy, which included the potential divestiture or monetization of certain assets, was materially negatively impacted by the unexpected announcement in November 2023 concerning FRG’s former

CEO and his alleged involvement in fraudulent schemes despite the fact that these allegations are unrelated to FRG and its businesses.

In the meantime, the consumer-facing portion of the U.S.

economy has deteriorated.

On July 23, 2024, Conn’s, Inc.

(“Conn’s”) and certain of its subsidiaries filed voluntary petitions for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).

FRG, pursuant to a transaction consummated in January 2024, acquired a substantial equity investment in Conn’s in exchange for the sale of its Badcock Home Furniture & more business to Conn’s.

The commencement of the Chapter 11 Cases constitute an event of default that accelerated the obligations under the Term Loan and Security Agreement, dated as of December 18, 2023 (the “Conn’s Term Loan”), among Conn’s, W.S.

Badcock LLC, as borrowers, and an affiliate of the Company, as administrative agent, collateral agent, and lender.

As of the date of the filing of the Chapter 11 Cases, $93.0 million in outstanding borrowings existed under the Conn’s Term Loan.

Any efforts to enforce payment obligations under the Conn’s Term Loan are automatically stayed as a result of the Chapter 11 Cases and the Company’s rights of enforcement in respect of the Conn’s Term Loan are subject to the applicable provisions of the Bankruptcy Code.

On November 3, 2024, FRG, its operating businesses, and certain other affiliates, including Freedom VCM, filed voluntary petitions for relief (the “FRG Chapter 11 Cases”) under chapter 11 of the Bankruptcy Code.

As a result, on November 4, 2024, we concluded that we are required to record an additional impairment of with respect to the Freedom VCM Investment and the Vintage Loan Receivable.

The additional non-cash impairments of the Freedom VCM Investment and the Vintage Loan Receivable are $118.0 million in the aggregate as of November 4, 2024.

As a result of such additional impairment we have ascribed no value to the Freedom VCM Investment and the Vintage Loan Receivable was valued at $2,250 at September 30, 2024.

Subsequent to September 30, 2024, the fair value of the underlying collateral for this loan, which is comprised of other public securities, decreased to a fair value of $2,006 at December 20, 2024.

As of the date of this Quarterly Report on Form 10-Q, we are in compliance with our Nomura credit agreement notwithstanding the aforementioned events.

Critical Accounting Estimates

6 unchanged sentences

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

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Condensed Consolidated Statements of Operations

(Dollars in thousands)

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2024 2023 Amount %

Services and fees $ 248,025 $ 230,327 $ 17,698 7.7 %

Trading (loss) income and fair value adjustments on loans (29,868) 51,568 (81,436) (157.9) %

Interest income - Loans and securities lending 59,944 77,186 (17,242) (22.3) %

Trading (loss) income (31,321) 33,158 (64,479) (194.5) %

Fair value adjustments on loans (175,582) 9,207 (184,789) n/m

Interest income - loans 18,508 35,126 (16,618) (47.3) %

Interest income - securities lending 24,798 40,073 (15,275) (38.1) %

Sale of goods 63,937 58,387 5,550 9.5 %

4 unchanged sentences

Selling, general and administrative expenses 209,338 188,885 20,453 10.8 %

Restructuring charge 789 93 696 n/m

Restructuring charge 20 628 (608) (96.8) %

Impairment of goodwill and tradenames 27,681 1,733 25,948 n/m

Interest expense - Securities lending and loan participations sold 23,313 35,780 (12,467) (34.8) %

Total operating expenses 368,621 323,284 45,337 14.0 %

Operating (loss) income (3,429) 84,923 (88,352) (104.0) %

Operating (loss) income (220,256) 82,994 (303,250) n/m

Other income (expense):

1 unchanged sentence

Dividend income 9,209 9,555 (346) (3.6) %

Realized and unrealized losses on investments (29,545) (28,442) (1,103) 3.9 %

Change in fair value of financial instruments and other 314 (209) 523 n/m

Loss from equity investments (4) (10) 6 (60.0) %

Realized and unrealized (losses) gains on investments (155,690) 18,843 (174,533) n/m

Change in fair value of financial instruments and other (163) 381 (544) (142.8) %

Income from equity investments 10 143 (133) (93.0) %

Interest expense (42,687) (47,332) 4,645 (9.8) %

(Loss) income before income taxes (408,773) 65,285 (474,058) n/m

Benefit from (provision for) income taxes 17,090 (7,919) 25,009 n/m

Provision for income taxes (25,008) (21,504) (3,504) 16.3 %

Net (loss) income (433,781) 43,781 (477,562) n/m

Net income (loss) attributable to noncontrolling interests 1,211 (595) 1,806 n/m

Net loss attributable to noncontrolling interests (177) (2,600) 2,423 (93.2) %

Net (loss) income attributable to B.

5 unchanged sentences

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2024 2023 Amount %

Revenues - Services and fees:

Services and fees:

Capital Markets segment $ 50,242 $ 44,961 $ 5,281 11.7 %

5 unchanged sentences

Subtotal 248,025 230,327 17,698 7.7 %

Revenues - Sale of goods:

Trading (loss) income:

Capital Markets segment (32,612) 32,685 (65,297) (199.8) %

Wealth Management segment 1,291 473 818 172.9 %

Subtotal (31,321) 33,158 (64,479) (194.5) %

Fair value adjustments on loans:

Capital Markets segment (175,582) 9,207 (184,789) n/m

Interest income - loans:

Capital Markets segment 18,508 35,126 (16,618) (47.3) %

Interest income - securities lending:

Capital Markets segment 24,798 40,073 (15,275) (38.1) %

Sale of goods:

Auction and Liquidation segment 8,364 1,676 6,688 n/m

3 unchanged sentences

Subtotal 63,937 58,387 5,550 9.5 %

Trading (loss) income and fair value adjustments on loans

Total revenues $ 148,365 $ 406,278 $ (257,913) (63.5) %

_______________________________________________

n/m - Not applicable or not meaningful.

Total revenues decreased $257.9 million to $148.4 million during the three months ended June 30, 2024 from $406.3 million during the three months ended June 30, 2023.

The decrease in revenues during the three months ended June 30, 2024 was primarily due to decreases in the fair value adjustments on loans of $184.8 million, fair value of the portfolio of securities and other investments owned of $64.5 million, interest income from loans of $16.6 million, and interest income from securities lending of $15.3 million, partially offset by increases in revenues from services and fees of $17.7 million and sale of goods of $5.6 million.

Of the $184.8 million decrease in fair value adjustments on loans, $151.1 million related to the loan to Vintage Capital Management, LLC (“VCM”), $12.0 million related to the loan to Freedom VCM, $7.4 million related to the loan to Badcock Receivables I, and $7.2 million related to the loan to Conn’s Inc.

The increase in revenue from services and fees in the three months ended June 30, 2024 consisted of increases in revenue of $15.6 million in All Other, $5.3 million in the Financial Consulting segment, $5.3 million in the Capital Markets segment, and $2.3 million in the Wealth Management segment, partially offset by decreases in revenue of $5.6 million in the Communications segment and $5.3 million in the Auction and Liquidation segment.

Revenues from services and fees in the Capital Markets segment increased $5.3 million to $50.2 million during the three months ended June 30, 2024 from $45.0 million during the three months ended June 30, 2023.

The increase in revenues was primarily due to increases of $9.4 million of corporate finance, consulting, and investment banking fees and $0.5 million in dividends, partially offset by decreases of $2.3 million in other income, $1.3 million of interest income, and $0.9 million in commission fees.

Revenues from services and fees in the Wealth Management segment increased $2.3 million to $49.6 million during the three months ended June 30, 2024 from $47.2 million during the three months ended June 30, 2023.

The increase in revenues was primarily due to increases in revenue of $1.7 million from wealth and asset management fees and $0.9 million in other income, partially offset by a decrease of $0.3 million in commission fees.

Revenues from services and fees in the Auction and Liquidation segment decreased $5.3 million to $3.6 million during the three months ended June 30, 2024 from $8.9 million during the three months ended June 30, 2023.

The decrease in revenues was primarily due to a decrease of $5.3 million in commission fees related to a decrease in the size of fee engagements.

Revenues from services and fees in the Financial Consulting segment increased $5.3 million to $36.5 million during the three months ended June 30, 2024 from $31.2 million during the three months ended June 30, 2023.

The increase in revenues was primarily due to an increase of $5.4 million within our Advisory Services and Appraisal divisions, partially offset by a decrease of $0.1 million from our Real Estate division.

Revenues from services and fees in the Communications segment decreased $5.6 million to $77.7 million during the three months ended June 30, 2024 from $83.3 million during the three months ended June 30, 2023.

The decrease in revenues was primarily due to decreases in subscription revenue of $5.8 million, partially offset by an increase of $0.2 million in advertising, licensing and other revenue.

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

Revenues from services and fees in All Other increased $15.6 million to $30.3 million during the three months ended June 30, 2024 from $14.7 million during the three months ended June 30, 2023.

(“Nogin”) which we acquired in the second quarter of 2024, and the operations of a regional environmental services business and a landscaping business that we acquired in 2022 and sold in the third quarter of 2023.

Revenues from services and fees in All Other increased by approximately $13.1 million related to merchandise rental fees from bebe, $2.7 million in commission fees from Nogin, and $2.7 million related to the regional environmental services business, partially offset by a decrease in revenues of $2.8 million due to the sale of the landscaping business in the fourth quarter of 2023.

Trading income (loss) decreased approximately $64.5 million to a loss of $31.3 million during the three months ended June 30, 2024 compared to income of $33.2 million during the three months ended June 30, 2023.

The loss of $31.3 million during the three months ended June 30, 2024 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts.

The fair value adjustment of $175.6 million on our loans receivable during the three months ended June 30, 2024 was primarily due to $151.1 million related to VCM, $12.0 million related to Freedom VCM, $7.4 million related to Badcock Receivables I, and $7.2 million related to Conn’s.

Interest income - loans decreased $16.6 million to $18.5 million during the three months ended June 30, 2024 from $35.1 million during the three months ended June 30, 2023.

The decrease was due to a reduction in loan receivable balances from $683.8 million as of June 30, 2023 to $229.2 million as of June 30, 2024.

Interest income - securities lending decreased $15.3 million to $24.8 million during the three months ended June 30, 2024 from $40.1 million during the three months ended June 30, 2023.

The decrease was due to a decrease in the securities borrowed balance from $2,938.5 million as of June 30, 2023 to $742.9 million as of June 30, 2024.

Revenues from the sale of goods increased $5.6 million to $63.9 million during the three months ended June 30, 2024 from $58.4 million during the three months ended June 30, 2023.

The increase was primarily related to an increase of $6.7 million from the Auction and Liquidation segment due to larger international asset deals and an increase of $2.7 million in All Other consisting of $2.3 million in sales of goods from Nogin which we acquired in the second quarter of 2024 and $0.4 million in sales of goods from bebe in which we acquired a controlling interest and consolidated during the fourth

quarter of 2023, partially offset by a decrease of $3.6 million from the Consumer Products segment due to a decrease in computer and peripheral sales worldwide and a decrease of $0.2 million from the Communications segment.

Cost of goods sold for the three months ended June 30, 2024 increased approximately $6.4 million to $46.7 million from $40.3 million during the three months ended June 30, 2023.

The increase in cost of goods sold was primarily attributable to increases of $6.3 million from the Auction and Liquidation segment and $2.2 million from All Other consisting of $1.2 million from Nogin which we acquired in the second quarter of 2024 and $1.0 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, partially offset by decreases of $1.7 million in the Consumer Products segment and $0.4 million in the Communications segment.

Operating Expenses

Direct Cost of Services

Direct cost of services increased approximately $5.6 million to $61.6 million during the three months ended June 30, 2024 from $55.9 million during the three months ended June 30, 2023.

The increase in direct cost of services was primarily attributable to increases of $0.2 million from the Communications segment and $6.0 million from All Other due to bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023 and Nogin which we acquired in the second quarter of 2024, partially offset by a decrease of $0.6 million from the Auction and Liquidation segment due to the size of the fee deals.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the three months ended June 30, 2024 and 2023 were comprised of the following:

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

Amount % Amount % Amount %

Capital Markets segment $ 50,551 24.2 % $ 46,863 24.8 % $ 3,688 7.9 %

Wealth Management segment 49,205 23.5 % 49,046 26.0 % 159 0.3 %

Auction and Liquidation segment 1,861 0.9 % 2,302 1.2 % (441) (19.2) %

Financial Consulting segment 28,667 13.7 % 22,894 12.1 % 5,773 25.2 %

Communications segment 25,478 12.2 % 26,646 14.1 % (1,168) (4.4) %

Consumer Products segment 17,049 8.1 % 19,063 10.1 % (2,014) (10.6) %

Corporate and All Other 36,527 17.4 % 22,071 11.7 % 14,456 65.5 %

Total selling, general & administrative expenses $ 209,338 100.0 % $ 188,885 100.0 % $ 20,453 10.8 %

Total selling, general and administrative expenses increased by $20.5 million to $209.3 million during the three months ended June 30, 2024 from $188.9 million during the three months ended June 30, 2023.

The increase was primarily due to increases of $14.5 million in Corporate and All Other, $5.8 million in the Financial Consulting segment, $3.7 million in the Capital Markets segment, and $0.2 million in the Wealth Management segment, partially offset by decreases of $2.0 million in the Consumer Products segment, $1.2 million in the Communications segment, and $0.4 million in the Auction and Liquidation segment.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment increased by $3.7 million to $50.6 million during the three months ended June 30, 2024 from $46.9 million during the three months ended June 30, 2023.

The increase was primarily due to an increase of $4.4 million in payroll and related expenses, which primarily related to increases in commissions paid, partially offset by decreases in share based compensation and other payroll expenses, and partially offset by a decrease of $0.7 million in consulting expenses.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment increased by $0.2 million to $49.2 million during the three months ended June 30, 2024 from $49.0 million during the three months ended June 30, 2023.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment decreased $0.4 million to $1.9 million during the three months ended June 30, 2024 from $2.3 million during the three months ended June 30, 2023.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment increased by $5.8 million to $28.7 million during the three months ended June 30, 2024 from $22.9 million during the three months ended June 30, 2023.

The increase was primarily due to an increase of $4.5 million in payroll and related expenses related to a business acquired in the third quarter of 2023 and an increase in headcount and an increase of $0.8 million in other expenses.

Communications

Selling, general and administrative expenses in the Communications segment decreased $1.2 million to $25.5 million for the three months ended June 30, 2024 from $26.6 million for the three months ended June 30, 2023.

The decrease was primarily due to decreases of $2.7 million in payroll and related expenses and $0.3 million in other expenses, partially offset by increases $1.0 million in legal settlements and $0.7 million in legal fees.

The decrease in payroll and related expenses and other expenses was primarily due to cost savings in 2024 resulting from the implementation of cost savings programs in second half of 2023 that included a reduction in headcount and other operating expenses.

Consumer Products

Selling, general and administrative expenses in the Consumer Products segment decreased $2.0 million to $17.0 million for the three months ended June 30, 2024 from $19.1 million during the three months ended June 30, 2023.

The decrease was primarily due to decreases of $1.4 million in payroll and related expenses due to reduced headcount, $0.9 million in other expenses due to efforts to reduce costs, and $0.7 million in depreciation and amortization expense due to items being fully amortized, partially offset by an increase of $0.8 million in share based compensation due to a reversal of unvested performance based shares compensation expense in the prior year.

Corporate and All Other

Selling, general and administrative expenses for Corporate and All Other increased approximately $14.5 million to $36.5 million during the three months ended June 30, 2024 from $22.1 million during the three months ended June 30, 2023.

The increase was primarily due to increases of $9.2 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $6.0 million from Nogin which we acquired in the second quarter of 2024, $2.3 million in transaction costs related to the Nogin acquisition, $1.7 million in legal settlements, and $1.0 million in other expenses, partially offset by a decrease of $5.8 million in payroll and related expenses which primarily related to decreases in share based compensation and other variable compensation.

Impairment of goodwill and tradenames.

We recognized impairment charges of $27.7 million during the three months ended June 30, 2024.

We performed an interim impairment test as of June 30, 2024, as further discussed in Note 8 of the condensed consolidated financial statements.

Based on the results of the impairment test, we recorded a non-cash impairment charge of $26.7 million related to goodwill and $1.0 million related to tradenames in the Consumer Products segment.

We recognized impairment charges of $1.7 million during the three months ended June 30, 2023 related to tradenames in the Capital Markets segment.

Other Income (Expense).

Other income included interest income of $0.8 million and $0.7 million during the three months ended June 30, 2024 and 2023, respectively.

Dividend income was $9.2 million during the three months ended June 30, 2024 compared to $9.6 million during the three months ended June 30, 2023.

Realized and unrealized (losses) gains on investments was a loss of $155.7 million during the three months ended June 30, 2024 compared to a gain of $18.8 million during the three months ended June 30, 2023.

The change was primarily due to a decrease in the valuation of

our investment in Freedom VCM of $181.0 million.

Change in fair value of financial instruments and other was a loss of $0.2 million during the three months ended June 30, 2024 and a gain of $0.4 million during the three months ended June 30, 2023.

Interest expense was $42.7 million during the three months ended June 30, 2024 compared to $47.3 million during the three months ended June 30, 2023.

The decrease in interest expense was due to lower debt balances during the three months ended June 30, 2024.

The decreases in interest expense primarily consisted of $5.9 million from the Pathlight term loan, $3.8 million from the issuance of senior notes, $1.0 million from the Nomura revolving credit facility, $0.1 million and $0.7 million from the Targus term loan and revolver, respectively, and $0.4 million from the BRPAC term loan, partially offset by increases in interest expense of $7.1 million from the Nomura term loan, $0.7 million from the bebe term loan, and $0.3 million from the Nogin secured convertible promissory note.

(Loss) Income Before Income Taxes .

Loss before income taxes was $408.8 million during the three months ended June 30, 2024 compared to income before income taxes of $65.3 million during the three months ended June 30, 2023.

The change was due to a decrease in revenue of $257.9 million, a change in realized and unrealized (losses) gains on investments of $174.5 million, an increase in operating expenses of $45.3 million, a decrease in change in fair value of financial instruments and other of $0.5 million, and a decrease of $0.3 million in dividend income, partially offset by a decrease in interest expense of $4.6 million and an increase of $0.1 million in interest income.

Provision for Income Taxes.

Provision for income taxes was $25.0 million during the three months ended June 30, 2024 compared to a provision for income taxes of $21.5 million during the three months ended June 30, 2023.

The effective income tax rate was 6.1% for the three months ended June 30, 2024 as compared to 32.9% for the three months ended June 30, 2023.

Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests.

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

The net loss attributable to noncontrolling interests was $0.2 million during the three months ended June 30, 2024 compared to net loss of $2.6 million during the three months ended June 30, 2023.

Net (Loss) Income Attributable to the Company .

Net loss attributable to the Company was $433.6 million during the three months ended June 30, 2024 compared to net income attributable to the Company of $46.4 million for the three months ended June 30, 2023.

The decrease was due to a change in operating (loss) income of $303.3 million, a decrease in realized and unrealized (losses) gains on investments of $174.5 million, a change in net loss attributable to noncontrolling interests and redeemable noncontrolling interests of $2.4 million, an increase in change in fair value of financial instruments and other of $0.5 million, and a decrease of $0.3 million in dividend income, partially offset by a decrease in interest expense of $4.6 million, a change in provision for income taxes of $3.5 million, and an increase of $0.1 million in interest income.

Preferred Stock Dividends .

Preferred stock dividends were $2.0 million for the three months ended June 30, 2024 and 2023.

Dividends on the Series A preferred paid during the three months ended June 30, 2024 and 2023 were $0.4296875 per depository share.

Dividends on the Series B preferred paid during the three months ended June 30, 2024 and 2023 were $0.4609375 per depository share.

Net (Loss) Income Available to Common Shareholders .

Net loss available to common shareholders was $435.6 million during the three months ended June 30, 2024 compared to net income available to common shareholders $44.4 million during the three months ended June 30, 2023.

Results of Operations

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

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Condensed Consolidated Statements of Operations

(Dollars in thousands)

Six Months Ended June 30, Change

2024 2023 Amount %

Services and fees $ 505,328 $ 465,886 $ 39,442 8.5 %

Trading (loss) income (48,988) 41,450 (90,438) n/m

Fair value adjustments on loans (187,783) 52,483 (240,266) n/m

Interest income - loans 40,643 75,138 (34,495) (45.9) %

Interest income - securities lending 62,607 77,247 (14,640) (19.0) %

Sale of goods 119,590 126,164 (6,574) (5.2) %

Total revenues 491,397 838,368 (346,971) (41.4) %

Operating expenses:

Direct cost of services 122,677 110,338 12,339 11.2 %

Cost of goods sold 86,333 87,943 (1,610) (1.8) %

Selling, general and administrative expenses 418,886 401,512 17,374 4.3 %

Restructuring charge 809 721 88 12.2 %

Impairment of tradenames 27,681 1,733 25,948 n/m

Interest expense - Securities lending and loan participations sold 58,696 68,204 (9,508) (13.9) %

Total operating expenses 715,082 670,451 44,631 6.7 %

Operating (loss) income (223,685) 167,917 (391,602) n/m

Other income (expense):

Interest income 1,473 3,275 (1,802) (55.0) %

Dividend income 21,024 22,759 (1,735) (7.6) %

Realized and unrealized losses on investments (185,235) (9,599) (175,636) n/m

Change in fair value of financial instruments and other 151 172 (21) (12.2) %

Income from equity investments 6 133 (127) (95.5) %

Interest expense (87,551) (94,893) 7,342 (7.7) %

(Loss) income before income taxes (473,817) 89,764 (563,581) n/m

Provision for income taxes (7,918) (29,423) 21,505 (73.1) %

Net (loss) income (481,735) 60,341 (542,076) n/m

Net income (loss) attributable to noncontrolling interests 1,034 (3,195) 4,229 (132.4) %

Net (loss) income attributable to B.

Riley Financial, Inc.

(482,769) 63,536 (546,305) n/m

Preferred stock dividends 4,030 4,027 3 0.1 %

Net (loss) income available to common shareholders $ (486,799) $ 59,509 $ (546,308) n/m

______________________________________________

n/m - Not applicable or not meaningful.

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

Six Months Ended June 30, Change

2024 2023 Amount %

Services and fees:

Capital Markets segment $ 110,589 $ 102,890 $ 7,699 7.5 %

Wealth Management segment 100,764 95,785 4,979 5.2 %

Auction and Liquidation segment 7,181 14,329 (7,148) (49.9) %

Financial Consulting segment 71,618 56,222 15,396 27.4 %

Communications segment 158,814 168,368 (9,554) (5.7) %

All Other 56,362 28,292 28,070 99.2 %

Subtotal 505,328 465,886 39,442 8.5 %

Interest income - Loans and securities lending:

Trading (loss) income:

Capital Markets segment (50,879) 39,705 (90,584) n/m

Wealth Management segment 1,891 1,745 146 8.4 %

Subtotal (48,988) 41,450 (90,438) n/m

Fair value adjustments on loans:

Capital Markets segment (187,783) 52,483 (240,266) n/m

Interest income - loans:

Capital Markets segment 40,643 75,138 (34,495) (45.9) %

Interest income - securities lending:

Capital Markets segment 62,607 77,247 (14,640) (19.0) %

Sale of goods:

Auction and Liquidation segment 10,584 1,892 8,692 n/m

Communications segment 2,761 3,507 (746) (21.3) %

Consumer Products segment 102,946 120,765 (17,819) (14.8) %

All Other 3,299 — 3,299 100.0 %

Subtotal 119,590 126,164 (6,574) (5.2) %

Total revenues $ 491,397 $ 838,368 $ (346,971) (41.4) %

1 unchanged sentence

n/m - Not applicable or not meaningful.

Total revenues decreased $89.1 million to $343.0 million during the three months ended March 31, 2024 from $432.1 million during the three months ended March 31, 2023.

The decrease in revenues during the three months ended March 31, 2024 was primarily due to decreases in the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $81.4 million, interest income from loans and securities lending of $17.2 million, and sale of goods of $12.1 million, partially offset by an increase in revenues from services and fees of $21.7 million.

The increase in revenue from services and fees in the three months ended March 31, 2024 consisted of increases in revenue of $12.5 million in All Other, $10.1 million in the Financial Consulting segment, $2.6 million in the Wealth Management segment, and $2.4 million in the Capital Markets segment, partially offset by decreases in revenue of $4.0 million in the Communications segment, and $1.9 million in the Auction and Liquidation segment.

Revenues from services and fees in the Capital Markets segment increased $2.4 million to $60.3 million during the three months ended March 31, 2024 from $57.9 million during the three months ended March 31, 2023.

The increase in revenues was primarily due to increases of $11.0 million of corporate finance, consulting, and investment banking fees, $0.5 million of other income, and $0.4 in asset management fees, partially offset by decreases of $6.5 million in dividends and $3.0 million of commission fees.

Revenues from services and fees in the Wealth Management segment increased $2.6 million to $51.2 million during the three months ended March 31, 2024 from $48.5 million during the three months ended March 31, 2023.

The increase in revenues was primarily due to an increase in revenue of $2.7 million from wealth and asset management fees.

Revenues from services and fees in the Auction and Liquidation segment decreased $1.9 million to $3.6 million during the three months ended March 31, 2024 from $5.4 million during the three months ended March 31, 2023.

Total revenues decreased $347.0 million to $491.4 million during the six months ended June 30, 2024 from $838.4 million during the six months ended June 30, 2023.

The decrease in revenues during the six months ended June 30, 2024 was primarily due to decreases in the fair value adjustments on loans of $240.3 million, fair value of the portfolio of securities and other investments owned of $90.4 million, interest income from loans of $34.5 million, and interest income from securities lending of $14.6 million, and sale of goods of $6.6 million, partially offset by an increase in revenues from services and fees of $39.4 million.

Of the $240.3 million decrease in fair value adjustments on loans, $168.4 million related to the loan to VCM, $13.7 million related to the loan to Freedom VCM, $8.5 million related to the loan to Conn’s, and $6.8 million related to the loan to Badcock Receivables I.

The increase in revenue from services and fees in the six months

ended June 30, 2024 consisted of increases in revenue of $28.1 million in All Other, $15.4 million in the Financial Consulting segment, $7.7 million in the Capital Markets segment, and $5.0 million in the Wealth Management segment, partially offset by decreases in revenue of $9.6 million in the Communications segment and $7.1 million in the Auction and Liquidation segment.

Revenues from services and fees in the Capital Markets segment increased $7.7 million to $110.6 million during the six months ended June 30, 2024 from $102.9 million during the six months ended June 30, 2023.

The increase in revenues was primarily due to increases of $20.4 million of corporate finance, consulting, and investment banking fees and $0.5 million in asset management fees, partially offset by decreases of $6.1 million in dividends, $3.9 million of commission fees, $1.8 million in other income, and $1.4 million in interest income.

Revenues from services and fees in the Wealth Management segment increased $5.0 million to $100.8 million during the six months ended June 30, 2024 from $95.8 million during the six months ended June 30, 2023.

The increase in revenues was primarily due to increases in revenue of $4.5 million from wealth and asset management fees and $0.5 million in other income.

Revenues from services and fees in the Auction and Liquidation segment decreased $7.1 million to $7.2 million during the six months ended June 30, 2024 from $14.3 million during the six months ended June 30, 2023.

The decrease in revenues was primarily due to a decrease of $8.1 million in commission fees, partially offset by an increase of $1.0 million in service contract revenues.

The decrease in commission fees was related to a decrease in the size of fee engagements.

Revenues from services and fees in the Financial Consulting segment increased $10.1 million to $35.1 million during the three months ended March 31, 2024 from $25.0 million during the three months ended March 31, 2023.

The increase in revenues was primarily due to an increase of $8.5 million within our Advisory Services division primarily consisting of $2.9 million due to a full quarter of revenues from acquisitions in the prior year and $5.6 million in advisory services.

The remaining increase in revenues was due to an increase of $1.6 million in Appraisal due to an increase in the number of appraisals performed.

Revenues from services and fees in the Communications segment decreased $4.0 million to $81.1 million during the three months ended March 31, 2024 from $85.1 million during the three months ended March 31, 2023.

Revenues from services and fees in the Financial Consulting segment increased $15.4 million to $71.6 million during the six months ended June 30, 2024 from $56.2 million during the six months ended June 30, 2023.

The increase in revenues was primarily due to an increase of $13.4 million within our Advisory Services division combined with an increase of $2.0 million in Appraisal due to an increase in the number of appraisals performed.

Revenues from services and fees in the Communications segment decreased $9.6 million to $158.8 million during the six months ended June 30, 2024 from $168.4 million during the six months ended June 30, 2023.

The decrease in revenues was primarily due to decreases in subscription revenue of $9.1 million and $0.5 million in advertising, licensing and other revenue.

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

Revenues from services and fees in All Other increased $12.5 million to $26.1 million during the three months ended March 31, 2024 from $13.6 million during the three months ended March 31, 2023.

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

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

Revenues from services and fees in All Other increased by approximately $14.0 million related to merchandise rental fees from bebe, $0.3 million related to the regional environmental services business, and $0.3 million related to licensing of brand trademarks, partially offset by a decrease in revenues of $2.1 million due to the sale of the landscaping business in the fourth quarter of 2023.

Trading income (loss) and fair value adjustments on loans decreased approximately $81.4 million to a loss of $29.9 million during the three months ended March 31, 2024 compared to income of $51.6 million during the three months ended March 31, 2023.

The loss of $29.9 million during the three months ended March 31, 2024 was primarily due to realized and unrealized losses on our loans receivable, at fair value of $12.2 million, partially offset by realized and unrealized losses on investments made in our proprietary trading accounts of $17.7 million.

The income of $51.6 million during the three months ended March 31, 2023 was primarily due to unrealized gains on our loans receivable, at fair value of $43.3 million and realized and unrealized gains on investments made in our proprietary trading accounts of $8.3 million.

Interest income – loans and securities lending decreased $17.2 million to $59.9 million during the three months ended March 31, 2024 from $77.2 million during the three months ended March 31, 2023.

Interest income from securities lending was $37.8 million and $37.2 million during the three months ended March 31, 2024 and 2023, respectively.

Interest income from loans was $22.1 million and $40.0 million during the three months ended March 31, 2024 and 2023, respectively, with the decrease due to a reduction in loan receivable balances from $772.1 million as of March 31, 2023 to $452.5 million as of March 31, 2024.

Revenues from the sale of goods decreased $12.1 million to $55.7 million during the three months ended March 31, 2024 from $67.8 million during the three months ended March 31, 2023.The decrease in revenues from sale of goods was attributable to a decrease of $14.2 million from the Consumer Products segment due to a decrease in computer and laptop sales worldwide and a decrease of $0.6 million from the Communications segment, partially offset by an increase of $2.0 million from the Auction and Liquidation segment due to larger international asset deals and an increase of $0.6 million in All Other due to sale of goods from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023.

Cost of goods sold for the three months ended March 31, 2024 decreased approximately $8.0 million to $39.6 million from $47.6 million during the three months ended March 31, 2023.

The decrease in cost of goods sold was primarily attributable to decreases of $8.5 million in the Consumer Products segment and $0.8 million in the Communications segment, partially offset by increases of $0.7 million from the Auction and Liquidation segment and $0.6 million from All Other.

Revenues from services and fees in All Other increased $28.1 million to $56.4 million during the six months ended June 30, 2024 from $28.3 million during the six months ended June 30, 2023.

These revenues include the licensing of brand trademarks, merchandise rental fees and sales from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, commission fees from Nogin which we acquired in the second quarter of 2024, and the operations of a regional environmental services business and a landscaping business that we acquired in 2022 and sold in the third quarter of 2023.

Revenues from services and fees in All Other increased by approximately $27.1 million related to merchandise rental fees from bebe, $3.0 million related to the regional environmental services business, $2.7 million related to commission fees from Nogin, and $0.2 million related to licensing of brand trademarks, partially offset by a decrease in revenues of $4.9 million due to the sale of the landscaping business in the fourth quarter of 2023.

Trading (loss) income decreased approximately $90.4 million to a loss of $49.0 million during the six months ended June 30, 2024 compared to income of $41.5 million during the six months ended June 30, 2023.

The loss of $49.0 million during the six months ended June 30, 2024 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts.

The fair value adjustment of $187.8 million on our loans receivable during the six months ended June 30, 2024 was primarily due to $168.4 million related to VCM, $13.7 million related to the loan to Freedom VCM, $8.5 million related to Conn’s, and $6.8 million related to Badcock Receivables I.

Interest income – loans decreased $34.5 million to $40.6 million during the six months ended June 30, 2024 from $75.1 million during the six months ended June 30, 2023.

The decrease was due to a reduction in loan receivable balances from $683.8 million as of June 30, 2023 to $229.2 million as of June 30, 2024.

Interest income – securities lending decreased $14.6 million to $62.6 million during the six months ended June 30, 2024 from $77.2 million during the six months ended June 30, 2023.

The decrease was due to a decrease in the securities borrowed balance from $2,938.5 million as of June 30, 2023 to $742.9 million as of June 30, 2024.

Revenues from the sale of goods decreased $6.6 million to $119.6 million during the six months ended June 30, 2024 from $126.2 million during the six months ended June 30, 2023.

The decrease in revenues from sale of goods was attributable to a decrease of $17.8 million from the Consumer Products segment due to a decrease in computer and peripheral sales worldwide and a decrease of $0.7 million from the Communications segment, partially offset by an increase of $8.7 million from the Auction and Liquidation segment due to larger international asset deals and an increase of $3.3 million from All Other consisting of $2.3 million in sale of goods from Nogin which we acquired in the second quarter of 2024 and $1.0 million in sale of goods from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023.

Cost of goods sold for the six months ended June 30, 2024 decreased approximately $1.6 million to $86.3 million from $87.9 million during the six months ended June 30, 2023.

The decrease in cost of goods sold was primarily attributable to decreases of $10.2 million in the Consumer Products segment and $1.2 million in the Communications segment, partially offset by increases of $7.1 million from the Auction and Liquidation segment and $2.7 million from All Other consisting of $1.6 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023 and $1.1 million from Nogin which we acquired in the second quarter of 2024.

Operating Expenses

Direct Cost of Services

Direct cost of services increased approximately $6.7 million to $61.1 million during the three months ended March 31, 2024 from $54.4 million during the three months ended March 31, 2023.

The increase in direct cost of services was primarily attributable to increases of $4.1 million from the Communications segment and $4.3 million from All Other due to bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, partially offset by a decrease of $1.7 million from the Auction and Liquidation segment due to the size of the fee deals.

Direct cost of services increased approximately $12.3 million to $122.7 million during the six months ended June 30, 2024 from $110.3 million during the six months ended June 30, 2023.

The increase in direct cost of services was primarily attributable to increases of $4.3 million from the Communications segment and $10.3 million from All Other consisting of to $8.7 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023 and $1.6 million from Nogin which we acquired in the second quarter of 2024, partially offset by a decrease of $2.3 million from the Auction and Liquidation segment due to the number and size of fee deals in prior year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the three months ended March 31, 2024 and 2023 were comprised of the following:

Three Months Ended March 31, 2024 Three Months Ended

March 31, 2023 Change

Selling, general and administrative expenses during the six months ended June 30, 2024 and 2023 were comprised of the following:

Six Months Ended

June 30, 2024 Six Months Ended

June 30, 2023 Change

Amount % Amount % Amount %

7 unchanged sentences

Total selling, general & administrative expenses $ 418,886 100.0 % $ 401,512 100.0 % $ 17,374 4.3 %

____________________________________

n/m - Not applicable or not meaningful.

Total selling, general and administrative expenses decreased by $3.1 million to $209.5 million during the three months ended March 31, 2024 from $212.6 million during the three months ended March 31, 2023.

The decrease was primarily due to decreases of $13.0 million in the Capital Markets segment, $5.3 million in the Communications segment, $4.4 million in the Consumer Products segment, and $0.8 million in the Auction and Liquidation segment, partially offset by increases of $10.9 million in Corporate and All Other, $7.7 million in the Financial Consulting segment, and $1.7 million in the Wealth Management segment.

Total selling, general and administrative expenses increased by $17.4 million to $418.9 million during the six months ended June 30, 2024 from $401.5 million during the six months ended June 30, 2023.

The increase was primarily due to increases of $25.4 million in Corporate and All Other, $13.5 million in the Financial Consulting segment, and $1.9 million in the Wealth Management segment, partially offset by decreases of $9.3 million in the Capital Markets segment, $6.4 million in the Consumer Products segment, $6.5 million in the Communications segment, and $1.2 million in the Auction and Liquidation segment.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment decreased by $13.0 million to $54.0 million during the three months ended March 31, 2024 from $67.0 million during the three months ended March 31, 2023.

The decrease was primarily due to decreases of $8.4 million related to an advisory agreement which ended in August of 2023, $3.7 million in payroll and related expenses of which $2.4 million related to a decrease in share based compensation and $1.3 million related to a decrease in payroll expenses, $1.5 million in other expenses, and $1.5 million in clearing charges, partially offset by an increase of $2.1 million in change in fair value of contingent consideration.

Selling, general and administrative expenses in the Capital Markets segment decreased by $9.3 million to $104.5 million during the six months ended June 30, 2024 from $113.8 million during the six months ended June 30, 2023.

The decrease was primarily due to decreases of (a)$10.0 million related to an advisory agreement which ended in August of

2023, (b) $1.5 million in clearing charges, (c) $0.7 million in depreciation and amortization expenses, and (d) $0.2 million in other expenses, partially offset by an increase of $3.2 million in change in fair value of contingent consideration.

The advisory agreement was terminated in August 2023 in connection with the FRG take private transaction as more fully described in Note 2(h) and there was no expense during the six months ended June 30, 2024 as compared to the prior year when the expense totaled $10.0 million.

For any given reporting period, the advisory agreement would result in an expense being reported in selling, general and administrative expenses when realized and unrealized gains on certain invested balances in the Company’s broker-dealer subsidiary exceeded a minimum return on the invested balances during such period;

in addition, a decrease in the invested balance in value during such reporting period would result in the reporting of a credit to selling, general and administrative expense.

During the six months ended June 30, 2023, the Company recorded an advisory fee of $10.0 million in accordance with the advisory agreement due to the realized and unrealized gains earned.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment increased by $1.7 million to $50.1 million during the three months ended March 31, 2024 from $48.4 million during the three months ended March 31, 2023.

The increase was primarily due to increases of $1.5 million in payroll and related expenses, $1.2 million in legal settlements, and $0.7 million in change in fair value of contingent consideration, partially offset by decreases of $1.7 million in other expenses.

Selling, general and administrative expenses in the Wealth Management segment increased by $1.9 million to $99.3 million during the six months ended June 30, 2024 from $97.5 million during the six months ended June 30, 2023.

The increase was primarily due to an increase of $3.6 million in payroll and related expenses, partially offset by a decrease of $1.7 million in other expenses.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment decreased $0.8 million to $1.5 million during the three months ended March 31, 2024 from $2.3 million during the three months ended March 31, 2023.

The decrease was primarily due to a decrease of $0.8 million in foreign currency fluctuation.

Selling, general and administrative expenses in the Auction and Liquidation segment decreased $1.2 million to $3.4 million during the six months ended June 30, 2024 from $4.6 million during the six months ended June 30, 2023.

The decrease was primarily due to decreases of $1.0 million in foreign currency fluctuation and $0.2 million in other expenses.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment increased by $7.7 million to $28.9 million during the three months ended March 31, 2024 from $21.2 million during the three months ended March 31, 2023.

The increase was primarily due to increases of $5.2 million in payroll and related expenses primarily related to the full quarter results of acquisitions from the prior year, $1.6 million in change in fair value of contingent consideration, and $0.9 million in other expenses.

Selling, general and administrative expenses in the Financial Consulting segment increased by $13.5 million to $57.6 million during the six months ended June 30, 2024 from $44.1 million during the six months ended June 30, 2023.

The increase was primarily due to increases of $9.6 million in payroll and related expenses related to a business acquired in the third quarter of 2023, an increase in headcount, and an increase in variable compensation, $1.6 million in change in fair value of contingent consideration, $1.4 million in other expenses, and $0.8 million in travel and entertainment expenses.

Communications

Selling, general and administrative expenses in the Communications segment decreased $5.3 million to $23.9 million for the three months ended March 31, 2024 from $29.2 million for the three months ended March 31, 2023.

The decrease was primarily due to decreases of $2.7 million in payroll and related expenses, $1.9 million in other expenses, and $0.7 million in depreciation and amortization expenses.

Selling, general and administrative expenses in the Communications segment decreased $6.5 million to $49.4 million for the six months ended June 30, 2024 from $55.8 million for the six months ended June 30, 2023.

The decrease was primarily due to decreases of $5.3 million in payroll and related expenses due to lower headcount and $1.2 million in depreciation and amortization expenses.

Consumer Products

Selling, general and administrative expenses in the Consumer Products segment decreased $4.4 million to $17.5 million for the three months ended March 31, 2024 from $21.9 million during the three months ended March 31, 2023.

The decrease was primarily due to decreases of $2.4 million in professional fees, $1.5 million in other expenses, and $0.5 million in marketing costs.

Selling, general and administrative expenses in the Consumer Products segment decreased $6.4 million to $34.6 million for the six months ended June 30, 2024 from $41.0 million during the six months ended June 30, 2023.

The decrease was primarily due to decreases of $2.2 million in professional fees, $1.4 million in payroll and related expenses due to reduced headcount, $1.3 million in depreciation and amortization expense due to items being fully amortized, $1.3 million in other expenses due to efforts to reduce costs, and $0.8 million in marketing costs, partially offset by an increase of $0.4 million in share based compensation due to a reversal of performance based shares compensation expense in the prior year.

Corporate and All Other

Selling, general and administrative expenses for Corporate and All Other increased approximately $10.9 million to $33.6 million during the three months ended March 31, 2024 from $22.7 million for the three months ended March 31, 2023.

The increase was primarily due to increases of $10.0 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $4.5 million in legal expenses, and $2.6 million in accounting expenses, partially offset by decreases of $3.7 million in payroll and related expenses, $2.1 million in foreign currency fluctuation, and $0.4 million in depreciation and amortization expense.

Selling, general and administrative expenses for Corporate and All Other increased approximately $25.4 million to $70.1 million during the six months ended June 30, 2024 from $44.7 million for the six months ended June 30, 2023.

The increase was primarily due to increases of $19.3 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $6.0 million from Nogin which was acquired in the second quarter of 2024, $5.9 million in legal expenses, $4.3 million in accounting expenses, and $2.3 million in transaction expenses related to the

Nogin acquisition, partially offset by decreases of $9.5 million in payroll and related expenses which primarily related to decreases in share based compensation and other variable compensation and $2.8 million in foreign currency fluctuation.

Impairment of goodwill and tradenames.

We recognized impairment charges of $27.7 million during the six months ended June 30, 2024.

We performed an interim impairment test as of June 30, 2024, as further discussed in Note 8 of the condensed consolidated financial statements.

Based on the results of the impairment test, we recorded a non-cash impairment charge of $26.7 million related to goodwill and $1.0 million related to tradenames in the Consumer Products segment.

We recognized impairment charges of $1.7 million during the six months ended June 30, 2023 related to tradenames in the Capital Markets segment.

Other Income (Expense).

Other income included interest income of $0.7 million and $2.6 million during the three months ended March 31, 2024 and 2023, respectively.

Dividend income was $11.8 million during the three months ended March 31, 2024 compared to $13.2 million during the three months ended March 31, 2023.

Realized and unrealized gains (losses) on investments was a loss of $29.5 million during the three months ended March 31, 2024 compared to a loss of $28.4 million during the three months ended March 31, 2023.

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

Change in fair value of financial instruments and other was a gain of $0.3 million during the three months ended March 31, 2024 and a loss of $0.2 million during the three months ended March 31, 2023.

Interest expense was $44.9 million during the three months ended March 31, 2024 compared to $47.6 million during the three months ended March 31, 2023.

The decrease in interest expense was due to lower debt balances during the three months ended March 31, 2024.

The decreases in interest expense primarily consisted of $6.4 million from the Pathlight term loan, $1.8 million from the issuance of senior notes, $1.5 million from the Nomura revolving credit facility, $0.1 million and $0.4 million from the Targus term loan and revolving loan, respectively, and $0.4 million from the BRPAC term loan, partially offset by increases in interest expense of $7.7 million from the Nomura term loan and $0.7 million from the bebe term loan.

Other income included interest income of $1.5 million and $3.3 million during the six months ended June 30, 2024 and 2023, respectively.

Dividend income was $21.0 million during the six months ended June 30, 2024 compared to $22.8 million during the six months ended June 30, 2023.

Realized and unrealized losses on investments was a loss of $185.2 million during the six months ended June 30, 2024 compared to a loss of $9.6 million during the six months ended June 30, 2023.

The change was primarily due to a decrease in the valuation of our investment in Freedom VCM of $223.4 million.

Change in fair value of financial instruments and other was a gain of $0.2 million during the six months ended June 30, 2024 and a gain of $0.2 million during the six months ended June 30, 2023.

Interest expense was $87.6 million during the six months ended June 30, 2024 compared to $94.9 million during the six months ended June 30, 2023.

The decrease in interest expense was due to lower debt balances during the six months ended June 30, 2024.

The decreases in interest expense primarily consisted of $12.3 million from the Pathlight term loan, $5.6 million from the issuance of senior notes, $2.5 million from the Nomura revolving credit facility, $0.2 million and $1.1 million from the Targus term loan and revolver, respectively, and $0.8 million from the BRPAC term loan, partially offset by increases in interest expense of $14.7 million from the Nomura term loan, $1.4 million from the bebe term loan, and $0.3 million from the Nogin secured convertible promissory note.

(Loss) Income Before Income Taxes .

Loss before income taxes was $65.0 million during the three months ended March 31, 2024 compared to income before income taxes of $24.5 million during the three months ended March 31, 2023.

The change was due to a decrease in revenue of $89.1 million, a decrease of $1.9 million in interest income, a decrease of $1.4 million in dividend income, and a change in realized and unrealized losses on investments of $1.1 million, partially

offset by a decrease in interest expense of $2.7 million, a decrease in operating expenses of $0.7 million, and an increase in change in fair value of financial instruments and other of $0.5 million.

Benefit from (Provision for) Income Taxes.

Benefit from income taxes was $17.1 million during the three months ended March 31, 2024 compared to a provision for income taxes of $7.9 million during the three months ended March 31, 2023.

The effective income tax rate was 26.3% for the three months ended March 31, 2024 as compared to 32.4% for the three months ended March 31, 2023.

Loss before income taxes was $473.8 million during the six months ended June 30, 2024 compared to income before income taxes of $89.8 million during the six months ended June 30, 2023.

The change was due to a decrease in revenue of $347.0 million, a change in realized and unrealized losses on investments of $175.6 million, an increase in operating expenses of $44.6 million, a decrease of $1.8 million in interest income, and a decrease of $1.7 million in dividend income, partially offset by a decrease in interest expense of $7.3 million.

Provision for Income Taxes.

Provision for income taxes was $7.9 million during the six months ended June 30, 2024 compared to a provision for income taxes of $29.4 million during the six months ended June 30, 2023.

The effective income tax rate was 1.7% for the six months ended June 30, 2024 as compared to 32.8% for the six months ended June 30, 2023.

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

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

The net income attributable to noncontrolling interests was $1.2 million during the three months ended March 31, 2024 compared to net loss of $0.6 million during the three months ended March 31, 2023.

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

The net income attributable to noncontrolling interests was $1.0 million during the six months ended June 30, 2024 compared to net loss of $3.2 million during the six months ended June 30, 2023.

Net (Loss) Income Attributable to the Company .

Net loss attributable to the Company was $49.2 million during the three months ended March 31, 2024 compared to net income attributable to the Company of $17.2 million for the three months ended March 31, 2023.

The decrease was due to a change in operating (loss) income of $88.4 million, a decrease of $1.9 million in interest income, a change in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests of $1.8 million, a decrease of $1.4 million in dividend income, and a decrease in realized and unrealized gains (losses) on investments of $1.1 million, partially offset by a change from provision for to benefit from income taxes of $25.0 million, a decrease in interest expense of $2.7 million, and an increase in change in fair value of financial instruments and other of $0.5 million.

Net loss attributable to the Company was $482.8 million during the six months ended June 30, 2024 compared to net income attributable to the Company of $63.5 million for the six months ended June 30, 2023.

The decrease was due to a change in operating (loss) income of $391.6 million, a decrease in realized and unrealized losses on investments of $175.6 million, a change in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests of $4.2 million, a decrease of $1.8 million in interest income, and a decrease of $1.7 million in dividend income, partially offset by a change in provision for income taxes of $21.5 million and a decrease in interest expense of $7.3 million.

Preferred Stock Dividends .

Preferred stock dividends were $2.0 million for the three months ended March 31, 2024 and 2023.

Dividends on the Series A preferred paid during the three months ended March 31, 2024 and 2023 were $0.4296875 per depository share.

Dividends on the Series B preferred paid during the three months ended March 31, 2024 and 2023 were $0.4609375 per depository share.

Preferred stock dividends were $4.0 million for the six months ended June 30, 2024 and 2023.

Dividends on the Series A preferred paid during the six months ended June 30, 2024 and 2023 were $0.4296875 per depository share.

Dividends on the Series B preferred paid during the six months ended June 30, 2024 and 2023 were $0.4609375 per depository share.

Net (Loss) Income Available to Common Shareholders .

Net loss available to common shareholders was $51.2 million during the three months ended March 31, 2024 compared to net income available to common shareholders $15.1 million during the three months ended March 31, 2023.

The decrease was due to a change in operating (loss) income of $88.4 million, a decrease of $1.9 million in interest income, a change in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests of $1.8 million, a decrease of $1.4 million in dividend income, and a decrease in realized and unrealized gains (losses) on investments of $1.1 million, partially offset by a decrease in interest expense of $2.7 million, a change from provision for to benefit from income taxes of $25.0 million, and an increase in change in fair value of financial instruments and other of $0.5 million.

Net loss available to common shareholders was $486.8 million during the six months ended June 30, 2024 compared to net income available to common shareholders $59.5 million during the six months ended June 30, 2023.

The decrease was due to a change in operating (loss) income of $391.6

million, a decrease in realized and unrealized losses on investments of $175.6 million, a change in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests of $4.2 million, a decrease of $1.8 million in interest income, and a decrease of $1.7 million in dividend income, partially offset by a change in provision for income taxes of $21.5 million and a decrease in interest expense of $7.3 million.

Liquidity and Capital Resources

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

During the three months ended March 31, 2024 and 2023, we generated net loss of $48.0 million and net income of $16.6 million, respectively.

During the six months ended June 30, 2024 and 2023, we generated net loss of $481.7 million and net income of $60.3 million, respectively.

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

As of March 31, 2024, we had $190.7 million of unrestricted cash and cash equivalents, $1.9 million of restricted cash, $949.9 million of securities and other investments, at fair value, $452.5 million of loans receivable, at fair value, and $2,186.4 million of borrowings outstanding.

The borrowings outstanding of $2,186.4 million as of March 31, 2024 included $1,553.6 million from the issuance of series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $596.3 million in term loans borrowed pursuant to the Tiger US Holdings Inc.

(“Targus”), Lingo Management, LLC (“Lingo Management”), BRPI Acquisition Co LLC (“BRPAC”), Nomura Corporate Fundings Americas, LLC (“Nomura”), and bebe stores, inc.

(“bebe”) credit agreements discussed below, $22.2 million of revolving credit facility under the Targus credit facility discussed below, and $14.3 million of notes payable.

to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying financial statements.

As of June 30, 2024, we had $236.9 million of unrestricted cash and cash equivalents, $1.7 million of restricted cash, $664.1 million of securities and other investments, at fair value, $229.2 million of loans receivable, at fair value, and $2,159.8 million of borrowings outstanding.

The borrowings outstanding of $2,159.8 million as of June 30, 2024 included $1,528.6 million from the issuance of series of senior notes that are due at various dates ranging from February 28, 2025 to August 31, 2028 with interest rates ranging from 5.00% to 6.50%, $581.4 million in term loans borrowed pursuant to the Tiger US Holdings Inc.

(“Targus”), Lingo Management, LLC (“Lingo Management”), BRPI Acquisition Co LLC (“BRPAC”), Nomura Corporate Fundings Americas, LLC (“Nomura”), and bebe credit agreements discussed below, $19.8 million of revolving credit facility under the Targus credit facility discussed below, and $30.0 million of notes payable.

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

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

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

On May 15, 2024, we declared a regular dividend of $0.50 per share that will be paid on or about June 11, 2024 to stockholders of record as of May 27, 2024.

During the six months ended June 30, 2024, we paid cash dividends on our common stock of $33.6 million.

During the year ended December 31, 2023, we paid cash dividends on our common stock of $141.1 million.

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

In August 2024, we announced the suspension of our common stock dividend as we prioritize reducing our debt.

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

A summary of common stock dividend activity for the three months ended March 31, 2024 and the year ended December 31, 2023 was as follows:

A summary of common stock dividend activity for the six months ended June 30, 2024 and the year ended December 31, 2023 was as follows:

Date Declared Date Paid Stockholder Record Date Amount

May 15, 2024 June 11, 2024 May 27, 2024 $ 0.50

February 29, 2024 March 22, 2024 March 11, 2024 0.50

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Dividends are payable quarterly in arrears, on or about the last day of January, April, July, and October.

As of March 31, 2024, dividends in arrears in respect of the Depositary Shares were $0.8 million.

On April 9, 2024, the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on April 30, 2024 to holders of record as of the close of business on April 22, 2024.

As of June 30, 2024, dividends in arrears in respect of

the Depositary Shares were $0.8 million.

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

On October 16, 2024 the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on October 31, 2024 to holders of record as of the close of business on October 28, 2024.

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends are payable quarterly in arrears, on or about the last day of January, April, July, and October.

As of March 31, 2024, dividends in arrears in respect of the Depositary Shares were $0.5 million.

On April 9, 2024, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on April 30, 2024 to holders of record as of the close of business on April 22, 2024.

A summary of preferred stock dividend activity for the three months ended March 31, 2024 and the year ended December 31, 2023 was as follows:

As of June 30, 2024, dividends in arrears in respect of the Depositary Shares were $0.5 million.

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

On October 16, 2024 the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on October 31, 2024 to holders of record as of the close of business on October 28, 2024.

A summary of preferred stock dividend activity for the six months ended June 30, 2024 and the year ended December 31, 2023 was as follows:

Stockholder Preferred Dividend per Depositary Share

Date Declared Date Paid Record Date Series A Series B

April 9, 2024 April 30, 2024 April 22, 2024 $ 0.4296875 $ 0.4609375

January 9, 2024 January 31, 2024 January 22, 2024 0.4296875 0.4609375

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Cash Flow Summary

Three Months Ended

Six Months Ended

(Dollars in thousands)

Net cash (used in) provided by:

Net cash provided by (used in):

Operating activities $ 246,839 $ 77,105

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Effect of foreign currency on cash (5,233) 2,347

Net decrease in cash, cash equivalents and restricted cash $ (41,260) $ (58,604)

Cash provided by operating activities was $135.4 million during the three months ended March 31, 2024 compared to cash provided by operating activities of $52.6 million during the three months ended March 31, 2023.

Cash provided by operating activities for the three months ended March 31, 2024 consisted of the impact of net loss of $48.0 million, noncash items of $19.8 million, and changes in operating assets and liabilities of $163.5 million.

The positive cash flow impact from noncash items of $19.8 million included fair value adjustments of $13.7 million, depreciation and amortization of $11.1 million, share-based compensation of $8.7 million, depreciation of rental merchandise of $4.2 million, provision for credit losses of $0.4 million, income allocated for mandatorily redeemable noncontrolling interests of $0.3 million, effect of foreign currency of $0.3 million, partially offset by deferred income taxes of $16.0 million, non-cash interest and other of $2.7 million, and gain on sale of business and other of $0.2 million.

Cash provided by operating activities for the three months ended March 31, 2023 consisted of the impact of net income of $16.6 million, noncash items of $10.7 million, and changes in operating assets and liabilities of $46.7 million.

The negative cash flow impact from noncash items of $10.7 million included fair value adjustments of $46.1 million and noncash interest and other of $1.1 million, partially offset by share-based compensation of $13.7 million, depreciation and amortization of $13.1 million, deferred income taxes of $5.8 million, provision for credit losses of $3.2 million, effect of foreign currency of $0.3 million, income allocated for mandatorily redeemable noncontrolling interests of $0.3 million, and dividends from equity investments of $0.1 million.

Cash provided by investing activities was $18.3 million during the three months ended March 31, 2024 compared to cash used in investing activities of $57.2 million for the three months ended March 31, 2023.

During the three months ended March 31, 2024, cash provided by investing activities consisted of cash provided by loans receivable repayment of $39.5 million and sale of loans receivable of $22.8 million, partially offset by cash used in purchases of loans receivable of $42.9 million, purchases of property and equipment of $0.9 million, and sale of business, net of cash sold and other of $0.2 million.

During the three months ended March 31, 2023, cash used in investing activities consisted of cash used for purchases of loans receivable of $312.0 million, acquisition of businesses and minority interest of $12.3 million, purchases of property and equipment of $1.7 million, and purchases of equity and other investments of $0.7 million, partially offset by cash received from loans receivable repayment of $260.6 million, sale of loan receivable of $7.5 million, and proceeds from sale of property, equipment, intangible assets, and other of $1.4 million.

Cash used in financing activities was $190.9 million during the three months ended March 31, 2024 compared to cash used in financing activities of $55.3 million during the three months ended March 31, 2023.

During the three months ended March 31, 2024, cash used in financing activities primarily consisted of $115.5 million used to redeem senior notes, $39.3 million used in payment of revolving lines of credit, $30.0 million used in the repayment of term loan, $16.0 million used to pay dividends on our common shares, $5.4 million used to repay our notes payable and other, $2.0 million used to pay dividends on our preferred shares, $1.5 million in distributions to noncontrolling interests, $1.2 million used in payment of employment taxes on vesting of restricted stock, $0.2 million used to pay debt issuance and offering costs, and $0.1 million used to pay contingent consideration, partially offset by cash provided by $17.7 million in proceeds from revolving line of credit and $2.5 million in contributions from noncontrolling interests.

During the three months ended March 31, 2023, cash used in financing activities primarily consisted of $72.9 million used in the repayment of term loan, $53.8 million used to repurchase our common shares, $46.9 million used to pay dividends on our common shares, $17.2 million used in repayment of revolving line of credit, $11.5 million used to repay our notes payable, $4.8 million used in payment of employment taxes on vesting of restricted stock, $2.0 million used in the payment of debt issuance and offering costs, $2.0 million used to pay dividends on our preferred shares, $1.3 million used in the payment of contingent consideration, and $1.0 million in distributions to noncontrolling interests, partially offset by cash provided by $128.2 million in proceeds

from borrowings under a term loan, $29.0 million in proceeds from revolving line of credit, $0.5 million in proceeds from issuance of preferred stock, and $0.4 million in contributions from noncontrolling interests.

Net increase (decrease) in cash, cash equivalents and restricted cash

$ 4,784 $ (161,024)

Cash provided by operating activities was $246.8 million during the six months ended June 30, 2024 compared to cash provided by operating activities of $77.1 million during the six months ended June 30, 2023.

Cash provided by operating activities for the six months ended June 30, 2024 consisted of the impact of net loss of $481.7 million, noncash items of $263.4 million, and changes in operating assets and liabilities of $465.2 million.

The positive cash flow impact from noncash items of $263.4 million included fair value adjustments of $189.5 million, impairment of goodwill and tradenames of $27.7 million, depreciation and amortization of $22.9 million, share-based compensation of $14.9 million, depreciation of rental merchandise of $8.2 million, deferred income taxes of $1.4 million, provision for credit losses of $1.2 million, income allocated for mandatorily redeemable noncontrolling interests of $0.8 million, effect of foreign currency of $0.3 million, partially offset by non-cash interest and other of $3.3 million, and gain on sale of business and other of $0.2 million.

Cash provided by operating activities for the six months ended June 30, 2023 consisted of the impact of net income of $60.3 million, noncash items of $12.5 million, and changes in operating assets and liabilities of $4.2 million.

The positive cash flow impact from noncash items of $12.5 million included depreciation and amortization of $25.6 million, share-based compensation of $24.2 million, deferred income taxes of $18.5 million, provision for credit losses of $3.8 million, impairment of intangibles, loss on disposal of fixed assets and other of $1.7 million, income allocated for mandatorily redeemable noncontrolling interests of $0.8 million, and dividends from equity investments of $0.1 million, partially offset by fair value adjustments of $56.6 million and noncash interest and other of $5.1 million, effect of foreign currency of $0.2 million, and income from equity investments of $0.1 million.

Cash provided by investing activities was $6.7 million during the six months ended June 30, 2024 compared to cash provided by investing activities of $216.3 million for the six months ended June 30, 2023.

During the six months ended June 30, 2024, cash provided by investing activities consisted of cash provided by loans receivable repayment of $72.4 million, and sale of loans receivable of $22.8 million, partially offset by cash used in purchases of loans receivable of $63.2 million, acquisition of businesses and minority interest, net of cash acquired of $19.1 million, purchases of property and equipment of $5.4 million, purchases of equity and other investments of $0.5 million, and sale of business, net of cash sold and other of $0.1 million.

During the six months ended June 30, 2023, cash provided by investing activities consisted of cash received from loans receivable repayment of $413.4 million, funds received from trust account of subsidiary of $175.8 million, sale of loan receivable of $7.5 million, and sale of business, net of cash sold and other of $1.5 million, partially offset by cash used for purchases of loans receivable of $360.0 million, acquisition of businesses and minority interest of $12.3 million, purchases of equity and other investments of $4.9 million, and purchases of property and equipment of $4.8 million.

Cash used in financing activities was $243.5 million during the six months ended June 30, 2024 compared to cash used in financing activities of $456.8 million during the six months ended June 30, 2023.

During the six months ended June 30, 2024, cash used in financing activities primarily consisted of $140.5 million used to redeem senior notes, $64.3 million used in payment of revolving lines of credit, $45.6 million used in the repayment of term loan, $33.6 million used to pay dividends on our common shares, $5.7 million used to repay our notes payable and other, $4.0 million used to pay dividends on our preferred shares, $3.2 million in distributions to noncontrolling interests, $3.1 million used in payment of employment taxes on vesting of restricted stock, $1.4 million used to pay contingent consideration, and $1.0 million used to pay debt issuance and offering costs, partially offset by cash provided by $40.3 million in proceeds from revolving line of credit, $15.0 million in proceeds from notes payable, $3.0 million in contributions from noncontrolling interests, and $0.7 million in proceeds from exercise of warrants.

During the six months ended June 30, 2023, cash used in financing activities primarily consisted of $175.8 million used in redemption of subsidiary temporary equity and distributions, $172.8 million used in the repayment of term loan, $80.3 million used to pay dividends on our common shares, $78.8 million used in repayment of revolving line of credit, $58.9 million used to redeem senior notes, $53.8 million used to repurchase our common shares, $11.7 million used to repay our notes payable, $8.3 million used in payment of employment taxes on vesting of restricted stock, $4.0 million used to pay dividends on our preferred shares, $3.2 million used in the payment of debt issuance and offering costs, $2.5 million in distributions to noncontrolling interests, and $1.3 million used in the payment of contingent consideration, partially offset by cash provided by $128.2 million in proceeds from term loans, $62.0 million in proceeds from revolving line of credit, $4.0 million in contributions from noncontrolling interests, and $0.5 million in proceeds from issuance of preferred stock.

Credit Agreements

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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 Targus Credit Agreement is secured by substantially all Targus assets as collateral defined in the Targus Credit Agreement which totals approximately $216.9 million .

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

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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.

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

1 and Amendment No.

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

We are in compliance with all financial covenants in the Targus Credit Agreement as of March 31, 2024.

2 to the Targus Credit Agreement, which, among other things, modified the fixed charge coverage ratio

and the minimum earnings before interest, taxes, depreciation, and amortization requirements which waived the financial covenant breaches for the periods ended September 30, 2023 and December 31, 2023, respectively.

Amendment No.

2 also provided, among other things, with a cure right for us to provide a capital contribution to Targus in the event of a financial covenant breach.

For the period ended September 30, 2023, the Fixed Charge Coverage Ratio “FCCR” covenant was not fulfilled in accordance with the Targus Credit Agreement and for the period ended December 31, 2023, the FCCR and minimum EBITDA covenant was not fulfilled in accordance with the Targus Credit Agreement.

However, the amendments to the Targus Credit Agreement and the capital contributions made to the subsidiary cured the covenant breaches.

On June 27, 2024 we entered into Amendment No.

3 to the Targus Credit Agreement to replace the terminating Canadian benchmark interest rate with the Term CORRA Reference Rate.

For the period ended June 30, 2024, the minimum EBITDA covenant was also breached.

On August 14, 2024, we contributed $1,602 to Targus to cure a minimum EBITDA financial covenant requirement for the period ended June 30, 2024.

For the period ended September 30, 2024, the minimum EBITDA covenant was also breached.

On November 7, 2024, we entered into Amendment No.

4 to the Targus Credit Agreement, which among other things, reduced revolving loan sublimits, modified the FCCR covenant, removed the minimum EBITDA requirement, imposed a minimum undrawn availability covenant, and modified the terms of the Keepwell.

Amendment No.

4 to the Targus Credit Agreement also waived the September 30, 2024 minimum EBITDA covenant breach.

Concurrently with the effectiveness of Amendment No.

4 to the Targus Credit Agreement, the Company repaid the outstanding balance of the term loan in full with $2.1 million of revolver loan advances and $7.5 million of cash from the Company.

After Amendment No.4 to the Targus Credit Agreement that included a waiver, we are in compliance with the Targus Credit Agreement.

The term loan bears interest on the outstanding principal amount equal to the Term Secured Overnight Financing Rate (“SOFR”) rate plus an applicable margin of 5.75%.

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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 $1.4 million.

Quarterly installments from September 30, 2024 to December 31, 2025 are in the amount of $2.1 million per quarter and the remaining principal balance is due on March 31, 2026.

As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $14.4 million (net of unamortized debt issuance costs of $0.3 million) and $17.8 million (net of unamortized debt issuance costs of $0.4 million), respectively, and the outstanding balance on the revolver loan was $22.2 million and $43.8 million, respectively.

Interest expense on these loans during the three months ended March 31, 2024 and 2023 was $1.4 million (including amortization of deferred debt issuance costs of $0.2 million and unused commitment fees of $0.03 million) and $1.8 million (including amortization of deferred debt issuance costs of $0.2 million and unused commitment fees of $0.0 million), 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% to 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.

As of June 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $13.0 million (net of unamortized debt issuance costs of $0.3 million) and $17.8 million (net of unamortized debt issuance costs of $0.4 million), respectively, and the outstanding balance on the revolver loan was $19.8 million and $43.8 million, respectively.

Interest expense on these loans during the three and six months ended June 30, 2024 was $1.1 million (including amortization of deferred debt issuance costs of $0.2 million and unused commitment fees of $0.03 million) and $2.4 million (including amortization of deferred debt issuance costs of $0.4 million and unused commitment fees of $0.1 million), respectively.

Interest expense on these loans during the three and six months ended June 30, 2023 was $2.1 million (including amortization of deferred debt issuance costs of $0.2 million and unused commitment fees of $0.02 million) and $3.8 million (including amortization of deferred debt issuance costs of $0.3 million and unused commitment fees of $0.04 million), respectively.

The interest rate on the term loan was 11.18% and 10.20% and the interest rate on the revolver loan ranged between 9.19% to 11.50% and between 8.45% to 11.25% as of June 30, 2024 and December 31, 2023, respectively.

The weighted average interest rate on the revolver loan was 10.21% and 8.53% as of June 30, 2024 and December 31, 2023, respectively.

Lingo Credit Agreement

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

On November 10, 2022, Lingo entered into

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

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

As of 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.

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

applicable spread adjustment.

As of June 30, 2024 and December 31, 2023, the interest rate on the Lingo Credit Agreement was 8.70%.

The Lingo Credit Agreement is guaranteed by the Company and Lingo's subsidiaries and secured by certain Lingo assets and equity interests as collateral which totals approximately $238.5 million defined in the Lingo Credit Agreement.

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

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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.

We are in compliance with all financial covenants in the Lingo Credit Agreement as of March 31, 2024.

We are in compliance with all financial covenants in the Lingo Credit Agreement as of June 30, 2024.

We received a series of extensions under our credit agreement with Banc of California, N.A.

with the most recent being dated December 18, 2024 to extend the required time to deliver our second quarter unaudited condensed consolidated financial statements to January 21, 2025.

Principal outstanding is due in quarterly installments.

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

As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $60.4 million (net of unamortized debt issuance costs of $0.7 million) and $63.2 million (net of unamortized debt issuance costs of $0.7 million), respectively.

Interest expense on the term loan during the three months ended March 31, 2024 and 2023 was $1.5 million (including amortization of deferred debt issuance costs of $0.1 million) and $1.6 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

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

As of June 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $57.8 million (net of unamortized debt issuance costs of $0.6 million) and $63.2 million (net of unamortized debt issuance costs of $0.7 million), respectively.

Interest expense on the term loan during the three and six months ended June 30, 2024 was $1.4 million (including amortization of deferred debt issuance costs of $0.1 million) and $2.9 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

Interest expense on the term loan during the three and six months ended June 30, 2023 was $1.6 million (including amortization of deferred debt issuance costs of $0.1 million) and $3.2 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

On January 6, 2025, as discussed below BRPAC entered into an amended and restated credit agreement (the “BRPAC Amended Credit Agreement”) with the Banc of California, in the capacity as agent and lender and with other lenders party thereto from time to time.

A portion of the proceeds from the BRPAC Amended Credit Agreement were used to pay all outstanding principal amounts and accrued interest under the Lingo Credit Agreement and the Lingo Credit Agreement was effectively terminated upon repayment on January 6, 2025.

bebe Credit Agreement

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

As a result of the Company obtaining a majority ownership interest in bebe on October 6, 2023, bebe's credit agreement with SLR Credit Solutions (the “bebe Credit Agreement”) for a $25.0 million -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.

As of June 30, 2024 and December 31, 2023, the interest rate on the bebe Credit Agreement was 11.11% and 11.14%, respectively.

The bebe Credit Agreement is collateralized by a first lien on all bebe assets and pledges of capital stock including equity interests which totals approximately $129.8 million.

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

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The agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

We are in compliance with all financial covenants in the bebe Credit Agreement as of March 31, 2024.

We are in compliance with all financial covenants in the bebe Credit Agreement as of June 30, 2024.

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

As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $22.2 million (net of unamortized debt issuance costs of $0.6 million) and $22.5 million (net of unamortized debt issuance costs of $0.6 million), respectively.

Interest expense on the term loan during the three months ended March 31, 2024 was $0.7 million (including amortization of deferred debt issuance costs of $0.1 million).

As of June 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $22.0 million (net of unamortized debt issuance costs of $0.5 million) and $22.5 million (net of unamortized debt issuance costs of $0.6 million), respectively.

Interest expense on the term loan during the three and six months ended June 30, 2024 was $0.7

million (including amortization of deferred debt issuance costs of $0.1 million) and $1.4 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

On October 25, 2024, upon the closing of the Brands Transaction as described in Note 21 – Subsequent Events proceeds of $22.2 million was used to pay off the then outstanding balance of the loan in full and $0.2 million of loan payoff expenses.

Nomura Credit Agreement

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

We and our wholly owned subsidiaries, BR Financial Holdings, LLC, and BR Advisory & Investments, LLC had entered into a credit agreement dated June 23, 2021 (as amended, the “Prior Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, for a four-year $300.0 million secured term loan credit facility (the “Prior Term Loan Facility”) and a four-year $80.0 million secured revolving loan credit facility (the “Prior Revolving Credit Facility”) with a maturity date of June 23, 2025.

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

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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 $349.2 million and $375.8 million and investments in the amount of $658.6 million and $786.7 million as of March 31, 2024 and December 31, 2023, respectively.

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 $190.7 million (which is included in the total loans receivable, at fair value balance of $229.2 million reported in our condensed consolidated balance sheet at June 30, 2024) and $375.8 million (which is included in the total loans receivable, at fair value balance of $532.4 million reported in our condensed consolidated balance sheet at December 31, 2023) and investments in the amount of $680.1 million (which is included in the total securities and other investments owned, at fair value of $664.1 million reported in our condensed consolidated balance sheet at June 30, 2024) and $786.7 million (which is included in the total securities and other investments owned, at fair value of $1,092.1 million reported in our condensed consolidated balance sheet at December 31, 2023) as of June 30, 2024 and December 31, 2023, respectively.

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

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

We are in compliance with all financial covenants in the Credit Agreement as of 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 $3.1 million per quarter.

As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $456.1 million (net of unamortized debt issuance costs of $17.6 million) and $475.1 million (net of unamortized debt issuance costs of $18.7 million), respectively.

Interest on the term loan during the three months ended March 31, 2024 and 2023 was $15.0 million (including amortization of deferred debt issuance costs of $1.1 million) and $7.3 million (including amortization of deferred debt issuance costs of $0.5 million), respectively.

The interest rate on the term loan as of March 31, 2024 and December 31, 2023 was 11.31% and 11.37%, respectively.

We 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 $0.5 million (including unused commitment fees of $0.2 million and amortization of deferred financing costs of $0.3 million) and $2.0 million (including amortization of deferred financing costs of $0.2 million), respectively.

The interest rate on the Revolving Credit Facility as of March 31, 2024 and December 31, 2023 was 11.37%.

On September 17, 2024, we entered into Amendment No.

4 to our credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Fourth Amendment”).

On September 17, 2024, we made a payment of $85.9 million which consisted of a principal payment of $85.1 million and accrued interest of $0.7 million.

Loan fees incurred in connection with the Fourth Amendment totaled $5.9 million of which $3.5 million was added to the principal balance of the term loan.

After giving effect to these amounts, the outstanding principal balance on the term loan was reduced from $469.8 million to $388.1 million.

In connection with the Fourth Amendment, the revolving credit facility in the amount of $100.0 million which had no balance outstanding at September 17, 2024 was terminated and

we are required to reduce the principal amount of the term loan to be no greater than $100.0 million on or prior to September 30, 2025.

The maturity date of the term loan is August 21, 2027 and all outstanding principal is required to be paid.

On December 9, 2024, the Company entered into Amendment No.

5 to its credit agreement, dated August 21, 2023, with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Fifth Amendment”).

As of June 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $452.5 million (net of unamortized debt issuance costs of $17.2 million) and $475.1 million (net of unamortized debt issuance costs of $18.7 million), respectively.

Interest on the term loan during the three months ended June 30, 2024 and 2023 was $14.6 million (including amortization of deferred debt issuance costs of $1.1 million) and $7.6 million (including amortization of deferred debt issuance costs of $0.5 million), respectively, and during the six months ended June 30, 2024 and 2023 was $29.6 million (including amortization of deferred debt issuance costs of $2.2 million) and $14.9 million (including amortization of deferred debt issuance costs of $1.1 million), respectively.

The interest rate on the term loan as of June 30, 2024 and December 31, 2023 was 11.33% and 11.37%, respectively.

We had an outstanding balance of zero under the revolving facility as of June 30, 2024 and December 31, 2023.

Interest on the revolving facility during the three months ended June 30, 2024 and 2023 was $0.5 million (including unused commitment fees of $0.2 million and amortization of deferred financing costs of $0.3 million) and $1.5 million (including unused commitment fees of $0.03 million and amortization of deferred financing costs of $0.2 million), respectively, and during the six months ended June 30, 2024 and 2023 was $1.0 million (including unused commitment fees of $0.5 million and amortization of deferred financing costs of $0.5 million) and $3.5 million (including unused commitment fees of $0.03 million and amortization of deferred financing costs of $0.3 million), respectively.

The interest rate on the Revolving Credit Facility as of June 30, 2024 and December 31, 2023 was 11.37%.

Wells Fargo Credit Agreement

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

The letters of credit issued under this facility are furnished by the lender to third parties for the

principal purpose of securing minimum guarantees under liquidation services contracts.

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.

3 unchanged sentences

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

Interest expense totaled $0.02 million 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 and December 31, 2023, there were no open letters of credit outstanding.

We are in compliance with all covenants in the asset based credit facility as of March 31, 2024.

Interest expense totaled $0.02 million during the three months ended June 30, 2024 and 2023, and $0.04 million during the six months ended June 30, 2024 and 2023.

There was no outstanding balance on this credit facility as of June 30, 2024 and December 31, 2023.

As of June 30, 2024 and December 31, 2023, there were no open letters of credit outstanding.

We are in compliance with all covenants in the asset based credit facility as of June 30, 2024.

We received a

series of extensions under our Wells Fargo Bank credit agreement with the most recent being dated September 27, 2024 to extend the required time to deliver our second quarter unaudited condensed financial statements to November 19, 2024.

On November 15, 2024, in connection with the GA Group Transaction as described in Note 21 – Subsequent Events the credit agreement which had no borrowings outstanding with Wells Fargo Bank was terminated.

BRPAC Credit Agreement

6 unchanged sentences

Riley Principal Investments, LLC, the parent corporation of BRPAC and a subsidiary of ours, are guarantors of the obligations under the BRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of BRPAC are pledged as collateral.

The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties, including a pledge of (a) 100% of the equity interests of the Credit Parties;

The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties which totals approximately $185.8 million, including a pledge of (a) 100% of the equity interests of the Credit Parties;

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

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

and (c) 65% of the equity interests in magicJack VocalTec Ltd., an Israel corporation.

Such security interests are evidenced by pledge, security, and other related agreements.

3 unchanged sentences

If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the BRPAC Credit Agreement.

We are in compliance with all financial covenants in the BRPAC Credit Agreement as of March 31, 2024.

We are in compliance with all financial covenants in the BRPAC Credit Agreement as of June 30, 2024.

We received a series of extensions under our credit agreement with Banc of California, N.A.

with the most recent being dated December 18, 2024 to extend the required time to deliver our second quarter unaudited condensed consolidated financial statements to January 21, 2025.

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:

1 unchanged sentence

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.

As of June 30, 2024 and December 31, 2023, the interest rate on the BRPAC Credit Agreement was 8.20% 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 $3.5 million per quarter, the quarterly installment on March 31, 2027 is in the amount of $2.6 million, and the remaining principal balance is due at final maturity on June 30, 2027.

As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $43.1 million (net of unamortized debt issuance costs of $0.5 million) and $46.6 million (net of unamortized debt issuance costs of $0.4 million), respectively.

Interest expense on the term loan during the three months ended March 31, 2024 and 2023 was $1.1 million (including amortization of deferred debt issuance costs of $0.1 million) and $1.4 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

The quarterly installments from September 30, 2024 to December 31, 2026 are in the amount of $3.2 million per quarter, the quarterly installment on March 31, 2027 is in the amount of $2.4 million, and the remaining principal balance is due at final maturity on June 30, 2027.

As of June 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $36.0 million (net of unamortized debt issuance costs of $0.4 million) and $46.6 million (net of unamortized debt issuance costs of $0.4 million), respectively.

Interest expense on the term loan during the three months ended June 30, 2024 and 2023 was $0.9 million (including amortization of deferred debt issuance costs of $0.1 million) and $1.3 million (including amortization of deferred debt issuance costs of $0.1 million), respectively, and during the six months ended June 30, 2024 and 2023 was $2.0 million (including amortization of deferred debt issuance costs of $0.1 million) and $2.8 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

On January 6, 2025 (the “Closing Date”), BRPAC entered into the BRPAC Amended Credit Agreement with certain subsidiaries of the Company, the Banc of California, in the capacity as agent and lender and with other lenders party thereto from time to time.

Our subsidiary Lingo was added as a Borrower to the BRPAC Amended Credit Agreement.

Pursuant to the BRPAC Amended Credit Agreement, the lenders made a new five-year $80.0 million term loan to the Borrowers, the proceeds of which were used to repay in full the obligations under the original BRPAC Credit Agreement dated December 19, 2018 and the Lingo Credit Agreement.

In connection with the BRPAC Amended Credit Agreement, the Borrowers also made certain distributions to the parent company of the Borrowers from existing cash on hand.

The BRPAC Amended Credit Agreement also builds in provisions for incremental term loans up to $40.0 million allowing certain distributions to the parent company of the Borrowers from the proceeds of such incremental term loans.

The Borrowers’ U.S.

subsidiaries are guarantors of all obligations under the BRPAC Amended Credit Agreement.

The obligations under the BRPAC Amended Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Borrowers, including a pledge of (a) 100% of the equity interests of the Borrowers;

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

and (c) 65% of the equity interests in magicJack VocalTec Ltd., an Israel corporation.

Such security interests are evidenced by pledge, security, and other related agreements.

The borrowings under the BRPAC Amended Credit Agreement bear interest equal to the Term SOFR rate plus a margin of 2.75% to 3.50% per annum, depending on the Borrowers consolidated total funded debt ratio as defined in the BRPAC Amended Credit Agreement.

The interest rate is subject to a margin level of 3.25%.

As of the Closing Date, the outstanding principal amount was $80.0 million with quarterly installments of principal due in the amount of $4.0 million, and any remaining principal balance is due at final maturity on January 6, 2030.

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

In addition, the BRPAC Amended Credit Agreement requires the Credit Parties to maintain certain financial ratios.

The BRPAC Amended Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of outstanding amounts due under the BRPAC Amended Credit Agreement.

Senior Note Offerings

The Company issued no senior notes during the three months ended March 31, 2024 and 2023.

The maturity dates of outstanding senior notes ranged from May 2024 to August 2028 pursuant to At the Market Issuance Sales Agreements with B.

During the three months ended June 30, 2024 and 2023, we issued zero and $0.2 million, and during the six months ended June 30, 2024 and 2023 we issued zero and $0.2 million, respectively, of senior notes.

The maturity dates of outstanding senior notes ranged from February 2025 to August 2028 pursuant to At the Market Issuance Sales Agreements with B.

Riley Securities, Inc.

5 unchanged sentences

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

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

The redemption price was equal to 100.00% of the aggregate principal amount, plus accrued and unpaid interest, up to, but excluding, the redemption date.

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

The redemption price

was equal to 100.00% of the aggregate principal amount, plus accrued and unpaid interest, up to, but excluding, the redemption date.

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

On May 1, 2024, we announced that we have called for the full redemption equal to $25.0 million aggregate principal amount of our 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, the total senior notes outstanding was $1,553.6 million (net of unamortized debt issue costs of $12.0 million) and $1,668.0 million (net of unamortized debt issue costs of $13.1 million), respectively, with a weighted average interest rate of 5.63% and 5.71%, respectively.

On May 31, 2024, we redeemed the remaining $25.0 million aggregate principal amount of the 6.75% 2024 Notes.

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

The total redemption payment included approximately $0.1 million in accrued interest.

In connection with the full redemption, the 6.75% 2024 Notes, which were listed on NASDAQ under the ticker symbol “RILYO,” were delisted from NASDAQ and ceased trading on the redemption date.

As of June 30, 2024 and December 31, 2023, the total senior notes outstanding was $1,528.6 million (net of unamortized debt issue costs of $11.0 million) and $1,668.0 million (net of unamortized debt issue costs of $13.1 million), respectively, with a weighted average interest rate of 5.62% and 5.71%, respectively.

Interest on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $24.4 million and $26.2 million during the three months ended March 31, 2024 and 2023, respectively.

Interest expense on senior notes totaled $23.0 million and $26.8 million during the three months ended June 30, 2024 and 2023, respectively and $47.4 million and $53.0 million during the six months ended June 30, 2024 and 2023, respectively.

Other Notes Payable

As of June 30, 2024 and December 31, 2023, the outstanding balance for the other notes payable was $30.0 million and $19.4 million, respectively.

On May 3, 2024, upon closing of the acquisition of Nogin, Nogin entered into a secured convertible promissory note agreement with a principal amount of $15.0 million with an annual interest rate of 10.0% and a maturity date of May 3, 2027.

The remaining notes payable primarily consisted of additional deferred cash consideration owed to the sellers of FocalPoint and a promissory note related to the Lingo minority interest purchase, which was paid in full on January 2, 2024.

Interest expense was $0.4 million and $0.1 million during the three months ended June 30, 2024 and 2023, respectively, and $0.5 million and $0.3 million during the six months ended June 30, 2024 and 2023, respectively.

Recent Accounting Standards

See Note 2(o) to the accompanying financial statements for recent accounting standards.

See Note 2(p) to the accompanying financial statements for recent accounting standards.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis