B.莱利金融公司及其子公司（统称为「公司」）向公众和私营公司、金融发起人、投资者、金融机构、法律和专业服务公司以及个人等广泛客户群提供投资银行、经纪、财富管理、资产管理、直接贷款和业务咨询服务。该公司还拥有一系列通信相关业务组合，提供消费者互联网接入和云通信服务，Tiger US Holdings，Inc.（「Targus」），设计及销售笔记本电脑及电脑配件;以及E-Commerce，为服装品牌及其他零售商提供商业即服务（「CaaS」）解决方案的技术平台供应商。
2024年10月13日，公司签订股权购买协议（「股权购买协议」），以出售 52.6Oaktree拥有评估和估值服务、房地产以及零售、批发和工业解决方案业务（统称为「Great American Group」）的%所有权股份。根据股权购买协议规定的条款和条件，公司进行了内部重组，并将「Great American Group」的所有权益注入新成立的控股公司Great American Holdings，LLC（「Great American NewCo」）。在2024年11月15日收盘时，（i）Oaktree收到（a）Great American NewCo的所有优秀A类优先有限责任单位（该单位将拥有 7.5%现金券和一张 7.5%实物支付息票）（「A类优先单位」）和（b）Great American NewCo的普通有限责任单位（「普通单位」）
代表 52.6Great American NewCo已发行和未发行普通有限责任单位的%，购买价格约为美元203,000 (with初始清算优先权约为美元203,000).公司保留（a） 93.2Great American NewCo已发行和发行的B类优先有限责任公司单位的%（该单位将拥有 2.3%实物支付息票和约美元的初始总清算优先权183,000）（「B类首选单位」）和（b） 44.2已发行和未偿还的普通单位的百分比。其余 6.8已发行和未发行B类优先单位的百分比 3.2%的已发行和未发行普通股将由某些少数股权投资者持有。公司采用权益法会计（参见附注2（m）-权益法投资）对其在Great American NewCo的非控股股权进行核算，其公允价值计入合并资产负债表中的「预付费用和其他资产」细目（参见附注7 -预付费用和其他资产）。
Great American Group，历史上在拍卖和清算部门报告-提供拍卖和清算服务，帮助客户处置资产，包括多地点零售库存、批发库存、贸易固定装置、机械和设备、知识产权和房地产-在金融咨询部门-提供破产、财务咨询、法证会计、房地产咨询、房地产咨询、以及估值和评估服务-被剥离。公司录得净收益为美元258,286 计入2024财年第四季度合并运营报表中的「已终止业务收入，扣除税款」细目。此次交易的税后净收益用于偿还某些债务并专注于核心运营子公司。
公司分析了与出售Great American Group相关的定量和定性因素，包括评估、房地产咨询以及拍卖和清算业务产生的营业收入对整体净利润（损失）、每股净（损失）收益和净资产的重要性，并确定已满足终止经营列报的这些条件。因此，该业务的经营业绩和现金流量在随附的截至2024年3月31日止三个月的未经审计简明综合财务报表中报告为已终止业务。
持续参与
除了保留按权益会计法核算的股权外，在交易结束时，公司还签订了一份过渡服务协议，根据该协议，公司将向Great American NewCo提供与Great American Group相关的某些过渡服务，期限最长 一年 从收盘开始。此外，该公司还签订了一份信贷协议，根据该协议，该公司的一家附属公司（作为贷方）将向Great American NewCo（作为借款人）提供最高为美元的第一优先权担保循环信贷融资40,000 出于一般企业目的，须遵守其中规定的条款和条件，未偿余额为美元1,698 关门时。该公司还签订了总额为美元的期票15,332 与截止时正在进行的某些零售清算业务的资本要求有关。
2025年1月6日，如下所述，特拉华州有限责任公司BRPI Acquisition Co LLC（「BRPAC」）与加州银行签订了一份修订和重述的信贷协议（「BRPAC修订信贷协议」）以行政代理人和贷方的身份，并不时与其他贷方进行合作。BRPAC修订后信贷协议的一部分收益用于支付Lingo定期贷款项下的所有未偿还本金和应计利息，Lingo信贷协议于2025年1月6日还款后实际终止。
新票据根据日期为2025年3月26日的邮戳发行（「契约」），公司、公司某些子公司（作为担保人）与GLAS Trust Company LLC（一家新罕布什尔州有限责任公司）作为受托人和抵押代理人之间，且新票据由本公司所有直接和间接全资受限制子公司共同和个别无条件担保，受某些排除在外的子公司（统称为「担保人」）的限制。新票据以公司和担保人的几乎所有资产以第二优先权为抵押，低于公司信贷融资项下的义务。
The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligation(s) are satisfied. Receivables related to revenues from contracts with customers totaled $61,597 and $68,653 as of March 31, 2025 and December 31, 2024, respectively. The Company had no significant impairments related to these receivables during the three months ended March 31, 2025 and 2024. The Company also has $3,335 and $3,387 of unbilled receivables included in prepaid expenses and other assets as of March 31, 2025 and December 31, 2024, respectively. The Company’s deferred revenue primarily relates to retainer and milestone fees received from corporate finance and investment banking advisory engagements, asset management agreements, and subscription services where the performance obligation has not yet been satisfied. Deferred revenue as of March 31, 2025 and December 31, 2024 was $57,254 and $58,148, respectively. The Company expects to recognize the deferred revenue of $57,254 as of March 31, 2025 as service and fee revenues when the performance obligation is met during the years ended December 31, 2025 (remaining nine months), 2026, 2027, 2028 and 2029 in the amount of $38,210, $8,617, $4,424, $2,047, and $1,222, respectively. The Company expects to recognize the deferred revenue of $2,734 after December 31, 2029.
During the three months ended March 31, 2025 and 2024, the Company recognized revenue of $17,241 and $20,542, respectively, that was recorded as deferred revenue at the beginning of the respective year.
Contract Costs
Contract costs include: (1) costs to fulfill contracts associated with corporate finance and investment banking engagements are capitalized where the revenue is recognized at a point in time and the costs are determined to be recoverable and; (2) commissions paid to obtain magicJack contracts which are recognized ratably over the contract term
and third party support costs for magicJack and related equipment purchased by customers which are recognized ratably over the service period.
The capitalized costs to fulfill a contract were $5,302 and $5,694 as of March 31, 2025 and December 31, 2024, respectively, and are recorded in the "Prepaid expenses and other assets" line item in the unaudited condensed consolidated balance sheets. For the three months ended March 31, 2025 and 2024, the Company recognized expenses of $1,060 and $1,537 related to capitalized costs to fulfill a contract, respectively. There were no significant impairment charges recognized in relation to these capitalized costs during the three months ended March 31, 2025 and 2024.
Remaining Performance Obligations and Revenue Recognized from Past Performance
The Company does not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material as of March 31, 2025. Corporate finance and investment banking fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded as the fees are considered variable and not included in the transaction price as of March 31, 2025.
During the three months ended March 31, 2025 and 2024, revenues recognized for customer contracts for performance obligations that are satisfied at a point in time was $90,470 and $138,074 and over time was $106,757 and $125,330, respectively.
NOTE 14 — INCOME TAXES
The Company’s effective income tax rate was a benefit of 13.2% for the three months ended March 31, 2025 as compared to a benefit of 25.8% for the three months ended March 31, 2024. During the three months ended March 31, 2025, the Company had a benefit for income taxes from continuing operations of $3,042 resulting primarily from the impact of the release of tax contingencies this quarter. The change in the effective tax rate compared to the prior year is primarily due to the release of uncertain tax positions and changes to the valuation allowance as of March 31, 2025. During the three months ended March 31, 2024, the Company had a benefit for income taxes from continuing operations of $21,330 on $(82,631) of loss on continuing operations.
As of March 31, 2025, the Company had federal net operating loss carryforwards of $344,508 and state net operating loss carryforwards of $71,248, respectively. The Company’s federal net operating loss carryforwards will expire in the tax years commencing on December 31, 2033, through December 31, 2038. The state net operating loss carryforwards will expire in the tax years commencing on December 31, 2030.
The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits of operating loss, capital loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382. Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income. As of December 31, 2024, a valuation allowance in the amount of $311,756 has been recorded, since it is more likely than not that the Company will not be able to utilize tax benefits before they expire. The Company reassesses the need for a valuation allowance on an ongoing basis.
The Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions. The Company is currently under audit by certain state, local, and foreign income tax authorities. The audits are in varying stages of completion. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments and closing of statutes of limitations. Such adjustments are reflected in the provision for income taxes, as appropriate. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 2021 to 2024.
The Pillar Two directive, which was established by the Organization for Economic Co-operation and Development, and which generally provides for a 15% minimum effective tax rate for multinational enterprises, in every jurisdiction in which they operate. While the Company does not anticipate that this will have a material impact on its tax provision or effective tax rate, it will continue to monitor evolving tax legislation in the jurisdictions in which it operates.
NOTE 15 — EARNINGS PER SHARE
Basic earnings per share is calculated by dividing (loss) income from continuing operations, (loss) income from discontinued operations, or net income (loss) by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing (loss) income from continuing operations, (loss) income from discontinued operations, or net income (loss) by the weighted-average number of common shares outstanding, after giving effect to all dilutive potential common shares outstanding during the period.
Securities that could potentially dilute basic net income per share in the future that were not included in the computation of diluted net income (loss) per share as the effect would be anti-dilutive were 2,483,159 and3,282,390 during the three months ended March 31, 2025 and 2024, respectively, because to do so would have been anti-dilutive.
Basic and diluted earnings per share were calculated as follows:
Three Months Ended March 31,
2025
2024
Continuing Operations
Discontinued Operations
Total
Continuing Operations
Discontinued Operations
Total
Net (loss) income
$
(19,962)
$
3,395
$
(16,567)
$
(61,301)
$
13,347
$
(47,954)
Net (loss) income attributable to noncontrolling interests
(6,592)
—
(6,592)
(3)
1,214
1,211
Net (loss) income attributable to B. Riley Financial, Inc.
(13,370)
3,395
(9,975)
(61,298)
12,133
(49,165)
Preferred stock dividends
2,015
—
2,015
2,015
—
2,015
Net (loss) income available to common shareholders
The Company is subject to certain legal and other claims that arise in the ordinary course of its business. In particular, the Company and its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. In addition to such legal and other claims, reviews, investigations, and proceedings, the Company and its subsidiaries are subject to the risk of unasserted claims, including, among others, as it relates to matters related to Mr. Kahn and our investment in Freedom VCM. If such claims are made, however, the Company believes it has valid defenses from any such claim and any such claim would be without merit. The Company has not accrued for any such contingent liabilities, but such contingent liabilities could be realized which could have a material adverse impact on the Company’s financial condition.
On May 2, 2024, a putative class action was filed by Ted Donaldson in the Superior Court for the State of California, County of Los Angeles on behalf of all persons who acquired the Company’s senior notes pursuant to the shelf registration statement filed with the SEC on Form S-3 dated January 28, 2021, and the prospectuses filed and published on August 4, 2021 and December 2, 2021 (the “Offerings”). The action asserts claims under §§ 11, 12, and 15 of the Securities Act of 1933 against the Company, some of the Company's current and former officers and directors, and the financial institutions that served as underwriters and book runners for the Offerings. An amended complaint was filed on September 27, 2024. The amended complaint alleges that the offering documents failed to advise investors that Brian Kahn and/or one or more of his controlled entities was engaged in illicit business activities, that the Company, despite the foregoing, continued to finance transactions for Kahn, eventually enabling him and others to take FRG private, and that the foregoing was reasonably likely to draw regulatory scrutiny and reputational harm to the Company. The Company believes these claims are meritless and intends to defend this action.
On January 24, 2024, a putative securities class action complaint was filed by Mike Coan in U.S. Federal District Court, Central District of California, against the Company, Mr. Riley, Tom Kelleher and Phillip Ahn. The purported class includes persons and entities that purchased shares of the Company’s common stock between May 10, 2023 and November 9, 2023. A second putative class action lawsuit was filed on March 15, 2024 by the KL Kamholz Joint Revocable Trust (“Kamholz”). On August 8, 2024, this matter was consolidated with the Kamholz matter and an amended complaint was then filed on April 21, 2025. The amended complaint alleges that the Company failed to disclose to investors material financial details concerning a going private transaction involving FRG, and that the Company made false or misleading statements concerning the Company’s lending practices, its high concentration of risk in transactions involving Mr. Kahn and his affiliates, the condition and composition of the Company’s loan portfolio, the Company’s due diligence and risk management procedures, and the Company’s level of concern and internal scrutiny concerning Mr. Kahn after it learned he was potentially implicated in a fraud involving an unrelated third party. The amended complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Company cannot estimate the amount of potential liability, if any, that could arise from these matters and believes these claims are meritless and intends to defend these actions.
On September 21, 2023, BRCC, a wholly owned subsidiary of the Company, received a demand alleging that certain payments to BRCC in the aggregate amount of approximately $32,166 made by Sorrento Therapeutics, Inc. (“Sorrento”), a chapter 11 debtor in U.S. Bankruptcy Court, Southern District of Texas (the “Court”), pursuant to that certain Bridge Loan Agreement dated September 30, 2022 between Sorrento and BRCC, are avoidable as preferential transfers (the “Alleged Preferences”). On June 16, 2025, the liquidating trustee (the “Trustee”) on behalf of the Sorrento Liquidating Trust filed a complaint with the Court in an adversary proceeding seeking to avoid and recover the Alleged Preferences. On September 12, 2025, the Court denied BRCC’s motion to dismiss. The Company believes that the liquidating trustee’s claims lack merit and intends to continue to assert its statutory defenses to defeat such claims.
In light of the significant factual issues to be resolved with respect to the asserted claims and other proceedings described above and uncertainties regarding unasserted claims described above, at the present time reasonably possible losses cannot be estimated with respect to the asserted and unasserted claims described in the preceding paragraphs.
(b) Babcock & Wilcox Commitments and Guarantees
On January 18, 2024, the Company entered into a guaranty (the “Axos Guaranty”) in favor of (i) Axos Bank, in its capacity as administrative agent (the “Administrative Agent”) for the secured parties under that certain credit agreement, dated as of January 18, 2024, among B&W, the guarantors party thereto, the lenders party thereto and the Administrative Agent (the “B&W Axos Credit Agreement”), and (ii) the secured parties. Subject to the terms and conditions of the Axos Guaranty, the Company has guaranteed certain obligations of B&W (subject to certain limitations) under the B&W Axos Credit Agreement, including the obligation to repay outstanding loans and letters of credit and to pay earned interest, fees costs and expenses of enforcing the Axos Guaranty, provided however, that the Company’s obligations with respect to the principal amount of credit extensions and unreimbursed letter of credit obligations under the B&W Axos Credit Agreement shall not at any time exceed $150,000 in the aggregate, which is the maximum potential amount of future payments under the guaranty. In consideration for the agreements and commitments under the Axos Guaranty and pursuant to a separate fee and reimbursement agreement, B&W has agreed to pay the Company a fee equal to 2.00% of the aggregate revolving commitments (as defined in the B&W Axos Credit Agreement) under the B&W Axos Credit Agreement, payable quarterly and, at B&W’s election, in cash in full or 50% in cash and 50% in the form of penny warrants. On June 18, 2025, an
amendment was made to the Axos Guaranty whereby the Company's obligations as guarantor were suspended until January 1, 2027.
On June 30, 2021, the Company agreed to guaranty (the “Cash Collateral Provider Guaranty”) up to $110,000 of obligations that B&W may owe to providers of cash collateral pledged in connection with a debt financing for B&W. The Cash Collateral Provider Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of B&W’s obligations under a reimbursement agreement with respect to such cash collateral. B&W will pay the Company $935 per annum in connection with the Cash Collateral Provider Guaranty. B&W has agreed to reimburse the Company to the extent the Cash Collateral Provider Guaranty is called upon. During the year ended December 31, 2024, B&W paid all of the obligations owed under the Cash Collateral Provider Guaranty and there are no amounts outstanding under this guarantee at December 31, 2024.
On December 22, 2021, the Company entered into a general agreement of indemnity in favor of one of B&W’s sureties. Pursuant to this indemnity agreement, the Company agreed to indemnify the surety in connection with a default by B&W under a €30,000 payment and performance bond issued by the surety in connection with a construction project undertaken by B&W. In consideration for providing the indemnity, B&W paid the Company fees in the amount of $1,694 on January 20, 2022.
On August 10, 2020, the Company entered into a project specific indemnity rider to a general agreement of indemnity made by B&W in favor of one of its sureties. Pursuant to the indemnity rider, the Company agreed to indemnify the surety in connection with a default by B&W under the underlying indemnity agreement relating to a $29,970 payment and performance bond issued by the surety in connection with a construction project undertaken by B&W. In consideration for providing the indemnity rider, B&W paid the Company fees in the amount of $600 on August 26, 2020. During the period ended December 31, 2024, the indemnity rider was reduced to $2,997, which remained outstanding at March 31, 2025.
(c) Other Commitments
In the normal course of business, the Company enters into commitments to its clients in connection with capital raising transactions, such as firm commitment underwritings, equity lines of credit, or other commitments to provide financing on specified terms and conditions. Securities underwriting exposes the Company to market and credit risk, primarily in the event that, for any reason, securities purchased by the Company cannot be distributed at the anticipated price and to balance sheet risk in the event that debt or equity financing commitments cannot be syndicated.
NOTE 17 — SHARE-BASED PAYMENTS
(a) Employee Stock Incentive Plans
Under the 2021 B. Riley Stock Incentive Plan (the “2021 Plan”), share-based compensation expense for restricted stock units under the Company’s 2021 Plan was:
Three Months Ended March 31,
2025
2024
Share-based compensation expense for restricted stock units for continuing operations
$
3,009
$
7,541
Share-based compensation expense for restricted stock units for discontinued operations
216
833
Total share-based compensation expense for restricted stock units
$
3,225
$
8,374
During the three months ended March 31, 2025, in connection with employee stock incentive plans, the Company did not grant any restricted stock units. Share based compensation expense is recorded in the "Selling, general and administrative expenses" line item in the unaudited condensed consolidated statements of operations.
The Company began settling equity-classified restricted stock units in cash and as a result of the past practice, the restricted stock units were reclassified to a liability during the period. The change in classification was accounted for as a modification under ASC 718, Compensation - Stock Compensation. The grant date fair value of the original equity award exceeded the fair value of the modified liability award; therefore, the Company continues to recognize compensation
expense based on the grant date fair value of the original award and no additional compensation expense was recognized. Further, the changes in fair value of the liability at the end of the reporting period do not impact earnings. The modification was recognized by a reclassification of $2,138 of additional paid-in capital to a liability. The liability represents the fair value of the restricted stock units that have not been settled through the balance sheet date for which the requisite services have been provided by the employees. The fair value of the liability at each balance sheet date is determined based on the Company’s stock price. For the three months ended March 31, 2025, the Company settled $1,862 of restricted stock units in cash and as of March 31, 2025, the liability was $565, which is recorded in the "Accrued expenses and other liabilities" line item in the unaudited condensed consolidated balance sheet.
During the three months ended March 31, 2024, in connection with employee stock incentive plans, the Company granted 1,223,263 restricted stock units with a grant date fair value of $16,181. The restricted stock units generally vest over a period of one to five years based on continued service. In determining the fair value of restricted stock units on the grant date, the fair value is adjusted for expected dividends based on historical patterns and the Company’s anticipated dividend payments over the expected holding period and the risk-free interest rate based on U.S. Treasuries for a maturity matching the expected holding period.
(b) Employee Stock Purchase Plan
In connection with the Company’s Employee Stock Purchase Plan (the “Purchase Plan”), there was no share based compensation expense during the three months ended March 31, 2025. During the three months ended March 31, 2024, share based compensation expense totaled $237, of which $191 was recorded in continuing operations and $46 was recorded in discontinued operations. Share based compensation expense is recorded in the "Selling, general and administrative expenses" line item in the unaudited condensed consolidated statements of operations. As of March 31, 2025 and December 31, 2024, there were 236,949, shares reserved for issuance under the Purchase Plan.
(c) BRSH Stock Incentive Plan
On March 10, 2025, the Company’s majority-owned subsidiary approved the BRSH Stock Incentive Plan which allows for issuance of up to 4,000,000 restricted stock awards of BRSH. On March 10, 2025, BRSH issued 1,873,600 restricted stock awards, representing approximately 10.0% of the equity of BRSH, to employees and officers with a grant date fair value of $21,657 in conjunction with the acquisition of the shell corporation as more fully described in see Note 2(n) - Noncontrolling Interests. The grant date fair value of the BRSH restricted stock awards was determined using the same discounted cash flows method and market value approach that was utilized to value the BRSH share issued to owners of the shell corporation as more fully described in Note 2(n) - Noncontrolling Interests with an additional discount of 17.5% for the lack of marketability due to the service condition of the restricted stock awards vesting over a period of up to five years.
The restricted stock awards vest over a period of four to five years based on continued service. The restricted stock awards vest for common stock of BRSH and increase the noncontrolling interest in BRSH, when vested. During the three months ended March 31, 2025, share-based compensation expense of $293 related to the BRSH restricted stock awards was recorded in the "Selling, general and administrative expenses" line item in the unaudited condensed consolidated statements of operations.
NOTE 18 — STOCKHOLDERS' EQUITY
(a) Common Stock
In November 2023, the Company's previous share repurchase program for common stock was reauthorized by the Board of Directors for share repurchases up to $50,000, which allowed for the repurchase of common shares and expired in October 2024. The shares repurchased under the program are retired. During the three months ended March 31, 2025 and 2024, the Company did not repurchase any shares of its common stock.
(b) Common Stock Warrants
On October 28, 2019, the Company issued 200,000 warrants to purchase common stock of the Company (the “BR Brands Warrants”) in connection with the acquisition of a majority ownership interest in BR Brand Holdings LLC. All of the BR Brands Warrants were vested and exercisable in 2021 on the second anniversary of the acquisition of the majority ownership interest in BR Brand Holdings LLC. In April 2024, 200,000 shares of the Company's common stock were issued in connection with the exercise of warrants for cash in the amount of $653.
In connection with the Oaktree Credit Agreement, on February 26, 2025 (refer to Note 10 - Term Loans and Revolving Credit Facility), the Company issued seven-year warrants to certain affiliates of Oaktree Capital Management, L.P. (the “Holders”) to purchase approximately 1,832,290 shares (or 6% on a fully diluted basis) of the Company’s Common Stock at an exercise price of $5.14 per share. The Warrants contain certain anti-dilution provisions pursuant to which, under certain circumstances, the Holders would be entitled to exercise the Warrants for up to 19.9% of the then-outstanding shares of common stock. The warrants were classified as a liability. At inception, on February 26, 2025 the fair value of the warrants were $7,860 and the fair value of the warrants were $5,160 at March 31, 2025 (see Note 2(l) - Fair Value Measurements). The warrant liability of $5,160 at March 31, 2025 is included in other liabilities in Note 12 - Accrued Expenses and Other Liabilities and the change in value of the warrant liability of $2,700 during the three months ended March 31, 2025 is included in the "Change in fair value of financial instruments and other" line item in the unaudited condensed consolidated statements of operations.
On March 26, 2025, in conjunction with the senior note debt exchange (refer to Note 11 - Senior Notes Payable), the Company issued seven-year warrants to the investors to purchase up to 351,012 shares of common stock at an exercise price of $10.00. The warrants contain certain anti-dilution provisions and upon exercise, the warrant holders are entitled to dividends and distributions as if the warrant had been exercised in full prior to the dividend or distribution date. The warrants were classified within stockholder’s equity. At inception, the value of the warrants was $863. The estimated fair value was determined using the Black-Scholes Option Pricing Model which uses the following inputs: value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends, and expected volatility of the price of the underlying common stock. The expected volatility is an significant unobservable level III input with a value of 75.0%.
(c) Preferred Stock
There were 2,834 shares of the Series A Preferred Stock issued and outstanding as of March 31, 2025 and December 31, 2024. The total liquidation preference for the Series A Preferred Stock as of March 31, 2025 and December 31, 2024 was $72,071 (inclusive of cumulative unpaid dividends of $1,218) and $70,854, respectively. There were no dividends declared or paid on the Series A Preferred Stock during the three months ended March 31, 2025. During the three months ended March 31, 2024 dividends paid on the Series A Preferred Stock were $0.4296875 per depository share. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Series A Preferred Stock. Unpaid dividends will accrue until paid in full.
There were 1,729 shares of the Series B Preferred Stock issued and outstanding as of March 31, 2025 and December 31, 2024. The total liquidation preference for the Series B Preferred Stock as of March 31, 2025 and December 31, 2024 was $44,025 (inclusive of cumulative unpaid dividends of $797) and $43,228, respectively. There were no dividends declared or paid on the Series B Preferred Stock during the three months ended March 31, 2025. During the three months ended March 31, 2024 dividends paid on the Series B Preferred Stock were $0.4609375 per depository share. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Series B Preferred Stock. Unpaid dividends will accrue until paid in full.
NOTE 19 — NET CAPITAL REQUIREMENTS
BRS and B. Riley Wealth Management (“BRWM”), the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory Authority, Inc. (“FINRA”). The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. As such, they are subject to the minimum net capital requirements promulgated by the SEC. As of March 31, 2025, BRS had net capital of $49,255, which was $47,118 in excess of required minimum net capital of $2,137; and BRWM had net capital of $17,082, which was $15,621 in excess of required minimum net capital of $1,461.
As of December 31, 2024, BRS had net capital of $69,197, which was $65,420 in excess of its required minimum net capital of $3,777; and BRWM had net capital of $16,384, which was $14,832 in excess of its required minimum net capital of $1,552.
The Company provides asset management and placement agent services to unconsolidated funds affiliated with the Company (the “Funds”). In connection with these services, the Funds may bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the Funds. Management fees from the Funds during the three months ended March 31, 2024 totaled $115. There were no management fees from the funds during 2025.
As of March 31, 2025 and December 31, 2024, amounts due from related parties were $438 and $189, respectively, of which $41, was due from the Funds for management fees and other operating expenses at December 31, 2024.
As of March 31, 2025 and December 31, 2024, amounts due to related parties were $1,782 and $3,404, respectively, of which $1,782 and $2,764, respectively, related to bebe’s rent to own stores which are franchised through Freedom VCM and consist of royalty fees, inventory purchases, marketing, and IT services.
During the three months ended March 31, 2025, royalty fees, marketing, and IT services charged to bebe by Freedom VCM totaled $1,217, and inventory purchases by bebe from Freedom VCM totaled $2,861. During the three months ended March 31, 2024, royalty fees, marketing, and IT services charged to bebe by Freedom VCM totaled $1,290, and inventory purchases by bebe from Freedom VCM totaled $3,539.
In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P. (“Whitehawk”), a limited partnership controlled by Mr. J. Ahn, who is the brother of one of the Company's executive officer's who was the Company’s Chief Financial Officer and Chief Operating Officer during the three months ended March 31, 2025. Whitehawk has agreed to provide investment advisory services for GACP I, L.P. and GACP II, L.P. During the three months ended March 31, 2024, management fees paid for investment advisory services by Whitehawk were $1,237. There were no management fees paid to Whitehawk during the three months ended March 31, 2025.
On June 27, 2024 and amended on July 19, 2024, Conn’s entered into a Consulting Agreement (the “Consulting Agreement”), with a then subsidiary of the Company. Pursuant to the Consulting Agreement, Conn’s engaged the Company's subsidiary to sell merchandise and furniture, fixtures, & equipment as well as additional goods at Conn’s and Badcock stores, headquarters, distribution centers, and cross-dock locations. The Consulting Agreement was assumed by the Conn's debtors in connection with the Chapter 11 Cases. On November 15, 2024, the Company sold the subsidiary that provided the consulting services to Conn's in connection with the Great American Group transaction and, accordingly, included in discontinued operations for Great American Group (see Note 3) are $26,106 in revenues from services and fees earned from the Consulting Agreement for the period through November 15, 2024.
The Company’s executive officers and members of the Company’s board of directors had a 15.3% financial interest in the 272LP for the period January 1, 2024 through February 5, 2024. On February 5, 2024, the Company sold its interest in 272LP and 272 Advisors, LLC for a promissory note of $2,000 plus additional revenue sharing up to $4,100, which is based on future management fees earned.After the sale on February 5, 2024, the Company’s executive officers and members of the Company’s board of directors no longer had a financial interest in the 272LP.
通信部门- 我们拥有多项业务，包括我们的通信部门，我们收购了具有吸引力的风险调整投资回报特征。我们可能会寻求未来收购，以扩大该业务组合，目前包括：Lingo Management，LLC（“Lingo”），一家全球云/统一通信和托管服务提供商，包括BullsEye Telecom，Inc.的运营。Marconi Wireless Holdings，LLC（“Marconi Wireless”），一家提供移动电话语音、文本和数据服务及设备的移动虚拟网络运营商; magicJack VoIP Services，LLC（“magicJack”），一家提供相关设备和订阅服务的基于VoIP云的技术和通信提供商; United Online，Inc.的（“UOL”），一家以NetZero和Juno品牌提供拨号、移动宽带和数字用户线路服务的互联网接入供应商。
消费品部门- 该部门由Tiger US Holdings，Inc.组成。（“Tagus”），这是一家跨国公司，与其子公司一起设计、制造和销售消费者和企业生产力产品，拥有庞大的企业对企业（B2B）客户群，并在全球100多个国家/地区分销。Tagus产品线包括笔记本电脑和平板电脑保护壳、背包、通用扩展坞和计算机配件。
Revenues from services and fees in All Other decreased $1.2 million to $20.3 million during the three months ended March 31, 2025 from $21.5 million during the three months ended March 31, 2024. These revenues include merchandise rental fees and sales from bebe and the operations of a regional environmental services business. Revenues from services and fees in All Other decreased by $1.8 million related to merchandise rental fees from bebe, and $0.5 million due to the operations of a regional environmental services business, partially offset by increases in revenues of $1.1 million in other income.
Trading gains (losses), net decreased $1.5 million to a loss of $16.2 million during the three months ended March 31, 2025 compared to loss of $17.7 million during the three months ended March 31, 2024. The loss of $16.2 million during the three months ended March 31, 2025 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts, primarily $15.1 million on B&W driven by a decrease in share price.
In our Capital Markets segment, we have a portfolio of loans receivable that are measured at fair value with changes in fair value reported in our results of operations. The loan portfolio and fair value adjustments on loans consisted of the following:
Fair Value Adjustments on Loans
Loans Receivable, at Fair Value
Three Months Ended March 31,
Industry or Type of Loan
March 31, 2025
December 31, 2024
2025
2024
Related Party Loans:
Vintage Capital Management, LLC
Retail / consumer
$
2,334
$
2,057
$
276
$
(17,238)
Freedom VCM Receivables, Inc.
Consumer receivable portfolio
—
3,913
1,393
(1,681)
Conn's, Inc.
Retail / consumer
15,000
38,826
(4,065)
(1,254)
W.S. Badcock Corporation
Consumer receivable portfolio
—
2,169
250
551
Great American Holdings, LLC
Professional Services
27,898
—
—
—
GA Joann Retail Partnership
Professional Services
14,184
—
—
—
Other related party loans
Professional Services, Industrials, Oil & Gas
1,900
4,937
—
497
Total related party
61,316
51,902
(2,146)
(19,125)
Exela Technologies, Inc.
Technology
27,563
32,136
(2,677)
213
Core Scientific, Inc.
Technology
—
—
—
8,473
Norlin EV Limited
Real Estate
6,142
6,065
(227)
28
Other loans
Various
3,575
—
(3,046)
(1,790)
Total
$
98,596
$
90,103
$
(8,096)
$
(12,201)
The fair value adjustments on loans receivable for the three months ended March 31, 2025 and 2024, were $(8.1) million and $(12.2) million, respectively. During the three months ended March 31, 2025 and 2024, fair value adjustments for loans receivable from related parties totaled $(2.1) million and $(19.1) million, respectively. During the three months ended March 31, 2025 and 2024, fair value adjustments for other loans receivable totaled $(6.0) million and $6.9 million, respectively.
The $4.1 million favorable variance in fair value adjustments related to loans was primarily driven by $17.5 million related to the loan to VCM, $3.1 million related to the loan to Freedom VCM, partially offset by unfavorable variances of $8.5 million related to the loan to Core Scientific, $2.9 million related to the loan to Exela, $2.8 million related to the loan to Conn's, and $2.3 million from all other loans receivable.
Interest income from loans decreased $18.9 million to $3.2 million during the three months ended March 31, 2025 from $22.1 million during the three months ended March 31, 2024. The decrease was primarily due to non-accrual of interest on the following adjusted loans: $6.1 million for VCM, $4.1 million for Conn's, $2.2 million for Freedom VCM, which was sold in February 2025, and $1.8 million for Nogin, as well as a reduction in loan receivable balances from $452.5 million as of March 31, 2024 to $98.6 million as of March 31, 2025.
Interest income from securities lending decreased $37.0 million to $0.8 million during the three months ended March 31, 2025 from $37.8 million during the three months ended March 31, 2024. The decrease was due to a decrease in the securities borrowed balance from $2.1 billion as of March 31, 2024 to $40.9 million as of March 31, 2025 and decreases of revenue from business decline due to counterparties constraining their business activity.
Revenues from the sale of goods decreased $6.0 million to $47.5 million during the three months ended March 31, 2025 from $53.4 million during the three months ended March 31, 2024. The decrease in revenues from sale of goods was attributable to decreases of $9.4 million from the Consumer Products segment due to a decrease in computer and peripheral sales worldwide due to market conditions and $0.1 million in All Other, consisting of sale of goods from bebe, partially offset by an increase of $3.5 million from the E-Commerce segment consisting of sale of goods from Nogin, which we acquired in the second quarter of 2024.
Operating Expenses
Direct cost of services
Direct cost of services decreased $17.0 million to $42.7 million during the three months ended March 31, 2025 from $59.7 million during the three months ended March 31, 2024. The decrease in direct cost of services was primarily attributable to decreases of $16.2 million from the Communications segment, $13.4 million of which was attributable to divestiture of the Lingo wholesale carrier business in the third quarter of fiscal year 2024, and $2.3 million from All Other consisting of $0.7 million from bebe, and $1.6 million from the regional environmental services business, partially offset by an increase of $1.6 million from the E-Commerce segment consisting of Nogin, which we acquired in the second quarter of 2024.
Cost of goods sold
Cost of goods sold for the three months ended March 31, 2025 decreased $2.1 million to $36.7 million from $38.8 million during the three months ended March 31, 2024. The decrease in cost of goods sold was primarily attributable to decreases of $5.3 million in the Consumer Products segment, due to lower sales volume, $0.2 million in the Communications segment and $0.1 million from All Other consisting of bebe, partially offset by an increase of $3.1 million from the E-Commerce segment, consisting of Nogin which we acquired in the second quarter of 2024.
Selling, general and administrative expenses during the three months ended March 31, 2025 and 2024 were comprised of the following:
Three Months Ended March 31, 2025
Three Months Ended March 31, 2024
Change
Amount
%
Amount
%
Amount
%
Capital Markets segment
$
41,837
25.1
%
$
53,995
30.2
%
$
(12,158)
(22.5)
%
Wealth Management segment
45,554
27.2
%
50,103
28.0
%
(4,549)
(9.1)
%
Communications segment
20,657
12.3
%
23,874
13.3
%
(3,217)
(13.5)
%
Consumer Products segment
15,615
9.3
%
17,522
9.8
%
(1,907)
(10.9)
%
E-Commerce segment
8,428
5.0
%
—
—
%
8,428
100.0
%
Corporate and All Other
35,297
21.1
%
33,446
18.7
%
1,851
5.5
%
Total selling, general & administrative expenses
$
167,388
100.0
%
$
178,940
100.0
%
$
(11,552)
(6.5)
%
Total selling, general and administrative expenses decreased by $11.6 million to $167.4 million during the three months ended March 31, 2025 from $178.9 million during the three months ended March 31, 2024. The decrease was primarily due to decreases of $12.2 million in the Capital Markets segment, $4.5 million in the Wealth Management segment, $3.2 million in the Communications segment, and $1.9 million in the Consumer Products segment, partially offset by increases of $8.4 million in the E-Commerce segment and $1.9 million in Corporate and All Other.
Capital Markets
Selling, general and administrative expenses in the Capital Markets segment decreased by $12.2 million to $41.8 million during the three months ended March 31, 2025 from $54.0 million during the three months ended March 31, 2024. The decrease was primarily due to decreases of $16.8 million in employee compensation and benefit related expenses, which primarily related to decreases in commissions paid, share based compensation and other payroll expenses largely related to reduced revenue and loss of headcount, and $0.1 million in other expenses, partially offset by increases of $3.4 million in write-offs of receivables and $1.3 million in professional services.
Wealth Management
Selling, general and administrative expenses in the Wealth Management segment decreased by $4.5 million to $45.6 million during the three months ended March 31, 2025 from $50.1 million during the three months ended March 31, 2024. The decrease was primarily due to a decrease of $6.8 million in employee compensation and benefit related expenses, which primarily related to decreases in commissions paid, bonuses and other payroll expenses due to a decrease in headcount, which aligns with the decrease in revenue, partially offset by increases of $1.8 million in arbitration settlements and $0.4 million in other expenses.
Communications
Selling, general and administrative expenses in the Communications segment decreased $3.2 million to $20.7 million for the three months ended March 31, 2025 from $23.9 million for the three months ended March 31, 2024. The decrease was primarily due to decreases of $2.0 million in employee compensation and benefit related expenses due to lower headcount, lower commissions and sale of the Lingo carrier business in the third quarter of 2024, and $1.2 million in depreciation and amortization expenses due to items being fully amortized in 2024.
Consumer Products
Selling, general and administrative expenses in the Consumer Products segment decreased $1.9 million to $15.6 million for the three months ended March 31, 2025 from $17.5 million during the three months ended March 31, 2024. The decrease was primarily due to decreases of $0.6 million in professional fees partially due to nonrecurring legal expenses in the prior year, $0.5 million in employee compensation and benefit related expenses due to reduced headcount, and $0.5 million in marketing costs, and $0.3 million in other expenses due to efforts to reduce costs.
Selling, general and administrative expenses in the E-Commerce segment consisted of $8.4 millionduring the three months ended March 31, 2025 from Nogin which was acquired in the second quarter of 2024. Of the $8.4 million, $3.2 million was in employee compensation and benefit related expenses, $2.5 million was in other selling general and administrative expenses, and $2.1 million was in professional services.
Corporate and All Other
Selling, general and administrative expenses for Corporate and All Other increased $1.9 million to $35.3 million during the three months ended March 31, 2025 from $33.4 million for the three months ended March 31, 2024. The increase was primarily due to increases of $6.0 million in transaction costs, of which $4.4 million were from the regional environmental services business which was sold this quarter, $1.5 million in foreign currency fluctuation, and $0.9 million in legal settlements, partially offset by decreases of $3.6 million in employee compensation and benefit related expenses primarily driven by a decrease in share based compensation, $2.0 million in occupancy-related costs, $0.6 million in professional services and $0.3 million in other expenses.
Interest Expense - Securities Lending and Loan Participations Sold. Interest expense - securities lending and loan participations sold decreased $34.7 million to $0.7 million during the three months ended March 31, 2025 from $35.4 million for the three months ended March 31, 2024. The decrease was due to a decrease in the securities loaned and loan participations sold balances from $2.0 billion as of March 31, 2024 to $33.0 million as of March 31, 2025.
Other Income (Expense). Other income included interest income of $1.5 million and $0.7 million during the three months ended March 31, 2025 and 2024, respectively. Dividend income was $0.1 million during the three months ended March 31, 2025 compared to $3.0 million during the three months ended March 31, 2024.
Realized and unrealized losses on investments was a loss of $14.5 million during the three months ended March 31, 2025 compared to a loss of $34.9 million during the three months ended March 31, 2024, which is comprised of the following:
Realized and Unrealized Gains (Losses)
Three Months Ended March 31,
2025
2024
Other income (Expense) - Realized & Unrealized Gains (Losses)
Public Equity Securities:
Babcock & Wilcox Enterprises, Inc. - common stock
$
(11,488)
$
(4,875)
Babcock & Wilcox Enterprises, Inc. - preferred stock
(462)
276
Alta Equipment Group, Inc. - common stock
—
(3,537)
Double Down Interactive Co., Ltd - common stock
(2,077)
14,147
Synchronoss Technologies, Inc. - common stock
—
2,520
LifeMD, Inc. - Common Stock
—
(1,015)
Other public equities
(208)
2,204
Subtotal
(14,235)
9,720
Private Equity Securities:
Freedom VCM Holdings, LLC
—
(32,655)
Kanaci Technologies, LLC
—
(7,096)
CSL Completions Co-Invest-A, LLC
—
(11,541)
Other private equities
(1,622)
6,223
Subtotal
(1,622)
(45,069)
Corporate bonds
1,357
467
Partnership interest and other
—
(42)
Total
$
(14,500)
$
(34,924)
The $20.4 million favorable variance was primarily due to unfavorable fair value adjustments recorded in the prior year quarter and no fair value adjustments recorded in the current quarter of $32.7 million in our investment in Freedom VCM Holdings, LLC, which was written off in the fourth quarter of the prior year, $11.5 million in our investment in CSL Completions Co-Invest-A, LLC, $7.1 million in our investment in Kanaci Technologies, LLC, and $3.5 million in our investment in Alta Equipment Group, Inc., the three of which were sold prior to March 31, 2025. These favorable increases were partially offset by unfavorable variances between the comparative reporting periods of $16.2 million related to our investment in Double Down Interactive Co. Ltd and $7.4 million related to our investment in Babcock & Wilcox Enterprises, Inc., both of which were driven by favorable changes in their respective stock prices in the prior year quarter, other private equities of $7.8 million, and other public equities of $3.9 million.
Other income (expense) also includes change in fair value of financial instruments and other was a gain of $0.9 million during the three months ended March 31, 2025 and a gain on sale and deconsolidation of businesses of $80.8 million during the three months ended March 31, 2025 primarily related to $52.4 million net gain on the sale of Atlantic Coast Recycling and $28.4 million net gain on the disposition of Nogin. The gain on senior note exchange was $10.5 million during the three months ended March 31, 2025. The loss on extinguishment of debt was $10.4 million during the three months ended March 31, 2025.
Interest expense was $30.0 million during the three months ended March 31, 2025 compared to $35.7 million during the three months ended March 31, 2024. The decrease in interest expense was due to lower average debt balances during the three months ended March 31, 2025 when compared to the same period in the prior year. The decreases in interest expense primarily consisted of $4.1 million from the Nomura term loan, $2.8 million from the issuance of senior notes,
$1.4 million from the Lingo term loan, $0.5 million from the Nomura revolving credit facility, and $0.5 million and $0.4 million from the Targus term loan and revolver, respectively, partially offset by increases in interest expense of $3.2 million from the Oaktree term loan, $0.5 million from the BRPAC term loan, and $0.4 million from the Nogin secured convertible promissory note.
Benefit from Income Taxes. Benefit from income taxes was $3.0 million during the three months ended March 31, 2025 compared to a benefit from income taxes of $21.3 million during the three months ended March 31, 2024. The benefit for income taxes in 2025 is primarily limited to the reversal of tax reserves due to the expiration of stature of limitations since the Company has a valuation allowance for deferred taxes. In the prior year period the benefit for income taxes approximated the effective rate for income taxes prior to establishing a valuation allowance at June 30, 2024 due to losses incurred in 2024. The effective income tax rate was 13.2% for the three months ended March 31, 2025 as compared to 25.8% for the three months ended March 31, 2024.
Income from Discontinued Operations, Net of Income Taxes. On October 25, 2024, we and our subsidiary bebe stores, inc. (“bebe”) completed a transaction for our brand assets yielding approximately $236.0 million in cash proceeds. The results have been presented as discontinued operations for the three months ended March 31, 2024. Income from discontinued operations, net of tax for Brands Transaction was $13.1 million during the three months ended March 31, 2024. The income from discontinued operations is primarily due to realized and unrealized losses incurred on the brand equity investments during the three months ended March 31, 2024 from the planned securitization transaction and Sale of equity investments by the Company’s majority owned subsidiary bebe, as more fully discussed in Note 3 - Discontinued Operations and Assets Held for Sale to the accompanying unaudited condensed consolidated financial statements.
On November 15, 2024, we completed the sale of our Great American Group and its results have been presented as discontinued operations for the three months ended March 31, 2024. Loss from discontinued operations, net of tax for Great American Group was $3.2 million during the three months ended March 31, 2024. Refer to Note 3 - Discontinued Operations and Assets Held for Sale to the accompanying unaudited condensed consolidated financial statements for additional information.
On June 27, 2025, we signed an equity purchase agreement to sell all of the membership interests of GlassRatner and Farber and their results have been presented as discontinued operations for the three months ended March 31, 2025 and 2024. Income from discontinued operations, net of tax for GlassRatner and Farber was $3.4 million for the three months ended March 31, 2025 and 2024. Refer to Note 3 - Discontinued Operations and Assets Held for Sale to the accompanying unaudited condensed consolidated financial statements for additional information.
Preferred Stock Dividends. Preferred stock dividends were $2.0 million for the three months ended March 31, 2025 and 2024. Dividends on the Series A preferred paid during the three months ended March 31, 2024 were $0.4296875 per depository share. Dividends on the Series B preferred paid during the three months ended March 31, 2024 were $0.4609375 per depository share. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Series A and B Preferred Stock. Unpaid dividends will accrue until paid in full.
Liquidity and Capital Resources
Our operations are funded through a combination of existing cash on hand, cash generated from operations, investment portfolio liquidity, borrowings under our senior notes payable, term loans and credit facilities, other financing arrangements, and obligations under operating leases. During the three months ended March 31, 2025 and 2024, we generated a net loss attributable to the Company of $10.0 million and $49.2 million, respectively. The Company operates several businesses in its segments that provide cash flows and operating income throughout the year.
As of March 31, 2025, we had $138.3 million of unrestricted cash and cash equivalents, $1.4 million of restricted cash, $231.8 million of securities and other investments owned, $98.6 million of loans receivable, at fair value, $1.6 billion of borrowings outstanding, and approximately $64.0 million of obligations under operating leases. The Company expects to collect approximately $72.5 million of loans at fair value in the next twelve months and has approximately $80.2 million of level 1 securities and other investments owned that are available for sale during the next twelve months.
The Company expects to utilize existing cash balances, cash generated from investments, cash proceeds from the sale of certain businesses described below, available borrowing capacity under our existing revolving credit facility and cash generated from operations to fund debt service obligations over the next twelve months which includes amounts coming due on the Company’s senior notes payable as discussed in Note 11 - Senior Notes Payable. The Company may also explore various funding options in the future that may include additional debt exchanges, refinancing of existing senior
notes and other debt, equity capital raises, the sale of operating companies, or the liquidation of securities and investments owned to provide liquidity to meet future debt obligations as they become due.
The following summarizes key liquidity events.
We completed the sale of (a) the Company’s majority owned subsidiary Atlantic Coast Recycling, LLC on March 3, 2025 for proceeds of approximately $68.6 million (the “Atlantic Coast Transaction”); (b) the sale of part of Wealth Management business for $26.0 million (the “Wealth Transaction”) as more fully described in Note 3; and (c) the sale of the Company’s financial consulting business on June 27, 2025 for $117.8 million. In addition to the sale of these businesses, approximately $30.0 million of investments and loans were sold during the three months ended March 31, 2025 and approximately $14.0 million of investments were sold from April 1, 2025 through October 31, 2025. Approximately $34.0 million in repayments of loans receivable, fair value were received during the three months ended March 31, 2025 and approximately $44.0 million in repayments of loans receivable, fair value were received from April 1, 2025 through October 31, 2025. The sale of additional investments in the next twelve months will vary based upon the realization of the investments providing the best economic value or as liquidity needs arise for the Company.
As discussed in more detail in Note 11 - Senior Notes Payable, from April 7, 2025 to July 11, 2025, we completed four private exchange transactions with institutional investors pursuant to which aggregate principal amounts of approximately $29.5 million of the 5.50% Senior Notes due March 2026, $2.1 million of the 6.50% Senior Notes Payable due September 2026, $109.7 million of the 5.00% Senior Notes due December 2026, $51.1 million of the 6.00% Senior Notes due January 2028, and $39.5 million of the 5.25% Senior Notes due August 2028 of the Company’s Exchanged Notes owned by the investors were exchanged for approximately $140.7 million aggregate principal amount of New Notes, whereupon the Exchanged Notes were cancelled.
The borrowings outstanding of $1.6 billion as of March 31, 2025 included $1.4 billion from the issuance of series of senior notes that are due at various dates ranging from March 31, 2026 to August 31, 2028 with interest rates ranging from 5.00% to 8.00%, $184.1 million in term loans borrowed pursuant to the Oaktree Capital Management, L.P. ("Oaktree") and BRPI Acquisition Co LLC (“BRPAC”) credit agreements, and $13.8 million of revolving credit facility under the Targus credit facility. Of the senior notes outstanding, after the completion of the four private exchange transactions discussed above, there is $101.6 million of senior notes due in the next twelve months and $1.2 billion thereafter.The $205.5 million of term loans outstanding includes $83.0 million that is expected to be repaid in the next twelve months and $122.5 million thereafter. Of the approximately $64.0 million of obligations due under operating lease, approximately $22.0 million is due in the next twelve months and approximately $42.0 million is due thereafter. For additional information regarding our debt offerings and related agreements, refer to Note 9 - Notes Payable, Note 10 - Term Loans and Revolving Credit Facility, and Note 11 - Senior Notes Payable to the unaudited condensed consolidated financial statements.
We believe that the current cash and cash equivalents, securities and other investments owned, funds available under our credit facilities, cash expected to be generated from operating activities and proceeds received from the Wealth Management Transaction and the sale of the Company’s GlassRatner and Farber financial consulting business 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. We continue to monitor our financial performance to ensure sufficient liquidity to fund operations and execute on our business plan.
Dividends
From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations. During the three months ended March 31, 2025, we did not pay any cash dividends on our common stock. During the year ended December 31, 2024, we paid cash dividends on our common stock of $33.7 million. 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, 2025 and the year ended December 31, 2024 was as follows:
Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day of January, April, July, and October. As of March 31, 2025, dividends in arrears in respect of the Depositary Shares were $2.0 million. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Series A Preferred Stock. Unpaid dividends will accrue until paid in full.
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, 2025, dividends in arrears in respect of the Depositary Shares were $1.3 million. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Series B Preferred Stock. Unpaid dividends will accrue until paid in full.
A summary of preferred stock dividend activity for the three months ended March 31, 2025 and the year ended December 31, 2024 was as follows:
Stockholder
Preferred Dividend per Depositary Share
Date Declared
Date Paid
Record Date
Series A
Series B
October 16, 2024
October 31, 2024
October 28, 2024
$
0.4296875
$
0.4609375
July 9, 2024
July 31, 2024
July 22, 2024
0.4296875
0.4609375
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
Our principal sources of liquidity to finance our business are our existing cash on hand, cash flows generated from operating activities, funds available under revolving credit facilities and special purpose financing arrangements.
Cash Flow Summary
Three Months Ended March 31,
2025
2024
(Dollars in thousands)
Net cash provided by (used in):
Operating activities
$
184
$
135,357
Investing activities
59,181
18,278
Financing activities
(172,529)
(190,933)
Effect of foreign currency on cash
(465)
(3,962)
Net decrease in cash, cash equivalents and restricted cash
$
(113,629)
$
(41,260)
Cash provided by operating activities was $0.2 million during the three months ended March 31, 2025 compared to cash provided by operating activities of $135.4 million during the three months ended March 31, 2024. The reduction of $135.2 million in net cash provided by operating activities in the first quarter of 2025 was primarily due to $143.4 million less cash generated from securities and other investments owned, as fewer securities positions were sold to provide liquidity to fund operations and repayment of the 6.375% Senior Notes due February 28, 2025. Cash provided by operating activities for the three months ended March 31, 2025 consisted of the impact of net loss of $16.6 million, noncash items of $40.9 million, and changes in operating assets and liabilities of $57.7 million. The negative cash flow impact from noncash items of $40.9 million included gain on sale and deconsolidation of business of $80.8 million, gain on senior note exchange of $10.5 million, gain on sale or disposal of fixed assets and other of $1.4 million, and net foreign currency gains of $0.2 million, partially offset by positive impact from loss on extinguishment of debt of $10.4 million, depreciation and amortization of $10.1 million, deferred income taxes of $9.0 million, fair value and remeasurement adjustments of $8.4 million, non-cash interest and other of $4.5 million, share-based compensation of $3.6 million, depreciation of rental merchandise of $3.4 million, provision for losses on accounts receivable of $2.1 million, loss from equity investments of
$0.6 million and dividends from equity investments of $0.1 million. 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 and remeasurement 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 losses on accounts receivable of $0.4 million, income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests of $0.3 million, net foreign currency losses 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 $0.3 million.
Cash provided by investing activities was $59.2 million during the three months ended March 31, 2025 compared to cash provided by investing activities of $18.3 million for the three months ended March 31, 2024. The increase of $40.9 million in net cash provided by investing activities in the first quarter of 2025 was primarily due to $68.9 million in proceeds received from the sale of the Atlantic Coast Recycling business, partially offset by a $27.3 million reduction in net proceeds from loans receivable, which were used in the first quarter of 2024 to create additional liquidity and facilitate the repayment of 6.375% Senior Notes due February 28, 2025. During the three months ended March 31, 2025, cash provided by investing activities consisted of cash provided by sale of business, net of cash sold and other of $68.9 million, loans receivable repayment of $46.8 million, proceeds from sale of property, equipment, intangible assets, and other of $7.2 million, sale of loans receivable of $6.8 million, proceeds from sale of loan participations of $4.0 million, and consolidation of VIE of $0.4 million, partially offset by cash used in purchases of loans receivable of $61.5 million, purchases of property, equipment and intangible assets of $6.7 million, and purchases of equity and other investments of $6.6 million. During the three months ended March 31, 2024, cash provided by investing activities consisted of cash received from loans receivable repayment of $39.5 million, and sale of loan receivable of $22.8 million, partially offset by cash used for 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.
Cash used in financing activities was $172.5 million during the three months ended March 31, 2025 compared to cash used in financing activities of $190.9 million during the three months ended March 31, 2024. The reduction of $18.4 million in net cash used in financing activities in the first quarter of 2025 was primarily due to the suspension of dividends, compared to $18.0 million paid in common stock and preferred dividends in the first quarter of 2024. During the three months ended March 31, 2025, cash used in financing activities primarily consisted of $239.3 million used in the repayment of term loan, $145.3 million used to redeem senior notes, $24.1 million used in payment of revolving line of credit, $12.8 million used to repay our notes payable and other, and $8.9 million used to pay debt issuance and offering costs, partially offset by cash provided by $235.6 million in proceeds from term loan, $21.5 million in proceeds from revolving line of credit, and $0.9 million in proceeds from notes payable. 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 repayment of revolving line 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 in the payment of debt issuance and offering costs, and $0.1 million used in the payment of 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.
Recent Accounting Standards
See Note 2(s) - Recent Accounting Standards to the accompanying unaudited condensed consolidated financial statements for recent accounting standards.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We transact business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive income in the accompanying unaudited condensed consolidated balance sheets. Transaction gains (losses) are included in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
Interest Rate Risk
We have exposure to interest rate risk which primarily relates to changes in cost of borrowings as a result of changes in interest rates. We utilize borrowings under our senior notes payable and credit facilities to fund costs and expenses incurred in connection with our acquisitions and operations. Borrowings under our senior notes payable are at fixed interest rates and borrowings under our credit facilities bear interest at a floating rates of interest. As of March 31, 2025, approximately 86% of our debt obligations bore interest at fixed rates and not impacted by changes in interest rates. Our interest expense from variable-rate debt obligations is principally affected by changes in the published Secured Overnight Financing Rate in connection with our credit facilities. Our variable-rate debt obligations are principally used to provide financing to our operating businesses which are supported by cash flows from operations for those businesses. The cash flows of such operating businesses are utilized to help to mitigate any increases in interest expense as a result of an increase in interest rates.
Management monitors the composition of debt obligations and debt investments on a periodic basis, as well as projected net interest income, interest coverage, and sensitivity of interest income changes in interest rates. This exposure is also monitored by our risk management group and reviewed periodically in risk committee meetings. If floating rates of interest had increased or decreased by 1% during the three months ended March 31, 2025, the rate increase or decrease would have resulted in an increase or decrease in interest expense of $0.5 million. If conditions existed in which Management would seek to mitigate potential interest rate risk, Management could elect to take steps such as entering into interest rate hedges, and refinancing debt obligations from floating-rate to fixed-rate.
An objective of our investment activities is to preserve capital for the purpose of funding operations while at the same time maximizing the income that we receive from investments without significantly increasing risk. To achieve these objectives, our investments allow us to maintain a portfolio of cash equivalents, short-term investments through a variety of securities owned that primarily includes common stocks, loans receivable, and investments in partnership interests. Our cash and cash equivalents through March 31, 2025, included amounts in bank checking and liquid money market accounts. We may be exposed to interest rate risk through trading activities in convertible and fixed income securities as well as U.S. Treasury securities, however, based on our daily monitoring of this risk, we believe we currently have limited exposure to interest rate risk in these activities.
Foreign Currency Risk
The majority of our operating activities are conducted in U.S. dollars. Revenues generated from our foreign subsidiaries totaled $26.0 million and $32.0 million during the three months ended March 31, 2025 and 2024, respectively, or 14.0% and 10.8% of our total revenues of $186.1 million and $297.6 million. The financial statements of our foreign subsidiaries are translated into U.S. dollars at period-end rates, with the exception of revenues, costs, and expenses, which are translated at average rates during the reporting period. We include gains and losses resulting from foreign currency transactions in income, while we exclude those resulting from translation of financial statements from income and include them as a component of accumulated other comprehensive income (loss). Transaction gains (losses), which were included in our unaudited condensed consolidated statements of operations, amounted to gains of $0.3 million and $1.6 million during the three months ended March 31, 2025 and 2024, respectively. We may be exposed to foreign currency risk; however, our operating results during the three months ended March 31, 2025 and 2024, included $26.0 million and $32.0 million of revenues, respectively, and $5.5 million and $6.4 million of operating expenses from our foreign subsidiaries, respectively, and a 10% appreciation or depreciation of the U.S. dollar relative to the local currency exchange rates would result in an approximately $0.3 million and $0.2 million change in our operating income during the three months ended March 31, 2025 and 2024, respectively.
We maintain a system of disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that is designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Under the supervision and with the participation of our management, including our Co-Chief Executive Officers and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon the foregoing evaluation, our Co-Chief Executive Officers and our Chief Financial Officer concluded that as of March 31, 2025 our disclosure controls and procedures were not effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
Other than as set forth below under “Material Weakness and Remediation,” there have been no changes to our internal control over financial reporting during the fiscal quarter covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Material Weakness and Remediation
The Company previously identified in its 2024 Annual Report the following material weaknesses:
•The Company identified two material weaknesses in controls related to information technology general controls (“ITGCs”) at our Lingo Management, LLC and Tiger US Holdings, Inc. subsidiaries in the areas of user access, program change management, and information technology (“IT”) operations over IT systems and the reports generated from these systems used in the execution of controls that support the Company’s financial reporting processes. As a result, business-process automated and manual controls that were dependent on the affected ITGCs could have been adversely impacted.
•The Company identified a material weakness relating to the design and operating effectiveness of management's review controls over the investment valuation of Level 3 investments such that management's review procedures were not operating at a level of precision sufficient to prevent or detect a potential material misstatement in the consolidated statements.
•The Company identified a material weakness relating to the design and operating effectiveness of management’s review controls over the identification and disclosure of material related party transactions in accordance with Accounting Standards Codification (“ASC”) 850, Related Party Disclosures. Specifically, management’s review procedures were not operating at a level of precision sufficient to prevent or detect a potential material misstatement in the consolidated financial statements.
•The Company identified a material weakness relating to the design and operating effectiveness of management's review controls over the income tax provision such that management's review procedures were not operating at a level of precision to prevent or detect a potential material misstatement in the consolidated statements.
•The Company identified two material weaknesses related to the design and operating effectiveness of management's review controls over goodwill such that management did not adequately evaluate relevant factors and indicators to determine whether it was more likely than not that the fair value of a business segment was less than the carrying amount of goodwill and other intangibles assigned to that reporting unit as well as a lack of appropriate approval in accordance with Company policy over significant decisions involving goodwill.
•The Company identified a material weakness related to the design and operating effectiveness of controls related to journal entry controls. There was a lack of segregation of duties considerations associated within the journal entry approval workflow. The workflow in the system did not systemically prevent individuals who can post journal entries to also approve the same entries. Additionally, the Company did not retain evidence of review of certain journal entries.
•The Company identified material weaknesses in controls related to ITGCs at Bebe Stores Inc. in the areas of user access, program change management, and IT operations over IT systems and the reports generated from these systems used in the execution of controls that support the Company’s financial reporting processes. As a result, business process automated and manual controls that were dependent on the affected ITGCs could have been adversely impacted. Additionally, the Company did not consistently retain evidence of review, further contributing to the material weakness.
•The Company identified a material weakness in controls due to its inability to rely on the SOC 1 Type 2 reports associated with two third-party service organizations that support significant elements of its financial reporting processes over B. Riley Retail Solutions, LLC. Specifically, the Company did not have adequate ITGCs in place over the IT systems and related reports at these third-party service providers, which are used in the execution of controls supporting the Company’s financial reporting. As a result, business process automated and manual controls that were dependent on these ITGCs at the service organizations could have been adversely impacted.
Remediation of Material Weaknesses
Management continues to implement measures designed to ensure that the control deficiencies contributing to the material weaknesses noted above are remediated, such that the controls are designed, implemented, and operating effectively. The remediation actions for the material weaknesses noted above include:
• Prior to December 31, 2024, the Retail Solutions material weakness was remediated through the divestiture of the business in November 2024.
• Implementation and enhancement of its ITGCs and related policies. This includes providing resources, training and support to process owners and reviewers with a specific focus on understanding the risks being addressed by the controls they are performing, as well as requirements for sufficient documentation and evidence in the execution of the controls.
• Updating of its IT policies and procedures to enhance user access, change management, and IT operations processes to ensure timely and accurate assignment of access rights and prompt removal of access for terminated employees, and to ensure appropriate restriction of access rights based on job responsibilities.
• Designing of alternative processes and controls to mitigate the risk of the third-party services providers not producing the SOC 1 Type 2 reports.
• Implementation of measures designed to ensure controls are appropriately designed, implemented, and operating effectively as it relates to the material weakness identified in investment valuations, related party transactions, income taxes, goodwill impairment assessment, and journal entries. The remediation actions include the improvement of the precision level of management review controls, documentation retention and additional resources.
While the foregoing measures are intended to effectively remediate the material weaknesses, it is possible that additional remediation steps will be necessary. As such, as we continue to evaluate and implement our plan to remediate the material weaknesses, our management may decide to take additional measures to address the material weaknesses or modify the remediation steps described above. The weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period and management has concluded, through testing, that these controls are operating effectively.
We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that control deficiencies contributing to the material weaknesses are remediated as soon as possible.
Notwithstanding the material weaknesses described above, management has concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP.
Inherent Limitation on Effectiveness of Controls
Our management, including our Co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well- designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
The Company is subject to certain legal and other claims that arise in the ordinary course of its business. In particular, the Company and its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. In addition to such legal and other claims, reviews, investigations, and proceedings, the Company and its subsidiaries are subject to the risk of unasserted claims, including, among others, as it relates to matters related to Mr. Kahn and our investment in Freedom VCM. If such claims are made, however, the Company believes it has valid defenses from any such claim and any such claim would be without merit. The Company has not accrued for any such contingent liabilities, but such contingent liabilities could be realized which could have a material adverse impact on the Company’s financial condition.
On July 11, 2025, the Company’s subsidiary, B. Riley Securities, Inc. ("BRS"), received a demand letter from certain parties that invested in a special purpose entity (the “SPV”) that in turn invested in the going private transaction (the “Transaction”) in August 2023 of Franchise Group, Inc. An arbitration demand (the “Demand”) was filed by such parties with the American Arbitration Association on October 10, 2025 against BRS and related entities (the “BR Defendants”). The Demand alleges that the BR Defendants (i) failed to disclose certain material facts regarding FRG and the Transaction in violation of certain securities laws, (ii) committed fraud and/or civil conspiracy, and (iii) breached fiduciary duties and aided and abetted the breach of fiduciary duties. Such investors seek rescission of the aggregate investment amount of $37.5 million plus interest thereon and related fees and expenses. The Company believes such claims are meritless and intends to defend such action.
On February 14, 2025, a stockholder derivative complaint was filed by Michael Marchner in the Delaware Chancery Court on behalf of the Company and against the members of the Company’s Board of Directors. The complaint alleges that certain of the Company's officers and the board of directors (i) breached their fiduciary duties related to the Company’s involvement with Brian Kahn and subsequent legal issues, (ii) engaged in misconduct, and (iii) wasted corporate assets, including the approval of improper compensation. The Company believes that these claims are meritless and intends to defend this action.
On January 22, 2025, a stockholder derivative complaint was filed by James Smith in the Superior Court for Los Angeles County against the Company, certain of the Company’s executive officers and the members of the Company’s Board of Directors. The complaint alleges that certain of the Company's officers and directors (i) breached their fiduciary duties related to the Company’s involvement with Brian Kahn and subsequent legal issues, (ii) engaged in a waste of corporate assets, and (iii) received unjust enrichment. The Company believes that these claims are meritless and intends to defend this action.
On July 9, 2024, a putative class action was filed by Brian Gale, Mark Noble, Terry Philippas and Lawrence Bass in the Delaware Chancery Court against Freedom VCM, Mr. Kahn, Andrew Laurence, Matthew Avril, and the Company. This complaint alleges that former shareholders of FRG suffered damages due to alleged breaches of fiduciary duties by officers, directors and other participants in the August 2023 management-led take private transaction of FRG and that the Company aided and abetted those alleged breaches of fiduciary duties. The claim seeks an award of unspecified damages, rescissory damages and/or quasi-appraisal damages, disgorgement of profits, attorneys’ fees and expenses, and interest thereon. The Company believes these claims are meritless and intends to defend this action.
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.
On May 2, 2024, a putative class action was filed by Ted Donaldson in the Superior Court for the State of California, County of Los Angeles on behalf of all persons who acquired the Company’s senior notes pursuant to the shelf registration statement filed with the SEC on Form S-3 dated January 28, 2021, and the prospectuses filed and published on August 4, 2021 and December 2, 2021 (the “Offerings”). The action asserts claims under §§ 11, 12, and 15 of the Securities Act of 1933, as amended (the "Securities Act") against the Company, some of the Company's current and former officers and directors, and the financial institutions that served as underwriters and book runners for the Offerings. An amended complaint was filed on September 27, 2024. The amended complaint alleges that the offering documents failed to advise investors that Brian Kahn and/or one or more of his controlled entities was engaged in illicit business activities, that the Company, despite the foregoing, continued to finance transactions for Kahn, eventually enabling him and others to take FRG private, and that the foregoing was reasonably likely to draw regulatory scrutiny and reputational harm to the Company. The Company believes these claims are meritless and intends to defend this action.
On January 24, 2024, a putative securities class action complaint was filed by Mike Coan in U.S. Federal District Court, Central District of California, against the Company, Mr. Riley, Tom Kelleher and Phillip Ahn. The purported class includes persons and entities that purchased shares of the Company’s common stock between May 10, 2023 and November 9, 2023. A second putative class action lawsuit was filed on March 15, 2024 by the KL Kamholz Joint Revocable Trust (“Kamholz”). On August 8, 2024, this matter was consolidated with the Kamholz matter and an amended complaint was then filed on April 21, 2025. The amended complaint alleges that the Company failed to disclose to investors material financial details concerning a going private transaction involving FRG, and that the Company made false or misleading statements concerning the Company’s lending practices, its high concentration of risk in transactions involving Mr. Kahn and his affiliates, the condition and composition of the Company’s loan portfolio, the Company’s due diligence and risk management procedures, and the Company’s level of concern and internal scrutiny concerning Mr. Kahn after it learned he was potentially implicated in a fraud involving an unrelated third party. The amended complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Company cannot estimate the amount of potential liability, if any, that could arise from these matters and believes these claims are meritless and intends to defend these actions.
On September 21, 2023, the Company’s wholly owned subsidiary, B. Riley Commercial Capital, LLC (“BRCC”), received a demand alleging that certain payments to BRCC in the aggregate amount of approximately $32.2 million made by Sorrento Therapeutics, Inc. (“Sorrento”), a chapter 11 debtor in U.S. Bankruptcy Court, Southern District of Texas (the “Court”), pursuant to that certain Bridge Loan Agreement dated September 30, 2022 between Sorrento and BRCC, are avoidable as preferential transfers (the “Alleged Preferences”). On June 16, 2025, the liquidating trustee (the “Trustee”) on behalf of the Sorrento Liquidating Trust filed a complaint with the Court in an adversary proceeding seeking to avoid and recover the Alleged Preferences. On September 12, 2025, the Court denied BRCC’s motion to dismiss. The Company believes that the liquidating trustee’s claims lack merit and intends to continue to assert its statutory defenses to defeat such claims.
In light of the significant factual issues to be resolved with respect to the asserted claims and other proceedings described above and uncertainties regarding unasserted claims described above, at the present time reasonably possible losses cannot be estimated with respect to the asserted and unasserted claims described in the preceding paragraphs.
There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. A detailed discussion of our risk factors was included in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report on Form 10-Q. Any of the risks described in the Annual Report on Form 10-K for the year ended December 31, 2024 could materially affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made.
Except as set forth below, there have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2024.
If we are unable to satisfy the applicable continued listing requirements of Nasdaq, our securities could be delisted.
Our shares of common stock and preferred stock, and our senior notes (collectively, our “Securities”) are listed on the Nasdaq Global Market. Generally, among other requirements, we must timely file all required periodic financial reports with the SEC.
As previously disclosed, on October 1, 2025, the Company received a Staff Determination Letter from the Nasdaq Listing Qualifications Staff (the “Staff”) based on the Company's non-compliance with Nasdaq Listing Rule 5250(c)(1) (the “Filing Rule”), as previously notified by the Staff on April 3, 2025, May 21, 2025 and August 20, 2025. The basis for the Staff Determination Letter was that the Company had not yet filed its Quarterly Reports on Form 10-Q for the periods ended March 31, 2025 and June 30, 2025 (the “Q2 Delayed Report”), with the Securities and Exchange Commission (the “SEC”). The Company filed its Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Form 10-K”) on September 19, 2025 and is actively working towards the filing of the Q2 Delayed Report and the timely filing of its Quarterly Report on Form 10-Q for the period ended September 30, 2025 to ensure full compliance with the Listing Rules.
The Staff Determination Letter noted that, after the Staff’s review of the materials submitted by the Company on September 4, 2025 and September 19, 2025 (the “Updated Plan of Compliance”), it lacked the discretion within Nasdaq’s rules to grant the Company a further exception beyond the September 29, 2025 deadline that was previously granted to regain compliance with the Filing Rule. The Staff Determination Letter has no immediate effect and will not immediately result in the suspension of trading or delisting of the Company’s securities.
The Staff Determination Letter notified the Company that it may request a hearing before a Nasdaq Hearings Panel (“Hearings Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series. A request for a hearing regarding one or more delinquent filings will automatically stay the suspension of the Company’s securities for a period of at least 15 calendar days from the date of the hearing request. By Nasdaq rule, when a company requests a hearing for one or more late SEC periodic public filings, it must also request an extension of the stay through the hearing date and subsequently during any additional extension period granted by a Hearings Panel following the hearing. Hearings are typically scheduled to occur approximately 30-45 days after the date of the hearing request. The Company timely submitted a request for a hearing on October 8, 2025, including continued listing of its securities pending the hearing and the Hearings Panel’s decision.
There can be no assurance that the Hearings Panel will grant any of the Company’s requests for additional time. In the unlikely event that there is no ruling on the stay of a suspension prior to the expiration of the automatic stay, it has been Nasdaq’s practice to take no action until a Hearings Panel makes a ruling on the extended stay request. Once the Hearings Panel makes a ruling on the extended stay, the Company intends to make a public announcement. A hearing before the Hearings Panel was held on November 4, 2025. The Company anticipates receiving a determination from the Hearings Panel within 30 days following the date of the hearing.
There can be no assurance that the Hearings Panel will grant our request for reconsideration, that any appeal will be successful with the Hearings Panel, or that we will be able meet the continued listing requirements if we are permitted to continue trading on Nasdaq. Even if the Hearing Panel grants us additional time to file the Q2 Delayed Report and we meet all terms of any exception to the Nasdaq Filing Rule afforded by the Hearings Panel, there can be no assurance that we will be able to timely file the required reports or meet other continued listing requirements in the future.
If Nasdaq delists our Securities from trading on its exchange, we expect our Securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
•limited availability of market quotations for our Securities;
•a determination that our shares of common and/or preferred stock is a “penny stock” which will require brokers trading in our Securities to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
•a limited amount of news and analyst coverage; and
•a decreased ability to issue additional securities or obtain additional financing in the future.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
There have been no sales of unregistered securities during the quarter ended March 31, 2025, except as set forth
below:
As previously disclosed, on February 26, 2025, the Company issued to certain affiliates of Oaktree Capital Management, L.P. (the “Oaktree Holders”) warrants (the “Oaktree Warrants”) to purchase approximately 1,832,290 shares of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), at an exercise price of $5.14 per share, in connection with the Oaktree Credit Agreement. The Oaktree Warrants contain certain anti-dilution provisions pursuant to which, under certain circumstances, the Oaktree Holders would be entitled to exercise the Oaktree Warrants for up to 19.9% of the then-outstanding shares of Common Stock.
As previously disclosed, on March 26, 2025, the Company issued warrants (the “Exchange Warrants,” and together with the Oaktree Warrants, the “Warrants”) to purchase up to 351,012 shares of the Common Stock, at an exercise price of $10.00 per share, in connection with a private exchange transaction in which certain of the Company’s senior notes held by an investor were exchanged for newly-issued New Notes. The Exchange Warrants contain certain anti-dilution provisions and upon exercise, the holders of the Exchange Warrants are entitled to dividends and distributions as if the Exchange Warrants had been exercised in full prior to the dividend or distribution date.
The Warrants were issued in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act, as the transactions did not involve any public offering.
No underwriters were engaged in connection with these issuances, and no underwriting discounts or commissions were paid. The Warrants contain restrictions on transfer and may not be offered or sold in the United States absent registration or an applicable exemption from registration under the Securities Act and applicable state securities laws.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Certain of our officers have made elections to participate in, and are participating in, our employee stock purchase plan and 401(k) plan and have made, and may from time to time make, elections to have shares withheld upon the vesting of restricted stock units to cover withholding taxes, which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K). As of the date of this filing, none of the Company’s officers or directors has implemented a 10b5-1 trading plan.
The exhibits filed as part of this Quarterly Report are listed in the index to exhibits immediately preceding such exhibits, which index to exhibits is incorporated herein by reference.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
_______________________________________________
* Filed herewith.
** Furnished herewith.
# Management contract or compensatory plan or arrangement.
§ In accordance with Item 601(a)(5) of Regulation S-K, certain schedules and exhibits have not been filed. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.