| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( a) Principles of Consolidation
and Basis of Presentation The condensed consolidated
financial statements include the accounts of B. Riley Financial, Inc. and its wholly-owned and majority-owned subsidiaries. The
condensed consolidated financial statements also include the accounts of (a) Great American Global Partners, LLC which is controlled
by the Company as a result of its ownership of a 50% member interest, appointment of two of the three executive officers and significant
influence over the funding of operations, and (b) GA Retail Investments, L.P. which is controlled by the Company as a result of
its ownership of a 50% partnership interest, appointment of executive officers and significant influence over the operations.
The condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to interim financial
reporting guidelines and the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information
and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally
accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations.
In the opinion of the Company's management, all adjustments, consisting of only normal and recurring adjustments, necessary
for a fair presentation of the financial position and the results of operations for the periods presented have been included.
These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated
financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December
31, 2018, filed with the SEC on March 6, 2019. The results of operations for the six months ended June 30, 2019 are not necessarily
indicative of the operating results to be expected for the full fiscal year or any future periods. (b) Use of
Estimates The preparation of
the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and
reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such
as valuation of securities, allowance for doubtful accounts, the fair value of intangible assets and goodwill, the fair value
of mandatorily redeemable noncontrolling interests, fair value of share based arrangements and accounting for income tax valuation
allowances. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable
under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ. (c) Revenue
Recognition On January 1, 2018,
the Company adopted Accounting Standards Codification ("ASC") 606 — Revenue from Contracts with Customers
Revenues are recognized
when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the
consideration the Company expects to be entitled to in exchange for the goods or services. There have been no
material changes to the Company's revenue recognition accounting policy set forth in the Company's Annual Report on
Form 10-K for the year ended December 31, 2018. See Note 12 for information on revenue from contracts with customers. (d) Direct Cost of Services Direct cost of services
relates to service and fee revenues. The costs consist of employee compensation and related payroll benefits, travel expenses,
the cost of consultants assigned to revenue-generating activities and direct expenses billable to clients in the Valuation and
Appraisal segment. Direct costs of services include participation in profits under collaborative arrangements in which the Company
is a majority participant. Direct costs of services also include the cost of consultants and other direct expenses related to
Auction and Liquidation contracts pursuant to commission and fee based arrangements in the Auction and Liquidation segment. Direct
cost of services in the Principal Investments — United Online and magicJack segment include cost of telecommunications and
data center costs, personnel and overhead-related costs associated with operating the Company's networks, servers and data
centers, sales commissions associated with multi-year service plans, depreciation of network computers and equipment, amortization
expense, third party advertising sales commissions, license fees, costs related to providing customer support, costs related to
customer billing and processing of customer credit cards and associated bank fees. Direct cost of services does not include an
allocation of the Company's overhead costs. (e) Interest Expense — Securities
Lending Activities Interest expense
from securities lending activities is included in operating expenses related to operations in the Capital Markets segment. Interest
expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company. (f) Concentration of Risk Revenues in the Capital
Markets, Valuation and Appraisal and Principal Investments — United Online and magicJack segments are currently primarily
generated in the United States. Revenues in the Auction and Liquidation segment are primarily generated in the United States,
Australia, Canada and Europe. The Company's
activities in the Auction and Liquidation segment are executed frequently with, and on behalf of, distressed customers and secured
creditors. Concentrations of credit risk can be affected by changes in economic, industry, or geographical factors. The Company
seeks to control its credit risk and potential risk concentration through risk management activities that limit the Company's
exposure to losses on any one specific liquidation services contract or concentration within any one specific industry. To mitigate
the exposure to losses on any one specific liquidation services contract, the Company sometimes conducts operations with third
parties through collaborative arrangements. The Company maintains
cash in various federally insured banking institutions. The account balances at each institution periodically exceed the Federal
Deposit Insurance Corporation's ("FDIC") insurance coverage, and as a result, there is a concentration of credit
risk related to amounts in excess of FDIC insurance coverage. The Company has not experienced any losses in such accounts. The
Company also has substantial cash balances from proceeds received from auctions and liquidation engagements that are distributed
to parties in accordance with the collaborative arrangements. (g)
Advertising Expenses The Company expenses
advertising costs, which consist primarily of costs for printed materials, as incurred. Advertising costs totaled $584 and $1,192
for the three months ended June 30, 2019 and 2018, respectively, and $946 and $1,285 for the six months ended June 30, 2019 and
2018, respectively. Advertising expense is included as a component of selling, general and administrative expenses in the accompanying
condensed consolidated statements of income. (h)
Share-Based Compensation The Company's
share-based payment awards principally consist of grants of restricted stock, restricted stock units and costs associated with
the Company's employee stock purchase plan. In accordance with the applicable accounting guidance, share-based payment awards
are classified as either equity or liabilities. For equity-classified awards, the Company measures compensation cost for the grant
of membership interests at fair value on the date of grant and recognizes compensation expense in the condensed consolidated statements
of income over the requisite service or performance period the award is expected to vest. The fair value of the liability-classified
award will be subsequently remeasured at each reporting date through the settlement date. Change in fair value during the requisite
service period will be recognized as compensation cost over that period. In June 2018, the
Company adopted the 2018 Employee Stock Purchase Plan ("Purchase Plan") which allows eligible employees to purchase
common stock through payroll deductions at a price that is 85% of the market value of the common stock on the last day of the
offering period. In accordance with the provisions of ASC 718, Compensation — Stock Compensation (i) Income Taxes The Company recognizes
deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the condensed
consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between
the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result
in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards
is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized
in future periods. Tax benefits of operating loss carryforwards are evaluated on an ongoing basis, including a review of historical
and projected future operating results, the eligible carryforward period, and other circumstances. If it becomes more likely than
not that a tax asset will be used, the related valuation allowance on such assets would be reduced. The Company recognizes
tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the position. Once this threshold has been met, the Company's
measurement of its expected tax benefits is recognized in its financial statements. The Company accrues interest on unrecognized
tax benefits as a component of income tax expense. Penalties, if incurred, would be recognized as a component of income tax expense. (j) Cash and
Cash Equivalents The Company considers
all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. (k) Restricted
Cash As of June 30, 2019,
restricted cash balance of $2,635 included $470 cash collateral for one of the Company's telecommunication suppliers, $365
certificate of deposits collateral for certain letters of credit and $1,800 of cash collateral related to a retail liquidation
engagement. As of December 31, 2018, restricted cash balance of $838 included $469 cash collateral for one of the Company's
telecommunication suppliers and $369 certificate of deposits collateral for certain letters of credit. (l)
Securities Borrowed and Securities Loaned Securities borrowed
and securities loaned are recorded based upon the amount of cash advanced or received. Securities borrowed transactions facilitate
the settlement process and require the Company to deposit cash or other collateral with the lender. With respect to securities
loaned, the Company receives collateral in the form of cash. The amount of collateral required to be deposited for securities
borrowed, or received for securities loaned, is an amount generally in excess of the market value of the applicable securities
borrowed or loaned. The Company monitors the market value of the securities borrowed and loaned on a daily basis, with additional
collateral obtained, or excess collateral recalled, when deemed appropriate. The Company accounts
for securities lending transactions in accordance with ASC "Topic 210: Balance Sheet," (m)
Due from/to Brokers, Dealers, and Clearing Organizations The Company clears
all of its proprietary and customer transactions through other broker-dealers on a fully disclosed basis. The amount receivable
from or payable to the clearing brokers represents the net of proceeds from unsettled securities sold, the Company's clearing
deposit and amounts receivable for commissions less amounts payable for unsettled securities purchased by the Company and amounts
payable for clearing costs and other settlement charges. This amount also includes the cash collateral received for securities
loaned less cash collateral for securities borrowed. Any amounts payable would be fully collateralized by all of the securities
owned by the Company and held on deposit at the clearing broker. (n)
Accounts Receivable Accounts receivable
represents amounts due from the Company's Auction and Liquidation, Valuation and Appraisal, Capital Markets and Principal
Investments — United Online and magicJack customers. The Company maintains an allowance for doubtful accounts for estimated
losses inherent in its accounts receivable portfolio. In establishing the required allowance, management utilizes a specific customer
identification methodology. Management also considers historical losses adjusted for current market conditions and the customers'
financial condition and the current receivables aging and current payment patterns. Account balances are charged off against the
allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does
not have any off-balance sheet credit exposure related to its customers. The Company's bad debt expense and changes in the
allowance for doubtful accounts for the three and six months ended June 30, 2019 and 2018 are included in Note 6. (o)
Leases The Company determines
if an arrangement is, or contains, a lease at the inception date. Operating leases are included in right-of-use assets, with the
related liabilities included in operating lease liabilities in the condensed consolidated balance sheet. Operating lease assets
represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments arising from the lease. Operating lease assets and liabilities are recognized at the lease commencement date based on
the estimated present value of lease payments over the lease term. We use our estimated incremental borrowing rate in determining
the present value of lease payments. Variable components of the lease payments such as fair market value adjustments, utilities,
and maintenance costs are expensed as incurred and not included in determining the present value. Our lease terms include options
to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized
on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components which are accounted
for as a single lease component. See Note 8 for additional information on leases. (p)
Property and Equipment Property and equipment
are stated at cost. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of
the assets. Property and equipment held under capital leases are amortized on a straight-line basis over the shorter of the lease
term or estimated useful life of the asset. Depreciation and amortization expense on property and equipment was $1,487 and $1,187
for the three months ended June 30, 2019 and 2018, respectively, and $3,023 and $2,364 for the six months ended June 30, 2019
and 2018, respectively. (q)
Loans Receivable Loans receivable
are measured at historical cost and reported at their outstanding principal balances net of any unearned income, charge-offs,
unamortized deferred fees and costs on originated loans, and for purchased loans, net of any unamortized premiums or discounts.
Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over
the lives of the related loans. Unearned income, discounts and premiums are amortized to interest income using a level yield methodology.
As of June 30, 2019 and December 31, 2018, total loans receivable have a carrying value of $250,521 and $38,794, respectively.
The loans receivable carried at cost have various maturity dates ranging from May 2020 to June 2022. (r) Securities
and Other Investments Owned and Securities Sold Not Yet Purchased Securities owned
consist of marketable securities and investments in partnership interests and other securities recorded at fair value. Securities
sold, but not yet purchased represents obligations of the Company to deliver the specified security at the contracted price and
thereby create a liability to purchase the security in the market at prevailing prices. Changes in the value of these securities
are reflected currently in the results of operations. As of June 30, 2019
and December 31, 2018, the Company's securities and other investments owned and securities sold not yet purchased at fair
value consisted of the following securities:
June 30, December 31,
2019 2018
Securities and other investments owned:
Common and preferred stocks and warrants $ 180,089 $ 193,459
Corporate bonds 23,170 18,825
Fixed income securities 5,767 3,825
Loans receivable at fair value 41,847 33,731
Partnership interests and other 19,417 23,737
$ 270,290 $ 273,577
Securities sold not yet purchased:
Common stocks $ 15,855 $ 11,130
Corporate bonds 21,158 16,338
Fixed income securities 5,741 10,155
$ 42,754 $ 37,623 (s) Fair Value Measurements The Company's
assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers
factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that
the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market. In general, fair values determined by Level 1 inputs utilize quoted
prices (unadjusted) for identical instruments that are highly liquid, observable and actively traded in over-the-counter markets.
Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets,
quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are
observable and can be corroborated by market data. Level 3 inputs are unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or liabilities. In certain cases, the inputs used to measure
fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within
which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant
to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the
fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The Company's
securities and other investments owned and securities sold and not yet purchased are comprised of common and preferred stocks
and warrants, corporate bonds, loans receivable valued at fair value and investments in partnerships. Investments in common stocks
that are based on quoted prices in active markets are included in Level 1 of the fair value hierarchy. The Company also holds
nonpublic common and preferred stocks and warrants for which there is little or no public market and fair value is determined
by management on a consistent basis. For investments where little or no public market exists, management's determination
of fair value is based on the best available information which may incorporate management's own assumptions and involves
a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent
sales prices of the issuer's securities and liquidity risks. These investments are included in Level 3 of the fair value
hierarchy. Investments in partnership interests include investments in private equity partnerships that primarily invest in equity
securities, bonds, and direct lending funds. The Company also invests in priority investment funds and the underlying securities
held by these funds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption
of amounts invested by the Company. The Company's partnership and investment fund interests are valued based on the Company's
proportionate share of the net assets of the partnerships and funds; the value for these investments are derived from the most
recent statements received from the general partner or fund administrator. These partnership and investment fund interests are
valued at net asset value ("NAV") in accordance with ASC "Topic 820: Fair Value Measurements The fair value of
mandatorily redeemable noncontrolling interests is determined based on the issuance of similar interests for cash, references
to industry comparables, and relied, in part, on information obtained from appraisal reports and internal valuation models. The following tables
present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of June
30, 2019 and December 31, 2018.
Financial Assets and Liabilities Measured at Fair Value
on a Recurring Basis at June 30, 2019 Using
Fair value at
June 30, Quoted prices
in active markets for identical assets Other
observable inputs Significant
unobservable inputs
2019 (Level 1) (Level 2) (Level 3)
Assets:
Securities and other investments owned:
Common and preferred stocks and warrants $ 180,089 $ 147,434 $ — $ 32,655
Corporate bonds 23,170 — 23,170 —
Fixed income securities 5,767 — 5,767 —
Loans receivable at fair value 41,847 — — 41,847
Total 250,873 $ 147,434 $ 28,937 $ 74,502
Investment funds valued at net asset value (1) 19,417
Total assets measured at fair value $ 270,290
Liabilities:
Securities sold not yet purchased:
Common stocks $ 15,855 $ 15,855 $ — $ —
Corporate bonds 21,158 — 21,158 —
Fixed income securities 5,741 — 5,741 —
Total securities sold not yet purchased 42,754 15,855 26,899 —
Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,224 — — 4,224
Total liabilities measured at fair value $ 46,978 $ 15,855 $ 26,899 $ 4,224
Financial Assets and Liabilities Measured at Fair Value
on a Recurring Basis at December 31, 2018 Using
Fair value at
Quoted prices
in active markets for identical assets Other
observable inputs Significant
unobservable inputs
2018 (Level 1) (Level 2) (Level 3)
Assets:
Securities and other investments owned:
Common and preferred stocks and warrants $ 193,459 $ 168,882 $ — $ 24,577
Corporate bonds 18,825 — 18,825 —
Fixed income securities 3,825 — 3,825 —
Loans receivable at fair value 33,731 — — 33,731
Total 249,840 $ 168,882 $ 22,650 $ 58,308
Investment funds valued at net asset value (1) 23,737
Total assets measured at fair value $ 273,577
Liabilities:
Securities sold not yet purchased:
Common stocks $ 11,130 $ 11,130 $ — $ —
Corporate bonds 16,338 — 16,338 —
Fixed income securities 10,155 — 10,155 —
Total securities sold not yet purchased 37,623 11,130 26,493 —
Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,633 — — 4,633
Total liabilities measured at fair value $ 42,256 $ 11,130 $ 26,493 $ 4,633
(1) Certain investments that are measured at fair value using
the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy in
accordance with ASC "Topic 820 Fair Value Measurements." As
of June 30, 2019 and December 31, 2018, financial assets measured and reported at fair value on a recurring basis and classified
within Level 3 were $74,502 and $58,308, respectively, or 3.8% and 3.0%, respectively, of the Company's assets.
In determining the fair value for these Level 3 financial assets, the Company analyzes various financial, performance and market
factors to estimate the value, including where applicable, over-the-counter market trading activity. The following table
summarizes the significant unobservable inputs in the fair value measurement of level 3 financial assets and liabilities by category
of investment and valuation technique as of June 30, 2019:
Fair value at
June 30, Weighted
2019 Valuation Technique Unobservable Input Range Average
Assets:
Common and preferred stocks and warrants $ 32,655 Market approach Over-the-counter trading activity $11.00/share $ 11.00
Market price of related security $0.34/share $ 0.34
Recent transaction $1,515.15/share $ 1,515.15
Yield analysis Market yield 13.0% 13.0 %
Option pricing model Annualized volatility 26% - 67% 48 %
Discounted cash flow Cost of capital 12.1% 12.1 %
Loans receivable at fair value 41,847 Discounted cash flow Market interest rate 6.0% - 18.0% 12.7 %
Market approach Market price of related security $11.51-$1,515.15/share
$ 792.73
Total level 3 assets measured at fair value $ 74,502
Liabilities:
Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,224 Market approach Operating income multiple 6.0x 6.0x The changes in Level
3 fair value hierarchy during the six months ended June 30, 2019 and 2018 are as follows:
Level 3 Level 3 Changes During the Period Level 3
Balance at Fair Relating to Purchases, Transfer in Balance at
Beginning of Value Undistributed Sales and and/or out End of
Year Adjustments Earnings Settlements of Level 3 Period
Six Months Ended June 30, 2019
Common and preferred stocks and warrants $ 24,577 $ 5,267 $ 1,360 $ 1,451 $ — $ 32,655
Loans receivable at fair value 33,731 8,619 475 (978 ) — 41,847
Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,633 — (409 ) — — 4,224
Six Months Ended June 30, 2018
Common stocks and warrants $ 28,346 $ (3,246 ) $ 578 $ 544 $ — $ 26,222
Loans receivable at fair value 33,713 (2 ) — (16,882 ) — 16,829
Partnership interests and other 26,104 968 (685 ) 18,279 — 44,666
Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,478 — (240 ) — — 4,238 The amount reported
in the table above for the six months ended June 30, 2019 and 2018 includes the amount of undistributed earnings attributable
to the noncontrolling interests that is distributed on a quarterly basis. The carrying amounts reported in the condensed consolidated
financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses
and other liabilities approximate fair value based on the short-term maturity of these instruments. The
carrying amount of the senior notes payable and term loan approximate fair value because the contractual interest rates or
effective yields of such instruments are consistent with current market rates of interest for instruments of comparable
credit risk. During the six months
ended June 30, 2019 and 2018, there were no assets or liabilities measured at fair value on a non-recurring basis. (t)
Derivative and Foreign Currency Translation The Company periodically
uses derivative instruments, which primarily consist of the purchase of forward exchange contracts, for certain Auction and Liquidation
engagements with operations outside the United States. The Company did not use any derivative contracts during the six months
ended June 30, 2019. During the six months ended June 30, 2018, the Company's use of derivatives consisted of the purchase
of forward exchange contracts (a) in the amount of $54,406 Canadian dollars, that were settled during the six months ended June
30, 2018 and (b) $1,500 Euro's that settled in March 2018. The net loss from
forward exchange contracts was $121 and $91 during the three months and six months ended June 30, 2018, respectively. This amount
is reported as a component of selling, general and administrative expenses in the condensed consolidated statements of income. The Company transacts
business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined
to be the local country's currency, revenues and expenses of operations outside the United States are translated into United
States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated
into United States dollars using year-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 condensed consolidated
balance sheets. Transaction (loss) gains were ($139) and $756 during the three months ended June 30, 2019 and 2018, respectively,
and ($325) and $894 during the six months ended June 30, 2019 and 2018, respectively. These amounts are included in selling, general
and administrative expenses in the Company's condensed consolidated statements of income. (u)
Common Stock Warrants The common stock
warrants entitle the holders of the warrants to acquire shares of the Company's common stock from the Company at a price
of $17.50 per share (the "Exercise Price"), subject to, among other matters, the proper completion of an exercise
notice and payment. The Exercise Price and the number of shares of Company common stock issuable upon exercise are subject to
customary anti-dilution and adjustment provisions, which include stock splits, subdivisions or reclassifications of the Company's
common stock. The common stock warrants expire on July 3, 2022. As of December 31, 2018, warrants to purchase 821,816 shares of
common stock were outstanding. On May 16, 2019, the Company repurchased 638,311 warrants for $2,777 ($4.35 per warrant) which
is included in common stock warrants repurchased in the condensed consolidated statements of equity. As of June 30, 2019, warrants
to purchase 183,505 shares of common stock were outstanding. (v)
Equity Investment bebe stores, inc. At June 30, 2019,
the Company had a 30.5% ownership interest in bebe stores, inc. ("bebe"). The equity ownership in bebe is accounted
for under the equity method of accounting, and is included in prepaid expenses and other assets in the condensed consolidated
balance sheets. National Holdings
Corporation On November 14, 2018,
the Company entered into an agreement to acquire shares of National Holdings Corporation ("National Holdings"), a
Nasdaq-listed issuer, from Fortress Biotech, Inc. for an aggregate purchase price totaling approximately $22.9 million. The transaction
was completed in two tranches. In the first tranche, which was completed in the fourth quarter of 2018, the Company acquired shares
representing 24% of the total outstanding shares of National Holdings. The second tranche was completed in the first quarter of
2019. As of June 30, 2019, the Company had purchased 6,159,550 shares of National Holdings' common stock, representing 48.8%
of National Holdings' outstanding shares, at $3.25 per share. The carrying value for the National Holdings investment is
included in prepaid expenses and other assets in the condensed consolidated balance sheets. The equity ownership in National Holdings
is accounted for under the equity method of accounting. (w)
Statements of Cash Flows – Supplemental Non-cash Disclosures During the six months
ended June 30, 2018, non-cash investing activities included the conversion of a loan receivable in the amount of $16,867 and accrued
interest receivable of $51 into an equity investment in bebe that totaled $16,918. (x)
Variable Interest Entity In January 2018,
the operations of GACP II, LP, a private debt investment limited partnership (the "Partnership") commenced operations.
The Company's investment in the Partnership is a variable interest entity ("VIE") since the unaffiliated limited
partners do not have substantive kick-out or participating rights to remove the Company's subsidiary that is the general
partner managing the Partnership. The Company has determined that it is not the primary beneficiary due to the fact that its fee
arrangements are considered at-market and thus not deemed to be variable interests, and |
