B. Riley Financial (RILY) 8-K/A Financial Statements and Exhibits

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined financial information and explanatory notes presented below, which we refer to as the pro forma financial statements, show the impact of the proposed merger of B. Riley Financial, Inc. (“B. Riley”) and FBR & Co. (“FBR”) on the historical financial positions and results of operations of B. Riley and FBR. The pro forma financial statements have been prepared to illustrate the effects of the merger involving B. Riley and FBR under the acquisition method of accounting with B. Riley treated as the acquiror. Under the acquisition method of accounting, the assets and liabilities of FBR, as of the effective date of the merger, will be recorded by B. Riley at their respective fair values and the excess of the merger consideration over the fair value of FBR’s net assets will be allocated to goodwill. The unaudited pro forma condensed combined balance sheet as of March 31, 2017 is presented as if the merger with FBR had occurred on March 31, 2017. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2017 and fiscal year ended December 31, 2016 is presented as if the merger with FBR had occurred on January 1, 2016, the first day of B. Riley’s 2016 fiscal year. The unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2016 is also presented as if B. Riley’s acquisition of United Online, Inc. had occurred on January 1, 2016, the first day of B. Riley’s 2016 fiscal year. The historical combined financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the statement of operations only, expected to have a continuing impact on combined results of operations.

The pro forma financial statements are presented for illustrative purposes only and do not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of the period presented. The adjustments included in these pro forma financial statements are preliminary and may be revised. The pro forma financial statements also do not consider any potential impacts of potential revenue enhancements, anticipated cost savings and expense efficiencies, or asset dispositions, among other factors.

The pro forma financial statements and accompanying notes should be read in conjunction with the separate historical combined financial statements and accompanying notes of B. Riley, FBR and United Online, Inc. included in B. Riley’s and FBR’s respective Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q for the three months ended March 31, 2017 and the Current Report on Form 8-K/A filed by B. Riley with the SEC on August 25, 2016 incorporated herein by reference.

Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2017

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED BALANCE SHEET

(UNAUDITED)

AS OF MARCH 31, 2017

	B. RILEY FINANCIAL, INC. (a)			FBR & CO. (b)			PRO FORMA ADJUSTMENTS			PRO FORMA TOTAL
	(Dollars in thousands, except par value)
Assets
Current assets:
Cash and cash equivalents	$	71,541		$	75,771	(2)	$	(54,027	)	$	88,575
						(3)		(4,710	)
Restricted cash		518			-			-			518
Securities owned, at fair value		41,093			24,927			-			66,020
Receivables:
Securities borrowed		-			910,051			-			910,051
Customers and other		18,022			7,911			-			25,933
Due from related parties		4,267			-			-			4,267
Advances against customer contracts		1,474			-			-			1,474
Prepaid expenses and other current assets		3,592			16,943			-			20,535
Total current assets		140,507			1,035,603			(58,737	)		1,117,373
Property and equipment, net		5,409			12,008			-			17,417
Goodwill		48,903			4,360	(1)		5,299			54,202
						(4)		(4,360	)
Other intangible assets, net		39,239			-	(1)		6,500			45,739
Deferred income taxes		18,894			-	(1)		11,150			30,044
Other assets		1,981			1,287			-			3,268
Total assets	$	254,933		$	1,053,258		$	(40,148	)	$	1,268,043
Liabilities
Current liabilities:
Accounts payable	$	2,498		$	-		$	-		$	2,498
Accrued payroll and related expenses		6,159			5,754	(6)		3,500			15,413
Accrued value added tax payable		169			-			-			169
Income taxes payable		15,260			-			-			15,260
Accrued expenses and other liabilities		18,389			10,119	(5)		6,019			34,527
Deferred revenue		3,815			-			-			3,815
Due to related parties and partners		416			-			-			416
Securities loaned		-			913,262						913,262
Securities sold not yet purchased		1,659			-			-			1,659
Acquisition consideration payable		10,381									10,381
Mandatorily redeemable noncontrolling interests		3,850			-			-			3,850
Total current liabilities		62,596			929,135			9,519			1,001,250
Other liabilities		2,578			7,671			-			10,249
Senior Notes Payable		27,754			-			-			27,754
Total liabilities		92,928			936,806			9,519			1,039,253
Equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued		-			-			-			-
Common stock, $0.0001 par value; 40,000,000 shares authorized; 19,307,008 issued and oustanding at March 31, 2017		2			7	(1)		(7	)		2
Additional paid-in capital		143,228			255,889	(1)		(139,437	)		218,223
						(1)		5,299
						(1)		6,500
						(1)		11,150
						(2)		(54,027	)
						(4)		(4,360	)
						(5)		(6,019	)
Restricted Stock Units		-			8,961	(1)		(8,961	)		-
Retained earnings (deficit)		18,888			(148,405	)(3)		(4,710	)		10,678
						(6)		(3,500	)
						(7)		148,405
Accumulated other comprehensive income		(1,067	)		-			-			(1,067	)
Total stockholders' equity		161,051			116,452			(49,667	)		227,836
Noncontrolling interests		954			-						954
Total equity (deficit)		162,005			116,452			(49,667	)		228,790
Total liabilities and equity (deficit)	$	254,933		$	1,053,258		$	(40,148	)	$	1,268,043

The accompanying notes are an integral part of this statement.

Unaudited Pro Forma Condensed Combined Statement of Operations for the Three Months Ended March 31, 2017

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2017

	B. RILEY FINANCIAL, INC. (a)			FBR & CO. (b)			PRO FORMA ADJUSTMENTS			PRO FORMA TOTAL
	(Dollars in thousands, except share data)
Revenues:
Services and fees	$	52,818		$	30,838		$	-		$	83,656
Securities lending - interest income		-			5,484			-			5,484
Securities lending - interest expense		-			(3,777	)		-			(3,777	)
Sale of goods and products		79			-			-			79
Total net revenues		52,897			32,545			-			85,442
Operating expenses:
Direct cost of services		17,601			-			-			17,601
Cost of goods sold		59			-			-			59
Selling, general and administrative expenses		24,152			31,227	(8)		(1,630	)		53,928
						(9)		179
Restructuring charge		374			-			-			374
Total operating expenses		42,186			31,227			(1,451	)		71,962
Operating income		10,711			1,318			1,451			13,480
Other income (expense):
Interest income		132			-			-			132
Interest expense		(791	)		-			-			(791	)
Other income, net		-			-			-			-
Income before income taxes		10,052			1,318			1,451			12,821
Benefit (provision) for income taxes		3,849			(52	)(10)		(741	)		3,056
Net income (loss)		13,901			1,266			710			15,877
Net loss attributable to noncontrolling interests		(120	)		-			-			(120	)
Net income (loss) attributable to common stockholders	$	14,021		$	1,266		$	710		$	15,997
Cash dividends per share	$	0.26		$	0.20					$	0.26
Basic earnings per share	$	0.73		$	0.18					$	0.67
Diluted earnings per share	$	0.71		$	0.17					$	0.65
Weighted average basic shares outstanding		19,182,000			7,214,000				(11)		24,017,374
Weighted average diluted shares outstanding		19,627,000			7,339,000				(11)		24,462,199

The accompanying notes are an integral part of this statement.

Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2016

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(UNAUDITED)

FOR THE YEAR ENDED DECEMBER 31, 2016

	B. RILEY FINANCIAL, INC. (a)			FBR & CO. (b)			UNITED ONLINE, INC. (c)			PRO FORMA ADJUSTMENTS			PRO FORMA TOTAL
	(Dollars in thousands, except share data)
Revenues:
Services and fees	$	164,235		$	89,728		$	34,370	(13)	$	(113	)	$	288,220
Securities lending - interest income		-			29,977			-			-			29,977
Securities lending - interest expense		-			(21,388	)		-			-			(21,388	)
Sale of goods and products		26,116			-			2,084			-			28,200
Total net revenues		190,351			98,317			36,454			(113	)		325,009
Operating expenses:
Direct cost of services		40,857			-			15,198	(12)		(2,064	)		53,909
									(14)		(82	)
Cost of goods sold		14,755			-			-	(12)		2,064			16,819
Technology and development		-			-			4,167	(12)		(4,167	)		-
Selling, general and administrative expenses		82,127			124,810			22,501	(12)		4,167			233,580
									(15)		(2,743	)
									(16)		2,809
									(17)		(805	)
									(18)		714
Impairment of goodwill		-			1,259			-						1,259
Restructuring charge		3,887			-			296			-			4,183
Total operating expenses		141,626			126,069			42,162			(107	)		309,750
Operating income (loss)		48,725			(27,752	)		(5,708	)		(6	)		15,259
Other income (expense):
Interest income		318			-			323			-			641
Interest expense		(1,996	)		-			-			-			(1,996	)
Other income, net		-			-			741			-			741
Income (loss) before income taxes		47,047			(27,752	)		(4,644	)		(6	)		14,645
(Provision) benefit for income taxes		(14,321	)		(38,252	)		(1,390	)(19)		52,585			(1,378	)
Net income (loss)		32,726			(66,004	)		(6,034	)		52,579			13,267
Net Income attributable to noncontrolling interests		11,200			-			-			-			11,200
Net income (loss) attributable to common stockholders	$	21,526		$	(66,004	)	$	(6,034	)	$	52,579		$	2,067
Cash dividends per share	$	0.28		$	0.80								$	0.28
Basic earnings per share	$	1.19		$	(8.89	)							$	0.09
Diluted earnings per share	$	1.17		$	(8.89	)							$	0.09
Weighted average basic shares outstanding		18,106,621			7,428,000							(20)		22,941,995
Weighted average diluted shares outstanding		18,391,852			7,428,000							(20)		23,227,226

The accompanying notes are an integral part of this statement.

Notes to Unaudited Pro Forma Condensed Combined Financial Information

(Dollar amounts in thousands, except share data)

NOTE 1 - ACQUISITION

Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding FBR common share, excluding certain specified shares, will be converted into the right to receive 0.671 of a B. Riley common share. The total consideration paid by B. Riley is approximately $74,995, which includes the issuance of approximately 4.84 million B. Riley common shares with an assumed value for purposes of these unaudited pro forma condensed combined financial statements of approximately $72,531 based on the closing price of $15.00 for B. Riley’s common shares on March 31, 2017 and approximately $2,464 of consideration attributable to the fair value of FBR restricted stock units and performance stock units, which we refer to collectively as FBR units, attributable to the service period prior to March 31, 2017, as more fully described in Note 2 – Pro Forma Adjustments and Assumptions. In addition, pursuant to the merger agreement, prior to the effective time but not earlier than the 15th day prior to the anticipated closing date of the merger, the FBR board of directors intends to declare and cause FBR to pay a pre-closing dividend of up to and including $8.50 per FBR common share to the FBR shareholders if, after giving effect to such pre-closing dividend, FBR will have remaining at least $33,500 in cash and cash equivalents and certain financial instruments (subject to certain adjustments), plus any amounts necessary to pay any accrued transaction expenses, which we refer to as the minimum cash and financial instrument amount. In addition, if there are additional available funds remaining after the payment of a pre-closing dividend of $8.50 per share, and such additional available funds are in excess of $5,000 above the minimum cash and financial instrument amount, a portion of the excess available funds may be paid as part of the pre-closing dividend. On May 19, 2017, the FBR board of directors declared a pre-closing dividend of $7.61 per FBR common share (with a record date of May 30, 2017) and the pro forma condensed combined financial statements include adjustments, as more fully described below, as if the dividend on FBR common share and dividend right on FBR units had occurred prior to closing on March 31, 2017.

The merger agreement further provides that, at or prior to the effective time of the merger, the number of directors comprising the full B. Riley board of directors will be increased by one to eight, with Richard J. Hendrix, who is the Chairman, President and Chief Executive Officer of FBR, being appointed to fill the new seat in accordance with the terms of the new Hendrix employment agreement.

NOTE 2 - PRO FORMA ADJUSTMENTS AND ASSUMPTIONS

The pro forma adjustments to the condensed combined balance sheet give effect to the acquisition of FBR as if the transaction had occurred on March 31, 2017. The pro forma adjustments to the condensed combined statement of operations for the three months ended March 31, 2017 and fiscal year ended December 31, 2016 give effect to the acquisition of FBR as if the transactions had been completed as of January 1, 2016. The pro forma adjustments to the condensed combined statement of operations for the fiscal year ended December 31, 2016 also give effect to the acquisition of United Online, Inc. (“UOL”) as if the transactions had been completed as of January 1, 2016. The pro forma financial statements were based on, and should be read in conjunction with, the financial statements indicated below. The pro forma financial statements have been presented for informational purposes only and are not necessarily indicative of what the combined company’s results of operations and financial position would have been had the acquisition of FBR and UOL been completed on the dates indicated. The pro forma financial statements do not reflect the cost of any integration activities or benefits that may result from synergies that may be derived from any integration activities or corporate overhead that will not be duplicated. In addition, the pro forma financial statements do not purport to project the future results of operations or financial position of the combined company.

The pro forma condensed combined statement of operations for the three months ended March 31, 2017 exclude $1,600 of nonrecurring charges which resulted directly from the pending acquisition of FBR by B. Riley. These expenses primarily relate to professional fees directly related to the transaction.

The pro forma condensed combined statement of operations for the fiscal year ended December 31, 2016 exclude $6,774 of nonrecurring charges which resulted directly from the acquisition of UOL by B. Riley on July 1, 2016. These expenses primarily related to the acceleration of UOL outstanding restricted stock awards that vested upon closing the transaction in accordance with change in control provision and professional fees directly related to the transaction.

Balance Sheet – March 31, 2017

a. Derived from the unaudited balance sheet of B. Riley as of March 31, 2017 contained in the Form 10-Q filed with the SEC on May 10, 2017.

b. Derived from the unaudited balance sheet of FBR as of March 31, 2017 contained in the Form 10-Q filed with the SEC on May 9, 2017.

(1) Reflects the acquisition of FBR based on preliminary consideration of $74,995, compromising the issuance of B. Riley common shares based on the exchange ratio of 0.671 as provided for in the merger agreement and $2,464 of consideration attributable to the fair value of FBR units attributable to the service period prior to March 31, 2017, as more fully described in Note 2 – Pro Forma Adjustments and Assumptions. The preliminary consideration was determined using the closing share price of B. Riley common shares of $15.00 on March 31, 2017 and is subject to change based on the final closing price of B. Riley common shares on the closing date. The pro forma purchase price adjustments are based on B. Riley management’s estimate of the fair value of the assets and liabilities acquired, and are subject to change and future adjustment upon completion of a final valuation and to the extent that additional information is obtained about the facts and circumstances that will exist on the closing date, and have been made solely for the purpose of providing the unaudited pro forma combined financial information presented herewith. Differences between these provisional estimates and the final acquisition accounting will occur and these differences could have a material impact on the accompanying pro forma financial statements and B. Riley’s future results of operations and financial position.

The following table summarizes the consideration paid by B. Riley and the estimated fair values of the assets acquired.

Consideration paid by B. Riley:
Number of FBR common shares outstanding at March 31, 2017		7,088,142
Stock merger exchange ratio		0.671
Number of B. Riley common shares		4,756,144
Number of B. Riley common shares to be issued from acceleration of vesting for outstanding FBR stock options, restricted stock and RSU awards		79,230
Total number of B. Riley common shares to be issued		4,835,374
Closing market price of B. Riley common shares on March 31, 2017	$	15.00
Total value of B. Riley common shares	$	72,531
Fair value of RSU's attributable to service period prior to March 31, 2017 (a)		2,464
Total consideration	$	74,995

(a) Outstanding FBR unit awards were assumed by B. Riley and adjusted to give effect to the acquisition of FBR as if the transaction had occurred on March 31, 2017 to represent the right to receive 0.671 B. Riley common shares for each outstanding FBR unit which amounts to a fair value of $2,464. The fair value of the FBR units were determined based on the closing price of the B. Riley's common shares on March 31, 2017 and is subject to change based on the final closing price of B. Riley common shares on the closing date. The resulting fair value of the FBR units were apportioned as purchase consideration based on service provided to FBR as of March 31, 2017 with the remaining fair value of the FBR unit awards to be recognized prospectively over the restricted stock and FBR units’ remaining vesting period.

Tangible assets acquired and assumed:
Cash	$	21,744
Receivables		7,911
Securities borrowed		910,051
Securities owned		24,927
Prepaid expenses and other assets		18,230
Property and equipment		12,008
Accrued payroll and related expenses		(5,754	)
Accounts expenses and other liabilities		(16,138	)
Securities borrowed		(913,262	)
Other liabilities		(7,671	)
Deferred tax assets		11,150
Customer relationships		5,000
Tradename		1,500
Goodwill		5,299
Total	$	74,995

The total consideration for the merger has been reflected as $74,995. Total consideration paid was allocated to the tangible and intangible assets and liabilities assumed based on B. Riley management’s estimate of their respective fair values at the date of the merger with the remaining unallocated purchase price in the amount of $5,299 recorded as goodwill. The deferred tax asset is the result of tax attributes to be acquired from FBR (primarily net operating loss carryforwards) and the tax effect of the customer list and tradename which is not expected to be deductible for income tax purposes.

Management is responsible for the valuation of net assets and considered a number of factors when estimating the fair values and estimated useful lives of acquired assets and liabilities.

(2) Reflects the reduction in cash of $54,027 as if the FBR shareholders were paid a dividend of $7.61 per share on March 31, 2017 based upon the 7,088,142 FBR common shares outstanding as of March 31, 2017 and the accelerated vesting of 11,369 outstanding FBR stock options that are to be paid a cash dividend as if the transaction had occurred on March 31, 2017.

(3) Reflects estimated expenses of $4,710 to be incurred by B. Riley and FBR in connection with the acquisition of FBR by B. Riley.

(4) Reflects the elimination of historical goodwill and other intangible assets of FBR in the amount of $4,360.

(5) Reflects the dividend right of $6,019 that is payable in the amount of $7.61 for each of the 790,874 FBR unit awards as if the dividend was declared prior to March 31, 2017.

(6) Reflects sign-on bonus in the amount of $3,500 that is payable to Richard J. Hendrix, President and Chief Executive Officer of FBR, as a result of entering into a new employment agreement with B. Riley upon closing of the acquisition.

(7) Reflects the elimination of the historical retained earnings of FBR.

Statement of Operations – Three Months Ended March 31, 2017

a. Derived from the unaudited statement of operations of B. Riley for the three months ended March 31, 2017 contained in the Form 10-Q filed with the SEC on May 10, 2017.

b. Derived from the unaudited statement of operations of FBR for the three months ended March 31, 2017 contained in the Form 10-Q filed with the SEC on May 9, 2017.

(8) Reflects the elimination of nonrecurring charges in the amount of $1,630 included in the historical results of operations of B. Riley and FBR which resulted directly from the acquisition of FBR by B. Riley. These amounts primarily related to legal and other professional fees.

(9) Reflects the estimated amortization expense of $179 for intangible assets related to customer relationships acquired as a result of the acquisition of FBR using the straight-line method. The estimated useful life of the customer list in Note (1) above is estimated to be 7 years. Upon completion of the final valuation of FBR the fair value of intangible assets for the purchase accounting, the estimated useful life of the intangible assets may change.

(10) Reflects pro forma adjustment for the income taxes of $741 for the three months ended March 31, 2017 based on the impact of a combined federal and state statutory tax rate of 40.0% on the pro forma income and pro forma adjustments that is subject to income tax expense for FBR.

(11) Pro forma earnings per share, basic and diluted, are based on the weighted average number of B. Riley common shares as if the shares issued in connection with the acquisition of FBR occurred on January 1, 2016.  Pro forma earnings per share is computed by dividing pro forma net income by the pro forma weighted-average number of B. Riley common shares outstanding during the year as follows:

B. Riley Weighted Average Basic Shares outstanding prior to the acquisition of FBR	19,182,000
B. Riley newly issued shares in connection with the acquisition as if the acquisition occurred on January 1, 2017	4,835,374
Pro Forma Weighted Average Basic Shares outstanding	24,017,374
Effect of dilutive potential common shares:
Diluted effect of restricted stock awards	400,058
Contingently issuable shares	44,767
Pro Forma Weighted Average Diluted Shares outstanding	24,462,199

Statement of Operations - For the Year Ended December 31, 2016

a. Derived from the audited statement of operations of B. Riley for the fiscal year ended December 31, 2016 contained in the Form 10-K filed with the SEC on March 10, 2017.

b. Derived from the audited statement of operations of FBR for the fiscal year ended December 31, 2016 contained in the Form 10-K filed with the SEC on March 13, 2017.

c. Derived from the unaudited operating results of UOL for the period from January 1, 2016 to July 1, 2016. UOL was acquired by B. Riley on July 1, 2016 and the results of operations of UOL prior to the acquisition date of July 1, 2016 are not included in the historical statement of operation of B. Riley in a. above for the fiscal year ended December 31, 2016.

(12) Reflects the cost of goods sold of $2,064 that is reclassified from direct costs of services and selling and general and administrative expenses of $4,167 that is reclassified from technology and development expenses to conform to the presentation of B. Riley’s Pro Forma Condensed Combined Statement of Operations.

(13) Reflects the estimated reduction in revenues of $113 for the fair value adjustment for deferred revenue related to the acquisition of UOL on July 1, 2016.

(14) Reflects the reduction in depreciation expense of $82 for the fair value of fixed assets acquired as a result of the acquisition of UOL using the straight-line method. The estimated useful life of the fixed assets acquired is three years.

(15) Reflects the elimination of nonrecurring charges in the amount of $2,743 included in the historical results of operations of UOL and B. Riley which resulted directly from the acquisition of UOL by B. Riley on July 1, 2016. These amounts primarily related to legal and other professional fees.

(16) Reflects the estimated amortization expense of $2,809 for intangible assets related to customer relationships, advertising relationships, domain names, internally developed software and tradenames acquired as a result of the UOL on July 1, 2016. The estimated useful life of the amortizable intangible assets range from 0.5 years to eight years.

(17) Reflects the reduction in depreciation expense of $805 for the fair value of fixed assets and leasehold improvements acquired as a result of the acquisition of UOL using the straight-line method. The estimated useful life of the fixed assets acquired ranges from three to five years.

(18) Reflects the estimated amortization expense of $714 for intangible assets related to customer relationships acquired as a result of the acquisition of FBR using the straight-line method. The estimated useful life of the customer list in Note (1) above is estimated to be 7 years. Upon completion of the final valuation of FBR the fair value of intangible assets for the purchase accounting, the estimated useful life of the intangible assets may change.

(19) Reflects pro forma adjustment for the income taxes of $52,585 for the fiscal year ended December 31, 2016 based on the impact of a combined federal and state statutory tax rate of 40.0% on the pro forma income that is subject to income taxes after accounting for the net income allocated to noncontrolling interests.

(20) Pro forma earnings per share, basic and diluted, are based on the weighted average number of B. Riley common shares as if the shares issued in connection with the acquisition of FBR occurred on January 1, 2016.  Pro forma earnings per share is computed by dividing pro forma net income by the pro forma weighted-average number of B. Riley common shares outstanding during the year as follows:

B. Riley Weighted Average Basic Shares outstanding prior to the acquisition of FBR	18,106,621
B. Riley newly issued shares in connection with the acquisition as if the acquisition occurred on January 1, 2016	4,835,374
Pro Forma Weighted Average Basic Shares outstanding	22,941,995
Effect of dilutive potential common shares:
Diluted effect of restricted stock awards	198,852
Contingently issuable shares	86,379
Pro Forma Weighted Average Diluted Shares outstanding	23,227,226