B Riley Financial (RILY) Risk Analysis

The market price of the Depositary Shares will depend on many factors, which may change from time to time, including: - prevailing interest rates, increases in which may have an adverse effect on the market price of the Depositary Shares;- the annual yield from distributions on the Depositary Shares as compared to yields on other financial instruments;- general economic and financial market conditions;- government action or regulation;- the financial condition, performance and prospects of the Company and its competitors;- changes in financial estimates or recommendations by securities analysts with respect to the Company, its competitors or the industry in which the Company operates;- the Company's issuance of additional preferred equity or debt securities; and - actual or anticipated variations in quarterly operating results of the Company and its competitors. As a result of these and other factors, investors who purchase the Depositary Shares may experience a decrease, which could be substantial and rapid, in the market price of the Depositary Shares, including decreases unrelated to the Company's operating performance or prospects.

Upon the occurrence of a Delisting Event or Change of Control (each as defined in the certificate of designation for each series of the Existing Preferred Stock, respectively), holders of the Depositary Shares will have the right (unless, prior to the Delisting Event Conversion Date or Change of Control Conversion Date (each as defined in the certificate of designation for each series of the Existing Preferred Stock, respectively), as applicable, the Company has provided or provide notice of the Company's election to redeem such series of Existing Preferred Stock) to direct the depositary to convert some or all of such series of Existing Preferred Stock underlying their Depositary Shares into the Company's common stock (or equivalent value of alternative consideration), and under these circumstances the Company will also have a special optional redemption right to redeem such series of Existing Preferred Stock. Upon such a conversion, the holders will be limited to a maximum number of shares of the Company's common stock equal to the Share Cap (as defined in the certificate of designation for each series of the Existing Preferred Stock, respectively) multiplied by the number of shares of such series of Existing Preferred Stock converted. If the common stock price is less than $11.49 in the case of the Series A Preferred Stock (which is approximately 50% of the closing sale price per share of the Company's common stock on October 1, 2019) or $13.39 in the case of the Series B Preferred Stock (which is approximately 50% of the closing sale price per share of the Company's common stock on August 31, 2020), subject to adjustment, the holders will receive a maximum number of shares of the Company's common stock per depositary share, which may result in a holder receiving value that is less than the liquidation preference of the Depositary Shares. In addition, those features of the Existing Preferred Stock and Depositary Shares may have the effect of inhibiting a third party from making an acquisition proposal for the Company or of delaying, deferring or preventing a change of control of the Company under circumstances that otherwise could provide the holders of the Company's common stock and Depositary Shares with the opportunity to realize a premium over the then-current market price or that shareholders may otherwise believe is in their best interests.

The Existing Preferred Stock and the Depositary Shares have not been rated and may never be rated. It is possible, however, that one or more rating agencies might independently decide to assign a rating to the Depositary Shares or that the Company may elect to obtain a rating of the Depositary Shares in the future. Furthermore, the Company may elect to issue other securities for which the Company may seek to obtain a rating. If any ratings are assigned to the Depositary Shares in the future or if the Company issues other securities with a rating, such ratings, if they are lower than market expectations or are subsequently lowered or withdrawn, could adversely affect the market for, or the market value of, the Depositary Shares. Ratings reflect the views of the issuing rating agency or agencies, and such ratings could at any time be revised downward, placed on negative outlook or withdrawn entirely at the discretion of the issuing rating agency or agencies. Furthermore, a rating is not a recommendation to purchase, sell or hold any particular security, including the Depositary Shares. Ratings do not reflect market prices or the suitability of a security for a particular investor, and any future rating of the Depositary Shares may not reflect all risks related to the Company and its business, or the structure or market value of the Depositary Shares.

The Company is allowed to issue additional shares of Existing Preferred Stock and additional series of preferred stock that would rank on a parity with the Existing Preferred Stock as to dividend payments and rights upon the Company's liquidation, dissolution or winding up of the Company's affairs pursuant to the Company's certificate of incorporation and the certificate of designation for the Existing Preferred Stock without any vote of the holders of the Existing Preferred Stock. The Company's certificate of incorporation authorizes the Company to issue up to 1,000,000 shares of preferred stock in one or more series on terms determined by the Company's Board of Directors. However, the use of depositary shares enables the Company to issue significant amounts of preferred stock, notwithstanding the number of shares authorized by the Company's certificate of incorporation. The issuance of additional shares of Existing Preferred Stock and additional series of parity preferred stock could have the effect of reducing the amounts available to the Existing Preferred stockholders upon the Company's liquidation or dissolution or the winding up of the Company's affairs. It also may reduce dividend payments on the Existing Preferred Stock issued and outstanding if the Company does not have sufficient funds to pay dividends on all Existing Preferred Stock outstanding and other classes of stock with equal priority with respect to dividends. In addition, although holders of the Depositary Shares are entitled to limited voting rights (discussed further below), the holders of the Depositary Shares will vote separately as a class along with all other outstanding series of the Company's preferred stock that the Company may issue upon which like voting rights have been conferred and are exercisable. As a result, the voting rights of holders of the Depositary Shares may be significantly diluted, and the holders of such other series of preferred stock that the Company may issue may be able to control or significantly influence the outcome of any vote. Future issuances and sales of parity preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for the Depositary Shares and the Company's common stock to decline and may adversely affect the Company's ability to raise additional capital in the financial markets at times and prices favorable to the Company. Such issuances may also reduce or eliminate the Company's ability to pay dividends on the Company's common stock.

In the event of a bankruptcy, liquidation, dissolution or winding-up of the affairs of the Company, the Company's assets will be available to pay obligations on the 6.875% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share (the "Series A Preferred Stock") and the 7.375% Series B Cumulative Perpetual Preferred Stock, par value $0.0001 per share (the "Series B Preferred Stock" and, together with the Series A Preferred Stock, the "Existing Preferred Stock"), which ranks in parity with the Series A Preferred Stock, only after all of the Company's indebtedness and other liabilities have been paid. The rights of holders of the Existing Preferred Stock to participate in the distribution of the Company's assets will rank junior to the prior claims of the Company's current and future creditors and any future series or class of preferred stock the Company may issue that ranks senior to the Existing Preferred Stock. In addition, the Existing Preferred Stock effectively ranks junior to all existing and future indebtedness and other liabilities of (as well as any preferred equity interests held by others) the Company's existing subsidiaries and any future subsidiaries. The Company's existing subsidiaries are, and any future subsidiaries would be, separate legal entities and have no legal obligation to pay any amounts to the Company in respect of dividends due on the Existing Preferred Stock. If the Company is forced to liquidate its assets to pay its creditors, the Company may not have sufficient assets to pay amounts due on any or all of the Existing Preferred Stock then outstanding. The Company and its subsidiaries have incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Existing Preferred Stock. The Company may incur additional indebtedness and become more highly leveraged in the future, which could harm the Company's financial position and potentially limit cash available to pay dividends. As a result, the Company may not have sufficient funds remaining to satisfy its dividend obligations relating to the Existing Preferred Stock if the Company incurs additional indebtedness. In January 2025, the Company suspended payment of cash dividends on its Series A Preferred Stock and Series B Preferred Stock. Future offerings of debt or senior equity securities may adversely affect the market price of the Depositary Shares. If the Company decides to issue debt or senior equity securities in the future, it is possible that these securities will be governed by an indenture or other instrument containing covenants restricting the Company's operating flexibility. Additionally, any convertible or exchangeable securities that the Company issues in the future may have rights, preferences and privileges more favorable than those of the Existing Preferred Stock and may result in dilution to owners of the Depositary Shares. The Company and, indirectly, the Company's shareholders, will bear the cost of issuing and servicing such securities. Because the Company's decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond the Company's control, the Company cannot predict or estimate the amount, timing or nature of the Company's future offerings. Thus, holders of the Depositary Shares will bear the risk of the Company's future offerings reducing the market price of the Depositary Shares and diluting the value of their holdings in the Company.

The Depositary Shares are trading on the Nasdaq Global Market but an active trading market or the Depositary Shares may be limited and the trading price of the Depositary Shares could be adversely affected. The Depositary Shares may trade at prices higher or lower than their initial offering price. The trading price of the Depositary Shares also depends on many factors, including, but not limited to: - prevailing interest rates;- the market for similar securities;- general economic and financial market conditions; and - the Company's financial condition, results of operations and prospects.

As of June 30, 2026, the Company executed nine Section 3(a)(9) exchanges whereby they exchanged outstanding units of various series of senior notes for shares of the Company's Common Stock in an effort to decrease the Company's outstanding indebtedness. As a result of these Section 3(a)(9) exchanges, the outstanding shares of our Common Stock increased by 8,358,495 shares. We may issue additional shares of Common Stock in similar Section 3(a)(9) exchanges or other capital raising transactions to further pay down the Company's outstanding indebtedness. Additional issuances will dilute the ownership interest of our common stockholders. Investors who purchase our shares will likely pay different prices, and so may experience different outcomes in their investment results. Investors may experience declines in the value of their shares as a result of share sales made at prices lower than the prices they paid. In addition, future issuances of Common Stock could depress the market price of our common stock and impair our ability to raise capital. We cannot predict the effect that future issuances of our common stock would have on the market price of our common stock. As a result of the Section 3(a)(9) exchanges and other issuances of Common Stock during the quarter, the aggregate beneficial ownership of our executive officers, directors and their affiliates declined from approximately 25.4% as reported in our Annual Report on Form 10-K/A to approximately 21.4% of our outstanding Common Stock as of August 3, 2026.

The voting rights of holders of Depositary Shares are limited. The Company's common stock is the only class of the Company's securities that carries full voting rights. Voting rights for holders of Depositary Shares exist primarily with respect to the ability to elect (together with the holders of other outstanding series of the Company's preferred stock, or Depositary Shares representing interests in the Company's preferred stock, or additional series of preferred stock the Company may issue in the future and upon which similar voting rights have been or are in the future conferred and are exercisable) two additional directors to the Company's Board of Directors in the event that six quarterly dividends (whether or not declared or consecutive) payable on the Existing Preferred Stock are in arrears, and with respect to voting on amendments to the Company's certificate of incorporation or certificate of designation (in some cases voting together with the holders of other outstanding series of the Company's preferred stock as a single class) that materially and adversely affect the rights of the holders of Depositary Shares (and other series of preferred stock, as applicable) or create additional classes or series of the Company's stock that are senior to the Existing Preferred Stock, provided that in any event adequate provision for redemption has not been made. Other than the limited circumstances described herein, holders of Depositary Shares will not have any voting rights. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Existing Preferred Stock. On April 30, 2026, the Company did not pay the quarterly dividend that would otherwise have been payable on its Series A Preferred Stock and Series B Preferred Stock for the Dividend Period (as defined in the applicable Certificate of Designation) ended April 30, 2026. This was the sixth quarterly Dividend Period for which dividends on the Series A Preferred Stock and Series B Preferred Stock have not been paid since the Company's announcement on January 21, 2025 of the temporary suspension of preferred dividends. As a result, a "Preferred Dividend Default" has occurred under each Certificate of Designation and the voting rights to elect two directors to the Company's Board of Directors subject to compliance with the procedures and process outlined in the each Certificate of Designation and the Company's by-laws will continue until all dividends accumulated and unpaid on the Series A Preferred Stock and Series B Preferred Stock for all past Dividend Periods shall have been fully paid.

Under the terms of the indentures governing our senior notes, we may from time to time without notice to, or the consent of, the holders of our senior notes, create and issue additional notes, including notes that are senior to our publicly-traded senior notes and including the issuance of notes with a security interest. Additional notes of the same series will not be issued unless such issuance would constitute a "qualified reopening" for U.S. federal income tax purposes. From March 26, 2025 through July 11, 2025, the Company completed five private exchange transactions with certain institutional investors pursuant to which the investors exchanged approximately $355.0 million of our outstanding publicly traded senior notes for approximately $228.4 million aggregate principal amount of the New Notes. The New Notes are unconditionally guaranteed jointly and severally by all direct and indirect wholly-owned restricted subsidiaries of the Company, subject to certain excluded subsidiaries and are secured on a second lien basis, junior to the obligations under the Company's credit agreement, by substantially all of the assets of the Company and the Guarantors.

The 5.00% 2026 Notes are quoted on Nasdaq under the symbol "RILYG," the 5.25% 2028 Notes are quoted on Nasdaq under the symbol "RILYZ," the 6.50% 2026 Notes are quoted on Nasdaq under the symbol "RILYN" and the 6.00% 2028 Notes are quoted on Nasdaq under the symbol "RILYT." We cannot provide any assurances that our senior note holders will be able to sell their senior notes. Since issuance, our senior notes have traded at times at a discount from their initial offering price due to prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. We cannot assure our senior note holders that a liquid trading market will develop for our senior notes, that our senior note holders will be able to sell our senior notes at a particular time or that the price our senior note holders receive when they sell will be favorable. Accordingly, our senior note holders may be required to bear the financial risk of an investment in our senior notes for an indefinite period of time.

The indenture under which our publicly traded senior notes were issued offers limited protection to holders of such senior notes. The terms of the indenture and our senior notes do not restrict our or any of our subsidiaries' ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on the holders of our senior notes. In particular, the terms of the indenture and our senior notes do not place any restrictions on our or our subsidiaries' ability to: - issue debt securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to our senior notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to our senior notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to our senior notes, and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to our senior notes with respect to the assets of our subsidiaries;- pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities subordinated in right of payment to our senior notes;- sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);- enter into transactions with affiliates;- create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;- make investments; or - create restrictions on the payment of dividends or other amounts to us from our subsidiaries. In addition, the indenture does not include any protection against certain events, such as a change of control, a leveraged recapitalization or "going private" transaction (which may result in a significant increase of our indebtedness levels), restructuring or similar transactions. Furthermore, the terms of the indenture and our senior notes do not protect holders of our senior notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity. Also, an event of default or acceleration under our other indebtedness would not necessarily result in an event of default under our senior notes. Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of our senior notes may have important consequences for the holders of our senior notes, including making it more difficult for us to satisfy our obligations with respect to our senior notes or negatively affecting the trading value of our senior notes. Other current debt contain, or debt we may issue or incur in the future could contain, more protections for its holders than the indenture and our senior notes, including additional covenants and events of default. The additional issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of our senior notes.

Trading of our common stock, Depositary Shares and publicly traded senior notes has in the past been highly volatile and the market price of shares of our common stock could continue to fluctuate substantially. Additionally, if we are not able to maintain our listing on Nasdaq, then our common stock will be quoted for trading on an over-the-counter quotation system and may be subject to more significant fluctuations in stock price and trading volume and large bid and ask price spreads. Our Depositary Shares and publicly traded senior notes may be delisted which would trigger certain rights of holders under the agreements governing our Depositary Shares and publicly traded senior notes. See "Risk Factors - The conversion feature may not adequately compensate the holders, and the conversion and redemption features of the Existing Preferred Stock and the Depositary Shares may make it more difficult for a party to take over the Company and may discourage a party from taking over the Company."

The market price of our common stock may be volatile and could fluctuate substantially due to many factors, including, among other things: - actual or anticipated fluctuations in our results of operations;- announcements of significant contracts and transactions by us or our competitors;- sale of common stock or other securities in the future;- the trading volume of our common stock;- changes in our pricing policies or the pricing policies of our competitors; and - general economic conditions In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market factors may materially harm the market price of our common stock, regardless of our operating performance.

Our executive officers, directors and their affiliates own or control, in the aggregate, approximately 25.4% of our outstanding common stock as of March 27, 2026. In particular, our Chairman and Co-Chief Executive Officer, Bryant R. Riley, owns or controls, in the aggregate, 6,914,063 shares of our common stock, or 19.7%, of our outstanding common stock as of March 27, 2026. These stockholders are able to exercise influence over matters requiring stockholder approval, such as the election of directors and the approval of significant corporate transactions, including transactions involving an actual or potential change of control of the company or other transactions that noncontrolling stockholders may not deem to be in their best interests. This concentration of ownership may harm the market price of our common stock by, among other things: - delaying, deferring, or preventing a change in control of our Company;- impeding a merger, consolidation, takeover, or other business combination involving our company;- causing us to enter into transactions or agreements that are not in the best interests of all stockholders; or - discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company.