ࡱ>  l \pThe Free Software Foundation B=PF0*8X@"1 Helvetica1Courier1 Courier New1 Courier New1 Helvetica$#,##0_);($#,##0)$#,##0_);[Red]($#,##0)$#,##0.00_);($#,##0.00)$#,##0.00_);[Red]($#,##0.00)-**_($* #,##0_);_($* (#,##0);_($* "-"_);_(@_)*)'_(* #,##0_);_(* (#,##0);_(* "-"_);_(@_)5,2_($* #,##0.00_);_($* (#,##0.00);_($* "-"??_);_(@_)2+/_(* #,##0.00_);_(* (#,##0.00);_(* "-"??_);_(@_)2$#,##0.00;[Red]$#,##0.003$#,##0.00;[Red]($#,##0.00)4$#,##0;[Red]($#,##00)50.00%;[Red](0.00%)6 0%;[Red](0%)7#,##0.00;[Red](#,##0.00)8#,##0;[Red](#,##0)                + ) , *   Ј ~~ ؈ ~~#؈ ~~ ؈ ~~7#܈ ~~4#܈ ~~8#܈ ~~3#܈ ~~83ffff̙̙3f3fff3f3f33333f33mB RILEY FINANCIAL INC&Item 901 Financial Statements a+AS OF DECEMBER 31 2017&[FOR THE YEAR ENDED DECEMBER 31  Balance Sheet$ Consideration paid by B Riley#Consideration paid by B (1)#DConsideration paid by B (2)VIncome Statement&[Statement of Operations Year En#Statement of Operations (1) l  y  dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? !Item 901 Financial Statements aAS OF DECEMBER 31 2017!FOR THE YEAR ENDED DECEMBER 31  Balance SheetConsideration paid by B RileyConsideration paid by B (1)Consideration paid by B (2)Income Statement!Statement of Operations Year EnStatement of Operations (1)U } $} $ } 6       B. Riley Financial, Inc. 8-K 03/20/2018 B. RILEY FINANCIAL, INC. ?/'Written communications pursuant to Rule  5 -425 under the Securities Act (17 CFR 230.425)    ? 3 +Soliciting material pursuant to Rule 14a-12  2 *under the Exchange Act (17 CFR 240.14a-12)    ?0(Pre-commencement communications pursuant/'to Rule 14d-2(b) under the Exchange Act(17 CFR 240.14d-2(b)) ?0(Pre-commencement communications pursuant/'to Rule 13e-4(c) under the Exchange Act(17 CFR 240.13e-4(c))$____________________________1)Created by Morningstar Document Research.0(http://documentresearch.morningstar.com/8{ocRHS=PF0*8X> @ l    dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INCAS OF DECEMBER 31 2017!FOR THE YEAR ENDED DECEMBER 31  Balance SheetConsideration paid by B RileyConsideration paid by B (1)Consideration paid by B (2)Income Statement!Statement of Operations Year EnStatement of Operations (1)U } I } $ } :       B. Riley Financial, Inc. 8-K 03/20/20185-Item 9.01. Financial Statements and Exhibits.Exhibit Description 7@ 8 0Consent of BDO USA, LLP, magicJack?s independent  * "registered public accounting firm. fffffX@ 1 )Audited Consolidated Financial Statements  / 'of magicJack VocalTec Ltd. for the year  - %ended December 31, 2017 (incorporated5-by reference to Part II, Item 8 of the Annual1)Report on Form 10-K of magicJack VocalTec1)Ltd. (File No. 000-27648), filed with theSEC on March 16, 2018).X@.&Unaudited pro forma condensed combined,$financial statements and explanatory.&notes relating to the magicJack Merger2*and related transactions as of and for the%year ended December 31, 2017.$____________________________1)Created by Morningstar Document Research.0(http://documentresearch.morningstar.com/>0rfZNx%@k;=PF0*8X> @ l  J7SnZ  dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INC!Item 901 Financial Statements a!FOR THE YEAR ENDED DECEMBER 31  Balance SheetConsideration paid by B RileyConsideration paid by B (1)Consideration paid by B (2)Income Statement!Statement of Operations Year EnStatement of Operations (1)U } 6} $ }  } $ } I} U} $ } } $ }  } $ J      B. Riley Financial, Inc. 8-K 03/20/2018AS OF DECEMBER 31, 2017$B. RILEY FINANCIAL, INC. (a) MAGICJACK   PRO FORMA ADJUSTMENTS PRO FORMA TOTAL       VOCALTEC       LTD. (b)  0 ((Dollars in thousands, except par value)                     Assets                 !Cash and cash equivalents~ ^~ z6~   ~  B $3 6,791~    ~   Restricted cash~ 3 ?     ? ~ 3!Due from clearing brokers~  ?     ? ~ /'Securities and other investments owned,~ B~      ? ~  at fair valueSecurities borrowed~ B1 ?     ? ~ B1 Accounts receivable, net~ 8~ %     ? ~ ^ Inventories ?~ b     ? ~ bDeferred costs ?~ B     ? ~ B Due from related parties~ X ?     ? ~ X+#Advances against customer contracts~ bQ ?     ? ~ bQ)!Prepaid expenses and other assets~ 6a~ J     ? ~ 2#Property and equipment, net~ &~ R+     ? ~ vGoodwill~ N~ ~    ~  ޲ ~ * ~    ~  B $Other intangible assets, net~ y~ :~    ~  u ~ ~    ~  ` Dl|pds3 4>==CY} !"#$%&'()*+,-./0123456789:;<=>? Deferred income taxes  ~    ~ ~    ~    ~ z ! Total assets!~ !bT!!~ !ʛ!! ! ~ ! ! !~ !X!"""""""""" " " " " """"# Liabilities######### # # # # ####$Accounts payable$~ $j)$$~ $1$$ $  $ $?$ $~ $f[$.%&Accrued expenses and other liabilities%%~ %`%%%~ %F<~ %% % % ~ % >% %%~ %%&Deferred revenue&&~ &1&&&~ &B~ && & & ~ & "& &&~ &vA&'Due to partners''~ '''' '?'' ' '  ' ?' ''~ '')(!Securities sold not yet purchased((~ (((( (?(( ( (  ( ?( ((~ (()Securities loaned))~ )1))) )?)) ) )  ) ?) ))~ )1)-*%Mandatorily redeemable noncontrolling**~ *E*** *?** * *  * ?* **~ *E*+ interests, Notes payable,,~ ,#,,, ,?,, , ,  , ?, ,,~ ,#,-Senior notes payable--~ -m --- -?-- - -  - ?- --~ -m -.Total liabilities..~ .lD...~ .`.. . . ~ . \. ..~ .)I.////////// / / / / ////0Equity:000000000 0 0 0 0 000051-Preferred stock, $0.0001 par value; 1,000,00011 1?111 1?11 1 1  1 ?1 11 1?1&2shares authorized; none issued33+Common stock, $0.0001 par value; 40,000,00033~ 3 333~ 3~ 33 3 3 ~ 3 j)3 33~ 3 3,4$shares authorized; 26,569,432 issued,5$and outstanding at December 31, 2017"6Additional paid-in capital66~ 62666~ 6b~ 66 6 6 ~ 6 '6 66~ 62677777777~ 77 7 7 ~ 7 "s 7 777788888888~ 88 8 8 ~ 8 B8 888899999999~ 99 9 9 ~ 9 B9 9999::::::::~ :: : : ~ : `: ::::;;;;;;;;~ ;; ; ; ~ ; ; ;;;;<Treasury stock<<<<<<~ < <(1)< < < ~ <  6< << <?<#=Retained earnings (deficit)==~ =f===~ =Z~ == = = ~ = = ==~ =b=>>>>>>>>~ >> > > ~ > z> >>>>????????~ ?? ? ? ~ ? =? ????Dl Mu?`W- 0Tx@ABCDEFGHI,@$Accumulated other comprehensive loss@@~ @@@@ @?@@ @ @  @ ?@ @@~ @@"ATotal stockholders? equityAA~ A<AAA~ AJ;AA A A ~ A B0A AA~ ABA BNoncontrolling interestsBB~ B"BBB B?BB B B  B ?B BB~ B"BCTotal equity (deficit)CC~ C9CCC~ CJ;CC C C ~ C B0C CC~ CbC.D&Total liabilities and equity (deficit)D~ DbTDD~ DʛDD D ~ D D D~ DXDEF$G____________________________1H)Created by Morningstar Document Research.0I(http://documentresearch.morningstar.com//B6*=PF0*8X> @IIHHGGDDDDDD DD$$$$$$ $$!!!!!! !!      l  >3y  dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INC!Item 901 Financial Statements aAS OF DECEMBER 31 2017 Balance SheetConsideration paid by B RileyConsideration paid by B (1)Consideration paid by B (2)Income Statement!Statement of Operations Year EnStatement of Operations (1)U } U5} $ }  } $ }  }  $ } } } $ }  }  } $ }  } $ >      B. Riley Financial, Inc. 8-K 03/20/2018,$FOR THE YEAR ENDED DECEMBER 31, 2017$B. RILEY FINANCIAL, INC. (a)FBR & Co., INC.  MAGICJACK VOCALTEC LTD.  PRO FORMA ADJUSTMENTSPRO FORMA TOTAL       (b)   (c)  1 )(Dollars in thousands, except share data)                        Revenues:                     Services and fees ~ &  ~ 6  ~ ^~  ~ &  ~  ,$Interest income - Securities lending~  ~     ?   ?~  Sale of goods~  ?    ?   ?~ Total revenues~ ~ "P  ~  ^  ~ &~ Operating expenses:     Direct cost of services~ 6c ?  ~  ~   ~ z~ o   ~   ~ 2Cost of goods sold~ : ?    ?   ?~ :4,Selling, general and administrative expenses~ B ~   ~  5~   ~ ~ 4   ~   ~    ~   ~ N   ~   ~ B   ~   ~ K-%Interest expense - Securities lending~ N~ 2l    ?   ?~ ~(-%Impairment of goodwill and intangible ? ?  ~     ?~ assetsRestructuring charge~ Z ?    ?   ?~ Z Consideration adjustment ? ?  ~      ?~   Total operating expenses~ R~    ~  :  ~ f~  -Dyl{ocW1*^Y|TD0!iW@ !"#$%&'()*+,-./0123456789:;<=                     !Operating income (loss)!!~ !!!!~ !FD!! ! ~ ! G! ! !~ !T!!!~ !!"""""""""" " " " " """""""#Other income (expense):######### # # # # #######$$Interest and dividend income$$~ $$$$ $?$$ $ ~ $ $ $ $ $?$$$~ $~$#%Loss from equity investment%%~ %.%%% %?%% %  % ?% % % %?%%%~ %.%&Interest expense&&~ & }&&& &?&& &  & ?& & & &?&&&~ & }&'Other expense, net'' '?''' '?'' ' ~ ' z' ' ' '?'''~ 'z'(((((((((( ( ( ( ( ((((((())!Income (loss) before income taxes))~ )v?)))~ )FD)) ) ~ ) I) ) )~ )T)))~ ) ),*$Benefit (provision) for income taxes**~ * {***~ *2** * ~ * 0~ * * *~ *Z***~ *v*++++++++++ + + + + +++++++, Net income (loss),,~ ,~,,,~ ,vC,, , ~ , y, , ,~ ,vc,,,~ ,Z,1-)Net income attributable to noncontrolling--~ ---- -?-- -  - ?- - - -?---~ --. interests0/(Net income (loss) attributable to common/~ ///~ /vC// ~ / y/ / ~ /vc//~ /n/0 stockholders1111111111 1 1 1 1 11111112222222222 2 2 2 2 2222222 3Cash dividends per share33q= ףp?333= ףp=@33 3 3 3 3 33333q= ףp?34444444444 4 4 4 4 4444444 5Basic earnings per share55?555555 5 5 5 5 55555\(\5"6Diluted earnings per share66Q?666666 6 6 6 6 66666\(\617)Weighted average basic shares outstanding77~ 72777777 7 7 7 7 77~ 777~ 7<738+Weighted average diluted shares outstanding88~ 8b888888 8 8 8 8 88~ 888~ 8<89:$;____________________________1<)Created by Morningstar Document Research.0=(http://documentresearch.morningstar.com/@DrvO#' bVJ"=PF0*8X> @==<<;;66665555333333////// ////         l    dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INC!Item 901 Financial Statements aAS OF DECEMBER 31 2017!FOR THE YEAR ENDED DECEMBER 31 Consideration paid by B RileyConsideration paid by B (1)Consideration paid by B (2)Income Statement!Statement of Operations Year EnStatement of Operations (1)U } 1} U} 6       B. Riley Financial, Inc. 8-K 03/20/2018 Balance Sheet a..&Derived from the audited balance sheet  5 -of B. Riley as of December 31, 2017 contained  4 ,in the Form 10-K filed with the SEC on March    14, 2018.  $____________________________1)Created by Morningstar Document Research.0(http://documentresearch.morningstar.com/&@zn"TH<=PF0*8X> @ l    dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INC!Item 901 Financial Statements aAS OF DECEMBER 31 2017!FOR THE YEAR ENDED DECEMBER 31  Balance SheetConsideration paid by B (1)Consideration paid by B (2)Income Statement!Statement of Operations Year EnStatement of Operations (1)U } 6} $ } } $       B. Riley Financial, Inc. 8-K 03/20/2018'Consideration paid by B. Riley:5-Number of magicJack common shares outstanding~ ' at December 31, 2017, $Cash purchase price per common share  Qk!@ 2 *Total cash consideration for common shares ~ Z   of magicJack3 +Cash consideration for fair value magicJack  ~ ! 1)stock options and restricted stock awards( from acceleration of vesting (a) Total cash consideration~  $____________________________1)Created by Morningstar Document Research.0(http://documentresearch.morningstar.com/0rth\we9=PF0*8X> @2   l    dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INC!Item 901 Financial Statements aAS OF DECEMBER 31 2017!FOR THE YEAR ENDED DECEMBER 31  Balance SheetConsideration paid by B RileyConsideration paid by B (2)Income Statement!Statement of Operations Year EnStatement of Operations (1)U } a/} $ } U} $       B. Riley Financial, Inc. 8-K 03/20/2018'Consideration paid by B. Riley:!Cash and cash equivalents~ z6  Investments  ~   Accounts receivable  ~ %   Inventories  ~ b  Deferred costs  ~ B ) !Prepaid expenses and other assets  ~ J Property and equipment~ R+Accounts payable~ /'Accounts expenses and other liabilities~ Deferred revenue~ Deferred tax assets~ Customer relationships~ Other intangible assets~  Tradename~ BGoodwill~ ޲ Total~  $____________________________1)Created by Morningstar Document Research.0(http://documentresearch.morningstar.com/>}0th\w./|.4pdX0=PF0*8X> @* l  1  dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INC!Item 901 Financial Statements aAS OF DECEMBER 31 2017!FOR THE YEAR ENDED DECEMBER 31  Balance SheetConsideration paid by B RileyConsideration paid by B (1)Income Statement!Statement of Operations Year EnStatement of Operations (1)U } U} : 1      B. Riley Financial, Inc. 8-K 03/20/2018'Consideration paid by B. Riley:~ 2*Reflects the reduction in cash of $143,170 8 0which includes: (a) $141,014 as if the magicJack . &shareholders were paid $8.71 per share 2 *on December 31, 2017 based upon 16,189,894 . &magicJack common shares outstanding as 8 0of December 31, 2017 and (b) $2,156 of estimated5-consideration attributable to the accelerated6.vesting magicJack stock options and restricted0(stock awards units as if the transaction*"had occurred on December 31, 2017.~ -%Reflects estimated expenses of $5,5000(to be incurred by B. Riley and magicJack7/in connection with the acquisition of magicJack by B. Riley.~ .&Reflects the elimination of historical7/goodwill of magicJack in the amount of $32,304.~ .&Reflects the elimination of historical/'other intangible assets of magicJack inthe amount of $10,190.DQlth\P?n.k$ u !"#$%&'()*+,-./0~ 1 )Reflects transaction bonuses to magicJack!1!)senior management in the amount of $4,002"0"(that is payable in accordance with their#4#,employment agreements, as a result of change$$in control provisions.%%~ &2&*Reflects fair value adjustment to decrease'2'*deferred revenue in the amount of $30,840.((~ )2)*Reflects the elimination of the historical*4*,retained earnings of magicJack in the amount++ of $28,822.,-$.____________________________1/)Created by Morningstar Document Research.00(http://documentresearch.morningstar.com/&@| @00//.. l  ?  dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INC!Item 901 Financial Statements aAS OF DECEMBER 31 2017!FOR THE YEAR ENDED DECEMBER 31  Balance SheetConsideration paid by B RileyConsideration paid by B (1)Consideration paid by B (2)!Statement of Operations Year EnStatement of Operations (1)U } $ } : ?      B. Riley Financial, Inc. 8-K 03/20/2018Income Statement a.80Derived from the audited statement of operations   3 +of B. Riley for the year ended December 31,   2 *2017 contained in the Form 10-K filed with   " the SEC on March 14, 2018.     b.4 ,Derived from the unaudited operating results2*of FBR for the period from January 1, 20170(to June 1, 2017 contained in the Current3+Report on Form 8-K/A filed by B. Riley with2*the SEC on June 28, 2017. FBR was acquired3+by B. Riley on June 1, 2017 and the results5-of operations of FBR prior to the acquisition4,date of June 1, 2017 are not included in the-%historical statement of operations of80B. Riley in a. above for the year ended December 31, 2017. c.80Derived from the audited statement of operations0(of magicJack for the year ended December1)31, 2017 contained in the Form 10-K filed'with the SEC on March 16, 2018.!FBR Pro Forma AdjustmentsD lwk`F9%p7e  !"#$%&'()*+,-./0123456789:;<=>~ 0 (Reflects the elimination of nonrecurring!!0!(charges in the amount of $1,630 included""/"'in the historical results of operations##3#+of B. Riley and FBR which resulted directly$$6$.from the acquisition of FBR by B. Riley. These%%.%&amounts primarily related to legal and&& &other professional fees.''~ (3(+Reflects the estimated amortization expense))0)(of $298 for intangible assets related to**3*+customer relationships acquired as a result++9+1of the acquisition of FBR using the straight-line,,0,(method. The estimated useful life of the--!-customer list is 7 years...'/magicJack Pro Forma Adjustments0~ 141,Reflects the estimated reduction in revenues2202(of $13,920 for the fair value adjustment3373/for deferred revenue related to the acquisition4424*of magicJack. Upon completion of the final5505(valuation of magicJack the fair value of6646,deferred revenue for the purchase accounting7707(and the estimated impact on revenues may888change.9999:;$<____________________________1=)Created by Morningstar Document Research.0>(http://documentresearch.morningstar.com/B Xr'<Wg*I\ eYM%=PF0*8X> @ >>==<<887766554433221111//--,,++**))((((&&%%$$##""!!    l  P@r  dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INC!Item 901 Financial Statements aAS OF DECEMBER 31 2017!FOR THE YEAR ENDED DECEMBER 31  Balance SheetConsideration paid by B RileyConsideration paid by B (1)Consideration paid by B (2)Income StatementStatement of Operations (1)U } $ P      B. Riley Financial, Inc. 8-K 03/20/2018<4Statement of Operations Year Ended December 31, 2017~ 0(Reflects the elimination of nonrecurring  0 (charges in the amount of $5,037 included  / 'in the historical results of operations  0 (of B. Riley and magicJack which resulted  2 *directly from the acquisition of magicJack  4 ,by B. Riley. These amounts primarily related-%to legal and other professional fees.~ 2*Reflects the elimination of the historical3+amortization expense of magicJack of $3,0424,related to technology, intellectual property3+rights, in-process development and customerrelationships.~ 3+Reflects the estimated amortization expense/'of $1,740 for intangible assets related,$to technology, intellectual property2*rights and in-process development acquired3+as a result of the acquisition of magicJack5-using the straight-line method. The estimated1)useful life of the amortizable intangible:2assets is estimated to be 5 years. Upon completion/'of the final valuation of magicJack the/'fair value of intangible assets for theD lk_SGn";#@b2> !"#$%&'()*+,-./0123456789:;<=>?  - %purchase accounting and the estimated!!0!(useful life of the intangible assets may"""change.##~ $2$*Reflects the elimination of the historical%%0%(amortization expense of magicJack of $48&&/&'related to covenants not-to-compete and'''process know how.((~ )3)+Reflects the estimated amortization expense**/*'of $4,800 for intangible assets related++0+(to customer relationships and tradenames,,/,'acquired as a result of the acquisition--8-0of magicJack using the straight-line method. The..0.(estimated useful life of the amortizable////'intangible is 10 years. Upon completion00/0'of the final valuation of magicJack the11/1'fair value of intangible assets for the22-2%purchase accounting and the estimated3303(useful life of the intangible assets may444change.55%6B Riley Pro Forma Adjustments7~ 858-Reflects pro forma adjustment for the benefit9909(for income taxes of $17,366 for the year::3:+ended December 31, 2017 based on the impact;;1;)of a combined federal and state statutory<<1<)tax rate of 40.0% on the pro forma income==1=)and pro forma adjustments that is subject>>4>,to income tax expense for FBR and magicJack.???Dr lk@(Mp$9XWKi@ABCDEFGHIJKLMNO@@~ A/A'Pro forma earnings per share, basic andBB2B*diluted, are based on the weighted averageCC2C*number of B. Riley common shares as if theDD8D0shares issued in connection with the acquisitionEE5E-of FBR occurred on January 1, 2017. Pro formaFF2F*earnings per share is computed by dividingGG>G6pro forma net income by the pro forma weighted-averageHH4H,number of B. Riley common shares outstandingII#Iduring the year as follows:JJJJKL$M____________________________1N)Created by Morningstar Document Research.0O(http://documentresearch.morningstar.com/$,Y fn/=PF0*8X> @"DOONNMMIIHHGGFFEEDDCCBBAAAA>>==<<;;::998888664433221100//..--,,++**))))''&&%%$$$$""!!       l    dMbP?_*+%,&٭e2?'٭e2?(٭e2?)٭e2?",D/?? B RILEY FINANCIAL INC!Item 901 Financial Statements aAS OF DECEMBER 31 2017!FOR THE YEAR ENDED DECEMBER 31  Balance SheetConsideration paid by B RileyConsideration paid by B (1)Consideration paid by B (2)Income Statement!Statement of Operations Year EnU } y<} $ } } $       B. Riley Financial, Inc. 8-K 03/20/2018<4Statement of Operations Year Ended December 31, 2017.&B. Riley Weighted Average Basic Shares~ 2  outstanding- %Incremental B. Riley Weighted Average  ~ j8 1 )Basic Shares outstanding as if the shares2 *issued in connection with the acquisitions' had occurred on January 1, 2017/'Pro Forma Weighted Average Basic Shares~ < outstanding0(B. Riley Weighted Average Diluted Shares~ b outstanding.&Reduction in B. Riley Weighted Average~ G:2Diluted Shares outstanding which are anti-dilutive-%Incremental B. Riley Weighted Average~ j83+Diluted Shares outstanding as if the shares2*issued in connection with the acquisitions'had occurred on January 1, 20171)Pro Forma Weighted Average Diluted Shares~ < outstanding$____________________________1)Created by Morningstar Document Research.0(http://documentresearch.morningstar.com/BXk_SGi4nW:b,wO=PF0*8X> @ Root Entry FBook    !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|}~