What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-02 compared with 2021-05-10 · 1035 added, 704 removed, 137 unchanged (93% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

report contains forward-looking statements.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations.

This report contains forward-looking

These statements relate to future events or our future financial performance.

In some cases,

you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,”

“expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,”

“future,” “intend,” “seek,” “likely,” “potential” or “continue,”

the negative of such terms or other comparable terminology.

In some cases, you can identify forward-looking

statements by terminology such as “may,” “will,” “should,” “could,” “expect,”

“plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,”

“intend,” “seek,” “likely,” “potential” or “continue,” the negative of such

terms or other comparable terminology.

These statements are only predictions.

Actual events or results may differ

we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels

of activity, performance or achievements.

Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness

of the forward-looking statements.

We are under no obligation to update any of the forward-looking statements after the filing of this

Quarterly Report to conform such statements to actual results or to changes in our expectations.

following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated

financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report.

also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors

which affect our business, including without limitation the disclosures made in Item 1A of Part II of this Quarterly Report under the

caption “Risk Factors.”

factors that could cause actual results to differ from those contained in the forward-looking statements include but are not limited

to risks related to:

Actual events or results may differ materially.

Although we believe that

the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance

or achievements.

Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking

We are under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report to conform

such statements to actual results or to changes in our expectations.

The following discussion

of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements

and the related notes and other financial information appearing elsewhere in this Quarterly Report.

Readers are also urged to carefully

review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business,

including without limitation the disclosures made in Item 1A of Part II of this Quarterly Report under the caption “Risk Factors.”

Risk factors that could

cause actual results to differ from those contained in the forward-looking statements include but are not limited to risks related to:

volatility in our revenues and results of operations;

the unpredictable and ongoing impact of the COVID-19 pandemic;

changing conditions in the financial markets;

changing conditions

in the financial markets;

our ability to generate sufficient revenues to achieve and maintain profitability;

exposure to credit risk;

our exposure to credit risk;

the short term nature of our engagements;

the accuracy of our estimates and valuations of inventory or assets

in “guarantee” based engagements;

the accuracy of our estimates and valuations of inventory or assets in “guarantee”

based engagements;

competition in the asset management business;

potential losses related to our auction or

liquidation engagements;

our dependence on communications, information and other systems and third parties;

potential losses related

to purchase transactions in our auction and liquidations business;

potential losses related to our auction or liquidation engagements;

dependence on communications, information and other systems and third parties;

potential losses related to purchase transactions in our

auction and liquidations business;

the potential loss of financial institution clients;

potential losses

from or illiquidity of our proprietary investments;

potential losses from or illiquidity of our proprietary

changing economic and market conditions;

potential liability and harm to our reputation

if we were to provide an inaccurate appraisal or valuation;

potential liability and harm to our reputation if we were to provide an inaccurate

appraisal or valuation;

potential mark-downs in inventory in connection with purchase transactions;

failure to successfully compete in any of our segments;

failure to successfully compete in

any of our segments;

loss of key personnel;

our ability to borrow under our credit facilities or at-the-market

offering as necessary;

our ability to borrow under our credit facilities or at-the-market offering as necessary;

failure to comply with the terms of our credit agreements or senior notes;

our ability to meet future capital

requirements;

our ability to realize the benefits of our completed acquisitions, including our ability to achieve anticipated opportunities

and operating cost savings, and accretion to reported earnings estimated to result from completed and proposed acquisitions in the time

frame expected by management or at all;

our ability to meet future capital requirements;

to realize the benefits of our completed acquisitions, including our ability to achieve anticipated opportunities and operating cost savings,

and accretion to reported earnings estimated to result from completed and proposed acquisitions in the time frame expected by management

the diversion of management time on acquisition- related issues;

the failure of our brand investment

portfolio licensees to pay us royalties;

the failure of our brand investment portfolio licensees to

pay us royalties;

and the intense competition to which our brand investment portfolio is subject.

no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

as otherwise required by the context, references in this Quarterly Report to the “Company,” “B.

Riley Financial,” “we,” “us” or “our” refer to the combined business of B.

We undertake no obligation to publicly

update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Except as otherwise required

by the context, references in this Quarterly Report to the “Company,” “B.

Riley Financial,”

“we,” “us” or “our” refer to the combined business of B.

Riley Financial, Inc.

and all of its subsidiaries.

Riley Financial, Inc.

RILY) and its subsidiaries provide collaborative financial services and solutions through several operating

subsidiaries including:

RILY) and its subsidiaries provide collaborative financial services and solutions through several operating subsidiaries including:

Riley Securities, Inc.

Riley Securities”) is a leading, full service investment

bank providing financial advisory, corporate finance, research, securities lending and sales

and trading services to corporate, institutional and high net worth individual clients.

Riley Securities”)

is a leading, full service investment bank providing financial advisory, corporate finance, research, securities lending and sales and

trading services to corporate, institutional and high net worth individual clients.

Riley Securities, (fka B.

Riley FBR) was formed in November 2017 through the merger

Riley & Co, LLC and FBR Capital Markets & Co., which the Company acquired in

was formed in November 2017 through the merger of B.

Riley & Co, LLC and FBR Capital Markets & Co., which the Company acquired

in June 2017.

Riley Wealth Management, Inc.

Riley Wealth Management”) provides comprehensive

wealth management and brokerage services to individuals and families, corporations and non-profit

organizations, including qualified retirement plans, trusts, foundations and endowments.

Riley Wealth Management was formerly Wunderlich Securities, Inc., which the Company acquired

on July 3, 2017 and whose name was changed in June 2018.

Holdings Corporation (“National”) provides wealth management, brokerage, insurance,

tax preparation and advisory services.

On February 25, 2021, the Company completed a tender

offer to acquire all of the outstanding shares of National not already owned by the Company.

Wealth Management”) provides comprehensive wealth management and brokerage services to individuals and families, corporations

and non-profit organizations, including qualified retirement plans, trusts, foundations and endowments.

Riley Wealth Management was

formerly Wunderlich Securities, Inc., which the Company acquired on July 3, 2017 and whose name was changed in June 2018.

● National Holdings Corporation (“National”)

provides wealth management, brokerage, insurance, tax preparation and advisory services.

On February 25, 2021, the Company completed a tender offer to acquire all of the outstanding shares of National not already owned by the

The merger expands the Company’s investment banking, wealth management and financial

planning offerings.

Riley Capital Management, LLC, a Securities and Exchange Commission (“SEC”) registered

investment advisor, which includes:

Riley Asset Management, an advisor to certain private funds and to institutional and high

net worth investors;

American Capital Partners, LLC (“GACP”), the general partner of two private funds,

and GACP II, L.P., both direct lending funds managed by WhiteHawk Capital Partners,

pursuant to an investment advisory services agreement, that provide senior secured loans

and second lien secured loan facilities to middle market public and private U.S.

Riley Advisory Services provides expert witness, bankruptcy, financial advisory, forensic

accounting, valuation and appraisal, and operations management services.

Riley Retail Solutions, LLC (fka Great American Group, LLC), a leading provider of asset

disposition and auction solutions to a wide range of retail and industrial clients.

Riley Real Estate works with real estate owners and tenants through all stages of the real

estate life cycle.

Riley Capital Management, LLC, a Securities

and Exchange Commission (“SEC”) registered investment advisor, which includes:

Riley Asset Management, an advisor to certain private funds and to institutional and high net worth

○ Great American Capital Partners, LLC (“GACP”), the general partner of two private funds, GACP

and GACP II, L.P., both direct lending funds managed by WhiteHawk Capital Partners, L.P.

pursuant to an investment advisory services

agreement, that provide senior secured loans and second lien secured loan facilities to middle market public and private U.S.

Riley Advisory Services provides expert witness,

bankruptcy, financial advisory, forensic accounting, valuation and appraisal, and operations management services.

Riley Retail Solutions, LLC (fka Great American

Group, LLC), a leading provider of asset disposition and auction solutions to a wide range of retail and industrial clients.

Riley Real Estate works with real estate owners

and tenants through all stages of the real estate life cycle.

Our real estate advisors advise companies, financial institutions, investors,

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A core focus of B.

real estate is the restructuring of lease obligations in both distressed and non-distressed

situations, both inside and outside of the bankruptcy process, on behalf of corporate tenants.

Riley Principal Investments identifies attractive investment opportunities and aims to deliver

financial and operational improvement to its portfolio companies.

Riley real estate is the restructuring of lease obligations

in both distressed and non-distressed situations, both inside and outside of the bankruptcy process, on behalf of corporate tenants.

Riley Principal Investments identifies attractive

investment opportunities and aims to deliver financial and operational improvement to its portfolio companies.

Our team concentrates on

opportunities presented by distressed companies or divisions that exhibit challenging market

Representative transactions include recapitalization, direct equity investment,

debt investment, active minority investment and buyouts.

opportunities presented by distressed companies or divisions that exhibit challenging market dynamics.

Representative transactions include

recapitalization, direct equity investment, debt investment, active minority investment and buyouts.

Riley Principal Investments seeks

to control or influence the operations of our investments to deliver financial and operational

improvements that will maximize free cash flow, and therefore, shareholder returns.

of our principal investment strategy, we acquired United Online, Inc.

to control or influence the operations of our investments to deliver financial and operational improvements that will maximize free cash

flow, and therefore, shareholder returns.

As part of our principal investment strategy, we acquired United Online, Inc.

or “United Online”) on July 1, 2016, magicJack VocalTec Ltd.

(“magicJack”)

on November 14, 2018 and on November 30, 2020 we acquired a 40% equity interest in with Lingo Management,

LLC (“Lingo”), with the ability to acquire an additional 40% equity interest

is a communications company that offers consumer subscription services and products, consisting

of Internet access services and devices under the NetZero and Juno brands primarily sold

in the United States.

is a Voice over IP (“VoIP”) cloud-based technology and services communications

is a global cloud/UC and managed service provider.

Brand Holding, LLC (“BR Brands”), in which the Company owns a majority interest,

provides licensing of certain brand trademarks.

BR Brand owns the assets and intellectual

(“magicJack”) on November 14, 2018 and on November

30, 2020 we acquired a 40% equity interest in with Lingo Management, LLC (“Lingo”), with the ability to acquire an additional

40% equity interest therein.

○ UOL is a communications company that offers consumer subscription services and products, consisting of

Internet access services and devices under the NetZero and Juno brands primarily sold in the United States.

○ magicJack is a Voice over IP (“VoIP”) cloud-based technology and services communications provider.

○ Lingo is a global cloud/UC and managed service provider.

● BR Brand Holding, LLC (“BR Brands”),

in which the Company owns a majority interest, provides licensing of certain brand trademarks.

BR Brands owns the assets and intellectual

property related to licenses of six brands:

Catherine Malandrino, English Laundry, Joan

Vass, Kensie Girl, Limited Too and Nanette Lepore as well as investments in the Hurley and

Justice brands with Bluestar Alliance LLC (“Bluestar”), a brand management company.

are headquartered in Los Angeles with offices in major cities throughout the United States including New York, Chicago, Boston, Atlanta,

Dallas, Memphis, Metro Washington D.C and West Palm Beach.

the fourth quarter of 2020, the Company realigned its segment reporting structure to reflect organizational management changes.

the new structure, the valuation and appraisal businesses are reported in the Financial Consulting segment and our bankruptcy, financial

advisory, forensic accounting, and real estate consulting businesses that were previously reported in the Capital Markets segment are

now reported as part of the Financial Consulting segment.

In conjunction with the new reporting structure, the Company recast its segment

presentation for all periods presented.

During the first quarter of 2021, in connection with the acquisition of National on February

25, 2021, the Company further realigned its segment reporting structure to reflect organizational management changes in the Company’s

wealth management business and created a new Wealth Management segment that was previously reported as part of the Capital Markets segment

In conjunction with the new reporting structures, the Company recast its segment presentation for all periods presented.

financial reporting purposes we classify our businesses into six operating segments:

(i) Capital Markets, (ii) Wealth Management,

(iii) Auction and Liquidation, (iv) Financial Consulting, (v) Principal Investments – United Online and magicJack and

Markets Segment .

Our Capital Markets segment provides a full array of investment banking, corporate finance, consulting, financial

advisory, research, securities lending and sales and trading services to corporate, institutional and individual clients.

Our corporate

finance and investment banking services include merger and acquisitions as well as restructuring advisory services to public and private

companies, initial and secondary public offerings, and institutional private placements.

In addition, we trade equity securities as a

principal for our account, including investments in funds managed by our subsidiaries.

Our Capital Markets segment also includes our

asset management businesses that manage various private and public funds for institutional and individual investors.

Management Segment .

Our Wealth Management segment provides wealth management and tax services to corporate, and high net worth

We offer comprehensive wealth management services for corporate businesses that include investment strategies, executive services,

retirement plans, lending & liquidity resources, and settlement solutions.

Our wealth management services for individual client services

provide investment management, education planning, retirement planning, risk management, trust coordination, lending & liquidity

solutions, legacy planning, and wealth transfer.

In addition, we supply market insights to provide unbiased guidance to make important

financial decisions.

Wealth management resources include market views from our highly regarded Chief Investment Strategist and Capital

Markets segment’s research.

and Liquidation Segment .

Our Auction and Liquidation segment utilizes our significant industry experience, a scalable network

of independent contractors and industry-specific advisors to tailor our services to the specific needs of a multitude of clients, logistical

challenges and distressed circumstances.

Furthermore, our scale and pool of resources allow us to offer our services across North American

as well as parts of Europe, Asia and Australia.

Our Auction and Liquidation segment operates through two main divisions, retail store

liquidations and wholesale and industrial assets dispositions.

Our wholesale and industrial assets dispositions division operates through

limited liability companies that are controlled by us.

Consulting Segment .

Our Financial Consulting segment provides services to law firms, corporations, financial institutions, lenders,

and private equity firms.

These services primarily include bankruptcy, financial advisory, forensic accounting, litigation support, real

estate consulting and valuation and appraisal services.

Our Financial Consulting segment operates through limited liability companies

that are wholly owned or majority owned by us.

Investments - United Online and magicJack Segment .

Our Principal Investments - United Online and magicJack segment consists

of businesses which have been acquired primarily for attractive investment return characteristics.

Currently, this segment includes UOL,

through which we provide consumer Internet access, and magicJack, through which we provide VoIP communication and related product and

subscription services.

Our Brands segment consists of our brand investment portfolio that is focused on generating revenue through the licensing

of trademarks and is held by BR Brand.

On March 31, 2021, the Company

exercised its option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”)

pursuant to the second supplemental indenture dated May 31, 2017.

The total redemption payment included $1.6 million in accrued interest.

February 25, 2021, the Company completed the acquisition of National Holdings Corporation (“National), pursuant to an agreement

and plan of merger dated January 10, 2021, following the successful completion of a tender offer commenced by us on January 27, 2021.

National is a full-service investment banking and asset management firm that, through its affiliates, provides a range of services including

financial advisory, investment banking, institutional sales and trading, equity research, financial planning, market making, tax preparation

and insurance to corporations, institutions, high net-worth individuals and retail investors.

We previously owned approximately 45% of

the common stock of National.

National complements our Wealth Management segment, bringing approximately 900 registered representatives

managing over $30.0 billion in assets.

January 25, 2021, the Company issued $230.0 million of senior notes due in January 2028 (“6.0% 2028 Notes”) pursuant to

the prospectus supplement dated February 12, 2020.

Interest on the 6.0% 2028 Notes is payable quarterly at 6.0%.

The 6.0% 2028 Notes

are unsecured and due and payable in full on January 31, 2028.

In connection with the issuance of the 6.0% 2028 Notes, the Company

received net proceeds of $225.7 million (after underwriting commissions, fees and other issuance costs of $4.3 million).

The Notes bear

interest at the rate of 6.0% per annum.

January 23, 2021, we committed up to $400.0 million aggregate principal amount of debt financing, consisting of $100.0 million of secured

debt financing, and $300.0 million of unsecured debt financing, to affiliates of Franchise Group, Inc.

(collectively, “FRG”)

in connection with FRG’s acquisition of Pet Supplies Plus.

January 15, 2021, the Company issued 1,413,045 shares of common stock inclusive of 184,310 shares issued pursuant to the full exercise

of the Underwriter’s option to purchase additional shares of common stock at a price of $46.00 per share for net proceeds of approximately

$64.7 million after underwriting fees and costs.

January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus

(the “COVID-19 outbreak”).

In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the

rapid increase in exposure globally.

During the first quarter 2021, the full impact of the COVID-19 outbreak continues to

economy recovers, aided by additional stimulus packages and positive momentum in the domestic vaccine rollout, countries

across the world continue to manage repeated waves of the pandemic amid uneven progress toward vaccination.

The impact of the COVID-19

outbreak on our results of operations, financial position and cash flows will depend on future developments, including the duration and

spread of the outbreak and related advisories and restrictions and the success of vaccines in slowing or halting the pandemic.

Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette

Lepore as well as investments in the Hurley and Justice brands with Bluestar Alliance LLC (“Bluestar”), a brand management

We are headquartered in Los Angeles with offices in major cities throughout

the United States including New York, Chicago, Boston, Atlanta, Dallas, Memphis, Metro Washington D.C., West Palm Beach, and Boca Raton.

During the fourth quarter

of 2020, the Company realigned its segment reporting structure to reflect organizational management changes.

Under the new structure,

the valuation and appraisal businesses are reported in the Financial Consulting segment and our bankruptcy, financial advisory, forensic

accounting, and real estate consulting businesses that were previously reported in the Capital Markets segment are now reported as part

of the Financial Consulting segment.

In conjunction with the new reporting structure, the Company recast its segment presentation for

all periods presented.

During the first quarter of 2021, in connection with the acquisition of National on February 25, 2021, the Company

further realigned its segment reporting structure to reflect organizational management changes in the Company’s wealth management

business and created a new Wealth Management segment that was previously reported as part of the Capital Markets segment in 2020.

In conjunction

with the new reporting structures, the Company recast its segment presentation for all periods presented.

For financial reporting purposes

we classify our businesses into six operating segments:

(i) Capital Markets, (ii) Wealth Management, (iii) Auction and Liquidation, (iv)

Financial Consulting, (v) Principal Investments – United Online and magicJack and (vi) Brands.

Capital Markets Segment .

Our Capital Markets segment provides a full array of investment banking, corporate finance, consulting, financial advisory, research,

securities lending and sales and trading services to corporate, institutional and individual clients.

Our corporate finance and investment

banking services include merger and acquisitions as well as restructuring advisory services to public and private companies, initial and

secondary public offerings, and institutional private placements.

In addition, we trade equity securities as a principal for our account,

including investments in funds managed by our subsidiaries.

Our Capital Markets segment also includes our asset management businesses

that manage various private and public funds for institutional and individual investors.

Wealth Management Segment .

Our Wealth Management segment provides wealth management and tax services to corporate, and high net worth clients.

We offer comprehensive

wealth management services for corporate businesses that include investment strategies, executive services, retirement plans, lending

& liquidity resources, and settlement solutions.

Our wealth management services for individual client services provide investment

management, education planning, retirement planning, risk management, trust coordination, lending & liquidity solutions, legacy planning,

and wealth transfer.

In addition, we supply market insights to provide unbiased guidance to make important financial decisions.

management resources include market views from our highly regarded Chief Investment Strategist and Capital Markets segment’s research.

Auction and Liquidation Segment.

Auction and Liquidation segment utilizes our significant industry experience, a scalable network of independent contractors and industry-specific

advisors to tailor our services to the specific needs of a multitude of clients, logistical challenges and distressed circumstances.

Furthermore, our scale and pool of resources allow us to offer our services across North America as well as parts of Europe, Asia and

Our Auction and Liquidation segment operates through two main divisions, retail store liquidations and wholesale and industrial

assets dispositions.

Our wholesale and industrial assets dispositions division operates through limited liability companies that are

controlled by us.

Financial Consulting Segment.

Financial Consulting segment provides services to law firms, corporations, financial institutions, lenders, and private equity firms.

These services primarily include bankruptcy, financial advisory, forensic accounting, litigation support, real estate consulting and valuation

and appraisal services.

Our Financial Consulting segment operates through limited liability companies that are wholly owned or majority

Principal Investments

- United Online and magicJack Segment.

Our Principal Investments - United Online and magicJack segment consists of businesses

which have been acquired primarily for attractive investment return characteristics.

Currently, this segment includes UOL, through which

we provide consumer Internet access, and magicJack, through which we provide VoIP communication and related product and subscription services.

Brands Segment.

Brands segment consists of our brand investment portfolio that is focused on generating revenue through the licensing of trademarks and

is held by BR Brands.

On June 23, 2021, we and our wholly owned subsidiaries, BR Financial

Holdings, LLC, a Delaware limited liability company (the “Primary Guarantor”), and BR Advisory & Investments, LLC,

a Delaware limited liability company (the “Borrower”), entered into a credit agreement (the “Credit Agreement”)

by and among us, Primary Guarantor, the Borrower, the lenders party thereto, Nomura Corporate Funding Americas, LLC, as administrative

agent and Wells Fargo Bank, N.A., as collateral agent, providing for a four-year $200.0 million secured term loan credit facility (the “Term

Loan Facility”) and a four-year $80.0 million secured revolving loan credit facility (the “Revolving Credit Facility” and,

together with the Term Loan Facility, the “Credit Facilities”).

The Credit Facilities will mature on June 23, 2025, subject

to acceleration or prepayment.

On the closing date, the Borrower borrowed the full $200.0 million under the Term Loan Facility.

The Revolving

Credit Facility is available for borrowing from time to time prior to the final maturity of the Revolving Credit Facility.

to June 30, 2021, we borrowed the full $80.0 million that was available under the Revolving Credit Facility.

On July 26, 2021, we redeemed, in full, $122.8 million aggregate principal

amount of its 7.25% Senior Notes due 2027 (“7.25% 2027 Notes”) pursuant to the third supplemental indenture dated December

The total redemption payment included approximately $2.1 million in accrued interest.

In connection with the full redemption,

the 7.25% 2027 Notes were delisted from NASDAQ.

On January 30, 2020, the

World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19

In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure

During the second quarter of 2021, the full impact of the COVID-19 outbreak continues to evolve.

recovers, aided by additional stimulus packages and positive momentum in the domestic vaccine rollout, countries across the world continue

to manage repeated waves of the pandemic, including variant strains of COVID-19, amid uneven progress toward vaccination.

The impact of

the COVID-19 outbreak on our results of operations, financial position and cash flows will depend on future developments, including the

duration and spread of the outbreak and related advisories and restrictions and the success of vaccines in slowing or halting the pandemic.

developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy continue to be highly uncertain

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position and cash flows may be materially adversely affected.

of Operations

following period to period comparisons of our financial results and our interim results are not necessarily indicative of future results.

Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Consolidated Statements of Operations

in thousands)

Results of Operations

The following period to period

comparisons of our financial results and our interim results are not necessarily indicative of future results.

Three Months Ended June 30, 2021 Compared

to Three Months Ended June 30, 2020

Condensed Consolidated Statements of Operations

(Dollars in thousands)

Three Months Ended

Services and fees

Trading income and fair value adjustments on loans

Interest income - Loans and securities lending

Sale of goods

Total revenues

Operating expenses:

Direct cost of services

Cost of goods sold

Selling, general and administrative expenses

Impairment of tradenames

Interest expense - Securities lending and loan participations sold

Total operating expenses

Operating income

Other income (expense):

Interest income

Gain on extinguishment of loans

Loss from equity investments

Interest expense

Income before income taxes

Provision for income taxes

Net loss attributable to noncontrolling interests

Net income attributable to B.

Riley Financial, Inc.

Preferred stock dividends

Net income available to common shareholders

Not applicable or not meaningful.

The table below and the discussion

that follows are based on how we analyze our business.

Three Months Ended

Revenues - Services and fees:

Capital Markets segment

Wealth Management segment

Auction and Liquidation segment

Financial Consulting segment

Principal Investments - United Online and magicJack segment

Brands segment

Revenues - Sale of goods:

Auction and Liquidation segment

Principal Investments - United Online and magicJack segment

Trading income (loss) and fair value adjustments on loans

Capital Markets segment

Wealth Management segment

Brands segment

Interest income - Loans and securities lending:

Capital Markets segment

Total revenues

Not applicable or not meaningful.

Total revenues increased

approximately $70.3 million to $336.8 million during the three months ended June 30, 2021 from $266.5 million during the three

months ended June 30, 2020.

The increase in revenues during the three months ended June 30, 2021 was primarily due to an increase in revenue

from services and fees of $140.5 million, revenue from sale of goods of $10.6 million, and interest income from loans and securities

lending of $1.0 million, offset by a decrease in revenue from trading income and fair value adjustments on loans of $81.9 million.

increase in revenue from services and fees in the three months ended June 30, 2021 consisted of increases in revenue of $65.6 million

in the Capital Markets segment, $72.1 million in the Wealth Management segment, $4.9 million in the Financial Consulting segment,

and $1.3 million in the Brands segment, offset by decreases in revenues of $1.7 million in both the Auction and Liquidation segment

and the Principal Investments — United Online and magicJack segment.

Revenues from services and fees in the Capital Markets segment increased

$65.6 million, to $126.0 million during the three months ended June 30, 2021 from $60.4 million during the three months

ended June 30, 2020.

The increase in revenues was primarily due to increases in revenue of $64.4 million from corporate finance,

consulting and investment banking fees and $4.3 million from the acquisition of National in the first quarter of 2021, partially offset

by decreases in asset management fees of $1.6 million and commissions of $1.5 million.

Revenues from services and

fees in the Wealth Management segment increased $72.1 million, to $87.4 million during the three months ended June 30, 2021 from

$15.3 million during the three months ended June 30, 2020.

The increase in revenues was primarily due to increases in revenue of

$63.7 million from the acquisition of National and $8.4 million from wealth and asset management fees.

Revenues from services and

fees in the Auction and Liquidation segment decreased $1.7 million, to $5.5 million during the three months ended June 30, 2021

from $7.2 million during the three months ended June 30, 2020.

The decrease in revenues was primarily due to fewer large retail fee

liquidation engagements.

Revenues from services and fees in the Financial Consulting segment

increased $4.9 million, to $23.7 million during the three months ended June 30, 2021 from $18.8 million during the three

months ended June 30, 2020.

The increase in revenues was primarily due to an increase in revenue

of $3.8 million in advisory services, $0.7 million in real estate engagement fees where we provide lease modification services for

corporate tenants, and $0.4 million due to a newly formed operations management group during fiscal year 2021.

Revenues from services and

fees in the Principal Investments - United Online and magicJack segment decreased $1.7 million to $18.9 million during the three

months ended June 30, 2021 from $20.7 million during the three months ended June 30, 2020.

The decrease in revenues was primarily

due to decreases in subscription services of $1.0 million and in advertising licensing and other of $0.8 million.

Management expects

revenues from the Principal Investments - United Online and magicJack segment to continue to decline year over year.

Revenues from services and

fees in the Brands segment increased $1.3 million to $4.5 million during the three months ended June 30, 2021 from $3.2 million

during the three months ended June 30, 2020.

The primary source of revenue included in this segment is the licensing of trademarks.

Trading income and fair value

adjustments on loans decreased $81.9 million to $32.7 million during the three months ended June 30, 2021 compared to $114.5 million

for the three months ended June 30, 2020.

The $81.9 million decrease for the three months ended June 30, 2021 was primarily due to a decrease

of $84.2 million in the Capital Markets segment partially offset by an increase of $2.4 million in the Wealth Management segment.

gain of $32.7 million for the three months ended June 30, 2021 included realized and unrealized amounts earned on investments made in

our proprietary trading accounts of $33.4 million partially offset by an unrealized loss on our loans receivable, at fair value of

$0.7 million.

Interest income – loans

and securities lending increased $1.0 million, to $25.5 million during the three months ended June 30, 2021 from $24.5 million

during the three months ended June 30, 2020.

Interest income from securities lending was $13.9 million and $13.5 million during

the three months ended June 30, 2021 and 2020, respectively.

Interest income from loans was $11.6 million and $11.0 million

during the three months ended June 30, 2021 and 2020, respectively.

Revenues – Sale of Goods

Revenues from the sale of

goods increased $10.6 million, to $12.5 million during the three months ended June 30, 2021 from $1.8 million during the

three months ended June 30, 2020.

Revenues from sale of goods were primarily attributable to $11.7 million of sales of retail goods

related to a retail liquidation engagement in Europe and $0.7 million of sales of magicJack devices that were sold in connection with

VoIP services.

Cost of goods sold for the three months ended June 30, 2021 was $3.6 million, resulting in a gross margin of 70.9%.

Operating Expenses

Direct Cost of Services

Direct cost of services increased

$4.1 million, to $12.1 million during the three months ended June 30, 2021 from $8.0 million during the three months ended June

Direct costs of services increased by $4.3 million in the Auction and Liquidation segment and decreased by $0.2 million

in the Principal Investments — United Online and magicJack segment.

The increase in direct costs in the Auction and Liquidation

segment was primarily due to a retail liquidation engagement in Europe where we purchased inventory for resale using the existing stores

of the client.

As part of the retail liquidation engagement, we incurred costs related to the store operations which primarily related

to expenses for occupancy, payroll and other store operating costs.

The decrease in direct costs in the Principal Investments —

United Online and magicJack segment was primarily due to a corresponding decrease in revenues from subscription based customers for the

three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Selling, General and Administrative Expenses

Selling, general and administrative

expenses during the three months ended June 30, 2021 and 2020 were comprised of the following:

Three Months Ended

June 30, 2021

Three Months Ended

June 30, 2020

Capital Markets segment

Wealth Management segment

Auction and Liquidation segment

Financial Consulting segment

Principal Investments - United Online and magicJack segment

Brands segment

Corporate and Other segment

Total selling, general & administrative expenses

Total selling, general and

administrative expenses increased approximately $93.4 million to $199.9 million during the three months ended June 30, 2021 from

$106.6 million for the three months ended June 30, 2020.

The increase of approximately $93.4 million in selling, general and

administrative expenses was due to increases of $8.5 million in the Capital Markets segment, $75.3 million in the Wealth Management

segment, $0.3 million in the Auction and Liquidation segment, $4.2 million in the Financial Consulting segment, $0.4 million in the

Principal Investments — United Online and magicJack segment, $0.4 million in the Brands segment, and $4.2 million in the Corporate

and Other segment.

Capital Markets

Selling, general and administrative

expenses in the Capital Markets segment increased by $8.5 million to $65.7 million during the three months ended June 30, 2021 from

$57.2 million during the three months ended June 30, 2020.

The increase was primarily due to increases of $17.7 million in payroll and

related expenses, $1.5 million from the acquisition of National, and $2.0 million in investment banking deal expenses, partially offset

by a decrease of $12.6 million in consulting expenses.

Wealth Management

Selling, general and administrative

expenses in the Wealth Management segment increased by $75.3 million to $91.0 million during the three months ended June 30, 2021

from $15.8 million during the three months ended June 30, 2020.

The increase was primarily due to increases of $69.6 million from the

acquisition of National, $6.1 million in payroll and related expenses, $0.2 million in software and equipment expenses, $0.1 million in

office expenses, and $0.1 million in travel and entertainment expenses, partially offset by decreases of $0.3 million in legal expenses,

$0.3 million in occupancy expenses, and $0.3 million in other expenses.

Auction and Liquidation

Selling, general and administrative

expenses in the Auction and Liquidation segment increased $0.3 million to $3.1 million during the three months ended June 30, 2021 from

$2.7 million during the three months ended June 30, 2020.

Financial Consulting

Selling, general and administrative

expenses in the Financial Consulting segment increased by $4.2 million to $19.6 million during the three months ended June 30, 2021

from $15.3 million during the three months ended June 30, 2020.

The increase was primarily due to increases of $3.1 million in payroll

and related expenses, $0.3 million in other expenses, $0.3 million in travel and entertainment expenses, $0.2 million in legal expenses,

and $0.2 million in outside contractor expenses.

Principal Investments

— United Online and magicJack

Selling, general and administrative expenses in the Principal Investments

— United Online and magicJack segment increased $0.4 million to $7.3 million for the three months ended June 30, 2021

from $6.9 million for the three months ended June 30, 2020.

The increase was primarily due to a $1.0 million legal settlement accrual

release in the three months ended June 30, 2020, partially offset by decreases of $0.3 million in depreciation and amortization expenses,

$0.2 million in payroll and related expenses, and $0.2 million in business promotion and marketing expenses.

Selling, general and administrative

expenses in the Brands segment increased by $0.4 million to $1.4 million during the three months ended June 30, 2021 from $1.0 million

during the three months ended June 30, 2020.

The increase was primarily due to increases of $0.2 million in payroll and related expenses

and $0.2 million in other expenses.

Corporate and Other

Selling, general and administrative

expenses for the Corporate and Other segment increased approximately $4.2 million to $11.8 million during the three months ended

June 30, 2021 from $7.6 million for the three months ended June 30, 2020.

The increase was primarily due to increases of $2.9 million

in payroll and related expenses, $0.5 million in gain from currency exchange, $0.4 million in software and equipment expense, $0.2 million

in transaction costs, and $0.2 million in other expenses.

Impairment of tradenames .

Due to the impact of the COVID-19 outbreak on economic activity and market volatility, we tested

our intangible assets as of June 30, 2020 and made the determination that the indefinite-lived tradenames in the Brands segment

were impaired.

In the three months ended June 30, 2020, the Company recognized impairment of $8.5 million on the indefinite-lived tradenames.

There was no impairment in the three months ended June 30, 2021.

Other Income (Expense).

income included interest income of less than $0.1 million during the three months ended June 30, 2021 and $0.2 million during the

three months ended June 30, 2020.

Gain on extinguishment of loans in the amount of $6.5 million during the three months ended June 30,

2021 was due to National PPP loans that were forgiven by the SBA.

Interest expense was $20.9 million during the three months ended June

30, 2021 compared to $16.5 million during the three months ended June 30, 2020.

The increase in interest expense during the three months

ended June 30, 2021 was primarily due to an increase in interest expense of $4.3 million from the issuance of senior notes.

in the three months ended June 30, 2021 included a loss on equity investments of $0.9 million compared to a loss of $0.3 million

in the prior year.

Income Before Income Taxes .

Income before income taxes was $95.0 million during the three months ended June 30, 2021 compared to $114.7 million during the three months

ended June 30, 2020.

The decrease in income before income taxes was primarily due to an increase in operating expenses of approximately

$91.5 million, interest expense of $4.3 million, loss from equity investments of $0.5 million, and a decrease in interest income of $0.2

million, partially offset by an increase in revenue of $70.3 million and gain on extinguishment of loans of $6.5 million, as discussed

Provision for Income Taxes.

Provision for income taxes was $19.9 million during the three months ended June 30, 2021 compared to $32.2 million during the three

months ended June 30, 2020.

The effective income tax rate was 20.9% for the three months ended June 30, 2021 as compared to 28.1% for

the three months ended June 30, 2020.

Net Loss Attributable

to Noncontrolling Interest .

Net loss attributable to noncontrolling interests represents the proportionate share of net loss generated

by membership interests of partnerships that we do not own.

The net loss attributable to noncontrolling interests was $0.6 million

during the three months ended June 30, 2021 compared to net loss of $1.3 million during the three months ended June 30, 2020.

Net Income Attributable to

Net income attributable to the Company for the three months ended June 30, 2021 was $75.7 million, a decrease from

$83.8 million for the three months ended June 30, 2020.

The decrease in net income attributable to the Company during the three months

ended June 30, 2021 as compared to the same period in 2020 was primarily due to a decrease in operating income of $21.2 million,

and increase in loss from equity investments of $0.5 million, an increase in interest expense of $4.3 million, and a decrease in interest

income of $0.2 million, partially offset by a decrease in provision for income taxes of $12.3 million and a gain on extinguishment

of loans of $6.5 million.

Preferred Stock Dividends .

On October 7, 2019, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 6.875% Series

A Cumulative Perpetual Preferred Stock, (trading under NASDAQ symbol “RILYP”), par value $0.0001 per share.

Holders of Series

A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate

of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875

per Depositary Share).

Dividends are payable quarterly in arrears, on or about the last day of January, April, July and October.

5, 2021, the Company declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders

of record as of the close of business on April 20, 2020.

On September 4, 2020, the

Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 7.375% Series B Cumulative Perpetual

Preferred Stock (trading under the NASDAQ symbol “RILYL”), par value $0.0001 per share.

Holders of Series B Preferred Stock,

when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum

of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends are payable quarterly in arrears, on or about the last day of January, April, July and October.

On April 5, 2021, the Company

declared a cash dividend of $0.4609375 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of

business on April 20, 2021.

Net Income Available to

Common Shareholders .

Net income available to common shareholders for the three months ended June 30, 2021 was

$73.9 million, a decrease from $82.8 million for the three months ended June 30, 2020.

The decrease in net income available to

common shareholders during the three months ended June 30, 2021 as compared to the same period in 2020 was primarily due to a

decrease in operating income of $21.2 million, an increase in interest expense of $4.3 million, an increase in preferred stock

dividends of $0.7 million, an increase in loss from equity investments of $0.5 million, and a decrease in interest income of $0.2

million, partially offset by a decrease in provision for income taxes of $12.3 million, gain on extinguishment of loans of $6.5

million and a decrease in loss attributable to noncontrolling interest of $0.7 million.

Six Months Ended June 30, 2021 Compared to

Six Months Ended June 30, 2020

Condensed Consolidated Statements of Operations

(Dollars in thousands)

Six Months Ended

Services and fees

Trading income (losses) and fair value adjustments on loans

9 unchanged sentences

Total operating expenses

Operating income (loss)

Operating income

Other income (expense):

Interest income

Gain (loss) from equity investments

Gain on extinguishment of loans

Income (loss) on equity investments

Interest expense

7 unchanged sentences

Net income (loss) available to common shareholders

table below and the discussion that follows are based on how we analyze our business.

Three Months Ended

Not applicable or not meaningful.

The table below and the discussion

that follows are based on how we analyze our business.

Revenues - Services and fees:

4 unchanged sentences

Principal Investments - United Online and magicJack segment

Brands segment

Revenues - Sale of goods

4 unchanged sentences

Wealth Management segment

Brands segment

Interest income - Loans and securities lending:

2 unchanged sentences

n/m - Not applicable or not meaningful.

revenues increased approximately $600.4 million to $600.2 million during the three months ended March 31, 2021 from ($0.2 million)

during the three months ended March 31, 2020.

The increase in revenues during the three months ended March 31, 2021 was primarily

due to trading gains and gains from fair value adjustment on loans that amounts to $266.9 million and in the prior year period ended

March 31, 2020 trading losses and losses on fair value adjustments on loans amounted to $182.4 million and was reported as a reduction

in revenue in 2020.

The increase in revenue from services and fees of $130.1 million in the three months ended March 31, 2021 was

primarily due to increases in revenue of $97.4 million in the Capital Markets segment, $46.7 million in the Wealth Management

segment, $0.7 million in the Financial Consulting segment and $0.6 million in the Brands segment;

partially offset by decreases

in revenues of $13.3 million in the Auction and Liquidation segment and $1.9 million in the Principal Investments — United

Online and magicJack segment.

from services and fees in the Capital Markets segment increased $97.4 million, to $171.0 million during the three months ended

March 31, 2021 from $73.6 million during the three months ended March 31, 2020.

The increase in revenues was primarily due to increases

in revenue of $14.8 from the acquisition of National, $76.4 million from corporate finance, consulting and investment banking fees;

asset management fees of $1.2 million;

commissions of $1.1 million and other revenues of $3.9 million.

from services and fees in the Wealth Management segment increased $46.7 million, to $65.5 million during the three months ended

March 31, 2021 from $18.9 million during the three months ended March 31, 2020.

The increase in revenues was primarily due to

increases in revenue of $42.9 from the acquisition of National and $3.6 million from wealth and asset management fees.

from services and fees in the Auction and Liquidation segment decreased $13.3 million, to $7.4 million during the three months

ended March 31, 2021 from $20.7 million during the three months ended March 31, 2020.

The decrease in revenues was primarily due

to fewer large retail fee liquidation engagements.

from services and fees in the Financial Consulting segment increased $0.7 million, to $21.4 million during the three months

ended March 31, 2021 from $20.7 million during the three months ended March 31, 2020.

The increase in revenues was primarily due

to an increase in revenue of $1.7 million for real estate engagement fees where we provide lease modification services for corporate

tenants, partially offset by a decrease of $0.8 million in revenues for appraisal engagements where we perform valuations for the monitoring

of collateral for financial institutions, lenders, and private equity investors.

from services and fees in the Principal Investments - United Online and magicJack segment decreased $1.9 million to $19.8 million

during the three months ended March 31, 2021 from $21.7 million during the three months ended March 31, 2020.

The decrease in revenues

was primarily due to a decrease in subscription services of $1.6 million and a decrease in advertising licensing and other of $0.6

Management expects revenues from the Principal Investments - United Online and magicJack segment to continue to decline year

from services and fees in the Brands segment increased $0.6 million to $4.4 million during the three months ended March 31,

2021 from $3.8 million during the three months ended March 31, 2020.

The primary source of revenue included in this segment is the

licensing of trademarks.

income and fair value adjustments on loans consisted of gains in the amount of $266.9 million during the three months ended March 31,

2021 compared to trading losses and losses on fair value adjustments on loans in the amount of $182.4 million for the three months

ended March 31, 2020.

The $449.4 million increase in gain for the three months ended March 31, 2021 was primarily due to increases

of $446.5 million in the Capital Markets segment and $2.8 million in the Wealth Management segment.

The gain of $266.9 million for the

three months ended March 31, 2021 included realized and unrealized amounts earned on investments made in our proprietary trading accounts

of $256.2 million and unrealized amounts on our loans receivable at fair value of $10.7 million.

income – loans and securities lending increased $15.1 million, to $36.9 million during the three months ended March 31,

2021 from $21.9 million during the three months ended March 31, 2020.

Interest income from securities lending was $22.9 million

and $10.1 million during the three months ended March 31, 2021 and 2020, respectively.

Interest income from loans was $14.0 million

and $11.7 million during the three months ended March 31, 2021 and 2020, respectively.

of Goods, Cost of Goods Sold and Gross Margin

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Investments -

United Online

and magicJack

Total revenues increased approximately

$670.7 million to $936.9 million during the six months ended June 30, 2021 from $266.3 million during the six months ended

June 30, 2020.

The increase in revenues during the six months ended June 30, 2021 was primarily due to trading gains and gains from fair

value adjustment on loans that amounted to $299.6 million and in the prior year period ended June 30, 2020 trading losses and losses

on fair value adjustments on loans amounted to $67.9 million and was reported as a reduction in revenue in 2020.

The increase in revenue

from services and fees of $270.6 million in the six months ended June 30, 2021 was primarily due to increases in revenue of $163.0 million

in the Capital Markets segment, $118.8 million in the Wealth Management segment, $5.6 million in the Financial Consulting segment

and $1.9 million in the Brands segment;

partially offset by decreases in revenues of $15.0 million in the Auction and Liquidation

segment and $3.6 million in the Principal Investments — United Online and magicJack segment.

Revenues from services and fees in the Capital Markets segment increased

$163.0 million, to $297.0 million during the six months ended June 30, 2021 from $134.0 million during the six months ended

June 30, 2020.

The increase in revenues was primarily due to increases in revenue of $140.8 million from corporate finance, consulting

and investment banking fees, $19.1 million from the acquisition of National in the first quarter of 2021, and other income of $4.0 million;

partially offset by decreases of $0.4 million in commissions and $0.4 million in wealth and asset management fees.

Revenues from services and

fees in the Wealth Management segment increased $118.8 million, to $153.0 million during the six months ended June 30, 2021 from

$34.2 million during the six months ended June 30, 2020.

The increase in revenues was primarily due to increases in revenue of $106.6

million from the acquisition of National and $12.0 million from wealth and asset management fees.

Revenues from services and

fees in the Auction and Liquidation segment decreased $15.0 million, to $12.9 million during the six months ended June 30, 2021

from $27.9 million during the six months ended June 30, 2020.

The decrease in revenues was primarily due to fewer large retail fee

liquidation engagements.

Revenues from services and fees in the Financial Consulting segment

increased $5.6 million, to $45.1 million during the six months ended June 30, 2021 from $39.6 million during the six months

ended June 30, 2020.

The increase in revenues was primarily due to an increase in revenue of $2.5 million from advisory

services, $2.4 million in real estate engagement fees where we provide lease modification services for corporate tenants, and $0.6 million

due to a newly formed operations management group during fiscal year 2021.

Revenues from services and fees in the Principal Investments - United

Online and magicJack segment decreased $3.6 million to $38.7 million during the six months ended June 30, 2021 from $42.4 million

during the six months ended June 30, 2020.

The decrease in revenues was primarily due to decreases in subscription services of $2.6 million

and in advertising licensing and other of $1.1 million.

Management expects revenues from the Principal Investments - United Online and

magicJack segment to continue to decline year over year.

Revenues from services and

fees in the Brands segment increased $1.9 million to $8.9 million during the six months ended June 30, 2021 from $7.0 million

during the six months ended June 30, 2020.

The primary source of revenue included in this segment is the licensing of trademarks.

Trading income and fair value

adjustments on loans consisted of gains in the amount of $299.6 million during the six months ended June 30, 2021 compared to trading

losses and losses on fair value adjustments on loans in the amount of $67.9 million for the six months ended June 30, 2020.

million increase in gain for the six months ended June 30, 2021 was primarily due to increases of $362.3 million in the Capital Markets

segment and $5.2 million in the Wealth Management segment.

The gain of $299.6 million for the six months ended June 30, 2021 included

realized and unrealized amounts earned on investments made in our proprietary trading accounts of $289.6 million and unrealized amounts

on our loans receivable, at fair value of $10.0 million.

Interest income – loans

and securities lending increased $16.1 million, to $62.4 million during the six months ended June 30, 2021 from $46.4 million

during the six months ended June 30, 2020.

Interest income from securities lending was $36.8 million and $23.6 million during

the six months ended June 30, 2021 and 2020, respectively.

Interest income from loans was $25.6 million and $22.7 million during

the six months ended June 30, 2021 and 2020, respectively.

Revenues – Sale of Goods

Cost of goods sold

Gross margin on sale of goods

Gross margin percentage

from the sale of goods increased $5.8 million, to $6.8 million during the three months ended March 31, 2021 from $1.0 million

during the three months ended March 31, 2020.

Revenues from sale of goods were primarily attributable $6.1 million

of sales of retail goods and $0.7 million of sales of magicJack devices that are sold in connection with VoIP services.

Cost of goods

sold for the three months ended March 31, 2021 was $5.3 million, resulting in a gross margin of 22.0%.

Cost of Services.

Direct cost of services and direct cost of services measured as a percentage of revenues – services and fees

by segment during the three months ended March 31, 2021 and 2020 are as follows:

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Investments -

United Online

and magicJack

Revenues - Services and fees

from the sale of goods increased $16.5 million, to $19.3 million during the six months ended June 30, 2021 from $2.8 million

during the six months ended June 30, 2020.

Revenues from sale of goods were primarily attributable to $17.8 million of sales of retail

goods related to a retail liquidation engagement in Europe and $1.5 million of sales of magicJack devices that were sold in connection

with VoIP services.

Cost of goods sold for the six months ended June 30, 2021 was $9.0 million, resulting in a gross margin of 53.6%.

Operating Expenses

Direct Cost of Services

Gross margin on services and fees

Gross margin percentage

direct costs decreased $8.6 million, to $11.3 million during the three months ended March 31, 2021 from $20.0 million during

the three months ended March 31, 2020.

Direct costs of services decreased by $8.2 million in the Auction and Liquidation segment and

$0.4 million in the Principal Investments — United Online and magicJack segment.

The decrease in direct costs in the Auction

and Liquidation segment was primarily due to a reduction in the number of retail fee type engagements performed during the three months

ended March 31, 2021 as compared to the three months ended March 31, 2020.

The decrease in direct costs in the Principal Investments

— United Online and magicJack segment was primarily due to a corresponding decrease in revenues from subscription based customers

for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

and Liquidation

margin in the Auction and Liquidation segment for services and fees decreased to 10.6% of revenues during the three months ended March

31, 2021, as compared to 28.3% of revenues during the three months ended March 31, 2020.

The decrease in margin in the Auction and Liquidation

segment is due to more services being provided under fee and commission type engagements during the three months ended March 31, 2021

as compared to the prior year period.

Investments — United Online and magicJack

margins in the Principal Investments — United Online and magicJack segment remained relatively flat at 76.0% of revenues during

the three months ended March 31, 2021, as compared to 76.4% of revenues during the three months ended March 31, 2020.

General and Administrative Expenses

general and administrative expenses during the three months ended March 31, 2021 and 2020 were comprised of the following:

Three Months Ended

March 31, 2021

March 31, 2020

Direct cost of services decreased $4.5 million, to $23.4 million

during the six months ended June 30, 2021 from $27.9 million during the six months ended June 30, 2020.

Direct cost of services decreased

by $3.9 million in the Auction and Liquidation segment and $0.6 million in the Principal Investments — United Online and magicJack

The decrease in direct costs in the Auction and Liquidation segment was primarily due to a decrease in the number of retail fee

type engagements performed during the six months ended June 30, 2021, partially offset by an increase of $4.7 million of direct costs

incurred on a retail liquidation engagement in Europe in the second quarter of 2021, where we purchased inventory for resale and as part

of the retail liquidation engagement we incurred costs related to the store operations which primarily related to expenses for occupancy,

payroll and other store operating costs.

Selling, General and Administrative Expenses

Selling, general and administrative

expenses during the six months ended June 30, 2021 and 2020 were comprised of the following:

Six Months Ended

June 30, 2021

June 30, 2020

Capital Markets segment

6 unchanged sentences

Total selling, general & administrative expenses

n/m - Not applicable or not meaningful.

selling, general and administrative expenses increased approximately $103.6 million to $191.3 million during the three months ended

March 31, 2021 from $87.7 million for the three months ended March 31, 2020.

The increase of approximately $103.6 million in

selling, general and administrative expenses was due to increases of $58.0 million in the Capital Markets segment, $45.8 million

in the Wealth Management segment and $2.3 million in the Financial Consulting segment, partially offset by decreases of $1.0 million

in the Principal Investments — United Online and magicJack segment, $0.2 million in the Brands segment and $1.3 million in

the Corporate and Other segment.

general and administrative expenses in the Capital Markets segment increased by $58.0 million to $86.9 million during the three

months ended March 31, 2021 from $28.9 million during the three months ended March 31, 2020.

The increase was primarily due to increases

of $26.4 million in payroll and related expenses, $19.6 million in consulting expenses, $11.7 million from the acquisition of National

and $0.6 million in investment banking deal expenses, partially offset by a decrease of $0.5 million in legal expenses.

general and administrative expenses in the Wealth Management segment increased by $45.8 million to $63.9 million during the three

months ended March 31, 2021 from $18.0 million during the three months ended March 31, 2020.

The increase was primarily due to increases

of $43.4 million from the acquisition of National and $3.2 million in payroll and related expenses, partially offset by decreases of

$0.4 million in legal expenses and $0.5 million in clearing charges.

and Liquidation

general and administrative expenses in the Auction and Liquidation segment remained at $1.5 million during the three months ended March

31, 2021 and 2020.

general and administrative expenses in the Financial Consulting segment increased by $2.3 million to $18.1 million during the three

months ended March 31, 2021 from $15.8 million during the three months ended March 31, 2020.

The increase was primarily due to an increase

of $2.2 million in payroll and related expenses.

Investments — United Online and magicJack

general and administrative expenses in the Principal Investments — United Online and magicJack segment decreased $0.9 million

to $7.4 million for the three months ended March 31, 2021 from $8.3 million for the three months ended March 31, 2020.

decrease was primarily due to decreases of $0.8 million in payroll and related expenses, $0.3 million in legal expenses and $0.3

million in depreciation and amortization expenses, partially offset by an increase of $0.5 million in transaction costs.

general and administrative expenses in the Brands segment decreased by $0.2 million to $1.4 million during the three months ended

March 31, 2021 from $1.6 million during the three months ended March 31, 2020.

The decrease was primarily due to a decrease of $0.2 million

in consulting expenses.

general and administrative expenses for the Corporate and Other segment decreased approximately $1.3 million to $12.2 million

during the three months ended March 31, 2021 from $13.5 million for the three months ended March 31, 2020.

The decrease was primarily

due to decreases of $11.1 million in other expenses and $0.2 million in legal expenses, partially offset by increases of $6.3 million

in payroll and related expenses, $2.5 million in extinguishment of debt, $0.9 million in transaction costs and $0.4 million in gain from

currency exchange.

gain on extinguishment of debt .

During the three months ended March 31, 2021, we repurchased 5,126,228 bonds with an aggregate

face value of $128.2 million at par, resulting in a loss net of expenses and original issue discount of $0.9 million.

redemption payment included approximately $1.6 million in accrued interest.

During the three months ended March 31, 2020, we

repurchased 137,710 bonds with an aggregate face value of $3.4 million for $1.8 million resulting in a gain net of expenses and

original issue discount of $1.6 million.

As part of the repurchase, the Company paid $30 thousand in interest accrued through the

date of each respective repurchase.

of tradenames .

Due to the impact of the COVID-19 outbreak on economic activity and market volatility, we tested our intangible assets

as of March 31, 2020 and made the determination that the indefinite-lived tradenames in the Brands segment were impaired.

months ended March 31, 2020, the Company recognized impairment of $4.0 million on the indefinite-lived tradenames.

There was no impairment

in the three months ended March 31, 2021.

Income (Expense).

Other income included interest income of less than $0.1 million during the three months ended March 31, 2021

and $0.2 million during the three months ended March 31, 2020.

Interest expense was $19.8 million during the three months ended

March 31, 2021 compared to $15.7 million during the three months ended March 31, 2020.

The increase in interest expense during the three

months ended March 31, 2020 was primarily due to an increase in interest expense of $4.3 million from the issuance of senior notes due

in - 2023, 2024, 2025, 2026, 2027 and 2028, partially offset by a decrease in interest expense of $0.2 million on our asset based

credit facility.

Other income in the three months ended March 31, 2021 included a gain on equity investments of $0.9 million compared

to a loss of $0.2 million in the prior year period.

(Loss) Before Income Taxes .

Income before income taxes was $354.1 million during the three months ended March 31, 2021 compared

to loss before income taxes of $136.8 million during the three months ended March 31, 2020.

The increase in income before income taxes

was primarily due to an increases in revenues of approximately $600.4 million and in gain from equity investments of $1.1 million, partially

offset by increases in operating expenses of $106.2 million, interest expense of $4.1 million and a decrease in interest income of $0.2

million, as discussed above.

Benefit for Income Taxes.

Provision for income taxes was $97.5 million during the three months ended March 31, 2021 compared

to benefit from income taxes of $37.5 million during the three months ended March 31, 2020.

The effective income tax rate was a provision

of 27.5% for the three months ended March 31, 2021 as compared to a benefit of 27.4% for the three months ended March 31, 2020.

Total selling, general and

administrative expenses increased approximately $197.0 million to $391.3 million during the six months ended June 30, 2021 from $194.3 million

for the six months ended June 30, 2020.

The increase of approximately $197.0 million in selling, general and administrative expenses

was due to increases of $66.5 million in the Capital Markets segment, $121.1 million in the Wealth Management segment, $0.3

million in the Auction and Liquidation segment, $6.5 million in the Financial Consulting segment, $0.2 million in the Brands segment,

and $2.9 million in the Corporate and Other segment, partially offset by a decrease of $0.5 million in the Principal Investments

— United Online and magicJack segment.

Capital Markets

Selling, general and administrative

expenses in the Capital Markets segment increased by $66.5 million to $152.6 million during the six months ended June 30, 2021 from

$86.1 million during the six months ended June 30, 2020.

The increase was primarily due to increases of $44.2 million in payroll and related

expenses, $13.2 million from the acquisition of National, $6.9 million in consulting expenses, $2.6 million in investment banking

deal expenses, and $0.4 million in clearing charges, partially offset by a decrease of $0.9 million in legal expenses.

Wealth Management

Selling, general and administrative

expenses in the Wealth Management segment increased by $121.1 million to $154.9 million during the six months ended June 30, 2021

from $33.8 million during the six months ended June 30, 2020.

The increase was primarily due to increases of $113.0 million from the acquisition

of National and $9.3 million in payroll and related expenses, partially offset by decreases of $0.7 million in legal expenses and

$0.5 million in clearing charges.

Auction and Liquidation

Selling, general and administrative

expenses in the Auction and Liquidation segment increased by $0.3 million to $4.6 million during the six months ended June 30, 2021 from

$4.3 million during the six months ended June 30, 2020.

The increase was primarily due to an increase of $1.2 million in business development

partially offset by decreases of $0.5 million in payroll and related expenses, and $0.5 million in foreign currency exchange.

Financial Consulting

Selling, general and administrative

expenses in the Financial Consulting segment increased by $6.5 million to $37.6 million during the six months ended June 30, 2021

from $31.1 million during the six months ended June 30, 2020.

The increase was primarily due to increases of $5.3 million in payroll

and related expenses, $0.6 million in legal expenses, $0.3 million in outside contractor expenses, and $0.3 million in other expenses.

Principal Investments

— United Online and magicJack

Selling, general and administrative expenses in the Principal Investments

— United Online and magicJack segment decreased $0.5 million to $14.7 million for the six months ended June 30, 2021 from

$15.2 million for the six months ended June 30, 2020.

The decrease was primarily due to decreases of $0.6 million in payroll

and related expenses, $0.6 million in depreciation and amortization expenses, and $0.1 million in communications expenses, partially offset

by an increase primarily due to a $0.8 million legal settlement accrual release in the six months ended June 30, 2020.

Selling, general and administrative

expenses in the Brands segment increased by $0.2 million to $2.8 million during the six months ended June 30, 2021 from $2.6 million

during the six months ended June 30, 2020.

The increase was primarily due to an increase of $0.2 million in management fees paid.

Corporate and Other

Selling, general and administrative expenses for the Corporate and

Other segment increased approximately $2.9 million to $24.0 million during the six months ended June 30, 2021 from $21.1 million

for the six months ended June 30, 2020.

The increase was primarily due to increases of $9.2 million in payroll and related expenses, $2.5

million in extinguishment of debt as further discussed below, and $0.5 million in computer software expenses, partially offset by a decrease

of $9.1 million primarily due to recording a pre-acquisition litigation claim related to one of our acquired subsidiaries in the six months

ended June 30, 2021.

During the six months ended June 30, 2021, we repurchased 5,126,228

senior notes with an aggregate face value of $128.2 million at par, resulting in a loss net of expenses and original issue discount of

$0.9 million.

The total redemption payment included approximately $1.6 million in accrued interest.

During the six months ended June

30, 2020, we repurchased 137,710 senior notes with an aggregate face value of $3.4 million for $1.8 million resulting in a gain net of

expenses and original issue discount of $1.6 million.

As part of the repurchase, the Company paid $0.03 million in interest accrued through

the date of each respective repurchase.

Impairment of tradenames .

Due to the impact of the COVID-19 outbreak on economic activity and market volatility, we tested

our intangible assets as of March 31, 2020 and June 30, 2020 and made the determination that the indefinite-lived tradenames in

the Brands segment were impaired.

In the six months ended June 30, 2020, the Company recognized impairments of $12.5 million on the indefinite-lived

There was no impairment in the six months ended June 30, 2021.

Other Income (Expense).

Other income included interest income of $0.1 million during the six

months ended June 30, 2021 and $0.5 million during the six months ended June 30, 2020.

Gain on extinguishment of loans in the amount

of $6.5 million during the six months ended June 30, 2021 was due to National PPP loans that were forgiven by the SBA.

Interest expense

was $40.6 million during the six months ended June 30, 2021 compared to $32.2 million during the six months ended June 30, 2020.

in interest expense during the six months ended June 30, 2021 was primarily due to an increase in interest expense of $8.6 million from

the issuance of senior notes, partially offset by a decrease in interest expense of $0.2 million on our asset based credit facility.

Other income in the six months ended June 30, 2021 included a gain on equity investments of $0.02 million compared to a loss of $0.6 million

in the prior year period.

Income (Loss) Before Income

Income before income taxes was $449.1 million during the six months

ended June 30, 2021 compared to loss before income taxes of $22.1 million during the six months ended June 30, 2020.

The increase of $471.2

million in income before income taxes was primarily due to an increase in revenues of approximately $670.7 million, a gain on extinguishment

of loans of $6.5 million, and a gain from equity investments of $0.6 million, partially offset by increases in operating expenses of $197.7

million, interest expense of $8.5 million, and a decrease in interest income of $0.4 million.

(Provision) Benefit for

Income Taxes.

Provision for income taxes was $117.4 million during the six months ended June 30, 2021 compared to benefit for

income taxes of $5.3 million during the six months ended June 30, 2020.

The effective income tax rate was a provision of 26.1% for the

six months ended June 30, 2021 as compared to a benefit of 24.2% for the six months ended June 30, 2020.

Net Income (Loss) Attributable

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The net income attributable to noncontrolling interests was $1.4 million

during the three months ended March 31, 2021 compared to net loss of $0.6 million during the three months ended March 31, 2020.

Income (Loss) Attributable to the Company .

Net income attributable to the Company for the three months ended March 31, 2021 was $254.7 million,

from net loss attributable to the Company of $98.7 million for the three months ended March 31, 2020.

The increase in net income

attributable to the Company during the three months ended March 31, 2021 as compared to the same period in 2020 was primarily due to

an increase in operating income of $494.1 million, and an increase in gain from equity investments of $1.1 million,

partially offset by an increase in provision for income taxes of $135.1 million and an increase in interest expense of $4.1 million

and a decrease in interest income of $0.2 million.

Stock Dividends .

On October 7, 2019, the Company closed its public offering of Depositary Shares, each representing 1/1000th of

a share of 6.875% Series A Cumulative Perpetual Preferred Stock, (trading under NASDAQ symbol “RILYP”), par value

$0.0001 per share.

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are

entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary

Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share).

Dividends will be payable quarterly in arrears, on or

about the last day of January, April, July and October.

On January 11, 2021, the Company declared a cash dividend representing

$0.4296875 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business

during the six months ended June 30, 2021 compared to net loss of $1.9 million during the six months ended June 30, 2020.

Net Income (Loss) Attributable

to the Company .

Net income attributable to the Company for the six months ended June

30, 2021 was $330.3 million, an increase from net loss attributable to the Company of $14.8 million for the six months ended

June 30, 2020.

The increase of $345.2 million in net income attributable to the Company during the six months ended June 30, 2021 as compared

to the same period in 2020 was primarily due to an increase in operating income of $472.9 million, an increase in gain on extinguishment

of loans of $6.5 million, and an increase in gain from equity investments of $0.6 million, partially offset by an increase in provision

for income taxes of $122.8 million, an increase in interest expense of $8.5 million, an increase in net income attributable to noncontrolling

interests of $3.3 million, and a decrease in interest income of $0.4 million.

Preferred Stock Dividends .

On October 7, 2019, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 6.875% Series

A Cumulative Perpetual Preferred Stock, (trading under NASDAQ symbol “RILYP”), par value $0.0001 per share.

Holders of Series

A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate

of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875

per Depositary Share).

Dividends are payable quarterly in arrears, on or about the last day of January, April, July and October.

On January 11,

September 4, 2020, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 7.375% Series

B Cumulative Perpetual Preferred Stock (trading under the NASDAQ symbol “RILYL”), par value $0.0001 per share.

Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends

at the rate of 7.375% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75

or $1.84375 per Depositary Share).

Dividends will be payable quarterly in arrears, on or about the last day of January, April, July and

On January 11, 2021, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on January 29,

2021, the Company declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on January 29, 2021

to holders of record as of the close of business on January 21, 2021.

Net Income (Loss) Available

to Common Shareholders .

Net income available to common shareholders for the three months ended March 31, 2021 was $252.9 million,

an increase from net loss available to common shareholders of $99.7 million for the three months ended March 31, 2020.

in net income available to common shareholders during the three months ended March 31, 2021 as compared to the same period in 2020 was

primarily due to an increase in operating income of $494.1 million and an increase in gain from equity investments of $1.1 million,

partially offset by an increase in provision for income taxes of $135.1 million, an increase in income attributable to noncontrolling

interest of $2.5 million and an increase in preferred stock dividends of $0.7 million, an increase in interest expense of $4.1 million

and a decrease in interest income of $0.2 million

and Capital Resources

operations are funded through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes

payable, term loan and credit facility, and special purposes financing arrangements.

the three months ended March 31, 2021 and 2020, we generated net income of $256.6 million and net loss of $99.2 million, respectively.

Our cash flows and profitability are impacted by the number and size of retail liquidation and capital markets engagements performed

on a quarterly and annual basis.

of March 31, 2021, we had $237.6 million of unrestricted cash and cash equivalents, $8.5 million of restricted cash, $1,166.7 million

of securities and other investments held at fair value, $294.1 million of loans receivable, and $1,226.8 million of borrowings

The borrowings outstanding of $1,226.8 million at March 31, 2021 included (a) $122.8 million of borrowings from

the issuance of the 7.25% 2027 Notes, (b) $137.5 million of borrowings from the issuance of the 7.375% 2023 Notes, (c) $115.2 million

of borrowings from the issuance of the 6.875% 2023 Notes, (d) $111.2 million of borrowings from the issuance of the 6.75% 2024 Notes,

(e) $136.5 million of borrowings from the issuance of the 6.50% 2026 Notes, (f) $132.1 million of borrowings from the issuance of the

6.375% 2025 Notes, (g) $239.8 million of borrowings from the issuance of the 6.00% 2028 Notes, (h) $159.5 million of borrowings from

the issuance of the 5.50% 2026 Notes, (i) $69.5 million term loan borrowed pursuant to the BRPAC Credit Agreement discussed below, (j)

$6.9 million of notes payable, and (k) $11.2 million of loan participations sold.

We believe that our current cash and cash equivalents,

securities and other investments owned, funds available under our asset based credit facility, and cash expected to be generated from

On April 5, 2021, the Company declared a cash dividend

representing $0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April

On September 4, 2020, the

Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 7.375% Series B Cumulative Perpetual

Preferred Stock (trading under the NASDAQ symbol “RILYL”), par value $0.0001 per share.

Holders of Series B Preferred Stock,

when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum

of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends are payable quarterly in arrears, on or about the last day of January, April, July and October.

On January 11, 2021, the Company

declared a cash dividend of $0.4609375 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of

business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend representing $0.4609375 per Depositary Share,

which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021.

Net Income (Loss)

Available to Common Shareholders .

Net income available to common shareholders for the six months ended June 30, 2021 was

$326.8 million, an increase from net loss available to common shareholders of $17.0 million for the six months ended June

The increase of $343.8 million in net income available to common shareholders during the six months ended June 30, 2021 as

compared to the same period in 2020 was primarily due to increases in operating income of $472.9 million, gain on

extinguishment of loans of $6.5 million, and a gain from equity investments of $0.6 million, partially offset by an increase in

provision for income taxes of $122.8 million, an increase in interest expense of $8.5 million, an increase in income

attributable to noncontrolling interest of $3.3 million, an increase in preferred stock dividends of $1.4 million, and a

decrease in interest income of $0.4 million.

Liquidity and Capital

Our operations are funded through a combination of existing cash on

hand, cash generated from operations, borrowings under our senior notes payable, term loans and credit facilities, and special purposes

financing arrangements.

During the six months ended June 30, 2021 and

2020, we generated net income of $331.7 million and net loss of $16.7 million, respectively.

Our cash flows and profitability

are impacted by capital market engagements performed on a quarterly and annual basis and amounts realized from the sale of our investments

in marketable securities.

As of June 30, 2021, we had $297.4 million of unrestricted cash

and cash equivalents, $1.3 million of restricted cash, $1,278.8 million of securities and other investments owned at fair value,

$270.3 million of loans receivable, and $1,475.0 million of borrowings outstanding.

The borrowings outstanding of $1,475.0 million

at June 30, 2021 included senior notes at amortized cost of $1,213.1 million, $257.1 million in term loans borrowed pursuant to the BRPAC

and Nomura Credit Agreements, $4.4 million of loan participations sold, and $0.4 million of notes payable.

We believe that our current

cash and cash equivalents, securities and other investments owned, funds available under our asset based credit facility, funds available

under the BRPAC and Nomura term loans, funds available under the Nomura revolving credit facility, and cash expected to be generated from

operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months

2 unchanged sentences

to fund operations and execute on our business plan.

time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations.

2021, we declared a regular dividend of $0.50 per share and special dividend of $2.50 per share that will be paid on or about May

28, 2021 to stockholders of record as of May 17, 2021.

On February 25, 2021, the Board of Directors announced an increase to the regular

quarterly dividend from $0.375 per share to $0.50 per share.

During the year ended December 31, 2020, we paid cash dividends on

our common stock of $38.8 million.

While it is the Board’s current intention to make regular dividend payments of $0.50 per share

each quarter and special dividend payments dependent upon exceptional circumstances from time to time, our Board of Directors may reduce

or discontinue the payment of dividends at any time for any reason it deems relevant.

The declaration and payment of any future dividends

or repurchases of our common stock will be made at the discretion of our Board of Directors and will be dependent upon our financial

condition, results of operations, cash flows, capital expenditures, and other factors that may be deemed relevant by our Board of Directors.

summary of dividend activity for the three months ended March 31, 2021 and the year ended December 31, 2020 was as follows:

Date Declared

From time to time, we may decide to pay dividends which will be dependent

upon our financial condition and results of operations.

On July 29, 2021, we declared a regular dividend of $0.50 per share and special

dividend of $1.50 per share that will be paid on or about August 26, 2021 to stockholders of record as of August 13, 2021.

On May 3, 2021,

we declared a regular dividend of $0.50 per share and special dividend of $2.50 per share that was paid on May 28, 2021 to stockholders

of record as of May 17, 2021.

On February 25, 2021, the Board of Directors announced an increase to the regular quarterly dividend from

$0.375 per share to $0.50 per share.

During the year ended December 31, 2020, we paid cash dividends on our common stock of $38.8

While it is the Board’s current intention to make regular dividend payments of $0.50 per share each quarter and special

dividend payments dependent upon exceptional circumstances from time to time, our Board of Directors may reduce or discontinue the payment

of dividends at any time for any reason it deems relevant.

The declaration and payment of any future dividends or repurchases of our common

stock will be made at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations,

cash flows, capital expenditures, and other factors that may be deemed relevant by our Board of Directors.

A summary of dividend activity

for the six months ended June 30, 2021 and the year ended December 31, 2020 was as follows:

February 25, 2021

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March 17, 2020

of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash

dividends at the rate of 6.875% per annum of the $25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent

to $1,718.75 or $1.71875 per Depositary Share).

Dividends will be payable quarterly in arrears, on or about the last day of January,

April, July and October.

As of March 31, 2021, dividends in arrears in respect of the Depositary Shares were $0.7 million.

January 11, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 29,

2021 to holders of record as of the close of business on January 21, 2021.

On April 5, 2021, the Company declared a

cash dividend $0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of

business on April 20, 2021.

of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash

dividends at the rate of 7.375% per annum of the $25 thousand liquidation preference ($25.00 per Depositary Share) per year

(equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends will be payable quarterly in arrears, on or about the last day

of January, April, July and October.

As of March 31, 2021, dividends in arrears in respect of the Depositary Shares were $0.4

On January 11, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on

January 29, 2021 to holders of record as of the close of business on January 21, 2021.

On April 5, 2021, the

Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 30, 2021 to holders of record as

of the close of business on April 20, 2021.

principal sources of liquidity to finance our business is our existing cash on hand, cash flows generated from operating activities,

funds available under revolving credit facilities and special purpose financing arrangements.

Three Months Ended

Holders of Series A Preferred Stock, when and as authorized by the

board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25 thousand liquidation

preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share).

Dividends will be payable

quarterly in arrears, on or about the last day of January, April, July and October.

As of June 30, 2021, dividends in arrears in

respect of the Depositary Shares were $0.8 million.

On January 11, 2021, the Company declared a cash dividend $0.4296875 per

Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21,

On April 5, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 30, 2021 to

holders of record as of the close of business on April 20, 2021.

On July 8, 2021, the Company declared a cash dividend $0.4296875 per

Depositary Share, which will be paid on or about August 2, 2021 to holders of record as of the close of business on July 21,

Holders of Series B Preferred Stock, when and as authorized by the

board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25 thousand liquidation

preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends will be payable

quarterly in arrears, on or about the last day of January, April, July and October.

As of June 30, 2021, dividends in arrears in

respect of the Depositary Shares were $0.5 million.

On January 11, 2021, the Company declared a cash dividend $0.4609375 per

Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21,

On April 5, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 30, 2021 to

holders of record as of the close of business on April 20, 2021.

On July 8, 2021, the Company declared a cash dividend $0.4609375 per

Depositary Share, which will be paid on or about August 2, 2021 to holders of record as of the close of business on July 21,

Our principal sources of

liquidity to finance our business is our existing cash on hand, cash flows generated from operating activities, funds available under

revolving credit facilities and special purpose financing arrangements.

Cash Flow Summary

Six Months Ended

(Dollars in thousands)

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Net increase in cash, cash equivalents and restricted cash

used in operating activities was $42.9 million during the three months ended March 31, 2021 compared to cash provided of

$1.0 million during the three months ended March 31, 2020.

Cash used in operating activities for the three months ended

March 31, 2021 included net income of $256.6 million adjusted for noncash items of $56.5 million and changes in

operating assets and liabilities of $356.0 million.

Noncash items of $56.5 million include (a) depreciation and

amortization of $6.8 million, (b) share-based compensation of $5.5 million, (c) income from equity investments of

$0.9 million, (d) fair value adjustments of $10.7 million, (e) provision for doubtful accounts of $0.4 million, (f) income

allocated for mandatorily redeemable noncontrolling interests of $0.1 million, (g) other noncash interest and other of $4.4

million, (h) deferred income taxes of $62.7 million, (i) dividends from equity investments of $0.3 million, (j) loss on

extinguishment of debt of $0.9 million, (k) gain on equity investment of $3.5 million and (l) effect of foreign currency on

operations of $0.7 million.

provided by investing activities was $0.7 million during the three months ended March 31, 2021 compared to cash used in investing

activities of $72.1 million for the three months ended March 31, 2020.

During the three months ended March 31, 2021, cash provided by

investing activities consisted of cash received from loans receivable repayment of $87.5 million, partially offset by cash used

for purchases of loans receivable of $75.7 million, repayments of loan participations sold of $6.1 million, cash used for purchases

of equity investments of $4.7 million and purchases of property and equipment of $0.1 million.

During the three months ended March

31, 2020, cash used in investing activities consisted of cash used for loans receivable of $115.3 million, repayments of loan participations

sold of $0.2 million and cash used for purchases of property and equipment of $0.4 million, offset by cash received from loans

receivable repayment of $42.1 million, sale of a loan receivable to a related party of $1.8 million.

provided by financing activities was $184.2 million during the three months ended March 31, 2021 compared to cash provided by

financing activities of $92.3 million during the three months ended March 31, 2020.

During the three months ended

March 31, 2021, cash provided by financing activities primarily consisted of $402.4 million proceeds from issuance of

senior notes, $64.7 million net proceeds from offerings of common stock and $3.7 million contributions from noncontrolling interests,

offset by (a) $37.6 million used to repay our notes payable, (b) $95.2 million used to pay dividends on our common shares, (c)

$4.8 million use for repayment on our term loan, (d) $128.2 million used to repurchase our senior notes, (e) $7.5 million

used to pay debt issuance costs, (f) $11.6 million distributions to noncontrolling interests and (g) $1.8 million used to pay

dividends on our preferred shares.

During the three months ended March 31, 2020, cash provided by financing activities

primarily consisted of $171.1 million proceeds from issuance of senior notes and $4.6 million proceeds from offerings of

preferred stock, offset by (a) $37.1 million used to repay our asset based credit facility, (b) $24.1 million used to

repurchase our common stock, (c) $9.6 million used to pay dividends on our common shares, (d) $4.8 million use for

repayment on our term loan, (e) $1.8 million used to repurchase our senior notes, (f) $2.7 million used to pay debt issuance

costs, (g) $1.3 million distribution to noncontrolling interests, (h) $1.1 million used to pay dividends on our preferred

shares (i) $0.5 million used for payment of employment taxes on vesting of restricted stock and (j) $0.4 million used to repay

our other notes payable.

April 21, 2017, we amended the asset based credit facility agreement (as amended, the “Credit Agreement”) with Wells Fargo

Bank to increase the maximum borrowing limit from $100.0 million to $200.0 million.

Such amendment, among other things, also extended

the expiration date of the credit facility from July 15, 2018 to April 21, 2022.

The Credit Agreement continues to allow for borrowings

under a separate credit agreement (a “UK Credit Agreement”) dated March 19, 2015 with an affiliate of Wells Fargo Bank which

provides for the financing of transactions in the United Kingdom with borrowings up to 50.0 million British Pounds.

Any borrowing on

the UK Credit Agreement reduces the availability of the asset based $200.0 million credit facility.

The UK Credit Agreement is cross

collateralized and integrated in certain respects with the Credit Agreement.

The Credit Agreement continues to include the addition of

our Canadian subsidiary, from the October 5, 2016 amendment to the Credit Agreement, to facilitate borrowings to fund retail liquidation

transactions in Canada.

From time to time, we utilize this credit facility to fund costs and expenses incurred in connection with liquidation

We also utilize this credit facility in order to issue letters of credit in connection with liquidation engagements conducted

on a guaranteed basis.

Subject to certain limitations and offsets, we are permitted to borrow up to $200.0 million under the credit facility,

less the aggregate principal amount borrowed under the UK Credit Agreement (if in effect).

Borrowings under the credit facility are only

made at the discretion of the lender and are generally required to be repaid within 180 days.

The interest rate for each revolving credit

advance under the related credit agreement is, subject to certain terms and conditions, equal to the LIBOR plus a margin of 2.25% to

3.25% depending on the type of advance and the percentage such advance represents of the related transaction for which such advance is

The credit facility is secured by the proceeds received for services rendered in connection with the liquidation service contracts

pursuant to which any outstanding loan or letters of credit are issued and the assets that are sold at liquidation related to such contract,

The credit facility also provides for success fees in the amount of 2.5% to 17.5% of the net profits, if any, earned on liquidation

engagements that are financed under the credit facility as set forth in the related credit agreement.

We typically seek borrowings on

an engagement-by-engagement basis.

The Credit Agreement contains certain covenants, including covenants that limit or restrict our ability

to incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge or consolidate and enter

into certain transactions with affiliates.

There was no outstanding balance on this credit facility at March 31, 2021 and December

At March 31, 2021, there were no open letters of credit outstanding.

We are in compliance with all financial covenants

in the asset based credit facility at March 31, 2021.

Cash used in operating activities was $147.9 million during the

six months ended June 30, 2021 compared to cash provided of $14.2 million during the six months ended June 30, 2020.

operating activities for the six months ended June 30, 2021 consisted of the positive impact of net income of $331.7 million and

noncash items of $50.2 million, offset by the negative impact of changes in operating assets and liabilities of $529.8 million.

The positive cash flow impact from noncash items of $50.2 million included deferred income taxes of $51.2 million, share-based compensation

of $14.1 million, depreciation and amortization of $12.9 million, loss on extinguishment of debt of $0.9 million, provision

for doubtful accounts of $0.8 million, dividends from equity investments of $0.6 million, and income allocated for mandatorily redeemable

noncontrolling interests of $0.3 million, partially offset by fair value adjustments of $10.0 million, other noncash interest and

other of $9.1 million, gain on extinguishment of loans of $6.5 million, gain on equity investment of $3.5 million, and effect of foreign

currency on operations of $1.5 million.

Cash used in investing activities was $13.7 million during the

six months ended June 30, 2021 compared to cash used in investing activities of $83.4 million for the six months ended June 30, 2020.

During the six months ended June 30, 2021, cash used in investing activities consisted of cash used in purchases of loans receivable of

$87.3 million, repayments of loan participations sold of $10.8 million, cash used for purchases of equity investments of $10.5

million, cash used in the National acquisition of $0.4 million, and purchases of property and equipment of $0.3 million, partially

offset by cash received from loans receivable repayment of $95.5 million.

During the six months ended June 30, 2020, cash used in

investing activities consisted of cash used for the purchase of loans receivable of $152.2 million, repayments of loan participations

sold of $0.9 million, cash used for equity investments of $6.5 million, and cash used for acquisition of other businesses of $1.5 million,

offset by cash received from loans receivable repayment of $74.5 million, sale of a loan receivable to a related party of $1.8 million

and loan participations sold of $2.4 million.

Cash provided by financing activities was $356.1 million during the

six months ended June 30, 2021 compared to cash provided by financing activities of $71.8 million during the six months ended June

During the six months ended June 30, 2021, cash provided by financing activities primarily consisted of $475.7 million

proceeds from issuance of senior notes, $200.0 million proceeds from the Nomura term loan, $64.7 million net proceeds from offerings of

common stock, $10.6 million contributions from noncontrolling interests, and $8.3 million net proceeds from offerings of preferred stock,

partially offset by $181.3 million used to pay dividends on our common shares, $128.2 million used to repurchase our senior notes,

$37.6 million used to repay our notes payable, $15.7 million used to pay debt issuance costs, $14.8 million in distributions

to noncontrolling interests, $11.5 million used for repayment on our BRPAC term loan, $10.4 million used to pay employment taxes

on vesting of restricted stock, and $3.5 million used to pay dividends on our preferred shares.

During the six months ended June 30, 2020,

cash provided by financing activities primarily consisted of $171.1 million proceeds from issuance of senior notes and $4.6 million

proceeds from offerings of preferred stock, offset by $37.1 million used to repay our asset based credit facility, $27.8 million

used to repurchase our common stock, $17.5 million used to pay dividends on our common shares, $9.6 million used for repayment

on our BRPAC term loan, $2.8 million used to pay debt issuance costs, $2.7 million used for payment of employment taxes on vesting

of restricted stock, $2.1 million in distributions to noncontrolling interests, $2.1 million used to pay dividends on our preferred

shares, $1.8 million used to repurchase our senior notes, and $0.4 million used to repay our other notes payable.

Credit Agreements

Credit Agreement

On June 23, 2021, the Company, the Primary Guarantor and the Borrower

entered into the Credit Agreement with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as

collateral agent, providing for a four-year $200.0 million secured Term Loan Facility and a four-year $80.0 million secured Revolving

Credit Facility.

The Credit Facilities will mature on June 23, 2025, subject to acceleration or prepayment.

loans under the Credit Facilities will accrue interest at the Eurodollar Rate plus an applicable margin of 4.50%.

Base rate loans will

accrue interest at the Base Rate plus an applicable margin of 3.50%.

In addition to paying interest on outstanding borrowings under the

Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit

Facility, which is determined by the average utilization of the Revolving Credit Facility for the immediately preceding fiscal quarter.

to certain eligibility requirements, the assets of certain subsidiaries of the Company that hold credit assets, private equity assets,

and public equity assets are placed into a borrowing base, which serves to limit the borrowings under the Credit Facilities.

If borrowings

under the Credit Facilities exceed the borrowing base, the Company is obligated to prepay the loans in an aggregate amount equal to such

The Credit Agreement contains certain representations and warranties (subject to certain agreed qualifications) that are customary

for financings of this kind.

The Credit Agreement contains certain affirmative and negative covenants

customary for financings of this type that, among other things, limit the Company’s, the Primary Guarantor’s, the Borrower’s,

and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain

fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions,

to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective

equity interests.

In addition, the Credit Agreement contains a financial covenant that requires the Company to maintain Operating EBITDA

of at least $115.0 million and the Primary Guarantor to maintain net asset value of at least $900.0 million.

The Credit Agreement contains

customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain

bankruptcy and insolvency events and customary change of control events.

Commencing on September 30,

2022, the Term Loan Facility will amortize in equal quarterly installments of 1.25% of the aggregate principal amount of the term loan

as of the closing date with the remaining balance due at final maturity.

Quarterly installments from September 30, 2022 to March 31, 2025

are in the amount of $2.5 million per quarter.

June 30, 2021, the outstanding balance on the credit facility’s term loan was $194.2 million (net of unamortized debt issuance costs

of $5.8 million).

Interest on the term loan for the three and six months ended June 30, 2021 was $0.2 million (including amortization

of deferred debt issuance costs of $0.03 million).

The interest rate on the term loan at June 30, 2021 was 4.64%.

We had not made any borrowings under the Revolving Credit Facility

at June 30, 2021.

The unused commitment fee on the revolving facility for the three and six months ended June 30, 2021 was $0.03 million

(including amortization of deferred financing costs of $0.01 million).

The interest rate on the Revolving Credit Facility at June 30,

2021 was 4.65%.

Subsequent to June 30, 2021, we drew down the full $80.0 million of the Revolving Credit Facility.

are in compliance with all financial covenants in the Nomura Credit Agreement at June 30, 2021.

Wells Fargo Credit Agreement

On April 21, 2017, we amended

the asset based credit facility agreement (as amended, the “Credit Agreement”) with Wells Fargo Bank to increase the maximum

borrowing limit from $100.0 million to $200.0 million.

Such amendment, among other things, also extended the expiration date of the credit

facility from July 15, 2018 to April 21, 2022.

The Credit Agreement continues to allow for borrowings under a separate credit agreement

(a “UK Credit Agreement”) dated March 19, 2015 with an affiliate of Wells Fargo Bank which provides for the financing of transactions

in the United Kingdom with borrowings up to 50.0 million British Pounds.

Any borrowing on the UK Credit Agreement reduces the availability

of the asset based $200.0 million credit facility.

The UK Credit Agreement is cross collateralized and integrated in certain respects

with the Credit Agreement.

The Credit Agreement continues to include the addition of our Canadian subsidiary, from the October 5, 2016

amendment to the Credit Agreement, to facilitate borrowings to fund retail liquidation transactions in Canada.

From time to time, we utilize

this credit facility to fund costs and expenses incurred in connection with liquidation engagements.

We also utilize this credit facility

in order to issue letters of credit in connection with liquidation engagements conducted on a guaranteed basis.

Subject to certain limitations

and offsets, we are permitted to borrow up to $200.0 million under the credit facility, less the aggregate principal amount borrowed under

the UK Credit Agreement (if in effect).

Borrowings under the credit facility are only made at the discretion of the lender and are generally

required to be repaid within 180 days.

The interest rate for each revolving credit advance under the related credit agreement is, subject

to certain terms and conditions, equal to the LIBOR plus a margin of 2.25% to 3.25% depending on the type of advance and the percentage

such advance represents of the related transaction for which such advance is provided.

The credit facility is secured by the proceeds

received for services rendered in connection with the liquidation service contracts pursuant to which any outstanding loan or letters

of credit are issued and the assets that are sold at liquidation related to such contract, if any.

The credit facility also provides for

success fees in the amount of 2.5% to 17.5% of the net profits, if any, earned on liquidation engagements that are financed under the

credit facility as set forth in the related credit agreement.

We typically seek borrowings on an engagement-by-engagement basis.

Agreement contains certain covenants, including covenants that limit or restrict our ability to incur liens, incur indebtedness, make

investments, dispose of assets, make certain restricted payments, merge or consolidate and enter into certain transactions with affiliates.

was no outstanding balance on this credit facility at June 30, 2021 and December 31, 2020.

At June 30, 2021, there were no open letters

of credit outstanding.

We are in compliance with all financial covenants in the asset based credit facility at June 30, 2021.

BRPAC Credit Agreement

December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware

8 unchanged sentences

to Credit Agreement and Joinder with City National Bank as a new lender in which the new lender extended to Borrowers the additional $10.0

$10.0 million.

December 31, 2020, the Borrowers, the Secured Guarantors, the Agent and the Lenders, entered into the Second Amendment to Credit Agreement

4 unchanged sentences

new Term Loans is five (5) years from the date of the Second Amendment, (iv) the interest rate margin was increased by 25 basis points

as set forth in the Second Amendment, (v) the Borrowers agreed to make mandatory prepayments of the Term Loans from a portion of the

Consolidated Excess Cash Flow (as defined in the Credit Agreement), (vi) the maximum Consolidated Total Funded Debt Ratio (as defined

in the Credit Agreement) was increased as set forth in the Second Amendment and (vii) the Company and B.

Riley Principal Investments,

LLC entered into a reaffirmation of their guarantees of the Borrowers’ obligations under the Credit Agreement.

Additionally, the

Borrowers paid a commitment fee and an arrangement fee, each based on a percentage of the aggregate commitments, in each case upon the

closing of the Second Amendment, as further discussed in Note 10 to the accompanying financial statements.

The borrowings under the amended

BRPAC Credit Agreement bear interest equal to the LIBOR plus a margin of 2.75% to 3.25% depending on the Borrowers’ consolidated

total funded debt ratio as defined in the BRPAC Credit Agreement.

At March 31, 2021, the interest rate on the BRPAC Credit Agreement

outstanding under the Amended BRPAC Credit Agreement are due in quarterly installments commencing on March 31, 2021.

Quarterly installments

from June 30, 2021 to December 31, 2021 are in the amount of $4.8 million per quarter, from March 31, 2022 to December 31, 2022 are in

the amount of $4.3 million per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $3.8 million per quarter, from

March 31, 2024 to December 31, 2024 are in the amount of $3.3 million per quarter, and from March 31, 2025 to December 31, 2025 are $2.8

million per quarter.

of March 31, 2021 and December 31, 2020, the outstanding balance on the term loan was $69.5 million (net of unamortized debt issuance

costs of $0.7 million) and $74.2 million (net of unamortized debt issuance costs of $0.8 million), respectively.

are in compliance with all financial covenants in the BRPAC Credit Agreement at March 31, 2021.

Note Offerings

the three months ended March 31, 2021, the Company issued $12.9 million of senior notes due with maturities dates ranging from May 2023

to January 2028 pursuant to At the Market Issuance Sales Agreements with B.

as set forth in the Second Amendment, (v) the Borrowers agreed to make mandatory prepayments of the Term Loans from a portion of the Consolidated

Excess Cash Flow (as defined in the Credit Agreement), (vi) the maximum Consolidated Total Funded Debt Ratio (as defined in the Credit

Agreement) was increased as set forth in the Second Amendment and (vii) the Company and B.

Riley Principal Investments, LLC entered into

a reaffirmation of their guarantees of the Borrowers’ obligations under the Credit Agreement.

Additionally, the Borrowers paid a

commitment fee and an arrangement fee, each based on a percentage of the aggregate commitments, in each case upon the closing of the Second

Amendment, as further discussed in Note 8 to the accompanying financial statements.

The borrowings under the amended BRPAC Credit Agreement

bear interest equal to the LIBOR plus a margin of 2.75% to 3.25% depending on the Borrowers’ consolidated total funded debt ratio

as defined in the BRPAC Credit Agreement.

At June 30, 2021, the interest rate on the BRPAC Credit Agreement was 3.36%.

Amounts outstanding under

the Amended BRPAC Credit Agreement are due in quarterly installments commencing on March 31, 2021.

Quarterly installments from September

30, 2021 to December 31, 2021 are in the amount of $4.8 million per quarter, from March 31, 2022 to December 31, 2022 are in the

amount of $4.3 million per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $3.8 million per quarter,

from March 31, 2024 to December 31, 2024 are in the amount of $3.3 million per quarter, and from March 31, 2025 to December

31, 2025 are in the amount of $2.8 million per quarter.

of June 30, 2021 and December 31, 2020, the outstanding balance on the term loan was $62.9 million (net of unamortized debt

issuance costs of $0.6 million) and $74.2 million (net of unamortized debt issuance costs of $0.8 million), respectively.

Interest expense

on the term loan during the three months ended June 30, 2021 and 2020, was $0.7 million (including amortization of deferred debt issuance

costs of $0.08 million) and $0.6 million (including amortization of deferred debt issuance costs of $0.07 million), respectively.

Interest expense on the term loan during the six months ended June 30, 2021 and 2020, was $1.4 million (including amortization of

deferred debt issuance costs of $0.2 million) and $1.4 million (including amortization of deferred debt issuance costs of $0.1 million),

respectively.

are in compliance with all financial covenants in the BRPAC Credit Agreement at June 30, 2021.

Senior Note Offerings

During the six months ended

June 30, 2021, the Company issued $85.3 million of senior notes due with maturities dates ranging from May 2023 to January 2028 pursuant

to At the Market Issuance Sales Agreements with B.

Riley Securities, Inc.

which governs the program of at-the-market

sales of the Company’s senior notes.

A series of prospectus supplements were filed by the Company with the SEC which allowed the

Company to sell these senior notes.

January 25, 2021, the Company issued $230.0 million of senior notes due in January 2028 (“6.0% 2028 Notes”).

Interest on the

6.0% 2028 Notes is payable quarterly at 6.0%.

which governs the program of at-the-market sales of the Company’s

senior notes.

A series of prospectus supplements were filed by the Company with the SEC which allowed the Company to sell these senior

On January 25, 2021, the

Company issued $230.0 million of senior notes due in January 2028 (“6.0% 2028 Notes”).

Interest on the 6.0% 2028 Notes

is payable quarterly at 6.0%.

The 6.0% 2028 Notes are unsecured and due and payable in full on January 31, 2028.

In connection with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $225.7 million (after underwriting

commissions, fees and other issuance costs of $4.3 million).

In connection

with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $225.7 million (after underwriting commissions, fees

and other issuance costs of $4.3 million).

The Notes bear interest at the rate of 6.0% per annum.

March 29, 2021, the Company issued $159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”).

Interest on the

5.5% 2026 Notes is payable quarterly at 5.5%.

On March 29, 2021, the Company

issued $159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”).

Interest on the 5.5% 2026 Notes is payable

quarterly at 5.5%.

The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026.

In connection with the issuance of the 5.5% 2026 Notes, the Company received net proceeds of $156.3 million (after underwriting

commissions, fees and other issuance costs of $3.2 million).

In connection with the issuance

of the 5.5% 2026 Notes, the Company received net proceeds of $156.3 million (after underwriting commissions, fees and other issuance

costs of $3.2 million).

The Notes bear interest at the rate of 5.5% per annum.

March 31, 2021, the Company exercised its option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50%

2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017.

The total redemption payment included $1.6 million in

accrued interest.

March 31, 2021 and December 31, 2020, the total senior notes outstanding was $1,139.1 million (net of unamortized debt issue costs of

$15.4 million) and $870.8 million (net of unamortized debt issue costs of $9.6 million) with a weighted average interest rate of 6.49%

and 6.95%, respectively.

Interest on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $18.7 million

and $14.4 million for the three months ended March 31, 2021 and 2020, respectively.

most recent sales agreement prospectus was filed by us with the SEC on April 6, 2021 (the “April 2021 Sales Agreement Prospectus”),

supplementing the prospectus filed on January 28, 2021 (the “January 2021 Sales Agreement Prospectus”).

This program provides

for the sale by the Company of up to $150.0 million of certain of the Company’s senior notes.

As of March 31, 2021, the Company

had $137.1 million remaining availability under the January 2021 Sales Agreement.

Balance Sheet Arrangements

part of our investment banking and financial services activities, from time to time we enter into guaranties of debt, commitments of

other entities, and similar transactions that may be considered off-balance sheet arrangements.

Credit Agreement and Backstop

January 31, 2020, the Company provided Babcock & Wilcox Enterprises, Inc.

(“B&W”) $30.0 million of additional Tranche

A-4 last out term loans pursuant to Amendment No.

20 (“Amendment No.

20”) to the Credit Agreement, dated May 11, 2015 (as

amended to date, the “B&W Credit Agreement”) with Bank of America, N.A., as administrative agent and lender, and the

other lenders party thereto.

The Company is a lender with respect to B&W’s existing last out term loans under the Credit Agreement.

Kenneth Young, our President, is the Chief Executive Officer of B&W.

Pursuant to Amendment No.

20, B&W and the lenders, including

the Company, also agreed upon a term sheet pursuant to which B&W would undertake a refinancing transaction on or prior to May 11,

2020 (the “Refinancing”) and B&W and the lenders, including the Company, would amend and restate the Credit Agreement

on the terms specified therein.

On January 31, 2020, B&W also entered into a letter agreement with the Company (the “Backstop

Commitment Letter”) pursuant to which the Company agreed to fund any shortfall in the $200.0 million of new debt or equity financing

required as part of the terms of the Refinancing to the extent such amounts have not been raised from third parties on the same terms

contemplated by the Refinancing.

On May 14, 2020, the Company provided B&W with another $30.0 million of last-out term loans pursuant

to a further amendments to B&W’s credit agreement, which also included future commitments for the Company to loan B&W $40.0

million on various dates starting in November 2020 and a limited guaranty by the Company of B&W’s obligations under the amended

credit facility, of which, at March 31, 2021, no amounts remain available.

August 10, 2020, the Company entered into a project specific indemnity rider (the “Indemnity Rider”) in favor of Berkley

Insurance Company and/or Berkley Regional Insurance Company (collectively, “Berkley”) to a general agreement of indemnity

made by B&W in favor of Berkley (the Indemnity Agreement”).

Pursuant to the Indemnity Rider, the Company agreed to indemnify

Berkley in connection with a default by B&W under the Indemnity Agreement relating to a $30.0 million payment and performance bond

issued by Berkley in connection with a construction project undertaken by B&W.

In consideration for providing the Indemnity Rider,

B&W paid the Company $0.6 million on August 26, 2020.

Group Commitment Letter and Loan Participant Guaranty

January 23, 2021, the Company committed up to $400.0 million aggregate principal amount of unsecured debt financing, consisting of $100.0

million of secured debt financing, and $300.0 million of unsecured debt financing, to affiliates of Franchise Group, Inc.

(collectively,

“FRG”) in connection with FRG’s acquisition of Pet Supplies Plus (“PSP”).

FRG consummated the acquisition

of PSP in March 2021 and the Company was not required nor did it provide any debt financing in connection therewith.

At March 31, 2021,

there were no further commitments outstanding to FRG.

June 19, 2020, the Company participated in a loan facility agreement to provide a total loan commitment up to 33.0 million EUROS to a

retailer in Europe.

The Company made an initial funding of 6.6 million EUROS in July 2020.

No additional borrowings have been made

since the initial funding, leaving unused future commitments available of up to 26.4 million EUROS as of March 31, 2021.

as disclosed above, we have no material obligations, assets or liabilities which would be considered off-balance sheet arrangements and

do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to

as variable interest entities, established for the purpose of facilitating off-balance sheet arrangements.

January 25, 2021, the Company issued $230.0 million of senior

notes due in January 2028 (“6.0% 2028 Notes”) pursuant to the prospectus supplement dated February 12, 2020.

Interest on the

6.0% 2028 Notes is payable quarterly at 6.0%.

The 6.0% 2028 Notes are unsecured and due and payable in full on January 31, 2028.

In connection with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $225.7 million (after underwriting commissions,

fees and other issuance costs of $4.3 million).

On March 31, 2021, the Company

exercised its option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”)

pursuant to the second supplemental indenture dated May 31, 2017.

The total redemption payment included $1.6 million in accrued interest.

On June 24, 2021, the Company

announced it will redeem all of the issued and outstanding 7.25% Senior Notes due 2027 (the "Notes") on July 26, 2021 (the

"Redemption Date").

The Notes have an aggregate principal amount of $122.8 million.

The redemption price is equal to 100%

of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the Redemption Date.

The Notes, which are

listed on NASDAQ under the ticker symbol "RILYG," will be delisted and cease trading on the Redemption Date.

At June 30, 2021 and December

31, 2020, the total senior notes outstanding was $1,213.1 million (net of unamortized debt issue costs of $13.9 million) and $870.8 million

(net of unamortized debt issue costs of $9.6 million) with a weighted average interest rate of 6.49% and 6.95%, respectively.

on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $20.0 million and $15.6 million for the three

months ended June 30, 2021 and 2020, respectively and $38.6 million and $30.0 million for the six months ended June 30, 2021 and 2020,

respectively.

The most recent sales agreement

prospectus was filed by us with the SEC on April 6, 2021 (the “April 2021 Sales Agreement Prospectus”), supplementing the

prospectus filed on January 28, 2021 (the “January 2021 Sales Agreement Prospectus”).

This program provides for the sale by

the Company of up to $150.0 million of certain of the Company’s senior notes.

As of June 30, 2021, the Company had $64.7 million remaining

availability under the April 2021 Sales Agreement.

Off Balance Sheet Arrangements

As part of our investment

banking and financial services activities, from time to time we enter into guaranties of debt, commitments of other entities, and similar

transactions that may be considered off-balance sheet arrangements.

Babcock and Wilcox Commitments

On June 30, 2021, in connection

with B&W’s entry into new debt financing with lenders not related to us, we agreed to guaranty (the “B.

Riley Guaranty”)

up to $110.0 million of obligations that B&W may owe to providers of cash collateral pledged in connection with such debt financing.

Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration

of B&W’s obligations under the Reimbursement Agreement.

B&W shall pay us $0.9 million per annum in connection with the B.

Riley Guaranty.

B&W has agreed to reimburse us to the extent the B.

Riley Guaranty is called upon.

On August 10, 2020, we entered

into a project specific indemnity rider (the “Indemnity Rider”) in favor of Berkley Insurance Company and/or Berkley Regional

Insurance Company (collectively, “Berkley”) to a general agreement of indemnity made by B&W in favor of Berkley (the Indemnity

Pursuant to the Indemnity Rider, we agreed to indemnify Berkley in connection with a default by B&W under the Indemnity

Agreement relating to a $30.0 million payment and performance bond issued by Berkley in connection with a construction project undertaken

In consideration for providing the Indemnity Rider, B&W paid us $0.6 million on August 26, 2020.

Other Commitments

On June 19, 2020, we participated

in a loan facility agreement to provide a total loan commitment up to 33.0 million EUROS to a retailer in Europe.

We made an initial

funding of 6.6 million EUROS in July 2020.

No additional borrowings have been made since the initial funding, leaving unused future commitments

available of up to 26.4 million EUROS as of June 30, 2021.

At June 30, 2021, we had

an outstanding commitment to purchase a loan pursuant to an assignment agreement with a client in the amount of $77.5 million that was

funded on July 2, 2021.

Simultaneously with the funding of the loan on July 2, 2021, we received a principal payment on the loan for $27.5

million reducing the loans receivable balance to $50.0 million.

Except as disclosed above,

we have no material obligations, assets or liabilities which would be considered off-balance sheet arrangements and do not participate

in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest

entities, established for the purpose of facilitating off-balance sheet arrangements.

Contractual Obligations

On January 25, 2021, we issued

$230.0 million of senior notes due in January 2028 (“6.0% 2028 Notes”) pursuant to the prospectus supplement dated February

Interest on the 6.0% 2028 Notes is payable quarterly at 6.0%.

The 6.0% 2028 Notes are unsecured and due and payable in

full on January 31, 2028.

In connection with the issuance of the 6.0% 2028 Notes, we received net proceeds of $225.7 million (after

underwriting commissions, fees and other issuance costs of $4.3 million).

The Notes bear interest at the rate of 6.0% per annum.

March 31, 2021, the Company exercised its option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50%

2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017.

The total redemption payment included $1.6 million in

accrued interest.

March 29, 2021, the Company issued $159.5 million of senior notes

due in March 2026 (“5.5% 2026 Notes”) pursuant to the prospectus supplement dated January 28, 2021.

Interest on the 5.5% 2026

Notes is payable quarterly at 5.5%.

The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026.

In connection

with the issuance of the 5.5% 2026 Notes, the Company received net proceeds of $156.3 million (after underwriting commissions, fees

and other issuance costs of $3.2 million).

On March 31, 2021, we exercised

our option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to

the second supplemental indenture dated May 31, 2017.

The total redemption payment included $1.6 million in accrued interest.

On March 29, 2021, we issued

$159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to the prospectus supplement dated January

Interest on the 5.5% 2026 Notes is payable quarterly at 5.5%.

The 5.5% 2026 Notes are unsecured and due and payable in

full on March 31, 2026.

In connection with the issuance of the 5.5% 2026 Notes, we received net proceeds of $156.3 million (after

underwriting commissions, fees and other issuance costs of $3.2 million).

The Notes bear interest at the rate of 5.5% per annum.

a result, our total senior notes payable increased to $1,154.5 million as of March 31, 2021 and our senior notes payable due in more

than 5 years increased to $551.0 million.

Additionally, our total contractual obligations increased to $1,639.7 million and our

total payments due in more than 5 years increased to $577.4 million.

were no other material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended

December 31, 2020.

Accounting Standards

Note 2(u) to the accompanying financial statements for recent accounting pronouncements we have not yet adopted and recently adopted.

On July 26, 2021, we redeemed, in full, $122.8 million aggregate principal

amount of its 7.25% Senior Notes due 2027 (“7.25% 2027 Notes”) pursuant to the third supplemental indenture dated December

The total redemption payment included approximately $2.1 million in accrued interest.

In connection with the full redemption,

the 7.25% 2027 Notes were delisted from NASDAQ.

As a result of the above,

our total senior notes payable (including interest) increased to $1,497.4 million as of June 30, 2021, and comparing June 30, 2021

to December 31, 2020, our senior notes payable due in one year or less increased by $137.1 million, our senior notes payable due in 1-3

years increased by $128.5 million, our senior notes due in 4-5 years increased by $360.4 million while our senior notes due in more than

5 years decreased by $220.3 million.

Additionally, our total contractual obligations increased to $1,860.1 million at June 30, 2021

and comparing June 30, 2021 to December 31, 2020, our total payments due in one year or less increased by $102.2 million, our payments

due in 1-3 years increased $152.5 million, our payments due in 4-5 years increased by $541.7 million, while our payments due in more than

5 years decreased by $215.1 million.

There were no other material

changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Recent Accounting Standards

See Note 2(u) to the accompanying

financial statements for recent accounting pronouncements we have not yet adopted and recently adopted.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis