What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-02 · 1111 added, 1075 removed, 900 unchanged (71% of the section changed)

1 unchanged sentence

RILEY FINANCIAL, INC.

Condensed Consolidated Balance

(Dollars in thousands, except

AND SUBSIDIARIES

Consolidated Balance Sheets

in thousands, except par value)

September 30,

Cash and cash equivalents

5 unchanged sentences

Due from related parties

Advances against customer contracts

Loans receivable, at fair value (includes $ 131,379 and $ 295,809 from related parties at June 30, 2021 and December 31, 2020, respectively)

Loans receivable, at fair value (includes $ 140,064 and $ 295,809 from related parties at September 30, 2021 and December 31, 2020, respectively)

Prepaid expenses and other assets

16 unchanged sentences

Loan participations sold

Revolving credit facility

Term loans, net

2 unchanged sentences

Commitments and contingencies (Note 14)

Redeemable noncontrolling interests in equity of subsidiaries

Riley Financial, Inc.

1 unchanged sentence

1,000,000 shares authorized;

4,275 and 3,971 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively;

and liquidation preference of $ 106,882 and $ 99,260 as of June 30, 2021 and December 31, 2020, respectively

4,485 and 3,971 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively;

and liquidation preference of $ 112,128 and $ 99,260 as of September 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.0001 par value;

100,000,000 shares authorized;

27,580,300 and 25,777,796 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

27,554,664 and 25,777,796 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

5 unchanged sentences

Total liabilities and equity

The accompanying notes are

an integral part of these condensed consolidated financial statements.

accompanying notes are an integral part of these condensed consolidated financial statements.

RILEY FINANCIAL, INC.

Condensed Consolidated Statements

of Operations

(Dollars in thousands, except

AND SUBSIDIARIES

Consolidated Statements of Operations

in thousands, except share data)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Services and fees

7 unchanged sentences

Selling, general and administrative expenses

Restructuring charge

Impairment of tradenames

4 unchanged sentences

Interest income

Gain on extinguishment of loans

(Loss) income from equity investments

Gain on extinguishment of loans and other

Income (loss) from equity investments

Interest expense

Income (loss) before income taxes

(Provision) benefit for income taxes

Net income (loss)

Net (loss) income attributable to noncontrolling interests

Net income (loss) attributable to B.

Income before income taxes

Provision for income taxes

Net income (loss) attributable to noncontrolling interests

Net income attributable to B.

Riley Financial, Inc.

Preferred stock dividends

Net income (loss) available to common shareholders

Basic income (loss) per common share

Diluted income (loss) per common share

Net income available to common shareholders

Basic income per common share

Diluted income per common share

Weighted average basic common shares outstanding

Weighted average diluted common shares outstanding

The accompanying notes are

an integral part of these condensed consolidated financial statements.

accompanying notes are an integral part of these condensed consolidated financial statements.

RILEY FINANCIAL, INC.

Condensed Consolidated Statements

of Comprehensive Income (Loss)

(Dollars in thousands)

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

in thousands)

Three Months Ended

Six Months Ended

Net income (loss)

Nine Months Ended

September 30,

Other comprehensive income (loss):

Change in cumulative translation adjustment

Other comprehensive income (loss), net of tax

Total comprehensive income (loss)

Comprehensive (loss) income attributable to noncontrolling interests

Comprehensive income (loss) attributable to B.

Other comprehensive (loss) income, net of tax

Total comprehensive income

Comprehensive income (loss) attributable to noncontrolling interests

Comprehensive income attributable to B.

Riley Financial, Inc.

The accompanying notes are

an integral part of these condensed consolidated financial statements.

accompanying notes are an integral part of these condensed consolidated financial statements.

RILEY FINANCIAL, INC.

Condensed Consolidated Statements

(Dollars in thousands, except

Three Months Ended June 30, 2021 and 2020

Preferred Stock

AND SUBSIDIARIES

Consolidated Statements of Equity

in thousands, except share data)

Three Months Ended September 30, 2021 and 2020 (Revised - See Note 19)

Comprehensive

Noncontrolling

Balance, April 1, 2021

Preferred stock issued

ESPP shares issued and vesting of restricted stock and

other, net of shares withheld for employer taxes

Share based payments

shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes

stock repurchased and retired

based payments

Dividends on common stock ($ 2.00 per share)

Dividends on preferred stock

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Other comprehensive income

Balance, June 30, 2021

Balance, April 1, 2020

ESPP shares issued and vesting of restricted stock and

other, net of shares withheld for employer taxes

Common stock repurchased and retired

Share based payments

on preferred stock

Distributions

to noncontrolling interests

Contributions

from noncontrolling interests

of noncontrolling interests

comprehensive loss

September 30, 2021

shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes

stock repurchased and retired

based payments

Dividends on common stock ($ 0.35 per share)

Dividends on preferred stock

Distributions to noncontrolling interests

Other comprehensive income

Balance, June 30, 2020

The accompanying notes are

an integral part of these condensed consolidated financial statements.

on preferred stock

Distributions

to noncontrolling interests

comprehensive income

September 30, 2020

RILEY FINANCIAL, INC.

Condensed Consolidated Statements

of Equity (Continued)

(Dollars in thousands, except

months ended June 30, 2021 and 2020

Preferred Stock

AND SUBSIDIARIES

Consolidated Statements of Equity

in thousands, except share data)

Ended September 30, 2021 and 2020 (Revised - See Note 19)

Comprehensive

Noncontrolling

Balance, January 1, 2021

Common stock issued, net of offering costs

Preferred stock issued

ESPP shares issued and vesting of restricted stock and

other, net of shares withheld for employer taxes

Share based payments

January 1, 2021

stock issued, net of offering costs

shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes

stock repurchased and retired

based payments

Dividends on common stock ($ 8.50 per share)

Dividends on preferred stock

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Acquisition of noncontrolling interests

Other comprehensive loss

Balance, June 30, 2021

Balance, January 1, 2020

Preferred stock issued

ESPP shares issued and vesting of restricted stock and

other, net of shares withheld for employer taxes

Common stock repurchased and retired

on preferred stock

Remeasurement

Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity

Distributions

to noncontrolling interests

Contributions

from noncontrolling interests

of noncontrolling interests

comprehensive loss

September 30, 2021

January 1, 2020

shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes

stock repurchased and retired

( 2,102,748 )

Share based payments

based payments

Dividends on common stock ($ 0.95 per share)

Dividends on preferred stock

Distributions to noncontrolling interests

Other comprehensive loss

Balance, June 30, 2020

The accompanying notes are

an integral part of these condensed consolidated financial statements.

on preferred stock

income (loss)

Remeasurement

Riley Principal Merger II Corporation subsidiary temporary equity

Distributions

to noncontrolling interests

comprehensive loss

September 30, 2020

accompanying notes are an integral part of these condensed consolidated financial statements.

RILEY FINANCIAL, INC.

Condensed Consolidated Statements

of Cash Flows

(Dollars in thousands)

Six Months Ended June 30,

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

in thousands)

Nine Months Ended

September 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

(Revised - See Note 19)

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

7 unchanged sentences

Deferred income taxes

Impairment of intangibles and gain on disposal of fixed assets

Impairment of intangibles and (gain) loss on disposal of fixed assets

Gain on extinguishment of loans

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Repayment of loan participations sold

Acquisition of business, net of $ 34,924 cash acquired

Acquisition of businesses, net of $34,942 cash acquired

Purchases of property, equipment and other

Proceeds from sale of property, equipment and intangible assets

Purchase of equity investments

Funds received from trust account of subsidiary

Investment of subsidiaries initial public offering proceeds into trust account

Acquisition of other business

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from revolving line of credit, net

Repayment of asset based credit facility

4 unchanged sentences

Redemption of senior notes

Payment of debt issuance costs

Payment for debt issuance and offering costs

Payment for contingent consideration

5 unchanged sentences

Contribution from noncontrolling interests

Redemption of subsidiary temporary equity and distributions

Proceeds from initial public offering of subsidiaries

Proceeds from issuance of common stock

8 unchanged sentences

Interest paid

The accompanying notes are an integral part

of these condensed consolidated financial statements.

accompanying notes are an integral part of these condensed consolidated financial statements.

RILEY FINANCIAL, INC.

2 unchanged sentences

(Dollars in thousands, except share data)

NOTE 1—ORGANIZATION AND NATURE OF BUSINESS OPERATIONS

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS

Riley Financial, Inc.

and its subsidiaries (collectively, the “Company”)

provide investment banking and financial services to corporate, institutional and high net worth clients, and asset disposition, financial

consulting, appraisal and capital advisory services to a wide range of retail, wholesale and industrial clients, as well as lenders, capital

providers, private equity investors and professional services firms throughout the United States, Australia, Canada, and Europe and consumer

Internet access and cloud communication services through its wholly-owned subsidiaries United Online, Inc.

(“UOL” or “United

Online”) and magicJack VocalTec Ltd.

and its subsidiaries (collectively, the “Company”) provide investment banking and financial services to corporate, institutional

and high net worth clients, and asset disposition, financial consulting, appraisal and capital advisory services to a wide range of retail,

wholesale and industrial clients, as well as lenders, capital providers, private equity investors and professional services firms throughout

the United States, Australia, Canada, and Europe and consumer Internet access and cloud communication services through its wholly-owned

subsidiaries United Online, Inc.

(“UOL” or “United Online”) and magicJack VocalTec Ltd.

(“magicJack”).

The Company also has a majority ownership interest in BR Brands

Holding, LLC (“BR Brands” or “Brands”), which provides licensing of trademarks.

On February 25, 2021, the Company completed the acquisition of all

of the outstanding shares of National Holdings Corporation (“National”) not already owned by the Company.

The total cash consideration

for the approximately 55 % of National outstanding shares that the Company did not previously own and settlement of outstanding share

based awards amounted to $ 35,314 .

The Company used the acquisition method of accounting for this acquisition.

The acquisition expands

the Company’s investment banking, wealth management and financial planning offerings by adding National’s brokerage, insurance,

tax preparation and advisory services.

As a result of the National acquisition, the Company realigned its segment reporting structure

in the first quarter of 2021 to reflect organizational management changes for its wealth management business.

Under the new structure,

the wealth management business previously reported in the Capital Markets segment are now reported in the Wealth Management segment.

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

The Company also has a majority ownership interest in BR Brands Holding, LLC (“BR Brands” or “Brands”), which

provides licensing of trademarks.

On February 25, 2021, the

Company completed the acquisition of all of the outstanding shares of National Holdings Corporation (“National”) not already

owned by the Company.

The total cash consideration for the approximately 55 % of National outstanding shares that the Company did

not previously own and settlement of outstanding share based awards amounted to $ 35,314 .

The Company used the acquisition method of accounting

for this acquisition.

The acquisition expands the Company’s investment banking, wealth management

and financial planning offerings by adding National’s brokerage, insurance, tax preparation and advisory services.

As a result of

the National acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational

management changes for its wealth management business.

Under the new structure, the wealth management business previously reported in

the Capital Markets segment are now reported in the Wealth Management segment.

In conjunction with the new reporting structure, the Company

recast its segment presentation for all periods presented.

The Company operates in six operating

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(iv) Financial Consulting, through

which the Company provides bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services;

(v) Principal Investments - United Online and magicJack, through which the Company provides consumer Internet access and related subscription

services from United Online and cloud communication services primarily through the magicJack devices;

and (vi) Brands, which is focused

on generating revenue through the licensing of trademarks.

which the Company provides bankruptcy, financial advisory, forensic accounting, operations management consulting, real estate consulting

and valuation and appraisal services;

(v) Principal Investments - United Online and magicJack, through which the Company provides consumer

Internet access and related subscription services from United Online and cloud communication services primarily through the magicJack

and (vi) Brands, which is focused on generating revenue through the licensing of trademarks.

On January 30, 2020, the

1 unchanged sentence

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.

During the third 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

8 unchanged sentences

results of operations, financial position and cash flows may be materially adversely affected.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

( a) Principles of Consolidation and Basis

26 unchanged sentences

SEC on March 4, 2021.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the

operating results to be expected for the full fiscal year or any future periods.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative

of the operating results to be expected for the full fiscal year or any future periods.

Revision of Prior Period

Financial Statements

In connection with the preparation of the Company’s condensed

consolidated financial statements for the three months ended September 30, 2021, the Company identified an error that was not material

related to the consolidation of certain Variable Interest Entities (“VIE’s) which primarily resulted in a gross up of the

balance sheet to reflect funds held in trust within prepaid expenses and other assets and the recording of temporary equity.

accordance with SAB No.

99, “Materiality,” and SAB No.

108, “Considering the Effects of Prior Year Misstatements

when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the error and determined that the related

impact did not, either individually or in the aggregate, materially misstate previously issued consolidated financial statements.

summary of revisions to certain previously reported financial information presented herein is included in Note 19.

(b) Use of Estimates

15 unchanged sentences

Interest expense from securities

lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $ 10,725 and $ 10,802

for the three months ended June 30, 2021 and 2020, respectively, and $ 29,446 and $ 18,723 for the six months ended June 30, 2021 and 2020,

respectively.

Loan participations sold as of June 30, 2021 and 2020 totaled $ 4,444 and $ 14,109 , respectively.

Interest expense from loan

participations sold totaled $ 258 and $ 419 for the three months ended June 30, 2021 and 2020, respectively, and $ 726 and $ 971 for the six

months ended June 30, 2021 and 2020, respectively.

lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $ 9,945 and $ 10,530 for

the three months ended September 30, 2021 and 2020, respectively, and $ 39,391 and $ 29,253 for the nine months ended September 30, 2021

and 2020, respectively.

There were no loan participations sold outstanding as of September 30, 2021 and loan participations sold totaled

$ 13,919 , at September 30, 2020.

Interest expense from loan participations sold totaled $ 152 and $ 445 for the three months ended September

30, 2021 and 2020, respectively, and $ 878 and $ 1,416 for the nine months ended September 30, 2021 and 2020, respectively.

(d) Concentration of

26 unchanged sentences

Advertising costs totaled $ 808 and $ 560 for the three months

ended June 30, 2021 and 2020, respectively, and $ 1,156 and $ 1,704 for the six months ended June 30, 2021 and 2020, respectively.

expense is included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements

of operations.

ended September 30, 2021 and 2020, respectively, and $ 1,964 and $ 2,264 for the nine months ended September 30, 2021 and 2020, respectively.

Advertising expense is included as a component of selling, general and administrative expenses in the accompanying condensed consolidated

statements of operations.

(f) Share-Based Compensation

7 unchanged sentences

service or performance period the award is expected to vest.

In June 2018, the Company adopted the 2018 Employee Stock Purchase

Plan (“Purchase Plan”) which allows eligible employees to purchase common stock through payroll deductions at a price that

is 85 % of the market value of the common stock on the last day of the offering period.

In accordance with the provisions of Accounting

Standards Codification 718, Compensation — Stock Compensation (“ASC 718”), the Company is required to recognize

compensation expense relating to shares offered under the Purchase Plan.

For the three months ended June 30, 2021 and 2020, the Company

recognized compensation expense of $ 115 and $ 59 , respectively, related to the Purchase Plan.

For the six months ended June 30, 2021 and

2020, the Company recognized compensation expense of $ 342 and $ 224 , respectively, related to the Purchase Plan.

In June 2018, the Company

adopted the 2018 Employee Stock Purchase Plan (“Purchase Plan”) which allows eligible employees to purchase common stock through

payroll deductions at a price that is 85 % of the market value of the common stock on the last day of the offering period.

In accordance

with the provisions of Accounting Standards Codification (ASC) “Topic 718:

Compensation — Stock Compensation”, the Company

is required to recognize compensation expense relating to shares offered under the Purchase Plan.

For the three months ended September

30, 2021 and 2020, the Company recognized compensation expense of $ 132 and $ 96 , respectively, related to the Purchase Plan.

months ended September 30, 2021 and 2020, the Company recognized compensation expense of $ 474 and $ 320 , respectively, related to the Purchase

(g) Income Taxes

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Penalties, if incurred, would be recognized as a component of income tax expense.

(h) Cash and Cash

(h) Cash and Cash Equivalents

The Company considers all

1 unchanged sentence

(i) Restricted

As of June 30, 2021, restricted cash included $ 864 of cash collateral

for foreign exchange contracts and leases and $ 471 related to one of the Company’s telecommunication suppliers.

In June 2021, National’s

Paycheck Protection Program (“PPP”) which the Company assumed as part of the acquisition of National on February 25, 2021

was forgiven, and $ 6,553 of restricted cash related to the loans was returned to the Company.

As of December 31, 2020, restricted cash

included $ 764 of cash collateral for foreign exchange contracts and $ 471 related to one of the Company’s telecommunication

(j) Securities

Borrowed and Securities Loaned

Securities borrowed and

securities loaned are recorded based upon the amount of cash advanced or received.

Securities borrowed transactions facilitate the settlement

process and require the Company to deposit cash or other collateral with the lender.

With respect to securities loaned, the Company receives

collateral in the form of cash.

The amount of collateral required to be deposited for securities borrowed, or received for securities

loaned, is an amount generally in excess of the market value of the applicable securities borrowed or loaned.

The Company monitors the

market value of the securities borrowed and loaned on a daily basis, with additional collateral obtained, or excess collateral recalled,

when deemed appropriate.

As of September 30, 2021,

restricted cash included $ 927 of cash collateral for foreign exchange contracts and leases.

As of December 31, 2020, restricted cash included

$ 764 of cash collateral for foreign exchange contracts and $ 471 related to one of the Company’s telecommunication suppliers.

(j) Securities Borrowed

and Securities Loaned

Securities borrowed and securities

loaned are recorded based upon the amount of cash advanced or received.

Securities borrowed transactions facilitate the settlement process

and require the Company to deposit cash or other collateral with the lender.

With respect to securities loaned, the Company receives collateral

in the form of cash.

The amount of collateral required to be deposited for securities borrowed, or received for securities loaned, is

an amount generally in excess of the market value of the applicable securities borrowed or loaned.

The Company monitors the market value

of the securities borrowed and loaned on a daily basis, with additional collateral obtained, or excess collateral recalled, when deemed

The Company accounts for

4 unchanged sentences

on a gross basis in the condensed consolidated balance sheets.

and Equipment

(k) Property and Equipment

Property and equipment are

stated at cost.

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets.

Property and equipment held under finance leases are amortized on a straight-line basis over the shorter of the lease term or estimated

useful life of the asset.

Depreciation and amortization expense on property and equipment was $ 1,031 and $ 899 for the three months ended

June 30, 2021 and 2020, respectively and $ 1,904 and $ 1,831 for the six months ended June 30, 2021 and 2020, respectively.

The Company adopted the new credit loss standard effective January

Pursuant to ASU 2016-13 and its amendment ASU 2019-05, the Company elected the irrevocable fair value option for all outstanding

loans receivable that were previously measured at amortized cost.

Under the fair value option, loans receivables are measured at each

reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded

in the condensed consolidated statements of operations.

These loans are no longer subject to evaluation for impairment through an allowance

for loan loss as such losses will be captured through fair value changes.

The impact of adopting ASC 326 was immaterial to the consolidated

financial statements.

Loans receivable, at fair value totaled $ 270,295 and $ 390,689 at

June 30, 2021 and December 31, 2020, respectively.

The loans have various maturities through March 2027.

As of June 30, 2021 and December 31,

2020, the historical cost of loans receivable accounted for under the fair value option was $ 274,624 and $ 405,064 , respectively, which

included principal balances of $ 284,664 and $ 416,401 , respectively, and unamortized costs, origination fees, premiums and discounts,

totaling $ 10,040 and $ 11,337 , respectively.

During the three months ended June 30, 2021 and 2020, the Company recorded unrealized losses

on the loans receivable at fair value of $ 680 and $ 4,049 , respectively, and during the six months ended June 30, 2021 and 2020, unrealized

gains of $ 10,046 and losses of $ 21,975 , respectively, which is included in trading income (losses) and fair value adjustments on loans

on the condensed consolidated statements of operations.

The Company may periodically provide limited guarantees to third parties

for loans that are made to investment banking and lending clients.

At June 30, 2021, the Company has outstanding limited guarantee

arrangements with respect to Babcock & Wilcox Enterprises, Inc.

(“B&W”) as further described in Note 13.

In accordance

with the new credit loss standard, the Company evaluates the need to record an allowance for credit losses for these loan guarantees since

they have off-balance sheet credit exposures.

At June 30, 2021, the Company has not recorded any provision for credit losses on the

B&W guarantees since the Company believes

that there is sufficient collateral to protect the Company from any credit loss exposure.

Interest income on loans receivable is recognized based on the stated

interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts

and is included in interest income - loans and securities lending on the condensed consolidated statements of operations.

Loan origination

fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related

Unearned income, discounts and premiums are amortized to interest income using a level yield methodology.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

Property and equipment

held under finance leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset.

Depreciation expense on property and equipment was $ 986 and $ 967 for the three months ended September 30, 2021 and 2020, respectively,

and $ 2,890 and $ 2,798 for the nine months ended September 30, 2021 and 2020, respectively.

(l) Loans Receivable

Under ASC “Topic 326:

Financial Instruments – Credit Losses” (“ASC 326”), the Company elected the irrevocable fair value option for

all outstanding loans receivable that were previously measured at amortized cost.

Under the fair value option, loans receivables are measured

at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value

are recorded in the condensed consolidated statements of operations.

These loans are no longer subject to evaluation for impairment through

an allowance for loan loss as such losses will be captured through fair value changes.

The impact of adopting ASC 326 was immaterial to

the consolidated financial statements.

Loans receivable, at fair

value totaled $ 350,762 and $ 390,689 as of September 30, 2021 and December 31, 2020, respectively.

The loans have various maturities

through March 2027.

As of September 30, 2021 and December 31, 2020, the historical cost of loans receivable accounted for under the

fair value option was $ 356,408 and $ 405,064 , respectively, which included principal balances of $ 365,882 and $ 416,401 , respectively, and

unamortized costs, origination fees, premiums and discounts, totaling $ 9,474 and $ 11,337 , respectively.

During the three months ended

September 30, 2021 and 2020, the Company recorded net unrealized losses of $ 1,317 and net unrealized gains of $ 141 , respectively, on

the loans receivable at fair value and during the nine months ended September 30, 2021 and 2020, net unrealized gains of $ 8,729 and net

unrealized losses of $ 21,835 , respectively, on the loans receivable at fair value, which is included in trading income (losses) and fair

value adjustments on loans on the condensed consolidated statements of operations.

The Company may periodically

provide limited guarantees to third parties for loans that are made to investment banking and lending clients.

As of September 30,

2021, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc.

as further described in Note 14.

In accordance with the new credit loss standard, the Company evaluates the need to record an allowance

for credit losses for these loan guarantees since they have off-balance sheet credit exposures.

As of September 30, 2021, the Company

has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral

to protect the Company from any credit loss exposure.

Interest income on loans

receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs,

origination fees, premiums and discounts and is included in interest income - loans and securities lending on the condensed consolidated

statements of operations.

Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest

income over the lives of the related loans.

Unearned income, discounts and premiums are amortized to interest income using a level yield

(m) Securities and

Other Investments Owned and Securities Sold Not Yet Purchased

Securities owned consist

of marketable securities and investments in partnership interests and other securities recorded at fair value.

Securities sold, but not

yet purchased represents obligations of the Company to deliver the specified security at the contracted price and thereby create a liability

to purchase the security in the market at prevailing prices.

Changes in the value of these securities are reflected currently in the results

of operations.

As of June 30, 2021 and December

31, 2020, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of

the following securities:

Securities and other

investments owned consist of marketable securities and investments in partnership interests and other securities recorded at fair

Securities sold, but not yet purchased represents obligations of the Company to deliver the specified security at the

contracted price and thereby create a liability to purchase the security in the market at prevailing prices.

Changes in the value of

these securities are reflected currently in the results of operations.

As of September 30, 2021

and December 31, 2020, the Company’s securities and other investments owned and securities sold not yet purchased at fair value

consisted of the following securities:

September 30,

Securities and other investments owned:

18 unchanged sentences

that are highly liquid, observable, and actively traded in over-the-counter markets.

Fair values determined by Level 2 inputs utilize inputs

other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs

include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are

not active and model-derived valuations whose inputs are observable and can be corroborated by market data.

Level 3 inputs are unobservable

inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, the level

in the fair value hierarchy within which the fair value measurement in its entirety has been determined based on the lowest level input

that is significant to the fair value measurement in its entirety.

Fair values determined by Level 2 inputs utilize

inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets

that are not active and model-derived valuations whose inputs are observable and can be corroborated by market data.

Level 3 inputs are

unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, the

level in the fair value hierarchy within which the fair value measurement in its entirety has been determined based on the lowest level

input that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a particular

35 unchanged sentences

including the level in the fair value hierarchy that was used.

As of June 30, 2021 and December 31, 2020, investments in nonpublic entities

valued using a measurement alternative of $ 42,931 and $ 26,948 , respectively, are included in securities and other investments owned

in the accompanying condensed consolidated balance sheets.

As of September 30, 2021 and December 31, 2020, investments in nonpublic

entities valued using a measurement alternative of $ 57,752 and $ 26,948 , respectively, are included in securities and other investments

owned in the accompanying condensed consolidated balance sheets.

Funds held in trust represents

treasury bills that were purchased with funds raised through the initial public offerings of B.

Riley Principal 150 Merger Corporation

(“BRPM 150”) and B.

Riley Principal 250 Merger Corporation (“BRPM 250”), consolidated special purpose acquisition

corporations (“SPACs”).

The funds raised are held in trust accounts that are restricted for use and may only be used for

purposes of completing an initial business combination or redemption of the class A public common shares of the SPAC’s as set forth

in their respective trust agreements.

The funds held in trust are included within Level 1 of the fair value hierarchy and included in

prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.

The Company has warrant liabilities related to warrants of the SPAC’s

that are held by investors in BRPM 150 and BRPM 250.

The warrants are accounted for as liabilities in accordance with ASC “Topic

Derivatives and Hedging,” and are measured at fair value at inception and on a recurring basis using quoted prices in over-the-counter

Warrant liabilities are included in accrued expenses and other liabilities in the accompanying condensed consolidated balance

sheets with changes in fair value that amounted to $ 1,999 during the nine months ended September 30, 2021 included within gain on extinguishment

of debt and other as part of other income (expense) in the condensed consolidated statements of operations.

The fair value of mandatorily

1 unchanged sentence

and relied, in part, on information obtained from appraisal reports and internal valuation models.

The following tables present

information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of June 30, 2021 and December 31,

Financial Assets and Liabilities Measured at Fair Value

on a Recurring Basis at June 30, 2021 Using

Quoted prices in

Fair value at

active markets for

identical assets

The following tables present information on the financial assets and

liabilities measured and recorded at fair value on a recurring basis as of September 30, 2021 and December 31, 2020.

Financial Assets and Liabilities

Measured at Fair Value on a

Recurring Basis at September 30, 2021 Using

Fair value at September 30, 2021

Quoted prices in active markets for identical assets

Other observable inputs

Significant unobservable inputs

Funds held in trust account

Securities and other investments owned:

11 unchanged sentences

Mandatorily redeemable noncontrolling interests issued after November 5, 2003

Warrant liabilities

Total liabilities measured at fair value

Financial Assets and Liabilities Measured at Fair Value

on a Recurring Basis at December 31, 2020 Using

Quoted prices in

Fair value at

active markets for

identical assets

Financial Assets and Liabilities Measured at Fair Value on a

Recurring Basis at December 31, 2020 Using

Fair value at December 31 2020

Quoted prices in active markets for identical assets

Other observable inputs

Significant unobservable inputs

Securities and other investments owned:

12 unchanged sentences

Total liabilities measured at fair value

As of June 30, 2021 and December

31, 2020, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $ 588,793 and $ 539,981 ,

respectively, or 14.3 % and 20.3 %, respectively, of the Company’s total assets.

In determining the fair value for these Level 3 financial

assets, the Company analyzes various financial, performance and market factors to estimate the value, including where applicable, over-the-counter

market trading activity.

As of September 30, 2021 and

December 31, 2020, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $ 683,727

and $ 539,981 , respectively, or 13.5 % and 20.3 %, respectively, of the Company’s total assets.

In determining the fair value for these

Level 3 financial assets, the Company analyzes various financial, performance and market factors to estimate the value, including where

applicable, over-the-counter market trading activity.

The following table summarizes

the significant unobservable inputs in the fair value measurement of Level 3 financial assets and liabilities by category of investment

and valuation technique as of June 30, 2021:

and valuation technique as of September 30, 2021:

Fair value at

Valuation Technique

Unobservable Input

September 30,

Equity securities

5 unchanged sentences

Market price of related security

$0.44 - 10.12

Option pricing model

8 unchanged sentences

The changes in Level 3 fair

value hierarchy during the six months ended June 30, 2021 and 2020 are as follows:

value hierarchy during the nine months ended September 30, 2021 and 2020 are as follows:

Level 3 Changes During the Period

Undistributed

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Equity securities

1 unchanged sentence

Mandatorily redeemable noncontrolling interests issued after November 5, 2003

Six Months Ended June 30, 2020

Warrant liabilities

Nine Months Ended September 30, 2020

Equity securities

1 unchanged sentence

Mandatorily redeemable noncontrolling interests issued after November 5,

The Company adopted ASU 2016-13

and its amendment ASU 2019-05 effective January 1, 2020.

Pursuant to ASU 2016-13 and its amendment ASU 2019-05, the Company elected the

irrevocable fair value option for all outstanding loans receivable that were measured at amortized cost as of December 31, 2019.

Under ASC 326, the Company

elected the irrevocable fair value option for all outstanding loans receivable that were measured at amortized cost as of December 31,

The loans receivable, at fair value are included in transfers into Level 3 fair value assets in the above table.

The amount reported in the

table above for the six months ended June 30, 2021 and 2020 includes the amount of undistributed earnings attributable to the noncontrolling

table above for the nine months ended September 30, 2021 and 2020 includes the amount of undistributed earnings attributable to the noncontrolling

interests that is distributed on a quarterly basis.

2 unchanged sentences

fair value based on the short-term maturity of these instruments.

As of June 30, 2021 and December 31, 2020, the senior notes payable

had a carrying amount of $ 1,213,105 and $ 870,783 , respectively, and fair value of $ 1,262,750 and $ 898,606 , respectively.

amount of the term loans approximates fair value because the effective yield of such instruments are consistent with current market rates

of interest for instruments of comparable credit risk.

The investments in nonpublic entities that do not report NAV are measured

at cost, adjusted for observable price changes and impairments, with changes recognized in trading income (losses) and fair value adjustments

on loans on the condensed consolidated statements of operations.

These investments are evaluated on a nonrecurring basis based on the

observable price changes in orderly transactions for the identical or similar investment of the same issuer.

Further adjustments are not

made until another observable transaction occurs.

Therefore, the determination of fair values of these investments in nonpublic entities

that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments.

Investments in nonpublic

entities that do not report NAV are subject to a qualitative assessment for indicators of impairment.

If indicators of impairment are

present, the Company is required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount

equal to the investment’s carrying value in excess of its estimated fair value.

Changes in the Level 3 fair value hierarchy during the nine months

ended September 30, 2021 included the fair value of warrant liabilities associated with BRPM 150 and BRPM 250.

The value of these warrants

transferred from Level 3 to Level 1 of the fair value hierarchy when the public warrants started trading in the over-the-counter markets

after the initial public offering.

As of September 30, 2021

and December 31, 2020, the senior notes payable had a carrying amount of $ 1,362,847 and $ 870,783 , respectively, and fair value of $ 1,421,533

and $ 898,606 , respectively.

The carrying amount of the term loans approximates fair value because the effective yield of such instruments

are consistent with current market rates of interest for instruments of comparable credit risk.

The investments in nonpublic

entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in

trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations.

These investments

are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment

of the same issuer.

Further adjustments are not made until another observable transaction occurs.

Therefore, the determination of fair

values of these investments in nonpublic entities that do not report NAV does not involve significant estimates and assumptions or subjective

and complex judgments.

Investments in nonpublic entities that do not report NAV are subject to a qualitative assessment for indicators

of impairment.

If indicators of impairment are present, the Company is required to estimate the investment’s fair value and immediately

recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

The following table sets

forth the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of June 30, 2021.

investment was measured due to an observable price change during the three months ended June 30, 2021.

Measurement Using

Quoted prices in

active markets for

identical assets

As of June 30, 2021

forth the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of September 30, 2021.

This investment was measured due to an observable price change during the nine months ended September 30, 2021.

Fair Value Measurement Using

prices in active markets for identical assets

observable inputs

unobservable inputs

As of September 30, 2021

Investments in nonpublic entities that do not report NAV

1 unchanged sentence

Investments in nonpublic entities that do not report NAV

During the six months ended

June 30, 2021 and 2020, except for the impact of the intangible impairment charge in 2020 as described in Note 6 - Goodwill and Intangible

During the nine months ended

September 30, 2021 and 2020, except for the impact of the intangible impairment charge in 2020 as described in Note 7 – Goodwill and Intangible

Assets, there were no additional assets or liabilities measured at fair value on a non-recurring basis.

1 unchanged sentence

Foreign Currency Translation

The Company periodically uses derivative instruments, which primarily

consist of the purchase of forward exchange contracts, for certain loans receivable and Auction and Liquidation engagements with operations

outside the United States.

As of June 30, 2021 and December 31, 2020, forward exchange contracts in the amount of 20,200 Euros and 6,000

Euros, respectively, were outstanding.

The Company periodically

uses derivative instruments, which primarily consist of the purchase of forward exchange contracts, for certain loans receivable and Auction

and Liquidation engagements with operations outside the United States.

As of September 30, 2021 and December 31, 2020, forward exchange

contracts in the amount of 6,000 Euros were outstanding.

The forward exchange contracts

were entered into to improve the predictability of cash flows related to a retail store liquidation engagement and a loan receivable.

The net gain from forward exchange contracts was $ 363 and $ 673 during the three and six months ended June 30, 2021, respectively.

was no forward exchange contract activity during the three and six months ended June 30, 2020.

This amount is reported as a component

of selling, general and administrative expenses in the consolidated statements of operations.

The Company transacts business in various foreign currencies.

where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and

expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and

liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates.

of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive

loss in the accompanying condensed consolidated balance sheets.

Transaction losses were $ 390 and $ 438 during the three months ended June

30, 2021 and 2020, respectively and gains were $ 166 and $ 510 during the six months ended June 30, 2021 and 2020, respectively.

These amounts

are included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

(p) Equity Investment

At June 30, 2021 and December 31, 2020, equity investments of $ 48,851

and $ 54,953 , respectively, were included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.

The Company’s share of earnings or losses from equity method investees is included in gain (loss) from equity investments in the

accompanying condensed consolidated statements of operations.

The net gain from forward exchange contracts was $ 248 and $ 921 during the three and nine months ended September 30, 2021, respectively.

The net loss from forward exchange contract activity during the three and nine months ended September 30, 2020 was $ 16 .

This amount is

reported as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

The Company transacts business

in various foreign currencies.

In countries where the functional currency of the underlying operations has been determined to be the local

country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using

average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars

using period-end exchange rates.

The effects of foreign currency translation adjustments are included in stockholders’ equity as

a component of accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets.

Transaction gains (losses)

were $ 689 and ($ 97 ) during the three months ended September 30, 2021 and 2020, respectively, and $ 855 and $ 413 during the nine months

ended September 30, 2021 and 2020, respectively.

These amounts are included in selling, general and administrative expenses in the Company’s

condensed consolidated statements of operations.

disclosed in Note 2(u) below, the Company has consolidated two VIE’s, BRPM 150 and BRPM 250, which have outstanding warrants that

settle in their respective class A shares of common stock.

These warrants have been recorded as a liability since the warrants contain

a provision to be settled in cash in the event of a qualifying cash tender offer, which is outside the control of the Company, for either

BRPM 150 or BRPM 250.

The outstanding warrants are considered derivative instruments with the warrant liability measured at fair value

at each reporting date, with changes in fair value reported in other income in the condensed consolidated statement of operations.

of September 30, 2021, the warrant liability totaled $ 8,466 which is included in accrued expenses and other liabilities in the condensed

consolidated balance sheet.

(p) Redeemable Noncontrolling

Interests in Equity of Subsidiaries

The Company records redeemable noncontrolling interests in equity of

subsidiaries to reflect the economic interests of the class A ordinary shareholders in BRPM 150 and BRPM 250 sponsored Special Purpose

Acquisition Corporations (“SPACs").

These interests are presented as redeemable noncontrolling interests in equity of subsidiaries

within the condensed consolidated balance sheet, outside of the permanent equity section.

The class A ordinary shareholders of BRPM 150

and BRPM 250 have redemption rights that are considered to be outside of the Company’s control.

As of September 30, 2021, the carrying

amount of the redeemable noncontrolling interest in equity of subsidiaries was recorded at its redemption value of $ 345,000 .

Remeasurements

to the redemption value of the redeemable noncontrolling interest in equity of subsidiaries are recorded within retained earnings.

remeasurements totaled $ 18,182 , comprising of offering costs incurred in connection with the sale of class A shares of SPAC 150 and SPAC

250 in the amount of $ 7,716 and initial valuation of the public warrants of SPAC 150 and SPAC 250 in the amount of $ 10,466 .

(q) Equity Investment

As of September 30, 2021

and December 31, 2020, equity investments of $ 37,713 and $ 54,953 , respectively, were included in prepaid expenses and other assets in

the accompanying condensed consolidated balance sheets.

The Company’s share of earnings or losses from equity method investees is

included in gain (loss) from equity investments in the accompanying condensed consolidated statements of operations.

bebe stores, inc.

At June 30, 2021 and December 31, 2020, the Company had a 39.5 %

ownership interest in bebe stores, inc.

On November 10, 2020, the Company purchased an additional 1,500,000 shares

of newly issued common stock of bebe for $ 7,500 and increased its’ ownership interest increased from 31.5 % to 39.5 %.

The equity ownership in bebe was accounted for under the equity method of accounting and is included in prepaid expenses and other assets

in the condensed consolidated balance sheets.

As of June 30, 2021, the

carrying value of the Company’s equity investment in bebe exceeded the fair value based on the quoted market prices.

In consideration

of these facts, the Company evaluated its investment for impairment.

The Company did not utilize bright-line tests in the evaluation.

Based on the available facts and information regarding the operating results of bebe, the Company’s ability and intent to hold the

investments until recovery, the relative amount of the declines, and the length of time that the fair values were less than the carrying

values, the Company concluded that recognition of impairment losses in earnings was not required.

However, the Company will continue to

monitor the investment and it is possible that impairment losses will be recorded in earnings in future periods based on changes in facts

and circumstances or intentions.

National Holdings Corporation

As of December 31, 2020, the Company owned approximately 45 % of the

commons stock of National which was included in prepaid expenses and other assets in the condensed consolidated balance sheets.

ownership in National was accounted for under the equity method of accounting for periods prior to February 25, 2021.

On February 25,

2021, the Company completed the acquisition of National by acquiring the 55 % of common stock not previously owned by the Company 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

The cash consideration for the purchase of the 55 % of common stock not previously owned by the Company and settlement of outstanding

share based awards was $ 35,314 .

National’s operating results subsequent to February 25, 2021 is included in the Company’s

condensed consolidated financial statements.

Other Equity Investments

The Company has other equity investments over which the Company exercises

significant influence but which do not meet the requirements for consolidation, including B.

Riley Principal 150 Merger Corp., B.

Principal 250 Merger Corp., and 40 % ownership interest in Lingo Management, LLC.

The equity ownership in these other investments was accounted

for under the equity method of accounting and is included in prepaid expenses and other assets in the condensed consolidated balance sheets.

(q) Loan Participations

As of June 30, 2021, the Company has sold investments (“Loan

Participations Sold”) to third parties (“Participants”) that are accounted for as secured borrowings under ASC Topic

860, Transfers and Servicing.

Under ASC Topic 860, a partial loan transfer does not qualify for sale accounting in order for sale treatment

to be allowed.

A participation or other partial loan transfer that meets the definition of a participating interest is classified as loan

receivable and the portion transferred is recorded as a secured borrowing under loan participations sold in the condensed consolidated

balance sheets.

The Participants are entitled to payments made by the borrower of the related loan equal to the current Loan Participations

Sold outstanding at the interest rates for the respective investment.

In the event that the borrower defaults, the Participants have rights

to payments from such borrower, but do not have recourse to the Company.

The terms of the Loan Participations Sold are commensurate with

the terms of the related loan.

As of June 30, 2021 and December

31, 2020, the Company had entered into participation agreements for a total of $ 4,444 and $ 17,316 , respectively.

In addition, the interest

income and interest expense related to the Loan Participations Sold resulted in interest income and interest expense which is presented

gross on the condensed consolidated statements of operations.

(r) Supplemental Non-cash

During the six months ended

June 30, 2021, non-cash investing activities included the repayment of a loan receivable in full in the amount of $ 133,453 with equity

In addition, $ 35,000 of loans receivable were exchanged for $ 35,000 of newly issued debt securities and a $ 36,000 note receivable

was issued for the sale of equity securities to a third party.

During the six months ended June 30, 2020, non-cash investing activities

included $ 4,633 non-cash conversion of an equity method investment and $ 6,170 conversion of a loan receivable to shares of stock.

(s) Reclassifications

Certain amounts reported

in the Capital Markets segment for the three and six months ended June 30, 2020 have been reclassified and reported in the Financial Consulting

and Wealth Management segments for the three and six months ended June 30, 2020 as a result of the organizational changes that created

the new Financial Consulting segment in the fourth quarter of 2020 and Wealth Management segment in the first quarter of 2021.

For the six months ended

June 30, 2020, $ 797 of dividends received from equity method investments that were previously included in cash flows from investing

activities have been reclassified and included in cash flows from operating activities to conform to the 2021 presentation.

(t) Variable Interest

In 2018, the operations of

GACP II, LP, a private debt investment limited partnership (the “Partnership”) commenced operations.

The Partnership is a

variable interest entity (“VIE”) since the unaffiliated limited partners do not have substantive kick-out or participating

rights to remove the Company’s subsidiary that is the general partner managing the Partnership.

The Company has determined that

it is not the primary beneficiary due to the fact that its fee arrangements are considered at-market and thus not deemed to be variable

interests, and it does not hold any other interests in the Partnership that are considered to be more than insignificant.

determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at

each reporting date.

In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the

entity held either directly by the Company or indirectly through related parties.

The consolidation analysis can generally be performed

qualitatively;

however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also

be performed.

In November 2020, the Company

invested in Lingo Management, LLC (“Lingo”), a joint venture with an unaffiliated third party.

On March 10, 2021, the Company

also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo).

Lingo is a VIE because the entity does

not have enough equity at risk to finance its activities without additional subordinated financial support.

The Company has determined

that it is not the primary beneficiary because it does not have the power to direct the activities of the VIE that most significantly

impact the entity’s financial performance.

The Company’s variable interests in Lingo include loans receivable, at fair value

and an equity investment accounted for under the equity method of accounting.

The Company, through its

newly acquired subsidiary, National, has entered into agreements to provide investment banking and advisory services to numerous investment

funds (the “Funds”) that are considered variable interest entities under the accounting guidance.

September 30, 2021 and December 31, 2020, the Company had a 39.5 % ownership interest in bebe stores, inc.

November 10, 2020, the Company purchased an additional 1,500,000 shares of newly issued common stock of bebe for $ 7,500 and

increased its’ ownership interest increased from 31.5 % to 39.5 %.

The equity ownership in bebe is accounted for under the

equity method of accounting and is included in prepaid expenses and other assets in the condensed consolidated balance sheets.

Holdings Corporation

of December 31, 2020, the Company owned approximately 45 % of the commons stock of National which was included in prepaid expenses

and other assets in the condensed consolidated balance sheets.

The equity ownership in National is accounted for under the equity method

of accounting for periods prior to February 25, 2021.

On February 25, 2021, the Company completed the acquisition of National by acquiring

the 55 % of common stock not previously owned by the Company 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.

The cash consideration for the purchase of the 55 %

of common stock not previously owned by the Company and settlement of outstanding share based awards was $ 35,314 .

National’s operating

results subsequent to February 25, 2021 is included in the Company’s condensed consolidated financial statements.

Equity Investments

Company has other equity investments over which the Company exercises significant influence but which do not meet the requirements for

consolidation, the largest ownership interest being a 40% ownership interest in Lingo Management, LLC (“Lingo”) which

was acquired in November 2020.

The equity ownership in these other investments was accounted for under the equity method of accounting

and is included in prepaid expenses and other assets in the condensed consolidated balance sheets.

(r) Loan Participations

As of September 30, 2021,

the Company has sold investments (“Loan Participations Sold”) to third parties (“Participants”) that are accounted

for as secured borrowings under ASC “Topic 860:

Transfers and Servicing” (“ASC 860”).

Under ASC 860, a partial

loan transfer does not qualify for sale accounting in order for sale treatment to be allowed.

A participation or other partial loan transfer

that meets the definition of a participating interest is classified as loan receivable and the portion transferred is recorded as a secured

borrowing under loan participations sold in the condensed consolidated balance sheets.

The Participants are entitled to payments made

by the borrower of the related loan equal to the current Loan Participations Sold outstanding at the interest rates for the respective

In the event that the borrower defaults, the Participants have rights to payments from such borrower, but do not have recourse

to the Company.

The terms of the Loan Participations Sold are commensurate with the terms of the related loan.

As of September 30, 2021,

there were no outstanding loan participations.

As of December 31, 2020, the Company had entered into participation agreements for a total

of $ 17,316 .

In addition, the interest income and interest expense related to the Loan Participations Sold resulted in interest income

and interest expense which is presented gross on the condensed consolidated statements of operations.

(s) Supplemental Non-cash

During the nine months ended

September 30, 2021, non-cash investing activities included:

the repayment of a loan receivable in full in the amount of $ 133,453 with

equity securities, a $ 51,000 note receivable issued for the sale of equity securities to a third party, $ 35,000 of loans receivable exchanged

for newly issued debt securities, the repayment of a $ 2,800 loan with equity securities, and $ 200 of loans receivable were converted to

During the nine months ended September 30, 2020, non-cash investing activities included $ 4,633 non-cash conversion of an equity

method investment and $ 9,778 conversion of loans receivable to shares of stock.

(t) Reclassifications

Certain prior period amounts

have been reclassified to conform with the current period presentation.

Such reclassifications consist of including advances against customer

contracts in prepaid expenses and other assets on the condensed consolidated balance sheets.

Certain amounts reported in the Capital Markets

segment for the three and nine months ended September 30, 2020 have been reclassified and reported in the Financial Consulting and Wealth

Management segments for the three and nine months ended September 30, 2020 as a result of the organizational changes that created the

new Financial Consulting segment in the fourth quarter of 2020 and Wealth Management segment in the first quarter of 2021.

(u) Variable Interest

Company holds interests in various entities that meet the characteristics of a VIE but are not

consolidated as the Company is not the primary beneficiary.

Interests in these entities are generally in the form of equity interests,

loans receivable, or fee arrangements.

2018, the operations of GACP II, LP, a private debt investment limited partnership (the “Partnership”) commenced operations.

The Partnership is a VIE since the unaffiliated limited partners do not have substantive kick-out or participating rights to remove the

Company’s subsidiary that is the general partner managing the Partnership.

The Company has determined that it is not the primary

beneficiary due to the fact that its fee arrangements are considered at-market and thus not deemed to be variable interests, and it does

not hold any other interests in the Partnership that are considered to be more than insignificant.

The Company determines whether it is

the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date.

evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly

by the Company or indirectly through related parties.

The consolidation analysis can generally be performed qualitatively;

it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed.

November 2020, the Company invested in Lingo Management, LLC (“Lingo”), a joint venture with an unaffiliated third party.

On March 10, 2021, the Company also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo).

is a VIE because the entity does not have enough equity at risk to finance its activities without additional subordinated financial support.

The Company has determined that it is not the primary beneficiary because it does not have the power to direct the activities of the VIE

that most significantly impact the entity’s financial performance.

The Company’s variable interests in Lingo include loans

receivable at fair value and an equity investment accounted for under the equity method of accounting.

Company, through its newly acquired subsidiary, National, has entered into agreements to provide investment banking and advisory services

to numerous investment funds (the “Funds”) that are considered variable interest entities under the accounting guidance.

Funds are established primarily to make and manage investments in equity or convertible debt securities of privately held companies that

3 unchanged sentences

investors when contractually permitted, estimated at approximately six months following such IPO or liquidity event.

The Company earns fees from

the Funds in the form of placement agent fees and carried interest.

For placement agent fees, the Company receives a cash fee of generally

7% to 10% of the amount of raised capital for the Funds and the fee is recognized at the time the placement services occurred.

receives carried interest as a percentage allocation (8% to 15%) of the profits of the Funds as compensation for asset management services

provided to the Funds and it is recognized under the ownership model of ASC 323 as an equity method investment with changes in allocation

recorded currently in the results of operations.

Once fund investors have received distributions in an amount equal to one hundred percent

(100%) of their total capital contributions, the Company as the manager of the Funds will be entitled to share in any profits of the Funds

to the extent of the carried interest.

As the fee arrangements under such agreements are arm's length and contain customary terms and

conditions and represent compensation that is considered fair value for the services provided, the fee arrangements are not considered

variable interests and accordingly, the Company does not consolidate such VIEs.

Placement agent fees

attributable to such arrangements from acquisition date through June 30, 2021 were $ 25,382 and are included in services and fees in

the condensed consolidated statements of operations.

Company earns fees from the Funds in the form of placement agent fees and carried interest.

For placement agent fees, the Company receives

a cash fee of generally 7 % to 10 % of the amount of raised capital for the Funds and the fee is recognized at the time the placement services

The Company receives carried interest as a percentage allocation ( 8 % to 15 %) of the profits of the Funds as compensation for

asset management services provided to the Funds and it is recognized under the ownership model of ASC “Topic 323:

Investments –

Equity Method and Joint Ventures” as an equity method investment with changes in allocation recorded currently in the results of

Once fund investors have received distributions in an amount equal to one hundred percent ( 100 %) of their total capital contributions,

the Company as the manager of the Funds will be entitled to share in any profits of the Funds to the extent of the carried interest.

the fee arrangements under such agreements are arm’s length and contain customary terms and conditions and represent compensation that

is considered fair value for the services provided, the fee arrangements are not considered variable interests and accordingly, the Company

does not consolidate such VIEs.

agent fees attributable to such arrangements for the quarter ended September 30, 2021 were $ 26,732 and are included in services and

fees in the condensed consolidated statements of operations.

The carrying value of the

Company’s investments in the VIEs that were not consolidated is shown below.

September 30,

Partnership investments

3 unchanged sentences

Maximum exposure to loss

(u) Recent Accounting

Riley Principal 150

and 250 Merger Corporations

During the nine months ended

September 30, 2021, the Company along with BRPM 150 and BRPM 250, both newly formed special purpose acquisition companies incorporated

as Delaware corporations, consummated the initial public offerings of 17,250,000 units of BRPM 150 and 17,250,000 units of BRPM 250.

Each Unit of BRPM 150 and BRPM 250 consisted of one share of class A common stock and one-third of one redeemable warrant, each whole

warrant entitling the holder thereof to purchase one share of BRPM 150 or BRPM 250 class A common stock at an exercise price of $ 11.50 per

The BRPM 150 and BRPM 250 Units were each sold at a price of $ 10.00 per unit, generating gross proceeds to BRPM 150 of $ 172,500

and BRPM 250 of $ 172,500 .

These proceeds which totaled $ 345,000 were deposited in a trust account established for the benefit of the BRPM

150 and BRPM 250 class A public shareholders and is included in prepaid expenses and other assets in the condensed balance sheet at September

These proceeds are invested only in U.S.

treasury securities in accordance with the governing documents of BRPM 150 and BRPM

Under the terms of the BRPM 150 and BRPM 250 initial public offerings, BRPM 150 and BRPM 250 are required to consummate a business

combination transaction within 24 months (or 27 months under certain circumstances) of the completion of their respective initial public

connection with the completion of the initial public offerings of BRPM 150 and BRPM 250, the Company invested in the private placement

units of BRPM 150 and BRPM 250.

Both BRPM 150 and BRPM 250 are determined to be VIE’s because each of the entities do not have enough

equity at risk to finance their activities without additional subordinated financial support.

The Company has determined that the class

A shareholders of BRPM 150 and BRPM 250 do not have substantive rights as shareholders of BRPM 150 and BRPM 250 since these equity interests

are determined to be temporary equity.

As such, the Company has determined that it is the primary beneficiary of BRPM 150 and BRPM 250

as it has the right to receive benefits or the obligation to absorb losses of each of the entities, as well as the power to direct a majority

of the activities that significantly impact BRPM 150 and BRPM 250’s economic performance.

Since the Company is determined to be

the primary beneficiary, BRPM 150 and BRPM 250 are consolidated into the Company’s financial statements.

(v) Recent Accounting

Not yet adopted

8 unchanged sentences

The Company is currently assessing the potential impacts the adoption of ASU 2020-04

may have on its consolidated results of operations, cash flows, financial position or disclosures.

may have on its consolidated results of operations, cash flows, financial position, and disclosures.

In August 2020, the FASB

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position, and disclosures.

In August 2021, the FASB

issued ASU 2021-06, Presentation of Financial Statements (Topic 205).

This update amends certain SEC paragraphs from the Codification

in response to the issuance of SEC Final Rule Nos.

33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses ,

which modified the significance test and improved disclosure requirements for acquired businesses and pro forma financial information.

The amendments in this update are applicable for public business entities for fiscal periods beginning after December 31, 2020.

adoption is permitted.

The Company adopted the SEC Final Rule effective January 1, 2021, and the ASU was adopted immediately.

of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures.

NOTE 3 — RESTRUCTURING CHARGE

The Company did not record

any restructuring charges for the three and six months ended June 30, 2021 and 2020.

The following tables summarize the changes in accrued

restructuring charge during the three and six months ended June 30, 2021 and 2020:

any restructuring charges for the three and nine months ended September 30, 2021.

The Company recorded restructuring charges of $1,557

for the three and nine months ended September 30, 2020.

The following tables summarize the changes in accrued restructuring charge during

the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Balance, beginning of period

Restructuring charge

Non-cash items

Balance, end of period

The following tables summarize the restructuring

activities by reportable segment during the three and nine months ended September 30, 2020:

Restructuring charges for the three months ended September 30, 2020:

Impairment of intangibles

Total restructuring charge

Restructuring charges for the nine months ended September 30, 2020:

Impairment of intangibles

Total restructuring charge

NOTE 4 — SECURITIES LENDING

The following table presents

the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of June 30, 2021 and December

offset in the

consolidated balance

Gross amounts

sheets but eligible

offset in the

included in the

for offsetting

Gross amounts

upon counterparty

balance sheets (1)

balance sheets

As of June 30, 2021

the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of September 30, 2021 and

December 31, 2020:

Gross amounts recognized

Gross amounts offset in the consolidated balance

Net amounts included in the

consolidated balance sheets

not offset in the consolidated balance sheets but eligible for offsetting upon counterparty

As of September 30, 2021

Securities borrowed

Securities loaned

As of June 30, 2020

As of December 31, 2020

Securities borrowed

3 unchanged sentences

(2) Includes the amount of cash collateral held/posted.

NOTE 5— ACCOUNTS

The components of accounts receivable, net, include

the following:

NOTE 5 — ACCOUNTS RECEIVABLE

The components of accounts receivable, net, include the

September 30,

Accounts receivable

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Balance, beginning of period

1 unchanged sentence

Balance, end of period

NOTE 6— GOODWILL AND

OTHER INTANGIBLE ASSETS

NOTE 6 — PREPAID EXPENSES AND OTHER

Prepaid expenses and

other assets consist of the following:

September 30,

Funds held in trust account

Equity investments

Prepaid expenses

Other receivables

Prepaid expenses and other assets

NOTE 7 — GOODWILL AND OTHER INTANGIBLE

Goodwill was $ 237,961 and

$ 227,046 at June 30, 2021 and December 31, 2020, respectively.

$ 227,046 at September 30, 2021 and December 31, 2020, respectively.

The changes in the carrying

amount of goodwill for the six months ended June 30, 2021 were as follows:

amount of goodwill for the nine months ended September 30, 2021 were as follows:

United Online

2 unchanged sentences

Goodwill acquired during the period:

Acquisition of business

Balance as of June 30, 2021

Acquisition of businesses

Balance as of September 30, 2021

Intangible assets consisted of the

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

9 unchanged sentences

Amortization expense was

$ 5,134 and $ 4,024 for the three months ended June 30, 2021 and 2020, respectively and $ 11,020 and $ 8,048 for the six months ended June

30, 2021 and 2020, respectively.

At June 30, 2021, estimated future amortization expense was $ 10,159 , $ 17,193 , $ 14,686 , $ 10,745 and $ 7,518

for the years ended December 31, 2021 (remaining six months), 2022, 2023, 2024 and 2025, respectively.

The estimated future amortization

expense after December 31, 2025 was $ 14,727 .

$ 5,156 and $ 3,919 for the three months ended September 30, 2021 and 2020, respectively and $ 16,176 and $ 11,967 for the nine months ended

September 30, 2021 and 2020, respectively.

At September 30, 2021, estimated future amortization expense was $ 4,599 , $ 17,304 , $ 14,797 ,

$ 10,856 , and $ 7,629 for the years ended December 31, 2021 (remaining three months), 2022, 2023, 2024 and 2025, respectively.

estimated future amortization expense after December 31, 2025 was $ 16,236 .

the first quarter of 2020, in accordance with ASU 2017-04, Intangibles-Goodwill and Other (Topic 350):

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engagements funded under the Credit Agreement as set forth therein.

Interest expense totaled $ 108 and $ 143 for the three months ended

June 30, 2021 and 2020, respectively and $ 216 and $ 420 for the six months ended June 30, 2021 and 2020, respectively.

There was no outstanding

balance on this credit facility at June 30, 2021 or December 31, 2020.

At June 30, 2021, there were no open letters of credit outstanding.

Interest expense totaled $ 109 for the three months ended September

30, 2021 and 2020, and $ 325 and $ 529 for the nine months ended September 30, 2021 and 2020, respectively.

There was no outstanding balance

on this credit facility at September 30, 2021 or December 31, 2020.

At September 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.

all financial covenants in the asset based credit facility at September 30, 2021.

Paycheck Protection Program

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the NSC Loan, the “PPP Loans”) in a principal amount of $ 973 .

The interest rate on each

PPP Note is a fixed rate of 1 % per annum.

Interest is calculated by applying the ratio of the interest rate over a year of 360 days, multiplied

by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.

The applicable borrower

is required to make monthly payments commencing on the first day of the first full calendar month following the end of a statutorily defined

deferral period (the “Deferral Period”), and such payments shall continue to be due and payable on the first day of each calendar

month thereafter until the date that is two years following the funding date (the “Maturity Date”), or April 13, 2022 in the

case of the NSC Note and April 16, 2022 in the case of the WEC Note.

Monthly payment amounts are based on repayment of interest accrued

during the Deferral Period, interest accruing until and including the Maturity Date, and full amortization of the outstanding principal

The PPP loans are included in notes payable in the condensed consolidated balance sheets.

According to the terms of

the PPP, all or a portion of loans under the PPP may be forgiven if certain conditions set forth in the CARES Act and the rules of the

In order to be forgiven, the proceeds of each PPP Loan are to be used to pay for payroll costs, continuation of group health

care benefits during periods of paid sick, medical, or family leave, or insurance premiums; salaries or commissions or similar compensation;

rent; utilities; and interest on certain other outstanding debt; however, 60 % of the proceeds of each PPP Loan must be

used for payroll purposes.

Each PPP Note includes events

of default, the occurrence and continuation of which would provide the Lender with the right to exercise remedies against NSC or WEC,

as applicable, including the right to declare the entire unpaid principal balance under the applicable PPP Note and all accrued unpaid

interest immediately due.

Upon completion of the acquisition of National, in accordance with the provisions of the Small Business Administration

regarding changes of ownership of an entity that has received PPP funds, the Company was required to place $ 6,553 of cash in a restricted

cash account with the PPP lender.

In June 2021, the full amount

of the Company’s PPP loans and accrued interest were forgiven in the amount of $ 6,509 , and the Company recorded a gain on extinguishment

of loans for this amount in the accompanying Condensed Consolidated Statement of Operations.

The full amount of the Company’s

PPP loans and accrued interest were forgiven in the amount of $ 6,509 in June 2021, and the Company recorded a gain on extinguishment of

loans for this amount in the accompanying condensed consolidated statement of operations.

Other Notes Payable

2 unchanged sentences

The notes payable accrue interest at the prime rate

plus 2.0% (5.25% at June 30, 2021) payable annually, maturing January 31, 2022.

At June 30, 2021 and December 31, 2020, the outstanding

balance for the notes payable was $ 357 and $ 714 , respectively.

Interest expense was $ 5 and $ 48 for the three months ended June 30, 2021

and 2020, respectively and $ 12 and $ 63 for the six months ended June 30, 2021 and 2020, respectively.

plus 2.0 % ( 5.25 % at September 30, 2021) payable annually, maturing January 31, 2022 .

At September 30, 2021 and December 31, 2020,

the outstanding balance for the notes payable was $ 357 and $ 714 , respectively.

Interest expense was $ 4 and $ 12 for the three months ended

September 30, 2021 and 2020, respectively, and $ 16 and $ 75 for the nine months ended September 30, 2021 and 2020, respectively.

Also included in notes payable

2 unchanged sentences

The note accrued interest at 12.5 % per annum and had a maturity date of March 31, 2021.

During the six months ended June 30, 2021, interest expense on the note was $ 238 .

The note was paid in full in

January 2021.

NOTE 8 — TERM LOANS

nine months ended September 30, 2021, interest expense on the note was $ 238 .

The note was paid in full in January 2021.

NOTE 9 — TERM LOANS AND REVOLVING CREDIT FACILITY

Credit Agreement

23, 2021, the Company, and its wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and

BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement (the “Credit Agreement”)

June 23, 2021, the Company, and its wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”),

and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement (the “Credit Agreement”)

with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, for a four-year

9 unchanged sentences

Facility, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter.

Subject 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 facilities exceed the borrowing base, the Company

is obligated to prepay the loans in an aggregate amount equal to such excess.

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 $ 115,000 and the Primary Guarantor to maintain net asset value of at least $ 900,000 .

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 $ 2,500 per quarter.

At June 30, 2021, the outstanding balance on the credit facility’s

term loan was $ 194,218 (net of unamortized debt issuance costs of $ 5,782 ).

Interest on the term loan for the three and six months ended

June 30, 2021, was $ 236 (including amortization of deferred debt issuance costs of $ 30 ).

The interest rate on the term loan at June 30,

2021 was 4.64 %.

Company 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 $ 30 (including amortization of deferred financing costs of $ 13 ).

The interest rate

on the revolving facility at June 30, 2021 was 4.65 %.

Subsequent to June 30, 2021, the Company drew down the full $ 80,000 of the Revolving

Credit Facility.

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 facilities exceed the borrowing base, the Company is obligated to prepay the loans in an aggregate amount equal to such excess.

The Credit Agreement contains certain representations and warranties (subject to certain agreed qualifications) that are customary for

financings of this kind.

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 $ 115,000 and the Primary Guarantor to maintain

net asset value of at least $ 900,000 .

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 $ 2,500 per quarter.

of September 30, 2021, the outstanding balance on the Term Loan Facility was $ 194,569 (net of unamortized debt issuance

costs of $ 5,431 ).

Interest on the term loan for the three and nine months ended September 30, 2021, was $ 2,720 (including amortization

of deferred debt issuance costs of $ 350 ) and $ 2,956 (including amortization of deferred debt issuance costs of $ 380 ), respectively.

interest rate on the term loan as of September 30, 2021 was 4.63 %.

Company had an outstanding balance of $ 80,000 under the Revolving Credit Facility as of September 30, 2021.

Interest on the revolving

facility for the three and nine months ended September 30, 2021 was $ 790 (including unused commitment fees of $ 58 and amortization of

deferred financing costs of $ 146 ) and $ 820 (including unused commitment fees of $ 76 and amortization of deferred financing costs of $ 159 ),

respectively.

The interest rate on the revolving facility at September 30, 2021 was 4.62 %.

The Company is in compliance

with all financial covenants in the Nomura Credit Agreement at June 30, 2021.

with all financial covenants in the Nomura Credit Agreement at September 30, 2021.

Credit Agreement

62 unchanged sentences

earnings before interest, taxes, depreciation, and amortization (EBITDA) for the preceding four fiscal quarters or other applicable period.

June 30, 2021 and December 31, 2020, the interest rate on the BRPAC Credit Agreement was 3.36 % and 3.40 %, respectively.

Amounts outstanding under

the Amended BRPAC Credit Agreement are due in quarterly installments commencing on March 31, 2021.

Quarterly installments from September

of September 30, 2021 and December 31, 2020, the interest rate on the BRPAC Credit Agreement was 3.09 % and 3.40 %, respectively.

Principal outstanding under

the Amended BRPAC Credit Agreement is due in quarterly installments commencing on March 31, 2021.

Quarterly installments on December

31, 2021 are in the amount of $ 4,600 , from March 31, 2022 to December 31, 2022 are in the amount of $ 4,116 per quarter, from March

31, 2023 to December 31, 2023 are in the amount of $ 3,631 per quarter, from March 31, 2024 to December 31, 2024 are in the amount

of $ 4,250 per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $ 3,750 per quarter, from March 31, 2024

to December 31, 2024 are in the amount of $ 3,250 per quarter, and from March 31, 2025 to December 31, 2025 are in the amount

of $ 2,750 per quarter.

As of June 30, 2021 and December 31,

2020, the outstanding balance on the term loan was $ 62,885 (net of unamortized debt issuance costs of $ 631 ) and $ 74,213 (net

of unamortized debt issuance costs of $ 787 ), respectively.

Interest expense on the term loan during the three months ended June 30, 2021

and 2020, was $ 663 (including amortization of deferred debt issuance costs of $ 77 ) and $ 586 (including amortization of deferred

debt issuance costs of $ 72 ), respectively.

Interest expense on the term loan during the six months ended June 30, 2021 and 2020, was $ 1,377 (including

amortization of deferred debt issuance costs of $ 157 ) and $ 1,415 (including amortization of deferred debt issuance costs of $ 148 ),

respectively.

of $ 3,147 per quarter, from March 31, 2025 to September 30, 2025 are in the amount of $ 2,663 per quarter, and the remaining

principal balance is due at final maturity on December 31, 2025.

As of September 30, 2021

and December 31, 2020, the outstanding balance on the term loan was $ 58,358 (net of unamortized debt issuance costs of $ 558 )

and $ 74,213 (net of unamortized debt issuance costs of $ 787 ), respectively.

Interest expense on the term loan during the three months

ended September 30, 2021 and 2020, was $ 554 (including amortization of deferred debt issuance costs of $ 72 ) and $ 497 (including

amortization of deferred debt issuance costs of $ 67 ), respectively.

Interest expense on the term loan during the nine months ended September

30, 2021 and 2020, was $ 1,931 (including amortization of deferred debt issuance costs of $ 229 ) and $ 1,912 (including amortization

of deferred debt issuance costs of $ 216 ), respectively.

The Company is in compliance

with all financial covenants in the BRPAC Credit Agreement at June 30, 2021.

with all financial covenants in the BRPAC Credit Agreement as of September 30, 2021.

NOTE 10 — SENIOR NOTES PAYABLE

1 unchanged sentence

are comprised of the following:

September 30,

7.500 % Senior notes due May 31, 2027

7 unchanged sentences

5.500 % Senior notes due March 31, 2026

5.250 % Senior notes due August 31, 2028

Unamortized debt issuance costs

During the six months ended

June 30, 2021, the Company issued $ 85,327 of senior notes due with maturity dates ranging from May 2023 to January 2028 pursuant to At

During the nine months ended

September 30, 2021, the Company issued $ 183,042 of senior notes with maturity dates ranging from May 2023 to August 2028 pursuant to At

the Market Issuance Sales Agreements with B.

4 unchanged sentences

these senior notes.

On January 25, 2021, the Company issued $ 230,000 of senior notes

due in January 2028 (“6.0% 2028 Notes”) pursuant to a 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 $ 225,723 (after underwriting commissions,

fees and other issuance costs of $ 4,277 ).

The 6.0% 2028 Notes bear interest at the rate of 6.0% per annum.

On March 29, 2021, the Company issued $ 159,493 of senior notes

due in March 2026 (“5.5% 2026 Notes”) pursuant to a 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 $ 156,260 (after underwriting commissions, fees and

other issuance costs of $ 3,233 ).

The 5.5% 2026 Notes bear interest at the rate of 5.5% per annum.

On January 25, 2021, the

Company issued $ 230,000 of senior notes due in January 2028 (“6.0% 2028 Notes”) pursuant to a 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 $ 225,723 (after

underwriting commissions, fees, and other issuance costs of $ 4,277 ).

The 6.0% 2028 Notes bear interest at the rate of 6.0 % per

On March 29, 2021, the Company

issued $ 159,493 of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to a 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, the Company received net proceeds of $ 156,260 (after

underwriting commissions, fees, and other issuance costs of $ 3,233 ).

The 5.5% 2026 Notes bear interest at the rate of 5.5 % per

On March 31, 2021, the Company

exercised its option for early redemption at par $ 128,156 of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant

1 unchanged sentence

The total redemption payment included $ 1,602 in accrued interest.

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 $ 122,793 .

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

On July 26, 2021, the Company redeemed, in full, $ 122,793 aggregate principal amount of its 7.25 % Senior Notes

due 2027 (“7.25% 2027 Notes”) pursuant to the third supplemental indenture dated December 31, 2017.

July 26, 2021, the Company redeemed, in full, $ 122,793 aggregate principal amount of its 7.25 % Senior Notes due 2027 (“7.25% 2027

Notes”) pursuant to the third supplemental indenture dated December 31, 2017.

The 7.25 % Notes had an aggregate principal amount

of $ 122,793 .

The redemption price was equal to 100 % of the aggregate principal amount, plus accrued and unpaid interest up to, but

excluding, the redemption date.

The total redemption payment included approximately $ 2,127 in accrued interest.

In connection with the

full redemption, the 7.25% 2027 Notes, which were listed on NASDAQ under the ticker symbol “RILYG,” were delisted from NASDAQ

and ceased trading on the redemption date.

On August 4, 2021, the Company

issued $ 316,250 of senior notes due in August 2028 (“5.25% 2028 Notes”) pursuant to a prospectus supplement dated January

Interest on the 5.25% 2028 Notes is payable quarterly at 5.25 %.

The 5.25% 2028 Notes are unsecured and due and payable

in full on August 31, 2028.

In connection with the issuance of the 5.25% 2028 Notes, the Company received net proceeds of $ 308,659 (after

underwriting commissions, fees, and other issuance costs of $ 7,591 ).

The 5.25% 2028 Notes bear interest at the rate of 5.25 %

September 4, 2021, the Company redeemed, in full, $ 137,454 aggregate principal amount of its 7.375 % Senior Notes due 2023 (“7.375%

2023 Notes”) pursuant to the fifth supplemental indenture dated September 11, 2018.

The redemption price was equal to 101.5 % of

the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the redemption date.

The total redemption payment

included approximately $ 2,127 in accrued interest.

In connection with the full redemption, the 7.25% 2027 Notes were delisted from NASDAQ.

At June 30, 2021 and December

31, 2020, the total senior notes outstanding was $ 1,213,105 (net of unamortized debt issue costs of $ 13,900 ) and $ 870,783 (net of unamortized

debt issue costs of $ 9,557 ) 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 $ 19,970 and $ 15,588 for the three months ended June 30, 2021 and 2020,

respectively and $ 38,564 and $ 29,980 for the six months ended June 30, 2021 and 2020, respectively.

included approximately $ 957 in accrued interest and $ 2,062 in premium.

In connection with the full redemption, the 7.375% 2023 Notes,

which were listed on NASDAQ under the ticker symbol “RILYH,” were delisted from NASDAQ and ceased trading on the redemption

On October 22, 2021, the Company redeemed, in full, $ 115.7 million

aggregate principal amount of its 6.875 % Senior Notes due 2023 (the “6.875% 2023 Notes”) pursuant to the fifth supplemental

indenture dated September 11, 2018.

The redemption price was equal to 101.0 % of the aggregate principal amount, plus accrued and unpaid

interest, up to, but excluding, the redemption date.

The total redemption payment included approximately $ 1.8 million in accrued

interest and $ 1.2 million in premium.

In connection with the full redemption, the 6.875% 2023 Notes under the ticker symbol “RILYI,”

were delisted from NASDAQ and ceased trading on the redemption date.

As of September 30, 2021

and December 31, 2020, the total senior notes outstanding was $ 1,362,847 (net of unamortized debt issue costs of $ 17,876 ) and $ 870,783

(net of unamortized debt issue costs of $ 9,557 ) with a weighted average interest rate of 5.96 % and 6.95 %, respectively.

Interest on senior

notes is payable on a quarterly basis.

Interest expense on senior notes totaled $ 21,458 and $ 15,562 for the three months ended September

30, 2021 and 2020, respectively and $ 60,010 and $ 45,543 for the nine months ended September 30, 2021 and 2020, respectively.

Sales Agreement Prospectus

1 unchanged sentence

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 with the SEC on January 28, 2021 (the “January 2021 Sales Agreement Prospectus”).

This program provides for the sale

by the Company of up to $ 150,000 of certain of the Company’s senior notes.

As of June 30, 2021, the Company had $ 64,673 remaining

availability under the April 2021 Sales Agreement.

prospectus was filed by us with the SEC August 11, 2021 (the “August 2021 Sales Agreement Prospectus”) superseding the prospectus

filed with the SEC on April 6, 2021 (the “April 2021 Sales Agreement Prospectus”) and the prospectus filed with the SEC on

January 28, 2021 (the “January 2021 Sales Agreement Prospectus”).

This program provides for the sale by the Company of up

to $ 250,000 of certain of the Company’s senior notes.

As of September 30, 2021, the Company had $ 152,285 remaining availability

under the August 2021 Sales Agreement.

NOTE 11 — REVENUE FROM CONTRACTS WITH CUSTOMERS

from contracts with customers by reportable segment for the three and six months ended June 30, 2021 and 2020 is as follows:

Revenue from contracts with

customers by reportable segment for the three and nine months ended September 30, 2021 and 2020 is as follows:

Investments -

United Online

Revenues for the three months ended June 30, 2021

Corporate finance, consulting and investment

and magicJack

Revenues for the three months ended September 30, 2021

Corporate finance, consulting and investment banking fees

Wealth and asset management fees

8 unchanged sentences

Total revenues

(1) Includes sale of goods of $11,743 in Auction and Liquidation and

$714 in Principal Investments - United Online and magicJack.

Revenues for the three months ended June 30, 2020

Corporate finance, consulting and investment

sale of goods of $ 34,327 in Auction and Liquidation and $ 631 in Principal Investments - United Online and magicJack.

Revenues for the three months ended September 30, 2020

Corporate finance, consulting and investment banking fees

Wealth and asset management fees

8 unchanged sentences

Total revenues

(1) Includes sale of goods of $1,045 in Auction and Liquidation and

$775 in Principal Investments - United Online and magicJack.

sale of goods of $ 22,712 in Auction and Liquidation and $ 938 in Principal Investments - United Online and magicJack.

Investments -

United Online

Revenues for the six months ended June 30, 2021

and magicJack

Revenues for the nine months ended September 30, 2021

Corporate finance, consulting and investment banking fees

9 unchanged sentences

Total revenues

(1) Includes sale of goods of $17,835 in Auction and Liquidation

and $1,450 in Principal Investments - United Online and magicJack.

Revenues for the six months ended June 30, 2020

sale of goods of $ 52,162 in Auction and Liquidation and $ 2,081 in Principal Investments - United Online and magicJack.

Revenues for the nine months ended September 30, 2020

Corporate finance, consulting and investment banking fees

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Total revenues

(1) Includes sale of goods of $1,044 in Auction and Liquidation

and $1,780 in Principal Investments - United Online and magicJack.

sale of goods of $ 23,757 in Auction and Liquidation and $ 2,718 in Principal Investments - United Online and magicJack.

Contract Balances

The timing of the Company’s revenue recognition may differ from

the timing of payment by its customers.

The Company records a receivable when revenue is recognized prior to payment and the Company has

an unconditional right to payment.

Alternatively, when payment precedes the provision of the related services, the Company records deferred

revenue until the performance obligation(s) are satisfied.

Receivables related to revenues from contracts with customers totaled $ 57,853

and $ 46,518 at June 30, 2021 and December 31, 2020, respectively.

The Company had no significant impairments related to these receivables

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

The Company also has $ 6,684 and $ 5,712 of unbilled receivables at June 30,

2021 and December 31, 2020, respectively, and advances against customer contracts of $ 200 at June 30, 2021 and December 31, 2020.

Company’s deferred revenue primarily relates to retainer and milestone fees received from corporate finance and investment banking

advisory engagements, asset management agreements, financial consulting engagements, subscription services where the performance obligation

has not yet been satisfied and license agreements with guaranteed minimum royalty payments and advertising/marketing fees with additional

royalty revenue based on a percentage of defined sales.

Deferred revenue at June 30, 2021 and December 31, 2020 was $ 68,398 and $ 68,651 ,

respectively.

The Company expects to recognize the deferred revenue of $68,398 at June 30, 2021 as service and fee revenues when the performance

obligation is met during the years December 31, 2021 (remaining six months), 2022, 2023, 2024 and 2025 in the amount of $ 37,452 , $ 11,493 ,

$ 7,632 , $ 5,212 , and $ 3,025 , respectively.

The timing of the Company’s

revenue recognition may differ from the timing of payment by its customers.

The Company records a receivable when revenue is recognized

prior to payment and the Company has an unconditional right to payment.

Alternatively, when payment precedes the provision of the related

services, the Company records deferred revenue until the performance obligation(s) are satisfied.

Receivables related to revenues from

contracts with customers totaled $ 54,790 and $ 46,518 as of September 30, 2021 and December 31, 2020, respectively.

The Company had no

significant impairments related to these receivables during the three and nine months ended September 30, 2021 and 2020.

The Company also

has $ 5,420 and $ 5,712 of unbilled receivables as of September 30, 2021 and December 31, 2020, respectively, and advances against customer

contracts of $ 200 as of September 30, 2021 and December 31, 2020.

The Company’s deferred revenue primarily relates to retainer and

milestone fees received from corporate finance and investment banking advisory engagements, asset management agreements, financial consulting

engagements, subscription services where the performance obligation has not yet been satisfied and license agreements with guaranteed

minimum royalty payments and advertising/marketing fees with additional royalty revenue based on a percentage of defined sales.

revenue as of September 30, 2021 and December 31, 2020 was $ 68,310 and $ 68,651 , respectively.

The Company expects to recognize the deferred

revenue of $ 68,310 as of September 30, 2021 as service and fee revenues when the performance obligation is met during the years December

31, 2021 (remaining three months), 2022, 2023, 2024 and 2025 in the amount of $ 37,923 , $ 11,308 , $ 7,738 , $ 5,251 , and $ 2,868 , respectively.

The Company expects to recognize the deferred revenue of $ 3,222 after December 31, 2025.

During the three months ended

June 30, 2021 and 2020, the Company recognized revenue of $ 9,370 and $ 10,087 that was recorded as deferred revenue at the beginning of

the respective year.

During the six months ended June 30, 2021 and 2020, the Company recognized revenue of $ 26,649 and $ 24,074 that was

recorded as deferred revenue at the beginning of the respective year.

September 30, 2021 and 2020, the Company recognized revenue of $ 4,728 and $ 8,102 that was recorded as deferred revenue at the beginning

of the respective year.

During the nine months ended September 30, 2021 and 2020, the Company recognized revenue of $ 31,377 and $ 32,176

that was recorded as deferred revenue at the beginning of the respective year.

Contract Costs

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over the service period.

The capitalized costs to

fulfill a contract were $ 242 and $ 279 at June 30, 2021 and December 31, 2020, respectively, and are recorded in prepaid expenses and other

assets in the condensed consolidated balance sheets.

For the three months ended June 30, 2021 and 2020, the Company recognized expenses

of $ 51 and $ 70 related to capitalized costs to fulfill a contract, respectively.

For the six months ended June 30, 2021 and 2020, the

Company recognized expenses of $ 109 and $ 142 related to capitalized costs to fulfill a contract, respectively.

There were no significant

impairment charges recognized in relation to these capitalized costs during the three and six months ended June 30, 2021 and 2020.

Remaining Performance Obligations and

Revenue Recognized from Past Performance

The Company does not disclose

information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less.

The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration

exceeding one year was not material at June 30, 2021.

Corporate finance and investment banking fees and retail liquidation engagement

fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded

as the fees are considered variable and not included in the transaction price at June 30, 2021.

NOTE 11— INCOME TAXES

The Company’s effective

income tax rate was a provision of 26.1 % and benefit of 24.2 % for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, the

Company had federal net operating loss carryforwards of $ 60,422 and state net operating loss carryforwards of $ 72,058 .

The Company’s

federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2031 through December 31, 2038.

net operating loss carryforwards will expire in the tax years commencing in December 31, 2025.

The Company establishes a

valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred

tax assets will not be realized.

Tax benefits of operating loss, capital loss and tax credit carryforwards are evaluated on an ongoing

basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances.

The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382.

the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s

actual taxable income.

As of June 30, 2021, the Company believes that the existing net operating loss carryforwards will be utilized in

future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient

to realize its deferred tax assets and has not provided a valuation allowance.

The Company does not believe that it is more likely than

not that the Company will be able to utilize the benefits related to capital loss carryforwards and has provided a valuation allowance

in the amount of $ 61,315 against these deferred tax assets.

The Company files income

tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions.

The Company is currently under

audit by certain federal, state and local, and foreign tax authorities.

capitalized costs to fulfill a contract were $ 917 and $ 279 as of September 30, 2021 and December 31, 2020, respectively, and are recorded

in prepaid expenses and other assets in the condensed consolidated balance sheets.

For the three months ended September 30, 2021 and

2020, the Company recognized expenses of $ 324 and $ 68 related to capitalized costs to fulfill a contract, respectively.

months ended September 30, 2021 and 2020, the Company recognized expenses of $ 433 and $ 210 related to capitalized costs to fulfill a

contract, respectively.

There were no significant impairment charges recognized in relation to these capitalized costs during the three

and nine months ended September 30, 2021 and 2020.

Performance Obligations and Revenue Recognized from Past Performance

Company does not disclose information about remaining performance obligations pertaining to contracts that have an original expected

duration of one year or less.

The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations

with an original expected duration exceeding one year was not material as of September 30, 2021.

Corporate finance and investment banking

fees and retail liquidation engagement fees that are contingent upon completion of a specific milestone and fees associated with certain

distribution services are also excluded as the fees are considered variable and not included in the transaction price as of September

12 — INCOME TAXES

Company’s effective income tax rate was a provision of 26.8 % and 29.4 % for the nine months ended September 30, 2021 and 2020,

respectively.

of September 30, 2021, the Company had federal net operating loss carryforwards of $ 60,422 and state net operating loss carryforwards

of $ 72,058 .

The Company’s federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2031

through December 31, 2038.

The state net operating loss carryforwards will expire in the tax years commencing in December 31, 2025.

Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion

or all of the deferred tax assets will not be realized.

Tax benefits of operating loss, capital loss and tax credit carryforwards are

evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period,

and other circumstances.

The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue

Code Section 382.

Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years

depending on the Company’s actual taxable income.

As of September 30, 2021, the Company believes that the existing net operating

loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future

taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance.

The Company does not

believe that it is more likely than not that the Company will be able to utilize the benefits related to capital loss carryforwards and

has provided a valuation allowance in the amount of $ 61,315 against these deferred tax assets.

Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions.

is currently under audit by certain federal, state and local, and foreign tax authorities.

The audits are in varying stages of completion.

The Company evaluates

its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities.

Uncertain tax positions

are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case

law developments and closing of statutes of limitations.

Such adjustments are reflected in the provision for income taxes, as appropriate.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December

31, 2017 to 2020.

NOTE 12— EARNINGS PER SHARE

The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities.

Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress

of tax audits, case law developments and closing of statutes of limitations.

Such adjustments are reflected in the provision for income

taxes, as appropriate.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the

calendar years ended December 31, 2017 to 2020.

13 — EARNINGS PER SHARE

Basic earnings per share

3 unchanged sentences

potential common shares outstanding during the period.

Securities that could potentially dilute basic net income per share in the future

that were not included in the computation of diluted net income per share were 936,727 and 1,365,738 for the three months ended June 30,

2021 and 2020, respectively and 832,360 and 1,592,958 for the six months ended June 30, 2021 and 2020, respectively, because to do so

would have been anti-dilutive.

Basic and diluted earnings per share were calculated

Remeasurements to the carrying value of

the redeemable noncontrolling interests in equity of subsidiaries are not deemed to be a dividend (see Note 2 (p)).

According to ASC “Topic

Distinguishing Liabilities from Equity,” there is no impact on earnings per share in the computation of basic and diluted earnings

per share to common shareholders for changes in the carrying value of the redeemable noncontrolling interests in equity, when such

changes in carrying value which in substance approximates fair value.

that could potentially dilute basic net income per share in the future that were not included in the computation of diluted net income

per share were 1,069,184 and 1,059,919 for the three months ended September 30, 2021 and 2020, respectively and 911,302 and 1,212,563

for the nine months ended September 30, 2021 and 2020, respectively, because to do so would have been anti-dilutive.

and diluted earnings per share were calculated as follows:

Three Months Ended

Six Months Ended

Net income (loss) attributable to B.

Nine Months Ended

September 30,

Net income attributable to B.

Riley Financial, Inc.

Preferred stock dividends

Net income (loss) applicable to common shareholders

Net income applicable to common shareholders

Weighted average common shares outstanding:

1 unchanged sentence

Restricted stock units and warrants

Basic income (loss) per common share

Diluted income (loss) per common share

NOTE 13 — COMMITMENTS AND

CONTINGENCIES

(a) Legal Matters

The Company is subject to

certain legal and other claims that arise in the ordinary course of its business.

In particular, the Company and its subsidiaries are

named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including

lawsuits, arbitration claims, class actions, and regulatory matters.

Some of these claims seek substantial compensatory, punitive, or

indeterminate damages.

The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental

and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties,

injunctions, and other relief.

In view of the number and diversity of claims against the Company, the number of jurisdictions in which

litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state

with certainty what the eventual outcome of pending litigation or other claims will be.

Basic income per common share

Diluted income per common share

14 — COMMITMENTS AND CONTINGENCIES

Legal Matters

Company is subject to certain legal and other claims that arise in the ordinary course of its business.

In particular, the Company and

its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business

activities, including lawsuits, arbitration claims, class actions, and regulatory matters.

Some of these claims seek substantial compensatory,

punitive, or indeterminate damages.

The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings

by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements,

fines, penalties, injunctions, and other relief.

In view of the number and diversity of claims against the Company, the number of jurisdictions

in which litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot

state with certainty what the eventual outcome of pending litigation or other claims will be.

Notwithstanding this uncertainty, the Company

does not believe that the results of these claims are likely to have a material effect on its financial position or results of operations.

On January 5, 2017, complaints

filed in November 2015 and May 2016 naming MLV & Co.

(“MLV”) and National Securities Corporation, each an indirect

broker-dealer subsidiary of the Company, as defendants in putative class action lawsuits alleging claims under the Securities Act, in

connection with the offerings of Miller Energy Resources, Inc.

(“Miller”), have been consolidated.

The Consolidated Complaint,

styled Gaynor v.

Miller et al., is pending in the Circuit Court for Morgan County, Tennessee, and, like its predecessor complaints, continues

to allege claims under Sections 11 and 12 of the Securities Act against nine underwriters for alleged material misrepresentations and

omissions in the registration statement and prospectuses issued in connection with six offerings (February 13, 2013;

January 5, 2017, complaints filed in November 2015 and May 2016 naming MLV & Co.

(“MLV”) and National Securities

Corporation (“NSC”), each an indirect broker-dealer subsidiary of the Company, as defendants in putative class action lawsuits

alleging claims under the Securities Act, in connection with the offerings of Miller Energy Resources, Inc., have been consolidated.

The Consolidated Complaint, styled Gaynor v.

Miller et al., is pending in the Circuit Court for Morgan County, Tennessee, and, like its

predecessor complaints, continues to allege claims under Sections 11 and 12 of the Securities Act against nine underwriters for alleged

material misrepresentations and omissions in the registration statement and prospectuses issued in connection with six offerings (February

June 28, 2013;

September 26, 2013;

October 17, 2013 (as to MLV only) and August 21, 2014) with an alleged aggregate offering price of approximately

A Court ordered mediation before a federal magistrate took place on August 6, 2019, with no resolution.

In December 2019, the

Court remanded the case to state court.

In July 2020, the Company agreed to settle this matter, subject to court approval which is expected

An accrual for the settlement is included in the accompanying condensed consolidated financial statements.

July 3, 2019, a lawsuit was filed against National Securities Corporation, (“NSC”) National Asset Management, Inc., National,

National’s current board members and certain former board members, certain officers of National, John Does 1–10, and the

National as a nominal defendant, in the United States District Court for the Southern District of New York, captioned Kay Johnson

National Securities Corporation, et al.

1:19-cv-06197-LTS.

The complaint presents three purported derivative causes

of action on behalf of the Company, and five causes of action by the plaintiff directly.

As part of the derivative claims, the complaint

generally alleges that certain of the individual defendants failed to establish and maintain adequate internal controls to ensure that

the Board acted in accordance with its fiduciary duties to prevent and uncover alleged legal and regulatory misconduct and wrongdoing

on the part of a National officer.

As part of its claims brought directly by the plaintiff, the complaint generally alleges that certain

individual and corporate defendants wrongfully terminated the employment of the plaintiff in violation of the Dodd-Frank Act and applicable

common law, or conspired to do so.

The complaint further alleges that certain corporate defendants violated the Equal Pay Act with regards

to the plaintiff’s compensation.

The complaint seeks monetary damages in favor of the Company, an order directing the Company’s

board members to take actions to enhance the Company’s governance, compensatory and punitive damages in favor of the plaintiff,

and attorneys’ fees and costs.

On February 2, 2020, the plaintiff filed an amended complaint presenting additional causes of action.

The Company has notified its insurer of the lawsuit and believes it has valid defenses to the asserted claims of the complaint.

18, 2020, the defendants filed a motion to dismiss the amended complaint.

The plaintiff filed an opposition to the defendants’

motion to dismiss on April 15, 2020, and the defendants filed a reply in further support of the motion to dismiss on May 6, 2020.

August 20, 2020, the parties entered into mediation with a private mediator in an attempt to settle the action and, on January 15, 2021,

as a result of the mediation, a settlement was reached.

In March 2021, a settlement agreement and release was executed by the parties

and all claims have been dismissed.

The New York Department of

Financial Services (the “Department”) completed its investigation of NSC’s compliance with the Department’s Cybersecurity

Requirements for Financial Services Companies (the “Regulations”).

The Regulations establish standards for the cybersecurity

programs of entities the Department licenses or otherwise regulates, including NSC.

On April 14, 2021, NSC paid the Department a fine

of $ 3,000 as a result of the Department’s finding that NSC violated certain of the Regulations.

NSC is a respondent in several

Financial Industry Regulatory Authority (“FINRA”) arbitration proceedings filed by investors alleging claims in connection

October 17, 2013 (as to MLV only) and August 21, 2014) with an alleged aggregate

offering price of approximately $ 151,000 .

A Court ordered mediation before a federal magistrate took place on August 6, 2019, with no

In December 2019, the Court remanded the case to state court.

In July 2020, the Company agreed to settle this matter, subject

to court approval which is expected in 2021.

An accrual for the settlement is included in the accompanying condensed consolidated

financial statements.

is a respondent in several Financial Industry Regulatory Authority arbitration proceedings filed by investors alleging claims in connection

with equity investments in GPB Capital Holdings, LLC (“GPB”) involving matters prior to the Company’s acquisition of

6 unchanged sentences

Department of Justice indicted

certain individuals affiliated with GPB for material misrepresentations and omissions under the federal securities laws with respect to

funds managed by GPB.

certain individuals affiliated with GPB for material misrepresentations and omissions under the federal securities laws with respect

to funds managed by GPB.

At the present time, the Company continues to vigorously defend these actions and is not able to determine

2 unchanged sentences

Company and its financial condition.

(b) Babcock &

Wilcox Commitments and Guarantees

On June 30, 2021, the Company agreed to guaranty (the “B.

Guaranty”) up to $ 110,000 of obligations that Babcock & Wilcox Enterprises, Inc.

(“B&W”) may owe to providers

of cash collateral pledged in connection with B&W’s 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 a reimbursement agreement

with respect to such cash collateral.

B&W will pay the Company $ 935 per annum in connection with the B.

Babcock & Wilcox Commitments and Guarantees

June 30, 2021, the Company agreed to guaranty (the “B.

Riley Guaranty”) up to $ 110,000 of obligations that Babcock &

Wilcox Enterprises, Inc.

(“B&W”) may owe to providers of cash collateral pledged in connection with B&W’s debt

Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the

acceleration of B&W’s obligations under a reimbursement agreement with respect to such cash collateral.

B&W will pay the

Company $ 935 per annum in connection with the B.

Riley Guaranty.

agreed to reimburse the Company to the extent the B.

Riley Guaranty is called upon.

On 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 $ 29,970 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 fees in the amount of $ 600 on August 26, 2020.

On May 14, 2020, the Company

entered into an agreement to provide B&W future commitments to loan B&W up to $ 40,000 at various dates starting in November

2020, of which, at June 30, 2021, no amounts remain available.

The Company provided a limited guaranty of B&W’s obligations

under B&W’s credit facility with Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (the “BOA

Credit Facility”), which was paid off and the Company’s obligations relating thereto terminated as of June 30, 2021, as more

fully described in Note 16 - Related Party Transactions

On June 19, 2020, the Company

participated in a loan facility agreement to provide a total loan commitment up to 33,000 EUROS to a retailer in Europe.

Company made an initial funding of 6,600 EUROS in July 2020.

No additional borrowings have been made since the initial funding, leaving

unused future commitments available of up to 26,400 EUROS as of June 30, 2021 and December 31, 2020.

At June 30, 2021, the Company had an outstanding commitment to purchase

a loan pursuant to an assignment agreement with a client in the amount of $ 77,477 that was funded on July 2, 2021.

Simultaneously with

the funding of the loan on July 2, 2021, the Company received a principal payment on the loan for $27,477 reducing the loans receivable

balance to $ 50,000 .

NOTE 14— SHARE-BASED PAYMENTS

B&W has agreed to reimburse the Company to the extent the B.

Guaranty is called upon.

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 $ 29,970 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 fees in the amount of $ 600 on August 26, 2020.

Other Commitments

June 19, 2020, the Company participated in a loan facility agreement to provide a total loan commitment up to 33,000 EUROS

to a retailer in Europe.

The Company made an initial funding of 6,600 EUROS in July 2020.

No additional borrowings have been

made since the initial funding, leaving unused future commitments available of up to 26,400 EUROS as of September 30, 2021 and December

the normal course of business, the Company enters into commitments to its clients in connection with capital raising transactions, such

as firm commitment underwritings and equity lines of credit.

These commitments require the Company to purchase securities at a specified

Securities underwriting exposes the Company to market and credit risk, primarily in the event that, for any reason, securities

purchased by the Company cannot be distributed at the anticipated price.

15 — SHARE-BASED PAYMENTS

Employee Stock Incentive Plans

compensation expense for restricted stock units under the Company’s Amended and Restated 2009 Stock Incentive Plan (the “Plan”)

was $ 8,493 and $ 4,109 for the three months ended June 30, 2021 and 2020, respectively and $ 13,792 and $ 9,265 for the six months

ended June 30, 2021 and 2020, respectively.

During the six months ended June 30, 2021, in connection with employee stock incentive

plans, the Company granted 365,050 restricted stock units with a grant date fair value of $ 25,534 and 1,100,000 performance

based restricted stock units with a grant date fair value of $ 40,876 .

The restricted stock units generally vest over a period of

one to three years based on continued service.

Performance based restricted stock units generally vest based on both the employee’s

continued service and the achievement of a set threshold of the Company’s common stock price, as defined in the grant, during the

three-year period following the grant.

In determining the fair value of restricted stock units on the grant date, the fair value

is adjusted for (a) estimated forfeitures, (b) expected dividends based on historical patterns and the Company’s anticipated dividend

payments over the expected holding period and (c) the risk-free interest rate based on U.S.

Treasuries for a maturity matching the expected

holding period.

was $ 9,243 and $ 4,680 for the three months ended September 30, 2021 and 2020, respectively, and $ 23,035 and $ 13,945 for the

nine months ended September 30, 2021 and 2020, respectively.

During the nine months ended September 30, 2021, in connection with

employee stock incentive plans, the Company granted 423,660 restricted stock units with a grant date fair value of $ 29,439

and 1,100,000 performance based restricted stock units with a grant date fair value of $ 40,876 .

The restricted stock units generally

vest over a period of one to three years based on continued service.

Performance based restricted stock units generally vest based on

both the employee’s continued service and the achievement of a set threshold of the Company’s common stock price, as defined

in the grant, during the three-year period following the grant.

In determining the fair value of restricted stock units on the

grant date, the fair value is adjusted for (a) estimated forfeitures, (b) expected dividends based on historical patterns and the Company’s

anticipated dividend payments over the expected holding period and (c) the risk-free interest rate based on U.S.

Treasuries for a maturity

matching the expected holding period.

Employee Stock Purchase Plan

connection with the Company’s Purchase Plan, share based compensation was $ 115 and $ 59 for the three months ended June 30, 2021

and 2020, respectively and $ 342 and $ 224 for the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021, there were 471,973

shares reserved for issuance under the Purchase Plan.

October 30, 2018, the Company’s Board of Directors authorized a share repurchase program of up to $ 50,000 of its outstanding

common shares.

connection with the Company’s Purchase Plan, share based compensation was $ 132 and $ 96 for the three months ended September 30,

2021 and 2020, respectively, and $ 474 and $ 320 for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30,

2021, there were 471,973 shares reserved for issuance under the Purchase Plan.

October 30, 2018, the Company’s Board of Directors has authorized annual share repurchase programs of up to $ 50,000 of

its outstanding common shares.

All share repurchases were effected on the open market at prevailing market prices or in privately negotiated transactions.

The share repurchase program expired on October 31, 2019.

On both October 31, 2019 and 2020, the Company’s Board of Directors

authorized share repurchase programs of up to $ 50,000 of its outstanding common shares.

During the year ended December 31, 2020,

the Company repurchased 2,165,383 shares of common stock for $ 48,248 .

The shares repurchased under the program were retired.

During the six months ended June 30, 2021, the Company did not repurchase any shares of its common stock.

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 $ 64,713 after underwriting fees and costs.

During the year ended December 31, 2020, the Company repurchased 2,165,383 shares of common stock for $ 48,248 .

nine months ended September 30, 2021, the Company repurchased 44,650 shares of its common stock for $ 2,656 .

The shares repurchased

under the program were retired.

On October 25, 2021, the share repurchase program was reauthorized by the Board of Directors for share

repurchases up to $ 50,000 of its outstanding common shares and expires in October 2022.

On 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 per share for net proceeds of approximately $ 64,713 after underwriting fees

Preferred Stock

the six months ended June 30, 2021, the Company issued 76,417 depository shares of the Series A Preferred Stock.

There were 2,657 and

2,581 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.

Total liquidation preference for the

Series A Preferred Stock at June 30, 2021 and December 31, 2020, was $ 66,430 and $ 64,519 , respectively.

Dividends on the Series A preferred

paid during the six months ended June 30, 2021, were $ 0.859375 per depository share.

the six months ended June 30, 2021, the Company issued 228,477 depository shares of the Series B Preferred Stock.

the nine months ended September 30, 2021, the Company issued 207,599 depository shares of the Series A Preferred Stock.

There were 2,788

and 1,390 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.

Total liquidation preference for

the Series B Preferred Stock at June 30, 2021 and December 31, 2020, was $ 40,452 and $ 34,741 , respectively.

Dividends on the Series B

preferred paid during the six months ended June 30, 2021, were $ 0.921875 per depository share.

NOTE 15— NET CAPITAL

Riley Securities (“BRS”),

Riley Wealth Management (“BRWM”), and National Securities Corporation (“NSC”), the Company’s broker-dealer

subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory Authority, Inc.

The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance

of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1.

and 2,581 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.

Total liquidation preference

for the Series A Preferred Stock as of September 30, 2021 and December 31, 2020, was $ 69,709 and $ 64,519 , respectively.

the Series A preferred paid during the nine months ended September 30, 2021, were $ 0.4296875 per depository share.

the nine months ended September 30, 2021, the Company issued 307,148 depository shares of the Series B Preferred Stock.

There were 1,697

and 1,390 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.

Total liquidation preference

for the Series B Preferred Stock as of September 30, 2021 and December 31, 2020, was $ 42,419 and $ 34,741 , respectively.

the Series B preferred paid during the nine months ended September 30, 2021, were $ 0.4609375 per depository share.

16 — NET CAPITAL REQUIREMENTS

Riley Securities (“BRS”), B.

Riley Wealth Management (“BRWM”), and National Securities Corporation (“NSC”),

the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory

Authority, Inc.

The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule

15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both

as defined, shall not exceed 15 to 1.

As such, they are subject to the minimum net capital requirements promulgated by the SEC.

As of June 30, 2021, BRS had net capital of

$ 329,063 , which was $ 324,101 in excess of required minimum net capital of $ 4,962 ;

BRWM had net capital of $ 10,073 , which was $ 9,328 in

excess of required minimum net capital of $ 745 ;

NSC had net capital of $ 7,162 which was $ 6,162 in excess of required minimum net capital

Winslow, Evans & Crocker, Inc (“WEC”), a subsidiary of National also subject to Rule 15c3-1, had net capital

of $ 2,599 which was $ 2,460 in excess of required minimum net capital of $ 139 .

NOTE 16— RELATED PARTY

At June 30, 2021, amounts

due from related parties of $ 734 included $ 1 from GACP I, L.P.

(“GACP I”) and $ 536 from GACP II, L.P.

II”) for management fees and other operating expenses, and $ 197 due from CA Global Partners (“CA Global”) for operating

expenses related to wholesale and industrial liquidation engagements managed by CA Global on behalf of GA Global Partners.

31, 2020, amounts due from related parties of $ 986 included $ 9 from GACP I, L.P.

(“GACP I”) and $ 544 from GACP

September 30, 2021, BRS had net capital of $ 367,406 , which was $ 360,308 in excess of required minimum net capital of $ 7,098 ;

net capital of $ 10,648 , which was $ 9,957 in excess of required minimum net capital of $ 691 ;

NSC had net capital of $ 9,680 which was $ 8,680

in excess of required minimum net capital of $ 1,000 .

17 — RELATED PARTY TRANSACTIONS

of September 30, 2021, amounts due from related parties of $ 1,513 included $ 1 from GACP I, L.P.

(“GACP I”) and $ 1,040 from

GACP II, L.P.

(“GACP II”) for management fees and other operating expenses, and $ 472 due from CA Global Partners (“CA

1 unchanged sentence

Global Partners.

At June 30, 2021, the Company

had sold loan participations to BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of its

subsidiaries, in the amount of $ 1,975 , and recorded interest expense of $ 133 and $ 479 during the three and six months ended June 30, 2021

related to BRCPOF’s loan participations, respectively.

The Company also recorded commission income of $ 93 and $ 422 from

introducing trades on behalf of BRCPOF during the three and six months ended June 30, 2021, respectively.

Our executive officers

and members of our board of directors have a 65.6 % financial interest, which includes a financial interest of Bryant Riley, our Co-Chief

Executive Officer, of 52.8 % in the BRCPOF at June 30, 2021.

At June 30, 2021 and December 31, 2020, the Company had outstanding

loan to participations to BRCPOF in the amount of $ 1,975 and $ 14,816 , respectively.

In June 2020, the Company entered into an investment advisory services

agreement with Whitehawk Capital Partners, L.P.

(“Whitehawk”), a limited partnership controlled by Mr.

Ahn, who is the

brother of Phil Ahn, the Company’s Chief Financial Officer and Chief Operating Officer.

Whitehawk has agreed to provide investment

advisory services for GACP I and GACP II.

During the three and six months ended June 30, 2021, management fees paid for investment

advisory services by Whitehawk was $ 236 and $ 1,446 , respectively.

The Company periodically

participates in loans and financing arrangements for which the Company has an equity ownership and representation on the board of directors

(or similar governing body).

The Company may also provide consulting services or investment banking services to raise capital for these

As of December 31, 2020, amounts due from related parties of $ 986 included $ 9 from GACP I and $ 544 from GACP II for management fees and other operating expenses, and $ 433 due

from CA Global for operating expenses related to wholesale and industrial liquidation engagements

managed by CA Global on behalf of GA Global Partners.

For the three and nine months

ended September 30, 2021, the Company recorded interest expense of $ 46 and $ 525 , respectively, related to loan participations sold to

BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of its subsidiaries.

The Company also

recorded commission income of $ 131 and $ 553 from introducing trades on behalf of BRCPOF during the three and nine months ended September

30, 2021, respectively.

Our executive officers and members of our board of directors have a 50.8 % financial interest, which

includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 35.5 % in the BRCPOF as of September 30, 2021.

Company had no outstanding loan participations to BRCPOF as of September 30, 2021 and had $ 14,816 outstanding as of December 31,

June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P.

(“Whitehawk”),

a limited partnership controlled by Mr.

Ahn, who is the brother of Phil Ahn, the Company’s Chief Financial Officer and Chief

Operating Officer.

Whitehawk has agreed to provide investment advisory services for GACP I and GACP II.

During the three and nine

months ended September 30, 2021, management fees paid for investment advisory services by Whitehawk was $ 142 and $ 1,588 , respectively.

Company periodically participates in loans and financing arrangements for which the Company has an equity ownership and representation

on the board of directors (or similar governing body).

The Company may also provide consulting services or investment banking services

to raise capital for these companies.

These transactions can be summarized as follows:

February 23, 2021, the Company earned $ 3,366 of underwriting fees from the initial public offering of B.

Riley Principal 150 Merger

Corp, (“BRPM 150”), which was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock

purchase, reorganization or similar business combination with one or more businesses (the “BRPM 150 IPO”).

has also agreed to loan BRPM 150 up to $ 300 for operating expenses.

The loan is interest free and there were no amounts outstanding

at December 31, 2020.

Subsequent to December 31, 2020, the Company loaned BRPM 150 $ 40 which was repaid in full on March 1, 2021,

using proceeds from the BRPM 150 IPO.

During the three months ended

June 30, 2021, the Company earned $ 3,337 of underwriting fees from the initial public offering of B.

Riley Principal 250 Merger Corp,

(“BRPM 250”), which was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase,

reorganization or similar business combination with one or more businesses (the “BRPM 250 IPO”).

Company has also agreed to loan BRPM 250 up to $ 300 for operating expenses.

The loan is interest free and there were no amounts outstanding

at December 31, 2020.

Subsequent to December 31, 2020, the Company loaned BRPM 250 $ 100 which was repaid in full on May 17, 2021,

using proceeds from the BRPM 250 initial public offering.

On June 30, 2021, the Company and EF Hutton, division of Benchmark

Investments, LLC (the “Sales Agents”), as sales agents, entered into an At Market Issuance Sales Agreement (the “Sonim

Sales Agreement”) with Sonim Technologies, Inc.

(“Sonim”) to sell shares of Sonim’s common stock, $ 0.001 par value

per share (the “Sonim Common Stock”), having an aggregate offering price of up to $ 10,000 (the “Sonim Shares”)

through the Sales Agents.

Under the Sonim Sales Agreement, the Sales Agents will be entitled to compensation of up to 3.0 % of the gross

proceeds from each sale of Sonim Shares sold through the Sales Agents.

Babcock and Wilcox

The Company had a last-out term loan receivable due from B&W that

was included in loans receivable, at fair value with a fair value of $ 176,191 at December 31, 2020.

On June 1, 2021 the Company agreed

to settle the outstanding balance and accrued interest on the last-out term loan receivable in exchange for $ 848 and 2,916,880 shares

of B&W’s 7.75 % Series A Cumulative Perpetual Preferred Stock.

Additionally, the Company holds senior notes from B&W with

a fair value of $ 21,415 at June 30, 2021.

On January 31, 2020, the Company provided B&W with an additional

$ 30,000 of last-out term loans pursuant to amendments to B&W’s BOA Credit Facility.

On May 14, 2020, the Company provided B&W

with another $ 30,000 of last-out term loans pursuant to a further amendment to the BOA Credit Facility which also included future commitments

for the Company to loan B&W $ 40,000 at various dates starting in November 2020 and a limited guaranty of B&W’s obligations

under the amended BOA Credit Facility, (the “Amendment Transactions”).

In November 2020, an additional $ 10,000 was funded

under the Amendment Transactions.

As part of the Amendment Transactions, the Company entered into the following agreements:

(i) an Amendment

and Restatement Agreement, dated as of May 14, 2020, among B&W, Bank of America, N.A., as Administrative Agent, and the other lenders

party thereto, including us;

(ii) a Fee Letter, dated as of May 14, 2020, among B&W and us;

(iii) a Fee and Interest Equitization

Agreement, dated May 14, 2020, between B&W and us;

(iv) a Termination Agreement, dated as of May 14, 2020, among us, B&W and acknowledged

by Bank of America, N.A.

with respect to the Backstop Commitment Letter described below (the “Termination Agreement”);

(v) a Limited Guaranty Agreement, dated as of May 14, 2020, among B&W, Bank of America, N.A and the Company.

On June 30, 2021, the

amended BOA Credit Facility was paid off and the Company’s obligations relating thereto terminated.

On February 12, 2021, B&W issued the Company an aggregate $ 35,000 in

principal amount of 8.125 % senior notes due 2026 in consideration for the cancellation or deemed prepayment of $ 35,000 principal

amount of Tranche A Term Loans made by the Company to B&W pursuant to the new BOA Credit Facility.

During the three and six months ended June 30, 2021, the Company earned

$ 1,710 and $ 12,348 , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s

capital raising activities.

One of the Company’s

wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the Company to serve as the

Chief Executive Officer of B&W until November 30, 2020 (the “Executive Consulting Agreement”), unless terminated by either

party with thirty days written notice.

Company had a last-out term loan receivable due from B&W that is included in loans receivable, at fair value with a fair value of

$ 176,191 as of December 31, 2020.

On June 1, 2021 the Company agreed to settle the outstanding balance and accrued interest on the

last-out term loan receivable in exchange for $ 848 and 2,916,880 shares of B&W’s 7.75 % Series A Cumulative Perpetual Preferred

the three and nine months ended September 30, 2021, the Company earned $ 401 and $ 12,749 , respectively, of underwriting and financial

advisory and other fees from B&W in connection with B&W’s capital raising activities.

of the Company’s wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the

Company to serve as the Chief Executive Officer of B&W until November 30, 2020 (the “Executive Consulting Agreement”),

unless terminated by either party with thirty days written notice.

The agreement was extended through December 31, 2023.

Under this agreement, fees for services provided

are $ 750 per annum, paid monthly.

In addition, subject to the achievement of certain performance objectives as determined by B&W’s

compensation committee of the board, a bonus or bonuses may also be earned and payable to the Company.

The Company is also a party

to an Indemnity Rider with B&W, and the B.

Riley Guaranty, each as disclosed above in Note 13 – Commitments and Contingencies.

The Company has loans receivable

due from the Maven, Inc.

(“Maven”) that are included in loans receivable, at fair value of $ 60,491 and $ 56,552 at June

30, 2021 and December 31, 2020, respectively.

Interest on these loans is payable at 10 % per annum with maturity dates through December

On October 28, 2020, in connection

with a capital raise by Maven, the Company converted $ 3,367 of Maven notes receivable into 3,367 shares of Maven Series

K Preferred stock.

In November 2020, the Company earned $ 441 of financial advisory fees from Maven in connection with providing services

with their capital raising activities.

On December 30, 2020, the Company converted loans receivable with a principal value of $ 9,991 and

accrued but unpaid interest of $ 2,698 into 38,376,090 shares of Maven common stock at an average price of $ 0.33 per share.

The Company has a loan receivable due from Lingo Management LLC (“Lingo”)

included in loans receivable, at fair value with a fair value of $ 56,335 and $ 55,066 at June 30, 2021 and December 31, 2020, respectively.

The term loan bears interest at 16.0 % per annum with a maturity date of December 1, 2022.

The term loan has a conversion feature

under which $ 17,500 will convert to additional equity ownership upon receipt of certain regulatory approval.

If those regulatory approvals

are received, the conversion would increase the Company’s ownership interest in Lingo from 40 % to 80 %.

On March 10, 2021,

the Company also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo) in the amount of $ 1,100 .

The note bears interest at 6 % per annum with a maturity date of March 31, 2022.

The Company has a loan receivable due from bebe stores, Inc.

in loans receivable, at fair value with a fair value of $ 7,900 and $ 8,000 at June 30, 2021 and December 31, 2020, respectively.

term loan bears interest at 16.0 % per annum with a maturity date of November 10, 2021.

The Company has loans receivable due from Dash Holding Company, Inc.

with a fair value of $ 3,020 and Rumble On, Inc.

with a fair value of $ 2,568 included in loans receivable, at fair value at June 30, 2021.

On March 2, 2021, the Company purchased a $ 2,400 minority equity interest in Dash Medical Holdings, LLC (“Dash”).

Company also loaned Dash Holding Company, Inc.

(together with Dash Medical Holdings, LLC, “Dash”), $ 3,000 pursuant to

that certain Subordinated Working Capital Promissory Note (the “Note”) and Subordination Agreement entered into on March 2,

The Note bears interest at 12.0 % per annum with a maturity date of March 1, 2027.

Dash is controlled by a member of our Board of

On March 12, 2021, the Company loaned Rumble On, Inc.

$ 2,500 , a company in which two of the Company’s senior executives

serve on the board of directors, which bears interest at 12 % and is due on September 30, 2021.

During the six months ended

June 30, 2021, the Company earned $ 2,957 and $ 1,234 of underwriting and financial advisory and other fees from Rumble On, Inc and

Applied Blockchain, Inc, a company in which a senior executive of the Company and the spouse of a senior executive of the Company serve

on the board of directors and in which employees and executives of the Company are investors, respectively, in connection with capital

raising activities.

NOTE 17— BUSINESS SEGMENTS

The Company’s business

is classified into the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment,

Principal Investments — United Online and magicJack segment, and Brands segment.

These reportable segments are all distinct businesses,

each with a different marketing strategy and management structure.

As a result of the National

acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational management changes

for its wealth management business.

Under the new structure, the wealth management business previously reported in the Capital Markets

segment are now reported in the Wealth Management segment.

Under the new structure, there is a new segment for Wealth Management.

In conjunction

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

The following is a summary

of certain financial data for each of the Company’s reportable segments:

Under this agreement,

fees for services provided are $ 750 per annum, paid monthly.

In addition, subject to the achievement of certain performance objectives

as determined by B&W’s compensation committee of the board, a bonus or bonuses may also be earned and payable to the Company.

Company is also a party to an Indemnity Rider with B&W, and the B.

Riley Guaranty, each as disclosed above in Note 14 – Commitments

and Contingencies.

Company has loans receivable due from the Maven, Inc.

that are included in loans receivable, at fair value of $ 62,036

and $ 56,552 as of September 30, 2021 and December 31, 2020, respectively.

Interest on these loans is payable at 10 % per annum

with maturity dates through December 2022.

Company has a loan receivable due from Lingo Management LLC (“Lingo”) included in loans receivable, at fair value with a

fair value of $ 55,990 and $ 55,066 as of September 30, 2021 and December 31, 2020, respectively.

The term loan bears interest at 16.0 %

per annum with a maturity date of December 1, 2022.

The term loan has a conversion feature under which $ 17,500 will convert to additional

equity ownership upon receipt of certain regulatory approval.

If those regulatory approvals are received, the conversion would increase

the Company’s ownership interest in Lingo from 40 % to 80 %.

On August 1, 2021, the credit agreement was amended to allow

the borrower to elect that a portion of interest payable be payable in kind.

On March 10, 2021, the Company

also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo) in the amount of $ 1,100 .

The note bears

interest at 6 % per annum with a maturity date of March 31, 2022.

Company had a loan receivable due from bebe stores, Inc.

included in loans receivable, at fair value with a fair value of $ 8,000 as of

December 31, 2020.

The term loan bore interest at 16.0 % per annum and had a maturity date of November 10, 2021.

The term loan was

paid in full in August 2021.

Solutions, Inc.

August 25, 2021 the Company extended a $ 17,852 promissory note to Charah Solutions, Inc., in which one of the

Company’s senior executives serves on the board of directors.

The promissory note bears interest at 8.0 % per annum with a maturity

date of September 25, 2022 and a 2.5 % commitment fee payable at maturity.

of September 30, 2021, the Company has loans receivable due from other related parties in the amount of $ 4,186 .

Company often provides consulting or investment banking services to raise capital for companies in which the Company has significant

influence through equity ownership, representation on the board of directors (or similar governing body), or both.

During the three and

nine months ended September 30, 2021, the Company earned $ 20,868 and $ 25,059 , respectively, of fees related to these services.

18 — BUSINESS SEGMENTS

Company’s business is classified into the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment,

Financial Consulting segment, Principal Investments — United Online and magicJack segment, and Brands segment.

These reportable

segments are all distinct businesses, each with a different marketing strategy and management structure.

a result of the National acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational

management changes for its wealth management business.

Under the new structure, the wealth management business previously reported in

the Capital Markets segment are now reported in the Wealth Management segment.

Under the new structure, there is a new segment for Wealth

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

following is a summary of certain financial data for each of the Company’s reportable segments:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Capital Markets segment:

Revenues - Services and fees

Trading income and fair value adjustments on loans

Trading income (loss) and fair value adjustments on loans

Interest income - Loans and securities lending

1 unchanged sentence

Selling, general and administrative expenses

Restructuring charge

Interest expense - Securities lending and loan participations sold

7 unchanged sentences

Depreciation and amortization

Segment (loss) income

Segment income

Auction and Liquidation segment:

5 unchanged sentences

Selling, general and administrative expenses

Restructuring charge

Depreciation and amortization

3 unchanged sentences

Selling, general and administrative expenses

Restructuring charge

Depreciation and amortization

11 unchanged sentences

Revenues - Services and fees

Trading loss and fair value adjustments on loans

Total revenues

Selling, general and administrative expenses

5 unchanged sentences

Interest income

Gain on extinguishment of loans

(Loss) income on equity investments

Gain on extinguishment of loans and other

Income (loss) on equity investments

Interest expense

Income (loss) before income taxes

(Provision) benefit for income taxes

Net income (loss)

Net (loss) income attributable to noncontrolling interests

Net income (loss) attributable to B.

Income before income taxes

Provision for income taxes

Net income (loss) income attributable to noncontrolling interests

Net income attributable to B.

Riley Financial, Inc.

Preferred stock dividends

Net income (loss) available to common shareholders

The following table presents

revenues by geographical area:

Net income available to common shareholders

following table presents revenues by geographical area:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Revenues - Services and fees:

5 unchanged sentences

North America

Total Revenues - Services and fees

Total Revenues - Sale of goods

Revenues - Interest income - Loans and securities lending:

3 unchanged sentences

Total Revenues

As of June 30, 2021 and December

31, 2020 long-lived assets, which consist of property and equipment and other assets, of $ 14,447 and $ 11,685 , respectively, were located

in North America.

Segment assets are not reported

to, or used by, the Company's Chief Operating Decision Maker to allocate resources to, or assess performance of, the segments and therefore,

total segment assets have not been disclosed.

of September 30, 2021 and December 31, 2020 long-lived assets, which consist of property and equipment and other assets, of $ 13,720 and

$ 11,685 , respectively, were located in North America.

assets are not reported to, or used by, the Company’s Chief Operating Decision Maker to allocate resources to, or assess performance

of, the segments and therefore, total segment assets have not been disclosed.

NOTE 19 — REVISION OF PRIOR PERIOD FINANCIALS

As disclosed in Note 2(a),

during the three months ended September 30, 2021, the Company identified misstatements related to the consolidation of certain VIE’s,

which primarily resulted in a gross up of the balance sheet to reflect funds held in trust within prepaid expenses and other assets and

the recording of temporary equity.

Although the Company concluded that these misstatements were not material, either individually or in

aggregate, to its current or previously issued consolidated financial statements, the Company has elected to revise its previously issued

consolidated financial statements to correct for these misstatements.

The revision to the accompanying

unaudited condensed consolidated statements of equity and consolidated statements of cash flows are as follows:

Three Months Ended September 30, 2020

As Previously

Statements of Equity

Retained Earnings (Deficit), July 1, 2020

Total Equity, July 1, 2020

Retained Earnings (Deficit), September 30, 2020

Total Equity, September 30, 2020

Nine Months Ended September 30, 2020

As Previously

Statements of Equity

Remeasurement of B.

Riley Principal Merger II

Corporation subsidiary temporary equity

Retained Earnings (Deficit), September 30, 2020

Total Equity, September 30, 2020

Nine Months Ended September 30, 2020

As Previously

Statement of Cash Flows

Cash flows from investing activities:

Purchase of equity investments

Funds received from trust account of subsidiary

Investment of subsidiaries initial public offering proceeds into trust account

$ ( 176,750 )

Net cash used in investing activities

$ ( 126,065 )

Cash flows from financing activities:

Payment for debt issuance and offering costs

Redemption of subsidiary temporary equity and distributions

$ ( 143,750 )

Proceeds from initial public offering of subsidiaries

Net cash provided by financing activities

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 1. Financial Statements