What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-02 · 861 added, 823 removed, 349 unchanged (83% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations.

This report contains forward-looking

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

report contains forward-looking statements.

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

In some cases, you can identify forward-looking

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

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

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

terms or other comparable terminology.

In some cases,

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

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

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

the negative of such terms or other comparable terminology.

These statements are only predictions.

Actual events or results may differ materially.

Although we believe that

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

or achievements.

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

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

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

The following discussion

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

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

Readers are also urged to carefully

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

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

Risk factors that could

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

Actual events or results may differ

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

of activity, performance, or achievements.

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

of the forward-looking statements.

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

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

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

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

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

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

caption “Risk Factors.”

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

to risks related to:

volatility in our revenues and results of operations;

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

changing conditions

in the financial markets;

changing conditions in the financial markets;

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

our exposure to credit risk;

exposure to credit risk;

the short term nature of our engagements;

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

based engagements;

the accuracy of our estimates and valuations of inventory or assets

in “guarantee” based engagements;

competition in the asset management business;

potential losses related to our auction or liquidation engagements;

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

potential losses related to purchase transactions in our

auction and liquidations business;

potential losses related to our auction or

liquidation engagements;

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

potential losses related

to purchase transactions in our auction and liquidations business;

the potential loss of financial institution clients;

potential losses from or illiquidity of our proprietary

potential losses

from or illiquidity of our proprietary investments;

changing economic and market conditions;

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

appraisal or valuation;

potential liability and harm to our reputation

if we were to provide an inaccurate appraisal or valuation;

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

failure to successfully compete in

any of our segments;

failure to successfully compete in any of our segments;

loss of key personnel;

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

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

offering as necessary;

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

our ability to meet future capital requirements;

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

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

our ability to meet future capital

requirements;

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

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

frame expected by management or at all;

the diversion of management time on acquisition- related issues;

the failure of our brand investment portfolio licensees to

pay us royalties;

the failure of our brand investment

portfolio licensees to pay us royalties;

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

We undertake no obligation to publicly

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

Except as otherwise required

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

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

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

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

Riley Financial,

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

Riley Financial, Inc.

and all of its subsidiaries.

Riley Financial, Inc.

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

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

subsidiaries including:

Riley Securities, Inc.

Riley Securities”)

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

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

Riley Securities”) is a leading, full service investment

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

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

Riley Securities, (fka B.

was formed in November 2017 through the merger of B.

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

in June 2017.

Riley FBR) was formed in November 2017 through the merger

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

Riley Wealth Management, Inc.

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

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

Riley Wealth Management was

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

● National Holdings Corporation (“National”)

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

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

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

planning offerings.

Riley Capital Management, LLC, a Securities

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

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

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

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

pursuant to an investment advisory services

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

Riley Advisory Services provides expert witness,

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

Riley Retail Solutions, LLC (fka Great American

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

Riley Real Estate works with real estate owners

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

Riley Wealth Management”) provides comprehensive

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

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

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

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

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

insurance, tax preparation and advisory services.

On February 25, 2021, the Company

completed a tender offer to acquire all of the outstanding shares of National not already

owned by the Company.

The merger expands the Company’s

investment banking, wealth management and financial planning offerings.

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

investment advisor, which includes:

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

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

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

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

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

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

accounting, valuation and appraisal, and operations management services.

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

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

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

estate life cycle.

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

1 unchanged sentence

A core focus of B.

Riley real estate is the restructuring of lease obligations

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

Riley Principal Investments identifies attractive

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

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

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

Riley Principal Investments identifies attractive investment opportunities and aims to deliver

financial and operational improvement to its portfolio companies.

Our team concentrates on

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

Representative transactions include

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

opportunities presented by distressed companies or divisions that exhibit challenging market

Representative transactions include recapitalization, direct equity investment,

debt investment, active minority investment and buyouts.

Riley Principal Investments seeks

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

flow, and therefore, shareholder returns.

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

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

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

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

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

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

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

40% equity interest therein.

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

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

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

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

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

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

(“magicJack”)

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

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

interest therein.

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

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

in the United States.

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

is a global cloud/UC and managed service provider.

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

provides licensing of certain brand trademarks.

BR Brands owns the assets and intellectual

property related to licenses of six brands:

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

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

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

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

During the fourth quarter

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

Under the new structure,

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

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

of the Financial Consulting segment.

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

all periods presented.

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

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

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

In conjunction

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

For financial reporting purposes

we classify our businesses into six operating segments:

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

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

Capital Markets Segment .

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

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

Our corporate finance and investment

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

secondary public offerings, and institutional private placements.

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

including investments in funds managed by our subsidiaries.

Our Capital Markets segment also includes our asset management businesses

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

Wealth Management Segment .

Catherine Malandrino, English Laundry, Joan

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

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

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

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

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

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

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

now reported as part of the Financial Consulting segment.

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

presentation for all periods presented.

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

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

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

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

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

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

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

Markets Segment .

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

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

Our corporate

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

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

In addition, we trade equity securities as a

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

Our Capital Markets segment also includes our

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

Management Segment .

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

We offer comprehensive

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

& liquidity resources, and settlement solutions.

Our wealth management services for individual client services provide investment

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

and wealth transfer.

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

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

Auction and Liquidation Segment.

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

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

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

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

assets dispositions.

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

controlled by us.

Financial Consulting Segment.

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

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

and appraisal services.

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

Principal Investments

- United Online and magicJack Segment.

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

which have been acquired primarily for attractive investment return characteristics.

Currently, this segment includes UOL, through which

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

Brands Segment.

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

is held by BR Brands.

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

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

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

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

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

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

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

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

to acceleration or prepayment.

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

The Revolving

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

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

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

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

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

plans, lending & liquidity resources, and settlement solutions.

Our wealth management services for individual client services provide

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

legacy planning, and wealth transfer.

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

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

segment’s research.

and Liquidation Segment.

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

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

challenges, and distressed circumstances.

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

as well as parts of Europe, Asia, and Australia.

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

liquidations and wholesale and industrial assets dispositions.

Our wholesale and industrial assets dispositions division operates through

limited liability companies that are controlled by us.

Consulting Segment.

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

and private equity firms.

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

management consulting, real estate consulting, and valuation and appraisal services.

Our Financial Consulting segment operates through

limited liability companies that are wholly owned or majority owned by us.

Investments - United Online and magicJack Segment.

Our Principal Investments - United Online and magicJack segment consists

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

Currently, this segment includes UOL,

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

subscription services.

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

of trademarks and is held by BR Brands.

July 26, 2021, we redeemed, in full, $122.8 million aggregate principal amount of our 7.25% Senior Notes due 2027 (“7.25% 2027

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

The total redemption payment included approximately

$2.1 million in accrued interest.

In connection with the full redemption, the 7.25% 2027 Notes under the ticker symbol “RILYG,”

were delisted from NASDAQ .

On August 4, 2021, we issued

$316.3 million of senior notes due in August 2028 (“5.25% 2028 Notes”).

Interest on the 5.25% 2028 Notes is payable quarterly

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 $308.7 million (after underwriting commissions, fees, and other issuance

costs of $7.6 million).

The 5.25% 2028 Notes bear interest at the rate of 5.25% per annum.

September 4, 2021, we redeemed, in full, $137.5 million aggregate principal amount of our 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 accrued and unpaid interest up to, but excluding, the redemption date.

The total redemption payment

included approximately $1.0 million in accrued interest and $2.1 million in premium.

In connection with the full redemption, the 7.375%

2023 Notes under the ticker symbol “RILYH,” were delisted from NASDAQ.

On October 22, 2021, we redeemed, in full, $115.7 million aggregate

principal amount of our 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

In connection with the full redemption,

the 7.25% 2027 Notes were delisted from NASDAQ.

On January 30, 2020, the

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

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

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

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

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

The impact of

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

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

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

and cannot be predicted.

If the financial markets and/or the overall economy continue to be impacted, our results of operations, financial

position and cash flows may be materially adversely affected.

Results of Operations

The following period to period

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

Three Months Ended June 30, 2021 Compared

to Three Months Ended June 30, 2020

Condensed Consolidated Statements of Operations

(Dollars in thousands)

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.

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

(the “COVID-19 outbreak”).

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

rapid increase in exposure globally.

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

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

countries across the world continue to manage repeated waves of the pandemic, including variant strains of COVID-19, amid uneven progress

toward vaccination.

The impact of the COVID-19 outbreak on our results of operations, financial position and cash flows will depend on

future developments, including the duration and spread of the outbreak and related advisories and restrictions and the success of vaccines

in slowing or halting the pandemic.

These developments and the impact of the COVID-19 outbreak on the financial markets and

the overall economy continue to be highly uncertain and cannot be predicted.

If the financial markets and/or the overall economy continue

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

of Operations

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

Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Consolidated Statements of Operations

in thousands)

Three Months Ended

September 30,

Services and fees

7 unchanged sentences

Selling, general and administrative expenses

Impairment of tradenames

Restructuring charge

Interest expense - Securities lending and loan participations sold

3 unchanged sentences

Interest income

Gain on extinguishment of loans

Loss from equity investments

Gain on extinguishment of loans and other

Income from equity investments

Interest expense

1 unchanged sentence

Provision for income taxes

Net loss attributable to noncontrolling interests

Net income attributable to noncontrolling interests

Net income attributable to B.

2 unchanged sentences

Net income available to common shareholders

Not applicable or not meaningful.

The table below and the discussion

that follows are based on how we analyze our business.

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

Three Months Ended

September 30,

Revenues - Services and fees:

8 unchanged sentences

Principal Investments - United Online and magicJack segment

Trading income (loss) and fair value adjustments on loans

Trading income and fair value adjustments on loans

Capital Markets segment

Wealth Management segment

Brands segment

Interest income - Loans and securities lending:

1 unchanged sentence

Total revenues

Not applicable or not meaningful.

Total revenues increased

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

months ended June 30, 2020.

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

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

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

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

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

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

and the Principal Investments — United Online and magicJack segment.

Revenues from services and fees in the Capital Markets segment increased

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

ended June 30, 2020.

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

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

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

Revenues from services and

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

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

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

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

Revenues from services and

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

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

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

liquidation engagements.

Revenues from services and fees in the Financial Consulting segment

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

months ended June 30, 2020.

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

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

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

Revenues from services and

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

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

n/m - Not applicable or not meaningful.

revenues increased approximately $155.3 million to $381.5 million during the three months ended September 30, 2021 from $226.3 million

during the three months ended September 30, 2020.

The increase in revenues during the three months ended September 30, 2021 was primarily

due to an increase in revenue from services and fees of $156.7 million, revenue from sale of goods of $11.3 million, and interest

income from loans and securities lending of $0.8 million, offset by a decrease in revenue from trading income and fair value adjustments

on loans of $13.6 million.

The increase in revenue from services and fees in the three months ended September 30, 2021 consisted of increases

in revenue of $79.0 million in the Capital Markets segment, $100.3 million in the Wealth Management segment, and $2.4 million

in the Brands segment, offset by decreases in revenues of $18.7 million in the Auction and Liquidation segment, $4.3 million in

the Financial Consulting segment, and $2.0 million in the Principal Investments — United Online and magicJack segment.

from services and fees in the Capital Markets segment increased $79.0 million, to $134.8 million during the three months ended

September 30, 2021 from $55.8 million during the three months ended September 30, 2020.

The increase in revenues was primarily due

to increases in revenue of $82.4 million from corporate finance, consulting, and investment banking fees, $3.6 million from the

acquisition of National in the first quarter of 2021, $1.2 million of asset management fees, and $1.8 million of commissions, partially

offset by a decrease of $8.8 million in dividends.

from services and fees in the Wealth Management segment increased $100.3 million, to $117.6 million during the three months ended

September 30, 2021 from $17.3 million during the three months ended September 30, 2020.

The increase in revenues was primarily due

to increases in revenue of $94.1 million from the acquisition of National and $6.0 million from wealth and asset management fees.

from services and fees in the Auction and Liquidation segment decreased $18.7 million, to $2.7 million during the three months

ended September 30, 2021 from $21.5 million during the three months ended September 30, 2020.

The decrease in revenues was primarily

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

Management expects

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

Revenues from services and

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

during the three months ended June 30, 2020.

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

Trading income and fair value

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

for the three months ended June 30, 2020.

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

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

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

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

$0.7 million.

Interest income – loans

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

during the three months ended June 30, 2020.

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

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

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

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

Revenues – Sale of Goods

Revenues from the sale of

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

three months ended June 30, 2020.

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

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

VoIP services.

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

Operating Expenses

Direct Cost of Services

Direct cost of services increased

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

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

in the Principal Investments — United Online and magicJack segment.

The increase in direct costs in the Auction and Liquidation

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

of the client.

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

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

The decrease in direct costs in the Principal Investments —

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

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

Selling, General and Administrative Expenses

Selling, general and administrative

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

due to fewer large retail fee liquidation engagements.

from services and fees in the Financial Consulting segment decreased $4.3 million, to $21.3 million during the three months

ended September 30, 2021 from $25.6 million during the three months ended September 30, 2020.

decrease in revenues was primarily due to a decrease in revenue of $3.8 million due to a large real estate consulting engagement

in 2020 and a decrease of $0.7 million in appraisal engagement fees, partially offset by an increase of $0.2 million due to a newly formed

operations management group during fiscal year 2021.

from services and fees in the Principal Investments - United Online and magicJack segment decreased $2.0 million to $18.7 million

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

in revenues was primarily due to decreases of $1.6 million in subscription services and $0.7 million in advertising, licensing,

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

from services and fees in the Brands segment increased $2.4 million to $6.4 million during the three months ended September

30, 2021 from $4.0 million during the three months ended September 30, 2020.

The primary source of revenue included in this segment

is the licensing of trademarks.

income and fair value adjustments on loans decreased $13.6 million to $18.2 million during the three months ended September 30, 2021

compared to $31.8 million for the three months ended September 30, 2020.

This decrease was primarily due to a decrease of $14.5

million in the Capital Markets segment, partially offset by an increase of $0.9 million in the Wealth Management segment.

$18.2 million for the three months ended September 30, 2021 was primarily due to realized and unrealized amounts earned on investments

made in our proprietary trading accounts of $20.9 million partially offset by an unrealized loss on our loans receivable, at fair

value of $1.2 million.

income – loans and securities lending increased $0.9 million, to $26.9 million during the three months ended September

30, 2021 from $26.0 million during the three months ended September 30, 2020.

Interest income from securities lending was $13.0 million

and $13.3 million during the three months ended September 30, 2021 and 2020, respectively.

Interest income from loans was $13.9 million

and $12.7 million during the three months ended September 30, 2021 and 2020, respectively.

– Sale of Goods

from the sale of goods increased $11.3 million, to $35.0 million during the three months ended September 30, 2021 from $23.7 million

during the three months ended September 30, 2020.

Revenues from sale of goods were primarily attributable to $34.3 million from

sales of retail goods related to retail liquidation engagements in Europe, partially offset by a decrease of $22.8 million from sales

of retail goods related to multiple liquidation engagements that ended in 2020.

Cost of goods sold for the three months ended September

30, 2021 was $12.4 million, resulting in a gross margin of 64.5%.

Cost of Services

cost of services decreased $5.2 million, to $18.0 million during the three months ended September 30, 2021 from $23.3 million

during the three months ended September 30, 2020.

The decrease was primarily due to a decrease of $4.8 million in the Auction and Liquidation

segment and $0.5 million in the Principal Investments — United Online and magicJack segment.

The decrease in direct costs

in the Auction and Liquidation segment was primarily due to a retail liquidation engagement in Europe where we purchased inventory for

resale using the existing stores of the client.

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

operations which primarily related to expenses for occupancy, payroll, and other store operating costs.

The decrease in direct costs

in the Principal Investments — United Online and magicJack segment was primarily due to a corresponding decrease in revenues from

subscription based customers for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

General and Administrative Expenses

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

Three Months Ended

June 30, 2021

Three Months Ended

June 30, 2020

September 30, 2021

September 30, 2020

Capital Markets segment

6 unchanged sentences

Total selling, general & administrative expenses

Total selling, general and

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

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

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

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

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

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

and Other segment.

Capital Markets

Selling, general and administrative

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

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

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

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

by a decrease of $12.6 million in consulting expenses.

Wealth Management

Selling, general and administrative

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

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

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

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

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

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

Auction and Liquidation

Selling, general and administrative

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

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

Financial Consulting

Selling, general and administrative

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

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

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

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

and $0.2 million in outside contractor expenses.

Principal Investments

— United Online and magicJack

Selling, general and administrative expenses in the Principal Investments

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

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

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

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

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

Selling, general and administrative

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

during the three months ended June 30, 2020.

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

and $0.2 million in other expenses.

Corporate and Other

Selling, general and administrative

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

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

The increase was primarily due to increases of $2.9 million

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

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

Impairment of tradenames .

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

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

were impaired.

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

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

applicable or not meaningful.

selling, general and administrative expenses increased approximately $147.1 million to $244.2 million during the three months ended

September 30, 2021 from $97.1 million for the three months ended September 30, 2020.

The increase was primarily due to increases

of $39.1 million in the Capital Markets segment, $95.4 million in the Wealth Management segment, $0.5 million in the Auction

and Liquidation segment, $0.7 million in the Financial Consulting segment, $0.4 million in the Principal Investments — United

Online and magicJack segment, and $11.0 million in the Corporate and Other segment.

general and administrative expenses in the Capital Markets segment increased by $39.1 million to $80.7 million during the three

months ended September 30, 2021 from $41.6 million during the three months ended September 30, 2020.

The increase was primarily due to

increases of $34.0 million in payroll and related expenses, $5.3 million in investment banking deal expenses, $3.4 million from the acquisition

of National, $0.6 million in legal expenses, $0.5 million in other expenses, $0.2 million in business development activities, and $0.2

million in occupancy costs, partially offset by a decrease of $5.3 million in consulting expenses.

general and administrative expenses in the Wealth Management segment increased by $95.4 million to $112.3 million during the three months

ended September 30, 2021 from $16.9 million during the three months ended September 30, 2020.

The increase was primarily due to increases

of $90.3 million from the acquisition of National, $4.8 million in payroll and related expenses, and $0.3 million in software and equipment

and Liquidation

general and administrative expenses in the Auction and Liquidation segment increased $0.5 million to $5.1 million during the three months

ended September 30, 2021 from $4.6 million during the three months ended September 30, 2020.

general and administrative expenses in the Financial Consulting segment increased by $0.7 million to $18.5 million during the three

months ended September 30, 2021 from $17.8 million during the three months ended September 30, 2020.

The increase was primarily due to

increases of $0.4 million in other expenses and $0.3 million in legal expenses.

Investments — United Online and magicJack

general and administrative expenses in the Principal Investments — United Online and magicJack segment increased $0.4 million

to $8.0 million for the three months ended September 30, 2021 from $7.6 million for the three months ended September 30, 2020.

increase was primarily due to $0.7 million in transaction costs, partially offset by a decrease of $0.4 million in payroll and related

general and administrative expenses in the Brands segment remained flat at $1.7 million during the three months ended September

30, 2021 and 2020.

general and administrative expenses for the Corporate and Other segment increased approximately $11.0 million to $18.0 million

during the three months ended September 30, 2021 from $6.9 million for the three months ended September 30, 2020.

The increase was primarily

due to increases of $6.2 million in payroll and related expenses, $4.0 million in gain from extinguishment of debt as further discussed

below, and $2.0 million in professional fees, partially offset by decreases of $0.4 million in legal expenses, $0.4 million in other

expenses, and $0.2 million in foreign currency fluctuations.

the three months ended September 30, 2021, we repurchased 10,409,895 senior notes with an aggregate face value of $260.2 million at par,

resulting in a loss net of expenses, premiums paid, and original issue discount of $4.0 million.

The total redemption payments included

approximately $3.1 million in accrued interest.

During the three months ended September 30, 2020, we did not repurchase any of our

senior notes.

Other Income (Expense).

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

three months ended June 30, 2020.

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

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

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

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

The increase in interest expense during the three months

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

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

in the prior year.

Income Before Income Taxes .

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

ended June 30, 2020.

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

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

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

Provision for Income Taxes.

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

months ended June 30, 2020.

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

the three months ended June 30, 2020.

Net Loss Attributable

to Noncontrolling Interest .

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

by membership interests of partnerships that we do not own.

The net loss attributable to noncontrolling interests was $0.6 million

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

Net Income Attributable to

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

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

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

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

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

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

of loans of $6.5 million.

Preferred Stock Dividends .

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

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

Holders of Series

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

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

per Depositary Share).

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

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

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

On September 4, 2020, the

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

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

Holders of Series B Preferred Stock,

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

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

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

On April 5, 2021, the Company

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

business on April 20, 2021.

Net Income Available to

Common Shareholders .

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

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

The decrease in net income available to

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

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

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

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

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

Six Months Ended June 30, 2021 Compared to

Six Months Ended June 30, 2020

Condensed Consolidated Statements of Operations

(Dollars in thousands)

Six Months Ended

Other income included interest income of $0.1 million during both the three months ended September 30, 2021 and 2020.

Gain on extinguishment

of loans and other in the amount of $1.8 million during the three months ended September 30, 2021 was primarily due to the change in

fair value of warrant liabilities.

Interest expense was $25.4 million during the three months ended September 30, 2021 compared to $16.4

million during the three months ended September 30, 2020.

The increase in interest expense during the three months ended September 30,

2021 was primarily due to increases in interest expense of $5.8 million from the issuance of senior notes, $2.7 million from the Nomura

term loan entered into in Q2 2021, and $0.5 million from the Nomura revolving credit facility entered into in Q2 2021.

Other income in

the three months ended September 30, 2021 included income from equity investments of $0.6 million compared to $0.4 million in the

Before Income Taxes .

Income before income taxes was $74.4 million during the three months ended September 30, 2021 compared to $67.6

million during the three months ended September 30, 2020.

The increase was primarily due to increases in revenue of $155.2 million, gain

on extinguishment of loans and other of $1.8 million, and income from equity investments of $0.7 million, partially offset by increases

in operating expenses of approximately $142.0 million and interest expense of $9.0 million, as discussed above.

for Income Taxes.

Provision for income taxes was $22.7 million during the three months ended September 30, 2021 compared to

$18.7 million during the three months ended September 30, 2020.

The effective income tax rate was 30.5% for the three months ended September

30, 2021 as compared to 27.7% for the three months ended September 30, 2020.

Income Attributable to Noncontrolling Interests .

Net income attributable to noncontrolling interests represents the proportionate

share of net income generated by membership interests of partnerships that we do not own.

The net income attributable to noncontrolling

interests was $1.1 million during the three months ended September 30, 2021 compared to $0.5 million during the three months ended

September 30, 2020.

Income Attributable to the Company .

Net income attributable to the Company was $50.6 million during the three months ended September

30, 2021 compared to $48.4 million for the three months ended September 30, 2020.

The increase in net income attributable to the Company

was primarily due to increases in operating income of $13.2 million, gain on extinguishment of loans and other of $1.8 million,

and income from equity investments of $0.7 million, partially offset by increases in interest expense of $9.0 million, provision for

income taxes of $4.0 million, and net income attributable to noncontrolling interests of $0.6 million.

Stock Dividends .

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

share of 6.875% Series A Cumulative Perpetual Preferred Stock (trading under NASDAQ symbol “RILYP”), par value $0.0001 per

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

cash dividends at the rate of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent

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

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

July, and October.

On July 8, 2021, the Company declared a cash dividend representing $0.4296875 per Depositary Share, which was

paid on August 2, 2021 to holders of record as of the close of business on July 21, 2020.

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

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

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

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

or $1.84375 per Depositary Share).

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

On July 8, 2021, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on August 2, 2021 to

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

Income Available to Common Shareholders .

Net income available to common shareholders was $48.6 million for the three months ended

September 30, 2021 compared to $47.3 million for the three months ended September 30, 2020.

The increase in net income available to common

shareholders was primarily due to increases in operating income of $13.2 million, gain on extinguishment of loans and other of $1.8

million, and income from equity investments of $0.7 million, partially offset by increases in interest expense of $9.0 million, provision

for income taxes of $4.0 million, preferred stock dividends of $0.8 million, and net income attributable to noncontrolling interests

of $0.6 million.

Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Consolidated Statements of Operations

in thousands)

Nine Months Ended

September 30,

Services and fees

7 unchanged sentences

Selling, general and administrative expenses

Rectructuring charge

Impairment of tradenames

4 unchanged sentences

Interest income

Gain on extinguishment of loans

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)

Income before income taxes

Provision for income taxes

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to B.

Net income attributable to B.

Riley Financial, Inc.

Preferred stock dividends

Net income (loss) available to common shareholders

Not applicable or not meaningful.

The table below and the discussion

that follows are based on how we analyze our business.

Net income available to common shareholders

applicable or not meaningful.

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

Nine Months Ended

September 30,

Revenues - Services and fees:

4 unchanged sentences

Principal Investments - United Online and magicJack segment

Brands segment

Revenues - Sale of goods

7 unchanged sentences

Total revenues

n/m - Not applicable or not meaningful.

Total revenues increased approximately

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

June 30, 2020.

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

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

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

The increase in revenue

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

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

and $1.9 million in the Brands segment;

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

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

Revenues from services and fees in the Capital Markets segment increased

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

June 30, 2020.

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

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

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

Revenues from services and

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

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

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

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

Revenues from services and

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

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

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

liquidation engagements.

Revenues from services and fees in the Financial Consulting segment

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

ended June 30, 2020.

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

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

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

Revenues from services and fees in the Principal Investments - United

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

during the six months ended June 30, 2020.

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

and in advertising licensing and other of $1.1 million.

Management expects revenues from the Principal Investments - United Online and

magicJack segment to continue to decline year over year.

Revenues from services and

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

during the six months ended June 30, 2020.

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

Trading income and fair value

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

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

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

segment and $5.2 million in the Wealth Management segment.

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

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

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

Interest income – loans

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

during the six months ended June 30, 2020.

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

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

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

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

Revenues – Sale of Goods

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

during the six months ended June 30, 2020.

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

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

applicable or not meaningful.

revenues increased by $825.9 million to $1,318.5 million during the nine months ended September 30, 2021 from $492.5 million

during the nine months ended September 30, 2020.

The increase was primarily due to trading income (losses) from fair value adjustment

on loans that increased by $354.0 million to income of $317.8 million during the nine months ended September 30, 2021 from a loss of

$36.1 million during the nine months ended September 30, 2020.

The increase in revenue from services and fees of $427.3 million

during the nine months ended September 30, 2021 was primarily due to increases in revenue of $242.0 million in the Capital Markets

segment, $219.1 million in the Wealth Management segment, $1.3 million in the Financial Consulting segment and $4.3 million

in the Brands segment;

partially offset by decreases in revenues of $33.7 million in the Auction and Liquidation segment and $5.6 million

in the Principal Investments — United Online and magicJack segment.

from services and fees in the Capital Markets segment increased $242.0 million, to $431.8 million during the nine months ended

September 30, 2021 from $189.8 million during the nine months ended September 30, 2020.

The increase in revenues was primarily due

to increases of $223.3 million from corporate finance, consulting, and investment banking fees, $22.6 million from the acquisition

of National in the first quarter of 2021, $1.4 million in commissions, and $0.7 million in asset management fees, partially offset by

decrease of $4.6 million in dividends and $1.4 million in other income.

from services and fees in the Wealth Management segment increased $219.1 million, to $270.6 million during the nine months ended

September 30, 2021 from $51.5 million during the nine months ended September 30, 2020.

The increase in revenues was primarily due

to increases in revenue of $200.7 million from the acquisition of National and $18.0 million from wealth and asset management fees.

from services and fees in the Auction and Liquidation segment decreased $33.7 million, to $15.6 million during the nine months

ended September 30, 2021 from $49.3 million during the nine months ended September 30, 2020.

The decrease in revenues was primarily

due to fewer large retail fee liquidation engagements.

from services and fees in the Financial Consulting segment increased $1.3 million, to $66.4 million during the nine months

ended September 30, 2021 from $65.1 million during the nine months ended September 30, 2020.

The increase in revenues was primarily

due to an increase in revenue of $1.7 million from advisory services, offset by a decrease of $0.5

million in other income.

from services and fees in the Principal Investments - United Online and magicJack segment decreased $5.6 million to $57.4 million

during the nine months ended September 30, 2021 from $63.0 million during the nine months ended September 30, 2020.

in revenues was primarily due to decreases in subscription services of $4.3 million and in advertising, licensing and other of $2.0

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

from services and fees in the Brands segment increased $4.3 million to $15.3 million during the nine months ended September

30, 2021 from $11.0 million during the nine months ended September 30, 2020.

The primary source of revenue included in this segment

is the licensing of trademarks.

income (losses) and fair value adjustments on loans consisted of income in the amount of $317.8 million during the nine months ended

September 30, 2021 compared to losses of $36.1 million for the nine months ended September 30, 2020.

This was primarily due to increases

of $347.9 million in the Capital Markets segment and $6.1 million in the Wealth Management segment.

The gain of $317.8 million for the

nine months ended September 30, 2021 included realized and unrealized amounts earned on investments made in our proprietary trading accounts

of $309.0 million and unrealized amounts on our loans receivable, at fair value of $8.8 million.

income – loans and securities lending increased $16.9 million, to $89.3 million during the nine months ended September

30, 2021 from $72.4 million during the nine months ended September 30, 2020.

Interest income from securities lending was $49.8 million

and $36.9 million during the nine months ended September 30, 2021 and 2020, respectively.

Interest income from loans was $39.5 million

and $35.4 million during the nine months ended September 30, 2021 and 2020, respectively.

– Sale of Goods

from the sale of goods increased $27.8 million, to $54.2 million during the nine months ended September 30, 2021 from $26.5 million

during the nine months ended September 30, 2020.

Revenues from sale of goods were primarily attributable to $46.1 million of sales

of retail goods related to retail liquidation engagements in Europe and $6.1 million of sales of retail goods related to a retail liquidation

engagement in the U.S., partially offset by decreases of $23.2 million from sales of retail goods related to multiple liquidation engagements

that ended in 2020 and $0.6 million in sales of magicJack devices that were sold in connection

with VoIP services .

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

Operating Expenses

Direct Cost of Services

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

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

Direct cost of services decreased

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

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

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

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

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

payroll and other store operating costs.

Selling, General and Administrative Expenses

Selling, general and administrative

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

Six Months Ended

June 30, 2021

June 30, 2020

Cost of goods sold for the nine months ended September 30, 2021 was $21.4 million, resulting in a gross margin

Cost of Services

cost of services decreased $9.8 million, to $41.4 million during the nine months ended September 30, 2021 from $51.2 million

during the nine months ended September 30, 2020.

Direct cost of services decreased by $8.7 million in the Auction and Liquidation segment

and $1.1 million in the Principal Investments — United Online and magicJack segment.

The decrease in direct costs in the Auction

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

ended September 30, 2021, partially offset by an increase of $15.7 million of direct costs incurred on a retail liquidation engagement

in Europe, where we purchased inventory for resale and as part of the retail liquidation engagement we incurred costs related to the

store operations which primarily related to expenses for occupancy, payroll and other store operating costs.

General and Administrative Expenses

general and administrative expenses during the nine months ended September 30, 2021 and 2020 were comprised of the following:

Nine Months Ended

September 30, 2021

September 30, 2020

Capital Markets segment

6 unchanged sentences

Total selling, general & administrative expenses

Total selling, general and

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

for the six months ended June 30, 2020.

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

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

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

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

— United Online and magicJack segment.

Capital Markets

Selling, general and administrative

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

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

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

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

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

Wealth Management

Selling, general and administrative

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

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

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

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

$0.5 million in clearing charges.

Auction and Liquidation

Selling, general and administrative

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

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

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

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

Financial Consulting

Selling, general and administrative

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

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

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

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

Principal Investments

— United Online and magicJack

Selling, general and administrative expenses in the Principal Investments

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

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

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

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

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

Selling, general and administrative

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

during the six months ended June 30, 2020.

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

Corporate and Other

Selling, general and administrative expenses for the Corporate and

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

for the six months ended June 30, 2020.

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

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

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

ended June 30, 2021.

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

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

$0.9 million.

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

During the six months ended June

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

expenses and original issue discount of $1.6 million.

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

the date of each respective repurchase.

applicable or not meaningful.

selling, general and administrative expenses increased approximately $344.0 million to $635.5 million during the nine months ended

September 30, 2021 from $291.4 million for the nine months ended September 30, 2020.

The increase of approximately $340.1 million

in selling, general and administrative expenses was due to increases of $105.6 million in the Capital Markets segment, $216.5 million

in the Wealth Management segment, $0.8 million in the Auction and Liquidation segment, $7.2 million in the Financial Consulting segment,

$0.1 million in the Brands segment, and $14.0 million in the Corporate and Other segment, partially offset by a decrease of $0.2 million

in the Principal Investments — United Online and magicJack segment.

general and administrative expenses in the Capital Markets segment increased by $105.6 million to $233.3 million during the nine

months ended September 30, 2021 from $127.7 million during the nine months ended September 30, 2020.

The increase was primarily due to

increases of $78.2 million in payroll and related expenses, $16.6 million from the acquisition of National, $7.9 million in investment

banking deal expenses, $1.6 million in consulting expenses, $0.4 million in occupancy expenses, $0.4 million in clearing charges, $0.3

million in other expenses, and $0.1 million in foreign currency fluctuations.

general and administrative expenses in the Wealth Management segment increased by $216.5 million to $267.1 million during the nine

months ended September 30, 2021 from $50.6 million during the nine months ended September 30, 2020.

The increase was primarily due to

increases of $203.3 million from the acquisition of National and $14.1 million in payroll and related expenses, partially offset by a

decrease of $0.9 million in legal expenses.

and Liquidation

general and administrative expenses in the Auction and Liquidation segment increased by $0.8 million to $9.7 million during the nine

months ended September 30, 2021 from $8.9 million during the nine months ended September 30, 2020.

The increase was primarily due to

an increase of $3.6 million in business development expenses;

partially offset by decreases of $1.3 million in payroll and related expenses,

$1.2 million in foreign currency exchange, and $0.4 million in outside contractor expenses.

general and administrative expenses in the Financial Consulting segment increased by $7.2 million to $56.2 million during the nine

months ended September 30, 2021 from $49.0 million during the nine months ended September 30, 2020.

The increase was primarily due to

increases of $5.1 million in payroll and related expenses, $0.9 million in legal expenses, and $0.7 million in other expenses.

Investments — United Online and magicJack

general and administrative expenses in the Principal Investments — United Online and magicJack segment decreased $0.2 million

to $22.7 million for the nine months ended September 30, 2021 from $22.8 million for the nine months ended September 30, 2020.

general and administrative expenses in the Brands segment increased by $0.1 million to $4.5 million during the nine months ended

September 30, 2021 from $4.4 million during the nine months ended September 30, 2020.

general and administrative expenses for the Corporate and Other segment increased approximately $14.0 million to $42.0 million

during the nine months ended September 30, 2021 from $28.1 million for the nine months ended September 30, 2020.

The increase was primarily

due to increases of $15.4 million in payroll and related expenses, $6.4 million in extinguishment of debt as further discussed below,

and $2.0 million in professional fees, partially offset by a decrease of $9.1 million in legal settlement accrual, primarily due to recording

a pre-acquisition litigation claim related to one of our acquired subsidiaries, and a decrease of $0.5 million in legal expenses.

the nine months ended September 30, 2021, we repurchased 15,536,123 senior notes with an aggregate face value of $388.4 million at par,

resulting in a loss net of expenses, premiums paid and original issue discount of $4.9 million.

The total redemption payments included

approximately $4.7 million in accrued interest.

During the nine months ended September 30, 2020, we repurchased 137,710 senior notes

with an aggregate face value of $3.4 million for $1.8 million resulting in a gain net of expenses and original issue discount of $1.6

As part of the repurchase, the Company paid $0.03 million in interest accrued through the date of each respective repurchase.

Impairment of tradenames .

2 unchanged sentences

the Brands segment were impaired.

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

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

In the nine months ended September 30, 2020, the Company recognized impairments of $12.5 million on

the indefinite-lived tradenames.

There was no impairment in the nine months ended September 30, 2021.

Other Income (Expense).

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

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

Gain on extinguishment of loans in the amount

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

Interest expense

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

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

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

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

in the prior year period.

Income (Loss) Before Income

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

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

The increase of $471.2

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

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

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

(Provision) Benefit for

Income Taxes.

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

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

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

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

Net Income (Loss) Attributable

to Noncontrolling Interest .

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

by membership interests of partnerships that we do not own.

The net income attributable to noncontrolling interests was $1.4 million

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

Other income included interest income of $0.2 million during the nine

months ended September 30, 2021 and $0.5 million during the nine months ended September 30, 2020.

Gain on extinguishment of loans

and other in the amount of $8.3 million during the nine months ended September 30, 2021 was primarily due to $6.5 million in National

PPP loans that were forgiven by the SBA and $2.0 million due to the change in fair value of warrant liabilities.

Interest expense was

$66.0 million during the nine months ended September 30, 2021 compared to $48.5 million during the nine months ended September 30, 2020.

The increase in interest expense during the nine months ended September 30, 2021 was primarily due to increases in interest expense of

$14.5 million from the issuance of senior notes and $3.0 million from the Nomura term loan, partially offset by a decrease in interest

expense of $0.2 million on our asset based credit facility.

Other income in the nine months ended September 30, 2021 included income

from equity investments of $1.2 million compared to a loss of $0.1 million in the prior year period.

Income Before Income Taxes .

Income before income taxes was $523.5 million during the nine months ended September 30, 2021 compared to $45.6 million during the nine

months ended September 30, 2020.

The increase was primarily due to increases in revenues of approximately $825.9 million, gain on extinguishment

of loans and other of $8.3 million, and income from equity investments of $1.3 million, partially offset by increases in operating expenses

of $339.8 million, interest expense of $17.5 million, and a decrease in interest income of $0.4 million.

Provision for Income Taxes.

Provision for income taxes was $140.1 million during the nine months ended September 30, 2021 compared to $13.4 million during the

nine months ended September 30, 2020.

The effective income tax rate was a provision of 26.8% for the nine months ended September 30, 2021

as compared to 29.4% for the nine months ended September 30, 2020.

Net Income (Loss) Attributable

to Noncontrolling Interests .

Net income (loss) attributable to noncontrolling interests represents the proportionate share of net

income (loss) generated by membership interests of partnerships that we do not own.

The net income attributable to noncontrolling interests

was $2.5 million during the nine months ended September 30, 2021 compared to net loss of $1.4 million during the nine months ended

September 30, 2020.

Net Income Attributable

to the Company .

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

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

June 30, 2020.

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

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

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

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

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

Net income attributable to the Company was $380.9 million for the nine months ended September 30, 2021 compared

to $33.6 million for the nine months ended September 30, 2020.

The increase was primarily due to increases in operating income of

$486.2 million, gain on extinguishment of loans and other of $8.3 million, and income from equity investments of $1.3 million, partially

offset by increases in provision for income taxes of $126.7 million, interest expense of $17.5 million, net income attributable to

noncontrolling interests of $3.9 million, and a decrease in interest income of $0.4 million.

Preferred Stock Dividends .

11 unchanged sentences

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

On July 8, 2021, the Company declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on August

2, 2021 to holders of record as of the close of business on July 21, 2020.

On September 4, 2020, the

10 unchanged sentences

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

Net Income (Loss)

Available to Common Shareholders .

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

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

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

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

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

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

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

decrease in interest income of $0.4 million.

On July 8, 2021, the Company

declared a cash dividend of $0.4609375 per Depositary Share, which was paid on August 2, 2021 to holders of record as of the close of

business on July 21, 2021.

Net Income Available to

Common Shareholders .

Net income available to common shareholders was $375.4 million during the nine months ended September 30,

2021 compared to $30.3 million during the nine months ended September 30, 2020.

The increase was primarily due to increases in operating

income of $486.2 million, gain on extinguishment of loans and other of $8.3 million, and income from equity investments of $1.3 million,

partially offset by increases in provision for income taxes of $126.7 million, interest expense of $17.5 million, income attributable

to noncontrolling interests of $3.9 million, preferred stock dividends of $2.2 million, and a decrease in interest income of $0.4

Liquidity and Capital

Our operations are funded through a combination of existing cash on

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

financing arrangements.

During the six months ended June 30, 2021 and

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

Our cash flows and profitability

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

in marketable securities.

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

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

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

The borrowings outstanding of $1,475.0 million

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

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

We believe that our current

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

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

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

from issuance date of the accompanying financial statements.

We continue to monitor our financial performance to ensure sufficient liquidity

to fund operations and execute on our business plan.

Our operations are funded

through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes payable, term loans

and credit facilities, and special purposes financing arrangements.

During the nine months ended September 30, 2021 and 2020, we generated

net income of $383.4 million and $32.2 million, respectively.

Our cash flows and profitability are impacted by capital market

engagements performed on a quarterly and annual basis and amounts realized from the sale of our investments in marketable securities.

As of September 30, 2021,

we had $378.2 million of unrestricted cash and cash equivalents, $0.9 million of restricted cash, $1,352.1 million of securities

and other investments owned at fair value, $350.8 million of loans receivable, and $1,696.1 million of borrowings outstanding.

The borrowings outstanding of $1,696.1 million as of September 30, 2021 included $1,362.8 million of senior notes at amortized cost,

$252.9 million in term loans borrowed pursuant to the BRPAC and Nomura Credit Agreements, $80.0 million of revolving credit under

the Nomura Credit Agreement, and $0.4 million of notes payable.

We believe that our current cash and cash equivalents, securities and

other investments owned, funds available under our asset based credit facility, funds available under the BRPAC and Nomura term loans,

funds available under the Nomura revolving credit facility, and cash expected to be generated from operating activities will be sufficient

to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying

financial statements.

We continue to monitor our financial performance to ensure sufficient liquidity to fund operations and execute on

our business plan.

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

upon our financial condition and results of operations.

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

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

On May 3, 2021,

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

of record as of May 17, 2021.

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

$0.375 per share to $0.50 per share.

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

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

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

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

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

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

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

On October 28, 2021, we declared a regular dividend of $1.00 per share and special

dividend of $3.00 per share that will be paid on or about November 23, 2021 to stockholders of record as of November 9, 2021.

29, 2021, we declared a regular dividend of $0.50 per share and special dividend of $1.50 per share that was paid on August 26, 2021 to

stockholders of record as of August 13, 2021.

On May 3, 2021, we declared a regular dividend of $0.50 per share and special dividend of

$2.50 per share that was paid on May 28, 2021 to stockholders of record as of May 17, 2021.

On October 28, 2021, the Board of Directors

announced an increase to the regular quarterly dividend from $0.50 per share to $1.00 per share.

During the year ended December 31,

2020, we paid cash dividends on our common stock of $38.8 million.

While it is the Board’s current intention to make regular dividend

payments of $0.50 per share each quarter and special dividend payments dependent upon exceptional circumstances from time to time, our

Board of Directors may reduce or discontinue the payment of dividends at any time for any reason it deems relevant.

The declaration and

payment of any future dividends or repurchases of our common stock will be made at the discretion of our Board of Directors and will be

dependent upon our financial condition, results of operations, cash flows, capital expenditures, and other factors that may be deemed

relevant by our Board of Directors.

A summary of dividend activity

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

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

July 29, 2021

August 26, 2021

August 13, 2021

February 25, 2021

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March 17, 2020

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

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

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

Dividends will be payable

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

As of June 30, 2021, dividends in arrears in

respect of the Depositary Shares were $0.8 million.

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

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

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

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

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

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

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

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

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

Dividends will be payable

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

As of June 30, 2021, dividends in arrears in

respect of the Depositary Shares were $0.5 million.

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

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

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

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

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

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

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

at the rate of 6.875% per annum of the $25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75

or $1.71875 per Depositary Share).

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

As of September 30, 2021, dividends in arrears in respect of the Depositary Shares were $0.8 million.

On January 11,

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

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

On April 5, 2021, the Company declared a cash dividend $0.4296875 per

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

8, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on August 2, 2021 to holders of

record as of the close of business on July 21, 2021.

On October 6, 2021, the Company declared a cash dividend $0.4296875 per

Depositary Share, which will be paid on or about November 1, 2021 to holders of record as of the close of business on October

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

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

or $1.84375 per Depositary Share).

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

As of September 30, 2021, dividends in arrears in respect of the Depositary Shares were $0.5 million.

On January 11,

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

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

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

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

8, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on August 2, 2021 to holders of

record as of the close of business on July 21, 2021.

On October 6, 2021, the Company declared a cash dividend $0.4609375 per

Depositary Share, which will be paid on or about November 1, 2021 to holders of record as of the close of business on October

Our principal sources of

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Cash Flow Summary

Six Months Ended

Nine Months Ended

September 30,

(Dollars in thousands)

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Net increase in cash, cash equivalents and restricted cash

Cash used in operating activities was $147.9 million during the

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

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

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

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

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

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

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

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

currency on operations of $1.5 million.

Cash used in investing activities was $13.7 million during the

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

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

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

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

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

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

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

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

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

and loan participations sold of $2.4 million.

Cash provided by financing activities was $356.1 million during the

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

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

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

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

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

$37.6 million used to repay our notes payable, $15.7 million used to pay debt issuance costs, $14.8 million in distributions

to noncontrolling interests, $11.5 million used for repayment on our BRPAC term loan, $10.4 million used to pay employment taxes

on vesting of restricted stock, and $3.5 million used to pay dividends on our preferred shares.

During the six months ended June 30, 2020,

cash provided by financing activities primarily consisted of $171.1 million proceeds from issuance of senior notes and $4.6 million

proceeds from offerings of preferred stock, offset by $37.1 million used to repay our asset based credit facility, $27.8 million

used to repurchase our common stock, $17.5 million used to pay dividends on our common shares, $9.6 million used for repayment

on our BRPAC term loan, $2.8 million used to pay debt issuance costs, $2.7 million used for payment of employment taxes on vesting

of restricted stock, $2.1 million in distributions to noncontrolling interests, $2.1 million used to pay dividends on our preferred

shares, $1.8 million used to repurchase our senior notes, and $0.4 million used to repay our other notes payable.

used in operating activities was $166.7 million during the nine months ended September 30, 2021 compared to cash provided of $87.9 million

during the nine months ended September 30, 2020.

Cash used in operating activities for the nine months ended September 30, 2021 consisted

of the positive impact of net income of $383.4 million and noncash items of $40.0 million,

offset by the negative impact of changes in operating assets and liabilities of $590.0 million.

The positive cash flow impact from

noncash items of $40.0 million included deferred income taxes of $28.6 million, share-based compensation of $23.5 million, depreciation

and amortization of $19.1 million, loss on extinguishment of debt of $4.9 million, dividends from equity investments of $1.4 million,

provision for doubtful accounts of $1.2 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.5 million,

partially offset by other noncash interest and other of $15.7 million, fair value adjustments of $10.7 million, gain on extinguishment

of loans of $6.5 million, gain on equity investment of $3.5 million, effect of foreign currency on operations of $1.3 million, income

from equity investments of $1.2 million, and gain on disposal of fixed assets and other of $0.1 million.

Cash used in investing activities

was $416.7 million during the nine months ended September 30, 2021 compared to cash used in investing activities of $126.1 million

for the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, cash used in investing activities consisted

of cash used in investment of subsidiaries initial public offering proceeds into trust account of $345.0 million, purchases of loans receivable

of $186.3 million, repayments of loan participations sold of $15.2 million, cash used for acquisition of businesses of $2.1

million, and purchases of property and equipment of $0.6 million, partially offset by cash received from loans receivable repayment

of $132.5 million.

During the nine months ended September 30, 2020, cash used in investing activities consisted of cash used for

investment of subsidiaries initial public offering proceeds into trust account of $176.8 million, cash used for the purchase of loans

receivable of $169.1 million, purchases of property, equipment, and other of $1.5 million, cash used for acquisition of other business

of $1.5 million, and repayments of loan participations sold of $1.1 million, partially offset by funds received from trust account

of subsidiary of $143.8 million, cash received from loans receivable repayment of $76.0 million, loan participations sold of $2.4

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

Cash provided by financing

activities was $859.4 million during the nine months ended September 30, 2021 compared to cash provided by financing activities of $104.1 million

during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, cash provided by financing activities

primarily consisted of $890.6 million in proceeds from issuance of senior notes, $345.0 million in proceeds from initial public offering

of subsidiaries, $200.0 million in proceeds from the Nomura term loan, $80.0 million in proceeds from Nomura revolving credit line, $64.7

million in net proceeds from offerings of common stock, $14.0 million in net proceeds from offerings of preferred stock, and $12.7 million

in contributions from noncontrolling interests, partially offset by $390.5 million used to repurchase our senior notes, $236.6 million

used to pay dividends on our common shares, $37.6 million used to repay our notes payable, $31.0 million used to pay debt issuance

costs, $16.1 million used for repayment on our BRPAC term loan, $15.7 million in distributions to noncontrolling interests,

$10.5 million used to pay employment taxes on vesting of restricted stock, $5.5 million used to pay dividends on our preferred shares,

$2.7 million used in the repurchase of common stock, and $1.6 million used to pay for contingent consideration.

During the nine months

ended September 30, 2020, cash provided by financing activities primarily consisted of $175.0 million proceeds from initial public offering

of subsidiaries, $171.4 million proceeds from issuance of senior notes, and $36.0 million proceeds from offerings of preferred stock,

partially offset by $143.8 million used in the redemption of subsidiary temporary equity and distributions, $38.3 million used to

repurchase our common stock, $37.1 million used to repay our asset based credit facility, $25.8 million used to pay dividends on

our common shares, $14.4 million used for repayment on our BRPAC term loan, $7.5 million used to pay debt issuance costs, $3.2

million used to pay dividends on our preferred shares, $3.0 million used for payment of employment taxes on vesting of restricted

stock, $3.0 million in distributions to noncontrolling interests, $1.8 million used to repurchase our senior notes, and $0.4 million

used to repay our other notes payable.

Credit Agreements

Credit Agreement

On June 23, 2021, the Company, the Primary Guarantor and the Borrower

entered into the Credit Agreement with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as

collateral agent, providing for a four-year $200.0 million secured Term Loan Facility and a four-year $80.0 million secured Revolving

Credit Facility.

The Credit Facilities will mature on June 23, 2025, subject to acceleration or prepayment.

June 23, 2021, the Company, the Primary Guarantor, and the Borrower entered into the Credit Agreement with Nomura Corporate Funding

Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, providing for a four-year $200.0 million secured

Term Loan Facility and a four-year $80.0 million secured Revolving Credit Facility.

The Credit Facilities will mature on June 23, 2025,

subject to acceleration or prepayment.

loans under the Credit Facilities will accrue interest at the Eurodollar Rate plus an applicable margin of 4.50%.

10 unchanged sentences

for financings of this kind.

The Credit Agreement contains certain affirmative and negative covenants

customary for financings of this type that, among other things, limit the Company’s, the Primary Guarantor’s, the Borrower’s,

and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain

fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions,

to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective

equity interests.

In addition, the Credit Agreement contains a financial covenant that requires the Company to maintain Operating EBITDA

of at least $115.0 million and the Primary Guarantor to maintain net asset value of at least $900.0 million.

The Credit Agreement contains

customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain

bankruptcy and insolvency events and customary change of control events.

Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit

the Company’s, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur

additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to

make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make

other distributions or redemptions/repurchases in respect of their respective equity interests.

In addition, the Credit Agreement contains

a financial covenant that requires the Company to maintain Operating EBITDA of at least $115.0 million and the Primary Guarantor to maintain

net asset value of at least $900.0 million.

The Credit Agreement contains customary events of default, including with respect to a failure

to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control

Commencing on September 30,

3 unchanged sentences

are in the amount of $2.5 million per quarter.

June 30, 2021, the outstanding balance on the credit facility’s term loan was $194.2 million (net of unamortized debt issuance costs

of $5.8 million).

Interest on the term loan for the three and six months ended June 30, 2021 was $0.2 million (including amortization

of deferred debt issuance costs of $0.03 million).

The interest rate on the term loan at June 30, 2021 was 4.64%.

We had not made any borrowings under the Revolving Credit Facility

at June 30, 2021.

The unused commitment fee on the revolving facility for the three and six months ended June 30, 2021 was $0.03 million

(including amortization of deferred financing costs of $0.01 million).

The interest rate on the Revolving Credit Facility at June 30,

2021 was 4.65%.

Subsequent to June 30, 2021, we drew down the full $80.0 million of the Revolving Credit Facility.

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

of September 30, 2021, the outstanding balance on the Term Loan Facility was $194.6 million (net of unamortized debt issuance costs of

$5.4 million).

Interest on the term loan for the three and nine months ended September 30, 2021 was $2.7 million (including amortization

of deferred debt issuance costs of $0.4 million) and $2.9 million (including amortization of deferred debt issuance costs of $0.4 million),

respectively.

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

had an outstanding balance of $80.0 million 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 $0.8 million (including unused commitment fees of $0.06 million and amortization

of deferred financing costs of $0.1 million) and $0.8 million (including unused commitment fees of $0.08 million and amortization of deferred

financing costs of $0.2 million), respectively.

The interest rate on the Revolving Credit Facility as of September 30, 2021 was 4.62%.

are in compliance with all financial covenants in the Nomura Credit Agreement as of September 30, 2021.

Wells Fargo Credit Agreement

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investments, dispose of assets, make certain restricted payments, merge, or consolidate and enter into certain transactions with affiliates.

was no outstanding balance on this credit facility at June 30, 2021 and December 31, 2020.

At June 30, 2021, there were no open letters

of credit outstanding.

We are in compliance with all financial covenants in the asset based credit facility at June 30, 2021.

was no outstanding balance on this credit facility as of September 30, 2021 and December 31, 2020.

As of 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 as of September 30, 2021.

BRPAC Credit Agreement

26 unchanged sentences

as defined in the BRPAC Credit Agreement.

At June 30, 2021, the interest rate on the BRPAC Credit Agreement was 3.36%.

Amounts outstanding under

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

Quarterly installments from September

30, 2021 to December 31, 2021 are in the amount of $4.8 million per quarter, from March 31, 2022 to December 31, 2022 are in the

amount of $4.3 million per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $3.8 million per quarter,

from March 31, 2024 to December 31, 2024 are in the amount of $3.3 million per quarter, and from March 31, 2025 to December

31, 2025 are in the amount of $2.8 million per quarter.

of June 30, 2021 and December 31, 2020, the outstanding balance on the term loan was $62.9 million (net of unamortized debt

issuance costs of $0.6 million) and $74.2 million (net of unamortized debt issuance costs of $0.8 million), respectively.

Interest expense

on the term loan during the three months ended June 30, 2021 and 2020, was $0.7 million (including amortization of deferred debt issuance

costs of $0.08 million) and $0.6 million (including amortization of deferred debt issuance costs of $0.07 million), respectively.

Interest expense on the term loan during the six months ended June 30, 2021 and 2020, was $1.4 million (including amortization of

deferred debt issuance costs of $0.2 million) and $1.4 million (including amortization of deferred debt issuance costs of $0.1 million),

respectively.

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

As of September 30, 2021, the interest rate on the BRPAC Credit Agreement was 3.09%.

Principal outstanding under

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

Quarterly installments on December

31, 2021 is in the amount of $4.6 million, from March 31, 2022 to December 31, 2022 are in the amount of $4.1 million per quarter,

from March 31, 2023 to December 31, 2023 are in the amount of $3.6 million per quarter, from March 31, 2024 to December 31, 2024

are in the amount of $3.1 million per quarter, from March 31, 2025 to September 30, 2025 are in the amount of $2.8 million per

quarter, and the remaining principal balance is due at final maturity on December 31, 2025.

of September 30, 2021 and December 31, 2020, the outstanding balance on the term loan was $58.4 million (net of unamortized

debt issuance costs of $0.6 million) and $74.2 million (net of unamortized debt issuance costs of $0.8 million), respectively.

expense on the term loan during the three months ended September 30, 2021 and 2020, was $0.5 million (including amortization of deferred

debt issuance costs of $0.07 million).

Interest expense on the term loan during the nine months ended September 30, 2021, was $1.9 million (including

amortization of deferred debt issuance costs of $0.2 million).

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

Senior Note Offerings

During the six months ended

June 30, 2021, the Company issued $85.3 million of senior notes due with maturities dates ranging from May 2023 to January 2028 pursuant

During the nine months ended

September 30, 2021, the Company issued $183.0 million of senior notes due with maturities dates ranging from May 2023 to August 2028 pursuant

to At the Market Issuance Sales Agreements with B.

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

On June 24, 2021, the Company

announced it will redeem all of the issued and outstanding 7.25% Senior Notes due 2027 (the "Notes") on July 26, 2021 (the

"Redemption Date").

The Notes have an aggregate principal amount of $122.8 million.

The redemption price is equal to 100%

of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the Redemption Date.

The Notes, which are

listed on NASDAQ under the ticker symbol "RILYG," will be delisted and cease trading on the Redemption Date.

At June 30, 2021 and December

31, 2020, the total senior notes outstanding was $1,213.1 million (net of unamortized debt issue costs of $13.9 million) and $870.8 million

(net of unamortized debt issue costs of $9.6 million) with a weighted average interest rate of 6.49% and 6.95%, respectively.

on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $20.0 million and $15.6 million for the three

months ended June 30, 2021 and 2020, respectively and $38.6 million and $30.0 million for the six months ended June 30, 2021 and 2020,

respectively.

July 26, 2021, the Company redeemed, in full, $122.8 million aggregate principal amount of our 7.25% Senior Notes due 2027 (“7.25%

2027 Notes”) pursuant to the third supplemental indenture dated December 31, 2017.

The total redemption payment included approximately

$2.1 million in accrued interest.

In connection with the full redemption, the 7.25% 2027 Notes under the ticker symbol “RILYG,”

were delisted from NASDAQ .

On August 4, 2021, the Company

issued $316.3 million of senior notes due in August 2028 (“5.25% 2028 Notes”).

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 $308.7 million (after underwriting commissions, fees, and

other issuance costs of $7.6 million).

The Notes bear interest at the rate of 5.25% per annum.

On September 4, 2021, we

redeemed, in full, $137.5 million aggregate principal amount of our 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 accrued and unpaid interest up to, but excluding, the redemption date.

The total redemption payment included approximately $1.0 million

in accrued interest and $2.1 million in premium.

In connection with the full redemption, the 7.375% 2023 Notes under the ticker symbol

“RILYH,” were delisted from NASDAQ.

On October 22, 2021, we redeemed, in full, $115.7

million aggregate principal amount of our 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% 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.

As of September 30, 2021

and December 31, 2020, the total senior notes outstanding was $1,363 million (net of unamortized debt issue costs of $17.9 million) and

$870.8 million (net of unamortized debt issue costs of $9.6 million) 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 $21.5 million and $15.6 million for

the three months ended September 30, 2021 and 2020, respectively and $60.0 million and $45.5 million for the nine months ended September

30, 2021 and 2020, respectively.

The most recent sales agreement

prospectus was filed by us with the SEC on April 6, 2021 (the “April 2021 Sales Agreement Prospectus”), supplementing the

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

This program provides for the sale by

the Company of up to $150.0 million of certain of the Company’s senior notes.

As of June 30, 2021, the Company had $64.7 million remaining

availability under the April 2021 Sales Agreement.

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

prospectus filed on April 6, 2021 (the “April 2021 Sales Agreement Prospectus”), and the prospectus filed on January 28, 2021

(the “January 2021 Sales Agreement Prospectus”).

This program provides for the sale by the Company of up to $250.0 million of

certain of the Company’s senior notes.

As of September 30, 2021, the Company had $152.3 million remaining availability under

the August 2021 Sales Agreement.

Off Balance Sheet Arrangements

3 unchanged sentences

Babcock and Wilcox Commitments

On June 30, 2021, in connection

with B&W’s entry into new debt financing with lenders not related to us, we agreed to guaranty (the “B.

Riley Guaranty”)

up to $110.0 million of obligations that B&W may owe to providers of cash collateral pledged in connection with such debt financing.

Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration

of B&W’s obligations under the Reimbursement Agreement.

B&W shall pay us $0.9 million per annum in connection with the B.

On June 30, 2021, we agreed

to guaranty (the “B.

Riley Guaranty”) up to $110.0 million 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.

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 us $0.9 million per annum in connection

Riley Guaranty.

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No additional borrowings have been made since the initial funding, leaving unused future commitments

available of up to 26.4 million EUROS as of June 30, 2021.

At June 30, 2021, we had

an outstanding commitment to purchase a loan pursuant to an assignment agreement with a client in the amount of $77.5 million that was

funded on July 2, 2021.

available of up to 26.4 million EUROS as of September 30, 2021.

As of September 30, 2021,

we had an outstanding commitment to purchase a loan pursuant to an assignment agreement with a client in the amount of $77.5 million that

was funded on July 2, 2021.

Simultaneously with the funding of the loan on July 2, 2021, we received a principal payment on the loan for

$27.5 million reducing the loans receivable balance to $50.0 million.

In the normal course of business,

we enter into commitments to our clients in connection with capital raising transactions, such as firm commitment underwritings and equity

lines of credit.

These commitments require us to purchase securities at a specified price.

Securities underwriting exposes us to market

and credit risk, primarily in the event that, for any reason, securities purchased by us cannot be distributed at the anticipated price.

Except as disclosed above,

23 unchanged sentences

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

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

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

July 26, 2021, we redeemed, in full, $122.8 million aggregate principal amount of our 7.25% Senior Notes due 2027 (“7.25% 2027 Notes”)

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

The total redemption payment included approximately $2.1 million

in accrued interest.

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

On August 4, 2021, we issued

$316.3 million 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 $308.7

million (after underwriting commissions, fees, and other issuance costs of $7.6 million).

The 5.25% 2028 Notes bear interest

at the rate of 5.25% per annum.

September 4, 2021, we redeemed, in full, $137.5 million aggregate principal amount of our 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 accrued and unpaid interest up to, but excluding, the redemption date.

The total redemption payment

included approximately $1.0 million in accrued interest and $2.1 million in premium.

In connection with the full redemption, the 7.375%

2023 Notes under the ticker symbol “RILYH,” were delisted from NASDAQ .

On October 22, 2021, we redeemed, in full, $115.7 million aggregate

principal amount of our 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

In connection with the full redemption,

the 7.25% 2027 Notes were delisted from NASDAQ.

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.

As a result of the above,

our total senior notes payable (including interest) increased to $1,497.4 million as of June 30, 2021, and comparing June 30, 2021

to December 31, 2020, our senior notes payable due in one year or less increased by $137.1 million, our senior notes payable due in 1-3

years increased by $128.5 million, our senior notes due in 4-5 years increased by $360.4 million while our senior notes due in more than

5 years decreased by $220.3 million.

Additionally, our total contractual obligations increased to $1,860.1 million at June 30, 2021

and comparing June 30, 2021 to December 31, 2020, our total payments due in one year or less increased by $102.2 million, our payments

due in 1-3 years increased $152.5 million, our payments due in 4-5 years increased by $541.7 million, while our payments due in more than

5 years decreased by $215.1 million.

our total senior notes payable (including interest) increased to $1,713.0 million as of September 30, 2021, and comparing September

30, 2021 to December 31, 2020, our senior notes payable due in one year or less increased by $21.4 million, our senior notes payable due

in 1-3 years increased by $16.3 million, our senior notes due in 4-5 years increased by $332.3 million while our senior notes due in more

than 5 years increased by $251.2 million.

Additionally, our total contractual obligations increased to $2,056.8 million as of September

30, 2021 and comparing September 30, 2021 to December 31, 2020, our total payments due in one year or less decreased by $12.2 million,

our payments due in 1-3 years increased $37.0 million, our payments due in 4-5 years increased by $500.6 million, and our payments due

in more than 5 years increased by $252.6 million.

There were no other material

2 unchanged sentences

See Note 2(u) to the accompanying

financial statements for recent accounting pronouncements we have not yet adopted and recently adopted.

financial statements for recent accounting standards we have not yet adopted and recently adopted.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis