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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-03-04 · 756 added, 1577 removed, 130 unchanged (95% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains

forward-looking statements.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This 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 statements.

Except as required by law we are under no obligation to update any of the forward-looking statements

after the filing of this Annual 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 consolidated financial statements and

the related notes and other financial information appearing elsewhere in this Annual 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 Annual Report under the caption “Risk

Risk factors that

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

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 statements.

Except as required by law we are under no obligation to update any of the forward-looking statements after the filing of this Annual 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 consolidated financial statements and the related notes and other financial information appearing elsewhere in this Annual 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 Annual 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;

changing conditions in the financial markets;

our ability to

generate sufficient revenues to achieve and maintain profitability;

to generate sufficient revenues to achieve and maintain profitability;

our exposure to credit risk;

1 unchanged sentence

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

competition in

the asset management business;

competition in the

asset management business;

potential losses related to our auction or liquidation engagements;

our dependence on communications,

information and other systems and third parties;

potential losses related to purchase transactions in our auction and liquidations

the potential loss of financial institution clients;

our dependence on communications, information

and other systems and third parties;

potential losses related to purchase transactions in our auction and liquidations business;

potential loss of financial institution clients;

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 mark-downs in inventory in connection with purchase transactions;

failure to successfully compete in any

of our segments;

changing economic

and market conditions, including increasing inflation;

the continuing effects of the COVID-19 pandemic, or other pandemics or severe

public health crises, and other related impacts including supply chain disruptions, labor shortages and increased labor costs;

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;

loss of key personnel;

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

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;

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;

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

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

or otherwise.

Except as otherwise

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

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

Riley Financial,

our ability to realize the benefits of our completed acquisitions,

including our ability to achieve anticipated opportunities and 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

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 Annual Report to the “Company,” “B.

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

Riley Financial, Inc.

and all of its subsidiaries.

Riley Financial,

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

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,

Riley FBR) was formed in November 2017 through the merger of B.

Riley & Co, LLC and FBR Capital Markets &

Co., which the Company acquired in June 2017.

Riley Wealth Management, Inc .

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

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

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

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.

o Great 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, L.P.

pursuant to an investment

advisory services agreement, that provide senior secured loans and second lien secured loan facilities to middle market public

and private U.S.

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

valuation and appraisal, and operations management services.

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

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

Riley Real Estate works with real estate owners and tenants

through all stages of the real estate life cycle.

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

family offices and individuals on real estate projects worldwide.

Riley Financial, Inc.

Riley” or the “Company”) is a diversified financial services platform

and opportunistically invests in companies or assets with attractive risk-adjusted return profiles to benefit its shareholders.

its affiliated subsidiaries, B.

Riley provides a full suite of investment banking, corporate finance research, sales, and trading, as

well as advisory, valuation, and wealth management, services.

The Company’s major business lines include:

Riley Securities, a leading, full service investment bank that provides corporate finance,

lending, research, securities lending and sales and trading services to corporate, institutional, and high net worth individual

It is nationally recognized for its proprietary small and mid-cap equity research.

Riley Securities was established from

the merger of B.

Riley & Co, LLC and FBR Capital Markets & Co.

Riley Wealth Management, which provides comprehensive

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

retirement plans, trusts, foundations, and endowments.

The firm was formerly known as Wunderlich Securities, Inc., which the Company

acquired in July 2017.

● National Holdings Corporation (“National”), which

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

was acquired in February 2021.

Riley Capital Management, which is a Securities and Exchange

Commission (“SEC”) registered investment advisor, that includes B.

Riley Asset Management, an advisor to and/or manager of

certain private funds.

Riley Advisory Services, which provides expert

witness, bankruptcy, financial advisory, forensic accounting, valuation and appraisal, and operations management services to companies,

financial institutions, and the legal community.

Riley Advisory Services is primarily comprised of the bankruptcy and restructuring,

forensic accounting, litigation support, and appraisal and valuation practices.

Riley Retail Solutions, which is a leading

provider of asset disposition, liquidation, and auction solutions to a wide range of retail and industrial clients.

Riley Real Estate, which advises companies,

financial institutions, investors, family offices and individuals on real estate projects worldwide.

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.

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.

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.

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

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

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

40% equity interest therein.

o 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.

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

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

● BR Brand Holding, LLC (“BR Brands”), in which the

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

BR Brand 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

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

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

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

For financial reporting

purposes we classify our businesses into five operating segments:

(i) Capital Markets, (ii) Auction and Liquidation, (iii) Financial

Consulting, (iv) Principal Investments – United Online and magicJack and

Riley Real Estate,

LLC 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, which identifies

attractive investment opportunities and seeks to control or influence the operations of our portfolio company investments to deliver financial

and operational improvements that will maximize the Company’s free cash flow, and therefore, shareholder returns.

The 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.

● Communications consist of United Online, Inc.

(“UOL” or “United Online”), which was acquired in July 2016, magicJack VocalTec Ltd.

(“magicJack”),

which was acquired in November 2018, a 40% equity interest in Lingo Management, LLC (“Lingo”), which was acquired in November

2020, and a mobile virtual network operator business (“Marconi Wireless”), which was acquired in October 2021.

of certain regulatory approvals, the Company has the right to acquire an additional 40% equity interest in Lingo.

The following briefly

describes each such business:

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.

○ magicJack is a Voice over IP (“VoIP”) cloud-based

technology and services and wireless mobile communications provider.

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

○ Marconi Wireless is a mobile virtual network operator business that provides mobile phone voice, text,

and data services and devices.

BR Brand Holding (“BR Brands”), in which the Company owns a majority interest, provides licensing of certain brand trademarks.

BR Brands owns the assets and intellectual property related to licenses of six brands:

Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore as well as investments in the Hurley and Justice brands with Bluestar Alliance LLC (“Bluestar”), a brand management company.

are headquartered in Los Angeles with over 44 offices 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 – Communications, 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, wealth management 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.

Auction and Liquidation

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

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

and distressed circumstances.

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

as well as parts of Europe, Asia and Australia.

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

store liquidations and wholesale and industrial assets dispositions.

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

Wealth management resources include market views from our investment strategists and B.

Riley Securities’ proprietary

equity research.

Auction 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.

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.

Financial Consulting

Our Financial Consulting segment provides services to law firms,

corporations, financial institutions, lenders, and private equity firms.

These services primarily include bankruptcy, financial

advisory, forensic accounting, litigation support, real estate consulting and valuation and appraisal services.

Our Financial Consulting

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

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

Financial 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 - Communications Segment .

Our Principal Investments - Communications segment consists of businesses which have

been acquired primarily for attractive investment return characteristics.

Currently, this segment includes, among other investments,

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

subscription services, and Marconi Wireless, through which we provide mobile phone services and devices.

Brands Segment .

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

and is held by BR Brand.

On March 1, 2021, the

Company announced its intention to redeem at par, and at its option, $128.2 million of senior notes due in February 2027 (“7.50%

2027 Notes”) on March 31, 2021 pursuant to the second supplemental indenture dated May 31, 2017.

The total redemption payment

will include approximately $1.6 million in accrued interest.

On February 25, 2021,

the Company completed the acquisition of National Holdings Corporation (“National), pursuant to an agreement and plan of

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

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

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

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

We previously owned approximately

45% of the common stock of National.

National complements our Capital Markets segment, bringing approximately 900 registered representatives

managing over $30 billion in assets.

On January 25, 2021, the

Company issued $230,000 of senior notes due in January 2028 (“6.0% 2028 Notes”) pursuant to the prospectus supplement

dated February 12, 2020.

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

The 6.0% 2028 Notes are unsecured and due

and payable in full on January 31, 2028.

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

of $225,746 (after underwriting commissions, fees and other issuance costs of $4,254).

The Notes bear interest at the rate of 6.0%

On January 23, 2021,

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

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

(collectively, “FRG”) in connection

with FRG’s acquisition of Pet Supplies Plus.

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

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

proceeds of approximately $61,370 after underwriting fees and costs.

On November 30, 2020

we closed a recapitalization transaction with Lingo Management, LLC (“Lingo”), a global cloud/UC and managed service

Pursuant to the recapitalization, B.

Riley purchased Lingo’s existing indebtedness held by affiliates of Garrison

Investment Group and converted a portion of such indebtedness into a 40% equity interest in Lingo with the ability to acquire

an additional 40% equity interest in consideration for the conversion of an additional portion of such indebtedness.

On January 30, 2020, the World Health Organization (“WHO”)

announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”).

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

into 2021, the full impact of the COVID-19 outbreak continues to evolve, as countries across the world manage repeated waves of

the pandemic and vaccines come to market.

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 for an extended period, our results of operations,

financial position and cash flows may be materially adversely affected.

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.

Recent Developments

On January 19, 2022, we acquired FocalPoint Securities, LLC, an independent

investment bank based in Los Angeles.

The combination is expected to significantly expand B.

Riley Securities’ mergers and acquisitions

(“M&A”) advisory business and enhance its debt capital markets and financial restructuring capabilities.

Founded in 2002,

FocalPoint specializes in M&A, private capital advisory, financial restructuring, and special situation transactions.

The firm includes

approximately 50 investment banking professionals with deep industry specialization in high-growth sectors such as aerospace and defense,

industrials, business services, consumer, healthcare, and technology/media/telecom.

Our acquisition of FocalPoint builds upon the momentum

and proven execution capabilities of both firms and is in line with our stated intent to expand capabilities in M&A advisory and fixed

This combination provides strategic and financial sponsor clients with access to both firms’ proven execution capabilities

and a full suite of end-to-end services from a single platform.

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 fourth quarter of 2021, the full impact of the COVID-19 outbreak continued

to evolve, with the emergence of variant strains and breakthrough infections becoming prevalent both in the U.S.

and worldwide.

economy recovers, aided by stimulus packages and fiscal and monetary policies, inflation has been rising at historically high rates,

and the Federal Reserve has signaled that it will begin increasing the target federal funds effective rate.

The impact of the COVID-19

outbreak and these related matters 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 and natural immunity

in controlling 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.

Results of Operations

The following period

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

Year Ended December 31, 2020 Compared to Year Ended December

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

A discussion of changes in our results of operations during the year ended December 31,

2020 compared to the year ended December 31, 2019 has been omitted from this Annual Report on Form 10-K, but may

be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in

our Annual Report on Form 10-K during the year ended December 31, 2020, filed with the SEC on March 4, 2021, which discussion

is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

Consolidated Statements of Income

3 unchanged sentences

Services and fees

Trading income and fair value adjustments on

Trading income and fair value adjustments on loans

Interest income - Loans and securities lending

12 unchanged sentences

Interest income

Loss on equity investments

Gain on extinguishment of loans and other

Income (loss) on equity investments

Interest expense

1 unchanged sentence

Provision for income taxes

Net (loss) income attributable to noncontrolling interests

Net income (loss) attributable to noncontrolling interests

Net income attributable to B.

3 unchanged sentences

n/m - Not applicable or not meaningful.

The table below and

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

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

December 31, 2021

2 unchanged sentences

Capital Markets segment

Wealth Management segment

Auction and Liquidation segment

Financial Consulting segment

Principal Investments - United Online and magicJack segment

Principal Investments - Communications segment

Brands segment

1 unchanged sentence

Auction and Liquidation segment

Principal Investments - United Online and magicJack segment

Principal Investments - Communications segment

Trading income and fair value adjustments on loans

Capital Markets segment

Wealth Management segment

Interest income - Loans and securities lending

1 unchanged sentence

Total revenues

n/m - Not applicable or not meaningful.

Total revenues increased

approximately $250.6 million to $902.7 million during the year ended December 31, 2020 from $652.1 million during the year ended

December 31, 2019.

The increase in revenues during the year ended December 31, 2019 was primarily due to an increase in revenue

from services and fees of $206.6 million, an increase in revenue from interest income — loans and securities lending of $25.3

million and increase in revenue from sale of goods of $21.2 million, partially offset by a decrease in revenue from trading income

and fair value adjustments on loans of $2.4 million.

The increase in revenue from services and fees of $206.6 million in 2020 was

primarily due to an increase in revenue of $147.5 million in the Capital Markets segment, $44.8 million in the Auction and Liquidation

segment, $15.3 million in the Financial Consulting segment and $12.4 million in the Brands segment, partially offset by a decrease

of $13.5 million in the Principal Investments - United Online and magicJack segment.

Revenues from services

and fees in the Capital Markets segment increased approximately $147.5 million, to $412.2 million during the year ended December

31, 2020 from $264.7 million during the year ended December 31, 2019.

The increase in revenues was primarily due to increases in

revenue of $125.5 million from corporate finance, consulting and investment banking fees, in commissions of $5.9 million and in

other income, including investment dividends of $20.3 million, partially offset by a decrease of $4.2 million in wealth and asset

management fees.

Revenues from services

and fees in the Auction and Liquidation segment increased $44.8 million, to $63.1 million during the year ended December 31, 2020

from $18.3 million during the year ended December 31, 2019.

The increase in revenues in the Auction and Liquidation segment was

primarily due to an increase in the number of fee related retail liquidation engagements in 2020 as compared to 2019.

in 2019 were negatively impacted from a loss incurred for a retail liquidation contract that was entered into during the fourth

quarter of 2019 to liquidate the assets of a retailer where the funds advanced exceeded the proceeds recovered from the liquidation

of inventory.

During the first half of 2020, the impact of COVID-19 resulted in delays and the temporary stoppage of certain retail

liquidation engagements.

In June 2020, these retail liquidation engagements resumed as a number of states allowed the reopening

of retail stores.

Revenues from services

and fees in the Financial Consulting segment increased $15.3 million, to $91.6 million during the year ended December 31, 2020

approximately $837.8 million to $1,740.6 million during the year ended December 31, 2021 from $902.7 million during the year ended December

The increase in revenues during the year ended December 31, 2021 was primarily due to an increase in revenue from services and

fees of $505.9 million, an increase in revenue from trading income and fair value adjustments on loans of $282.7 million, an increase

in revenue from sale of goods of $29.1 million, and an increase in revenue from interest income - loans and securities lending of $20.2

million, as further described below.

The increase in revenue from services and fees of $505.9 million was primarily due to increases in

revenue of $302.0 million in the Wealth Management segment, $235.4 million in the Capital Markets segment, $4.8 million in the Principal

Investments - Communications segment, $3.9 million in the Brands segment, and $2.7 million in the Financial Consulting segment, partially

offset by a decrease of $42.9 million in the Auction and Liquidation segment, as further described below.

from services and fees in the Capital Markets segment increased approximately $235.4 million, to $575.3 million during the year

ended December 31, 2021 from $339.9 million during the year ended December 31, 2020.

The increase in revenues was primarily due

to increases in revenue of $203.2 million from corporate finance, consulting and investment banking fees, $26.0 million from the

acquisition of National, $5.5 million in dividends, and $1.4 million in other income, partially offset by a decrease in revenue of

$0.6 million from asset management fees.

Revenues from services and fees in the Wealth Management segment increased $302.0 million, to $374.4 million during the year ended December 31, 2021 from $72.3 million during the year ended December 31, 2020.

The increase in revenues was primarily due to increases in revenue of $280.9 million from the acquisition of National, $20.7 million from wealth and asset management fees, and $0.5 million in other income.

Revenues from services and fees in the Auction and Liquidation segment decreased $42.9 million, to $20.2 million during the year ended December 31, 2021 from $63.1 million during the year ended December 31, 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 $2.7 million, to $94.3 million during the year ended December 31, 2021 from $91.6 million during the year ended December 31, 2020.

The increase in revenues was primarily due to an increase in revenue of $2.4 million from advisory services.

Revenues from services and

fees in the Principal Investments - Communications segment increased $4.8 million to $88.5 million during the year ended December 31,

2021 from $83.7 million during the year ended December 31, 2020.

The increase in revenues was primarily due to increases in revenue

of $16.6 million from consulting fees and in other income of $0.7 million, partially

offset by a decrease of $2.0 million in valuation and appraisal fees.

Revenues from services

and fees in the Principal Investments - United Online and magicJack segment decreased $13.5 million to $83.7 million year ended

December 31, 2020 from $97.1 million during the year ended December 31, 2019.

The decrease in revenues from services and fees is

a result of a decrease in subscription services of $9.4 million and a decrease in advertising licensing and other of $4.3 million.

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

Revenues from services

and fees in the Brands segment increased approximately $12.4 million, to $16.5 million during the year ended December 31, 2020

from $4.1 million for the year ended December 31, 2019.

We established the Brands segment in 2019 following the acquisition of

a majority interest in BR Brands on October 28, 2019.

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

Trading income and

fair value adjustments on loans decreased $2.4 million to income of $104.0 million during the year ended December 31, 2020 from

$106.5 million for the year ended December 31, 2019.

Fair value adjustments on our loans receivable at fair value included unrealized

losses of $22.0 million and gains of $12.3 million during the year ended December 31, 2020 and 2019, respectively.

unrealized trading gains on investments made in our proprietary trading account were $126.1 million and $94.2 million during the

year ended December 31, 2020 and 2019, respectively.

Investments held in our proprietary trading account increased to $777.3 million

at December 31, 2020 from $408.2 million at December 31, 2019.

Interest income –

loans and securities lending increased $25.3 million, to $102.5 million during the year ended December 31, 2020 from $77.2 million

during the year ended December 31, 2019.

Interest income from securities lending was $51.3 million and $40.2 million during the

year ended December 31, 2020 and 2019, respectively.

Interest income from loans was $49.2 million and $34.6 million during the

year ended December 31, 2020 and 2019, respectively.

The increase in interest income on loans was primarily due to the increase

in lending activities in our Capital Markets segment which included an increase in loans receivable to $390.7 million at December

31, 2020 from $269.2 million at December 31, 2019.

Sale of Goods, Cost of Goods Sold and

Year Ended December 31, 2020

Year Ended December 31, 2019

Investments -

United Online

and magicJack

Investments -

United Online

and magicJack

The increase in revenues was primarily due to $12.4 million from the

acquisition of a mobile phone services business during Q4 2021, partially offset by a decrease in revenues of $7.6 million from subscription

Revenues from services and fees in the Brands segment increased approximately $3.9 million, to $20.3 million during the year ended December 31, 2021 from $16.4 million during the year ended December 31, 2020.

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

Trading income and fair

value adjustments on loans increased $282.7 million to income of $386.7 million during the year ended December 31, 2021 compared to $104.0

million during the year ended December 31, 2020.

This was primarily due to increases of $275.8 million in the Capital Markets segment

and $6.8 million in the Wealth Management segment.

The gain of $386.7 million during the year ended December 31, 2021 included realized

and unrealized amounts earned on investments made in our proprietary trading accounts of $376.2 million and unrealized amounts on our

loans receivable, at fair value of $10.5 million.

Interest income – loans and securities lending increased $20.2 million, to $122.7 million during the year ended December 31, 2021 from $102.5 million during the year ended December 31, 2020.

Interest income from securities lending was $66.1 million and $51.3 million during the year ended December 31, 2021 and 2020, respectively.

Interest income from loans was $56.6 million and $51.2 million during the year ended December 31, 2021 and 2020, respectively.

The increase in interest income on loans was primarily due to the increase in lending activities in our Capital Markets segment which included an increase in loans receivable to $873.2 million as of December 31, 2021 from $390.7 million as of December 31, 2020.

Revenues – Sale of Goods

Cost of goods sold

Gross margin on sale of goods

Gross margin percentage

from the sale of goods increased $29.1 million, to $58.2 million during the year ended December 31, 2021 from $29.1 million during

the year ended December 31, 2020.

The increase in revenues from sale of goods was primarily attributable to the sale of goods for

certain retail liquidation engagements where we acquired the title to inventory goods in Europe and operated the retail stores

as part of a going-out-of-business sale.

Cost of goods sold for the year ended December 31, 2020 was $12.5 million, resulting in

a gross margin of 57.2%.

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

to retail liquidation engagements in Europe, $6.1 million of sales of retail goods related to a retail liquidation engagement in the

U.S., and $2.7 million in sales of magicJack devices that were sold in connection with VoIP services, partially offset by a decrease

of $25.7 million from sales of goods related to multiple liquidation engagements that ended in 2020.

Cost of goods sold during the years

ended December 31, 2021 and 2020 was $27.0 million and $12.5 million, respectively, resulting in a gross margin of 53.7% and 57.2%, respectively.

Operating Expenses

Direct Cost of Services

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

the year ended December 31, 2020 and 2019 are as follows:

Year Ended December 31, 2020

Year Ended December 31, 2019

Investments -

United Online

and magicJack

Investments -

United Online

and magicJack

Revenues - Services and fees

Direct cost of services

Gross margin on services and fees

Gross margin percentage

Total direct costs

increased $1.6 million, to $60.5 million during the year ended December 31, 2020 from $58.8 million during the year ended December

Direct costs of services increased by $7.4 million in the Auction and Liquidation segment partially offset by a decrease

of $5.8 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 the costs incurred to operate the retail stores where we acquired title to inventory

goods in Europe and operated a going-out-of-business sale.

The decrease in direct costs in the Principal Investments — United

Online and magicJack segment was primarily a result of the sale of a lower gross margin division of magicJack in May

2019, as well as the impact of cost reductions initiatives in 2020.

Gross margin in the Auction and Liquidation segment for services

and fees increased to 35.5% of revenues during the year ended December 31, 2020, as compared to a loss of 82.0% of revenues during

the year ended December 31, 2019.

The margin in the Auction and Liquidation segment in 2020 is primarily the result of an increase

in the number of fee related engagements during 2020 as compared to 2019.

The margin in 2020 is higher than the loss in 2019 since

the results in 2019 included a loss incurred for a retail liquidation contract that was entered into during the fourth quarter

of 2019 to liquidate the assets of a retailer where the funds advanced exceeded the proceeds recovered from the liquidation of

Principal Investments

- United Online and magicJack

Gross margins in the

Principal Investments - United Online and magicJack segment increased to 76.4% of revenues year ended December 31, 2020 as compared

to 73.7% of revenues during the year ended December 31, 2019.

The increase in margin in the Principal Investments — United

Online and magicJack segment is primarily due to the sale of a lower gross margin division of magicJack in May

2019, as well as the impact of cost reductions initiatives in 2020.

Selling, General

and Administrative Expenses.

Selling, general and administrative expenses during the year ended December 31, 2020 and 2019

were comprised of the following:

Total direct costs decreased $6.1 million, to $54.4 million during the year ended December 31, 2021 from $60.5 million during the year ended December 31, 2020.

Direct costs of services decreased by $10.0 million in the Auction and Liquidation segment, partially offset by an increase of $4.0 million in the Principal Investments - Communications 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 year ended December 31, 2021, partially offset by an increase of $11.7 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.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the years ended December 31, 2021 and 2020 were comprised of the following:

Selling, General and Administrative Expenses

December 31, 2021

1 unchanged sentence

Capital Markets segment

Wealth Management segment

Auction and Liquidation segment

Financial Consulting segment

Principal Investments - United Online and magicJack

Principal Investments - Communications segment

Brands segment

1 unchanged sentence

Total selling, general & administrative expenses

Total selling, general

and administrative expenses increased $43.3 million to $428.6 million during the year ended December 31, 2020 from $385.2 million

for the year ended December 31, 2019.

The increase of $43.3 million in selling, general and administrative expenses was due to

an increase of $27.0 million in the Capital Markets segment, an increase of $1.6 million in the Auction and Liquidation segment,

an increase of $10.1 million in the Financial Consulting segment, an increase of $4.4 million in the Brands segment and an increase

of $5.8 million in the Corporate and Other segment, partially offset by a decrease of $5.5 million in the Principal Investments

- United Online and magicJack segment.

Capital Markets

Selling, general and

administrative expenses in the Capital Markets segment increased by $27.0 million to $271.6 million during the year ended December

31, 2020 from $244.6 million during the year ended December 31, 2019.

The increase was primarily due to increases of $32.7 million

in payroll and related expenses, $2.6 million in legal expenses and $2.3 million in investment banking deal expenses;

offset by decreases of $2.9 million in consulting expenses, $2.1 million in travel and entertainment expenses, $2.0 million in

occupancy expenses, $1.6 million in business development expenses, $0.9 million in clearing charges and $0.6 million in depreciation

and amortization.

Auction and Liquidation

Selling, general and

administrative expenses in the Auction and Liquidation segment increased by $1.6 million to $12.4 million during the year ended

December 31, 2020 from $10.7 million during the year ended December 31, 2019.

The increase in selling, general and administrative

expenses in the Auction and Liquidation segment was primarily due to an increase of $1.5 million in other business development

Financial Consulting

Selling, general and

administrative expenses in the Financial Consulting segment increased by $10.1 million to $68.6 million during the year ended December

31, 2020 from $58.5 million during the year ended December 31, 2019.

The increase in selling, general and administrative expenses

in the Financial Consulting segment was primarily due to increases of $11.2 million in payroll and related expenses and $1.5 million

in other expenses, partially offset by a decrease of $2.5 million in travel and entertainment expenses.

Principal Investments

- United Online and magicJack

Selling, general and

administrative expenses in the Principal Investments - United Online and magicJack segment decreased by $5.6 million to $31.4 million

for the year ended December 31, 2020 from $36.9 million for the year ended December 31, 2019.

The decrease in selling, general

and administrative expenses in the Principal Investments — United Online and magicJack segment is primarily due to decreases

of $1.5 million in payroll and related expenses, $2.1 million in legal expenses, $1.0 million in other expenses and $0.9 million

in depreciation and amortization expense.

Selling, general and

administrative expenses in the Brands segment increased by $4.4 million to $5.7 million during the year ended December 31, 2020

from $1.4 million for the year ended December 31, 2019.

We established the Brands segment in 2019 following the acquisition of

a majority equity interest in BR Brands on October 28, 2019.

Corporate and Other

Selling, general and

administrative expenses for the Corporate and Other segment increased $5.8 million to $38.9 million during the year ended December

31, 2020 from $33.1 million for the year ended December 31, 2019.

The increase of expenses in the Corporate and Other segment for

the year ended December 31, 2020 was primarily due to increases in payroll and related expenses.

Restructuring

Restructuring charges of $1.6 million during the year ended December 31, 2020 were primarily related to impairment

of certain acquired tradename intangibles associated with the Company’s

brand realignment across its subsidiary companies to provide greater external consistency and affiliation.

The restructuring charges

of $1.7 million for the year ended December 31, 2019 were primarily related to severance costs for magicJack employees from a reduction

in workforce and lease termination costs in the Principal Investments – United Online and magicJack segment.

Total selling, general and administrative expenses increased $477.7 million

to $906.2 million during the year ended December 31, 2021 from $428.5 million during the year ended December 31, 2020.

The increase of $477.7 million in selling, general and administrative expenses was due to increases of $146.2 million in the

Capital Markets segment, $295.8 million in the Wealth Management segment, $1.7 million in the Auction and Liquidation segment, $8.8 million

in the Financial Consulting segment, $4.9 million in the Principal Investments - Communications segment, $0.2 million in the Brands

segment, and $20.0 million in the Corporate and Other segment, as described below.

Selling, general and administrative expenses in the Capital Markets segment increased by $146.2 million to $347.6 million during the year ended December 31, 2021 from $201.3 million during the year ended December 31, 2020.

The increase was primarily due to increases of $85.4 million in payroll and related expenses, $32.1 million in consulting expenses, $18.7 million from the acquisition of National, and $10.3 million in investment banking deal expenses, partially offset by a decrease in depreciation and amortization of $0.3 million.

Selling, general and administrative expenses in the Wealth Management segment increased by $295.8 million to $366.1 million during the year ended December 31, 2021 from $70.2 million during the year ended December 31, 2020.

The increase was primarily due to increases of $280.8 million from the acquisition of National and $16.7 million in payroll and related expenses, partially offset by decreases of $1.3 million in legal expenses and $0.5 million in other expenses.

and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment increased by $1.7 million to $14.1 million during the year ended December 31, 2021 from $12.4 million during the year ended December 31, 2020.

The increase was primarily due to an increase of $3.5 million in other business development activities, partially offset by decreases of $0.7 million in payroll and related expenses, $0.6 million in outside contractors, and $0.4 million in foreign currency fluctuations.

Selling, general and administrative expenses in the Financial Consulting segment increased by $8.8 million to $77.4 million during the year ended December 31, 2021 from $68.6 million during the year ended December 31, 2020.

The increase was primarily due to increases of $5.7 million in payroll and related expenses, $1.8 million in legal expenses, $0.7 million in other expenses, $0.6 million in travel and entertainment expenses, and $0.2 million in occupancy expenses.

Investments - Communications

Selling, general and administrative expenses in the Principal Investments - Communications segment increased by $4.9 million to $36.2 million during the year ended December 31, 2021 from $31.4 million during the year ended December 31, 2020.

The increase was primarily due to increases of $1.2 million in communications expenses, $0.9 million in payroll and related expenses, $0.8 million due to a legal settlement accrual release in 2020, $0.8 million in transaction costs, $0.7 million in other expenses, and $0.5 million in other business development activities expenses.

Selling, general and administrative expenses in the Brands segment increased by $0.2 million to $5.9 million during the year ended December 31, 2021 from $5.7 million during the year ended December 31, 2020.

Selling, general and administrative expenses for the Corporate and

Other segment increased $20.0 million to $58.9 million during the year ended December 31, 2021 from $38.9 million during

the year ended December 31, 2020.

The increase was primarily due to increases of $18.9 million in payroll and related expenses, $8.0 million

in gains on extinguishment of debt, and $4.0 million from the consolidation of special purpose acquisition

corporations (“SPACs”) , partially offset by decreases of $8.7 million in legal

settlement accrual, primarily due to recording a pre-acquisition litigation claim related to one of our acquired subsidiaries,

$1.8 million in other expenses, and $0.8 million in legal expenses .

During the year ended December 31, 2021, we repurchased $513.8 million of our senior notes with an aggregate face value of $504.1 million, resulting in a loss net of expenses, premiums paid, and original issue discount of $6.5 million.

The total redemption payments included approximately $6.5 million in accrued interest.

During the year ended December 31, 2020, we repurchased bonds with an aggregate face value of $3.4 million for $1.8 million resulting in a gain net of expenses of $1.6 million.

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

Impairment of tradenames .

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

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

tradenames in the Brands segment were impaired and the Company recognized impairment charges of $12.5 million.

Due to the impact of the COVID-19 outbreak on economic activity and market volatility, we tested our intangible assets as of March 31, 2020 and June 30, 2020 and made the determination that the indefinite-lived tradenames in the Brands segment were impaired and the Company recognized impairment charges of $12.5 million during the year ended December 31, 2020.

There was no impairment recognized during the year ended December 31, 2021.

Other Income (Expense).

Other income included interest income of $0.6 million during the year ended December 31, 2020 compared to $1.6 million during the

year ended December 31, 2019.

Loss on equity investments was $0.6 million during the year ended December 31, 2020 compared to loss

of $1.4 million during the year ended December 31, 2019.

Interest expense was $65.2 million during the year ended December 31,

2020 compared to $50.2 million during the year ended December 31, 2019.

The increase in interest expense during the year ended

December 31, 2020 was primarily due to an increase in interest expense of $17.4 million from the issuance of senior notes, partially

offset by a decrease in interest expense of $2.2 million from the term loan.

Income Before Income

Income before income taxes increased $162.9 million to income before income taxes of $279.5 million during the year

ended December 31, 2020 from an income before income taxes of $116.6 million during the year ended December 31, 2019.

in income before income taxes was primarily due to an increase in revenues of approximately $250.6 million partially offset by

an increase in operating expenses of $72.5 million, an increase in interest expense of $15.0 million and a decrease in loss from

equity investments of $0.8 million.

Provision for Income

Provision for income taxes was $75.4 million during the year ended December 31, 2020 compared to provision for income

taxes of $34.6 million during the year ended December 31, 2019.

The effective income tax rate was a provision of 27.0% for the

year ended December 31, 2020 as compared to a provision of 29.7% for the year ended December 31, 2019.

Net (Loss) Income

Attributable to Noncontrolling Interest .

Net income attributable to noncontrolling interests represents the proportionate share

of net income generated by BR Brand, 20% of the membership interest of which we do not own and Great American Global Partners,

LLC, 50% of the membership interest of which we do not own.

The net loss attributable to noncontrolling interests was $1.1 million

during the year ended December 31, 2020 compared to income of $0.3 million during the year ended December 31, 2019.

Net Income Attributable

to the Company .

Net income attributable to the Company for the year ended December 31, 2020 was $205.1 million, an increase

of net income of $123.5 million, from net income attributable to the Company of $81.6 million for the year ended December 31, 2019.

Increase in net income attributable to the Company during the year ended December 31, 2020 as compared to the same period in 2019

was primarily due to an increase in operating income of $178.1 million, offset by an increase in interest expense of approximately

$15.0 million, a decrease in loss from equity investments of $0.8 million and an increase in provision for income taxes of $40.8

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, 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).

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

On January 9, 2020, the Company

declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on January 31, 2020 to holders of record

as of the close of business on January 21, 2020.

On April 13, 2020, the Company declared a cash dividend $0.4296875 per Depositary

Share, which was paid on April 30, 2020 to holders of record as of the close of business on April 23, 2020.

On July 7, 2020, the

Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on July 31, 2020 to holders of record as of the

close of business on July 21, 2020.

On October 8, 2020, the Company declared a cash dividend $0.4296875 per Depositary Share, which

was paid on October 31, 2020, to holders of record as of the close of business on October 21, 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 will be payable quarterly in arrears, on or about the last day of January, April,

July and October.

On October 8, 2020, the Company declared a cash dividend $0.29193 per Depositary Share, which was paid on October

31, 2020, to holders of record as of the close of business on October 21, 2020.

Net Income Available

to Common Shareholders .

Net income available to common shareholders for the year ended December 31, 2020 was $200.4 million,

an increase of $119.1 million, from net income available to common shareholders of $81.3 million for the year ended December 31,

The increase in net income available to common shareholders during the year ended December 31, 2020 as compared to the same

period in 2019 was primarily due to an increase in operating income of $178.1 million, offset by an increase in interest expense

of approximately $15.0 million, an increase in preferred stock dividends of $4.4 million and an increase in provision for income

taxes of $40.8 million.

Year Ended December 31, 2019 Compared to Year Ended December

Consolidated Statements of Income

(Dollars in thousands)

December 31, 2019

December 31, 2018

Trading income (loss) and

fair value adjustments on loans

Interest income - Loans

and securities lending

Sale of goods

Direct cost of services

Cost of goods sold

Selling, general and administrative

Restructuring charge

expense - Securities lending and loan participations sold

operating expenses

Operating income

income (expense):

Interest income

(Loss) income on equity

Other income included interest income of $0.2 million during the year ended December 31, 2021 compared to $0.6 million during the year ended December 31, 2020.

Gain on extinguishment of loans and other in the amount of $3.8 million during the year ended December 31, 2021 was primarily due to a gain of $6.5 million from National PPP loans that were forgiven by the SBA, partially offset by a loss of $2.7 million due to changes in fair value of warrant liabilities.

Income on equity investments was $2.8 million during the year ended December 31, 2021 compared to a loss of $0.6 million during the year ended December 31, 2020.

Interest expense was $92.5 million during the year ended December 31, 2021 compared to $65.2 million during the year ended December 31, 2020.

The increase in interest expense was primarily due to increases in interest expense of $20.2 million from the issuance of senior notes, $5.9 million from the Nomura term loan, and $1.9 million from the Nomura revolver.

Income Before Income Taxes .

for income taxes

income attributable to noncontrolling interests

Net income attributable

Riley Financial, Inc.

stock dividends

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.

Revenues - Services and

Capital Markets

Auction and Liquidation

Financial Consulting segment

Principal Investments -

United Online and magicJack segment

Brands segment

Revenues - Sale of goods

Auction and Liquidation

Investments - United Online and magicJack segment

Trading income (losses)

and fair value adjustments on loans

Markets segment

Interest income - Loans

and securities lending:

Capital Markets segment

Total revenues increased

approximately $229.1 million to $652.1 million during the year ended December 31, 2019 from $423.0 million during the year ended

December 31, 2018.

The increase in revenues during the year ended December 31, 2019 was primarily due to an increase in revenue

from services and fees of $68.4 million, an increase in revenue from interest income — loans and securities lending of $38.9

million, an increase in revenue from trading income (losses) and fair value adjustments on loans of $114.5 million and increase

in revenue from sale of goods of $7.3 million.

The increase in revenue from services and fees of $68.4 million in 2019 was primarily

due to an increase in revenue of $32.6 million in the Capital Markets segment, $24.9 million in the Financial Consulting segment,

$43.5 million in the Principal Investments - United Online and magicJack segment and $4.1 million in the Brands segment, partially

offset by a decrease of $36.6 million in the Auction and Liquidation segment.

Revenues from services

and fees in the Capital Markets segment increased approximately $32.6 million, to $264.7 million during the year ended December

31, 2019 from $232.1 million during the year ended December 31, 2018.

The increase in revenues was primarily due to an increase

in revenue of $24.2 million from corporate finance, consulting and investment banking fees and an increase in asset management fees and carried interest of $8.3 million.

Revenues from services

and fees in the Auction and Liquidation segment decreased $36.6 million, to $18.3 million during the year ended December 31, 2019

from $54.9 million during the year ended December 31, 2018.

The decrease in revenues of $36.6 million was primarily due to a decrease

in revenues of $31.8 million from services and fees related to retail liquidation engagements and a decrease in revenues of $2.5

million from services and fees in our wholesale and industrial auction division.

The $31.8 million decrease in revenues from retail

liquidation engagements was caused by a retail engagement loss incurred for a contract entered into during the fourth quarter of

2019 to liquidate the assets of a retailer where the funds advanced exceed the expected recovery.

Revenues from

services and fees in the Financial Consulting segment increased $24.9 million, to $76.3 million during the year ended

December 31, 2019 from $51.4 million during the year ended December 31, 2018.

The increase in revenues was primarily due to

an increase in revenue of $24.8 million from bankruptcy, financial advisory, and forensic accounting services primarily as a result of the acquisition of GlassRatner on August 1, 2018.

Revenues from services

and fees in the Principal Investments - United Online and magicJack segment increased $43.5 million to $97.1 million year ended

December 31, 2019 from $53.7 million during the year ended December 31, 2018.

The increase in revenues from services and fees is

a result of the acquisition of magicJack on November 14, 2018 in the segment for the full year ended December 31, 2019 which increased

revenue $53.3 million from the year ended December 31, 2018.

This increase was partially offset by a decrease in services and fees

revenue from UOL of $9.8 million.

Management expects revenues from UOL continue to decline year over year.

The primary source of

revenue included in this segment is subscription services revenue and some advertising and other revenues.

Revenues from services

and fees in the Brands segment were $4.1 million for the year ended December 31, 2019.

We established the Brands segment in 2019

following the acquisition of a majority interest in BR Brands on October 28, 2019.

The primary source of revenue included in this

segment is the licensing of trademarks.

Trading income (losses)

and fair value adjustments on loans increased $114.5 million to income of $106.5 million for the year ended December 31, 2019 from

a loss of $8.0 million during the year ended December 31, 2018.

Investments made in our proprietary trading account increased to

$408.2 million at December 31, 2019 from $273.6 million at December 31, 2018.

Interest income –

loans and securities lending increased $38.9 million, to $77.2 million during the year ended December 31, 2019 from $38.3 million

during the year ended December 31, 2018.

Interest income from securities lending was $40.2 million and $31.8 million during the

year ended December 31, 2019 and 2018, respectively.

Interest income from loans was $34.6 million and $6.5 million during the year

ended December 31, 2019 and 2018, respectively.

The increase in interest income on loans was primarily due to the increase in lending

activities in our Capital Markets segment which included an increase in loans receivable to $269.2 million at December 31, 2019

from $38.8 million at December 31, 2018.

Sale of Goods, Cost of Goods Sold and

Year Ended December 31, 2019

Year Ended December 31, 2018

Investments -

United Online

and magicJack

Investments -

United Online

and magicJack

Revenues - Sale of Goods

Cost of goods sold

Gross margin on sale of goods

Gross margin percentage

from the sale of goods increased $7.3 million, to $7.9 million during the year ended December 31, 2019 from $0.6 million during

the year ended December 31, 2018.

The increase in revenues from sale of goods were primarily attributable to $4.2 million of goods

sold as part of our retail liquidation engagements and $3.1 million of sales of magicJack devices that are sold in connection with

VoIP services and, to a lesser extent, sale of mobile broadband devices from UOL that are sold in connection with the mobile broadband

Cost of goods sold for the year ended December 31, 2019 was $7.6 million, resulting in a gross margin of 4.5%.

Operating Expenses

Direct Cost of Services.

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

the year ended December 31, 2019 and 2018 are as follows:

Year Ended December 31, 2019

Year Ended December 31, 2018

Investments -

United Online

and magicJack

Investments -

United Online

and magicJack

Revenues - Services and fees

Direct cost of services

Gross margin on services and fees

Gross margin percentage

Total direct costs

increased $24.1 million, to $58.8 million during the year ended December 31, 2019 from $34.8 million during the year ended December

Direct costs of services increased by $13.7 million in the Auction and Liquidation segment and $10.4 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 mix of engagement types performed during the year ended December 31, 2019 as compared to the year ended December 31, 2018.

The increase in direct costs in the Principal Investments - United Online and magicJack segment was primarily as a result of the

acquisition of magicJack on November 14, 2018.

Gross margin in the

Auction and Liquidation segment for services and fees decreased to a loss of 82.0% of revenues during the year ended December 31,

2019, as compared to 64.3% of revenues during the year ended December 31, 2018.

The decrease in margin in the Auction and Liquidation

segment is due to a retail engagement loss incurred for a contract entered into during the fourth quarter of 2019 to liquidate

the assets of a retailer where the funds advanced exceed the expected recovery.

Principal Investments

- United Online and magicJack

Gross margins in the

Principal Investments - United Online and magicJack segment increased to 73.7% of revenues year ended December 31, 2019 as compared

to 71.8% of revenues during the year ended December 31, 2018.

The increase in margin in the Principal Investments - United Online

and magicJack segment is primarily due to the mix of revenues of services and fees and as a result of the acquisition of magicJack

on November 14, 2018.

Selling, General

and Administrative Expenses.

Selling, general and administrative expenses during the year ended December 31, 2019 and 2018

were comprised of the following:

Selling, General and Administrative Expenses

December 31, 2019

December 31, 2018

Capital Markets segment

Auction and Liquidation segment

Financial Consulting segment

Principal Investments - United Online and magicJack segment

Brands segment

Corporate and Other segment

Total selling, general & administrative expenses

Total selling, general

and administrative expenses increased $74.7 million to $385.2 million during the year ended December 31, 2019 from $310.5 million

for the year ended December 31, 2018.

The increase of $74.7 million in selling, general and administrative expenses was due to

an increase of $21.0 million in the Capital Markets segment, an increase of $2.4 million in the Auction and Liquidation segment,

an increase of $20.9 million in the Financial Consulting segment, an increase of $18.4 million in the Principal Investments - United

Online and magicJack segment an increase of $1.4 million in the Brands segment and an increase of $10.6 million in the Corporate

and Other segment.

Capital Markets

Selling, general

and administrative expenses in the Capital Markets segment increased by $21.0 million to $244.6 million during the year ended

December 31, 2019 from $223.5 million during the year ended December 31, 2018.

The increase was primarily due to an increase

of $3.0 million in payroll and related expenses, $11.1 million in professional advisory fees incurred in connection with the

management of certain investments that are included in securities and other investments owned and $9.0 million in

other expenses, partially offset by a decrease of $2.0 million in occupancy expenses.

Auction and Liquidation

Selling, general and

administrative expenses in the Auction and Liquidation segment increased by $2.4 million to $10.7 million during the year ended

December 31, 2019 from $8.3 million during the year ended December 31, 2018.

The increase in selling, general and administrative

expenses in the Auction and Liquidation segment was primarily due to an increase of $2.0 million in payroll and related expenses.

Financial Consulting

Selling, general

and administrative expenses in the Financial Consulting segment increased by $20.9 million to $58.5 million during the year

ended December 31, 2019 from $37.6 million during the year ended December 31, 2018.

The increase was primarily due to

increases of $15.9 million in payroll and related expenses, $2.1 million in other expenses, $1.1 million in occupancy

expenses and $0.8 million in travel and entertainment expenses.

The increase in expenses was primarily as a result of the acquisition of GlassRatner on August 1, 2018.

Principal Investments

- United Online and magicJack

Selling, general and

administrative expenses in the Principal Investments - United Online and magicJack segment increased by $18.4 million to $36.9

million for the year ended December 31, 2019 from $18.6 million for the year ended December 31, 2018.

The increase in selling,

general and administrative expenses in the Principal Investments - United Online and magicJack segment is due to the acquisition

of magicJack on November 14, 2018.

magicJack’s selling, general and administrative expenses included in the segment for the

year ended December 31, 2019 was $22.3 million.

Selling, general and

administrative expenses in the Brands segment was $1.4 million for the year ended December 31, 2019.

We established the Brands

segment in 2019 following the acquisition of a majority equity interest in BR Brands on October 28, 2019.

Corporate and Other

Selling, general and

administrative expenses for the Corporate and Other segment increased $10.6 million to $33.1 million during the year ended December

31, 2019 from $22.5 million for the year ended December 31, 2018.

The increase of expenses in the Corporate and Other segment for

the year ended December 31, 2019 was primarily due to an increase of $9.2 million in payroll and related expenses.

Restructuring

Restructuring charge decreased $6.8 million to $1.7 million for the year ended December 31, 2019.

The restructuring

charges during the year ended December 31, 2019 were primarily related to severance costs for magicJack employees from a reduction

in workforce and lease termination costs in the Principal Investments – United Online and magicJack segment.

The re structuring

charge of $8.5 million during the year ended December 31, 2018 was primarily related to severance costs and lease loss accruals

for the planned consolidation of office space related to operations in the Capital Markets segment and the impairment of tradename

for the rebranding of B.

Riley Wealth Management.

Other Income (Expense).

Other income included interest income of $1.6 million during the year ended December 31, 2019 compared to $1.3 million during the

year ended December 31, 2018.

Loss on equity investments was $1.4 million during the year ended December 31, 2019 compared to income

of $8.0 million during the year ended December 31, 2018.

Interest expense was $50.2 million during the year ended December 31,

2019 compared to $33.4 million during the year ended December 31, 2018.

The increase in interest expense during the year ended

December 31, 2019 was primarily due to an increase in interest expense of $18.4 million from the issuance of senior notes, and

an increase in interest expense of $4.2 million from the term loan dated December 2018, offset by a decrease in interest expense

on our asset based credit facility and other borrowings in connection with retail liquidation engagements of $6.4 million.

Income Before Income

Income before income taxes increased $95.3 million to income before income taxes of $116.6 million during the year ended

December 31, 2019 from an income before income taxes of $21.3 million during the year ended December 31, 2018.

The increase in

income before income taxes was primarily due to an increase in revenues of approximately $229.1 million offset by an increase in

operating expenses of $107.9 million, and a decrease in income from equity investments of $9.4 million and an increase in interest

expense of $16.8 million.

Provision for Income

Provision for income taxes was $34.6 million during the year ended December 31, 2019 compared to provision for income

taxes of $4.9 million during the year ended December 31, 2018.

The effective income tax rate was a provision of 29.7% for the year

ended December 31, 2019 as compared to a provision of 23.0% for the year ended December 31, 2018.

Net Income Attributable

to Noncontrolling Interest .

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

generated by BR Brand, 20% of the membership interest of which we do not own and Great American Global Partners, LLC, 50% of the

membership interest of which we do not own.

The net income attributable to noncontrolling interests was $0.3 million during the

year ended December 31, 2019 compared to $0.9 million during the year ended December 31, 2018.

Net Income Attributable

to the Company .

Net income attributable to the Company for the year ended December 31, 2019 was $81.6 million, an increase

of net income of $66.1 million, from net income attributable to the Company of $15.5 million for the year ended December 31, 2018.

Increase in net income attributable to the Company during the year ended December 31, 2019 as compared to the same period in 2018

was primarily due to an increase in operating income of $121.3 million, offset by an increase in interest expense of approximately

$16.8 million, a decrease in income from equity investments of $9.4 million and an increase in provision for income taxes of $29.7

Income before income taxes increased $335.3 million to $614.8 million during the year ended December 31, 2021 from $279.5 million during the year ended December 31, 2020.

The increase in income before income taxes was primarily due to increases in revenues of approximately $837.8 million, gain on extinguishment of loans and other of $3.8 million, and income from equity investments of $3.4 million, partially offset by increases in operating expenses of $482.2 million, interest expense of $27.2 million, and a decrease in interest income of $0.3 million.

Provision for Income Taxes.

Provision for income taxes was $164.0 million during the year ended December 31, 2021 compared to $75.4 million during the year ended December 31, 2020.

The effective income tax rate was a provision of 26.7% during the year ended December 31, 2021 as compared to a provision of 27.0% during the year ended December 31, 2020.

Net Income (Loss) Attributable to Noncontrolling Interest .

Net income 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 $5.7 million during the year ended December 31, 2021 compared to a net loss of $1.1 million during the year ended December 31, 2020.

Net Income Attributable to the Company .

Net income attributable to the Company during the year ended December 31, 2021 was $445.1 million, an increase of $239.9 million, from net income attributable to the Company of $205.1 million during the year ended December 31, 2020.

The increase was primarily due to increases in operating income of $355.6 million, gain on extinguishment of loans and other of $3.8 million, and income from equity investments of $3.4 million, partially offset by increases in provision for income taxes of $88.5 million, interest expense of approximately $27.2 million, net income attributable to noncontrolling interests of $6.9 million, and a decrease in interest income of $0.3 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, par value $0.0001 per share.

Holders of Series A Preferred

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

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

per Depositary Share).

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

On October 15, 2019, the Company declared a cash dividend of $0.3 million representing $0.11458333 per Depositary Share.

was paid on October 31, 2019 to holders of record as of the close of business on October 21, 2019.

On January 9, 2020, the Company

declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on January 31, 2019 to holders of record

as of the close of business on January 21, 2019.

Net Income Available

to Common Shareholders .

Net income available to common shareholders for the year ended December 31, 2019 was $81.3 million,

an increase of $65.8 million, from net income available to common shareholders of $15.5 million for the year ended December 31,

The increase in net income available to common shareholders during the year ended December 31, 2019 as compared to the same

period in 2018 was primarily due to an increase in operating income of $121.3 million, offset by an increase in interest expense

of approximately $16.8 million, a decrease in income from equity investments of $9.4 million and an increase in provision for income

taxes of $29.7 million.

Liquidity and Capital

Our operations are funded

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

loan and credit facility, issuances of common and preferred stock and special purposes financing arrangements.

During the years ended

December 31, 2020 and 2019, we generated net income attributable to the Company of $205.2 million and $81.6 million, respectively.

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

on a quarterly and annual basis.

of December 31, 2020, we had $103.6 million of unrestricted cash and cash equivalents, $1.2 million of restricted cash, $777.3

million of securities and other investments held at fair value, $390.7 million of loans receivable, held at fair value, and $1,000.3

million of borrowings outstanding.

The borrowings outstanding of $1,000.3 million at December 31, 2020 included (a) $870.8

million of borrowings from the issuance of the series of Senior Notes that are due at various dates ranging from May 31, 2023 to

December 31, 2027 with interest rates ranging from 6.375% to 7.5%, (b) $74.2 million term loan borrowed pursuant to the BRPAC Credit

Agreement discussed below, (c) $38.0 million of notes payable, and (d) $17.3 million of loan participations sold .

We believe that our

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

and cash expected to be generated from 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.

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 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 was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.

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

at the rate of 7.375% per annum of the $25,000 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 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.

On July 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 was paid

on November 1, 2021 to holders of record as of the close of business on October 21, 2021.

Net Income Available to Common Shareholders .

Net income available to common shareholders during the year ended December 31, 2021 was $437.6 million, an increase of $237.2 million, from net income available to common shareholders of $200.4 million during the year ended December 31, 2020.

The increase was primarily due to increases in operating income of $355.6 million, gain on extinguishment of loans and other of $3.7 million, and income from equity investments of $3.4 million, partially offset by increases in provision for income taxes of $88.5 million, interest expense of approximately $27.2 million, net income attributable to noncontrolling interests of $6.9 million, preferred stock dividends of $2.7 million, and a decrease in interest income of $0.3 million.

Liquidity and Capital Resources

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 purpose

financing arrangements.

During the years ended December 31, 2021 and 2020, we generated net income attributable to the Company of $445.1 million

and $205.2 million, respectively.

Our cash flows and profitability are impacted by capital markets engagements performed on a quarterly

and annual basis and amounts realized from the sale of our investments in marketable securities.

As of December 31, 2021, we had $278.9 million of unrestricted cash and cash equivalents, $0.9 million of restricted cash, $1,532.1 million of securities and other investments, at fair value, $873.2 million of loans receivable, at fair value, and $2,033.3 million of borrowings outstanding.

The borrowings outstanding of $2,033.3 million as of December 31, 2021 included $1,606.6 million of borrowings from the issuance of the series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $346.4 million term loans borrowed pursuant to the BRPAC Credit Agreement and Nomura Credit Agreement discussed below, $80.0 million of revolving credit facility under the Nomura credit facility discussed below, 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.

Cash Flow Summary

Following is a summary of our

cash flows provided by (used in) operating activities, investing activities and financing activities during the years ended December 31,

2021 and 2020.

A discussion of cash flows during the year ended December 31, 2019 has been omitted from this Annual Report

on Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results

of Operations,” under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K during the year

ended December 31, 2020, filed with the SEC on March 4, 2021, which discussion is incorporated herein by reference and which is available

free of charge on the SEC’s website at www.sec.gov.

Ended December 31, 2021 Compared to Year Ended December 31, 2020

Year Ended December 31,

5 unchanged sentences

Effect of foreign currency on cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Year Ended December

31, 2020 Compared to Year Ended December 31, 2019

Cash provided by operating

activities was $57.7 million during the year ended December 31, 2020 compared to cash used in operating activities of $27.2 million

during the year ended December 31, 2019.

Cash provided by operating activities for the year ended December 31, 2020 included net

income of $204.0 million adjusted for noncash items of $123.4 million and changes in operating assets and liabilities of $269.7

Noncash items of $123.4 million include (a) deferred income taxes of $61.6 million, (b) noncash fair value adjustments

of $22.0 million, (c) depreciation and amortization of $19.4 million, (d) share-based compensation of $18.6 million, (e) other

noncash interest and other of $16.8 million, (f) impairment of leaseholds, intangibles and lease loss accrual and gain on disposal

of fixed assets of $14.1 million, (g) provision for doubtful accounts of $3.4 million, (h) gain on extinguishment of debt of $1.6

million, (i) dividends from equity investments of $1.3 million, (j) income allocated for mandatorily redeemable noncontrolling

interests of $1.2 million, and (k) loss on equity investments of $0.6 million.

Cash used in investing

activities was $128.4 million during the year ended December 31, 2020 compared to cash used in investing activities of $298.6 million

for the year ended December 31, 2019.

During the year ended December 31, 2020, cash used in investing activities consisted of cash

used for purchases of loans receivable of $207.5 million, cash used for purchases of equity investments of $14.0 million, repayments

of loan participations sold of $2.2 million, cash used for acquisition of businesses of $1.5 million and cash used for purchases

of property and equipment and intangible assets of $2.0 million, offset by cash received from loans receivable repayment of $90.1

million, loan participations sold of $6.9 million and proceeds from sale of loans receivable to related party of $1.8 million.

During the year ended December 31, 2019, cash used in investing activities consisted of cash used for loans receivable of $343.8

million, cash used for purchases of equity investments of $33.4 million, repayments of loan participations sold of $18.9 million,

cash used for purchase of a majority equity interest in BR Brands, net of cash acquired of $114.9 million and cash used for purchases

of property and equipment and intangible assets of $3.5 million, offset by proceeds from sale of division of magicJack of $6.2

million, cash received from loans receivable repayment of $159.2 million, loan participations sold of $31.8 million, distributions

from equity investments of $18.2 million and proceeds from sale of property, equipment and intangible assets of $0.5 million.

Cash provided by

financing activities was $69.5 million during the year ended December 31, 2020 compared to cash provided by financing

activities of $250.2 million during the year ended December 31, 2019.

During the year ended December 31, 2020, cash provided

by financing activities primarily consisted of $75.0 million proceeds from our term loan, $186.8 million proceeds from

issuance of senior notes, $0.6 million contributions from noncontrolling interests, $39.5 million proceeds from our offering

of preferred stock, offset by (a) $37.1 million used for repayment of our asset based credit facility, (b) $38.8 million used

to pay dividends on our common shares, (c) $67.3 million used for repayment on our term loan, (d) $48.2 million used to

repurchase our common stock, (e) $1.8 million used to repurchase our senior notes;

(f) $3.4 million used to pay debt issuance

costs, (g) $22.6 million used for payment of employment taxes on vesting of restricted stock, (h) $3.8 million distribution

to noncontrolling interests, (i) $0.4 million used to repay our other notes payable, (j) $4.7 million used to pay dividends

on our preferred shares and (k) $4.3 million used for payment of participating note payable and contingent consideration.

During the year ended December 31, 2019, cash provided by financing activities primarily consisted of $10.0 million proceeds

from our term loan, $281.9 million proceeds from issuance of senior notes, $140.4 million proceeds from our asset based

credit facility $56.6 million proceeds from our offering of preferred stock, offset by (a) $103.3 million used for repayment

of our asset based credit facility, (b) $41.1 million used to pay dividends on our common shares, (c) $22.7 million used for

repayment on our term loan, (d) $7.1 million used to repurchase our common stock and warrants, (e) $4.3 million used for

payment of participating note payable and contingent consideration;

(f) $3.4 million used to pay debt issuance costs, (g)

$2.0 million used for payment of employment taxes on vesting of restricted stock, (h) $2.0 million distribution to

noncontrolling interests, and (i) $0.5 million used to repay our other notes payable.

Year Ended December

31, 2019 Compared to Year Ended December 31, 2018

Cash used in operating

activities was $27.2 million during the year ended December 31, 2019 compared to cash used in operating activities of $102.2 million

during the year ended December 31, 2018.

Cash used in operating activities for the year ended December 31, 2019 included net income

of $81.9 million adjusted for noncash items of $53.4 million and changes in operating assets and liabilities of $162.6 million.

Noncash items of $53.4 million include (a) depreciation and amortization of $19.0 million, (b) share-based compensation of $15.9

million, (c) loss on equity investments of $1.4 million, (d) provision for doubtful accounts of $2.1 million, (e) income allocated

and fair value adjustment for mandatorily redeemable noncontrolling interests of $1.2 million, (f) other noncash interest and other

of $12.3 million, (g) deferred income taxes of $10.9 million, (h) impairment of leaseholds, intangibles and lease loss accrual

and gain on disposal of fixed assets of $0.3 million, (i) dividends from equity investments of $3.2 million and (j) noncash interest

and other of $12.3 million.

used in investing activities was $298.6 million during the year ended December 31, 2019 compared to cash used in investing activities

of $154.1 million for the year ended December 31, 2018.

During the year ended December 31, 2019, cash used in investing activities

consisted of cash used for loans receivable of $343.8 million, cash used for purchases of equity investments of $33.4 million,

repayments of loan participations sold of $18.9 million, cash used for purchase of a majority equity interest in BR Brands, net

of cash acquired of $114.9 million and cash used for purchases of property and equipment and intangible assets of $3.5 million,

offset by proceeds from sale of division of magicJack of $6.2 million, cash received from loans receivable repayment of $159.2

million, loan participations sold of $31.8 million, distributions from equity investments of $18.2 million and proceeds from sale

of property, equipment and intangible assets of $0.5 million.

During the year ended December 31, 2018, cash used in investing

activities consisted of cash used to purchase loans receivable of $38.8 million, cash used for the acquisition of magicJack, net

of cash acquired of $89.2 million, cash used for purchases of equity investments of $16.6 million, cash used of $4.0 million to

acquire a business and cash use of $5.4 million for purchases of property and equipment.

Cash provided by financing

activities was $250.2 million during the year ended December 31, 2019 compared to cash provided by financing activities of $284.9

million during the year ended December 31, 2018.

During the year ended December 31, 2019, cash provided by financing activities

primarily consisted of $10.0 million proceeds from our term loan, $281.9 million proceeds from issuance of senior notes, $140.4

million proceeds from our asset based credit facility $56.6 million proceeds from our offering of preferred stock, offset by (a)

$103.3 million used for repayment of our asset based credit facility, (b) $41.1 million used to pay dividends on our common shares,

(c) $22.7 million used for repayment on our term loan, (d) $7.1 million used to repurchase our common stock and warrants, (e) $4.3

million used for payment of participating note payable and contingent consideration;

(f) $3.4 million used to pay debt issuance

costs, (g) $2.0 million used for payment of employment taxes on vesting of restricted stock, (h) $2.0 million distribution to noncontrolling

interests, and (i) $0.5 million used to repay our other notes payable.

During the year ended December 31, 2018, cash provided by

financing activities primarily consisted of (a) $300.0 million proceeds from asset based credit facility, (b) $259.0 million proceeds

from issuance of senior notes, (c) $80.0 million proceeds from our term loan and (d) $51.0 million in proceeds from notes payable,

offset by (a) $300.0 million used to repay the asset based credit facility, (b) $22.7 million used to pay cash dividends, (c) $51.7

million used to repay other notes payable, (d) $1.1 million distributions to noncontrolling interests, (e) $7.3 million used for

debt issuance costs, (f) $18.7 million used to repurchase common stock, and (g) $3.7 million used for the payment of employment

taxes on vesting of restricted stock.

Net increase in cash, cash equivalents and restricted cash

Cash provided by operating activities was $50.9 million during

the year ended December 31, 2021 compared to cash provided by operating activities of $57.7 million during the year ended December 31,

Cash provided by operating activities during the year ended December 31, 2021 included net income of $450.8 million adjusted

for noncash items of $91.5 million and changes in operating assets and liabilities of $491.4 million.

Noncash items of $91.5 million

included deferred income taxes of $61.8 million, share-based compensation of $36.0 million, depreciation and amortization of $25.9 million,

loss on extinguishment of debt of $6.1 million, dividends from equity investments of $2.1 million, provision for doubtful accounts of

$1.5 million, effect of foreign currency on operations of $0.1 million, and income allocated for mandatorily redeemable noncontrolling

interests of $0.9 million, partially offset by interest and other of $22.3 million, fair value adjustments of $7.6 million,

gain on extinguishment of loans of $6.5 million, gain on equity investments of $3.5 million, income from equity investments of $2.8

million, and impairment of leaseholds, intangibles and lease loss accrual and gain on disposal of fixed assets of $0.1 million.

provided by operating activities during the year ended December 31, 2020 included net income of $204.0 million adjusted for noncash items

of $123.4 million and changes in operating assets and liabilities of $269.7 million.

Noncash items of $123.4 million included deferred

income taxes of $61.6 million, noncash fair value adjustments of $22.0 million, depreciation and amortization of $19.4 million, share-based

compensation of $18.6 million, other noncash interest and other of $16.8 million, impairment of leaseholds, intangibles and lease loss

accrual and gain on disposal of fixed assets of $14.1 million, provision for doubtful accounts of $3.4 million, gain on extinguishment

of debt of $1.6 million, dividends from equity investments of $1.3 million, income allocated for mandatorily redeemable noncontrolling

interests of $1.2 million, and loss on equity investments of $0.6 million.

Cash used in investing activities

was $956.5 million during the year ended December 31, 2021 compared to cash provided by investing activities of $21.8 million during

the year ended December 31, 2020.

During the year ended December 31, 2021, cash used in investing activities consisted of cash used for

purchases of loans receivable of $738.9 million, cash of $345.0 million used to fund two trust accounts for the future redemption

of our subsidiaries’ redeemable common stock, cash used for acquisition of businesses of $28.3 million, cash used for repayments

of loan participations sold of $15.2 million, cash used for purchases of property and equipment and intangible assets of $0.7 million,

and purchases of equity investments of $0.6 million, partially offset by cash received from loans receivable repayment of $172.1 million.

During the year ended December 31, 2020, cash provided by investing activities consisted of funds received from trust account of subsidiary

of $320.5 million, cash received from loans receivable repayment of $90.1 million, loan participations sold of $6.9 million,

and proceeds from sale of loans receivable to related party of $1.8 million, partially offset by cash used for purchases of loans receivable

of $207.5 million, cash of $176.8 million used to fund a trust account for the future redemption of one of our subsidiaries’

redeemable common stock, cash used for purchases of equity investments of $7.5 million, repayments of loan participations sold of $2.2 million,

cash used for acquisition of businesses of $1.5 million and cash used for purchases of property and equipment and intangible assets of

$2.0 million.

Cash provided by financing activities was $1,081.0 million during the

year ended December 31, 2021 compared to cash used in financing activities of $80.7 million during the year ended December 31, 2020.

During the year ended December 31, 2021, cash provided by financing activities primarily consisted of $1,249.1 million proceeds from

issuance of senior notes, $345.0 million proceeds from initial public offering of subsidiaries, $300.0 million proceeds from our

term loan, $80.0 million proceeds from revolving line of credit, $64.7 million proceeds from our offering of common stock, $13.7 million

contributions from noncontrolling interests, $14.7 million proceeds from our offering of preferred stock, partially offset by $507.3 million

used to repurchase our senior notes, $347.1 million used to pay dividends on our common shares, $37.6 million used to repay our notes

payable, $33.4 million used to pay debt issuance costs, $20.7 million used for repayment on our term loan, $16.5 million

distribution to noncontrolling interests, $9.6 million used for payment of employment taxes on vesting of restricted stock, $7.5

million used to pay dividends on our preferred shares, $2.7 million used to repurchase our common stock, and $3.7 million used

for payment of participating note payable and contingent consideration.

During the year ended December 31, 2020, cash used in financing

activities primarily consisted of $318.8 million used for redemption of subsidiary temporary equity and distributions, $67.3 million

used for repayment on our term loan, $48.2 million used to repurchase our common stock, $38.8 million used to pay dividends

on our common shares, $37.1 million used for repayment of our asset based credit facility, $22.6 million used for payment of employment

taxes on vesting of restricted stock, $9.8 million used to pay debt issuance and offering costs, $4.7 million used to pay dividends

on our preferred shares, $4.3 million used for payment of participating note payable and contingent consideration, $3.8 million

distribution to noncontrolling interests, $1.8 million used to repurchase our senior notes, and $0.4 million used to repay our other

notes payable, partially offset by $186.8 million proceeds from issuance of senior notes, $175.0 million proceeds from initial public

offering of subsidiaries, $75.0 million proceeds from our term loan, $39.5 million proceeds from our offering of preferred stock,

and $0.6 million contributions from noncontrolling interests.

Credit Agreements

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

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

Such amendment, among other things, also

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

The Credit Agreement continues to allow

for borrowings under a separate credit agreement (a “UK Credit Agreement”) dated March 19, 2015 with an affiliate of

Wells Fargo Bank which provides for the financing of transactions in the United Kingdom with borrowings up to 50.0 million British

Nomura Credit Agreement

On June 23, 2021, we, and our wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement (as amended prior to the Second Amendment (as defined below) the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Administrative Agent”) , and Wells Fargo Bank, N.A., as collateral agent (the “Collateral Agent”) , for a four-year $200.0 million secured term loan credit facility (the “Term Loan Facility”) and a four-year $80.0 million revolving loan credit facility (the “Revolving Credit Facility”).

On December 17, 2021 (the “Amendment Date”), we, the Primary

Guarantor, and the Borrower entered into a Second Incremental Amendment to Credit Agreement (the “Second Amendment”), by and

among us, the Primary Guarantor, the Borrower, each of the subsidiary guarantors signatory thereto, each of the lenders party thereto,

the Administrative Agent and the Collateral Agent, pursuant to which the Borrower established an incremental facility in an aggregate

principal amount of $100.0 million (the “Incremental Facility” and the incremental term loans made thereunder, the “Incremental

Term Loans”) of secured term loans under the Credit Agreement on terms identical to those applicable to the Term Loan Facility.

The Borrower borrowed the full amount of the Incremental Term Loans on the Amendment Date.

The Term Loan Facility, Revolving Credit Facility,

and Incremental Facility, together, (“Credit Facilities”), mature on June 23, 2025, subject to acceleration or prepayment.

Eurodollar loans under the Credit Facilities accrue interest at the

Eurodollar Rate plus an applicable margin of 4.50%.

Base rate loans accrue interest at the Base Rate plus an applicable margin of 3.50%.

In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, we are required to pay a quarterly commitment

fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the Revolving Credit

Facility for the immediately preceding fiscal quarter.

Subject to certain eligibility requirements, the assets of certain subsidiaries of ours that hold credit assets, private equity assets, and public equity assets are placed into a borrowing base, which serves to limit the borrowings under the Credit Facilities.

If borrowings under the Credit Facilities exceed the borrowing base, we are obligated to prepay the loans in an aggregate amount equal to such excess.

The Credit Agreement and the Second Amendment contain certain representations and warranties (subject to certain agreed qualifications) that are customary for financings of this kind.

The Credit Agreement and the Second Amendment contain certain affirmative and negative covenants customary for financings of this type that, among other things, limit our, 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 and the Second Amendment contain a financial covenant that requires us to maintain Operating EBITDA of at least $135.0 million and the Primary Guarantor to maintain net asset value of at least $1,100.0 million.

The Credit Agreement and the Second Amendment contain customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.

Commencing on September 30, 2022, the Term Loan Facility and Incremental Facility will amortize in equal quarterly installments of 1.25% of the aggregate principal amount of the term loan as of the closing date with the remaining balance due at final maturity.

Quarterly installments from September 30, 2022 to March 31, 2025 are in the amount of $3.8 million per quarter.

of December 31, 2021, the outstanding balance on the Term Loan Facility and Incremental Facility was $292.7 million (net of unamortized

debt issuance costs of $7.4 million).

Interest on the term loan during the year ended December 31, 2021 was $5.9 million (including amortization

of deferred debt issuance costs of $0.8 million).

The interest rate on the term loan as of December 31, 2021 was 4.72%.

We had an outstanding balance of $80.0 million under the Revolving Credit Facility as of December 31, 2021.

Interest on the revolving facility during the year ended December 31, 2021 was $1.9 million (including unused commitment fees of $0.08 million and amortization of deferred financing costs of $0.3 million).

The interest rate on the Revolving Credit Facility as of December 31, 2021 was 4.67%.

We are in compliance with all financial covenants in the Nomura Credit Agreement as of December 31, 2021.

Wells Fargo Credit Agreement

On April 21, 2017, we amended the asset based credit facility agreement (as amended, the “Credit Agreement”) with Wells Fargo Bank to increase the maximum borrowing limit from $100.0 million to $200.0 million.

Such amendment, among other things, also extended the expiration date of the credit facility from July 15, 2018 to April 21, 2022.

The Credit Agreement continues to allow for borrowings under a separate credit agreement (a “UK Credit Agreement”) dated March 19, 2015 with an affiliate of Wells Fargo Bank which provides for the financing of transactions in the United Kingdom with borrowings up to 50.0 million British Pounds.

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

UK Credit Agreement is cross collateralized and integrated in certain respects with the Credit Agreement.

The Credit Agreement

continues to include the addition of our Canadian subsidiary, from the October 5, 2016 amendment to the Credit Agreement, to facilitate

borrowings to fund retail liquidation transactions in Canada.

From time to time, we utilize this credit facility to fund costs

and expenses incurred in connection with liquidation engagements.

We also utilize this credit facility in order to issue letters

of credit in connection with liquidation engagements conducted on a guaranteed basis.

Subject to certain limitations and offsets,

we are permitted to borrow up to $200.0 million under the credit facility, less the aggregate principal amount borrowed under the

UK Credit Agreement (if in effect).

Borrowings under the credit facility are only made at the discretion of the lender and are

generally required to be repaid within 180 days.

The interest rate for each revolving credit advance under the related credit agreement

is, subject to certain terms and conditions, equal to the LIBOR plus a margin of 2.25% to 3.25% depending on the type of advance

and the percentage such advance represents of the related transaction for which such advance is provided.

The credit facility is

secured by the proceeds received for services rendered in connection with the liquidation service contracts pursuant to which any

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

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

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

We typically seek borrowings

on an engagement-by-engagement basis.

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

our ability to incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge or

consolidate and enter into certain transactions with affiliates.

There was no outstanding balance

on this credit facility at December 31, 2020.

The outstanding balance on this credit facility was $37.1 million at December 31,

At December 31, 2020, there were no open letters of credit outstanding.

We are in compliance with all financial covenants

in the asset based credit facility at December 31, 2020.

December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation,

Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of the Company, in the capacity

of borrowers, entered into a credit agreement with Banc of California, N.A.

in the capacity as agent and lender and with the other

lenders party thereto (the “BRPAC Credit Agreement”).

Under the BRPAC Credit Agreement, we borrowed $80.0 million due

December 19, 2023.

Pursuant to the terms of the BRPAC Credit Agreement, we may request additional optional term loans in an aggregate

principal amount of up to $10.0 million at any time prior to the first anniversary of the agreement date.

On February 1, 2019,

the Borrowers entered into the First Amendment to Credit Agreement and Joinder with City National Bank as a new lender in which

the new lender extended to Borrowers the additional $10.0 million.

On December 31, 2020,

the Borrowers, the Secured Guarantors, the Agent and the Lenders, entered into the Second Amendment to Credit Agreement (the “Second

Amendment”) pursuant to which, among other things, (i) the Lenders agreed to make a new $75.0 million term loan to the Borrowers,

the proceeds of which the Borrowers’ will use to repay the outstanding principal amount of the existing Terms Loans and Optional

Loans and for other general corporate purposes, (ii) the Borrowers were permitted to make a one-time Permitted Distribution (as

defined in the Second Amendment) in the amount of $30.0 million on the date of the Second Amendment, (iii) the maturity date of

the new Term Loans is five (5) years from the date of the Second Amendment, (iv) the interest rate margin was increased by 25 basis

points as set forth in the Second Amendment, (v) the Borrowers agreed to make mandatory prepayments of the Term Loans from a portion

of the Consolidated Excess Cash Flow (as defined in the Credit Agreement), (vi) the maximum Consolidated Total Funded Debt Ratio

(as defined in the Credit Agreement) was increased as set forth in the Second Amendment and (vii) the Company and B.

Riley Principal

Investments, LLC entered into a reaffirmation of their guarantees of the Borrowers’ obligations under the Credit Agreement.

Additionally, the Borrowers paid a commitment fee and an arrangement fee, each based on a percentage of the aggregate commitments,

in each case upon the closing of the Second Amendment, as further discussed in Note 11 to the accompanying financial statements.

The borrowings under the amended BRPAC Credit Agreement bear interest equal to the LIBOR plus a margin of 2.75% to 3.25% depending

on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement.

At December 31, 2020, the

interest rate on the BRPAC Credit Agreement was at 3.40%.

Amounts outstanding

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

Quarterly installments

from March 31, 2021 to December 31, 2021 are in the amount of $4.8 million per quarter, from March 31, 2022 to December 31, 2022

The UK Credit Agreement is cross collateralized and integrated in certain respects with the Credit Agreement.

The Credit Agreement continues to include the addition of our Canadian subsidiary, from the October 5, 2016 amendment to the Credit Agreement, to facilitate borrowings to fund retail liquidation transactions in Canada.

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

We also utilize this credit facility in order to issue letters of credit in connection with liquidation engagements conducted on a guaranteed basis.

Subject to certain limitations and offsets, we are permitted to borrow up to $200.0 million under the credit facility, less the aggregate principal amount borrowed under the UK Credit Agreement (if in effect).

Borrowings under the credit facility are only made at the discretion of the lender and are generally required to be repaid within 180 days.

The interest rate for each revolving credit advance under the related credit agreement is, subject to certain terms and conditions, equal to the LIBOR plus a margin of 2.25% to 3.25% depending on the type of advance and the percentage such advance represents of the related transaction for which such advance is provided.

The credit facility is secured by the proceeds received for services rendered in connection with the liquidation service contracts pursuant to which any outstanding loan or letters of credit are issued and the assets that are sold at liquidation related to such contract, if any.

The credit facility also provides for success fees in the amount of 2.5% to 17.5% of the net profits, if any, earned on liquidation engagements that are financed under the credit facility as set forth in the related credit agreement.

We typically seek borrowings on an engagement-by-engagement basis.

The Credit Agreement contains certain covenants, including covenants that limit or restrict our ability to incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge, or consolidate and enter into certain transactions with affiliates.

There was no outstanding balance on this credit facility as of December 31, 2021 or 2020.

As of December 31, 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 December 31, 2021.

BRPAC Credit Agreement

On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”),

a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect

wholly owned subsidiaries of ours, in the capacity of borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”)

with Banc of California, N.A.

in its capacity as agent (the “Agent”) and lender and with the other lenders party (the “Closing

Date Lenders”).

Under the BRPAC Credit Agreement, we borrowed $80.0 million due December 19, 2023.

Pursuant to the terms of the

BRPAC Credit Agreement, we may request additional optional term loans in an aggregate principal amount of up to $10.0 million at any time

prior to the first anniversary of the agreement date.

On February 1, 2019, the Borrowers entered into the First Amendment to Credit Agreement

and Joinder with City National Bank as a new lender in which the new lender extended to Borrowers the additional $10.0 million.

On December 31, 2020, the Borrowers, the Secured Guarantors, the Agent, and the Closing Date Lenders, entered into the Second Amendment to Credit Agreement (the “Second Amendment”) pursuant to which, among other things, (i) the Lenders agreed to make a new $75.0 million term loan to the Borrowers, the proceeds of which the Borrowers’ will use to repay the outstanding principal amount of the existing Terms Loans and Optional Loans and for other general corporate purposes, (ii) the Borrowers were permitted to make a one-time Permitted Distribution (as defined in the Second Amendment) in the amount of $30.0 million on the date of the Second Amendment, (iii) the maturity date of the new Term Loans is five (5) years from the date of the Second Amendment, (iv) the interest rate margin was increased by 25 basis points as set forth in the Second Amendment, (v) the Borrowers agreed to make mandatory prepayments of the Term Loans from a portion of the Consolidated Excess Cash Flow (as defined in the Credit Agreement), (vi) the maximum Consolidated Total Funded Debt Ratio (as defined in the Credit Agreement) was increased as set forth in the Second Amendment and (vii) the Company and B.

Riley Principal Investments, LLC entered into a reaffirmation of their guarantees of the Borrowers’ obligations under the Credit Agreement.

Additionally, the Borrowers paid a commitment fee and an arrangement fee, each based on a percentage of the aggregate commitments, in each case upon the closing of the Second Amendment.

On December 16, 2021, the Borrowers, the Secured Guarantors, the Agent,

and the Closing Date Lenders, entered into the Third Amendment to Credit Agreement (the “Third Amendment”) pursuant to which,

among other things, replaced LIBOR with the Secured Overnight Financing Rate (“SOFR”) reference rate and the Borrowers were

permitted to make a one-time Permitted Distribution (as defined in the Third Amendment) in the amount of $30.0 million on the date of

the Third Amendment.

The borrowings under the amended BRPAC Credit Agreement bear interest equal to the SOFR rate plus a margin of 2.75% to 3.25% depending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement.

As of December 31, 2021 and 2020, the interest rate on the amended BRPAC Credit Agreement was at 3.17% and 3.40%, respectively.

Principal outstanding

under the amended BRPAC Credit Agreement is due in quarterly installments.

Quarterly installments 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 $3.3 million per quarter, and from March 31, 2025 to December 31,

2025 are $2.8 million per quarter.

As of December 31, 2020,

and 2019, the outstanding balance on the term loan was $74.2 million (net of unamortized debt issuance costs of $0.8 million) and

$66.7 million (net of unamortized debt issuance costs of $0.6 million), respectively.

We are in compliance

with all financial covenants in the BRPAC Credit Agreement at December 31, 2020.

from March 31, 2024 to December 31, 2024 are in the amount of $3.1 million per quarter, from March 31, 2025 to December 31, 2025

are $2.8 million per quarter , and the remaining principal balance is due at final maturity on December

As of December 31, 2021 and 2020, the outstanding balance on the term loan was $53.7 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 years ended December 31, 2021 and 2020, was $2.5 million (including amortization of deferred debt issuance costs of $0.3 million) and $2.4 million (including amortization of deferred debt issuance costs of $0.3 million), respectively.

We are in compliance with all financial covenants in the amended BRPAC Credit Agreement as of December 31, 2021.

Preferred Stock Offering

On October 7, 2019,

the Company closed its public offering of depositary shares, each representing 1/1000 th of a share of Series A Preferred

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.

The liquidation preference of each share of Series A Preferred Stock is $25,000 ($25.00 per Depositary Share).

At the closing,

the Company issued 2,000 shares of Series A Preferred Stock represented by 2,000,000 Depositary Shares issued.

On October 11, 2019,

the Company completed the sale of an additional 300,000 Depositary Shares, pursuant to the underwriters’ full exercise of

their over-allotment option to purchase additional Depositary Shares.

The offering of the 2,300,000 Depository Shares generated

$57,500 of gross proceeds.

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.

The liquidation preference of each share of Series A Preferred Stock is $25,000 ($25.00 per Depositary

As a result of the offering the Company issued 1,300 shares of Series B Preferred Stock represented by 1,300,000 depositary

As a result of the offering the Company issued 1,300 shares of Series B Preferred Stock represented by 1,300,000 depositary shares.

The offering resulted in gross proceeds of approximately $32.5 million.

Senior Note Offerings

During the year ended

December 31, 2020, we issued $54.5 million of senior notes due with maturities dates ranging from May 2023 to December 2027 pursuant

to At the Market Issuance Sales Agreements with B.

Riley Securities, which governs the program of at-the-market sales of our senior

During the year ended December 31, 2021, we issued $223.4 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.

Riley Securities, which governs the program of at-the-market sales of our senior notes.

We filed a series of prospectus supplements with the SEC which allowed us to sell these senior notes.

On February 12, 2020,

we issued $132.3 million of senior notes due in February 2025 (“6.375% 2025 Notes”) pursuant to the prospectus supplement

dated February 10, 2020.

On January 25, 2021, we issued $230.0 million of senior notes due in January 2028 (“6.0% 2028 Notes”).

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

The 6.375% 2025 Notes are unsecured

and due and payable in full on February 28, 2025.

In connection with the issuance of the 6.375% 2025 Notes, we received net proceeds

of $129.2 million (after underwriting commissions, fees and other issuance costs of $3.0 million).

We currently anticipate using

the net proceeds from the 6.375% 2025 notes for general corporate purposes, including funding future acquisitions and investments,

repaying indebtedness, making capital expenditures and funding working capital.

During March 2020, we

repurchased bonds with an aggregate face value of $3.4 million for $1.8 million resulting in a gain net of expenses of $1.6 million

as of December 31, 2020.

As part of the repurchase, we paid $30 thousand in interest accrued through the date of each respective

At December 31, 2020

and December 31, 2019, the total senior notes outstanding was $870.8 million (net of unamortized debt issue costs of $9.6 million)

and $688.1 million (net of unamortized debt issue costs of $8.9 million) with a weighted average interest rate of 6.95% and 7.05%,

respectively.

Interest on senior notes is payable on a quarterly basis.

Interest expense

on senior notes totaled $61.2 million, $43.8 million and $25.4 million for the three years ended December 31, 2020, 2019 and 2018,

respectively.

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

to the prospectus supplement dated February 12, 2020.

The 6.0% 2028 Notes are unsecured and due and payable in full on January 31, 2028.

In connection with the issuance of the 6.0% 2028 Notes, we received net proceeds of $225.7 million (after underwriting commissions, fees, and other issuance costs of $4.3 million).

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

On March 29, 2021, we issued $159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”).

Interest on the 5.5% 2026 Notes is payable quarterly at 5.5%.

The 6.0% 2028

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

In connection with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $225.7 million (after underwriting

commissions, fees and other issuance costs of $4.2 million).

The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026.

In connection with the issuance of the 5.5% 2026 Notes, we received net proceeds of $156.3 million (after underwriting commissions, fees, and other issuance costs of $3.2 million).

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

On March 1, 2021,

the Company announced its intention to redeem at par, and at its option, $128.2 million of senior notes due in February 2027 (“7.50%

2027 Notes”) on March 31, 2021 pursuant to the second supplemental indenture dated May 31, 2017.

The total redemption payment

will include approximately $1.6 million in accrued interest.

On February 14, 2020,

we entered into a new At Market Issuance Sales Agreement (the “February 2020 Sales Agreement”) with B.

Riley Securities

governing a program of at-the-market sales of certain of our senior notes.

The most recent sales agreement prospectus was filed

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

The Sales Agreement Prospectus

allows us to sell up to $150.0 million of certain of our senior notes pursuant to an effective Registration Statement on Form S-3.

As of December 31, 2020, we had $132.7 million remaining availability under the February 2020 Sales Agreement.

Off Balance Sheet Arrangements

As part of our investment

banking and financial services activities, from time to time we enter into guaranties of debt, commitments of other entities, and

similar transactions that may be considered off-balance sheet arrangements.

Agreement and Backstop

On January 31, 2020,

the Company provided Babcock & Wilcox Enterprises, Inc.

(“B&W”) $30 million of additional Tranche A-4 last

out term loans pursuant to Amendment No.

20 (“Amendment No.

20”) to the Credit Agreement, dated May 11, 2015 (as amended

to date, the “B&W Credit Agreement”) with Bank of America, N.A., as administrative agent and lender, and the other

lenders party thereto.

The Company is a lender with respect to B&W’s existing last out term loans under the Credit Agreement.

Kenneth Young, our President, is the Chief Executive Officer of B&W.

Pursuant to Amendment No.

20, B&W and the lenders,

including the Company, also agreed upon a term sheet pursuant to which B&W would undertake a refinancing transaction on or

prior to May 11, 2020 (the “Refinancing”) and B&W and the lenders, including the Company, would amend and restate

the Credit Agreement on the terms specified therein.

On January 31, 2020, B&W also entered into a letter agreement with the

Company (the “Backstop Commitment Letter”) pursuant to which the Company agreed to fund any shortfall in the $200

million of new debt or equity financing required as part of the terms of the Refinancing to the extent such amounts have not been

raised from third parties on the same terms contemplated by the Refinancing.

On May 14, 2020, the Company provided B&W with

another $30,000 of last-out term loans pursuant to a further amendments to B&W’s credit agreement, which also included

future commitments for the Company to loan B&W $40.0 million on various dates starting in November 2020 and a limited guaranty

by the Company of B&W’s obligations under the amended credit facility.

On August 10, 2020,

the Company entered into a project specific indemnity rider (the “Indemnity Rider”) in favor of Berkley Insurance Company

and/or Berkley Regional Insurance Company (collectively, “Berkley”) to a general agreement of indemnity made by B&W

in favor of Berkley (the Indemnity Agreement”).

Pursuant to the Indemnity Rider, the Company agreed to indemnify Berkley

in connection with a default by B&W under the Indemnity Agreement relating to a $30.0 million payment and performance bond

issued by Berkley in connection with a construction project undertaken by B&W.

In consideration for providing the Indemnity

Rider, B&W paid the Company $0.6 million on August 26, 2020.

Franchise Group

Commitments and Loan Participant Guaranty

PSP Commitment

On January 23, 2021,

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

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

(collectively, “FRG”)

in connection with FRG’s acquisition of Pet Supplies Plus (“PSP”).

We are in the process of arranging financing

for FRG’s PSP acquisition and to the extent needed we will fund any shortfall in the debt financing up to the $400.0 million

The Loan Participant

On February 14, 2020

FRG, the lenders from time to time party thereto and GACP Finance as administrative agent, entered into a Credit Agreement (the

“Term Loan Credit Agreement”), pursuant to which the lenders provided a term loan facility to FRG in an aggregate principal

amount of $575.0 million.

On February 19, 2020,

the Company entered into a limited guaranty (the “Loan Participant Guaranty”) to one of the lenders under the Term

Loan Credit Agreement (the “Loan Participant”) pursuant to which the Company guaranteed the payment when due of certain

obligations, including principal, interest, and other amounts payable to the Loan Participant under the Term Loan Credit Agreement

in an amount not to exceed $50.0 million plus certain expenses of the Loan Participant and certain protective advances related

to such guaranteed obligations (the “Loan Participant Guaranteed Obligations”).

The Loan Participant may require payment

of the Loan Participant Guaranteed Obligations by the Company upon the occurrence of certain guarantor events of default, including

payment or bankruptcy events of default, in each case pursuant to the Term Loan Credit Agreement.

The Loan Participant Guaranty

remains in effect until the date that the Loan Participant Guaranteed Obligations have been paid in full.

The Loan Participant

Guaranteed Obligations are unsecured obligations of the Company and rank equally in right of payment with all of the Company’s

other existing and future unsecured and unsubordinated indebtedness.

The Loan Participant Guaranteed Obligations are effectively

subordinated in right of payment to all of the Company’s existing and future secured indebtedness and structurally subordinated

to all existing and future indebtedness of the Company’s subsidiaries, including trade payables.

Riley Principal

II LOI Backstop Commitment

Riley Principal Merger

II (“BRPM II”) was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock

purchase, reorganization or similar business combination with one or more businesses.

BRPM II entered into an agreement and plan

of merger (the “Merger Agreement”) to acquire Eos Energy Storage LLC, a Delaware limited liability company, a privately

held company that is not related to the Company (the “Acquisition”).

In order to help meet the condition under the

Merger Agreement that BRPM II maintain a certain level of cash available upon the closing (before taking into account certain transaction

expenses), the Company entered into an Equity Commitment Letter with BRPM II and B.

Riley Principal Sponsor Co.

II, LLC, pursuant

to which the Company committed to provide up to $40.0 million in equity financing at closing, less the number of shares of BRPM

II’s common stock already issued pursuant to subscription agreements entered into with investors prior to the closing.

Acquisition closed on November 17, 2020 and the Company’s equity commitment thereby terminated.

Except as disclosed

above, we have no material obligations, assets or liabilities which would be considered off-balance sheet arrangements and do not

participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to

as variable interest entities, established for the purpose of facilitating off-balance sheet arrangements.

Other Commitment

On June 19, 2020,

the Company participated in a loan facility agreement to provide a total loan commitment up to 33,000 EUROS to a retailer in Europe.

The Company made an initial funding of 6,600 EUROS in July 2020.

No additional borrowings have been made since the initial funding,

leaving unused future commitments available of up to 26,400 EUROS as of December 31, 2020.

From time to time,

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

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.

On February 25, 2021, the Company declared a regular quarterly dividend of $0.50 per share and a special dividend of $3.00 per

share, which will be paid on or about March 24, 2021 to stockholders of record as of March 10, 2021.

During the years ended December

31, 2020 and 2019, we paid cash dividends on our common stock of $38.8 million and $41.1 million, respectively.

On March 31, 2021, we exercised our option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017.

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

On 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 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, we 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.

On December 3, 2021, we issued $322.7 million of senior notes due in December 2026 (“5.00% 2026 Notes”).

Interest on the 5.00% 2026 Notes is payable quarterly at 5.00%.

The 5.00% 2026 Notes are unsecured and due and payable in full on December 31, 2026.

In connection with the issuance of the 5.00% 2026 Notes, we received net proceeds of $317.6 million (after underwriting commissions, fees, and other issuance costs of $5.0 million).

The Notes bear interest at the rate of 5.00% per annum.

As of December 31, 2021 and December 31, 2020, the total senior notes outstanding was $1,606.6 million (net of unamortized debt issue costs of $21.5 million) and $870.8 million (net of unamortized debt issue costs of $9.6 million) with a weighted average interest rate of 5.69% and 6.95%, respectively.

Interest on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $81.5 million and $61.2 million, during the years ended December 31, 2021 and 2020, respectively.

The most recent sales agreement prospectus was filed by us with the SEC on January 5, 2022 (the “January 2022 Sales Agreement Prospectus”), supplementing the prospectus filed on August 11, 2021, the prospectus filed on April 6, 2021, and the prospectus filed on January 28, 2021.

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 December 31, 2021, the Company had $111.9 million remaining availability under the January 2022 Sales Agreement.

Off Balance Sheet

about our off-balance sheet arrangements is included in Note 17 of the Notes to Consolidated Financial Statements.

Such information is

hereby incorporated by reference.

From time to time, we

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

During the years ended

December 31, 2021 and 2020, we paid cash dividends on our common stock of $347.1 million and $38.8 million, respectively.

February 23, 2022, the Company declared a regular quarterly dividend of $1.00 per share, which will be paid on or about March 23,

2022 to stockholders of record as of March 9, 2022.

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,

On July 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.

On October 28, 2020, the Company declared a regular quarterly dividend of $0.375 per share, which was paid on November 24, 2020

to stockholders of record as of November 10, 2020.

On July 30, 2020, the Board of Directors announced an increase to the regular

quarterly dividend from $0.25 per share to $0.30 per share.

On July 30, 2020, the Company declared a regular quarterly dividend

of $0.30 per share and a special dividend of $0.05 per share which was paid on August 28, 2020 to stockholders of record as of

August 14, 2020.

On May 8, 2020, we declared a quarterly dividend of $0.25 per share which was paid on June 10, 2020 to stockholders

of record as of June 1, 2020.

On March 3, 2020, the Board of Directors announced an increase to the regular quarterly dividend

from $0.175 per share to $0.25 per share.

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 our common

stock dividend activity for the years ended December 31, 2020 and 2019 was as follows:

Date Declared

it is the Board’s current intention to make regular dividend payments of $1.00 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 our common stock dividend activity during the years ended December 31, 2021 and 2020 was as follows:

October 28, 2021

4 unchanged sentences

August 13, 2021

June 10, 2020

March 3, 2020

February 25, 2021

March 24, 2021

3 unchanged sentences

November 10, 2020

August 1, 2019

July 30, 2020

August 28, 2020

August 14, 2020

June 10, 2020

March 3, 2020

1 unchanged sentence

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 $25,000

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

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

On January 9, 2020, the

Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on January 31, 2020 to holders

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 $0.03 million liquidation

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

Dividends are payable quarterly

As of December 31, 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 13, 2020, the Company declared a cash dividend of

$0.4296875 per Depositary Share, which was paid on April 30, 2020 to holders of record as of the close of business on April 23,

On July 7, 2020, the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on July 31, 2020

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

On October 8, 2020, the Company declared a cash dividend

of $0.4296875 per Depositary Share, which was paid on October 31, 2020 to holders of record as of the close of business on October

On January 11, 2021, the Company declared a cash dividend of $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.

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).

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

On October 8, 2020, the

Company declared a cash dividend of $0.29193 per Depositary Share, which was paid on October 31, 2020 to holders of record as of

the close of business on October 21, 2020.

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

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

Contractual Obligations

The following table

sets forth aggregate information about our contractual obligations as of December 31, 2020 and the periods in which payments are

Payments due by period

(Dollars in thousands)

Contractual Obligations

Operating lease obligations

Notes payable

Senior notes payable, including interest

We anticipate that

cash generated from operations and existing borrowing arrangements under our credit facility to fund costs and expenses incurred

in connection with liquidation engagements should be sufficient to meet our cash requirements for at least the next twelve months.

However, our future capital requirements will depend on many factors, including the success of our businesses in generating cash

from operations, continued compliance with financial covenants contained in our credit facility, the timing of principal payments

on our long-term debt and the Capital Markets in general, among other factors.

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 was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.

January 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 31, 2022 to

holders of record as of the close of business on January 21, 2022.

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 are payable quarterly

As of December 31, 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 was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.

January10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid January 31, 2022 to holders

of record as of the close of business on January 21, 2022.

Critical Accounting Policies

Our financial statements

and the notes thereto contain information that is pertinent to management’s discussion and analysis.

The preparation of financial

statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent

assets and liabilities.

Management bases its estimates on historical experience and on various other assumptions that are believed

to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of

assets and liabilities that are not readily apparent from other sources.

On a continual basis, management reviews its estimates

utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions.

Our financial statements and the notes thereto contain information that is pertinent to management’s discussion and analysis.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

On a continual basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions.

After such reviews, and if deemed appropriate, management’s estimates are adjusted accordingly.

Actual results may vary from

these estimates and assumptions under different and/or future circumstances.

Management considers an accounting estimate to be

● it requires assumptions to be made that

were uncertain at the time the estimate was made;

● changes in the estimate, or the use of

different estimating methods that could have been selected, could have a material impact on results of operations or financial

Use of Estimates.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements

and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Estimates are used when accounting for certain items such as valuation of securities, reserves for accounts receivable, the carrying

value of intangible assets and goodwill, the fair value of mandatorily redeemable noncontrolling interests and accounting for income

tax valuation allowances, recovery of contract assets and sales returns and allowances.

Estimates are based on historical experience,

where applicable, and assumptions that management believes are reasonable under the circumstances.

Due to the inherent uncertainty

involved with estimates, actual results may differ.

On 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.

Coming into 2021, the full impact of the COVID-19 outbreak continues to evolve, as countries across the world

manage repeated waves of the pandemic and vaccines come to market.

The impact of the COVID-19 outbreak on the Company’s 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, the Company’s results of operations,

financial position and cash flows may be materially adversely affected.

Our significant accounting

policies are described in Note 2 to the consolidated financial statements included elsewhere in this Annual Report.

believes that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation

of our financial statements.

Revenue Recognition.

On January 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with

Customers using the modified retrospective method and the impact was determined to be immaterial on our consolidated financial

The new revenue standard was applied prospectively in our consolidated financial statements from January 1, 2018 forward

and reported financial information for historical comparable periods will not be revised and will continue to be reported under

the accounting standards in effect during those historical periods.

Revenues are recognized

when control of the promised goods or performance obligations for services is transferred to our customers, in an amount that reflects

the consideration we expect to be entitled to in exchange for the goods or services.

Revenues from contracts

with customers in the Capital Markets segment, Auction and Liquidation segment, Financial Consulting segment, Principal Investments

– United Online and magicJack segment and Brands segment are primarily comprised of the following:

Capital Markets

Segment - Fees earned from corporate finance and investment banking services are derived from debt, equity and convertible

securities offerings in which the Company acted as an underwriter or placement agent.

Fees from underwriting activities are recognized

as revenues when the performance obligation for the services related to the underwriting transaction is satisfied under the terms

of the engagement and is not subject to any other contingencies.

Fees are also earned from financial advisory and consulting services

rendered in connection with client mergers, acquisitions, restructurings, recapitalizations and other strategic transactions.

performance obligation for financial advisory services is satisfied over time as work progresses on the engagement and services

are delivered to the client.

The performance obligation for financial advisory services may also include success and performance

based fees which are recognized as revenue when the performance obligation is no longer constrained and it is not probable that

the revenue recognized would be subject to significant reversal in a future period.

Generally, it is probable that the revenue

recognized is no longer subject to significant reversal upon the closing of the investment banking transaction.

Fees from wealth and

asset management services consist primarily of investment management fees that are recognized over the period the performance obligation

for the services are provided.

Investment management fees are primarily comprised of fees for investment management services and

are generally based on the dollar amount of the assets being managed.

Revenues from sales

and trading are recognized when the performance obligation is satisfied and include commissions resulting from equity securities

transactions executed as agent or principal and are recorded on a trade date basis and fees paid for equity research.

Revenues from other

sources in the Capital Markets segment is primarily comprised of (i) interest income from loans receivable and securities lending

activities, (ii) related net trading gains and losses from market making activities, the commitment of capital to facilitate customer

orders, (iii) trading activities from our Principal Investments in equity and other securities for the Company’s account,

and (iv) other income.

Interest income from

securities lending activities consists of interest income from equity and fixed income securities that are borrowed from one party

and loaned to another.

The Company maintains relationships with a broad group of banks and broker-dealers to facilitate the sourcing,

borrowing and lending of equity and fixed income securities in a “matched book” to limit the Company’s exposure

to fluctuations in the market value or securities borrowed and securities loaned.

Other revenues include

(i) net trading gains and losses from market making activities in our fixed income group, (ii) carried interest from our asset

management recognized as earnings from financial assets within the scope

of ASC 323 - Investments - Equity Method and Joint Ventures , and therefore will not be in the scope of ASC 606 - Revenue

from Contracts with Customers .

In accordance with ASC 323 - Investments

- Equity Method and Joint Ventures , the Company will record equity method income (losses) as a component of investment income

based on the change in our proportionate claim on net assets of the investment fund, including performance-based capital allocations,

assuming the investment fund was liquidated as of each reporting date pursuant to each fund’s governing agreements, and (iii)

other miscellaneous income.

Auction and Liquidation

segment - Commission and fees earned on the sale of goods at Auction and Liquidation sales are recognized when evidence of

a contract or arrangement exists, the transaction price has been determined, and the performance obligation has been satisfied

when control of the product and risks of ownership has been transferred to the buyer.

The commission and fees earned for these

services are included in revenues in the accompanying consolidated statements of income.

Under these types of arrangements, revenues

also include contractual reimbursable costs.

Revenues earned from

Auction and Liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction

or liquidation are recognized over time when the performance obligation is satisfied.

We generally use the cost-to-cost measure

of progress for our contracts because it best depicts the transfer of services to the customer which occurs as we incur costs on

our contracts.

Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio

of costs incurred to date to the total estimated costs at completion of the performance obligation.

Revenues, including estimated

fees or profits, are recorded proportionally as costs are incurred.

Costs to fulfill the contract include labor and other direct

costs incurred by the Company related to the contract.

Due to the nature of the guarantees and performance obligations under these

contracts, the estimation of revenue that is ultimately earned is complex and subject to many variables and requires significant

It is common for these contracts to contain provisions that can either increase or decrease the transaction price upon

completion of our performance obligations under the contract.

Estimated amounts are included in the transaction price at the most

likely amount it is probable that a significant reversal of revenue will not occur.

Our estimates of variable consideration and

determination of whether or not to include estimated amounts in the transaction price are based on an assessment of our anticipated

performance under the contract taking into consideration all historical, current and forecasted information that is reasonably

available to us.

Costs that directly relate to the contract and expected to be recoverable are capitalized as an asset and included

in advances against customer contracts in the accompanying consolidated balance sheets.

These costs are amortized as the services

are transferred to the customer over the contract period, which generally does not exceed six months, and the expense is recognized

as a component of direct cost of services.

If, during the auction or liquidation sale, the Company determines that the total costs

to be incurred on a performance obligation under a contract exceeds the total estimated revenues to be earned, a provision for

the entire loss on the performance obligation is recognized in the period the loss is determined.

If the Company determines

that the variable consideration used in the initial determination of the transaction price for the contract is such that the total

recoveries from the auction or liquidation will not exceed the guaranteed recovery values or advances made in accordance with the

contract, the transaction price will be reduced and a loss or negative revenue could result from the performance obligation.

provision for the entire loss as negative revenue on the performance obligation is recognized in the period the loss is determined.

Financial Consulting

Segment - Revenues in the Financial Consulting segment are primarily comprised of fees earned from providing bankruptcy, financial

advisory, forensic accounting, real estate consulting and valuation and appraisal services.

Fees earned from bankruptcy, financial

advisory, forensic accounting and real estate consulting services are rendered to clients over time as work progresses on the engagement

and services are delivered to the client.

Fees may also include success and performance based fees which are recognized as revenue

when the performance obligation is no longer constrained and it is not probable that the revenue recognized would be subject to

significant reversal in a future period.

Revenues for valuation and appraisal services are recognized when the performance obligation

is completed and is generally at the point in time upon delivery of the report to the customer.

Revenues in the Financial Consulting

segment also include contractual reimbursable costs.

Principal Investments

– United Online and magicJack Segment –Revenues in the Principal Investments - United Online and magicJack segment

are primarily comprised of services revenue from fees charged to United Online pay accounts;

sales revenue from the sale of the

magicJack and related devices and access rights;

Actual results may vary from these estimates and assumptions under different and/or future circumstances.

Management considers an accounting estimate to be critical if:

it requires assumptions to be made that were uncertain at the time the estimate was made;

changes in the estimate, or the use of different estimating methods that could have been selected, could have a material impact on results of operations or financial condition.

of Estimates.

The preparation of financial statements in conformity with GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date

of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could

differ from those estimates.

Estimates are used when accounting for certain items such as valuation of securities, reserves for

accounts receivable, the fair value of loans receivable, intangible assets and goodwill, share based arrangements and accounting for income tax valuation allowances, recovery of contract assets and sales returns and

Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable

under the circumstances.

Due to the inherent uncertainty involved with estimates, actual results may differ.

On January 30, 2020, the World Health Organization (“WHO”)

announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”).

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

fourth quarter of 2021, the full impact of the COVID-19 outbreak continued to evolve, with the emergence of variant strains and breakthrough

infections becoming prevalent both in the U.S.

and worldwide.

economy recovers, aided by stimulus packages and fiscal and

monetary policies, inflation has been rising at historically high rates, and the Federal Reserve has signaled that it will begin increasing

the target federal funds effective rate.

The impact of the COVID-19 outbreak and these related matters 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 and natural immunity in controlling 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.

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.

Our significant accounting policies are described in Note 2 to the consolidated financial statements included elsewhere in this Annual Report.

Management believes that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our financial statements.

Recognition .

We recognize revenues under Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts

with Customers

Revenues are recognized when control of the promised goods or performance obligations for services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for the goods or services.

Revenues from contracts with customers in the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment, Principal Investments – Communications segment and Brands segment are primarily comprised of the following:

Capital Markets Segment - Fees earned from corporate finance and investment banking services are derived from debt, equity and convertible securities offerings in which the Company acted as an underwriter or placement agent.

Fees from underwriting activities are recognized as revenues when the performance obligation for the services related to the underwriting transaction is satisfied under the terms of the engagement and is not subject to any other contingencies.

Fees are also earned from financial advisory and consulting services rendered in connection with client mergers, acquisitions, restructurings, recapitalizations and other strategic transactions.

The performance obligation for financial advisory services is satisfied over time as work progresses on the engagement and services are delivered to the client.

The performance obligation for financial advisory services may also include success and performance based fees which are recognized as revenue when the performance obligation is no longer constrained and it is not probable that the revenue recognized would be subject to significant reversal in a future period.

Generally, it is probable that the revenue recognized is no longer subject to significant reversal upon the closing of the investment banking transaction.

Fees from asset management services are recognized over the period the performance obligation for the services are provided.

Asset management fees are primarily comprised of fees for asset management services and are generally based on the dollar amount of the assets being managed.

Revenues from sales and trading are recognized when the performance obligation is satisfied and include commissions resulting from equity securities transactions executed as agent or principal and are recorded on a trade date basis and fees paid for equity research.

Revenues from other sources in the Capital Markets segment is primarily comprised of (i) interest income from loans receivable and securities lending activities, (ii) related net trading gains and losses from market making activities, the commitment of capital to facilitate customer orders, (iii) trading activities from our Principal Investments in equity and other securities for the Company’s account, and (iv) other income.

Interest income from securities lending activities consists of interest income from equity and fixed income securities that are borrowed from one party and loaned to another.

The Company maintains relationships with a broad group of banks and broker-dealers to facilitate the sourcing, borrowing and lending of equity and fixed income securities in a “matched book” to limit the Company’s exposure to fluctuations in the market value or securities borrowed and securities loaned.

Other revenues include (i) net trading gains and losses from market making activities in our fixed income group, (ii) carried interest from our asset management recognized as earnings from financial assets within the scope of ASC 323 - Investments - Equity Method and Joint Ventures , and therefore will not be in the scope of ASC 606 - Revenue from Contracts with Customers .

In accordance with ASC 323 - Investments - Equity Method and Joint Ventures , the Company will record equity method income (losses) as a component of investment income based on the change in our proportionate claim on net assets of the investment fund, including performance-based capital allocations, assuming the investment fund was liquidated as of each reporting date pursuant to each fund’s governing agreements, and (iii) other miscellaneous income.

Wealth Management segment - Fees from wealth management asset advisory services consist primarily of investment advisory fees that are recognized over the period the performance obligation for the services provided.

Investment advisory and asset management fees are primarily comprised of fees for investment services and are generally based on the dollar amount of the assets being managed.

Investment advisory fee revenues as a principal registered investment advisor (RIA) are recognized on a gross basis.

Asset management fee revenues as an agent are recognized on a net basis.

Auction and Liquidation segment - Commission and fees earned on the sale of goods at Auction and Liquidation sales are recognized when evidence of a contract or arrangement exists, the transaction price has been determined, and the performance obligation has been satisfied when control of the product and risks of ownership has been transferred to the buyer.

The commission and fees earned for these services are included in revenues in the accompanying consolidated statements of income.

Under these types of arrangements, revenues also include contractual reimbursable costs.

Revenues earned from Auction and Liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction or liquidation are recognized over time when the performance obligation is satisfied.

We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of services to the customer which occurs as we incur costs on our contracts.

Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred.

Costs to fulfill the contract include labor and other direct costs incurred by the Company related to the contract.

Due to the nature of the guarantees and performance obligations under these contracts, the estimation of revenue that is ultimately earned is complex and subject to many variables and requires significant judgment.

It is common for these contracts to contain provisions that can either increase or decrease the transaction price upon completion of our performance obligations under the contract.

Estimated amounts are included in the transaction price at the most likely amount it is probable that a significant reversal of revenue will not occur.

Our estimates of variable consideration and determination of whether or not to include estimated amounts in the transaction price are based on an assessment of our anticipated performance under the contract taking into consideration all historical, current and forecasted information that is reasonably available to us.

Costs that directly relate to the contract and expected to be recoverable are capitalized as an asset and included in advances against customer contracts in the accompanying consolidated balance sheets.

These costs are amortized as the services are transferred to the customer over the contract period, which generally does not exceed six months, and the expense is recognized as a component of direct cost of services.

If, during the auction or liquidation sale, the Company determines that the total costs to be incurred on a performance obligation under a contract exceeds the total estimated revenues to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is determined.

If the Company determines that the variable consideration used in the initial determination of the transaction price for the contract is such that the total recoveries from the auction or liquidation will not exceed the guaranteed recovery values or advances made in accordance with the contract, the transaction price will be reduced and a loss or negative revenue could result from the performance obligation.

A provision for the entire loss as negative revenue on the performance obligation is recognized in the period the loss is determined.

Financial Consulting Segment - Revenues in the Financial Consulting segment are primarily comprised of fees earned from providing bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services.

Fees earned from bankruptcy, financial advisory, forensic accounting and real estate consulting services are rendered to clients over time as work progresses on the engagement and services are delivered to the client.

Fees may also include success and performance based fees which are recognized as revenue when the performance obligation is no longer constrained and it is not probable that the revenue recognized would be subject to significant reversal in a future period.

Revenues for valuation and appraisal services are recognized when the performance obligation is completed and is generally at the point in time upon delivery of the report to the customer.

Revenues in the Financial Consulting segment also include contractual reimbursable costs.

Investments – Communications Segment – Revenues in the Principal Investments - Communications segment are primarily

comprised of subscription services revenues which consist of fees charged to United Online pay accounts;

revenues from the sale of the

magicJack access rights;

revenues from access rights renewals and mobile apps;

prepaid minutes revenues;

revenues from access and wholesale charges;

service revenue from UCaaS hosting services;

advertising and other revenues;

revenues from the sale of magicJack and mobile broadband service devices, including the related shipping and handling and installation

fees, if applicable.

Service revenues from

fees charged to United Online pay accounts are recognized in the period in which fees are fixed or determinable and the related

services are provided to the customer.

The Company’s pay accounts generally pay in advance for their services by credit card,

PayPal, automated clearinghouse or check, and revenues are then recognized ratably over the service period.

Advance payments from

pay accounts are recorded in the consolidated balance sheets as deferred revenue.

In circumstances where payment is not received

in advance, revenues are only recognized if collectability is probably.

Revenues from sales

of the magicJack devices and access rights represent revenues recognized from sales of the magicJack devices to retailers, wholesalers,

or direct to customers, net of returns, over the period associated with the access right period.

Revenues for the device and initial

access right were accounted for as a combined unit of accounting and recognized ratably over the service term.

The transaction

price for magicJack devices is allocated between equipment and service based on stand-alone selling prices.

Revenues allocated

to equipment are recognized upon delivery (when control transfers to the customer), and service revenue is recognized ratably over

the service term.

The Company estimates the return of direct sales as part of the transaction price using a six month rolling average

of historical returns.

Revenues for hardware and shipping are recognized at the time of delivery and revenues for services are

recognized ratably over the service.

The Company recognizes revenue for hardware based on delivery terms to the retailer and revenue

for service is deferred for the delay period and recognized ratably over the remaining access right period.

Revenues from access

rights renewals and mobile apps represents revenues from customers purchasing rights to access our servers beyond the access right

period included in a magicJack device or magicJack service.

The extended access right ranges from one to five years.

charged to customers are initially deferred and recognized as revenue ratably over the extended access right period.

Revenues from

access rights granted to users of the magicJack Apps are recognized ratably over the access right period.

Revenues from the

sale of other magicJack related products are revenues recognized from the sale of other items related to the magicJack devices

and access right renewals the Company offers its customers, including porting fees charged to customers to port their existing

phone number to a magicJack device or services, fees charged for customer to select a custom, vanity or Canadian phone number and

fees charged to customers to change their existing number.

These revenues are recognized at the time of sale.

Prepaid minutes revenues

are primarily from the usage and expiration of international prepaid minutes, net of chargebacks.

Revenues from prepaid minutes

are recognized as minutes are used.

Revenues from access

and wholesale charges are generated from access fees charged to other telecommunication carriers or providers for Interexchange

Carriers (“IXC”) calls terminated to the Company’s end-users, and other fees charged to telecommunication carriers

or providers for origination of calls to their 800-numbers.

These revenues are recorded based on rates set forth in the respective

state and federal tariffs or negotiated contract rates, less provisions for billing adjustments.

revenues from access and wholesale

charges are recognized as calls are terminated to the network.

UCaaS revenues are

recurring monthly service revenue from sales of its hosted services.

Customers are billed monthly in advance for these recurring

services and in arrears for one time service charges and other certain usage charges.

UCaaS revenues also includes non-recurring

revenue from the sale of hardware and network equipment.

Revenues for recurring monthly service are recorded in the period the

services are provided over the term of the respective customer agreements and revenue from the sale of hardware and network equipment

is recognized in the period that the equipment is delivered and put into service.

Advertising revenues

consist primarily of amounts from the Company’s Internet search partner that are generated as a result of users utilizing

the partner’s Internet search services and amounts generated from display advertisements.

The Company recognizes such advertising

revenues in the period in which the advertisement is displayed or, for performance-based arrangements, when the related performance

criteria are met.

In determining whether an arrangement exists, the Company ensures that a written contract is in place, such as

a standard insertion order or a customer-specific agreement.

The Company assesses whether performance criteria have been met and

whether the fees are fixed or determinable based on a reconciliation of the performance criteria and the payment terms associated

with the transaction.

The reconciliation of the performance criteria generally includes a comparison of customer-provided performance

data to the contractual performance obligation and to internal or third-party performance data in circumstances where that data

is available.

Brands Segment –

Licensing revenue results from various license agreements that provide revenue based on guaranteed minimum royalty amounts and

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

Guaranteed minimum royalty amounts

are recognized as revenue on a straight-line basis over the full contract term.

Royalty payments exceeding the guaranteed minimum

amounts in a specific contract year are recognized only subsequent to when the guaranteed minimum amount has been achieved.

licensing fees are recognized at a point in time once the performance obligations have been satisfied.

Payments received

as consideration for the grant of a license are recorded as deferred revenue at the time payment is received and recognized ratably

as revenue over the term of the license agreement.

Advanced royalty payments are recorded as deferred revenue at the time payment

is received and recognized as revenue when earned.

service revenue from UCaaS hosting services;

and revenues from mobile phone voice, text, and data services.

Products revenues

consist of revenues from the sale of magicJack, mobile phone, and mobile broadband service devices, including the related shipping and

handling and installation fees, if applicable.

This segment’s revenues also include advertising revenues which consist primarily

of amounts from the Company’s Internet search partner that are generated as a result of users utilizing the partner’s Internet

search services and amounts generated from display advertisements.

The Company recognizes such advertising revenues in the period in

which the advertisement is displayed or, for performance-based arrangements, when the related performance criteria are met.

Subscription service revenues are recognized over time in the service

period in which the transaction price has been determinable and the related performance obligations for services are provided to the customer.

Fees charged to customers in advance are initially recorded in the consolidated balance sheets as deferred revenue and then recognized

ratably over the service period as the performance obligations are provided.

revenues for hardware and shipping are recognized at the time of delivery.

Revenues from sales of devices and services

represent revenues recognized from sales of the magicJack devices to retailers, wholesalers, or direct to customers, net of returns,

and rights to access the Company’s servers over the period associated with the access right period, and from sales of mobile

phones and voice, text, and data services.

The transaction price for devices is allocated between equipment and service based on

stand-alone selling prices.

Revenues allocated to devices are recognized upon delivery (when control transfers to the customer), and

service revenue is recognized ratably over the service term.

The Company estimates the return of magicJack device direct sales as

part of the transaction price using a six month rolling average of historical returns.

Brands Segment – Licensing revenue results from various license agreements that provide revenue based on guaranteed minimum royalty amounts and advertising/marketing fees with additional royalty revenue based on a percentage of defined sales.

Guaranteed minimum royalty amounts are recognized as revenue on a straight-line basis over the full contract term.

Royalty payments exceeding the guaranteed minimum amounts in a specific contract year are recognized only subsequent to when the guaranteed minimum amount has been achieved.

Other licensing fees are recognized at a point in time once the performance obligations have been satisfied.

Payments received as consideration for the grant of a license are recorded as deferred revenue at the time payment is received and recognized ratably as revenue over the term of the license agreement.

Advanced royalty payments are recorded as deferred revenue at the time payment is received and recognized as revenue when earned.

Revenue is not recognized unless collectability is probable.

Allowance for

Doubtful Accounts.

We maintain an allowance for doubtful accounts for estimated losses inherent in our accounts receivable

Allowance for Doubtful Accounts.

We maintain an allowance for doubtful accounts for estimated losses inherent in our accounts receivable portfolio.

In establishing the required allowance, management utilizes the expected loss model.

Management also considers historical

losses adjusted for current market conditions and the customers’ financial condition, the amount of receivables in dispute,

and the current receivables aging and current payment patterns.

Account balances are charged off against the allowance after all

means of collection have been exhausted and the potential for recovery is considered remote.

The bad debt expense is included as

a component of selling, general and administrative expenses in the accompanying consolidated statements of income.

Other Intangible Assets.

We account for goodwill and intangible assets in accordance with the accounting guidance which

requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if

events or circumstances indicate that the fair value of an asset has decreased below its carrying value.

Goodwill includes

the excess of the purchase price over the fair value of net assets acquired in business combinations and the acquisition of noncontrolling

The Codification requires that goodwill be tested for impairment at the reporting unit level (operating segment or one

level below an operating segment).

Application of the goodwill impairment test requires judgment, including the identification

of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining

the fair value.

The Company operates five reporting units, which are the same as its reporting segments described in Note 22 to

the consolidated financial statements.

Significant judgment is required to estimate the fair value of reporting units which includes

estimating future cash flows, determining appropriate discount rates and other assumptions.

Changes in these estimates and assumptions

could materially affect the determination of fair value and/or goodwill impairment.

When testing goodwill

for impairment, in accordance with ASU 2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment,

the Company made a qualitative assessment of the impact of the COVID-19 outbreak on goodwill and other intangible assets.

on the Company’s qualitative assessments during 2020, the Company concluded that a positive assertion can be made from the

qualitative assessment that it is more likely than not that the fair value of the reporting units exceeded their carrying values

and no impairments were identified.

The Company reviews

the carrying value of its amortizable intangibles and other long-lived assets for impairment at least annually or whenever events

or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived

assets is measured by comparing the carrying amount of the asset or asset group to the undiscounted cash flows that the asset or

asset group is expected to generate.

If the undiscounted cash flows of such assets are less than the carrying amount, the impairment

to be recognized is measured by the amount by which the carrying amount of the asset or asset group, if any, exceeds its fair market

During the year ended December 31, 2020, the Company determined that the COVID-19 outbreak was a triggering event for testing

the indefinite-lived tradenames in the Brands segment during the first quarter and again in the second quarter and determined that

the indefinite-lived tradenames in the Brands segment were impaired.

As a result, the Company recognized impairment charges of

$12,500, during the year ended December 31, 2020, which are included in restructuring charge in the Company’s consolidated

statements of income.

Management also considers historical losses adjusted for current market conditions and the customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The bad debt expense is included as a component of selling, general and administrative expenses in the accompanying consolidated statements of income.

Goodwill and Other Intangible Assets.

We account for goodwill and intangible assets in accordance with the accounting guidance which requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.

Goodwill includes the excess of the purchase price over the fair value of net assets acquired in business combinations and the acquisition of noncontrolling interests.

The Codification requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment).

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value.

The Company operates five reporting units, which are the same as its reporting segments described in Note 22 to the consolidated financial statements.

Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions.

Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.

When testing goodwill for impairment, in accordance with ASU 2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment, the Company made a qualitative assessment of the impact of the COVID-19 outbreak on goodwill and other intangible assets.

Based on the Company’s qualitative assessments during 2020, the Company concluded that a positive assertion can be made from the qualitative assessment that it is more likely than not that the fair value of the reporting units exceeded their carrying values and no impairments were identified.

The Company reviews the carrying value of its amortizable intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets is measured by comparing the carrying amount of the asset or asset group to the undiscounted cash flows that the asset or asset group is expected to generate.

If the undiscounted cash flows of such assets are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group, if any, exceeds its fair market value.

During the year ended December 31, 2020, the Company determined that the COVID-19 outbreak was a triggering event for testing the indefinite-lived tradenames in the Brands segment during the first quarter and again in the second quarter and determined that the indefinite-lived tradenames in the Brands segment were impaired.

As a result, the Company recognized impairment charges of $12,500, during the year ended December 31, 2020, which are included in restructuring charge in the Company’s consolidated statements of income.

During the year ended December 31, 2021, the Company recognized no impairment of intangibles.

Fair Value Measurements.

The Company records securities and other investments owned, securities sold not yet purchased, and mandatorily redeemable noncontrolling

interests that were issued after November 5, 2003 at fair value with fair value determined in accordance with the Codification.

Our mandatorily redeemable noncontrolling interests are measured at fair value on a recurring basis and are categorized using the

three levels of fair value hierarchy.

In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) for

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

Fair values determined

by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either

directly or indirectly.

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

or similar instruments in markets that are not active and model-derived valuations whose inputs are observable and can be corroborated

by market data.

Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant

to the fair value of the assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different

levels of the fair value hierarchy.

In such cases, the level in the fair value hierarchy within which the fair value measurement

in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in

its entirety.

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment

and considers factors specific to the asset or liability.

The fair value of mandatorily

redeemable noncontrolling interests is determined based on the issuance of similar interests for cash, references to industry comparables,

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

Investments in partnership

interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending

We also invest in priority investment funds and the underlying securities held by these funds are primarily corporate and

asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company.

The Company’s

partnership and investment fund interests are valued based on the Company’s proportionate share of the net assets of the

partnerships and funds;

the value for these investments are derived from the most recent statements received from the general partner

or fund administrator.

These partnership and investment fund interests are valued at net asset value (“NAV”) in accordance

with ASC “Topic 820:

Fair Value Measurements .”

The carrying amounts

reported in the consolidated financial statements for cash, restricted cash, accounts receivable, accounts payable and accrued

expenses and other current liabilities approximate fair value based on the short-term maturity of these instruments.

amounts of the notes payable (including credit lines used to finance liquidation engagements), long-term debt and capital lease

obligations approximate fair value because the contractual interest rates or effective yields of such instruments are consistent

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

Compensation.

The Company’s share based payment awards principally consist of grants of restricted stock and restricted

The Company records securities and other investments owned, securities sold not yet purchased, and mandatorily redeemable noncontrolling interests that were issued after November 5, 2003 at fair value with fair value determined in accordance with the Codification.

Our mandatorily redeemable noncontrolling interests are measured at fair value on a recurring basis and are categorized using the three levels of fair value hierarchy.

In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) for identical instruments that are highly liquid, observable and actively traded in over-the-counter markets.

Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable and can be corroborated by market data.

Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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

In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The fair value of mandatorily redeemable noncontrolling interests is determined based on the issuance of similar interests for cash, references to industry comparables, and relied, in part, on information obtained from appraisal reports and internal valuation models.

Investments in partnership interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending funds.

We also invest in priority investment funds and the underlying securities held by these funds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company.

The Company’s partnership and investment fund interests are valued based on the Company’s proportionate share of the net assets of the partnerships and funds;

the value for these investments is derived from the most recent statements received from the general partner or fund administrator.

These partnership and investment fund interests are valued at net asset value (“NAV”) in accordance with ASC 820 - Fair Value Measurements .

The carrying amounts reported in the consolidated financial statements for cash, restricted cash, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate fair value based on the short-term maturity of these instruments.

The carrying amounts of the notes payable (including credit lines used to finance liquidation engagements), long-term debt and capital lease obligations approximate fair value because the contractual interest rates or effective yields of such instruments are consistent with current market rates of interest for instruments of comparable credit risk.

Share-Based Compensation.

The Company’s share based payment awards principally consist of grants of restricted stock and restricted stock units.

Share based payment awards also include grants of membership interests in the Company’s majority owned subsidiaries.

The grants of membership interests consist of percentage interests in the Company’s majority owned subsidiaries as determined

at the date of grant.

In accordance with the accounting guidance share based payment awards are classified as either equity or

For equity-classified awards, the Company measures compensation cost for the grant of membership interests at fair

value on the date of grant and recognizes compensation expense in the consolidated statement of income over the requisite service

or performance period the award is expected to vest.

In June 2018, the

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

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

In accordance with the provisions of ASC 718, “Compensation – Stock Compensation” (“ASC 718”),

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

The grants of membership interests consist of percentage interests in the Company’s majority owned subsidiaries as determined at the date of grant.

In accordance with the accounting guidance share based payment awards are classified as either equity or a liability.

For equity-classified awards, the Company measures compensation cost for the grant of membership interests at fair value on the date of grant and recognizes compensation expense in the consolidated statements of income over the requisite service or performance period the award is expected to vest.

In June 2018, the Company adopted the 2018 Employee Stock Purchase Plan (“Purchase Plan”) which allows eligible employees to purchase common stock through payroll deductions at a price that is 85% of the market value of the common stock on the last day of the offering period.

In accordance with the provisions of ASC 718 - Compensation – Stock Compensation , the Company is required to recognize compensation expense relating to shares offered under the Purchase Plan.

Income Taxes.

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included

in the financial statements or tax returns.

Deferred tax liabilities and assets are determined based on the difference between

the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences

are expected to reverse.

The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit

based on expected profitability by tax jurisdiction, the eligible carryforward period, and other circumstances.

A valuation allowance

for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such

deferred tax asset will not be realized in future periods.

Tax benefits of operating loss carryforwards are evaluated on an ongoing

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

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns.

Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect during the year in which the differences are expected to reverse.

The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction, the eligible carryforward period, and other circumstances.

A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods.

Tax benefits of operating loss carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances.

If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.

The Company establishes

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

deferred tax assets will not be realized.

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

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

As a result of the common stock offering that was completed on June 5, 2014, the Company had a more than 50% ownership shift in

accordance with Internal Revenue Code Section 382.

Accordingly, the Company is limited to the amount of net operating loss that

may be utilized in future taxable years depending on the Company’s actual taxable income.

As of December 31, 2019, the Company

believes that the net operating loss that existed as of the more than 50% ownership shift will be utilized in future tax periods

and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided

an allowance.

The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax benefits of operating loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances.

As a result of the common stock offering that was completed on June 5, 2014, the Company had a more than 50% ownership shift in accordance with Internal Revenue Code Section 382.

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

As of December 31, 2019, the Company believes that the net operating loss that existed as of the more than 50% ownership shift will be utilized in future tax periods and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided an allowance.

Recent Accounting Standards

See Note 2(ab) to

the accompanying financial statements for recent accounting standards we have not yet adopted and recently adopted.

See Note 2(ac) to the accompanying 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-K

Item 7. Management’s Discussion and Analysis