BRC Group Holdings, Inc. 10-K

Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain a system of disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that is designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Under the supervision and with the participation of our management, including our Co-Chief Executive Officers and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon the foregoing evaluation, our Co-Chief Executive Officers and our Chief Financial Officer concluded that as of December 31, 2021 our disclosure controls and procedures were effective at the reasonable assurance level. Changes in Internal Control over Financial Reporting On February 25, 2021, we completed the acquisition of National Holdings Corporation (“National”). We are in the process of integrating National and will be conducting an evaluation of internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002. Excluding the National acquisition, there have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Report of Management on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Under the supervision and with the participation of management, including our Co-Chief Executive Officers and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2021. Management has excluded from its assessment of internal controls over financial reporting as of December 31, 2021 the internal control over financial reporting of National and their subsidiaries, which we acquired in a purchase business combination on February 25, 2021. National’s total assets and total revenues represents 2.6% and 18.0%, respectively, of our related consolidated financial statements amounts as of and for the year ended December 31, 2021. Our independent registered public accounting firm, Marcum LLP, has audited the effectiveness of our internal control over financial reporting as of December 31, 2021, as stated in their report which is included in the Financial Statements of this Annual Report on Form 10-K. Our management, including our Co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well- designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Item 9B. OTHER INFORMATION None. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 75 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information called for by this item is hereby incorporated by reference from our definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2021. Item 11. EXECUTIVE COMPENSATION The information called for by this item is hereby incorporated by reference from our definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2021. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information called for by this item is hereby incorporated by reference from our definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2021. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANACTIONS, AND DIRECTOR INDEPENDENCE The information called for by this item is hereby incorporated by reference from our definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2021. Item 14 . PRINCIPAL ACCOUNTANT FEES AND SERVICES The information called for by this item is hereby incorporated by reference from our definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2021. 76 PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: 1. Financial Statements. The Company’s Consolidated Financial Statements required to be filed in the Annual Report on the Form 10-K and the notes thereto, together with the report of the independent auditors on those Consolidated Financial Statements and the effectiveness of internal control over financial reporting of the Company, are hereby filed as part of this report, beginning on page F-1. 2. Financial Statement Schedules. Financial Statement Schedules other than those listed above have been omitted because they are either not applicable or the information is otherwise included in the consolidated financial statements or the notes thereto. (b) Exhibits and Index to Exhibits, below. (c) Exhibit Index Incorporated by Reference Exhibit No. Description Form Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation, as amended, dated as of August 17, 2015. 10-Q 3.1 8/3/2018 3.2 Amended and Restated Bylaws, dated as of November 6, 2014. 10-Q 3.6 11/6/2014 3.3 Amendment to Amended and Restated Bylaws of B. Riley Financial, Inc., dated April 3, 2019. 8-K 3.1 4/9/2019 3.4 Certificate of Designation designating the 6.875% Series A Cumulative Perpetual Preferred Stock of B. Riley Financial, Inc. 8-K 3.1 10/7/2019 3.5 Certificate of Designation designating the 7.375% Series B Cumulative Perpetual Preferred Stock of B. Riley Financial, Inc. 8-K 3.1 9/4/2020 4.1 Form of common stock certificate. 10-K 4.1 3/30/2015 4.2 Base Indenture, dated as of November 2, 2016, by and between the registrant and U.S. Bank National Association, as Trustee. 8-K 4.1 11/2/2016 4.3 Second Supplemental Indenture, dated as of May 31, 2017, by and between the registrant and U.S. Bank National Association, as Trustee. 8-K 4.1 5/31/2017 4.4 Form of 7.50% Senior Note due 2027 (included in Exhibit 4.3). 8-K 4.1 5/31/2017 4.5 Third Supplemental Indenture, dated as of December 13, 2017, by and between the registrant and U.S. Bank National Association, as Trustee. 8-K 4.1 12/13/2017 77 Incorporated by Reference Exhibit No. Description Form Exhibit Filing Date 4.6 Form of 7.25% Senior Note due 2027 (included in Exhibit 4.5). 8-K 4.1 12/13/2017 4.7 Fourth Supplemental Indenture, dated as of May 17, 2018, by and between the registrant and U.S. Bank National Association, as Trustee. 8-K 4.1 5/17/2018 4.8 Form of 7.375% Senior Note due 2023 (included in Exhibit 4.7). 8-K 4.2 5/17/2018 4.9 Fifth Supplemental Indenture, dated as of September 11, 2018, by and between the registrant and U.S. Bank National Association, as Trustee. 8-K 4.1 9/11/2018 4.10 Form of 6.875% Senior Note due 2023 (included in Exhibit 4.9). 8-K 4.2 9/11/2018 4.11 Second Supplemental Indenture, dated as of September 23, 2019, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee. 8-K 4.3 9/23/2019 4.12 Form of 6.50% Senior Note due 2026 (included in Exhibit 4.11). 8-K 4.4 9/23/2019 4.13 Deposit Agreement, dated October 7, 2019, among B. Riley Financial, Inc., Continental Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts, with respect to B. Riley Financial, Inc.’s 6.875% Series A Cumulative Perpetual Preferred Stock. 8-K 4.1 10/7/2019 4.14 Form of Specimen Certificate representing the 6.875% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, of B. Riley Financial, Inc. 8-K 4.2 10/7/2019 4.15 Form of Depositary Receipt. 8-K 4.3 10/7/2019 4.16 Third Supplemental Indenture, dated as of February 12, 2020, by and between the Company and The Bank of New York Mellon Trust Company National Association, as Trustee. 8-K 4.4 2/12/2020 4.17 Form of 6.375% Senior Note due 2025 (included in Exhibit 4.16). 8-K 4.4 2/12/2020 4.18 Deposit Agreement, dated September 4, 2020, among B. Riley Financial, Inc., Continental Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts, with respect to B. Riley Financial, Inc.’s 7.375% Series B Cumulative Perpetual Preferred Stock 8-K 4.1 9/4/2020 4.19 Form of Specimen certificate representing the 7.375% Series B Cumulative Perpetual Preferred Stock, par value $0.0001 per share, of B. Riley Financial, Inc. 8-K 4.2 9/4/2020 4.20 Form of Depositary Receipt. 8-K 4.3 9/4/2020 4.21 Fourth Supplemental Indenture, dated as of January 25, 2021, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee 8-K 4.5 1/25/2021 4.22 Form of 6.00% Senior Note due 2028 8-K 4.6 1/25/2021 4.23 Fifth Supplemental Indenture, dated as of March 29, 2021, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee 8-K 4.6 3/29/2021 78 Incorporated by Reference Exhibit No. Description Form Exhibit Filing Date 4.24 Form of 5.50% Senior Note due 2026 8-K 4.7 3/29/2021 4.25 Sixth Supplemental Indenture, dated as of August 6, 2021, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee 8-K 4.7 8/6/2021 4.26 Form of 5.25% Senior Note due 2028 8-K 4.8 8/6/2021 4.27 Seventh Supplemental Indenture, dated as of December 3, 2021, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee 8-K 4.8 12/3/2021 4.28 Form of 5.00% Senior Note due 2026 8-K 4.9 12/3/2021 4.29* Description of Registered Securities 10.1 Security Agreement, dated as of October 21, 2008, by and between Great American Group WF, LLC and Wells Fargo Bank, National Association (Successor to Wells Fargo Retail Finance, LLC). 10-Q 10.8 8/31/2009 10.2 Escrow Agreement, dated as of July 31, 2009, by and among Alternative Asset Management Acquisition Corp., the registrant, Andrew Gumaer, as the Member Representative, and Continental Stock Transfer & Trust Company. 8-K 10.6 8/6/2009 10.3# Form of Director and Officer Indemnification Agreement. 8-K 10.11 8/6/2009 10.4 Loan and Security Agreement (Accounts Receivable & Inventory Line of Credit), dated as of May 17, 2011, by and between BFI Business Finance and Great American Group Advisory & Valuation Services, LLC. 8-K 10.1 5/26/2011 10.5 Second Amended and Restated Credit Agreement, dated as of July 15, 2013, by and between Great American Group WF, LLC and Wells Fargo Bank, National Association. 8-K 10.1 7/19/2013 10.6 Third Amended and Restated Guaranty, dated as of July 15, 2013, by and between the registrant and Great American Group, LLC, in favor of Wells Fargo Bank, National Association. 8-K 10.2 7/19/2013 10.7 Uncommitted Liquidation Finance Agreement, dated as of March 19, 2014, by and among GA Asset Advisors Limited, each special purpose vehicle affiliated to GA Asset Advisors Limited which accedes to such agreement, and Burdale Financial Limited. 8-K 10.1 3/25/2014 10.8 Master Guarantee and Indemnity, dated as of March 19, 2014, by and among GA Asset Advisors Limited, the registrant, Great American Group, LLC, Great American Group WF, LLC, Burdale Financial Limited and Wells Fargo Bank, National Association. 8-K 10.2 3/25/2014 10.9 First Amendment to Credit Agreement and Limited Consent and Waiver, dated as of May 28, 2014, by and among Wells Fargo Bank, National Association, Great American Group WF, LLC, Great American Group, Inc. and Great American Group, LLC. 10-Q 10.8 8/14/2014 79 Incorporated by Reference Exhibit No. Description Form Exhibit Filing Date 10.10 Third Amendment to Credit Agreement, dated as of February 5, 2015, by and between Great American Group WF, LLC and Wells Fargo Bank, National Association. 10-Q 10.7 5/7/2015 10.11 Fourth Amendment to Credit Agreement, dated as of February 19, 2015, by and between Great American Group WF, LLC, GA Retail, Inc. and Wells Fargo Bank, National Association. 10-Q 10.8 5/7/2015 10.12# Amended and Restated 2009 Stock Incentive Plan. 10-Q 10.1 8/11/2015 10.13# Amended and Restated 2009 Stock Incentive Plan – Form of Restricted Stock Unit Agreement. 10-Q 10.2 8/11/2015 10.14# Amended and Restated 2009 Stock Incentive Plan – Stock Bonus Program and Form of Stock Bonus Award Agreement. 10-Q 10.3 8/11/2015 10.15# B. Riley Financial, Inc. Management Bonus Plan. 8-K 10.1 8/18/2015 10.16 Fifth Amendment to Credit Agreement, dated June 10, 2016, by and among Great American Group WF, LLC, GA Retail, Inc. and Wells Fargo Bank, National Association. 10-Q 10.1 8/5/2016 10.17 Sixth Amendment and Joinder under Credit Facility among Great American Group WF, LLC and Wells Fargo Bank, National Association as Lender October 5, 2016. 10-Q 10.1 11/14/2016 10.18 Seventh Amendment to Credit Agreement, dated as of April 21, 2017, by and among Great American Group WF, LLC, GA Retail, Inc., GA Retail Canada, ULC, Wells Fargo Bank, National Association and Wells Fargo Capital Finance Corporation Canada. 8-K 10.1 4/27/2017 10.19 Warrant Agreement, dated as of July 3, 2017, by and between the registrant and Continental Stock Transfer & Trust Company. 8-K 10.1 7/5/2017 10.20# Registration Rights Agreement, dated as of July 3, 2017, by and among the registrant and the persons listed on the signature pages thereto. 8-K 10.4 7/5/2017 10.21# Employment Agreement, dated as of January 1, 2018, by and between the registrant and Bryant R. Riley. 8-K 10.1 1/5/2018 10.22# Employment Agreement, dated as of January 1, 2018, by and between the registrant and Thomas J. Kelleher. 8-K 10.2 1/5/2018 10.23# Employment Agreement, dated as of January 1, 2018, by and between the registrant and Phillip J. Ahn. 8-K 10.4 1/5/2018 10.24# Employment Agreement, dated as of January 1, 2018, by and between the registrant and Alan N. Forman. 10-K 10.42 3/14/2018 80 Incorporated by Reference Exhibit No. Description Form Exhibit Filing Date 10.25 Debt Conversion and Purchase and Sale Agreement, dated January 12, 2018, by and among the registrant, bebe stores, inc. and The Manny Mashouf Living Trust. 8-K 10.1 1/16/2018 10.26# Employment Agreement, dated as of July 10, 2018, by and between the registrant and Kenneth M. Young. 8-K 10.1 7/16/2018 10.27# Employment Agreement, dated as of July 10, 2018, by and between B. Riley FBR, Inc. and Andrew Moore. 8-K 10.2 7/16/2018 10.28# Amendment No. 1 to Employment Agreement, dated as of July 10, 2018, by and between the registrant and Bryant R. Riley. 8-K 10.3 7/16/2018 10.29# Amendment No. 1 to Employment Agreement, dated as of July 10, 2018, by and between the registrant and Thomas Kelleher. 8-K 10.4 7/16/2018 10.30# 2018 Employee Stock Purchase Plan. 8-K 10.1 7/31/2018 10.31 Credit Agreement, dated December 19, 2018. 8-K 10.1 12/27/2018 10.32 First Amendment to Credit Agreement and Joinder, dated February 1, 2019 8-K 10.2 2/7/2019 10.33 Second Amendment to Credit Agreement, dated December 31, 2020 8-K 10.1 1/6/2021 10.34 Security and Pledge Agreement, dated December 19, 2018. 8-K 10.2 12/27/2018 10.35 Unconditional Guaranty and Pledge Agreement by B. Riley Principal Investments, LLC, dated December 19, 2018. 8-K 10.3 12/27/2018 10.36 Unconditional Guaranty by the registrant, dated December 19, 2018. 8-K 10.3 12/27/2018 10.37# Amendment to Amended and Restated 2009 Stock Incentive Plan. 10-Q 10.4 11/1/2019 10.38 Form of Restricted Stock Unit Award Agreement (Time-Vesting) under the B. Riley Financial, Inc. 2021 Stock Incentive Plan. 8-K 10.01 5/28/2021 10.39 B. Riley Financial, Inc. 2021 Stock Incentive Plan, incorporated by reference to Appendix A to the Company’s definitive proxy statement, dated April 20, 2021 filed with the Securities and Exchange Commission. 8-K 10.01 6/3/2021 81 Incorporated by Reference Exhibit No. Description Form Exhibit Filing Date 10.40 Credit agreement, dated June 23, 2021, among B. Riley Financial, Inc., BR Financial Holdings, LLC, BR Advisory & Investments, LLC, each of the lenders from time to time parties thereto, Nomura Corporate Funding Americas, LLC, and Wells Fargo Bank, N.A. 8-K 10.1 6/25/2021 10.41 Master Receivables Purchase Agreement, dated as of December 20, 2021, between B. Riley Receivables, LLC and W.S. Badcock Corporation 8-K 10.1 12/22/2021 10.42 Servicing Agreement, dated as of December 20, 2021, between B. Riley Receivables, LLC and W.S. Badcock Corporation 8-K 10.2 12/22/2021 10.43 Form of Director and Officer Indemnification Agreement 8-K 10.3 12/22/2021 10.44* Third Amendment to Credit Agreement, dated as of December 16, 2021. 10.45* Second Incremental Amendment to Credit Agreement, dated as of December 17, 2021. 10.46*# PRSU Grant Agreement 14.1 B. Riley – Code of Business Conduct and Ethics_022321 8-K 14.1 3/01/2021 21.1* Subsidiary List 23.1* Consent of Marcum LLP 31.1* Certification of Co-Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934 31.2* Certification of Co-Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934 31.3* Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934 32.1** Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.3** Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 82 Incorporated by Reference Exhibit No. Description Form Exhibit Filing Date 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * Filed herewith. ** Furnished herewith. + Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby agrees to furnish a copy of any omitted schedules to the Securities and Exchange Commission upon request. # Management contract or compensatory plan or arrangement. § The Company has omitted certain information contained in this exhibit pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is not material and, if publicly disclosed, would likely cause competitive harm to the Company. Certain schedules and annexes to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or annex will be furnished to the U.S. Securities and Exchange Commission or its staff upon request. ^ Pursuant to Item 601(b)(10) of Regulation S-K, certain annexes to the agreement have not been filed herewith. The registrant agrees to furnish supplementally a copy of any omitted annex to the Securities and Exchange Commission upon request. Item 16. FORM 10-K SUMMARY None. 83 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. B. Riley Financial, Inc. Date: February 25, 2022 / s / PHILLIP J. AHN (Phillip J. Ahn, Chief Financial Officer and Chief Operating Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated: Signature Title Date /s/ BRYANT R. RILEY Co-Chief Executive Officer Chairman of the Board February 25, 2022 (Bryant R. Riley) (Principal Executive Officer) /s/ THOMAS J. KELLEHER Co-Chief Executive Officer Director February 25, 2022 (Thomas J. Kelleher) /s/ PHILLIP J. AHN Chief Financial Officer Chief Operating Officer February 25, 2022 (Phillip J. Ahn) (Principal Financial Officer) /s/ HOWARD E. WEITZMAN Chief Accounting Officer (Principal Accounting Officer) February 25, 2022 (Howard E. Weitzman) /s/ ROBERT L. ANTIN Director February 25, 2022 (Robert L. Antin) /s/ ROBERT D’AGOSTINO Director February 25, 2022 (Robert D’Agostino) /s/ TAMMY BRANDT Director February 25, 2022 (Tammy Brandt) /s/ RENÉE E. LABRAN Director February 25, 2022 (Renée E. LaBran) /s/ RANDALL E. PAULSON Director February 25, 2022 (Randall E. Paulson) /s/ MICHAEL J. SHELDON Director February 25, 2022 (Michael J. Sheldon) /s/ MIMI K. WALTERS Director February 25, 2022 (Mimi K. Walters) /s/ MIKEL H. WILLIAMS Director February 25, 2022 (Mikel H. Williams) 84 B. RILEY FINANCIAL, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID Number 688 ) F-2 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting F-4 Consolidated Balance Sheets F-5 Consolidated Statements of Income F-6 Consolidated Statements of Comprehensive Income F-7 Consolidated Statements of Equity F-8 Consolidated Statements of Cash Flows F-9 Notes to Consolidated Financial Statements F-10 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of B. Riley Financial, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of B. Riley Financial, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated February 25, 2022, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Accounting for acquisition of National Holdings Corporation (“National”) Description of the Matter As discussed in Note 1 of the financial statements, the Company completed an acquisition of the remaining 55% of National outstanding shares that the Company did not previously own and settlement of outstanding share based awards amounting to approximately $35,314,000. The transaction was accounted for using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Auditing the Company's accounting for the acquisition of National was complex due to the significant estimates in determining the fair value of its identifiable intangible assets, which principally consisted of customer relationships and trademarks. The uncertainty of significant estimates was primarily due to the sensitivity of the underlying assumptions related to future performance of the acquired business. The significant assumptions used to estimate the fair value of the customer relationships included the future operating performance and cash flows generated by the customer relationships and a discount rate. The significant assumptions used to estimate the fair value of the trademarks included the projected revenues generated by the trademarks, a royalty rate, and a discount rate. These significant assumptions are forward looking and could be affected by future economic and market conditions. How We Addressed the Matter in Our Audit Our audit procedures related to the accounting for the acquisition of National to address this critical audit matter included the following: ● We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s accounting for acquisitions, including the valuation of identifiable intangible assets ● We tested the Company's controls over management’s review of the identifiable intangible asset valuation models, as well as the significant assumptions used in the valuation models. ● Additionally we read the purchase agreement to identify the significant terms, and tested management’s process for estimating the fair value of customer relationships and trademarks including: o We involved our valuation specialists to assist in our evaluation of the methodologies used by the Company and the significant assumptions included in the fair value estimates, which included guideline companies, discount rates, internal rate of return, weighted average cost of capital, weighted average return on assets. o We evaluated the reasonableness of management’s forecasts of future cash flows by comparing projections to historical results and applying a reasonable growth rate. o We compared the significant assumptions to the historical results of the acquired business and performed retrospective review of the actual results compared to the projected cash flows. F- 2 Valuation of Certain Level 3 Investments Description of the Matter The Company estimates the fair value of certain investments and loans receivable utilizing valuation models with unobservable inputs. Unlike Level 1 and 2 inputs, Level 3 inputs are unobservable, supported by little or no market activity, and are significant to the fair value of certain investments and loans receivable. As of December 31, 2021, the Company had equity securities of $377,549,000 and loan receivables recorded at fair value of $873,186,000 utilizing Level 3 inputs. Subjective and challenging judgment is required by management to determine the assumptions and valuation methodology to record financial assets at their fair value using Level 3 inputs. Auditing management’s models to determine the fair value of certain investments and loans receivable was complex and required judgment, particularly when evaluating inputs such as discount rates, projected EBITDA, multiples of EBITDA, projected revenue, multiples of revenue, multiple of PV-10, expected annualized volatility rates and market interest rates. These assumptions are affected by expectations about future economic and industry factors as well as estimates of the investee’s future growth. How We Addressed the Matter in Our Audit Our audit procedures related to the valuation of certain Level 3 Investments to address this critical audit matter included the following: ● We obtained an understanding of the control environment, evaluating the design effectiveness, and testing the operating effectiveness of controls over the Company’s process to establish a valuation methodology and determine assumptions used in valuation models to record financial assets at their fair value. For example, we tested management’s review controls over the significant assumptions described above as well as over the data used in the valuation models. ● With assistance from our valuation specialists, we evaluated the reasonableness of the valuation methodology and significant assumptions; tested inputs for reasonableness, including discount rates, multiples of revenue, multiple of PV-10, expected annualized volatility rates and market interest rates; and corroborated with audit evidence from external sources or comparisons to other companies in the industry. ● We tested the Company's process used to develop the revenue, projected EBITDA, multiples of EBITDA, projected revenue, multiple of PV-10 and EBITDA projections evaluated audit evidence from events or transactions occurring after the measurement date for comparison to management’s estimate. Accounting for investments in variable interest entities Description of the Matter As discussed in Note 2 (ab) to the consolidated financial statements, the Company holds interests in various entities that meet the characteristics of a variable interest entity (“VIE”). The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE, which requires consolidation based upon the following criteria: a) the power to direct the activities of the entity that most significantly impact its economic success, b) the obligation to absorb the expected losses of the entity, or c) the right to receive the expected residual returns of the entity; or d) the voting rights of some investors in the entity are not proportional to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. We identified the accounting for investments in variable interest entities to be a critical audit matter. Evaluating the Company’s judgments in determining whether an entity is a VIE and the primary beneficiary of each VIE required a high degree of complex auditor judgment. How We Addressed the Matter in Our Audit Our audit procedures related to the accounting for investments in variable interest entities to address this critical audit matter included the following: ● We tested certain internal controls over the Company’s process to identify and account for a VIE. These included controls related to the consideration of various interests in an entity, and determining whether the Company is the primary beneficiary of the VIE. ● We obtained and read the agreements in which the Company evaluated and compared the terms of the agreements to the Company’s assessment. ● We reviewed the Company’s VIE analyses to determine if the VIE meets the criteria for consolidation in accordance with Accounting Standards Codification (“ASC”) 810, Consolidations. ● We evaluated the factors considered to determine whether the Company omitted any significant potential variable interests in their analyses. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2009. New York, NY February 25, 2022 F- 3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING To the Shareholders and Board of Directors of B. Riley Financial, Inc. Opinion on Internal Control over Financial Reporting We have audited B. Riley Financial, Inc.'s (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2021 and 2020 and the related consolidated statements of income, comprehensive income, equity, and cash flows and the related notes for each of the three years in the period ended December 31, 2021 of the Company, and our report dated February 25, 2022 expressed an unqualified opinion on those financial statements. Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate. /s/ Marcum LLP Marcum LLP New York , NY February 25, 2022 F- 4 PART IV. FINANCIAL INFORMATION Item 15. Financial Statements. B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except par value) December 31, December 31, 2021 2020 Assets Assets: Cash and cash equivalents $ 278,933 $ 103,602 Restricted cash 927 1,235 Due from clearing brokers 29,657 7,089 Securities and other investments owned, at fair value 1,532,095 777,319 Securities borrowed 2,090,966 765,457 Accounts receivable, net 49,673 40,806 Due from related parties 2,074 986 Loans receivable, at fair value (includes $ 167,744 and $ 295,809 from related parties as of December 31, 2021 and 2020, respectively) 873,186 390,689 Prepaid expenses and other assets 463,502 93,174 Operating lease right-of-use assets 56,969 48,799 Property and equipment, net 12,870 11,685 Goodwill 250,568 227,046 Other intangible assets, net 207,651 190,745 Deferred tax assets, net 2,848 4,098 Total assets $ 5,851,919 $ 2,662,730 Liabilities and Equity Liabilities: Accounts payable $ 6,326 $ 2,722 Accrued expenses and other liabilities 343,750 173,178 Deferred revenue 69,507 68,651 Deferred tax liabilities, net 93,055 34,248 Due to related parties and partners — 327 Due to clearing brokers 69,398 13,672 Securities sold not yet purchased 28,623 10,105 Securities loaned 2,088,685 759,810 Operating lease liabilities 69,072 60,778 Notes payable 357 37,967 Loan participations sold — 17,316 Revolving credit facility 80,000 — Term loans 346,385 74,213 Senior notes payable, net 1,606,560 870,783 Total liabilities 4,801,718 2,123,770 Commitments and contingencies (Note 17) Redeemable noncontrolling interests in equity of subsidiaries 345,000 — B. Riley Financial, Inc. stockholders’ equity: Preferred stock, $ 0.0001 par value; 1,000,000 shares authorized; 4,512 and 3,971 shares issued and outstanding as of December 31, 2021 and 2020, respectively; liquidation preference of $ 112,790 and $ 99,260 as of December 31, 2021 and 2020, respectively. — — Common stock, $ 0.0001 par value; 100,000,000 shares authorized; 27,591,028 and 25,777,796 shares issued and outstanding as of December 31, 2021 and 2020, respectively. 3 3 Additional paid-in capital 413,486 310,326 Retained earnings 248,862 203,080 Accumulated other comprehensive loss ( 1,080 ) ( 823 ) Total B. Riley Financial, Inc. stockholders’ equity 661,271 512,586 Noncontrolling interests 43,930 26,374 Total equity 705,201 538,960 Total liabilities and equity $ 5,851,919 $ 2,662,730 The accompanying notes are an integral part of these consolidated financial statements. F- 5 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollars in thousands, except share data) Year Ended December 31, 2021 2020 2019 Revenues: Services and fees $ 1,172,957 $ 667,069 $ 460,493 Trading income and fair value adjustments on loans 386,676 104,018 106,463 Interest income - Loans and securities lending 122,723 102,499 77,221 Sale of goods 58,205 29,135 7,935 Total revenues 1,740,561 902,721 652,112 Operating expenses: Direct cost of services 54,390 60,451 58,824 Cost of goods sold 26,953 12,460 7,575 Selling, general and administrative expenses 906,196 428,537 385,219 Restructuring charge — 1,557 1,699 Impairment of tradenames — 12,500 — Interest expense - Securities lending and loan participations sold 52,631 42,451 32,144 Total operating expenses 1,040,170 557,956 485,461 Operating income 700,391 344,765 166,651 Other income (expense): Interest income 229 564 1,577 Gain on extinguishment of loans and other 3,796 — — Income (loss) from equity investments 2,801 ( 623 ) ( 1,431 ) Interest expense ( 92,455 ) ( 65,249 ) ( 50,205 ) Income before income taxes 614,762 279,457 116,592 Provision for income taxes ( 163,960 ) ( 75,440 ) ( 34,644 ) Net income 450,802 204,017 81,948 Net income (loss) attributable to noncontrolling interests 5,748 ( 1,131 ) 337 Net income attributable to B. Riley Financial, Inc. 445,054 205,148 81,611 Preferred stock dividends 7,457 4,710 264 Net income available to common shareholders $ 437,597 $ 200,438 $ 81,347 Basic income per common share $ 15.99 $ 7.83 $ 3.08 Diluted income per common share $ 15.09 $ 7.56 $ 2.95 Weighted average basic common shares outstanding 27,366,292 25,607,278 26,401,036 Weighted average diluted common shares outstanding 29,005,602 26,508,397 27,529,157 The accompanying notes are an integral part of these consolidated financial statements. F- 6 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Dollars in thousands) Year Ended December 31, 2021 2020 2019 Net income $ 450,802 $ 204,017 $ 81,948 Other comprehensive income (loss): Change in cumulative translation adjustment ( 257 ) 1,165 173 Other comprehensive income (loss), net of tax ( 257 ) 1,165 173 Total comprehensive income 450,545 205,182 82,121 Comprehensive income (loss) attributable to noncontrolling interests 5,748 ( 1,131 ) 337 Comprehensive income attributable to B. Riley Financial, Inc. $ 444,797 $ 206,313 $ 81,784 The accompanying notes are an integral part of these consolidated financial statements. F- 7 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Consolidated Statements of Equity (Dollars in thousands, except share data) Accumulated Additional Other Preferred Stock Common Stock Paid-in Retained Comprehensive Noncontrolling Total Shares Amount Shares Amount Capital Earnings Loss Interests Equity Balance, January 1, 2019 - $ - 26,603,355 $ 2 $ 258,638 $ 1,579 $ ( 2,161 ) $ 602 $ 258,660 Common stock issued — — 2,248 — 63 — — — 63 Preferred stock issued 2,349 — — — 56,566 — — — 56,566 Issuance of common stock warrant for purchase of BR Brand Holdings, LLC — — — — 990 — — — 990 ESPP shares issued and vesting of restricted stock, net of shares withheld for employer taxes — — 604,661 1 ( 2,014 ) — — — ( 2,013 ) Common stock repurchased and retired — — ( 237,932 ) — ( 4,273 ) — — — ( 4,273 ) Warrants repurchased and retired — — — — ( 2,777 ) — — — ( 2,777 ) Share based payments — — — — 15,916 — — — 15,916 Dividends on common stock ($ 1.49 per share) — — — — — ( 43,390 ) — — ( 43,390 ) Dividends on preferred stock — — — — — ( 264 ) — — ( 264 ) Net income — — — — — 81,611 — 337 81,948 Distributions to noncontrolling interests — — — — — — — ( 721 ) ( 721 ) Noncontrolling interest from purchase — — — — — — — 29,373 29,373 of BR Brand Holdings, LLC Foreign currency translation adjustment — — — — — — 173 — 173 Balance, December 31, 2019 2,349 $ — 26,972,332 $ 3 $ 323,109 $ 39,536 $ ( 1,988 ) $ 29,591 $ 390,251 Preferred stock issued 1,622 — — — 39,455 — — — 39,455 ESPP shares issued and vesting of restricted stock, net of shares withheld for employer taxes — — 1,358,212 — ( 22,578 ) — — — ( 22,578 ) Common stock repurchased and retired — — ( 2,552,748 ) — ( 48,248 ) — — — ( 48,248 ) Share based payments — — — — 18,588 — — — 18,588 Dividends on common stock — — — — — ( 36,894 ) — — ( 36,894 ) ($1.325 per share) Dividends on preferred stock — — — — — ( 4,710 ) — — ( 4,710 ) Net income (loss) — — — — — 205,148 — ( 1,131 ) 204,017 Distributions to noncontrolling interests — — — — — — — ( 2,690 ) ( 2,690 ) Contributions from noncontrolling interests — — — — — — — 604 604 Foreign currency translation adjustment — — — — — — 1,165 — 1,165 Balance, December 31, 2020 3,971 $ — 25,777,796 $ 3 $ 310,326 $ 203,080 $ ( 823 ) $ 26,374 $ 538,960 Common stock issued, net of offering costs — — 1,413,045 $ — 64,713 — — — 64,713 Preferred stock issued 541 — — — 14,712 — — — 14,712 ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 433,182 — ( 9,620 ) — — — ( 9,620 ) Common stock repurchased and retired — — ( 44,650 ) — ( 2,656 ) — — — ( 2,656 ) Warrants exercised — — 11,655 — — — — — — Share based payments — — — — 36,011 — — — 36,011 Dividends on common stock ($ 12.50 per share) — — — — — ( 373,633 ) — — ( 373,633 ) Dividends on preferred stock — — — — — ( 7,457 ) — — ( 7,457 ) Net income — — — — — 445,054 — 5,748 450,802 Remeasurement of B. Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity — — — — — ( 18,182 ) — — ( 18,182 ) Distributions to noncontrolling interests — — — — — — — ( 15,497 ) ( 15,497 ) Contributions from noncontrolling interests — — — — — — — 13,680 13,680 Acquisition of noncontrolling interests — — — — — — — 13,625 13,625 Other comprehensive loss — — — — — — ( 257 ) — ( 257 ) Balance, December 31, 2021 4,512 $ — 27,591,028 $ 3 $ 413,486 $ 248,862 $ ( 1,080 ) $ 43,930 $ 705,201 The accompanying notes are an integral part of these consolidated financial statements. F- 8 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) Year Ended December 31, 2021 2020 2019 Cash flows from operating activities: (Revised - See Note 23) (Revised - See Note 23) Net income $ 450,802 $ 204,017 $ 81,948 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 25,871 19,369 19,048 Provision for doubtful accounts 1,453 3,385 2,126 Share-based compensation 36,011 18,588 15,916 Fair value adjustments, non-cash ( 7,562 ) 21,954 12,258 Non-cash interest and other ( 22,322 ) ( 16,810 ) ( 12,267 ) Effect of foreign currency on operations 127 ( 460 ) ( 78 ) (Income) loss from equity investments ( 2,801 ) 623 1,431 Dividends from equity investments 2,136 1,343 3,194 Deferred income taxes 61,770 61,619 10,874 Impairment of leaseholds and intangibles, lease loss accrual and gain on disposal of fixed assets ( 137 ) 14,107 ( 286 ) Gain on extinguishment of loans ( 6,509 ) — — Loss (gain) on extinguishment of debt 6,131 ( 1,556 ) — Gain on equity investment ( 3,544 ) — — Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests 857 1,230 1,220 Change in operating assets and liabilities: Amounts due to/from clearing brokers 40,628 30,401 13,920 Securities and other investments owned ( 581,785 ) ( 331,759 ) ( 178,023 ) Securities borrowed ( 1,325,509 ) 48,873 117,015 Accounts receivable and advances against customer contracts ( 715 ) 18,776 ( 37,637 ) Prepaid expenses and other assets ( 3,737 ) 10,135 13,298 Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities 37,798 31,301 32,553 Amounts due to/from related parties and partners ( 1,415 ) 3,423 ( 4,781 ) Securities sold, not yet purchased 18,011 ( 31,715 ) 4,197 Deferred revenue ( 3,540 ) 1,530 ( 3,098 ) Securities loaned 1,328,875 ( 50,685 ) ( 120,026 ) Net cash provided by (used in) operating activities 50,894 57,689 ( 27,198 ) Cash flows from investing activities: Purchases of loans receivable ( 738,909 ) ( 207,466 ) ( 343,811 ) Repayments of loans receivable 172,119 90,083 159,186 Sale of loan receivable to related party — 1,800 — Proceeds from loan participations sold — 6,900 31,806 Repayment of loan participations sold ( 15,216 ) ( 2,233 ) ( 18,911 ) Asset acquisition - BR Brand, net of cash acquired $ 2,160 — — ( 114,912 ) Acquisition of businesses, net of $ 34,942 cash acquired in 2021 ( 28,254 ) ( 1,500 ) — Proceeds from sale of division of magicJack — — 6,196 Purchases of property, equipment and intangible assets ( 676 ) ( 2,045 ) ( 3,461 ) Proceeds from sale of property, equipment and intangible assets 14 1 513 Funds received from trust account of subsidiary — 320,500 — Investment of subsidiaries initial public offering proceeds into trust account ( 345,000 ) ( 176,750 ) ( 143,750 ) Purchases of equity investments ( 612 ) ( 7,500 ) ( 28,757 ) Distributions from equity investments — — 18,195 Net cash (used in) provided by investing activities ( 956,534 ) 21,790 ( 437,706 ) Cash flows from financing activities: Proceeds from revolving line of credit, net 80,000 — — Proceeds from asset based credit facility — — 140,439 Repayment of asset based credit facility — ( 37,096 ) ( 103,343 ) Repayment of notes payable ( 37,610 ) ( 357 ) ( 478 ) Payment of participating note payable and contingent consideration ( 3,714 ) ( 4,250 ) ( 4,250 ) Proceeds from term loan 300,000 75,000 10,000 Repayment of term loan ( 20,684 ) ( 67,266 ) ( 22,734 ) Proceeds from issuance of senior notes 1,249,083 186,796 281,924 Redemption of senior notes ( 507,348 ) ( 1,829 ) ( 52,154 ) Payment of debt issuance and offering costs ( 33,377 ) ( 9,845 ) ( 8,059 ) Payment of employment taxes on vesting of restricted stock ( 9,620 ) ( 22,578 ) ( 2,022 ) Common dividends paid ( 347,135 ) ( 38,792 ) ( 41,138 ) Preferred dividends paid ( 7,457 ) ( 4,710 ) ( 264 ) Repurchase of common stock ( 2,656 ) ( 48,248 ) ( 4,273 ) Repurchase of warrants — — ( 2,777 ) Distribution to noncontrolling interests ( 16,542 ) ( 3,826 ) ( 1,958 ) Contributions from noncontrolling interests 13,680 604 — Redemption of subsidiary temporary equity and distributions — ( 318,750 ) Proceeds from initial public offering of subsidiaries 345,000 175,000 143,750 Proceeds from offering common stock 64,713 — 63 Proceeds from offering preferred stock 14,712 39,455 56,566 Net cash provided by (used in) financing activities 1,081,045 ( 80,692 ) 389,292 Increase (decrease) in cash, cash equivalents and restricted cash 175,405 ( 1,213 ) ( 75,612 ) Effect of foreign currency on cash, cash equivalents and restricted cash ( 382 ) 1,311 73 Net increase (decrease) in cash, cash equivalents and restricted cash 175,023 98 ( 75,539 ) Cash, cash equivalents and restricted cash, beginning of year 104,837 104,739 180,278 Cash, cash equivalents and restricted cash, end of year $ 279,860 $ 104,837 $ 104,739 Supplemental disclosures: Interest paid $ 138,369 $ 98,595 $ 75,625 Taxes paid $ 88,153 $ 2,368 $ 8,649 The accompanying notes are an integral part of these consolidated financial statements. F- 9 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data) NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS OPERATIONS B. Riley Financial, Inc. and its subsidiaries (collectively, the “Company”) provide investment banking and financial services to corporate, institutional and high net worth clients, and asset disposition, financial consulting, appraisal and capital advisory services to a wide range of retail, wholesale and industrial clients, as well as lenders, capital providers, private equity investors and professional services firms throughout the United States, Australia, Canada, and Europe and consumer Internet access and cloud communication services through its wholly-owned subsidiaries United Online, Inc. (“UOL” or “United Online”) and magicJack VocalTec Ltd. (“magicJack”). The Company also has a majority ownership interest in BR Brands Holding, LLC (“BR Brands” or “Brands”), which provides licensing of trademarks. On February 25, 2021, the Company completed the acquisition of all of the outstanding shares of National Holdings Corporation (“National”) not already owned by the Company. The total cash consideration for the approximately 55 % of National outstanding shares that the Company did not previously own and settlement of outstanding share based awards amounted to $ 35,314 . The Company used the acquisition method of accounting for this acquisition. The acquisition expands the Company’s investment banking, wealth management and financial planning offerings by adding National’s brokerage, insurance, tax preparation and advisory services. As a result of the National acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational management changes for its wealth management business. Under the new structure, the wealth management business previously reported in the Capital Markets segment are now reported in the Wealth Management segment. In conjunction with the new reporting structure, the Company recast its segment presentation for all periods presented. The Company operates in six operating segments: (i) Capital Markets, through which the Company provides investment banking, corporate finance, securities lending, restructuring, research, sales and trading services to corporate and institutional clients; (ii) Wealth Management, through which the Company provides wealth management and tax services to corporate, institutional and high net worth clients; (iii) Auction and Liquidation, through which the Company provides auction and liquidation services to help clients dispose of assets that include multi-location retail inventory, wholesale inventory, trade fixtures, machinery and equipment, intellectual property and real property; (iv) Financial Consulting, through which the Company provides bankruptcy, financial advisory, forensic accounting, operations management consulting, real estate consulting and valuation and appraisal services; (v) Principal Investments - Communications, through which the Company provides consumer Internet access and related subscription services from United Online and cloud communication services primarily through the magicJack devices; and (vi) Brands, which is focused on generating revenue through the licensing of trademarks. 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. During the fourth quarter of 2021, the full impact of the COVID-19 outbreak continues to evolve, with the emergence of variant strains and breakthrough infections becoming prevalent both in the U.S. and worldwide. As the U.S. economy recovers, aided by additional stimulus packages, 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 and positive momentum in the domestic vaccine rollout, countries across the world continue to manage repeated waves of the pandemic, including variant strains of COVID-19, amid uneven progress toward vaccination. The impact of the COVID-19 outbreak on our results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions and the success of vaccines and natural immunity in controlling slowing or halting the pandemic. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy continue to be highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted, our results of operations, financial position and cash flows may be materially adversely affected. F- 10 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( a) Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of B. Riley Financial, Inc. and its wholly-owned and majority-owned subsidiaries. The consolidated financial statements also include the accounts of Great American Global Partners, LLC which is controlled by the Company as a result of its ownership of a 50 % member interest, appointment of two of the three executive officers and significant influence over the funding of operations. All intercompany accounts and transactions have been eliminated upon consolidation. The accounting guidance requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a Variable Interest Entity (“VIE”); to eliminate the solely quantitative approach previously required for determining the primary beneficiary of a VIE; to add an additional reconsideration event for determining whether an entity is a VIE when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a VIE. Revision of Prior Period Financial Statements In connection with the preparation of the Company’s consolidated financial statements during the year ended December 31, 2021, the Company identified an error that was not material related to the consolidation of certain VIE which primarily resulted in a gross up between investing activities and financing activities in the consolidated statements of cash flows. In accordance with SAB No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the error and determined that the related impact did not, either individually or in the aggregate, materially misstate previously issued consolidated financial statements. A summary of revisions to certain previously reported financial information presented herein is included in Note 23. (b) Use of Estimates The preparation of the consolidated financial statements in accordance 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 at the date of the consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as valuation of securities, allowance for doubtful accounts, the fair value of loans receivables, intangible assets and goodwill, share based arrangements, 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. (d) Revenue Recognition The Company recognizes 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 the Company’s customers, in an amount that reflects the consideration the Company expects 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: F- 11 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 and fair value adjustments on loans, (iii) trading activities from the Company’s 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 the Company’s fixed income group, (ii) carried interest from the Company’s 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 the Company’s 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 is 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. Revenues from sales and trading are recognized when the performance obligation is satisfied and include commissions resulting from equity securities transactions executed as agent and are recorded on a trade date 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. F- 12 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. The Company generally uses the cost-to-cost measure of progress for the Company’s contracts because it best depicts the transfer of services to the customer which occurs as the Company incurs costs on its 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 the Company’s 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. The Company estimates of variable consideration and determination of whether or not to include estimated amounts in the transaction price are based on an assessment of the Company’s anticipated performance under the contract taking into consideration all historical, current and forecasted information that is reasonably available to the Company. 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. Principal 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; 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. Product 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. F- 13 (d) Direct Cost of Services Direct cost of services relates to service and fee revenues. Direct costs of services include participation in profits under collaborative arrangements in which the Company is a majority participant. Direct costs of services also include the cost of consultants and other direct expenses related to Auction and Liquidation contracts pursuant to commission and fee based arrangements in the Auction and Liquidation segment. Direct cost of services in the Principal Investments - Communications segment include cost of telecommunications and data center costs, personnel and overhead-related costs associated with operating the Company’s networks, servers and data centers, sales commissions associated with multi-year service plans, depreciation of network computers and equipment, amortization expense, third party advertising sales commissions, license fees, costs related to providing customer support, costs related to customer billing and processing of customer credit cards and associated bank fees. Direct cost of services does not include an allocation of the Company’s overhead costs. (e) Interest Expense - Securities Lending Activities and Loan Participations Sold Interest expense from securities lending activities is included in operating expenses related to operations in the Capital Markets segment. Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $ 51,753 , $ 40,490 , and $30,739 during the years ended December 31, 2021, 2020, and 2019, respectively. There were no loan participations sold outstanding as of December 31, 2021 and the loan participation sold totaled $ 17,316 , as of December 31, 2020. Interest expense from loan participations sold totaled $ 878 , $ 1,961 , and $ 1,405 during the years ended December 31, 2021, 2020, and 2019, respectively. (f) Concentration of Risk Revenues in the Capital Markets, Financial Consulting, Wealth Management, Principal Investments - Communications and Brands segments are currently primarily generated in the United States. Revenues in the Auction and Liquidation segment are primarily generated in the United States, Australia, Canada and Europe. The Company’s activities in the Auction and Liquidation segment are executed frequently with, and on behalf of, distressed customers and secured creditors. Concentrations of credit risk can be affected by changes in economic, industry, or geographical factors. The Company seeks to control its credit risk and potential risk concentration through risk management activities that limit the Company’s exposure to losses on any one specific liquidation services contract or concentration within any one specific industry. To mitigate the exposure to losses on any one specific liquidations services contract, the Company sometimes conducts operations with third parties through collaborative arrangements. The Company maintains cash in various federally insured banking institutions. The account balances at each institution periodically exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts in excess of FDIC insurance coverage. The Company has not experienced any losses in such accounts. The Company also has substantial cash balances from proceeds received from auctions and liquidation engagements that are distributed to parties in accordance with the collaborative arrangements. (g) Advertising Expenses The Company expenses advertising costs, which consist primarily of costs for printed materials, as incurred. Advertising costs totaled $ 3,681 , $ 3,013 , and $ 1,903 during the years ended December 31, 2021, 2020, and 2019, respectively. Advertising expense is included as a component of selling, general and administrative expenses in the accompanying consolidated statements of income. (h) Share-Based Compensation The Company’s share-based payment awards principally consist of grants of restricted stock, restricted stock units and costs associated with the Company’s employee stock purchase plan. In accordance with the applicable accounting guidance, share-based payment awards are classified as either equity or liabilities. 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. During the years ended December 31, 2021, 2020, and 2019, the Company recognized compensation expense of $ 758 , $ 377 , and $ 322 respectively, related to the Purchase Plan. As of December 31, 2021 and 2020, there were 450,717 and 502,326 shares reserved for issuance under the Purchase Plan, respectively. F- 14 (i) Income Taxes The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement basis 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. 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 recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The Company accrues interest on unrecognized tax benefits as a component of income tax expense. Penalties, if incurred, would be recognized as a component of income tax expense. (j) Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. (k) Restricted Cash As of December 31, 2021, restricted cash included $ 927 of cash collateral for leases. As of December 31, 2020, restricted cash included $ 764 of cash collateral for foreign exchange contracts and $ 471 of collateral related to one of the Company’s telecommunication suppliers. Cash, cash equivalents and restricted cash consist of the following: December 31, December 31, 2021 2020 Cash and cash equivalents $ 278,933 $ 103,602 Restricted cash 927 1,235 Total cash, cash equivalents and restricted cash $ 279,860 $ 104,837 (l) Securities Borrowed and Securities Loaned Securities borrowed and securities loaned are recorded based upon the amount of cash advanced or received. Securities borrowed transactions facilitate the settlement process and require the Company to deposit cash or other collateral with the lender. With respect to securities loaned, the Company receives collateral in the form of cash. The amount of collateral required to be deposited for securities borrowed, or received for securities loaned, is an amount generally in excess of the market value of the applicable securities borrowed or loaned. The Company monitors the market value of the securities borrowed and loaned on a daily basis, with additional collateral obtained, or excess collateral recalled, when deemed appropriate. The Company accounts for securities lending transactions in accordance with ASC 210 - Balance Sheet , which requires companies to report disclosures of offsetting assets and liabilities. The Company does not net securities borrowed and securities loaned and these items are presented on a gross basis in the consolidated balance sheets. (m) Due from/to Brokers, Dealers, and Clearing Organizations The Company clears all of its proprietary and customer transactions through other broker-dealers on a fully disclosed basis. The amount receivable from or payable to the clearing brokers represents the net of proceeds from unsettled securities sold, the Company’s clearing deposits and amounts receivable for commissions less amounts payable for unsettled securities purchased by the Company and amounts payable for clearing costs and other settlement charges. This amount also includes the cash collateral received for securities loaned less cash collateral for securities borrowed. Any amounts payable would be fully collateralized by all of the securities owned by the Company and held on deposit at the clearing broker. F- 15 (n) Accounts Receivable Accounts receivable represents amounts due from the Company’s Auction and Liquidation, Financial Consulting, Capital Markets, Wealth Management, Principal Investments - Communications and Brands customers. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its 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 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 Company does not have any off-balance sheet credit exposure related to its customers. The Company’s bad debt expense and changes in the allowance for doubtful accounts are included in Note 5. (o) Leases The Company determines if an arrangement is, or contains, a lease at the inception date. Operating leases are included in right-of-use assets, with the related liabilities included in operating lease liabilities in the consolidated balance sheets. Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. We use our estimated incremental borrowing rate in determining the present value of lease payments. Variable components of the lease payments such as fair market value adjustments, utilities, and maintenance costs are expensed as incurred and not included in determining the present value. Our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components which are accounted for as a single lease component. See Note 9 for additional information on leases. (p) Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Property and equipment held under finance leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Depreciation expense on property and equipment was $ 3,865 , $ 3,632 , and $ 5,202 during the years ended December 31, 2021, 2020, and 2019, respectively. (q) Loans Receivable Under ASC 326 - Financial Instruments – Credit Losses , the Company elected the irrevocable fair value option for all outstanding loans receivable that were previously measured at amortized cost. Under the fair value option, loans receivables are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the consolidated statements of income. These loans are no longer subject to evaluation for impairment through an allowance for loan loss as such losses will be captured through fair value changes. Loans receivable, at fair value totaled $ 873,186 and $ 390,689 as of December 31, 2021 and 2020, respectively. The loans have various maturities through March 2027. As of December 31, 2021 and 2020, the historical cost of loans receivable accounted for under the fair value option was $ 877,527 and $ 405,064 , respectively, which included principal balances of $ 886,831 and $ 416,401 , respectively, and unamortized costs, origination fees, premiums and discounts, totaling $ 9,304 and $ 11,337 , respectively. During the years ended December 31, 2021 and 2020, the Company recorded net unrealized gains of $ 10,035 and net unrealized losses of $ 22,033 , respectively, on loans receivable, at fair value, which is included in trading income and fair value adjustments on loans on the consolidated statements of income. The Company may periodically provide limited guarantees to third parties for loans that are made to investment banking and lending customers. As of December 31, 2021, the Company has provided limited guarantees with respect to Babcock & Wilcox Enterprises, Inc. (“B&W”) as further described in Note 17(b). In accordance with the credit loss standard, the Company evaluates the need to record an allowance for credit losses for these loan guarantees since they have off-balance sheet credit exposures. As of December 31, 2021, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure. F- 16 Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans and securities lending on the consolidated statements of income. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Unearned income, discounts, and premiums are amortized to interest income using a level yield methodology. Badcock Loan Receivable On December 20, 2021, the Company entered into a Master Receivables Purchase Agreement (“Receivables Purchase Agreement” with W.S. Badcock Corporation, a Florida corporation (“WSBC”), an indirect wholly owned subsidiary of Franchise Group, Inc., a Delaware corporation (“FRG”). The Company paid $ 400,000 in cash to WSBC for the purchase of certain consumer credit receivables of WSBC. The Company recognized the $ 400,000 as part of its loans receivable, at fair value on the consolidated balance sheets, which is collateralized by the performance of the consumer credit receivables of WSBC. In connection with the Receivables Purchase Agreement, the Company entered into a Servicing Agreement (the “Servicing Agreement”) with WSBC pursuant to which WSBC will provide to the Company certain customary servicing and account management services in respect of the receivables purchased by the Company under the Receivables Purchase Agreement. In addition, subject to certain terms and conditions, FRG has agreed to guarantee the performance by WSBC of its obligations under the Receivables Purchase Agreement and the Servicing Agreement. (r) Securities and Other Investments Owned and Securities Sold Not Yet Purchased Securities owned consist of equity securities including, common and preferred stocks, warrants, and options; corporate bonds; other fixed income securities including, government and agency bonds; loans receivable valued at fair value; and investments in partnerships. Securities sold, but not yet purchased represent obligations of the Company to deliver the specified security at the contracted price and thereby create a liability to purchase the security in the market at prevailing prices. Changes in the value of these securities are reflected currently in the results of operations. As of December 31, 2021 and 2020, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities: December 31, December 31, 2021 2020 Securities and other investments owned: Equity securities $ 1,444,474 $ 697,288 Corporate bonds 7,632 3,195 Other fixed income securities 2,606 1,913 Partnership interests and other 77,383 74,923 $ 1,532,095 $ 777,319 Securities sold not yet purchased: Equity securities $ 20,302 $ 4,575 Corporate bonds 6,327 4,288 Other fixed income securities 1,994 1,242 $ 28,623 $ 10,105 F- 17 (s) Goodwill and Other Intangible Assets The Company accounts 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. ASC 350 – Intangibles - Goodwill and Other 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 six reporting units, which are the same as its reporting segments described in Note 22. 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 ASC 350, the Company made a qualitative assessment of the impact of the COVID-19 outbreak on goodwill and other intangible assets during the years ended December 31, 2021 and 2020. Based on the Company’s qualitative assessments, the Company concluded that a positive assertion could be made from the qualitative assessments that it is more likely than not that the fair value of the reporting units exceeded their carrying values. There were no impairments of goodwill identified during the years ended December 31, 2021, 2020, and 2019. During the years ended December 31, 2021 and 2019, the Company recognized no impairment of indefinite-lived intangibles. 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 were included as an impairment of tradenames in the Company’s consolidated statements of income. The Company reviews the carrying value of its finite-lived 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 years ended December 31, 2021, 2020, and 2019, the Company recognized no impairment of finite-lived intangibles. (t) Fair Value Measurements The Company’s 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. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. 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 has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. F- 18 The Company’s securities and other investments owned and securities sold and not yet purchased are comprised of common and preferred stocks and warrants, corporate bonds, and investments in partnerships. Investments in common stocks that are based on quoted prices in active markets are included in Level 1 of the fair value hierarchy. The Company also holds loans receivable valued at fair value, nonpublic common and preferred stocks and warrants for which there is little or no public market and fair value is determined by management on a consistent basis. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks. These investments are included in Level 3 of the fair value hierarchy. Investments in partnership interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending funds. The Company also invests 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”) and are excluded from the fair value hierarchy in the table below in accordance with ASC 820 - Fair Value Measurements . As of December 31, 2021 and 2020, partnership and investment fund interests valued at NAV of $ 77,383 and $ 74,923 , respectively, and are included in securities and other investments owned in the accompanying consolidated balance sheets. Securities and other investments owned also include investments in nonpublic entities that do not have a readily determinable fair value and do not report NAV per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold. Any investments adjusted to their fair value by applying the measurement alternative are disclosed as nonrecurring fair value measurements, including the level in the fair value hierarchy that was used. As of December 31, 2021 and 2020, investments in nonpublic entities valued using a measurement alternative of $ 59,745 and $ 26,948 , respectively, are included in securities and other investments owned in the accompanying consolidated balance sheets. Funds held in trust represents U.S. treasury bills that were purchased with funds raised through the initial public offerings of B. Riley Principal 150 Merger Corporation (“BRPM 150”) and B. Riley Principal 250 Merger Corporation (“BRPM 250”), consolidated special purpose acquisition corporations (“SPACs”). The funds raised are held in trust accounts that are restricted for use and may only be used for purposes of completing an initial business combination or redemption of the class A public common shares of the SPAC’s as set forth in their respective trust agreements. The funds held in trust are included within Level 1 of the fair value hierarchy and included in prepaid expenses and other assets in the accompanying consolidated balance sheets. The Company has warrant liabilities related to warrants of the SPAC’s that are held by investors in BRPM 150 and BRPM 250. The warrants are accounted for as liabilities in accordance with ASC 815 - Derivatives and Hedging and are measured at fair value at inception and on a recurring basis using quoted prices in over-the-counter markets. Warrant liabilities are included in accrued expenses and other liabilities in the accompanying consolidated balance sheets with changes in fair value that amounted to a loss of $ 2,473 during the year ended December 31, 2021 included within gain on extinguishment of loans and other as part of other income (expense) in the consolidated statements of income. 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. F- 19 The following tables present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of December 31, 2021 and 2020. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2021 Using Quoted prices in Other Significant Fair value at active markets for observable unobservable December 31 identical assets inputs inputs 2021 (Level 1) (Level 2) (Level 3) Assets: Funds held in trust account $ 345,024 $ 345,024 $ — $ — Securities and other investments owned: Equity securities 1,384,729 1,007,180 — 377,549 Corporate bonds 7,632 — 7,632 — Other fixed income securities 2,606 — 2,606 — Total securities and other investments owned 1,394,967 1,007,180 10,238 377,549 Loans receivable, at fair value 873,186 — — 873,186 Total assets measured at fair value $ 2,613,177 $ 1,352,204 $ 10,238 $ 1,250,735 Liabilities: Securities sold not yet purchased: Equity securities $ 20,302 $ 20,302 $ — $ — Corporate bonds 6,327 — 6,327 — Other fixed income securities 1,994 — 1,994 — Total securities sold not yet purchased 28,623 20,302 8,321 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,506 — — 4,506 Warrant liabilities 12,938 12,938 — — Total liabilities measured at fair value $ 46,067 $ 33,240 $ 8,321 $ 4,506 Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2020 Using Quoted prices in Other Significant Fair value at active markets for observable unobservable December 31 identical assets inputs inputs 2020 (Level 1) (Level 2) (Level 3) Assets: Securities and other investments owned: Equity securities $ 670,340 $ 521,048 $ — $ 149,292 Corporate bonds 3,195 — 3,195 — Other fixed income securities 1,913 — 1,913 — Total securities and other investments owned 675,448 521,048 5,108 149,292 Loans receivable, at fair value 390,689 — — 390,689 Total assets measured at fair value $ 1,066,137 $ 521,048 $ 5,108 $ 539,981 Liabilities: Securities sold not yet purchased: Equity securities $ 4,575 $ 4,575 $ — $ — Corporate bonds 4,288 — 4,288 — Other fixed income securities 1,242 — 1,242 — Total securities sold not yet purchased 10,105 4,575 5,530 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,700 — — 4,700 Total liabilities measured at fair value $ 14,805 $ 4,575 $ 5,530 $ 4,700 F- 20 As of December 31, 2021 and 2020, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $ 1,250,735 and $ 539,981 , respectively, or 21.4 % and 20.3 %, respectively, of the Company’s total assets. In determining the fair value for these Level 3 financial assets, the Company analyzes various financial, performance and market factors to estimate the value, including where applicable, over-the-counter market trading activity. The following table summarizes the significant unobservable inputs in the fair value measurement of level 3 financial assets and liabilities by category of investment and valuation technique as of December 31, 2021: Fair value at December 31, 2021 Valuation Technique Unobservable Input Range Weighted Average Assets: Equity securities $ 291,178 Market approach Multiple of EBITDA 3.25 x - 17.50 x 6.67x Multiple of PV-10 0.60 x - 0.65 x 0.61x Multiple of Sales 1.45 x - 1.60 x 1.48x Market price of related security $0.84 - $51.43 $42.13 74,157 Discounted cash flow Market interest rate 14.8% 14.8% 12,214 Option pricing model Annualized volatility 0.30 - 2.80 0.74 Loans receivable at fair value 873,186 Discounted cash flow Market interest rate 6.0% - 38.0% 26.3% Total level 3 assets measured at fair value $ 1,250,735 Liabilities: Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,506 Market approach Operating income multiple 6.0 x 6.0x The changes in Level 3 fair value hierarchy during the year ended December 31, 2021 and 2020 are as follows: Level 3 Level 3 Changes During the Period Level 3 Balance at Fair Relating to Purchases, Transfer in Balance at Beginning of Value Undistributed Sales and and/or out End of Year Adjustments Earnings Settlements of Level 3 Period Year Ended December 31, 2021 Equity securities $ 149,292 88,804 — 138,766 687 377,549 Loans receivable at fair value 390,689 10,035 10,952 461,510 — 873,186 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,700 — ( 194 ) — — 4,506 Warrant liabilities — — — 10,466 ( 10,466 ) — Year Ended December 31, 2020 Equity securities $ 109,251 $ ( 4,358 ) $ — $ 54,178 $ ( 9,779 ) $ 149,292 Loans receivable at fair value 43,338 ( 22,033 ) 4,409 139,127 225,848 390,689 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,616 — 84 — — 4,700 F- 21 Under ASC 326, the Company elected the irrevocable fair value option for all outstanding loans receivable that were measured at amortized cost. The loans receivable, at fair value are included in transfers into level 3 fair value assets in the above table. The amounts reported in the table above during the years ended December 31, 2021 and 2020 include the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis. The carrying amounts reported in the consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value based on the short-term maturity of these instruments. Changes in the Level 3 fair value hierarchy during the year ended December 31, 2021 included the fair value of warrant liabilities associated with BRPM 150 and BRPM 250. The value of these warrants transferred from Level 3 to Level 1 of the fair value hierarchy when the public warrants started trading in the over-the-counter markets after the initial public offering. As of December 31, 2021 and 2020, the senior notes payable had a carrying amount of $ 1,606,560 and $ 870,783 , respectively, and a fair value of $ 1,661,189 and $ 898,606 , respectively. The carrying amount of the term loan approximates fair value because the effective yield of such instrument is consistent with current market rates of interest for instruments of comparable credit risk. The investments in nonpublic entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in trading income (losses) and fair value adjustments on loans on the consolidated statements of income. These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer. Further adjustments are not made until another observable transaction occurs. Therefore, the determination of fair values of these investments in nonpublic entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments. Investments in nonpublic entities that do not report NAV are subject to a qualitative assessment for indicators of impairment. If indicators of impairment are present, the Company is required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value. As of December 31, 2021 and 2020, except for the impact of the intangible impairment charge in 2020 as described in Note 8 – Goodwill and Intangible Assets, there were no additional assets or liabilities measured at fair value on a non-recurring basis. (u) Derivative and Foreign Currency Translation The Company periodically uses derivative instruments, which primarily consist of the purchase of forward exchange contracts, for certain loans receivable and Auction and Liquidation engagements with operations outside the United States. During the year ended December 31, 2020, the Company’s use of derivatives consisted of the purchase of forward exchange contracts in the amount of 12,700 Euros, of which 6,700 Euros were settled. As of December 31, 2021 and 2020, forward exchange contracts in the amount of 6,000 Euros were outstanding. The forward exchange contracts were entered into to improve the predictability of cash flows related to a retail store liquidation engagement and a loan receivable. The net gain from forward exchange contracts was $ 1,052 and net loss was $ 285 during the years ended December 31, 2021 and 2020, respectively. This amount is reported as a component of selling, general and administrative expenses in the consolidated statements of income. The Company transacts business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive income in the accompanying consolidated balance sheets. Transaction gains (losses) were $ 1,256 , ($ 639 ), and ($ 238 ), during the years ended December 31, 2021, 2020, and 2019, respectively. These amounts are included in selling, general and administrative expenses in the Company’s consolidated statements of income. As disclosed in Note 2(ab) below, the Company has consolidated two VIE’s, BRPM 150 and BRPM 250, which have outstanding warrants that were issued in their respective initial public offerings. The warrants have been recorded as a liability since the warrants contain a provision to be settled in cash in the event of a qualifying cash tender offer, which is outside the control of the Company, for both BRPM 150 and BRPM 250. The outstanding warrants are considered derivative instruments with the warrant liability measured at fair value at each reporting date until exercised, with changes in fair value reported in other income in the consolidated statements of income. As of December 31, 2021, the warrant liability totaled $ 12,938 which is included in accrued expenses and other liabilities in the consolidated balance sheets. F- 22 (v) Redeemable Noncontrolling Interests in Equity of Subsidiaries The Company records redeemable noncontrolling interests in equity of subsidiaries to reflect the economic interests of the class A ordinary shareholders in BRPM 150 and BRPM 250 sponsored SPACs. These interests are presented as redeemable noncontrolling interests in equity of subsidiaries within the consolidated balance sheets, outside of the permanent equity section. The class A ordinary shareholders of BRPM 150 and BRPM 250 have redemption rights that are considered to be outside of the Company’s control. As of December 31, 2021, the carrying amount of the redeemable noncontrolling interest in equity of subsidiaries was recorded at its redemption value of 345,000 . Remeasurements to the redemption value of the redeemable noncontrolling interest in equity of subsidiaries are recorded within retained earnings. Such remeasurements totaled $ 18,182 , comprising of offering costs incurred in connection with the sale of class A shares of SPAC 150 and SPAC 250 in the amount of $ 7,716 and initial valuation of the public warrants of SPAC 150 and SPAC 250 in the amount of $ 10,466 . (w) Common Stock Warrants The Company issued 821,816 warrants to purchase common stock of the Company (the “Wunderlich Warrants”) in connection with the acquisition of Wunderlich Securities, Inc. (“Wunderlich”) on July 3, 2017. The Wunderlich Warrants entitle the holders of the warrants to acquire shares of the Company’s common stock from the Company at an exercise price of $ 17.50 per share, subject to, among other matters, the proper completion of an exercise notice and payment. The exercise price and the number of shares of Company common stock issuable upon exercise are subject to customary anti-dilution and adjustment provisions, which include stock splits, subdivisions or reclassifications of the Company’s common stock. On May 16, 2019, the Company repurchased 638,311 warrants for $ 2,777 ($ 4.35 per warrant). On June 11, 2020, 167,352 warrants held in escrow from the acquisition of Wunderlich were cancelled in accordance with the terms of the escrow instructions. The Wunderlich Warrants expire on July 3, 2022. All warrants were exercised in the third quarter of fiscal year 2021. As of December 31, 2021 and 2020, zero and 16,153 Wunderlich Warrants to purchase shares of common stock, respectively, were outstanding. On October 28, 2019, the Company issued 200,000 warrants to purchase common stock of the Company (the “BR Brands Warrants”) in connection with the acquisition of a majority ownership interest in BR Brand Holdings LLC. The BR Brands Warrants entitle the holders of the warrants to acquire shares of the Company’s common stock from the Company at an exercise price of $ 26.24 per share. One-third of the BR Brands Warrants immediately vested and became exercisable upon issuance, and the remaining two-thirds of warrants will vest and become exercisable following the first and/or second anniversaries of the closing, subject to BR Brands’ (or another related joint venture with Bluestar Alliance LLC) satisfaction of specified financial performance targets. The BR Brands warrants expire three years after the last vesting event occurs. As of December 31, 2021 and 2020, 200,000 BR Brands warrants were outstanding. (x) Equity Investment As of December 31, 2021 and 2020, equity investments of $ 39,190 and $ 54,953 , respectively, were included in prepaid expenses and other assets in the accompanying consolidated balance sheets. The Company’s share of earnings or losses from equity method investees is included in gain (loss) from equity investments in the accompanying consolidated statements of income. bebe stores, inc. As of December 31, 2021 and 2020, the Company had a 40.1 % and 39.5 % ownership interest, respectively, in bebe stores, inc. (“bebe”). In December 2021, the Company purchased an additional 71,970 shares of newly issued common stock of bebe for $ 612 and increased its ownership interest from 39.5 % to 40.1 %. The equity ownership in bebe is accounted for under the equity method of accounting and is included in prepaid expenses and other assets in the consolidated balance sheets. National Holdings Corporation As of December 31, 2020, the Company owned approximately 45 % of the commons stock of National which was included in prepaid expenses and other assets in the consolidated balance sheets. The equity ownership in National is accounted for under the equity method of accounting for periods prior to February 25, 2021. On February 25, 2021, the Company completed the acquisition of National by acquiring the 55 % of common stock not previously owned by the Company pursuant to an agreement and plan of merger dated January 10, 2021, following the successful completion of a tender offer commenced by us on January 27, 2021. The cash consideration for the purchase of the 55 % of common stock not previously owned by the Company and settlement of outstanding share based awards was $ 35,314 . National’s operating results subsequent to February 25, 2021 is included in the Company’s consolidated financial statements. F- 23 Other Equity Investments The Company has other equity investments over which the Company exercises significant influence but do not meet the requirements for consolidation, the largest ownership interest being a 40% ownership interest in Lingo Management, LLC (“Lingo”) which was acquired in November 2020. The equity ownership in these other investments was accounted for under the equity method of accounting and is included in prepaid expenses and other assets in the consolidated balance sheets. (y) Loan Participations Sold As of December 31, 2021, the Company has sold investments (“Loan Participations Sold”) to third parties (“Participants”) that are accounted for as secured borrowings under ASC 860 - Transfers and Servicing. Under ASC 860, a partial loan transfer does not qualify for sale accounting. A participation or other partial loan transfer that meets the definition of a participating interest is classified as loan receivable and the portion transferred is recorded as a secured borrowing under loan participations sold in the consolidated balance sheets. The Participants are entitled to payments made by the borrower of the related loan equal to the current Loan Participations Sold outstanding at the interest rates for the respective investment. In the event that the borrower defaults, the Participants have rights to payments from such borrower, but do not have recourse to the Company. The terms of the Loan Participations Sold are commensurate with the terms of the related loan. As of December 31, 2021, there were no outstanding loan participations. As of December 31, 2020, the Company had entered into participation agreements for a total of $ 17,316 . In addition, the interest income and interest expense related to the Loan Participations Sold resulted in interest income and interest expense which is presented gross on the consolidated statements of income. (z) Supplemental Non-cash Disclosures During the year ended December 31, 2021, non-cash investing activities included: the repayment of a loan receivable in full in the amount of $ 133,453 with equity securities, a $ 51,000 note receivable issued for the sale of equity securities to a third party, $ 35,000 of loans receivable exchanged for newly issued debt securities, the repayment of a $ 2,800 loan with equity securities, and $ 200 of loans receivable were converted to equity. During the year ended December 31, 2021, other non-cash activities included the recognition of new operating lease right-of-use assets of $ 18,862 and the recognition of new operating lease liabilities of $ 20,137 . During the year ended December 31, 2020, non-cash investing activities included $ 11,133 non-cash conversions of equity method investments and $ 26,238 conversion of loans receivable to shares of stock. In connection with the purchase of a loan receivable in the amount of $ 61,687 , the Company funded $ 24,434 in cash and the remaining $ 37,253 remains payable as a note payable as of December 31, 2020. During the year ended December 31, 2020, other non-cash activities included the recognition of new operating lease right-of-use assets of $ 8,915 and the recognition of new operating lease liabilities of $ 8,915 . During the year ended December 31, 2019, non-cash activities included the conversion of loans receivable in the amount of $ 12,209 into securities and other investments owned, the recognition of new operating right-of-use assets of $ 1,032 , the recognition of new operating lease liabilities of $ 1,032 and the issuance of warrants to purchase the Company’s stock in the amount of $ 990 related to the purchase of BR Brand. (aa) Reclassifications Certain prior period amounts have been reclassified to conform with the current period presentation. Such reclassifications consist of a reclass of unbilled receivables from accounts receivables, net, to contract assets that is included in prepaid expenses and other assets and a reclass of advances against customer contracts to contract assets that is included in prepaid expenses and other assets on the consolidated balance sheets. Certain amounts reported in the Capital Markets segment during the years ended December 31, 2020 and 2019 have been reclassified and reported in the Financial Consulting and Wealth Management segments during the years ended December 31, 2020 and 2019 as a result of the organizational changes that created the new Financial Consulting segment in the fourth quarter of 2020 and Wealth Management segment in the first quarter of 2021. F- 24 (ab) Variable Interest Entity The Company holds interests in various entities that meet the characteristics of a VIE but are not consolidated as the Company is not the primary beneficiary. Interests in these entities are generally in the form of equity interests, loans receivable, or fee arrangements. The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed. In November 2020, the Company invested in Lingo Management, LLC (“Lingo”), a joint venture with an unaffiliated third party. On March 10, 2021, the Company also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo). Lingo is a VIE because the entity does not have enough equity at risk to finance its activities without additional subordinated financial support. The Company has determined that it is not the primary beneficiary because it does not have the power to direct the activities of the VIE that most significantly impact the entity’s financial performance. The Company’s variable interests in Lingo include loans receivable at fair value and an equity investment accounted for under the equity method of accounting. The Company, through its newly acquired subsidiary, National, has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered variable interest entities under the accounting guidance. The Company earns fees from the Funds in the form of placement agent fees and carried interest. For placement agent fees, the Company receives a cash fee of generally 7 % to 10 % of the amount of raised capital for the Funds and the fee is recognized at the time the placement services occurred. The Company receives carried interest as a percentage allocation ( 8 % to 15 %) of the profits of the Funds as compensation for asset management services provided to the Funds and it is recognized under the ownership model of ASC “Topic 323: Investments – Equity Method and Joint Ventures” as an equity method investment with changes in allocation recorded currently in the results of operations. As the fee arrangements under such agreements are arm’s length and contain customary terms and conditions and represent compensation that is considered fair value for the services provided, the fee arrangements are not considered variable interests and accordingly, the Company does not consolidate such VIEs. Placement agent fees attributable to such arrangements during the year ended December 31, 2021 were $ 66,263 and are included in services and fees in the consolidated statements of income. The carrying amounts for the Company’s variable interests in VIEs that were not consolidated is shown below. December 31, 2021 Securities and other investments owned, at fair value $ 27,445 Loans receivable, at fair value 205,265 Other assets 4,956 Maximum exposure to loss $ 237,666 F- 25 B. Riley Principal 150 and 250 Merger Corporations During the year ended December 31, 2021, the Company along with BRPM 150 and BRPM 250, both newly formed SPACs incorporated as Delaware corporations, consummated the initial public offerings of 17,250,000 units of BRPM 150 and 17,250,000 units of BRPM 250. Each Unit of BRPM 150 and BRPM 250 consisted of one share of class A common stock and one-third of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of BRPM 150 or BRPM 250 class A common stock at an exercise price of $ 11.50 per share. The BRPM 150 and BRPM 250 Units were each sold at a price of $ 10.00 per unit, generating gross proceeds to BRPM 150 of $ 172,500 and BRPM 250 of $ 172,500 . These proceeds which totaled $ 345,000 were deposited in a trust account established for the benefit of the BRPM 150 and BRPM 250 class A public shareholders and is included in prepaid expenses and other assets in the consolidated balance sheets as of December 31, 2021. These proceeds are invested only in U.S. treasury securities in accordance with the governing documents of BRPM 150 and BRPM 250. Under the terms of the BRPM 150 and BRPM 250 initial public offerings, BRPM 150 and BRPM 250 are required to consummate a business combination transaction within 24 months (or 27 months under certain circumstances) of the completion of their respective initial public offerings. In connection with the completion of the initial public offerings of BRPM 150 and BRPM 250, the Company invested in the private placement units of BRPM 150 and BRPM 250. Both BRPM 150 and BRPM 250 are determined to be VIE’s because each of the entities do not have enough equity at risk to finance their activities without additional subordinated financial support. The Company has determined that the class A shareholders of BRPM 150 and BRPM 250 do not have substantive rights as shareholders of BRPM 150 and BRPM 250 since these equity interests are determined to be temporary equity. As such, the Company has determined that it is the primary beneficiary of BRPM 150 and BRPM 250 as it has the right to receive benefits or the obligation to absorb losses of each entity, as well as the power to direct a majority of the activities that significantly impact BRPM 150 and BRPM 250’s economic performance. Since the Company is determined to be the primary beneficiary, BRPM 150 and BRPM 250 are consolidated into the Company’s financial statements. (ac) Recent Accounting Standards Not yet adopted In March 2020, FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) , which provide d optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). The amendments appl ied only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848 ) , which refine d the scope of Topic 848 through optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships. The amendments were effective through December 31, 2022. The Company is currently assessing the potential impacts of this ASU and does not expect it to have any material impact on its consolidated results of operations, cash flows, financial position or disclosures. In October 2021 , the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers to require acquiring entities to apply Topic 606 when recognizing and measuring contract assets and contract liabilities instead of only recognizing such items at fair value on the acquisition date. The update addressed diversity in practice related to the acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this update are effective the Company beginning with fiscal year 2023, with early adoption permitted, and should be applied prospectively to business combinations after the adoption date. The Company is currently assessing the potential impacts of this ASU and does not expect it to have any material impact on its consolidated results of operations, cash flows, financial position or disclosures. F- 26 Recently adopted In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . This standard simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes on investments, performing intra-period allocations, and calculating income taxes in interim periods. The ASU also adds guidance to reduce the complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company adopted the ASU effective January 1, 2021. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures. In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 to address accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. Entities are required to remeasure its investment immediately before the transition from the measurement alternative for an equity investment under ASC 321 to the equity method due to an observable transaction. Similarly, entities are required to remeasure its investment immediately after the transition from the equity method to ASC 321 due to an observable transaction. The amendments in this update should be applied prospectively and at the beginning of the period that includes the adoption date. The Company adopted the ASU effective January 1, 2020. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures. In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The Company adopted the ASU effective January 1, 2021. The amendments in this update can be applied through either a modified retrospective method or fully retrospective method of transition. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures. In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs . The amendments in this update clarify that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. The Company adopted the ASU effective January 1, 2021. The amendments in this update should be applied prospectively and at the beginning of the period that includes the adoption date. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures. In October 2020, the FASB issued ASU 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762 . The amendments mostly apply to Topic 470 and relate to financial disclosure requirements for SEC registrants and other entities required to furnish information with the SEC. The Company adopted the ASU effective January 4, 2021. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures. In October 2020, the FASB issued ASU 2020-10, Codification Improvements to make incremental improvements to GAAP and address stakeholder suggestions, including, among other things, clarifying that the requirement to provide comparative information in the financial statements extends to the corresponding disclosures section. The Company adopted the ASU effective January 1, 2021. The amendments in this update should be applied retrospectively and at the beginning of the period that includes the adoption date. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures. In August 2021, the FASB issued ASU 2021-06, Presentation of Financial Statements (Topic 205) Financial Services—Depositary and Lending (Topic 942), and Financial Services— Investment Companies (Topic 946). This update amends certain SEC paragraphs from the Codification in response to the issuance of SEC Final Rule Nos. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses , which modified the significance test and improved disclosure requirements for acquired businesses and pro forma financial information. The Company adopted the SEC Final Rule effective January 1, 2021, and the ASU was adopted immediately. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures. F- 27 NOTE 3 — RESTRUCTURING CHARGE The Company did not record any restructuring charges during the year ended December 31, 2021. The Company recorded restructuring charges in the amount of $ 1,557 and $ 1,699 during the years ended December 31, 2020 and 2019, respectively. The restructuring charges 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 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 – Communications segment. The following tables summarize the changes in accrued restructuring charge during the years ended December 31, 2021, 2020, and 2019: Year Ended December 31, 2021 2020 2019 Balance, beginning of year $ 727 $ 1,600 $ 3,855 Restructuring charge — 1,557 1,699 Cash paid ( 114 ) ( 901 ) ( 4,150 ) Non-cash items 11 ( 1,529 ) 196 Balance, end of year $ 624 $ 727 $ 1,600 The following tables summarize the restructuring activities by reportable segment during the years ended December 31, 2020 and 2019: Auction Principal Capital Wealth and Financial Investments - Markets Management Liquidation Consulting Communications Total Restructuring charges for the year ended December 31, 2020: Impairment of intangible assets $ 917 $ — $ 140 $ 500 $ — $ 1,557 Total restructuring charge $ 917 $ — $ 140 $ 500 $ — $ 1,557 Restructuring charges for the year ended December 31, 2019: Employee termination costs $ — $ — $ — $ — $ 1,594 $ 1,594 Facility closure and consolidation charge (recovery) — ( 4 ) — — 109 105 Total restructuring charge $ — $ ( 4 ) $ — $ — $ 1,703 $ 1,699 F- 28 NOTE 4 — SECURITIES LENDING The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of December 31, 2021 and 2020: Gross amounts recognized Gross amounts offset in the consolidated balance sheets (1) Net amounts included in the consolidated balance sheets Amounts not offset in the consolidated balance sheets but eligible for offsetting upon counterparty default (2) Net amounts As of December 31, 2021 Securities borrowed $ 2,090,966 $ — $ 2,090,966 $ 2,090,966 $ — Securities loaned $ 2,088,685 $ — $ 2,088,685 $ 2,088,685 $ — As of December 31, 2020 Securities borrowed $ 765,457 $ — $ 765,457 $ 765,457 $ — Securities loaned $ 759,810 $ — $ 759,810 $ 759,810 $ — (1) Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred. (2) Includes the amount of cash collateral held/posted. NOTE 5 — ACCOUNTS RECEIVABLE The components of accounts receivable, net, include the following: December 31, December 31, 2021 2020 Accounts receivable $ 39,045 $ 33,604 Investment banking fees, commissions and other receivables 14,286 10,316 Total accounts receivable 53,331 43,920 Allowance for doubtful accounts ( 3,658 ) ( 3,114 ) Accounts receivable, net $ 49,673 $ 40,806 Additions and changes to the allowance for doubtful accounts consist of the following: Year Ended December 31, 2021 2020 2019 Balance, beginning of period $ 3,114 $ 1,514 $ 696 Add: Additions to reserve 1,453 3,385 2,126 Less: Write-offs ( 1,074 ) ( 1,785 ) ( 1,151 ) Less: Recovery 165 — ( 157 ) Balance, end of period $ 3,658 $ 3,114 $ 1,514 F- 29 NOTE 6 — PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other assets consist of the following: December 31, December 31, 2021 2020 Funds held in trust account $ 345,024 $ — Equity investments 39,190 54,953 Prepaid expenses 14,965 7,371 Unbilled receivables 12,315 5,712 Other receivables 40,483 16,230 Other assets 11,525 8,908 Prepaid expenses and other assets $ 463,502 $ 93,174 Unbilled receivables represent the amount of contractual reimbursable costs and fees for services performed in connection with fee and service based contracts in the Auction and Liquidation segment, mobile handsets in the Principal Investments – Communications segment, and consulting related engagements in the Financial Consulting segment. NOTE 7 — PROPERTY AND EQUIPMENT Property and equipment, net, consists of the following: Estimated December 31, December 31, Useful Lives 2021 2020 Leasehold improvements Shorter of the remaining lease term or estimated useful life $ 13,766 $ 10,737 Machinery, equipment and computer software 1.8 to 15 years 16,624 15,650 Furniture and fixtures 5 years 4,724 4,128 Total 35,114 30,515 Less: Accumulated depreciation and amortization ( 22,244 ) ( 18,830 ) $ 12,870 $ 11,685 Depreciation expense was $ 3,865 , $ 3,632 , and $ 5,202 during the years ended December 31, 2021, 2020, and 2019, respectively. F- 30 NOTE 8 — GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill was $ 250,568 and $ 227,046 as of December 31, 2021 and 2020, respectively. The changes in the carrying amount of goodwill during the years ended December 31, 2021 and 2020 were as follows: Principal Capital Wealth Auction and Financial Investments- Markets Management Liquidation Consulting Communications Segment Segment Segment Segment Segment Total Balance as of December 31, 2019 $ 50,806 $ 28,396 $ 1,975 $ 20,331 $ 122,189 $ 223,697 Goodwill acquired during the year: Acquisition of other business — — — 3,349 — 3,349 Balance as of December 31, 2020 50,806 28,396 1,975 23,680 122,189 227,046 Goodwill acquired during the year: Acquisition of other business 532 22,799 — — 191 23,522 Balance as of December 31, 2021 $ 51,338 $ 51,195 $ 1,975 $ 23,680 $ 122,380 $ 250,568 Intangible assets consisted of the following: As of December 31, 2021 As of December 31, 2020 Gross Gross Carrying Accumulated Intangibles Carrying Accumulated Intangibles Useful Life Value Amortization Net Value Amortization Net Amortizable assets: Customer relationships 0.1 to 16 Years $ 130,801 $ 59,671 $ 71,130 $ 98,898 $ 40,281 $ 58,617 Domain names 7 Years 185 143 42 235 148 87 Advertising relationships 8 Years 100 69 31 100 56 44 Internally developed software and other intangibles 0.5 to 5 Years 15,275 8,820 6,455 11,775 6,913 4,862 Trademarks 6 to 10 Years 6,369 1,652 4,717 2,850 991 1,859 Total 152,730 70,355 82,375 113,858 48,389 65,469 Non-amortizable assets: Tradenames 125,276 — 125,276 125,276 — 125,276 Total intangible assets $ 278,006 $ 70,355 $ 207,651 $ 239,134 $ 48,389 $ 190,745 Amortization expense was $ 22,006 , $ 15,737 , and $ 13,846 , during the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, estimated future amortization expense was $ 20,116 , $ 17,769 , $ 13,832 , $ 10,386 , $ 10,410 during the years ended December 31, 2022, 2023, 2024, 2025 and 2026, respectively. The estimated future amortization expense after December 31, 2026 was $ 9,861 . In the first quarter of 2020, in accordance with ASC 350, the Company made a qualitative assessment of the impact of the COVID-19 outbreak on goodwill and other intangible assets. The Company determined that the COVID-19 outbreak was a triggering event for testing the indefinite-lived tradenames in the Brands segment and made a determination that the indefinite-lived tradenames in the Brands segment were impaired and the Company recognized an impairment charge of $ 4,000 . As a result of the continuing impact and duration of the COVID-19 outbreak on the operations of the Brands segment, the Company determined that there was another triggering event for testing the indefinite-lived tradenames in the Brands segment and made a determination that the indefinite-lived tradenames in the Brands segment were impaired and the Company recognized an additional impairment charge of $ 8,500 in the second quarter of 2020. There have been no triggering events subsequent to the second quarter of 2020 for testing indefinite-lived tradenames in the Brands segment. The Company will continue to monitor the impacts of the COVID-19 outbreak in future quarters. Changes in our forecasts could cause the book values of indefinite-lived tradenames to exceed fair values which may result in additional impairment charges in future periods. F- 31 NOTE 9 — LEASING ARRANGEMENTS The Company’s operating lease assets primarily represent the lease of office space where the Company conducts its operations with the weighted average lease term of 7.4 years and 7.2 years as of December 31, 2021 and 2020, respectively. The operating leases have lease terms up to 10 and 11 years as of December 31, 2021 and 2020, respectively. The weighted average discount rate used to calculate the present value of lease payments was 5.25 % and 5.55 % as of December 31, 2021 and 2020, respectively. During the years ended December 31, 2021, 2020, and 2019, the total operating lease expense was $ 15,230 , $ 13,434 , and $ 12,582 , respectively. During the years ended December 31, 2021, 2020, and 2019, $ 1,377 , $ 1,225 , and $ 1,289 , respectively, of operating lease expense were attributable to variable lease expenses. Operating lease expense is included in selling, general and administrative expenses in the consolidated statements of income. During the years ended December 31, 2021, 2020, and 2019, cash payments against operating lease liabilities totaled $ 15,509 , $ 12,901 , and $ 12,934 respectively, and non-cash lease expense transactions totaled $ 3,750 , $ 3,314 , and $ 3,679 , respectively. Cash flows from operating leases are classified as net cash flows from operating activities in the accompanying consolidated statements of cash flows. As of December 31, 2021, maturities of operating lease liabilities were as follows: Operating Leases Year ending December 31: 2022 $ 16,125 2023 12,629 2024 12,232 2025 11,417 2026 7,977 Thereafter 21,517 Total lease payments 81,897 Less: imputed interest ( 12,825 ) Total operating lease liability $ 69,072 As of December 31, 2021 and 2020, the Company did not have any significant leases executed but not yet commenced. F- 32 NOTE 10 — NOTES PAYABLE Asset Based Credit Facility On April 21, 2017, the Company amended its credit agreement (as amended, the “Credit Agreement”) governing its asset based credit facility with Wells Fargo Bank, National Association (“Wells Fargo Bank”) to increase the maximum borrowing limit from $ 100,000 to $ 200,000 . 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 the separate credit agreement (a “UK Credit Agreement”) which was dated March 19, 2015 with an affiliate of Wells Fargo Bank which provides for the financing of transactions in the United Kingdom. Such facility allows the Company to borrow up to 50 million British Pounds. Any borrowings on the UK Credit Agreement reduce the availability on the asset based $ 200,000 credit facility. The UK Credit Agreement is cross collateralized and integrated in certain respects with the Credit Agreement. Cash advances and the issuance of letters of credit under the credit facility are made at the lender’s discretion. The letters of credit issued under this facility are furnished by the lender to third parties for the principal purpose of securing minimum guarantees under liquidation services contracts more fully described in Note 2(e). All outstanding loans, letters of credit, and interest are due on the expiration date which is generally within 180 days of funding. The credit facility is secured by the proceeds received for services rendered in connection with liquidation service contracts pursuant to which any outstanding loan or letters of credit are issued and the assets that are sold at liquidation related to such contract. The Company paid Wells Fargo Bank a closing fee in the amount of $ 500 in connection with the April 2017 amendment to the Credit Agreement. The interest rate for each revolving credit advance under the 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 also provides for success fees in the amount of 2.5 % to 17.5 % of the net profits, if any, earned on the liquidation engagements funded under the Credit Agreement as set forth therein. Interest expense totaled $ 435 , $ 639 , and $ 1,503 during the years ended December 31, 2021, 2020, and 2019, respectively. There is no outstanding balance on this credit facility as of December 31, 2021 and 2020. As of December 31, 2021 and 2020, 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. Paycheck Protection Program On April 10, 2020, NSC (a subsidiary of National) entered into a Promissory Note (the “NSC Note”) with Axos Bank as the lender (the “Lender”), pursuant to which the Lender agreed to make a loan to NSC under the Paycheck Protection Program (the “NSC Loan”) offered by the U.S. Small Business Administration (the “SBA”) pursuant to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to qualified small businesses (the “PPP”) in a principal amount of $ 5,524 . On April 15, 2020, WEC (another subsidiary of National) also entered into a Promissory Note (the “WEC Note” and together with the NSC Note, the “PPP Notes”) with the Lender, pursuant to which the Lender agreed to make a loan to WEC under the PPP (the “WEC Loan” and together with the NSC Loan, the “PPP Loans”) in a principal amount of $ 973 . The full amount of the Company’s PPP loans and accrued interest were forgiven in the amount of $ 6,509 in June 2021, and the Company recorded a gain on extinguishment of loans and other for this amount in the accompanying consolidated statements of income. Other Notes Payable Notes payable include notes payable to a clearing organization for one of the Company’s broker dealers. The notes payable accrue interest at the prime rate plus 2.0 % ( 5.25 % as of December 31, 2021) payable annually, maturing January 31, 2022. As of December 31, 2021 and 2020, the outstanding balance for the notes payable was $ 357 and $ 714 , respectively. Interest expense was $ 21 , $ 51 , and $ 87 during the years ended December 31, 2021, 2020, and 2019, respectively. Also included in notes payable as of December 31, 2020, was a $ 37,253 note payable to Garrison TNCI LLC which was assumed as part of the Company’s investment in Lingo Management LLC. The note accrued interest at 12.5 % per annum and had a maturity date of March 31, 2021. During the years ended December 31, 2021 and 2020, interest expense on the note was $ 238 and $ 447 , respectively. The note was paid in full in January 2021. F- 33 NOTE 11 — TERM LOANS AND REVOLVING CREDIT FACILITY Nomura Credit Agreement On June 23, 2021, the Company, and its wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement (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 $ 200,000 secured term loan credit facility (the “Term Loan Facility”) and a four-year $ 80,000 secured revolving loan credit facility (the “Revolving Credit Facility”). On December 17, 2021 (the “Amendment Date”), the Company, the Primary Guarantor, and the Borrower entered into a Second Incremental Amendment to Credit Agreement (the “Second Amendment”), by and among the Company, 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 $ 100,000 (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, the Company is required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter. Subject to certain eligibility requirements, the assets of certain subsidiaries of the Company that hold credit assets, private equity assets, and public equity assets are placed into a borrowing base, which serves to limit the borrowings under the Credit Facilities. If borrowings under the facilities exceed the borrowing base, the Company is obligated to prepay the loans in an aggregate amount equal to such excess. The Credit Agreement 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 the Company’s, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests. In addition, the Credit Agreement and the Second Amendment contain a financial covenant that requires the Company to maintain Operating EBITDA of at least $ 135,000 and the Primary Guarantor to maintain net asset value of at least $ 1,100,000 . 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 $ 3,750 per quarter. As of December 31, 2021, the outstanding balance on the Term Loan Facility and Incremental Facility was $ 292,650 (net of unamortized debt issuance costs of $ 7,350 ). Interest on the term loan during the year ended December 31, 2021, was $ 5,907 (including amortization of deferred debt issuance costs of $ 766 ). The interest rate on the term loan as of December 31, 2021 was 4.72 %. The Company had an outstanding balance of $ 80,000 under the Revolving Credit Facility as of December 31, 2021. Interest on the revolving facility during the year ended December 31, 2021 was $ 1,915 (including unused commitment fees of $ 76 and amortization of deferred financing costs of $ 305 ). The interest rate on the revolving facility as of December 31, 2021 was 4.67 %. The Company is in compliance with all financial covenants in the Nomura Credit Agreement as of December 31, 2021. F- 34 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 the Company, in the capacity as borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with the Banc of California, N.A. in the capacity as agent (the “Agent”) and lender and with the other lenders party thereto (the “Closing Date Lenders”). Certain of the Borrowers’ U.S. subsidiaries are guarantors of all obligations under the BRPAC Credit Agreement and are parties to the BRPAC Credit Agreement in such capacity (collectively, the “Secured Guarantors”; and together with the Borrowers, the “Credit Parties”). In addition, the Company and B. Riley Principal Investments, LLC, the parent corporation of BRPAC and a subsidiary of the Company, are guarantors of the obligations under the BRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of BRPAC are pledged as collateral. The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties, including a pledge of (a) 100 % of the equity interests of the Credit Parties, (b) 65 % of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India; and (c) 65 % of the equity interests in magicJack VocalTec LTD., a limited company organized under the laws of Israel. Such security interests are evidenced by pledge, security and other related agreements. The BRPAC Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’ ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the BRPAC Credit Agreement requires the Credit Parties to maintain certain financial ratios. The BRPAC Credit Agreement also contains customary representations and warranties, affirmative covenants and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding BRPAC Credit Agreement. Under BRPAC Credit Agreement, the Company borrowed $ 80,000 due December 19, 2023. Pursuant to the terms of the BRPAC Credit Agreement, the Company may request additional optional term loans in an aggregate principal amount of up to $ 10,000 at any time prior to the first anniversary of the agreement date (the “Option Loan”) with a final maturity date of December 19, 2023 . On February 1, 2019, the Credit Parties, the Closing Date Lenders, the Agent and City National Bank, as a new lender (the “New Lender”), entered into the First Amendment to the Credit Agreement and Joinder (the “First Amendment”) pursuant to which, among other things, (i) New Lender became a party to the BRPAC Credit Agreement, (ii) the New Lender extended to Borrowers the Option Loan in the amount of $ 10,000 , (iii) the aggregate outstanding principal amount of the term loans was increased from $ 80,000 to $ 90,000 ; and (iv) the amortization schedule under the BRPAC was amended as set forth in the First Amendment. Additionally, in connection with the Option Loan, the Borrowers executed a term note in favor of New Lender dated February 1, 2019 in the amount of $ 10,000 . 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 $ 75,000 term loan to the Borrowers, the proceeds of which the Borrowers’ used to repay the outstanding principal amount of the existing Terms Loans and Optional Loans and will use 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 $ 30,000 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 $ 30,000 on the date of the Third Amendment. Borrowings under the amended BRPAC Credit Agreement bear interest at a rate equal to (a) the SOFR rate for loans, plus (b) the applicable margin rate, which ranges from 2.75 % to 3.25 % per annum, based upon the Borrowers’ ratio of consolidated funded indebtedness to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the preceding four fiscal quarters or other applicable period. As of December 31, 2021 and 2020, the interest rate on the amended BRPAC Credit Agreement was 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 $ 4,116 per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $ 3,631 per quarter, from March 31, 2024 to December 31, 2024 are in the amount of $ 3,147 per quarter, from March 31, 2025 to December 31, 2025 are $ 2,663 per quarter, and the remaining principal balance is due at final maturity on December 31, 2025. As of December 31, 2021, and 2020, the outstanding balance on the term loan was $ 53,735 (net of unamortized debt issuance costs of $ 582 ) and $ 74,213 (net of unamortized debt issuance costs of $ 787 ), respectively. Interest expense on the term loan during the years ended December 31, 2021, 2020, and 2019, was $ 2,468 (including amortization of deferred debt issuance costs of $ 300 ), $ 2,369 (including amortization of deferred debt issuance costs of $ 278 ) and $ 4,609 (including amortization of deferred debt issuance costs of $ 350 ), respectively. We are in compliance with all financial covenants in the amended BRPAC Credit Agreement as of December 31, 2021. F- 35 NOTE 12 — SENIOR NOTES PAYABLE Senior notes payable, net, is comprised of the following as of December 31, 2021 and 2020: December 31, December 31, 2021 2020 7.500 % Senior notes due May 31, 2027 $ — $ 128,156 7.250 % Senior notes due December 31, 2027 — 122,793 7.375 % Senior notes due May 31, 2023 — 137,454 6.875 % Senior notes due September 30, 2023 — 115,168 6.750 % Senior notes due May 31, 2024 111,170 111,170 6.500 % Senior notes due September 30, 2026 178,787 134,657 6.375 % Senior notes due February 28, 2025 144,521 130,942 6.000 % Senior notes due January 31, 2028 259,347 — 5.500 % Senior notes due March 31, 2026 214,243 — 5.250 % Senior notes due August 31, 2028 397,302 — 5.000 % Senior notes due December 31, 2026 322,679 — 1,628,049 880,340 Less: Unamortized debt issuance costs ( 21,489 ) ( 9,557 ) $ 1,606,560 $ 870,783 During the year ended December 31, 2021, the Company issued $ 233,416 of senior notes with maturity dates ranging from May 2023 to August 2028 pursuant to At the Market Issuance Sales Agreements with B. Riley Securities, Inc., which governs the program of at-the-market sales of the Company’s senior notes. On January 25, 2021, the Company issued $ 230,000 of senior notes due in January 2028 (“6.0% 2028 Notes”) pursuant to a prospectus supplement dated February 12, 2020. Interest on the 6.0% 2028 Notes is payable quarterly at 6.0 %. The 6.0% 2028 Notes are unsecured and due and payable in full on January 31, 2028. In connection with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $ 225,723 (after underwriting commissions, fees, and other issuance costs of $ 4,277 ). The 6.0% 2028 Notes bear interest at the rate of 6.0 % per annum. On March 29, 2021, the Company issued $ 159,493 of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to a prospectus supplement dated January 28, 2021. Interest on the 5.5% 2026 Notes is payable quarterly at 5.5 %. The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026. In connection with the issuance of the 5.5% 2026 Notes, the Company received net proceeds of $ 156,260 (after underwriting commissions, fees, and other issuance costs of $ 3,233 ). The 5.5% 2026 Notes bear interest at the rate of 5.5 % per annum. On March 31, 2021, the Company exercised its option for early redemption at par $ 128,156 of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017. The total redemption payment included $ 1,602 in accrued interest. On July 26, 2021, the Company redeemed, in full, $ 122,793 aggregate principal amount of its 7.25 % Senior Notes due 2027 (“7.25% 2027 Notes”) pursuant to the third supplemental indenture dated December 31, 2017. The 7.25 % Notes had an aggregate principal amount of $ 122,793 . The redemption price was equal to 100 % of the aggregate principal amount, plus accrued and unpaid interest up to, but excluding, the redemption date. The total redemption payment included approximately $ 2,127 in accrued interest. In connection with the full redemption, the 7.25% 2027 Notes, which were listed on NASDAQ under the ticker symbol “RILYG,” were delisted from NASDAQ and ceased trading on the redemption date. On August 4, 2021, the Company issued $ 316,250 of senior notes due in August 2028 (“5.25% 2028 Notes”) pursuant to a prospectus supplement dated January 28, 2021. Interest on the 5.25% 2028 Notes is payable quarterly at 5.25 %. The 5.25% 2028 Notes are unsecured and due and payable in full on August 31, 2028. In connection with the issuance of the 5.25% 2028 Notes, the Company received net proceeds of $ 308,659 (after underwriting commissions, fees, and other issuance costs of $ 7,591 ). The 5.25% 2028 Notes bear interest at the rate of 5.25 % per annum. F- 36 On September 4, 2021, the Company redeemed, in full, $ 137,454 aggregate principal amount of its 7.375 % Senior Notes due 2023 (“7.375% 2023 Notes”) pursuant to the fifth supplemental indenture dated September 11, 2018. The redemption price was equal to 101.5 % of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the redemption date. The total redemption payment included approximately $ 957 in accrued interest and $ 2,062 in premium. In connection with the full redemption, the 7.375% 2023 Notes, which were listed on NASDAQ under the ticker symbol “RILYH,” were delisted from NASDAQ and ceased trading on the redemption date. On October 22, 2021, the Company redeemed, in full, $ 115,726 aggregate principal amount of its 6.875 % Senior Notes due 2023 (the “6.875% 2023 Notes”) pursuant to the fifth supplemental indenture dated September 11, 2018. The redemption price was equal to 101.0 % of the aggregate principal amount, plus accrued and unpaid interest, up to, but excluding, the redemption date. The total redemption payment included approximately $ 1,812 in accrued interest and $ 1,157 in premium. In connection with the full redemption, the 6.875% 2023 Notes under the ticker symbol “RILYI,” were delisted from NASDAQ and ceased trading on the redemption date. On December 3, 2021, the Company issued $ 322,679 of senior notes due in December 2026 (“5.00% 2026 Notes”) pursuant to a prospectus supplement dated November 29, 2021. 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, the Company received net proceeds of $ 317,633 (after underwriting commissions, fees, and other issuance costs of $ 5,046 ). The 5.00% 2026 Notes bear interest at the rate of 5.00 % per annum. As of December 31, 2021 and 2020, the total senior notes outstanding was $ 1,606,560 (net of unamortized debt issue costs of $ 21,489 ) and $ 870,783 (net of unamortized debt issue costs of $ 9,557 ) 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 $ 81,475 , $ 61,233 , and $ 43,823 during the years ended December 31, 2021, 2020, and 2019, respectively. Sales Agreement Prospectus to Issue Up to $ 250,000 of Senior Notes The most recent sales agreement prospectus was filed by us with the SEC on January 5, 2022 (the “January 2022 Sales Agreement Prospectus”) superseding the prospectus filed with the SEC on August 11, 2021, the prospectus filed with the SEC on April 6, 2021, and the prospectus filed with the SEC on January 28, 2021. This program provides for the sale by the Company of up to $ 250,000 of certain of the Company’s senior notes. As of December 31, 2021, the Company had $ 111,911 remaining availability under the January 2022 Sales Agreement. F- 37 NOTE 13 — REVENUE FROM CONTRACTS WITH CUSTOMERS Revenue from contracts with customers by reportable segment during the years ended December 31, 2021, 2020, and 2019 is as follows: Capital Wealth Auction and Financial Principal Investments - Markets Management Liquidation Consulting Communications Brands Total Revenues for the year ended December 31, 2021: Corporate finance, consulting and investment banking fees $ 484,247 $ — $ — $ 56,439 $ — $ — $ 540,686 Wealth and asset management fees 6,769 282,711 — — — — 289,480 Commissions, fees and reimbursed expenses 48,382 75,776 19,079 37,873 — — 181,110 Subscription services — — — — 79,149 — 79,149 Service contract revenues — — 1,090 — — — 1,090 Advertising, licensing and other (1) — — 53,348 — 14,198 20,308 87,854 Total revenues from contracts with customers 539,398 358,487 73,517 94,312 93,347 20,308 1,179,369 Interest income - Loans and securities lending 122,722 — — — — — 122,722 Trading gains on investments 368,537 7,623 — — — — 376,160 Fair value adjustment on loans 10,516 — — — — — 10,516 Other 35,920 15,874 — — — — 51,794 Total revenues $ 1,077,093 $ 381,984 $ 73,517 $ 94,312 $ 93,347 $ 20,308 $ 1,740,561 (1) Includes sale of goods of $ 53,348 in Auction Liquidation and $ 4,857 in Principal Investments - Communications. Revenues for the year ended December 31, 2020: Corporate finance, consulting and investment banking fees $ 255,023 $ — $ — $ 54,051 $ — $ — $ 309,074 Wealth and asset management fees 7,391 71,204 — — — — 78,595 Commissions, fees and reimbursed expenses 48,416 — 50,035 36,855 — — 135,306 Subscription services — — — — 72,666 — 72,666 Service contract revenues — — 13,066 — — — 13,066 Advertising, licensing and other (1) — — 25,663 — 14,472 16,458 56,593 Total revenues from contracts with customers 310,830 71,204 88,764 90,906 87,138 16,458 665,300 Interest income - Loans and securities lending 102,499 — — — — — 102,499 Trading gains on investments 125,247 804 — — — — 126,051 Fair value adjustment on loans ( 22,033 ) — — — — — ( 22,033 ) Other 29,047 1,141 — 716 — — 30,904 Total revenues $ 545,590 $ 73,149 $ 88,764 $ 91,622 $ 87,138 $ 16,458 $ 902,721 (1) Includes sale of goods of $ 25,663 in Auction Liquidation and $ 3,472 in Principal Investments - Communications. F- 38 Revenues for the year ended December 31, 2019: Corporate finance, consulting and investment banking fees $ 129,477 $ 2 $ — $ 37,471 $ — $ — $ 166,950 Wealth and asset management fees 18,421 64,357 — — — — 82,778 Commissions, fees and reimbursed expenses 42,503 — 49,849 38,821 — — 131,173 Subscription services — — — — 82,088 — 82,088 Service contract revenues — — ( 31,553 ) — — — ( 31,553 ) Advertising, licensing and other (1) — — 4,220 — 18,774 4,055 27,049 Total revenues from contracts with customers 190,401 64,359 22,516 76,292 100,862 4,055 458,485 Interest income - Loans and securities lending 77,221 — — — — — 77,221 Trading gains on investments 92,379 1,826 — — — — 94,205 Fair value adjustment on loans 12,258 — — — — — 12,258 Other 9,229 714 — — — — 9,943 Total revenues $ 381,488 66,899 22,516 76,292 100,862 4,055 652,112 (1) Includes sale of goods of $ 4,220 in Auction Liquidation and $ 3,715 in Principal Investments - Communications. Revenues are recognized when control of the promised goods or performance obligations for services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’s progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that we determine the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for those promised goods or services (i.e., the “transaction price”). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of the Company’s past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as market volatility or the judgment and actions of third parties. Revenues by geographic region by segment is included in Note 22 – Business Segments. The following provides detailed information on the recognition of the Company’s revenues from contracts with customers: Corporate finance, consulting and investment banking fees . 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. 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. 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. F- 39 Wealth and asset management fees . 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. Commissions, fees and reimbursed expenses . Commissions and other fees from clients for trading activities are earned from equity securities transactions executed as agent or principal are recorded at a point in time on a trade date basis. Commission, fees and reimbursed expenses 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. Revenues from fees and reimbursed expenses for valuation services to clients are recognized when the performance obligation is completed and is generally at the point in time upon delivery of the report to the customer. Subscription services . Subscription service revenues are primarily earned from Principal Investments – Communication service contracts and are recognized in the period in which the transaction price has been determinable and the related performance obligations for services are provided to the customer. UOL pay accounts generally pay in advance for their internet access services and revenues are then recognized ratably over the service period. Subscription service revenues from magicJack include (a) revenues for initial access rights, which are recognized ratably over the service term, (b) revenues from access rights renewal, which are recognized ratably over the extended access right period; (c) revenues from access and wholesale charges, which are recognized as calls are terminated to the network; (d) revenues from UCaaS services, which are recognized in the period the services are provided over the term of the customer agreements; and (e) prepaid international long distance minutes, which are recognized as the minutes are used or expired. Subscription service revenues from our mobile phone business include revenues from mobile voice, text, and data services and are recognized ratably over the service period. Voice, text, and data overage charges are recognized over time as the consumer simultaneously receives and consumes the benefits each period as the Company performs. Service contract revenues . Service contract revenues are primarily 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. The Company generally uses the cost-to-cost measure of progress for its contracts because it best depicts the transfer of services to the customer which occurs as the Company incurs costs on its 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. The Company’s estimates of variable consideration and determination of whether or not to include estimated amounts in the transaction price are based on an assessment of its anticipated performance under the contract taking into consideration all historical, current and forecasted information that is reasonably available to the Company. 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. Negative revenue from one retail liquidation engagement contributed to the Company reporting negative service contract revenues of $ 31,553 in the Auction and Liquidation segment during the year ended December 31, 2019. Advertising, licensing and other . Advertising and other revenues consist primarily of amounts from UOL’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 portion of revenues from the sale of magicJack devices that is allocated to hardware, as well as revenues from magicJack ancillary products and mobile broadband service devices to customers, and amounts from the sale of goods acquired in Auction and Liquidation asset purchase agreements. Advertising revenues are recognized 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 transaction price is 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. Revenues from the hardware portion of the sale of magicJack devices are recognized upon delivery (when control transfers to the customer). Revenues from the sale of other magicJack related products are recognized at the time of sale. Sale of product revenues also include the related shipping and handling and installment fees, if applicable. Revenues from the sale of goods acquired in Auction and Liquidation asset purchase agreements are recognized when control of the product and risks of ownership has been transferred to the buyer. F- 40 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. Information on Remaining Performance Obligations and Revenue Recognized from Past Performance The Company does not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligation(s) with an original expected duration exceeding one year was not material as of December 31, 2021. Corporate finance and investment banking fees and retail liquidation engagement fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded as the fees are considered variable and not included in the transaction price as of December 31, 2021. Contract Balances The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligation(s) are satisfied. Receivables related to revenues from contracts with customers totaled $ 49,673 and $ 40,806 as of December 31, 2021 and 2020, respectively. The Company had no significant impairments related to these receivables during the years ended December 31, 2021 and 2020. The Company also has $ 12,315 and $ 5,712 of unbilled receivables included in prepaid expenses and other assets as of December 31, 2021 and 2020, respectively, and advances against customer contracts of $ 200 included in prepaid expenses and other assets as of December 31, 2021 and 2020, respectively. The Company’s deferred revenue primarily relates to retainer and milestone fees received from corporate finance and investment banking advisory engagements, asset management agreements, financial consulting engagements, subscription services where the performance obligation has not yet been satisfied and license agreements with guaranteed minimum royalty payments and advertising/marketing fees with additional royalty revenue based on a percentage of defined sales. Deferred revenue as of December 31, 2021 and 2020 was $ 69,507 and $ 68,651 , respectively. The Company expects to recognize the deferred revenue of $ 69,507 as of December 31, 2021 as service and fee revenues when the performance obligation is met during the years December 31, 2022, 2023, 2024, 2025 and 2026 in the amount of $ 39,181 , $ 11,364 , $ 7,936 , $ 5,265 , and $ 2,745 , respectively. The Company expects to recognize the deferred revenue of $ 3,016 after December 31, 2026. During the years ended December 31, 2021, 2020, and 2019, the Company recognized revenue of $ 39,906 , $ 38,330 , and $ 39,885 that was recorded as deferred revenue, respectively. Contract Costs Contract costs include: (1) costs to fulfill contracts associated with corporate finance and investment banking engagements are capitalized where the revenue is recognized at a point in time and the costs are determined to be recoverable; (2) costs to fulfill Auction and Liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction or liquidation where the revenue is recognized over time when the performance obligation is satisfied; and (3) commissions paid to obtain magicJack contracts which are recognized ratably over the contract term and third party support costs for magicJack and related equipment purchased by customers which are recognized ratably over the service period. The capitalized costs to fulfill a contract were $ 1,605 and $ 279 as of December 31, 2021 and 2020, respectively, and are recorded in prepaid expenses and other assets in the consolidated balance sheets. During the years ended December 31, 2021, 2020, and 2019, the Company recognized expenses of $ 580 , $ 405 , and $ 2,755 related to capitalized costs to fulfill a contract, respectively. There were no significant impairment charges recognized in relation to these capitalized costs during years ended December 31, 2021, 2020, and 2019. F- 41 NOTE 14 — INCOME TAXES The Company’s provision for income taxes consists of the following during the years ended December 31, 2021, 2020, and 2019: Year Ended December 31, 2021 2020 2019 Current: Federal $ 67,322 $ 4,730 $ 16,499 State 30,036 3,297 6,176 Foreign 4,796 5,344 1,092 Total current provision 102,154 13,371 23,767 Deferred: Federal 42,734 41,979 10,702 State 17,824 18,518 175 Foreign 1,248 1,572 — Total deferred 61,806 62,069 10,877 Total provision for income taxes $ 163,960 $ 75,440 $ 34,644 A reconciliation of the federal statutory rate of 21 % to the effective tax rate for income before income taxes is as follows during the years ended December 31, 2021, 2020, and 2019: Year Ended December 31, 2021 2020 2019 Provision for income taxes at federal statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 6.5 % 6.3 % 5.9 % Noncontrolling interest tax differential 0.1 % ( 0.1 %) ( 0.1 %) Employee stock based compensation ( 1.1 %) ( 2.2 %) ( 0.9 %) Other 0.2 % 2.0 % 3.8 % Effective income tax rate 26.7 % 27.0 % 29.7 % Deferred income tax assets (liabilities) consisted of the following as of December 31, 2021 and 2020: December 31, 2021 2020 Deferred tax assets: Accrued liabilities and other $ 8,286 $ 2,066 Mandatorily redeemable noncontrolling interests 1,190 1,190 Other 649 — State taxes 5,321 237 Share based payments 6,871 — Foreign tax and other tax credit carryforwards 490 1,558 Capital loss carryforward 62,539 61,315 Net operating loss carryforward 32,445 33,185 Total deferred tax assets 117,791 99,551 Deferred tax liabilities: Deductible goodwill and other intangibles ( 5,129 ) ( 2,333 ) Share based payments — ( 434 ) Depreciation ( 1,592 ) ( 112 ) Deferred revenue ( 116,631 ) ( 43,631 ) Other ( 6,483 ) ( 4,902 ) Total deferred tax liabilities ( 129,835 ) ( 51,412 ) Net deferred tax assets ( 12,044 ) 48,139 Valuation allowance ( 78,163 ) ( 78,289 ) Net deferred tax liabilities $ ( 90,207 ) $ ( 30,150 ) Deferred tax assets, net $ 2,848 $ 4,098 Deferred tax liabilities, net ( 93,055 ) ( 34,248 ) Net deferred tax liabilities $ ( 90,207 ) $ ( 30,150 ) F- 42 The Company’s income before income taxes of $ 614,762 during the year ended December 31, 2021 includes a United States component of income before income taxes of $ 598,882 and a foreign component comprised of income before income taxes of $ 15,880 . As of December 31, 2021, the Company had federal net operating loss carryforwards of $ 48,869 and state net operating loss carryforwards of $ 52,548 . The Company’s federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2031 through December 31, 2038, the state net operating loss carryforwards will expire in tax years commencing in December 31, 2025. The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits of operating loss, capital loss, and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382. 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, 2021, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance. The Company does not believe that it is more likely than not that it will be able to utilize the benefits related to capital loss carryforwards and has provided a valuation allowance in the amount of $ 65,900 against these deferred tax assets. As of December 31, 2021, the Company had gross unrecognized tax benefits totaling $ 10,826 all of which would have an impact on the Company’s effective income tax rate, if recognized. A reconciliation of the amounts of gross unrecognized tax benefits (before federal impact of state items), excluding interest and penalties, was as follows: Year Ended December 31, 2021 Beginning balance $ 10,561 Additions for current year tax positions 15 Additions for prior year tax positions 331 Reductions for prior year tax positions ( 4 ) Reductions due to lapse in statutes of limitations ( 77 ) Ending balance $ 10,826 The Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions. The Company is currently under audit by certain federal, state and local, and foreign tax authorities. The audits are in varying stages of completion. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments, and closing of statutes of limitations. Such adjustments are reflected in the provision for income taxes, as appropriate. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 2018 to 2021. As of December 31, 2021, the Company believes it is reasonably possible that its gross liabilities for unrecognized tax benefits may decrease by approximately $ 43 within the next 12 months due to expiration of statute of limitations. During the year ended December 31, 2021, the Company had accrued interest and penalties relating to uncertain tax positions of $ 551 and $ 5,345 for UOL and magicJack, respectively, all of which was included in income taxes payable. During the year ended December 31, 2021, the Company recorded a benefit of $ 103 for UOL related to interest and penalties for uncertain tax positions primarily due to the lapse in statute of limitations. F- 43 NOTE 15 — EARNINGS PER SHARE Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding, after giving effect to all dilutive potential common shares outstanding during the period. Remeasurements to the carrying value of the redeemable noncontrolling interests in equity of subsidiaries are not deemed to be a dividend (see Note 2(v)). According to ASC 480 - Distinguishing Liabilities from Equity , there is no impact on earnings per share in the computation of basic and diluted earnings per share to common shareholders for changes in the carrying value of the redeemable noncontrolling interests in equity, when such changes in carrying value which in substance approximates fair value. Basic common shares outstanding exclude 387,365 common shares in 2019 that were held in escrow and subject to forfeiture. The 387,365 common shares held in escrow were forfeited and cancelled on June 11, 2020 to indemnify the Company for certain representations and warranties and related claims pursuant to a related acquisition agreement. Securities that could potentially dilute basic net income per share in the future that were not included in the computation of diluted net income per share were 1,639,310 , 1,445,301 , and 1,334,810 during the years ended December 31, 2021, 2020, and 2019, respectively, because to do so would have been anti-dilutive. Basic and diluted earnings per share were calculated as follows: Year Ended December 31, 2021 2020 2019 Net income attributable to B. Riley Financial, Inc. $ 445,054 $ 205,148 $ 81,611 Preferred stock dividends ( 7,457 ) ( 4,710 ) ( 264 ) Net income applicable to common shareholders $ 437,597 $ 200,438 $ 81,347 Weighted average common shares outstanding: Basic 27,366,292 25,607,278 26,401,036 Effect of dilutive potential common shares: Restricted stock units and warrants 1,514,728 901,119 1,082,700 Contingently issuable shares 124,582 — 45,421 Diluted 29,005,602 26,508,397 27,529,157 Basic income per common share $ 15.99 $ 7.83 $ 3.08 Diluted income per common share $ 15.09 $ 7.56 $ 2.95 NOTE 16 — ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consist of the following: December 31, December 31, 2021 2020 Accrued payroll and related expenses $ 107,904 $ 67,333 Dividends payable 28,486 1,987 Income taxes payable 39,776 29,177 Other tax liabilities 20,106 18,047 Accrued expenses 96,250 28,210 Other liabilities 51,228 28,424 Accrued expenses and other liabilities $ 343,750 $ 173,178 Other tax liabilities primarily consist of uncertain tax positions, sales and VAT taxes payable, and other non-income tax liabilities. Accrued expenses primarily consist of accrued trade payables, investment banking payables and legal settlements. Other liabilities primarily consist of interest payables, customer deposits, and accrued legal fees. F- 44 NOTE 17 — COMMITMENTS AND CONTINGENCIES (a) Legal Matters The Company is subject to certain legal and other claims that arise in the ordinary course of its business. In particular, the Company and its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. In view of the number and diversity of claims against the Company, the number of jurisdictions in which litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state with certainty what the eventual outcome of pending litigation or other claims will be. Notwithstanding this uncertainty, the Company does not believe that the results of these claims are likely to have a material effect on its financial position or results of operations. (b) Babcock & Wilcox Commitments and Guarantee On June 30, 2021, the Company agreed to guaranty (the “B. Riley Guaranty”) up to $ 110,000 of obligations that Babcock & Wilcox Enterprises, Inc. (“B&W”) may owe to providers of cash collateral pledged in connection with B&W’s debt financing. The B. Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of B&W’s obligations under a reimbursement agreement with respect to such cash collateral. B&W will pay the Company $ 935 per annum in connection with the B. Riley Guaranty. B&W has agreed to reimburse the Company to the extent the B. Riley Guaranty is called upon. On August 10, 2020, the Company entered into a project specific indemnity rider to a general agreement of indemnity made by B&W in favor of one of its sureties. Pursuant to the indemnity rider, the Company agreed to indemnify the surety in connection with a default by B&W under the underlying indemnity agreement relating to a $29,970 payment and performance bond issued by the surety in connection with a construction project undertaken by B&W. In consideration for providing the indemnity rider, B&W paid the Company fees in the amount of $600 on August 26, 2020. On December 22, 2021, the Company entered into a general agreement of indemnity in favor of one of B&W’s sureties. Pursuant to this indemnity agreement, the Company agreed to indemnify the surety in connection with a default by B&W under a EUR 30,000 payment and performance bond issued by the surety in connection with a construction project undertaken by B&W. In consideration for providing the indemnity, B&W paid the Company fees in the amount of $ 1,694 on January 20, 2022. (c) Other Commitments 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 and no additional borrowings were made after the initial funding. On December 29, 2021, the availability period under the loan expired, leaving no outstanding commitments under the facility as of December 31, 2021. As of December 31, 2020, unused commitments of 26,400 EUROS were outstanding under the facility. In the normal course of business, the Company enters into commitments to its clients in connection with capital raising transactions, such as firm commitment underwritings, equity lines of credit, or other commitments to provide financing on specified terms and conditions. These commitments require the Company to purchase securities at a specified price or otherwise provide debt or equity financing on specified terms. Securities underwriting exposes the Company to market and credit risk, primarily in the event that, for any reason, securities purchased by the Company cannot be distributed at the anticipated price and to balance sheet risk in the event that debt or equity financing commitments cannot be syndicated. F- 45 NOTE 18 — SHARE-BASED PAYMENTS (a) 2021 Stock Incentive Plan The 2021 Stock Incentive Plan (the “2021 Plan”) replaced the Amended and Restated 2009 Stock Incentive Plan on May 27, 2021. Share-based compensation expense for restricted stock units under the 2021 Plan was $ 33,168 , $ 14,830 , and $ 11,626 during the years ended December 31, 2021, 2020, and 2019, respectively. During the year ended December 31, 2021, in connection with employee stock incentive plans the Company granted 516,152 restricted stock units with a total grant date fair value of $ 35,289 and 1,958,540 performance stock units with a total grant date fair value of $ 67,227 . During the year ended December 31, 2020, in connection with employee stock incentive plans the Company granted 465,711 restricted stock units with a total grant date fair value of $ 8,818 . The restricted stock units generally vest over a period of one to five years based on continued service. Performance based restricted stock units generally vest based on both the employee’s continued service and the Company’s common stock price, as defined in the grant, achieving a set threshold during the two to three-year period following the grant. In determining the fair value of restricted stock units on the grant date, the fair value is adjusted for (a) estimated forfeitures, (b) expected dividends based on historical patterns and the Company’s anticipated dividend payments over the expected holding period, and (c) the risk-free interest rate based on U.S. Treasuries for a maturity matching the expected holding period. As of December 31, 2021, the expected remaining unrecognized share-based compensation expense of $ 82,639 was to be expensed over a weighted average period of 1.9 years. As of December 31, 2020, the expected remaining unrecognized share-based compensation expense of $ 11,156 was to be expensed over a weighted average period of 1.9 years. A summary of equity incentive award activity during the years ended December 31, 2021 and 2020 was as follows: Weighted Average Shares Fair Value Nonvested at December 31, 2019 2,263,988 $ 12.35 Granted 465,711 18.93 Vested ( 1,730,734 ) 10.88 Forfeited ( 171,743 ) 11.47 Nonvested at December 31, 2020 827,222 $ 19.29 Granted 2,474,692 41.43 Vested ( 412,272 ) 19.97 Forfeited ( 5,766 ) 50.52 Nonvested at December 31, 2021 2,883,876 $ 38.21 The per-share weighted average grant-date fair value of restricted stock units granted during the years ended December 31, 2021 and 2020 was $ 68.37 and $ 18.93 , respectively. For the year ended December 31, 2021, the grant-date per-share weighted average fair value of performance stock units granted was $ 34.33 . During the year ended December 31, 2021, the total fair value of shares vested was $ 8,233 . During the year ended December 31, 2020, the total fair value of shares vested was $ 18,831 , which included $ 11,236 in performance based restricted stock units which fully vested in December 2020. (b) Amended and Restated FBR & Co. 2006 Long-Term Stock Incentive Plan In connection with the acquisition of FBR & Co. on June 1, 2017, the equity awards previously granted or available for issuance under the FBR & Co. 2006 Long-Term Stock Incentive Plan (the “FBR Stock Plan”) may be issued. On May 27, 2021, the FBR Stock Plan was replaced by the 2021 Plan. During the year ended December 31, 2021, the Company granted restricted stock units representing 15,334 shares of common stock with a total grant date fair value of $ 1,007 and 140,000 performance stock units with a grant date fair value of $ 5,202 under the FBR Stock Plan. During the year ended December 31, 2020, the Company granted, restricted stock units representing 142,029 shares of common stock with a total grant date fair value of $ 2,603 under the FBR Stock Plan. The share-based compensation expense in connection with the FBR Stock Plan restricted stock awards was $ 2,085 , $ 3,381 , and $ 3,969 during the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, the expected remaining unrecognized share-based compensation expense of $ 5,183 will be expensed over a weighted average period of 1.2 years. As of December 31, 2020, the expected remaining unrecognized share-based compensation expense of $ 3,686 will be expensed over a weighted average period of 1.8 years. F- 46 A summary of equity incentive award activity as of December 31, 2021 and 2020 was as follows: Weighted Average Shares Fair Value Nonvested at December 31, 2019 485,033 $ 18.33 Granted 142,029 18.33 Vested ( 310,867 ) 17.37 Forfeited ( 26,075 ) 19.21 Nonvested at December 31, 2020 290,120 $ 19.33 Granted 155,334 39.98 Vested ( 150,337 ) 20.08 Forfeited ( 10,636 ) 30.59 Nonvested at December 31, 2021 284,481 $ 30.06 The per-share weighted average grant-date fair value of restricted stock units granted as of December 31, 2021 and 2020 was $ 65.69 and $ 18.33 , respectively. As of December 31, 2021, the grant-date per-share weighted average fair value of performance stock units granted was $ 37.16 . The total fair value of shares vested as of December 31, 2021 and 2020 was $ 3,018 and $ 5,400 , respectively. F- 47 NOTE 19 — BENEFIT PLANS AND CAPITAL TRANSACTIONS (a) Employee Benefit Plans The Company maintains qualified defined contribution 401(k) plans, which cover substantially all of its U.S. employees. Under the plans, participants are entitled to make pre-tax contributions up to the annual maximums established by the Internal Revenue Service. The plan documents permit annual discretionary contributions from the Company. Employer contributions in the amount of $ 2,125 , $ 1,565 and $ 1,424 were made during the years ended December 31, 2021, 2020, and 2019, respectively. (b) Employee Stock Purchase Plan In connection with the Company’s Employee Stock Purchase Plan, share based compensation was $ 758 , $ 377 and $ 322 during the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, there were 450,717 shares reserved for issuance under the Purchase Plan. As of December 31, 2020, there were 502,326 shares reserved for issuance under the Purchase Plan. (c) Common Stock Since October 30, 2018, the Company’s Board of Directors has authorized annual share repurchase programs of up to $ 50,000 of its outstanding common shares. All share repurchases were effected on the open market at prevailing market prices or in privately negotiated transactions. During the year ended December 31, 2021, the Company repurchased 44,650 shares of its common stock for $ 2,656 , which represents an average price of $ 59.49 per common share. The shares repurchased under the program were retired. On October 25, 2021, the share repurchase program was reauthorized by the Board of Directors for share repurchases up to $ 50,000 of its outstanding common shares and expires in October 2022. During the year ended December 31, 2020, the Company repurchased 2,165,383 shares of its common stock for $ 48,248 which represents an average price of $ 22.28 per common share. On July 1, 2020, the Company entered into an agreement to repurchase 900,000 shares of its common stock for $ 19,800 ($ 22.00 per common share) from one of its shareholders. In accordance with the agreement, the Company repurchased 450,000 shares for $ 9,900 on July 2, 2020 and the remaining 450,000 shares were repurchased for $ 9,900 on November 2, 2020. In addition to the repurchases of common stock, 387,365 shares of the Company’s common stock that were previously held in escrow in connection with the acquisition of a wealth management company in 2017 were forfeited and cancelled on June 11, 2020 to indemnify the Company for certain representations and warranties and related claims pursuant to a related acquisition agreement. In January and February of 2020, the Company repurchased 880,000 shares of its common stock in a block purchase from an existing stockholder as part of a privately-negotiated transaction. The Company purchased the shares at $ 24.4725 per share for an aggregate amount of $ 21,536 . On January 15, 2021, the Company issued 1,413,045 shares of common stock inclusive of 184,310 shares issued pursuant to the full exercise of the Underwriter’s option to purchase additional shares of common stock at a price of $ 46 per share for net proceeds of approximately $ 64,713 after underwriting fees and costs. (d) Preferred Stock On October 7, 2019, the Company closed its public offering of depositary shares (the “Depositary Shares”), each representing 1/1000 th of a share of 6.875 % Series A Cumulative Perpetual Preferred Stock, par value $ 0.0001 per share (the “Series A 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 Depositary Shares generated $ 57,500 of gross proceeds. The Company may elect from time to time to offer the Series A Preferred Stock via ATM sales. During the years ended December 31, 2021 and 2020, the Company issued depositary shares equivalent to 233 and 232 shares, respectively, of the Series A Preferred Stock through ATM sales. There were 2,814 and 2,581 shares issued and outstanding as of December 31, 2021 and 2020, respectively. Total liquidation preference for the Series A Preferred Stock as of December 31, 2021 and 2020, was $ 70,362 and $ 64,519 , respectively. Dividends on the Series A preferred paid during the years ended December 31, 2021 and 2020, were $ 1.71875 and $ 1.71875 per depositary share, respectively. F- 48 On September 4, 2020, the Company issued depositary shares each representing 1/1000th of a share of 7.375 % Series B Cumulative Perpetual Preferred Stock, par value $ 0.0001 per share (the “Series B Preferred Stock”). The Series B Preferred Stock has a liquidation preference of $ 25 per 1/1000 depositary share or $ 25,000 per preferred share. 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 $ 32,500 . The Company may elect from time to time to offer the Series B Preferred Stock via ATM sales. During the years ended December 31, 2021 and 2020, the Company issued depositary shares equivalent to 307 and 90 shares, respectively, of the Series B Preferred Stock through ATM sales. There were 1,697 shares and 1,390 shares issued and outstanding as of December 31, 2021, and 2020, respectively. Total liquidation preference for the Series B Preferred Stock as of December 31, 2021 and 2020, was $ 42,428 and $ 34,741 , respectively. Dividends on the Series B preferred paid during the years ended December 31, 2021 and 2020, were $ 1.84375 and $ 0.29193 per depositary share, respectively. The Series A Preferred Stock and the Series B Preferred Stock ranks, as to dividend rights and rights upon the Company’s liquidation, dissolution or winding up: (i) senior to all classes or series of the Company’s common stock and to all other equity securities issued by the Company other than equity securities issued with terms specifically providing that those equity securities rank on a parity with the Series A Preferred Stock or Series B Preferred Stock, (ii) junior to all equity securities issued by the Company with terms specifically providing that those equity securities rank senior to the Series A Preferred Stock and the Series B Preferred Stock with respect to payment of dividends and the distribution of assets upon the Company’s liquidation, dissolution or winding up and (iii) effectively junior to all of the Company’s existing and future indebtedness (including indebtedness convertible into our common stock or preferred stock) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) the Company’s existing or future subsidiaries. Generally, the Series A Preferred Stock and the Series B Preferred Stock is not redeemable by the Company prior to October 7, 2024. However, upon a change of control or delisting event, the Company will have the special option to redeem the Series A Preferred Stock and the Series B Preferred Stock. (e) Dividends 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, 2020, and 2019, we paid cash dividends on our common stock of $ 347,135 , $ 38,792 , and $ 41,138 , respectively. On 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, 2021. 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. 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 certain 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. F- 49 A summary of our common stock dividend activity during the years ended December 31, 2021, 2020, and 2019 was as follows: Regular Dividend Special Dividend Total Dividend Date Declared Date Paid Stockholder Record Date Amount Amount Amount October 28, 2021 November 23, 2021 November 9, 2021 $ 1.000 $ 3.000 $ 4.000 July 29, 2021 August 26, 2021 August 13, 2021 0.500 1.500 2.000 May 3, 2021 May 28, 2021 May 17, 2021 0.500 2.500 3.000 February 25, 2021 March 24, 2021 March 10, 2021 0.500 3.000 3.500 October 28, 2020 November 24, 2020 November 10, 2020 0.375 0.000 0.375 July 30, 2020 August 28, 2020 August 14, 2020 0.300 0.050 0.350 May 8, 2020 June 10, 2020 June 1, 2020 0.250 0.000 0.250 March 3, 2020 March 31, 2020 March 17, 2020 0.250 0.100 0.350 October 30, 2019 November 26, 2019 November 14, 2019 0.175 0.475 0.650 August 1, 2019 August 29, 2019 August 15, 2019 0.175 0.325 0.500 May 1, 2019 May 29, 2019 May 15, 2019 0.080 0.180 0.260 March 5, 2019 March 26, 2019 March 19, 2019 0.080 0.000 0.080 Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875 % per annum of the $ 25,000 liquidation preference ($ 25.00 per Depositary Share) per year (equivalent to $ 1,718.75 or $ 1.71875 per Depositary Share). Dividends will be payable quarterly in arrears, on or about the last day of January, April, July and October. On January 9, 2020, the Company declared a cash dividend of $ 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 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, 2020. 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 21, 2020. 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. On April 5, 2021, the Company declared a cash dividend $ 0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021. On July 8, 2021, the Company declared a cash dividend $ 0.4296875 per Depositary Share, which 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. On 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 $ 25,000 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 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. 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. On January 10, 2022, the Company declared a cash dividend $ 0.4609375 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022. Our principal sources of liquidity to finance our business is our existing cash on hand, cash flows generated from operating activities, funds available under revolving credit facilities and special purpose financing arrangements. F- 50 NOTE 20 — NET CAPITAL REQUIREMENTS B. Riley Securities (“BRS”), B. Riley Wealth Management (“BRWM”), and National Securities Corporation (“NSC”), the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory Authority, Inc. (“FINRA”). The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, to not exceed 15 to 1. As such, they are subject to the minimum net capital requirements promulgated by the SEC. As of December 31, 2021, BRS had net capital of $ 277,611 , which was $ 265,093 in excess of its required minimum net capital of $ 12,518 ; BRWM had net capital of $ 13,833 , which was $ 12,819 in excess of its required minimum net capital of $ 1,014 ; and NSC had net capital of $ 1,959 which was $ 959 in excess of required minimum net capital of $ 1,000 . As of December 31, 2020, BRS had net capital of $ 146,060 , which was $ 140,101 in excess of its required minimum net capital of $ 5,959 ; and BRWM had net capital of $ 4,998 , which was $ 4,299 in excess of its required minimum net capital of $ 699 . NOTE 21 — RELATED PARTY TRANSACTIONS The Company provides asset management and placement agent services to unconsolidated funds affiliated with the Company (the “Funds”). In connection with these services, the Funds may bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the Funds. As of December 31, 2021, amounts due from related parties of $ 2,306 included $ 621 from the Funds for management fees and other operating expenses, and $ 1,635 due from CA Global Partners (“CA Global”) for operating expenses related to wholesale and industrial liquidation engagements managed by CA Global on behalf of GA Global Partners. As of December 31, 2020, amounts due from related parties of $ 1,037 included $ 604 from the Funds for management fees and other operating expenses and $ 433 due from CA Global for operating expenses related to wholesale and industrial liquidation engagements managed by CA Global on behalf of GA Global Partners. During the years ended December 31, 2021 and 2020, the Company recorded interest expense of $ 525 and $ 1,710 , respectively, related to loan participations sold to BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of its subsidiaries. The Company also recorded commission income of $ 555 and $ 568 from introducing trades on behalf of BRCPOF during the years ended December 31, 2021 and 2020, respectively. Our executive officers and members of our board of directors have a 55.8 % financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 31.8 % in the BRCPOF as of December 31, 2021. The Company had no outstanding loan participations to BRCPOF as of December 31, 2021 and had $ 14,816 outstanding as of December 31, 2020. In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P. (“Whitehawk”), a limited partnership controlled by Mr. J. Ahn, who is the brother of Phil Ahn, the Company’s Chief Financial Officer and Chief Operating Officer. Whitehawk has agreed to provide investment advisory services for GACP I, L.P. and GACP II, L.P. During the years ended December 31, 2021 and 2020, management fees paid for investment advisory services by Whitehawk was $ 1,729 and $ 1,214 , respectively. The Company periodically participates in loans and financing arrangements for which the Company has an equity ownership and representation on the board of directors (or similar governing body). The Company may also provide consulting services or investment banking services to raise capital for these companies. These transactions can be summarized as follows: Babcock and Wilcox The Company had a last-out term loan receivable due from B&W that is included in loans receivable, at fair value with a fair value of $ 176,191 as of December 31, 2020. On June 1, 2021 the Company agreed to settle the outstanding balance and accrued interest on the last-out term loan receivable in exchange for $ 848 and 2,916,880 shares of B&W’s 7.75 % Series A Cumulative Perpetual Preferred Stock. During the years ended December 31, 2021 and 2020, the Company earned $ 15,766 and $ 2,486 , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities. One of the Company’s wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the Company to serve as the Chief Executive Officer of B&W until November 30, 2020 (the “Executive Consulting Agreement”), unless terminated by either party with thirty days written notice. The agreement was extended through December 31, 2023. Under this agreement, fees for services provided are $ 750 per annum, paid monthly. In addition, subject to the achievement of certain performance objectives as determined by B&W’s compensation committee of the board, a bonus or bonuses may also be earned and payable to the Company. The Company is also a party to indemnification agreements for the benefit of B&W, and the B. Riley Guaranty, each as disclosed above in Note 17 – Commitments and Contingencies. Maven The Company has loans receivable due from the Maven, Inc. that are included in loans receivable, at fair value of $ 69,835 and $ 56,552 as of December 31, 2021 and 2020, respectively. Interest on these loans is payable at 10 % per annum with maturity dates through December 2022. F- 51 Lingo The Company has loans receivable due from Lingo Management LLC (“Lingo”) included in loans receivable, at fair value with a fair value of $ 58,565 and $ 55,066 as of December 31, 2021 and 2020, respectively. The term loan bears interest at 16.0 % per annum with a maturity date of December 1, 2022. The term loan has a conversion feature under which $ 17,500 will convert to additional equity ownership upon receipt of certain regulatory approval. If those regulatory approvals are received, the conversion would increase the Company’s ownership interest in Lingo from 40 % to 80 %. On August 1, 2021, the credit agreement was amended to allow the borrower to elect that a portion of interest payable be payable in kind. On March 10, 2021, the Company also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo) in the amount of $ 1,100 . The note bears interest at 6 % per annum with a maturity date of March 31, 2022 . bebe The Company had a loan receivable due from bebe included in loans receivable, at fair value with a fair value of $ 8,000 as of December 31, 2020. The term loan bore interest at 16.0 % per annum and had a maturity date of November 10, 2021. The term loan was paid in full in August 2021. Charah Solutions, Inc. On August 25, 2021 the Company extended a $ 17,852 promissory note to Charah Solutions, Inc., in which one of the Company’s senior executives serves on the board of directors. The promissory note bore interest at 8.0 % per annum and had a maturity date of September 25, 2022 and a 2.5 % commitment fee payable at maturity. The promissory note was paid in full in December 2021. California Natural Resources Group, LLC. On November 1, 2021 the Company extended a $ 34,393 bridge promissory note bearing interest at up to 10 % per annum (the “Bridge Note”) to California Natural Resources Group, LLC (“CalNRG”). As of December 31, 2021, the Bridge Note is included in loans receivable, at fair value in the amount of $ 34,000 . On January 3, 2022, CalNRG repaid the Bridge Note using proceeds from a new credit facility with a third party bank (the “CalNRG Credit Facility”). The Company has guaranteed CalNRG’s obligations, up to $ 10,375 , under the CalNRG Credit Facility. Other As of December 31, 2021, the Company has loans receivable due from other related parties in the amount of $ 4,201 . The Company often provides consulting or investment banking services to raise capital for companies in which the Company has significant influence through equity ownership, representation on the board of directors (or similar governing body), or both. During the year ended December 31, 2021, the Company earned $ 26,236 of fees related to these services. NOTE 22 — BUSINESS SEGMENTS The Company’s business is classified into the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment, Principal Investments - Communications segment and Brands segment. These reportable segments are all distinct businesses, each with a different marketing strategy and management structure. 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 in the Financial Consulting segment. As a result of the National acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational management changes for its wealth management business. Under the new structure, the wealth management business previously reported in the Capital Markets segment are now reported in the Wealth Management segment. Under the new structure, there is a new segment for Wealth Management. F- 52 In conjunction with the new reporting structure, the Company recast its segment presentation for all periods presented. The following is a summary of certain financial data for each of the Company’s reportable segments: Year Ended December 31, 2021 2020 2019 Capital Markets segment: Revenues - Services and fees $ 575,317 $ 339,877 $ 199,630 Trading income and fair value adjustments on loans 379,053 103,214 104,637 Interest income - Loans and securities lending 122,723 102,499 77,221 Total revenues 1,077,093 545,590 381,488 Selling, general and administrative expenses ( 345,455 ) ( 198,962 ) ( 175,369 ) Restructuring charge — ( 917 ) — Interest expense - Securities lending and loan participations sold ( 52,631 ) ( 42,451 ) ( 32,144 ) Depreciation and amortization ( 2,136 ) ( 2,386 ) ( 2,810 ) Segment income 676,871 300,874 171,165 Wealth Management segment: Revenues - Services and fees 374,361 72,345 65,073 Trading income and fair value adjustments on loans 7,623 804 1,826 Total revenues 381,984 73,149 66,899 Selling, general and administrative expenses ( 357,130 ) ( 68,368 ) ( 64,347 ) Restructuring recovery — — 4 Depreciation and amortization ( 8,920 ) ( 1,880 ) ( 2,048 ) Segment income 15,934 2,901 508 Auction and Liquidation segment: Revenues - Services and fees 20,169 63,101 18,296 Revenues - Sale of goods 53,348 25,663 4,220 Total revenues 73,517 88,764 22,516 Direct cost of services ( 30,719 ) ( 40,730 ) ( 33,295 ) Cost of goods sold ( 20,675 ) ( 9,766 ) ( 4,016 ) Selling, general and administrative expenses ( 14,069 ) ( 12,357 ) ( 10,731 ) Restructuring charge — ( 140 ) — Depreciation and amortization — ( 2 ) ( 7 ) Segment income (loss) 8,054 25,769 ( 25,533 ) Financial Consulting segment: Revenues - Services and fees 94,312 91,622 76,292 Selling, general and administrative expenses ( 77,062 ) ( 68,232 ) ( 58,226 ) Restructuring charge — ( 500 ) — Depreciation and amortization ( 356 ) ( 347 ) ( 252 ) Segment income 16,894 22,543 17,814 Principal Investments - Communications segment: Revenues - Services and fees 88,490 83,666 97,147 Revenues - Sale of goods 4,857 3,472 3,715 Total revenues 93,347 87,138 100,862 Direct cost of services ( 23,671 ) ( 19,721 ) ( 25,529 ) Cost of goods sold ( 6,278 ) ( 2,694 ) ( 3,559 ) Selling, general and administrative expenses ( 25,493 ) ( 20,352 ) ( 24,256 ) Depreciation and amortization ( 10,747 ) ( 11,011 ) ( 12,658 ) Restructuring charge — — ( 1,703 ) Segment income 27,158 33,360 33,157 Brands segment: Revenues - Services and fees 20,308 16,458 4,055 Selling, general and administrative expenses ( 3,178 ) ( 2,889 ) ( 881 ) Depreciation and amortization ( 2,745 ) ( 2,858 ) ( 507 ) Impairment of tradenames — ( 12,500 ) — Segment income (loss) 14,385 ( 1,789 ) 2,667 Consolidated operating income from reportable segments 759,296 383,658 199,778 Corporate and other expenses ( 58,905 ) ( 38,893 ) ( 33,127 ) Interest income 229 564 1,577 Gain on extinguishment of loans and other 3,796 — — Income (loss) on equity investments 2,801 ( 623 ) ( 1,431 ) Interest expense ( 92,455 ) ( 65,249 ) ( 50,205 ) Income before income taxes 614,762 279,457 116,592 Provision for income taxes ( 163,960 ) ( 75,440 ) ( 34,644 ) Net income 450,802 204,017 81,948 Net income (loss) attributable to noncontrolling interests 5,748 ( 1,131 ) 337 Net income attributable to B. Riley Financial, Inc. 445,054 205,148 81,611 Preferred stock dividends 7,457 4,710 264 Net income available to common shareholders $ 437,597 $ 200,438 $ 81,347 F- 53 The following table presents revenues by geographical area: Year Ended December 31, 2021 2020 2019 Revenues: Revenues - Services and fees: North America $ 1,168,483 $ 641,127 $ 460,374 Australia — 664 58 Europe 4,474 25,278 61 Total Revenues - Services and fees $ 1,172,957 $ 667,069 $ 460,493 Trading income and fair value adjustments on loans North America $ 386,676 $ 104,018 $ 106,463 Revenues - Sale of goods North America $ 12,130 $ 6,788 $ 7,935 Europe 46,075 22,347 — Total Revenues - Sale of Goods $ 58,205 $ 29,135 $ 7,935 Revenues - Interest income - Loans and securities lending: North America $ 122,723 $ 102,499 $ 77,221 Total Revenues: North America $ 1,690,012 $ 854,432 $ 651,993 Australia — 664 58 Europe 50,549 47,625 61 Total Revenues $ 1,740,561 $ 902,721 $ 652,112 As of December 31, 2021 and 2020 long-lived assets, which consist of property and equipment and other assets of $ 12,870 and $ 11,685 , respectively, were located in North America. Segment assets are not reported to, or used by, the Company’s Chief Operating Decision Maker to allocate resources to, or assess performance of, the segments and therefore, total segment assets have not been disclosed. F- 54 NOTE 23 — REVISION OF PRIOR PERIOD FINANCIALS As disclosed in Note 2(a), during the year ended December 31, 2021, the Company identified misstatements related to the consolidation of certain VIE’s, which primarily resulted in a gross up the investing and financing activities in the consolidated statements of cash flows. Although the Company concluded that these misstatements were not material, either individually or in aggregate, to its current or previously issued consolidated financial statements, the Company has elected to revise its previously issued consolidated financial statements to correct for these misstatements. The revision to the accompanying consolidated statements of cash flows are as follows: Year Ended December 31, 2020 As Previously Reported Adjustments As Revised Statement of Cash Flows Cash flows from investing activities: Purchase of equity investments $ ( 13,986 ) $ 6,486 $ ( 7,500 ) Funds received from trust account of subsidiary — 320,500 320,500 Investment of subsidiaries initial public offering proceeds into trust account — ( 176,750 ) ( 176,750 ) Net cash (used in) provided by investing activities $ ( 128,446 ) $ 150,236 $ 21,790 Cash flows from financing activities: Payment of debt issuance and offering costs $ ( 3,359 ) $ ( 6,486 ) $ ( 9,845 ) Redemption of subsidiary temporary equity and distributions — ( 318,750 ) ( 318,750 ) Proceeds from initial public offering of subsidiaries — 175,000 175,000 Net cash provided by (used in) financing activities $ 69,544 $ ( 150,236 ) $ ( 80,692 ) Year Ended December 31, 2019 As Previously Reported Adjustments As Revised Statement of Cash Flows Cash flows from investing activities: Purchase of equity investments $ ( 33,391 ) $ 4,634 $ ( 28,757 ) Investment of subsidiaries initial public offering proceeds into trust account — ( 143,750 ) ( 143,750 ) Net cash used in investing activities $ ( 298,590 ) $ ( 139,116 ) $ ( 437,706 ) Cash flows from financing activities: Payment of debt issuance and offering costs $ ( 3,425 ) $ ( 4,634 ) $ ( 8,059 ) Proceeds from initial public offering of subsidiaries — 143,750 143,750 Net cash provided by financing activities $ 250,176 $ 139,116 $ 389,292 NOTE 24 — SUBSEQUENT EVENT On January 19, 2022, the Company completed the acquisition of FocalPoint Securities, LLC (“FocalPoint”), an independent investment bank, for total cash, stock, and contingent consideration of up to $ 175,000 . The acquisition is expected to expand B. Riley Securities’ mergers and acquisitions advisory business and enhance its debt capital markets and financial restructuring capabilities. The acquisition of FocalPoint will be accounted for using the acquisition method of accounting in the first quarter of fiscal year 2022. The Company has not completed the preliminary purchase price accounting since it is in the process of completing the valuation of the assets of FocalPoint. F- 55