What changed in this filing

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Item 1. Financial Statements

2022-04-29 compared with 2021-11-09 · 771 added, 1637 removed, 374 unchanged (87% of the section changed)

2 unchanged sentences

AND SUBSIDIARIES

Consolidated Balance Sheets

in thousands, except par value)

September 30,

Condensed Consolidated Balance Sheets

(Dollars in thousands, except par value)

2022 December 31,

Cash and cash equivalents $ 213,584 $ 278,933

5 unchanged sentences

Due from related parties 1,480 2,074

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

Loans receivable, at fair value (includes $ 154,862 and $ 167,744 from related parties as of March 31, 2022 and December 31, 2021, respectively)

882,391 873,186

Prepaid expenses and other assets 470,525 463,502

1 unchanged sentence

Property and equipment, net 12,980 12,870

Goodwill 362,466 250,568

Other intangible assets, net 211,915 207,651

Deferred tax assets, net 2,867 2,848

Total assets $ 5,251,759 $ 5,851,919

LIABILITIES AND EQUITY

3 unchanged sentences

Deferred tax liabilities, net 51,174 93,055

Due to related parties and partners

Due to clearing brokers — 69,398

1 unchanged sentence

Securities loaned 1,619,132 2,088,685

Mandatorily redeemable noncontrolling interests

Operating lease liabilities 72,339 69,072

Notes payable 22,891 357

Loan participations sold

Revolving credit facility 80,000 80,000

7 unchanged sentences

1,000,000 shares authorized;

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

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

4,535 and 4,512 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively;

and liquidation preference of $ 113,380 and $ 112,790 as of March 31, 2022 and December 31, 2021, respectively

Common stock, $ 0.0001 par value;

100,000,000 shares authorized;

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

27,928,234 and 27,591,028 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 450,164 413,486

4 unchanged sentences

Noncontrolling interests 45,813 43,930

Total equity 700,177 705,201

Total liabilities and equity $ 5,251,759 $ 5,851,919

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

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

RILEY FINANCIAL, INC.

AND SUBSIDIARIES

Consolidated Statements of Operations

in thousands, except share data)

Condensed Consolidated Statements of Operations

(Dollars in thousands, except share data)

Three Months Ended

Nine Months Ended

September 30,

Services and fees $ 210,675 $ 289,469

Trading income (losses) and fair value adjustments on loans

Trading (losses) income and fair value adjustments on loans ( 68,390 ) 266,942

Interest income - Loans and securities lending 61,426 36,920

5 unchanged sentences

Selling, general and administrative expenses 175,199 191,344

Restructuring charge

Impairment of tradenames

Interest expense - Securities lending and loan participations sold 11,766 19,189

3 unchanged sentences

Interest income 67 49

Gain on extinguishment of loans and other

Income (loss) from equity investments

Change in fair value of financial instruments and other 5,981 —

Income from equity investments 6,775 875

Interest expense ( 30,436 ) ( 19,786 )

Income before income taxes

Provision for income taxes

Net income (loss) attributable to noncontrolling interests

Net income attributable to B.

(Loss) income before income taxes ( 12,891 ) 354,116

Benefit (provision) for income taxes 3,695 ( 97,518 )

Net (loss) income ( 9,196 ) 256,598

Net income attributable to noncontrolling interests 866 1,942

Net (loss) income attributable to B.

Riley Financial, Inc.

$ ( 10,062 ) $ 254,656

Preferred stock dividends 2,002 1,749

Net income available to common shareholders

Basic income per common share

Diluted income per common share

Net (loss) income available to common shareholders $ ( 12,064 ) $ 252,907

Basic (loss) income per common share $ ( 0.43 ) $ 9.38

Diluted (loss) income per common share $ ( 0.43 ) $ 8.81

Weighted average basic common shares outstanding 27,855,033 26,972,275

Weighted average diluted common shares outstanding 27,855,033 28,710,368

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

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

RILEY FINANCIAL, INC.

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

in thousands)

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Dollars in thousands)

Three Months Ended

Nine Months Ended

September 30,

Net (loss) income $ ( 9,196 ) $ 256,598

Other comprehensive income (loss):

Change in cumulative translation adjustment ( 488 ) ( 636 )

Other comprehensive (loss) income, net of tax

Total comprehensive income

Other comprehensive loss, net of tax ( 488 ) ( 636 )

Total comprehensive (loss) income ( 9,684 ) 255,962

Comprehensive income (loss) attributable to noncontrolling interests 866 1,942

Comprehensive income attributable to B.

Riley Financial, Inc.

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

Comprehensive (loss) income attributable to B.

Riley Financial, Inc.

AND SUBSIDIARIES

Consolidated Statements of Equity

in thousands, except share data)

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

Comprehensive

Noncontrolling

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

stock repurchased and retired

based payments

Dividends on common stock ($ 2.00 per share)

on preferred stock

Distributions

to noncontrolling interests

Contributions

from noncontrolling interests

of noncontrolling interests

comprehensive loss

September 30, 2021

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

stock repurchased and retired

based payments

Dividends on common stock ($ 0.35 per share)

on preferred stock

Distributions

to noncontrolling interests

comprehensive income

September 30, 2020

$ ( 10,550 ) $ 254,020

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

RILEY FINANCIAL, INC.

AND SUBSIDIARIES

Consolidated Statements of Equity

in thousands, except share data)

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

Condensed Consolidated Statements of Equity

(Dollars in thousands, except share data)

For the Three Months Ended March 31, 2022 and 2021

Preferred Stock Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Noncontrolling

January 1, 2021

stock issued, net of offering costs

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

stock repurchased and retired

based payments

Loss Noncontrolling

Interests Total

Shares Amount Shares Amount

Balance, January 1, 2022 4,512 $ — 27,591,028 $ 3 $ 413,486 $ 248,862 $ ( 1,080 ) $ 43,930 $ 705,201

Preferred stock issued 23 — — — 639 — — — 639

Vesting of restricted stock and other, net of shares withheld for employer taxes — — 32,328 — ( 1,294 ) — — — ( 1,294 )

Shares issued for the acquisition of FocalPoint — — 304,878 — 20,320 — — — 20,320

Share based payments — — — — 17,013 — — — 17,013

Dividends on common stock ($ 1.00 per share)

on preferred stock

Remeasurement

Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity

Distributions

to noncontrolling interests

Contributions

from noncontrolling interests

of noncontrolling interests

comprehensive loss

September 30, 2021

January 1, 2020

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

stock repurchased and retired

— — — — — ( 31,033 ) — — ( 31,033 )

based payments

Dividends on preferred stock — — — — — ( 2,002 ) — — ( 2,002 )

Net loss — — — — — ( 10,062 ) — 866 ( 9,196 )

Distributions to noncontrolling interests — — — — — — — ( 935 ) ( 935 )

Contributions from noncontrolling interests — — — — — — — 1,770 1,770

Acquisition of noncontrolling interests — — — — — — — 182 182

Other comprehensive loss — — — — — — ( 488 ) — ( 488 )

Balance, March 31, 2022

4,535 $ — 27,928,234 $ 3 $ 450,164 $ 205,765 $ ( 1,568 ) $ 45,813 $ 700,177

Balance, January 1, 2021 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

Vesting of restricted stock and other, net of shares withheld for employer taxes — — 4,068 — ( 22 ) — — — ( 22 )

Share based payments — — — — 5,526 — — — 5,526

Dividends on common stock ($ 3.50 per share)

on preferred stock

income (loss)

Remeasurement

Riley Principal Merger II Corporation subsidiary temporary equity

Distributions

to noncontrolling interests

comprehensive loss

September 30, 2020

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

— — — — — ( 103,077 ) — — ( 103,077 )

Dividends on preferred stock — — — — — ( 1,749 ) — — ( 1,749 )

Net income — — — — — 254,656 — 1,942 256,598

Distributions to noncontrolling interests — — — — — — — ( 11,257 ) ( 11,257 )

Contributions from noncontrolling interests — — — — — — — 3,722 3,722

Acquisition of noncontrolling interests — — — — — — — 13,042 13,042

Other comprehensive loss — — — — — — ( 636 ) — ( 636 )

Balance, March 31, 2021

3,971 $ — 27,194,909 $ 3 $ 380,543 $ 352,910 $ ( 1,459 ) $ 33,823 $ 765,820

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

RILEY FINANCIAL, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

in thousands)

Nine Months Ended

September 30,

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

Three Months Ended

Cash flows from operating activities:

(Revised - See Note 20)

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

Net (loss) income $ ( 9,196 ) $ 256,598

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

Depreciation and amortization 7,848 6,759

4 unchanged sentences

Effect of foreign currency on operations ( 34 ) ( 726 )

(Income) loss from equity investments

Income from equity investments ( 6,775 ) ( 875 )

Dividends from equity investments 774 305

Deferred income taxes ( 41,900 ) 62,696

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

Gain on extinguishment of loans

Loss (gain) on extinguishment of debt

Loss on loans receivable and disposal of fixed assets 257 —

Gain on extinguishment of loan ( 1,102 ) —

Loss on extinguishment of debt — 919

Gain on equity investment — ( 3,544 )

Income allocated for mandatorily redeemable noncontrolling interests

Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests 215 130

Change in operating assets and liabilities:

Due from clearing brokers

Amounts due to/from clearing brokers ( 80,091 ) ( 416,038 )

Securities and other investments owned 215,973 ( 235,504 )

2 unchanged sentences

Prepaid expenses and other assets 1,701 ( 5,629 )

Accounts payable, accrued expenses and other liabilities

Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities ( 82,962 ) 30,505

Amounts due to/from related parties and partners 594 1,083

2 unchanged sentences

Securities loaned ( 469,553 ) 547,259

Net cash (used in) provided by operating activities

Net cash used in operating activities ( 14,898 ) ( 42,894 )

Cash flows from investing activities:

1 unchanged sentence

Repayments of loans receivable 101,000 87,476

Sale of loan receivable to related party

Proceeds from loan participations sold

Repayment of loan participations sold — ( 6,086 )

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

Purchases of property, equipment and other

Acquisition of businesses, net of $ 26,076 and $ 34,924 cash acquired for 2022 and 2021, respectively

( 40,047 ) ( 260 )

Purchases of property, equipment and intangible assets ( 176 ) ( 101 )

Proceeds from sale of property, equipment and intangible assets 2 —

Funds received from trust account of subsidiary

Investment of subsidiaries initial public offering proceeds into trust account — ( 172,500 )

Acquisition of other business

Purchase of equity and other investments ( 2,439 ) ( 4,698 )

Net cash used in investing activities ( 35,513 ) ( 171,838 )

Cash flows from financing activities:

Proceeds from revolving line of credit, net

Repayment of asset based credit facility

Repayment of notes payable ( 357 ) ( 37,610 )

Repayment of term loan ( 4,116 ) ( 4,750 )

Proceeds from term loan

Proceeds from issuance of senior notes 20,037 402,404

Redemption of senior notes — ( 128,156 )

Payment for debt issuance and offering costs

Payment for contingent consideration

Payment of debt issuance and offering costs — ( 7,510 )

Payment of contingent consideration ( 181 ) ( 75 )

Payment of employment taxes on vesting of restricted stock ( 1,294 ) ( 22 )

1 unchanged sentence

Preferred dividends paid ( 2,002 ) ( 1,749 )

Repurchase of common stock

Distribution to noncontrolling interests ( 1,051 ) ( 11,571 )

Contribution from noncontrolling interests 1,770 3,722

Redemption of subsidiary temporary equity and distributions

Proceeds from initial public offering of subsidiaries — 172,500

1 unchanged sentence

Proceeds from issuance of preferred stock 639 —

Net cash provided by financing activities

Increase in cash, cash equivalents and restricted cash

Net cash (used in) provided by financing activities ( 14,441 ) 356,713

(Decrease) increase in cash, cash equivalents and restricted cash ( 64,852 ) 141,981

Effect of foreign currency on cash, cash equivalents and restricted cash ( 496 ) ( 696 )

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash ( 65,348 ) 141,285

Cash, cash equivalents and restricted cash, beginning of period 279,860 104,837

2 unchanged sentences

Interest paid $ 38,272 $ 36,725

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

Taxes paid $ 73 $ 53

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

RILEY FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share data)

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS OPERATIONS

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.

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

(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 - United Online and magicJack, through which the Company provides consumer

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

The Company has a majority ownership interest in BR Brands Holding, LLC (“BR Brands” or “Brands”), which provides licensing of trademarks.

On January 19, 2022, the Company acquired FocalPoint Securities, LLC ("FocalPoint"), an independent investment bank headquartered in Los Angeles, California.

The purchase price consideration totaled $ 124,479 , which consisted of $ 64,248 in cash, $ 20,320 in issuance of common stock of the Company, and $ 39,911 in deferred cash and contingent consideration payable over the next three years .

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

Goodwill of $ 110,612 and other intangible assets of $ 10,680 that were recorded as a result of the acquisition will be deductible for tax purposes.

The acquisition is expected to expand B.

Riley Securities’ mergers and acquisitions (“M&A”) advisory business and enhance its debt capital markets and financial restructuring capabilities.

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 expanded the Company’s investment banking, wealth management and financial planning offerings by adding National’s brokerage, insurance, tax preparation and advisory services.

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, real estate consulting and valuation and appraisal services;

(v) Principal Investments - Communications and Other, through which the Company provides consumer Internet access and related subscription services from United Online, cloud communication services primarily through the magicJack devices, and mobile phone voice, text, and data services and devices through a mobile virtual network operator;

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

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

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

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

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 the Company’s results of operations, financial position and cash flows will depend on future developments,

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

the pandemic.

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

to be highly uncertain and cannot be predicted.

If the financial markets and/or the overall economy continue to be impacted, the Company’s

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

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

( a) Principles of Consolidation and Basis

of Presentation

The condensed consolidated

financial statements include the accounts of B.

There continues to be widespread impact from COVID-19, which the World Health Organization classified as a pandemic in March 2020.

There has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel, and government activities and functions;

however, the full impact of the COVID-19 outbreak continues to evolve with the emergence of new variant strains and breakthrough infections.

Although the U.S.

economy continued to grow during the first quarter of 2022, the continuing impact of the COVID-19 pandemic, higher inflation, the actions by the Federal Reserve to address inflation, and rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods.

These developments and the impact on the financial markets and the overall economy continue to be highly uncertain and cannot be predicted.

If the financial markets and/or the overall economy continue to be impacted, the Company’s results of operations, financial position, and cash flows may be materially adversely affected.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

( a) Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of B.

Riley Financial, Inc.

and its wholly-owned and majority-owned subsidiaries.

The condensed

consolidated financial statements also include the accounts of (a) 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, and (b) National Asset Management, Inc.

(“NAM”), a federally-registered investment adviser providing

asset management advisory services to retail clients for a fee based upon a percentage of assets managed.

NAM has a majority voting interest

in Innovation X Management, LLC (“Innovation X”), which together serve as the investment manager of an investment fund (see

Variable Interest Entities below).

Because NAM has the majority voting interest in Innovation X, the results of operations of Innovation

X are included in the Company’s consolidated financial statements, and the amount attributable to the other investor is recorded as a

non-controlling interest.

The condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to

interim financial reporting guidelines and the rules and regulations of the Securities and Exchange Commission (“SEC”).

information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles

generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

In the opinion of the Company’s management, all adjustments, consisting of only normal and recurring adjustments, necessary for

a fair presentation of the financial position and the results of operations for the periods presented have been included.

These condensed

consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements

and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the

SEC on March 4, 2021.

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

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

Revision of Prior Period

Financial Statements

In connection with the preparation of the Company’s condensed

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

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

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

accordance with SAB No.

The condensed 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

Applicable 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.

The condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to interim financial reporting guidelines and the rules and regulations of the Securities and Exchange Commission (“SEC”).

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

In the opinion of the Company’s management, all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the periods presented have been included.

These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.

Revision of Prior Period Financial Statements

In connection with the preparation of the Company’s consolidated financial statements during prior year, the Company identified an error that was not material related to the consolidation of certain VIEs 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.

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

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 20.

(b) Use of Estimates

The preparation of the condensed

consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities at the date of the condensed 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 and loans receivables,

allowance for doubtful accounts, the fair value of intangible assets and goodwill, the fair value of mandatorily redeemable noncontrolling

interests, fair value of share based arrangements, accounting for income tax valuation allowances, recovery of contract assets, sales

returns and allowances and contingencies.

Estimates are based on historical experience, where applicable, and assumptions that management

believes are reasonable under the circumstances.

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed 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, contingent consideration, 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.

— 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 $ 9,945 and $ 10,530 for

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

and 2020, respectively.

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

$ 13,919 , at September 30, 2020.

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

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

(d) Concentration of

Revenues in the Capital Markets,

Financial Consulting, Wealth Management, Brands and Principal Investments — United Online and magicJack 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.

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 $ 11,766 and $ 18,721 during the three months ended March 31, 2022 and 2021,

respectively.

Interest expense from loan participations sold totaled zero and $ 468 during the three months ended March 31, 2022 and 2021, respectively.

(d) Concentration of Risk

Revenues in the Capital Markets, Financial Consulting, Wealth Management, Brands and Principal Investments — Communications and Other segments are currently primarily generated in the United States.

Revenues in the Auction and Liquidation segment are primarily generated in the United States, 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.

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.

(e) Advertising Expenses

The Company expenses advertising

costs, which consist primarily of costs for printed materials, as incurred.

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

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

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

statements of operations.

The Company expenses advertising costs, which consist primarily of costs for printed materials, as incurred.

Advertising costs totaled $ 1,763 and $ 578 during the three months ended March 31, 2022 and 2021, respectively.

Advertising expense was included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

(f) 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 condensed consolidated statements of operations 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 Accounting Standards Codification (ASC) “Topic 718:

Compensation — Stock Compensation”, the Company

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

For the three months ended September

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

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

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 condensed consolidated statements of operations 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 (“ASC 718”), the Company is required to recognize compensation expense relating to shares offered under the Purchase Plan.

During the three months ended March 31, 2022 and 2021, the Company recognized compensation expense of $ 153 and $ 227 , respectively, related to the Purchase Plan.

(g) Income Taxes

The Company recognizes deferred

tax liabilities and assets for the expected future tax consequences of events that have been included in the condensed 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 for the year in which the differences are expected to

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.

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the condensed 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 for the year in which the differences are expected to reverse.

The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction.

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.

(h) 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.

(i) Restricted

As of September 30, 2021,

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

As of December 31, 2020, restricted cash included

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

(j) Securities Borrowed

and Securities Loaned

Securities borrowed and securities

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

Securities borrowed transactions facilitate the settlement process

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

With respect to securities loaned, the Company receives collateral

in the form of cash.

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

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

The Company monitors the market value

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

The Company accounts for

securities lending transactions in accordance with ASC “Topic 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 condensed consolidated balance sheets.

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

(i) Restricted Cash

As of March 31, 2022 and December 31, 2021, restricted cash included $ 928 and $ 927 of cash collateral for leases, respectively.

Cash, cash equivalents and restricted cash consist of the following:

2022 December 31,

Cash and cash equivalents $ 213,584 $ 278,933

Restricted cash 928 927

Total cash, cash equivalents and restricted cash $ 214,512 $ 279,860

(j) Securities Borrowed and Securities Loaned

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

Securities borrowed transactions facilitate the settlement process and require the Company to deposit cash or other collateral with the lender.

With respect to securities loaned, the Company receives collateral in the form of cash.

The amount of collateral required to be deposited for securities borrowed, or received for securities loaned, is an amount generally in excess of the market value of the applicable securities borrowed or loaned.

The Company monitors the market value of the securities borrowed and loaned on a daily basis, with additional collateral obtained, or excess collateral recalled, when deemed appropriate.

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 condensed consolidated balance sheets.

(k) Property and Equipment

Property and equipment are

stated at cost.

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 $ 986 and $ 967 for the three months ended September 30, 2021 and 2020, respectively,

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

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 $ 1,032 and $ 873 during the three months ended March 31, 2022 and 2021, respectively.

(l) Loans Receivable

Under ASC “Topic 326:

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

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

Under the fair value option, loans receivables are measured

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

are recorded in the condensed consolidated statements of operations.

These loans are no longer subject to evaluation for impairment through

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

The impact of adopting ASC 326 was immaterial to

the consolidated financial statements.

Loans receivable, at fair

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

The loans have various maturities

through March 2027.

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

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

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

During the three months ended

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

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

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

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

The Company may periodically

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

As of September 30,

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

as further described in Note 14.

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

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

As of September 30, 2021, the Company

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

to protect the Company from any credit loss exposure.

Interest income on loans

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

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

statements of operations.

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

income over the lives of the related loans.

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

(m) Securities and

Other Investments Owned and Securities Sold Not Yet Purchased

Securities and other

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

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

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

Changes in the value of

these securities are reflected currently in the results of operations.

As of September 30, 2021

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

consisted of the following securities:

September 30,

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 operations.

These loans are no longer subject to evaluation for impairment through an allowance for loan loss as such losses will be captured through fair value changes.

Loans receivable, at fair value totaled $ 882,391 and $ 873,186 as of March 31, 2022 and December 31, 2021, respectively.

The loans have various maturities through March 2027 .

As of March 31, 2022 and December 31, 2021, the historical cost of loans receivable accounted for under the fair value option was $ 875,794 and $ 877,527 , respectively,

which included principal balances of $ 883,965 and $ 886,831 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $ 8,170 and $ 9,304 , respectively.

During the three months ended March 31, 2022 and 2021, the Company recorded net unrealized gains of $ 10,937 and $ 10,726 , respectively, on the loans receivable at fair value, which was included in trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations.

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

As of March 31, 2022, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc.

(“B&W”) as further described in Note 15.

In accordance with the new credit loss standard, the Company evaluates the need to record an allowance for credit losses for these loan guarantees since they have off-balance sheet credit exposures.

As of March 31, 2022, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure.

Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans and securities lending on the condensed consolidated statements of operations.

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

Unearned income, discounts and premiums are amortized to interest income using a level yield 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 ("Badcock Receivables"), which was 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.

As of March 31, 2022 and December 31, 2021, the principal outstanding for the Badcock Receivables was $ 380,591 and $ 400,000 , respectively, and included in loans receivable, at fair value on the condensed consolidated balance sheets.

(m) Securities and Other Investments Owned and Securities Sold Not Yet Purchased

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

Securities sold, but not yet purchased represents obligations of the Company to deliver the specified security at the contracted price and thereby create a liability to purchase the security in the market at prevailing prices.

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

As of March 31, 2022 and December 31, 2021, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities:

2022 December 31,

Securities and other investments owned:

3 unchanged sentences

Partnership interests and other 74,222 77,383

$ 1,317,101 $ 1,532,095

Securities sold not yet purchased:

2 unchanged sentences

Other fixed income securities 334 1,994

$ 7,498 $ 28,623

(n) 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.

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.

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.

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”) in accordance with ASC “Topic 820:

Fair Value Measurements.”

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.

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

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

owned in the accompanying condensed consolidated balance sheets.

Funds held in trust represents

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.

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”) in accordance with ASC 820 - Fair Value Measurements.

As of March 31, 2022 and December 31, 2021, partnership and investment fund interests valued at NAV of $ 74,222 and $ 77,383 , respectively, are included in securities and other investments owned in the accompanying condensed 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 March 31, 2022 and December 31, 2021, investments in nonpublic entities valued using a measurement alternative of $ 73,006 and $ 59,745 , respectively, are included in securities and other investments owned in the accompanying condensed 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 condensed consolidated balance sheets.

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

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

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

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

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

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

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

The fair value of mandatorily

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.

The following tables present information on the financial assets and

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

Financial Assets and Liabilities

Measured at Fair Value on a

Recurring Basis at September 30, 2021 Using

Fair value at September 30, 2021

Quoted prices in active markets for identical assets

Other observable inputs

Significant unobservable inputs

Riley Principal 150 Merger Corporation (“BRPM 150”) and B.

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

The funds raised are held in trust accounts that are restricted for use and may only be used for purposes of completing an initial business combination or redemption of the class A public common shares of the SPAC’s as set forth in their respective trust agreements.

The funds held in trust are included within Level 1 of the fair value hierarchy and included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.

The Company has warrant liabilities related to warrants of the SPAC’s that are held by investors in BRPM 150 and BRPM 250.

The warrants are accounted for as liabilities in accordance with ASC 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 condensed consolidated balance sheets with changes in fair value that amounted to $ 4,879 during the three months ended March 31, 2022 included within change in fair value of financial instruments and other as part of other income (expense) in the condensed consolidated statements of operations.

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.

The following tables present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.

Financial Assets and Liabilities Measured at Fair Value on a

Recurring Basis as of March 31, 2022 Using

Fair value as of March 31, 2022

Quoted prices in active markets

for identical assets

(Level 1) Other observable inputs

(Level 2) Significant unobservable inputs

Funds held in trust account $ 345,057 $ 345,057 $ — $ —

13 unchanged sentences

Warrant liabilities 8,059 8,059 — —

Contingent earnout 22,464 — — 22,464

Total liabilities measured at fair value $ 42,523 $ 9,177 $ 6,380 $ 26,966

2 unchanged sentences

Fair value at December 31, 2021

Quoted prices in active markets for identical assets

Other observable inputs

Significant unobservable inputs

Quoted prices in active markets

for identical assets

(Level 1) Other observable inputs

(Level 2) Significant unobservable inputs

Funds held in trust account $ 345,024 $ 345,024 $ — $ —

Securities and other investments owned:

11 unchanged sentences

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

As of September 30, 2021 and

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

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

In determining the fair value for these

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

applicable, over-the-counter market trading activity.

The following table summarizes

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

and valuation technique as of September 30, 2021:

As of March 31, 2022 and December 31, 2021, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $ 1,271,055 and $ 1,250,735 , respectively, or 24.2 % and 21.4 %, 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 March 31, 2022:

Fair value at

September 30,

Equity securities

Market approach

Multiple of EBITDA

3.5 x - 15.00 x

Multiple of PV-10

Multiple of Sales

March 31, 2022

Technique Unobservable

Input Range Weighted

Equity securities $ 311,960 Market approach Multiple of EBITDA 3.75 x - 17.50 x

Multiple of PV-10 0.32 x - 0.70 x

Multiple of Sales 1.22 x - 1.25 x

Market price of related security $ 9.91 - $ 64.51

$0.44 - 10.12

Option pricing model

Annualized volatility

Loans receivable at fair value

Discounted cash flow

Market interest rate

72,290 Discounted cash flow Market interest rate 15.8 % 15.8 %

4,414 Option pricing model Annualized volatility 30.0 % - 484.0 %

Loans receivable at fair value 849,558 Discounted cash flow Market interest rate 6.0 % - 40.0 %

32,833 Market approach Multiple of EBITDA 5.00 x 5.00 x

Total level 3 assets measured at fair value $ 1,271,055

Mandatorily redeemable noncontrolling interests issued after November 5, 2003

Market approach

Operating income multiple

The changes in Level 3 fair

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

Level 3 Changes During the Period

Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,502 Market approach Operating income multiple 6.0 x 6.0 x

Contingent earnout 22,464 Discounted cash flow EBITDA volatility 75 % 75 %

The changes in Level 3 fair value hierarchy during the three months ended March 31, 2022 and 2021 were as follows:

Year Level 3 Changes During the Period Level 3

Adjustments Relating to

Undistributed

Nine Months Ended September 30, 2021

Earnings Purchases,

Settlements Transfer in

Three Months Ended March 31, 2022

Equity securities $ 377,549 $ ( 4,543 ) $ — $ 19,912 $ ( 4,254 ) $ 388,664

1 unchanged sentence

Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,506 — 247 ( 251 ) — 4,502

Warrant liabilities

Nine Months Ended September 30, 2020

Contingent earnout — — — — 22,464 — 22,464

Three Months Ended March 31, 2021

Equity securities $ 149,292 $ 21,600 $ — $ 6,473 $ ( 5,395 ) $ 171,970

1 unchanged sentence

Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,700 — ( 186 ) — — 4,514

Under ASC 326, the Company

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

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

The amount reported in the

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

interests that is distributed on a quarterly basis.

The carrying amounts reported in the condensed 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 nine months

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

The value of these warrants

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

after the initial public offering.

As of September 30, 2021

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

and $ 898,606 , respectively.

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

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

The investments in nonpublic

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

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

These investments

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

of the same issuer.

The amount reported in the table above during the three months ended March 31, 2021 included the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis.

The carrying amounts reported in the condensed 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.

As of March 31, 2022 and December 31, 2021, the senior notes payable had a carrying amount of $ 1,627,649 and $ 1,606,560 , respectively, and fair value of $ 1,626,938 and $ 1,661,189 , respectively.

The carrying amount of the term loans approximates fair value because the effective yield of such instruments are consistent with current market rates of interest for instruments of comparable credit risk.

The investments in nonpublic entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations.

These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer.

Further adjustments are not made until another observable transaction occurs.

Therefore, the determination of fair

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

and complex judgments.

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

of impairment.

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

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

The following table sets

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

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

Therefore, the determination of fair values of these investments in nonpublic entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments.

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

If indicators of impairment are present, the Company is required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

The following table presents information on the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of March 31, 2022 and December 31, 2021.

These investments were measured due to an observable price change or impairment during the three months ended March 31, 2022.

Fair Value Measurement Using

prices in active markets for identical assets

observable inputs

unobservable inputs

As of September 30, 2021

Total Quoted prices in active markets

for identical assets

(Level 1) Other observable inputs

(Level 2) Significant unobservable inputs

As of March 31, 2022

Investments in nonpublic entities that do not report NAV $ 16,011 $ — $ 15,511 $ 500

1 unchanged sentence

Investments in nonpublic entities that do not report NAV $ — $ — $ — $ —

During the nine months ended

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

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

(o) 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.

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

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

The forward exchange contracts

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

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

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

This amount is

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

The Company transacts business

in various foreign currencies.

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

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

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

using period-end exchange rates.

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

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

Transaction gains (losses)

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

ended September 30, 2021 and 2020, respectively.

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

condensed consolidated statements of operations.

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

settle in their respective class A shares of common stock.

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

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

BRPM 150 or BRPM 250.

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

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

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

consolidated balance sheet.

(p) Redeemable Noncontrolling

Interests in Equity of Subsidiaries

The Company records redeemable noncontrolling interests in equity of

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

Acquisition Corporations (“SPACs").

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

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

The class A ordinary shareholders of BRPM 150

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

As of September 30, 2021, the carrying

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

Remeasurements

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

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

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

(o) 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.

As of March 31, 2022, there were no forward exchange contracts outstanding.

As of December 31, 2021, 6,000 € forward exchange contracts 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 $ 68 and $ 310 during the three months ended March 31, 2022 and 2021, respectively.

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

The Company transacts business in various foreign currencies.

In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates.

The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets.

Transaction gains were $ 296 and $ 555 during the three months ended March 31, 2022 and 2021, respectively.

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

As disclosed in Note 2(s) 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 condensed consolidated statements of operations.

As of March 31, 2022 and December 31, 2021, the warrant liability totaled $ 8,059 and $ 12,938 , respectively, which was included in accrued expenses and other liabilities in the condensed consolidated balance sheet.

(p) Redeemable Noncontrolling Interests in Equity of Subsidiaries

The Company records redeemable noncontrolling interests in equity of subsidiaries to reflect the economic interests of the class A ordinary shareholders in BRPM 150 and BRPM 250 sponsored SPACs.

These interests are presented as redeemable noncontrolling interests in equity of subsidiaries within the condensed consolidated balance sheet, outside of the permanent equity section.

The class A ordinary shareholders of BRPM 150 and BRPM 250 have redemption rights that are considered to be outside of the Company’s control.

As of March 31, 2022 and 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 BRPM 150 and BRPM 250 in the amount of $ 7,716 and initial valuation of the public warrants of BRPM 150 and BRPM 250 in the amount of $ 10,466 .

(q) Equity Investment

As of September 30, 2021

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

the accompanying condensed consolidated balance sheets.

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

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

As of March 31, 2022 and December 31, 2021, equity investments of $ 45,978 and $ 39,190 , respectively, were included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.

The Company’s share of earnings or losses from equity method investees was included in income from equity investments in the accompanying condensed consolidated statements of operations.

bebe stores, inc.

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

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

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

The equity ownership in bebe is accounted for under the

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

Holdings Corporation

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

and other assets in the condensed consolidated balance sheets.

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

of accounting for periods prior to February 25, 2021.

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

the 55 % of common stock not previously owned by the Company pursuant to an agreement and plan of merger dated January 10, 2021, following

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

The cash consideration for the purchase of the 55 %

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

National’s operating

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

Equity Investments

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

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

was acquired in November 2020.

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

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

(r) Loan Participations

As of September 30, 2021,

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

for as secured borrowings under ASC “Topic 860:

Transfers and Servicing” (“ASC 860”).

Under ASC 860, a partial

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

A participation or other partial loan transfer

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

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

The Participants are entitled to payments made

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

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

to the Company.

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

As of September 30, 2021,

there were no outstanding loan participations.

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

of $ 17,316 .

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

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

(s) Supplemental Non-cash

During the nine months ended

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

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

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

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

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

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

(t) Reclassifications

Certain prior period amounts

have been reclassified to conform with the current period presentation.

Such reclassifications consist of including advances against customer

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

Certain amounts reported in the Capital Markets

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

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

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

(u) Variable Interest

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

consolidated as the Company is not the primary beneficiary.

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

loans receivable, or fee arrangements.

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

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

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

The Company has determined that it is not the primary

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

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

The Company determines whether it is

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

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

by the Company or indirectly through related parties.

As of March 31, 2022 and December 31, 2021, the Company had a 40.1 % ownership interest in bebe stores, inc.

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

Other Equity Investments

The Company had other equity investments over which the Company exercises significant influence but which did 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 was included in prepaid expenses and other assets in the condensed consolidated balance sheets.

(r) Supplemental Non-cash Disclosures

During the three months ended March 31, 2022, non-cash investing activities included $ 20,320 in issuance of the Company's common stock as part of the purchase price consideration from the FocalPoint acquisition and $ 22,661 in seller financing for deferred cash consideration.

During the three months ended March 31, 2021, non-cash investing activities included the repayment of a loan receivable in full in the amount of $ 64,754 with equity securities.

In addition, $ 35,000 of loans receivable were exchanged for $ 35,000 of newly issued debt securities.

(s) Variable Interest Entities

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;

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

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

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, a joint venture with an unaffiliated third party.

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

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

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

that most significantly impact the entity’s financial performance.

The Company’s variable interests in Lingo include loans

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

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

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

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

the Company, as investment advisor to the Funds, believes possess innovative or disruptive technologies and present opportunities for

an initial public offering (“IPO”) or other similar liquidity event within approximately one to five years from the date of

The Funds intend to hold the investments until an IPO or other similar liquidity event and then to make distributions to its

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

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

For placement agent fees, the Company receives

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

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

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

Investments –

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

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

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

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

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

does not consolidate such VIEs.

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

fees in the condensed consolidated statements of operations.

The carrying value of the

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

September 30,

Partnership investments

Equity investment

Due from related party

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 subsidiary, National, has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered VIEs 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 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 three months ended March 31, 2022 and 2021 were $ 12,051 and $ 11,360 , respectively, and are included in services and fees in the condensed consolidated statements of operations.

The carrying value of the Company’s investments in the VIEs that were not consolidated is shown below.

2022 December 31,

Securities and other investments owned, at fair value $ 30,373 $ 27,445

Loans receivable, at fair value 163,780 205,265

Other assets 8,573 4,956

Maximum exposure to loss $ 202,726 $ 237,666

Riley Principal 150

and 250 Merger Corporations

During the nine months ended

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

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

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

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

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

and BRPM 250 of $ 172,500 .

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

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

Riley Principal 150 and 250 Merger Corporations

In 2021, the Company along with BRPM 150 and BRPM 250, both newly formed special purpose acquisition companies incorporated as Delaware corporations, consummated the initial public offerings of 17,250,000 units of BRPM 150 and 17,250,000 units of BRPM 250.

Each Unit of BRPM 150 and BRPM 250 consisted of one share of class A common stock and one-third of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of BRPM 150 or BRPM 250 class A common stock at an exercise price of $ 11.50 per 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 was included in prepaid expenses and other assets in the condensed balance sheet.

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

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

units of BRPM 150 and BRPM 250.

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

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

The Company has determined that the class

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

are determined to be temporary equity.

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

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

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

Since the Company is determined to be

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

(v) Recent Accounting

Not yet adopted

In March 2020, FASB issued

2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”), which provides 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 in ASU 2020-04 apply only to contracts,

hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.

The amendments

in ASU 2020-04 are effective through December 31, 2022.

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

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

This Update addresses

issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial

instruments with characteristics of liabilities and equity.

In addressing the complexity, the Board focused on amending the guidance on

convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity.

For convertible

instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock.

Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared

with current GAAP.

In addition to eliminating certain accounting models, the ASU also provides guidance to enhance information transparency

by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance.

Additionally, the

ASU amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based

accounting conclusions, and to amend the related EPS guidance.

The amendments in this update are effective for public business entities

for fiscal periods beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted,

but no earlier than fiscal years beginning after December 15, 2020.

The Company has not yet adopted this update and is currently evaluating

the effect, if any, this new standard will have on its financial condition and results of operations.

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 of the entities, as well as the power to direct a majority of the activities that significantly impact BRPM 150 and BRPM 250’s economic performance.

Since the Company is determined to be the primary beneficiary, BRPM 150 and BRPM 250 are consolidated into the Company’s financial statements.

(t) Recent Accounting Standards

Recently adopted

In December 2019, the Financial

Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic

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.

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.

The revised guidance will be applied prospectively and is effective for SEC filers for annual

periods or interim periods with fiscal years beginning after December 15, 2020.

Early adoption is permitted for interim or annual periods

for which financial statements have not been issued.

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 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 Update is intended to clarify the Codification and make the Codification easier to understand and easier to apply

by eliminating inconsistencies and providing clarifications.

The amendments in this update are effective for public business entities

for fiscal periods beginning after December 15, 2020, including interim periods within those fiscal years.

Early adoption is not permitted.

In March 2020, FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848) , which provided 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 applied 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 refined the scope of Topic 848 through optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships.

The Company adopted the ASU effective January 1, 2022.

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.

The Update contains amendments that improve the consistency of the Codification by including

all disclosure guidance in the appropriate Disclosure Section (Section 50).

Many of the Amendments arose because the Board provided an

option to give certain information either on the face of the financial statements or in the notes to financial statements and that option

was only included in the Other Presentation Matters Section (Section 45) of the Codification.

The option to disclose information in the

notes to financial statements should have been codified in the Disclosure section as well as the Other Presentation Matters Section (or

other Section of the Codification in which the option to disclose in the notes to financial statements appears).

These amendments are

not expected to change current practice but are intended to improve the Codification by ensuring that all guidance that requires or provides

an option for an entity to provide information in the notes to financial statements is included in the Disclosure Section of the Codification,

thus reducing the likelihood that the disclosure requirement would be missed.

The Board does not anticipate that the amendments will result

in any changes to current GAAP.

The amendments in the Update are effective for annual periods beginning after December 15, 2020, for public

business entities.

Early application of the amendments is permitted for public business entities for any annual or interim period for

which financial statements have not been issued.

The amendments in the Update should be applied retrospectively.

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 August 2021, the FASB

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

This update amends certain SEC paragraphs from the Codification

in response to the issuance of SEC Final Rule Nos.

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

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

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

adoption is permitted.

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

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

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

In October 2021, the FASB issued 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 Company early adopted the ASU on January 1, 2022.

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

NOTE 3 — RESTRUCTURING CHARGE

The Company did not record

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

The Company recorded restructuring charges of $1,557

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

The following tables summarize the changes in accrued restructuring charge during

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

The Company had no restructuring charges during the three months ended March 31, 2022 and 2021.

The following tables summarize the changes in accrued restructuring charge during the three months ended March 31, 2022 and 2021:

Three Months Ended

Nine Months Ended

September 30,

Balance, beginning of period $ 624 $ 727

Restructuring charge — —

Cash paid ( 27 ) ( 28 )

Non-cash items 2 3

Balance, end of period $ 599 $ 702

The following tables summarize the restructuring

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

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

Impairment of intangibles

Total restructuring charge

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

Impairment of intangibles

Total restructuring charge

NOTE 4 — SECURITIES LENDING

The following table presents

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

December 31, 2020:

Gross amounts recognized

Gross amounts offset in the consolidated balance

Net amounts included in the

consolidated balance sheets

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

As of September 30, 2021

The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of March 31, 2022 and December 31, 2021:

Gross amounts recognized Gross amounts offset in the consolidated balance

Net amounts included in the consolidated balance sheets Amounts not offset in the consolidated balance sheets but eligible for offsetting upon counterparty default (2)

As of March 31, 2022

Securities borrowed $ 1,629,773 $ — $ 1,629,773 $ 1,629,773 $ —

3 unchanged sentences

Securities loaned $ 2,088,685 $ — $ 2,088,685 $ 2,088,685 $ —

(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.

_________________________

(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

September 30,

The components of accounts receivable, net, include the following:

2022 December 31,

Accounts receivable $ 39,656 $ 39,045

Investment banking fees, commissions and other receivables 8,169 14,286

Unbilled receivables

Total accounts receivable 47,825 53,331

1 unchanged sentence

Accounts receivable, net $ 44,722 $ 49,673

Unbilled receivables represent

the amount of contractual reimbursable costs and fees for services performed in connection with fee and service based auction and liquidation

Additions and changes to the allowance for doubtful accounts

consist of the following:

Additions and changes to the allowance for doubtful accounts consist of the following:

Three Months Ended

Nine Months Ended

September 30,

Balance, beginning of period $ 3,658 $ 3,599

Additions to reserve 405 402

Write-offs ( 960 ) ( 501 )

Recovery — 26

Balance, end of period $ 3,103 $ 3,526

NOTE 6 — PREPAID EXPENSES AND OTHER

Prepaid expenses and

other assets consist of the following:

September 30,

NOTE 6 — PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following:

2022 December 31,

Funds held in trust account $ 345,057 $ 345,024

1 unchanged sentence

Prepaid expenses 10,881 14,965

Unbilled receivables 14,100 12,315

Other receivables 39,685 40,483

Other assets 14,824 11,525

Prepaid expenses and other assets $ 470,525 $ 463,502

NOTE 7 — GOODWILL AND OTHER INTANGIBLE

Goodwill was $ 237,961 and

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

The changes in the carrying

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

United Online

and magicJack

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 and Other segment, and consulting related engagements in the Financial Consulting segment.

NOTE 7 — GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill was $ 362,466 and $ 250,568 as of March 31, 2022 and December 31, 2021, respectively.

The changes in the carrying amount of goodwill for the three months ended March 31, 2022 were as follows:

Capital Markets Segment Wealth Management Segment Auction and Liquidation Segment Financial Consulting Segment Principal Investments- Communications and Other Segment Total

Balance as of December 31, 2021

$ 51,338 $ 51,195 $ 1,975 $ 23,680 $ 122,380 $ 250,568

Goodwill acquired during the period:

Acquisition of businesses

Balance as of September 30, 2021

Intangible assets consisted of the

As of September 30, 2021

Acquisition of other business 110,612 — — — 1,286 111,898

Balance as of March 31, 2022

$ 161,950 $ 51,195 $ 1,975 $ 23,680 $ 123,666 $ 362,466

Intangible assets consisted of the following:

As of March 31, 2022

As of December 31, 2021

Useful Life Gross Carrying Value Accumulated Amortization Intangibles Net Gross Carrying Value Accumulated Amortization Intangibles Net

Amortizable assets:

Customer relationships

0.1 to 18 Years

Advertising relationships

Internally developed software and other intangibles

0.5 to 5 Years

7 to 10 Years

Customer relationships 0.1 to 13 Years

$ 135,401 $ 65,235 $ 70,166 $ 130,801 $ 59,671 $ 71,130

Domain names 7 years 185 149 36 185 143 42

Advertising relationships 8 years 100 72 28 100 69 31

Internally developed software and other intangibles 0.5 to 5 Years

18,455 9,626 8,829 15,275 8,820 6,455

Trademarks 3 to 10 Years

9,669 2,089 7,580 6,369 1,652 4,717

Total 163,810 77,171 86,639 152,730 70,355 82,375

Non-amortizable assets:

Tradenames 125,276 — 125,276 125,276 — 125,276

Total intangible assets $ 289,086 $ 77,171 $ 211,915 $ 278,006 $ 70,355 $ 207,651

Amortization expense was

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

September 30, 2021 and 2020, respectively.

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

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

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

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

Simplifying the Test for Goodwill

Impairment, the Company made a qualitative assessment of the impact of the COVID-19 outbreak on goodwill and other intangible assets.

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.

In the three months ended March

31, 2020, the Company recognized an impairment charge of $ 4,000 for the indefinite-lived tradenames in the Brands segment.

Company also determined that there was a further triggering event for testing the indefinite-lived tradenames in the Brands segment in

the second quarter of 2020 and made a determination that the indefinite-lived tradenames in the Brands segment were impaired and an additional

impairment charge of $ 8,500 was recorded 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.

Amortization expense was $ 6,816 and $ 5,886 during the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, estimated future amortization expense was $ 19,268 , $ 19,873 , $ 15,757 , $ 11,322 , and $ 10,473 for the years ended December 31, 2022 (remaining nine months), 2023, 2024, 2025 and 2026, respectively.

The estimated future amortization expense after December 31, 2026 was $ 9,946 .

NOTE 8 — 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 50,000 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.

The Company is party to a credit agreement (as amended, the “Credit Agreement”) governing its asset based credit facility with Wells Fargo Bank, National Association (“Wells Fargo Bank”) with a maximum borrowing limit of $ 200,000 and a maturity date of April 20, 2027.

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(c) in the Annual Report on Form 10-K.

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 $ 109 for the three months ended September

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

There was no outstanding balance

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

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

We are in compliance with

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

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

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(d) in the Annual Report on Form 10-K.

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 interest rate for each revolving credit advance under the Credit Agreement is subject to certain terms and conditions, equal to the Secured Overnight Financing Rate (“SOFR”) 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 provides for success fees in the amount of 1.0 % to 10.0 % of the net profits, if any, earned on the liquidation engagements funded under the Credit Agreement as set forth therein.

The credit facility also provides for funding fees in the amount of 0.05 % to 0.20 % of the aggregate principal amount of all credit advances and letters of credit issued in connection with a liquidation sale.

Interest expense totaled $ 108 during the three months ended March 31, 2022 and 2021.

There was no outstanding balance on this credit facility as of March 31, 2022 and December 31, 2021.

As of March 31, 2022, there were no open letters of credit outstanding.

The Company is in compliance with all financial covenants in the asset based credit facility as of March 31, 2022.

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 % at September 30, 2021) payable annually, maturing January 31, 2022 .

At September 30, 2021 and December 31, 2020,

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

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

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

Also included in notes payable

at 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.

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

The note was paid in full in January 2021.

As of March 31, 2022 and December 31, 2021, the outstanding balance for the other notes payable was $ 22,891 and $ 357 , respectively.

Interest expense was $ 232 and $ 7 during the three months ended March 31, 2022 and 2021, respectively.

Notes payable consisted of additional deferred cash consideration owed to the sellers of FocalPoint as of March 31, 2022.

Notes payable to a clearing organization for one of the Company’s broker dealers, which accrued interest at the prime rate plus 2.0 %, matured on January 31, 2022 and was repaid during the three months ended March 31, 2022.

NOTE 9 — TERM LOANS AND REVOLVING CREDIT FACILITY

Credit Agreement

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

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

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

$ 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” and, together with the Term Loan Facility, the “Credit

Facilities”).

The Credit Facilities will mature on June 23, 2025, subject to acceleration or prepayment.

loans under the Credit Facilities will accrue interest at the Eurodollar Rate plus an applicable margin of 4.50 %.

Base rate loans will

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

In addition to paying interest on outstanding borrowings under the

Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit

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

to certain eligibility requirements, the assets of certain subsidiaries of the Company that hold credit assets, private equity assets,

and public equity assets are placed into a borrowing base, which serves to limit the borrowings under the Credit Facilities.

If borrowings

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

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

financings of this kind.

Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit

the Company’s, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur

additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to

make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make

other distributions or redemptions/repurchases in respect of their respective equity interests.

In addition, the Credit Agreement contains

a financial covenant that requires the Company to maintain Operating EBITDA of at least $ 115,000 and the Primary Guarantor to maintain

net asset value of at least $ 900,000 .

The Credit Agreement contains customary events of default, including with respect to a failure to

make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.

Commencing on September 30,

2022, the Term Loan Facility will amortize in equal quarterly installments of 1.25 % of the aggregate principal amount of the term loan

as of the closing date with the remaining balance due at final maturity.

Quarterly installments from September 30, 2022 to March 31, 2025

are in the amount of $ 2,500 per quarter.

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

costs of $ 5,431 ).

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

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

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

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

Interest on the revolving

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

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

respectively.

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

The Company is in compliance

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

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”).

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, 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, 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, the “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 contains certain representations and warranties (subject to certain agreed qualifications) that are customary for financings of this kind.

The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit the Company’s, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests.

In addition, the Credit Agreement contains a financial covenant that requires the Company to maintain operating earnings before interest, taxes, depreciation, and amortization (EBITDA) of at least $ 135,000 and the Primary Guarantor to maintain net asset value of at least $ 1,100,000 .

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

Commencing on September 30, 2022, the Term Loan Facility 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 March 31, 2022 and December 31, 2021, the outstanding balances on the Term Loan Facility and Incremental Facility were $ 293,159 (net of unamortized debt issuance costs of $ 6,841 ) and $ 292,650 (net of unamortized debt issuance costs of $ 7,350 ), respectively.

Interest on the term loan during the three months ended March 31, 2022 was $ 4,102 (including amortization of deferred debt issuance costs of $ 509 ).

The interest rate on the term loan as of March 31, 2022 and December 31, 2021 was 5.46 % and 4.72 %, respectively.

The Company had an outstanding balance of $ 80,000 under the Revolving Credit Facility as of March 31, 2022 and December 31, 2021.

Interest on the revolving facility during the three months ended March 31, 2022 was $ 1,100 (including amortization of deferred financing costs of $ 143 ).

The interest rate on the revolving facility as of March 31, 2022 and December 31, 2021 was 5.01 % and 4.67 %, respectively.

The Company is in compliance with all financial covenants in the Credit Agreement as of March 31, 2022.

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”;

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

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

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 the 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 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 was

set at 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.

under the BRPAC Credit Agreement bear interest at a rate equal to (a) the LIBOR rate for Eurodollar 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.

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

Principal outstanding under

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

Quarterly installments on December

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

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

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

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

As of September 30, 2021

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

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

Interest expense on the term loan during the three months

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

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

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

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

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

The Company is in compliance

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

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 the 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 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 was set at 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”) which, among other things, replaced LIBOR with the SOFR reference rate, and pursuant to which the Borrowers were permitted to make a one-time Permitted Distribution (as defined in the Third Amendment) in the amount of $ 15,000 on the date of the Third Amendment.

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

As of March 31, 2022 and December 31, 2021, the interest rate on the BRPAC Credit Agreement was 3.26 % and 3.17 %, respectively.

Principal outstanding under the Amended BRPAC Credit Agreement is due in quarterly installments.

Quarterly installments from June 30, 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 in the amount of $ 2,663 per quarter, and the remaining principal balance is due at final maturity on December 31, 2025.

As of March 31, 2022 and December 31, 2021, the outstanding balance on the term loan was $ 49,691 (net of unamortized debt issuance costs of $ 510 ) and $ 53,735 (net of unamortized debt issuance costs of $ 582 ), respectively.

Interest expense on the term loan during the three months ended March 31, 2022 and 2021, was $ 502 (including amortization of deferred debt issuance costs of $ 72 ) and $ 714 (including amortization of deferred debt issuance costs of $ 80 ), respectively.

The Company is in compliance with all financial covenants in the BRPAC Credit Agreement as of March 31, 2022.

NOTE 10 — SENIOR NOTES PAYABLE

Senior notes payable, net,

are comprised of the following:

September 30,

7.500 % Senior notes due May 31, 2027

7.250 % Senior notes due December 31, 2027

7.375 % Senior notes due May 31, 2023

6.875 % Senior notes due September 30, 2023

Senior notes payable, net, are comprised of the following:

2022 December 31,

6.750 % Senior notes due May 31, 2024

$ 111,287 $ 111,170

6.500 % Senior notes due September 30, 2026

179,783 178,787

6.375 % Senior notes due February 28, 2025

144,521 144,521

6.000 % Senior notes due January 31, 2028

266,058 259,347

5.500 % Senior notes due March 31, 2026

216,277 214,243

5.250 % Senior notes due August 31, 2028

405,483 397,302

5.000 % Senior notes due December 31, 2026

324,714 322,679

1,648,123 1,628,049

Unamortized debt issuance costs ( 20,474 ) ( 21,489 )

During the nine months ended

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

the Market Issuance Sales Agreements with B.

$ 1,627,649 $ 1,606,560

During the three months ended March 31, 2022 and 2021, the Company issued $ 20,073 and $ 12,858 , respectively, 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.

A series of prospectus supplements were filed by the Company with the SEC in respect of the Company’s offerings of

these senior notes.

On January 25, 2021, the

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

February 12, 2020.

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

The 6.0% 2028 Notes are unsecured and due and payable

in full on January 31, 2028.

In connection with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $ 225,723 (after

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

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

On March 29, 2021, the Company

issued $ 159,493 of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to a prospectus supplement dated January

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

The 5.5% 2026 Notes are unsecured and due and payable in

full on March 31, 2026.

In connection with the issuance of the 5.5% 2026 Notes, the Company received net proceeds of $ 156,260 (after

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

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

On March 31, 2021, the Company

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

to the second supplemental indenture dated May 31, 2017.

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

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

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

The 7.25 % Notes had an aggregate principal amount

of $ 122,793 .

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

excluding, the redemption date.

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

In connection with the

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

and ceased trading on the redemption date.

On August 4, 2021, the Company

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

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

The 5.25% 2028 Notes are unsecured and due and payable

in full on August 31, 2028.

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

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

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

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

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

The redemption price was equal to 101.5 % of

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

The total redemption payment

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

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

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

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

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

indenture dated September 11, 2018.

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

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

The total redemption payment included approximately $ 1.8 million in accrued

interest and $ 1.2 million in premium.

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

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

As of September 30, 2021

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

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

Interest on senior

notes is payable on a quarterly basis.

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

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

Sales Agreement Prospectus

to Issue Up to $ 250,000 of Senior Notes

The most recent sales agreement

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

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

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

This program provides for the sale by the Company of up

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

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

under the August 2021 Sales Agreement.

which governs the program of at-the-market sales of the Company’s senior notes.

A series of prospectus supplements were filed by the Company with the SEC in respect of the Company’s offerings of these senior notes.

As of March 31, 2022 and December 31, 2021, the total senior notes outstanding was $ 1,627,649 (net of unamortized debt issue costs of $ 20,474 ) and $ 1,606,560 (net of unamortized debt issue costs of $ 21,489 ) with a weighted average interest rate of 5.69 %.

Interest on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $ 24,409 and $ 18,706 for the three months ended March 31, 2022 and 2021, 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 “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 March 31, 2022 and December 31, 2021, the Company had $ 91,838 and $ 111,911 , respectively, remaining availability under the Sales Agreement Prospectus.

NOTE 11 — ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

2022 December 31,

Accrued payroll and related expenses $ 73,472 $ 107,904

Dividends payable 31,633 28,486

Income taxes payable 77,625 39,776

Other tax liabilities 18,761 20,106

Contingent consideration 22,464 —

Accrued expenses 32,968 96,250

Other liabilities 41,982 51,228

Accrued expenses and other liabilities $ 298,905 $ 343,750

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.

NOTE 12 — REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue from contracts with

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

Revenue from contracts with customers by reportable segment for the three months ended March 31, 2022 and 2021 was as follows:

Segment Wealth

Segment Auction and

Segment Financial

Segment Principal

Investments -

United Online

and magicJack

Revenues for the three months ended September 30, 2021

Corporate finance, consulting and investment banking fees

Wealth and asset management fees

Commissions, fees and reimbursed expenses

Subscription services

Service contract revenues

Advertising, licensing and other (1)

Total revenues from contracts with customers

Interest income - Loans and securities lending

Trading gains on investments

Fair value adjustment on loans

Total revenues

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

Revenues for the three months ended September 30, 2020

Communications and Other Segment Brands

Segment Total

Revenues for the three months ended March 31, 2022

Corporate finance, consulting and investment banking fees $ 41,673 $ — $ — $ 16,970 $ — $ — $ 58,643

4 unchanged sentences

Advertising, licensing and other (1)

— — — — 4,851 4,557 9,408

Total revenues from contracts with customers 56,118 77,071 3,355 25,936 32,664 4,557 199,701

Interest income - Loans and securities lending 61,426 — — — — — 61,426

Trading gains on investments

Trading (losses) gains on investments ( 79,850 ) 522 — — — ( 79,328 )

Fair value adjustment on loans 10,938 — — — — — 10,938

Other 12,966 ( 114 ) — — — — 12,852

Total revenues $ 61,598 $ 77,479 $ 3,355 $ 25,936 $ 32,664 $ 4,557 $ 205,589

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

(1) Includes sale of goods of $ 1,878 in Principal Investments - Communications and Other.

Segment Wealth

Segment Auction and

Segment Financial

Segment Principal

Investments -

United Online

and magicJack

Revenues for the nine months ended September 30, 2021

Communications and Other Segment Brands

Segment Total

Revenues for the three months ended March 31, 2021

Corporate finance, consulting and investment banking fees $ 147,069 $ — $ — $ 13,427 $ — $ — $ 160,496

4 unchanged sentences

Advertising, licensing and other (1)

— — 6,092 — 3,285 4,388 13,765

Total revenues from contracts with customers 165,496 63,979 13,450 21,409 20,529 4,388 289,251

2 unchanged sentences

Fair value adjustment on loans 10,726 — — — — — 10,726

Total revenues

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

Revenues for the nine months ended September 30, 2020

Corporate finance, consulting and investment banking fees

Wealth and asset management fees

Commissions, fees and reimbursed expenses

Subscription services

Service contract revenues

Advertising, licensing and other (1)

Total revenues from contracts with customers

Interest income - Loans and securities lending

Trading losses on investments

Fair value adjustment on loans

Other 5,483 1,563 — — — 7,046

Total revenues $ 472,402 $ 67,898 $ 13,450 $ 21,409 $ 20,529 $ 4,471 $ 600,159

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

(1) Includes sale of goods of $ 6,092 in Auction and Liquidation and $ 736 in Principal Investments - Communications and Other.

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

The Company had no

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

The Company also

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

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

The Company’s deferred revenue primarily relates to retainer and

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

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

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

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

The Company expects to recognize the deferred

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

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

The 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 $ 44,722 and $ 49,673 as of March 31, 2022 and December 31, 2021, respectively.

The Company had no significant impairments related to these receivables during the three months ended March 31, 2022 and 2021.

The Company also has $ 14,100 and $ 12,315 of unbilled receivables included in prepaid expenses and other assets as of March 31, 2022 and December 31, 2021, respectively, and advances against customer contracts included in prepaid expenses and other assets of $ 200 as of March 31, 2022 and December 31, 2021.

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 March 31, 2022 and

December 31, 2021 was $ 75,509 and $ 69,507 , respectively.

The Company expects to recognize the deferred revenue of $ 75,509 as of March 31, 2022 as service and fee revenues when the performance obligation is met during the years December 31, 2022 (remaining nine months), 2023, 2024, 2025 and 2026 in the amount of $ 43,386 , $ 12,249 , $ 8,594 , $ 5,344 , and $ 2,724 , respectively.

The Company expects to recognize the deferred revenue of $ 3,212 after December 31, 2026.

During the three months ended

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

of the respective year.

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

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

During the three months ended March 31, 2022 and 2021, the Company recognized revenue of $ 14,939 and $ 17,279 that was recorded as deferred revenue at the beginning of the respective year.

Contract Costs

Contract costs include:

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.

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

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

For the three months ended September 30, 2021 and

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

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

contract, respectively.

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

and nine months ended September 30, 2021 and 2020.

Performance Obligations and Revenue Recognized from Past Performance

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

duration of one year or less.

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

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

Corporate finance and investment banking

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

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

12 — INCOME TAXES

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

respectively.

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

of $ 72,058 .

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

through December 31, 2038.

(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 $ 868 and $ 1,605 as of March 31, 2022 and December 31, 2021, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets.

For the three months ended March 31, 2022 and 2021, the Company recognized expenses of $ 915 and $ 57 related to capitalized costs to fulfill a contract, respectively.

There were no significant impairment charges recognized in relation to these capitalized costs during the three months ended March 31, 2022 and 2021.

Remaining Performance Obligations and Revenue Recognized from Past Performance

The Company does not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less.

The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material as of March 31, 2022.

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 March 31, 2022.

NOTE 13 — INCOME TAXES

The Company’s effective income tax rate was a provision of 28.7 % and 27.5 % for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, 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 the tax years commencing in December 31, 2025.

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

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

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

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

and other circumstances.

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

Code Section 382.

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

depending on the Company’s actual taxable income.

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

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

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

The Company does not

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

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

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

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

The audits are in varying stages of completion.

The Company 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 March 31, 2022, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance.

The Company does not believe that it is more likely than not that the Company will be able to utilize the benefits related to capital loss carryforwards and has provided a valuation allowance in the amount of $ 65,900 against these deferred tax assets.

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

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

audits are in varying stages of completion.

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

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

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

Such adjustments are reflected in the provision for income

taxes, as appropriate.

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

calendar years ended December 31, 2017 to 2020.

13 — 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 (p)).

According to ASC “Topic

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

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

changes in carrying value which in substance approximates fair value.

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

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

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

and diluted earnings per share were calculated as follows:

Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments and closing of statutes of limitations.

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

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 2017 to 2021.

NOTE 14 — EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net income (loss) 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(p)).

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.

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 1,350,062 and 727,994 for the three months ended March 31, 2022 and 2021, respectively, because to do so would have been anti-dilutive.

Basic and diluted earnings per share were calculated as follows:

Three Months Ended

Nine Months Ended

September 30,

Net income attributable to B.

Net (loss) income attributable to B.

Riley Financial, Inc.

$ ( 10,062 ) $ 254,656

Preferred stock dividends ( 2,002 ) ( 1,749 )

Net income applicable to common shareholders

Net (loss) income applicable to common shareholders $ ( 12,064 ) $ 252,907

Weighted average common shares outstanding:

Basic 27,855,033 26,972,275

Effect of dilutive potential common shares:

Restricted stock units and warrants — 1,738,093

Basic income per common share

Diluted income per common share

14 — COMMITMENTS AND CONTINGENCIES

Legal Matters

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

In particular, the Company and

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

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

Some of these claims seek substantial compensatory,

punitive, or indeterminate damages.

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

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

fines, penalties, injunctions, and other relief.

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

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

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

Notwithstanding this uncertainty, the Company

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

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

(“MLV”) and National Securities

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

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

The Consolidated Complaint, styled Gaynor v.

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

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

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

June 28, 2013;

September 26, 2013;

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

offering price of approximately $ 151,000 .

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

In December 2019, the Court remanded the case to state court.

In July 2020, the Company agreed to settle this matter, subject

to court approval which is expected in 2021.

An accrual for the settlement is included in the accompanying condensed consolidated

financial statements.

is a respondent in several Financial Industry Regulatory Authority arbitration proceedings filed by investors alleging claims in connection

with equity investments in GPB Capital Holdings, LLC (“GPB”) involving matters prior to the Company’s acquisition of

National on February 25, 2021.

Some of these arbitration claims, among other things, also allege that NSC failed to supervise certain

registered representatives.

NSC is evaluating each arbitration claim on its own merits.

GPB and its affiliates have been the subject

of various civil claims and fraud investigations over the past few years and, in February 2021, the U.S.

Department of Justice indicted

certain individuals affiliated with GPB for material misrepresentations and omissions under the federal securities laws with respect

to funds managed by GPB.

At the present time, the Company continues to vigorously defend these actions and is not able to determine

the ultimate resolution of these matters.

Adverse judgments in these matters in the aggregate could materially and adversely affect the

Company and its financial condition.

Babcock & Wilcox Commitments and Guarantees

June 30, 2021, the Company agreed to guaranty (the “B.

Riley Guaranty”) up to $ 110,000 of obligations that Babcock &

Wilcox Enterprises, Inc.

(“B&W”) may owe to providers of cash collateral pledged in connection with B&W’s debt

Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the

acceleration of B&W’s obligations under a reimbursement agreement with respect to such cash collateral.

B&W will pay the

Company $ 935 per annum in connection with the B.

Diluted 27,855,033 28,710,368

Basic (loss) income per common share $ ( 0.43 ) $ 9.38

Diluted (loss) income per common share $ ( 0.43 ) $ 8.81

NOTE 15 — 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 Guarantees

On June 30, 2021, the Company agreed to guaranty (the “B.

Riley Guaranty”) up to $ 110,000 of obligations that B&W may owe to providers of cash collateral pledged in connection with B&W’s debt financing.

Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of B&W’s obligations under a reimbursement agreement with respect to such cash collateral.

B&W will pay the Company $ 935 per annum in connection with the B.

Riley Guaranty.

B&W has agreed to reimburse the Company to the extent the B.

Guaranty is called upon.

August 10, 2020, the Company entered into a project specific indemnity rider (the “Indemnity Rider”) in favor of Berkley

Insurance Company and/or Berkley Regional Insurance Company (collectively, “Berkley”) to a general agreement of indemnity

made by B&W in favor of Berkley (the “Indemnity Agreement”).

Pursuant to the Indemnity Rider, the Company agreed to indemnify

Berkley in connection with a default by B&W under the Indemnity Agreement relating to a $ 29,970 payment and performance bond

issued by Berkley in connection with a construction project undertaken by B&W.

In consideration for providing the Indemnity Rider,

B&W paid the Company fees in the amount of $ 600 on August 26, 2020.

Other Commitments

June 19, 2020, the Company participated in a loan facility agreement to provide a total loan commitment up to 33,000 EUROS

to a retailer in Europe.

The Company made an initial funding of 6,600 EUROS in July 2020.

No additional borrowings have been

made since the initial funding, leaving unused future commitments available of up to 26,400 EUROS as of September 30, 2021 and December

the normal course of business, the Company enters into commitments to its clients in connection with capital raising transactions, such

as firm commitment underwritings and equity lines of credit.

These commitments require the Company to purchase securities at a specified

Securities underwriting exposes the Company to market and credit risk, primarily in the event that, for any reason, securities

purchased by the Company cannot be distributed at the anticipated price.

15 — SHARE-BASED PAYMENTS

Employee Stock Incentive Plans

compensation expense for restricted stock units under the Company’s Amended and Restated 2009 Stock Incentive Plan (the “Plan”)

was $ 9,243 and $ 4,680 for the three months ended September 30, 2021 and 2020, respectively, and $ 23,035 and $ 13,945 for the

nine months ended September 30, 2021 and 2020, respectively.

During the nine months ended September 30, 2021, in connection with

employee stock incentive plans, the Company granted 423,660 restricted stock units with a grant date fair value of $ 29,439

and 1,100,000 performance based restricted stock units with a grant date fair value of $ 40,876 .

The restricted stock units generally

vest over a period of one to three years based on continued service.

Performance based restricted stock units generally vest based on

both the employee’s continued service and the achievement of a set threshold of the Company’s common stock price, as defined

in the grant, during the three-year period following the grant.

In determining the fair value of restricted stock units on the

grant date, the fair value is adjusted for (a) estimated forfeitures, (b) expected dividends based on historical patterns and the Company’s

anticipated dividend payments over the expected holding period and (c) the risk-free interest rate based on U.S.

Treasuries for a maturity

matching the expected holding period.

Employee Stock Purchase Plan

connection with the Company’s Purchase Plan, share based compensation was $ 132 and $ 96 for the three months ended September 30,

2021 and 2020, respectively, and $ 474 and $ 320 for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30,

2021, there were 471,973 shares reserved for issuance under the Purchase Plan.

October 30, 2018, the Company’s Board of Directors has authorized annual share repurchase programs of up to $ 50,000 of

its outstanding common shares.

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 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.

On December 30, 2021, the Company agreed to guaranty up to $ 25,000 of obligations that certain affiliates of Nextpoint Financial, Inc.

(collectively, “Nextpoint”) may owe to lenders to Nextpoint (the “Nextpoint Guaranty”).

The Company entered into the Nextpoint Guaranty in connection with the entry by Nextpoint into a credit agreement with the lenders.

The Nextpoint Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of Nextpoint’s obligations to the lenders.

In consideration for the Nextpoint Guaranty, Nextpoint paid the Company a fee of $ 800 on January 6, 2022 and will pay the Company 10 % of any amount paid by the Company to the lenders to the extent the Nextpoint Guaranty is called upon, in addition to indemnifying the Company from all losses incurred by the Company in connection with the Nextpoint Guaranty.

(d) Other Commitments

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.

NOTE 16 — SHARE-BASED PAYMENTS

(a) Employee Stock Incentive Plans

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 Company’s 2021 Plan was $ 16,860 and $ 5,299 for the three months ended March 31, 2022 and 2021, respectively.

During the three months ended March 31, 2022, in connection with employee stock incentive plans, the Company granted 161,559 restricted stock units with a grant date fair value of $ 11,863 and 65,000 performance based restricted stock units with a grant date fair value of $ 2,329 .

During the three months ended March 31, 2021, in connection with employee stock incentive plans, the Company granted 48,714 restricted stock units with a grant date fair value of $ 2,234 and 1,100,000 performance based restricted stock units with a grant date fair value of $ 40,876 .

The restricted stock units generally vest over a period of one to five years based on continued service.

Performance based restricted stock units generally vest based on both the employee’s continued service and the achievement of a set threshold of the Company’s common stock price, as defined in the grant, during the 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.

(b) Employee Stock Purchase Plan

In connection with the Company’s Employee Stock Purchase Plan ("Purchase Plan"), share based compensation was $ 153 and $ 227 for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022 and December 31, 2021, there were 450,717 shares reserved for issuance under the Purchase Plan.

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, 2020, the Company repurchased 2,165,383 shares of common stock for $ 48,248 .

nine months ended September 30, 2021, the Company repurchased 44,650 shares of its common stock for $ 2,656 .

The shares repurchased

under the program were retired.

On October 25, 2021, the share repurchase program was reauthorized by the Board of Directors for share

repurchases up to $ 50,000 of its outstanding common shares and expires in October 2022.

On January 15, 2021, the Company issued 1,413,045 shares

of common stock inclusive of 184,310 shares issued pursuant to the full exercise of the Underwriter’s option to purchase

additional shares of common stock at a price of $ 46 per share for net proceeds of approximately $ 64,713 after underwriting fees

Preferred Stock

the nine months ended September 30, 2021, the Company issued 207,599 depository shares of the Series A Preferred Stock.

There were 2,788

and 2,581 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.

Total liquidation preference

for the Series A Preferred Stock as of September 30, 2021 and December 31, 2020, was $ 69,709 and $ 64,519 , respectively.

the Series A preferred paid during the nine months ended September 30, 2021, were $ 0.4296875 per depository share.

the nine months ended September 30, 2021, the Company issued 307,148 depository shares of the Series B Preferred Stock.

There were 1,697

and 1,390 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.

Total liquidation preference

for the Series B Preferred Stock as of September 30, 2021 and December 31, 2020, was $ 42,419 and $ 34,741 , respectively.

the Series B preferred paid during the nine months ended September 30, 2021, were $ 0.4609375 per depository share.

16 — NET CAPITAL REQUIREMENTS

During the three months ended March 31, 2022 and 2021, the Company did not repurchase shares of its common stock.

The shares repurchased under the program are 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.

(d) Preferred Stock

During the three months ended March 31, 2022 and 2021, the Company issued 20 and no depository shares of the Series A Preferred Stock, respectively.

There were 2,834 and 2,814 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.

Total liquidation preference for the Series A Preferred Stock as of March 31, 2022 and December 31, 2021, was $ 70,854 and $ 70,362 , respectively.

Dividends on the Series A preferred paid during the three months ended March 31, 2022 and 2021, were $ 0.4296875 per depository share.

During the three months ended March 31, 2022 and 2021, the Company issued 4 and no depository shares of the Series B Preferred Stock.

There were 1,701 and 1,697 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.

Total liquidation preference for the Series B Preferred Stock as of March 31, 2022 and December 31, 2021, was $ 42,527 and $ 42,428 , respectively.

Dividends on the Series B preferred paid during the three months ended March 31, 2022 and 2021, were $ 0.4609375 per depository share.

NOTE 17 — NET CAPITAL REQUIREMENTS

Riley Securities (“BRS”), B.

Riley Wealth Management (“BRWM”), and National Securities Corporation (“NSC”),

the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory

Authority, Inc.

The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule

15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both

as defined, shall not exceed 15 to 1.

Riley Wealth Management (“BRWM”), National Securities Corporation (“NSC”) and FocalPoint Securities, LLC ("FocalPoint"), the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory Authority, Inc.

The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1.

As such, they are subject to the minimum net capital requirements promulgated by the SEC.

September 30, 2021, BRS had net capital of $ 367,406 , which was $ 360,308 in excess of required minimum net capital of $ 7,098 ;

net capital of $ 10,648 , which was $ 9,957 in excess of required minimum net capital of $ 691 ;

NSC had net capital of $ 9,680 which was $ 8,680

in excess of required minimum net capital of $ 1,000 .

17 — RELATED PARTY TRANSACTIONS

of September 30, 2021, amounts due from related parties of $ 1,513 included $ 1 from GACP I, L.P.

(“GACP I”) and $ 1,040 from

GACP II, L.P.

(“GACP II”) for management fees and other operating expenses, and $ 472 due from CA Global Partners (“CA

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 $ 986 included $ 9 from GACP I and $ 544 from GACP II for management fees and other operating expenses, and $ 433 due

from CA Global for operating expenses related to wholesale and industrial liquidation engagements

managed by CA Global on behalf of GA Global Partners.

For the three and nine months

ended September 30, 2021, the Company recorded interest expense of $ 46 and $ 525 , respectively, related to loan participations sold to

BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of its subsidiaries.

The Company also

recorded commission income of $ 131 and $ 553 from introducing trades on behalf of BRCPOF during the three and nine months ended September

30, 2021, respectively.

Our executive officers and members of our board of directors have a 50.8 % financial interest, which

includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 35.5 % in the BRCPOF as of September 30, 2021.

Company had no outstanding loan participations to BRCPOF as of September 30, 2021 and had $ 14,816 outstanding as of December 31,

June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P.

(“Whitehawk”),

a limited partnership controlled by Mr.

Ahn, who is the brother of Phil Ahn, the Company’s Chief Financial Officer and Chief

Operating Officer.

Whitehawk has agreed to provide investment advisory services for GACP I and GACP II.

During the three and nine

months ended September 30, 2021, management fees paid for investment advisory services by Whitehawk was $ 142 and $ 1,588 , respectively.

Company periodically participates in loans and financing arrangements for which the Company has an equity ownership and representation

on the board of directors (or similar governing body).

The Company may also provide consulting services or investment banking services

to raise capital for these companies.

As of March 31, 2022, BRS had net capital of $ 249,536 , which was $ 245,970 in excess of required minimum net capital of $ 3,566 ;

BRWM had net capital of $ 8,765 , which was $ 7,846 in excess of required minimum net capital of $ 919 ;

NSC had net capital of $ 2,874 which was $ 1,874 in excess of required minimum net capital of $ 1,000 ;

FocalPoint had net capital of $ 1,444 which was $ 672 in excess of the required minimum net capital of $ 772 .

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 .

NOTE 18 — 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 March 31, 2022, amounts due from related parties of $ 1,480 included $ 1,088 from the Funds for management fees and other operating expenses, and $ 442 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, 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.

No interest expense was recorded related to loan participations sold to BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of its subsidiaries, during the three months ended March 31, 2022.

During the three months ended March 31, 2021, the Company recorded interest expense of $ 346 related to loan participations sold to BRCPOF.

No commission income was recorded from introducing trades on behalf of BRCPOF during three months ended March 31, 2022.

The Company recorded commission income of $ 330 from introducing trades on behalf of BRCPOF during the three months ended March 31, 2021.

Our executive officers and members of our board of directors have a 49.1 % financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 29.1 % in the BRCPOF as of March 31, 2022.

In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P.

(“Whitehawk”), a limited partnership controlled by Mr.

Ahn, who is the brother of Phil Ahn, the Company’s Chief Financial Officer and Chief Operating Officer.

Whitehawk has agreed to provide investment advisory services for two of the funds, GACP I, L.P.

and GACP II, L.P.

During the three months ended March 31, 2022 and 2021, management fees paid for investment advisory services by Whitehawk was $ 1,079 and $ 1,210 , 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:

Company had a last-out term loan receivable due from B&W that is included in loans receivable, at fair value with a fair value of

$ 176,191 as of December 31, 2020.

On June 1, 2021 the Company agreed to settle the outstanding balance and accrued interest on the

last-out term loan receivable in exchange for $ 848 and 2,916,880 shares of B&W’s 7.75 % Series A Cumulative Perpetual Preferred

the three and nine months ended September 30, 2021, the Company earned $ 401 and $ 12,749 , respectively, of underwriting and financial

advisory and other fees from B&W in connection with B&W’s capital raising activities.

of the Company’s wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the

Company to serve as the Chief Executive Officer of B&W until November 30, 2020 (the “Executive Consulting Agreement”),

unless terminated by either party with thirty days written notice.

Babcock and Wilcox

During the three months ended March 31, 2022 and 2021, the Company earned $ 53 and $ 10,638 , 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.

Company is also a party to an Indemnity Rider with B&W, and the B.

Riley Guaranty, each as disclosed above in Note 14 – Commitments

and Contingencies.

Company has loans receivable due from the Maven, Inc.

that are included in loans receivable, at fair value of $ 62,036

and $ 56,552 as of September 30, 2021 and December 31, 2020, respectively.

Interest on these loans is payable at 10 % per annum

with maturity dates through December 2022.

Company has a loan receivable due from Lingo Management LLC (“Lingo”) included in loans receivable, at fair value with a

fair value of $ 55,990 and $ 55,066 as of September 30, 2021 and December 31, 2020, respectively.

The term loan bears interest at 16.0 %

per annum with a maturity date of December 1, 2022.

The term loan has a conversion feature under which $ 17,500 will convert to additional

equity ownership upon receipt of certain regulatory approval.

If those regulatory approvals are received, the conversion would increase

the Company’s ownership interest in Lingo from 40 % to 80 %.

On August 1, 2021, the credit agreement was amended to allow

the borrower to elect that a portion of interest payable be payable in kind.

On March 10, 2021, the Company

also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo) in the amount of $ 1,100 .

The note bears

interest at 6 % per annum with a maturity date of March 31, 2022.

Company had a loan receivable due from bebe stores, Inc.

included in loans receivable, at fair value with a fair value of $ 8,000 as of

December 31, 2020.

The term loan bore interest at 16.0 % per annum and had a maturity date of November 10, 2021.

The term loan was

paid in full in August 2021.

Solutions, Inc.

August 25, 2021 the Company extended a $ 17,852 promissory note to Charah Solutions, Inc., in which one of the

Company’s senior executives serves on the board of directors.

The promissory note bears interest at 8.0 % per annum with a maturity

date of September 25, 2022 and a 2.5 % commitment fee payable at maturity.

of September 30, 2021, the Company has loans receivable due from other related parties in the amount of $ 4,186 .

Company often provides consulting or investment banking services to raise capital for companies in which the Company has significant

influence through equity ownership, representation on the board of directors (or similar governing body), or both.

During the three and

nine months ended September 30, 2021, the Company earned $ 20,868 and $ 25,059 , respectively, of fees related to these services.

18 — BUSINESS SEGMENTS

Company’s business is classified into the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment,

Financial Consulting segment, Principal Investments — United Online and magicJack segment, and Brands segment.

These reportable

segments are all distinct businesses, each with a different marketing strategy and management structure.

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

management changes for its wealth management business.

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

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

Under the new structure, there is a new segment for Wealth

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

following is a summary of certain financial data for each of the Company’s reportable segments:

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.

In March 2022, a $ 1,000 performance fee was approved in accordance with the Executive Consulting Agreement.

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 15 – Commitments and Contingencies.

The Arena Group Holdings, Inc.

(fka the Maven, Inc.)

The Company has loans receivable due from the Arena Group Holdings, Inc.

(fka the Maven, Inc.) ("Arena") included in loans receivable, at fair value with a fair value of $ 67,988 and $ 69,835 as of March 31, 2022 and December 31, 2021, respectively.

Interest on these loans is payable at 10 % per annum with maturity dates through December 2023.

During the three months ended March 31, 2022, the Company earned $ 2,021 underwriting and financial advisory and other fees from Arena in connection with Arena's capital raising activities.

The Company has a loan receivable due from Lingo included in loans receivable, at fair value with a fair value of $ 71,842 and $ 58,565 as of March 31, 2022 and December 31, 2021, respectively.

The term loan bears interest at 16.0 % per annum with a maturity date of December 1, 2022.

The term loan had 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.

March 10, 2021, the Company also extended a promissory note to Lingo Communications, LLC in the amount of $ 1,100 .

The note bears interest at 6 % per annum with a maturity date of June 30, 2022.

California Natural Resources Group, LLC

On November 1, 2021, the Company extended a $ 34,393 bridge promissory note bearing interest at up to 10.0 % per annum to California Natural Resources Group, LLC (“CalNRG”).

On January 3, 2022, CalNRG repaid the promissory 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.

On March 9, 2022, the Company extended $ 10,000 to Faze Clan, Inc.

(“Faze”) pursuant to a bridge credit agreement (the “Bridge Agreement”).

The terms of the Bridge Agreement allow Faze to borrow an additional $ 10,000 with all principal and accrued interest due upon closing of Faze’s merger with B.

Riley Principal 150 Merger Corp.

In the event the merger agreement is terminated, without completion of the merger, Faze will issue convertible secured promissory notes in an aggregate principal amount equal to the outstanding principal balance and the unpaid accrued interest of the loans on such date.

As of March 31, 2022, the note is included in loans receivable, at fair value in the amount of $ 9,540 .

Notes issued pursuant to the Bridge Agreement bear interest at 7.0 % per annum.

As of March 31, 2022 and December 31, 2021, the Company had loans receivable due from other related parties in the amount of $ 4,417 and $ 4,201 , respectively.

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 three months ended March 31, 2022, the Company earned $ 1,880 of fees related to these services.

NOTE 19 — 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 and Other segment, and Brands segment.

These reportable segments are all distinct businesses, each with a different marketing strategy and management structure.

The following is a summary of certain financial data for each of the Company’s reportable segments:

Three Months Ended

Nine Months Ended

September 30,

Capital Markets segment:

Revenues - Services and fees $ 69,084 $ 170,979

Trading income (loss) and fair value adjustments on loans

Trading (loss) income and fair value adjustments on loans ( 68,912 ) 264,503

Interest income - Loans and securities lending 61,426 36,920

1 unchanged sentence

Selling, general and administrative expenses ( 34,117 ) ( 86,140 )

Restructuring charge

Interest expense - Securities lending and loan participations sold ( 11,766 ) ( 19,189 )

7 unchanged sentences

Depreciation and amortization ( 1,833 ) ( 2,399 )

Segment income

Segment (loss) income ( 10,096 ) 4,027

Auction and Liquidation segment:

5 unchanged sentences

Selling, general and administrative expenses ( 1,820 ) ( 1,489 )

Restructuring charge

Depreciation and amortization

Segment income

Segment (loss) income ( 800 ) 907

Financial Consulting segment:

1 unchanged sentence

Selling, general and administrative expenses ( 20,943 ) ( 17,989 )

Restructuring charge

Depreciation and amortization ( 81 ) ( 98 )

Segment income 4,912 3,322

Principal Investments - United Online and magicJack segment:

Principal Investments - Communications and Other segment:

Revenues - Services and fees 30,786 19,793

8 unchanged sentences

Revenues - Services and fees 4,557 4,388

Trading income and fair value adjustments on loans — 83

Total revenues 4,557 4,471

Selling, general and administrative expenses ( 756 ) ( 676 )

Depreciation and amortization ( 583 ) ( 714 )

Impairment of tradenames

Segment income (loss)

Segment income 3,218 3,081

Consolidated operating income from reportable segments 19,900 385,176

1 unchanged sentence

Interest income 67 49

Gain on extinguishment of loans and other

Income (loss) on equity investments

Change in fair value of financial instruments and other 5,981 —

Income on equity investments 6,775 875

Interest expense ( 30,436 ) ( 19,786 )

Income before income taxes

Provision for income taxes

Net income (loss) income attributable to noncontrolling interests

Net income attributable to B.

(Loss) income before income taxes ( 12,891 ) 354,116

Benefit from (provision for) income taxes 3,695 ( 97,518 )

Net (loss) income ( 9,196 ) 256,598

Net income attributable to noncontrolling interests 866 1,942

Net (loss) income attributable to B.

Riley Financial, Inc.

( 10,062 ) 254,656

Preferred stock dividends 2,002 1,749

Net income available to common shareholders

following table presents revenues by geographical area:

Net (loss) income available to common shareholders $ ( 12,064 ) $ 252,907

The following table presents revenues by geographical area:

Three Months Ended

Nine Months Ended

September 30,

Revenues - Services and fees:

North America $ 208,722 $ 288,984

Europe 1,953 485

Total Revenues - Services and fees 210,675 289,469

3 unchanged sentences

North America 1,878 6,828

Total Revenues - Sale of goods

Revenues - Interest income - Loans and securities lending:

2 unchanged sentences

North America 203,636 599,674

Europe 1,953 485

Total Revenues $ 205,589 $ 600,159

of September 30, 2021 and December 31, 2020 long-lived assets, which consist of property and equipment and other assets, of $ 13,720 and

$ 11,685 , respectively, were located in North America.

assets are not reported to, or used by, the Company’s Chief Operating Decision Maker to allocate resources to, or assess performance

of, the segments and therefore, total segment assets have not been disclosed.

As of March 31, 2022 and December 31, 2021, long-lived assets, which consist of property and equipment and other assets, of $ 12,980 and $ 12,870 , 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.

NOTE 20 — REVISION OF PRIOR PERIOD FINANCIALS

As disclosed in Note 2(a),

during the three months ended September 30, 2021, the Company identified misstatements related to the consolidation of certain VIE’s,

which primarily resulted in a gross up of the balance sheet to reflect funds held in trust within prepaid expenses and other assets and

the recording of temporary equity.

Although the Company concluded that these misstatements were not material, either individually or in

aggregate, to its current or previously issued consolidated financial statements, the Company has elected to revise its previously issued

consolidated financial statements to correct for these misstatements.

The revision to the accompanying

unaudited condensed consolidated statements of equity and consolidated statements of cash flows are as follows:

Three Months Ended September 30, 2020

As Previously

Statements of Equity

Retained Earnings (Deficit), July 1, 2020

Total Equity, July 1, 2020

Retained Earnings (Deficit), September 30, 2020

Total Equity, September 30, 2020

Nine Months Ended September 30, 2020

As Previously

Statements of Equity

Remeasurement of B.

Riley Principal Merger II

Corporation subsidiary temporary equity

Retained Earnings (Deficit), September 30, 2020

Total Equity, September 30, 2020

Nine Months Ended September 30, 2020

As disclosed in Note 2(a) in the prior year, the Company identified misstatements related to the consolidation of certain VIE’s, which primarily resulted in a gross up of the balance sheet to reflect funds held in trust within prepaid expenses and other assets and the recording of temporary equity.

Although the Company concluded that these misstatements were not material, either individually or in aggregate, to its current or previously issued consolidated financial statements, the Company has elected to revise its previously issued consolidated financial statements to correct for these misstatements.

The revision to the accompanying unaudited condensed consolidated statements of cash flows are as follows:

Three Months Ended March 31, 2021

As Previously

Reported Adjustments As Revised

Statement of Cash Flows

Cash flows from investing activities:

Purchase of equity investments

Funds received from trust account of subsidiary

Investment of subsidiaries initial public offering proceeds into trust account $ — $ ( 172,500 ) $ ( 172,500 )

$ ( 176,750 )

Net cash used in investing activities

$ ( 126,065 )

Net cash provided by (used in) investing activities $ 662 $ ( 172,500 ) $ ( 171,838 )

Cash flows from financing activities:

Payment for debt issuance and offering costs

Redemption of subsidiary temporary equity and distributions

$ ( 143,750 )

Proceeds from initial public offering of subsidiaries $ — $ 172,500 $ 172,500

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements