What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-29 compared with 2021-11-09 · 328 added, 1128 removed, 82 unchanged (95% of the section changed)

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

report contains forward-looking statements.

This report contains forward-looking statements.

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

In some cases,

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

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

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

the negative of such terms or other comparable terminology.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “seek,” “likely,” “potential” or “continue,” the negative of such terms or other comparable terminology.

These statements are only predictions.

Actual events or results may differ

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

of activity, performance, or achievements.

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

of the forward-looking statements.

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

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

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

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

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

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

caption “Risk Factors.”

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

to risks related to:

Actual events or results may differ materially.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

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

We are under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report to conform such statements to actual results or to changes in our expectations.

The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report.

Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made in Item 1A of Part II of this Quarterly Report under the caption “Risk Factors.”

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

volatility in our revenues and results of operations;

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

changing conditions in the financial markets;

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

exposure to credit risk;

our exposure to credit risk;

the short term nature of our engagements;

the accuracy of our estimates and valuations of inventory or assets

in “guarantee” based engagements;

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

competition in the asset management business;

potential losses related to our auction or

liquidation engagements;

potential losses related to our auction or liquidation engagements;

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

potential losses related

to purchase transactions in our auction and liquidations business;

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

the potential loss of financial institution clients;

potential losses

from or illiquidity of our proprietary investments;

changing economic and market conditions;

potential liability and harm to our reputation

if we were to provide an inaccurate appraisal or valuation;

potential losses from or illiquidity of our proprietary investments;

changing economic and market conditions, including increasing inflation and actions by the Federal Reserve to address inflation;

the continuing effects of the COVID-19 pandemic, or other pandemics or severe public health crises, and other related impacts including supply chain disruptions, labor shortages and increased labor costs;

potential liability and harm to our reputation if we were to provide an inaccurate appraisal or valuation;

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

1 unchanged sentence

loss of key personnel;

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

offering as necessary;

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

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

our ability to meet future capital

requirements;

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

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

frame expected by management or at all;

our ability to meet future capital requirements;

our ability to realize the benefits of our completed acquisitions, including our ability to achieve anticipated opportunities and cost savings, and accretion to reported earnings estimated to result from completed and proposed acquisitions in the time frame expected by management or at all;

the diversion of management time on acquisition-related issues;

the failure of our brand investment

portfolio licensees to pay us royalties;

the failure of our brand investment portfolio licensees to pay us royalties;

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

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

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

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

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

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

Riley Financial,

Riley Financial, Inc.

and all of its subsidiaries.

Riley Financial, Inc.

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

subsidiaries including:

Riley Securities, Inc.

Riley Securities”) is a leading, full service investment

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

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

Riley Securities, (fka B.

Riley FBR) was formed in November 2017 through the merger

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

Riley Wealth Management, Inc.

Riley Wealth Management”) provides comprehensive

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

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

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

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

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

insurance, tax preparation and advisory services.

On February 25, 2021, the Company

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

owned by the Company.

The merger expands the Company’s

investment banking, wealth management and financial planning offerings.

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

investment advisor, which includes:

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

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

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

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

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

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

accounting, valuation and appraisal, and operations management services.

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

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

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

estate life cycle.

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

family offices and individuals on real estate projects worldwide.

Riley” or the “Company”) is a diversified financial services platform and opportunistically invests in companies or assets with attractive risk-adjusted return profiles to benefit its shareholders.

Through its affiliated subsidiaries, B.

Riley provides a full suite of investment banking, corporate finance research, sales, and trading, as well as advisory, valuation, and wealth management, services.

The Company’s major business lines include:

Riley Securities, a leading, full service investment bank that provides corporate finance, lending, research, securities lending and sales and trading services to corporate, institutional, and high net worth individual clients.

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

Riley Securities was established from the merger of B.

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

Riley Wealth Management, which provides comprehensive wealth management and brokerage services to individuals and families, corporations and non-profit organizations, including qualified retirement plans, trusts, foundations, and endowments.

The firm was formerly known as Wunderlich Securities, Inc., which the Company acquired in July 2017.

• National Holdings Corporation (“National”), which provides wealth management, brokerage, insurance brokerage, tax preparation and advisory services, was acquired in February 2021.

Riley Capital Management, which is a Securities and Exchange Commission (“SEC”) registered investment advisor, that includes B.

Riley Asset Management, an advisor to and/or manager of certain private funds.

Riley Advisory Services, which provides expert witness, bankruptcy, financial advisory, forensic accounting, valuation and appraisal, and operations management services to companies, financial institutions, and the legal community.

Riley Advisory Services is primarily comprised of the bankruptcy and restructuring, forensic accounting, litigation support, and appraisal and valuation practices.

Riley Retail Solutions, which is a leading provider of asset disposition, liquidation, and auction solutions to a wide range of retail and industrial clients.

Riley Real Estate, which advises companies, financial institutions, investors, family offices and individuals on real estate projects worldwide.

A core focus of B.

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

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

Riley Principal Investments identifies attractive investment opportunities and aims to deliver

financial and operational improvement to its portfolio companies.

Our team concentrates on

opportunities presented by distressed companies or divisions that exhibit challenging market

Representative transactions include recapitalization, direct equity investment,

debt investment, active minority investment and buyouts.

Riley Principal Investments seeks

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

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

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

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

(“magicJack”)

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

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

interest therein.

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

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

in the United States.

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

is a global cloud/UC and managed service provider.

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

provides licensing of certain brand trademarks.

BR Brands owns the assets and intellectual

property related to licenses of six brands:

Catherine Malandrino, English Laundry, Joan

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

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

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

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

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

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

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

now reported as part of the Financial Consulting segment.

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

presentation for all periods presented.

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

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

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

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

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

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

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

Markets Segment .

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

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

Our corporate

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

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

In addition, we trade equity securities as a

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

Our Capital Markets segment also includes our

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

Management Segment .

Riley Real Estate, LLC is the restructuring of lease obligations in both distressed and non-distressed situations, both inside and outside of the bankruptcy process, on behalf of corporate tenants.

Riley Principal Investments, which identifies attractive investment opportunities and seeks to control or influence the operations of our portfolio company investments to deliver financial and operational improvements that will maximize the Company’s free cash flow, and therefore, shareholder returns.

The team concentrates on opportunities presented by distressed companies or divisions that exhibit challenging market dynamics.

Representative transactions include recapitalization, direct equity investment, debt investment, active minority investment and buyouts.

• Communications consist of United Online, Inc.

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

(“magicJack”), which was acquired in November 2018, a 40% equity interest in Lingo Management, LLC (“Lingo”), which was acquired in November 2020, and a mobile virtual network operator business (“Marconi Wireless”), which was acquired in October 2021.

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

The following briefly describes each such business:

◦ UOL is a communications company that offers consumer subscription services and products, consisting of Internet access services and devices under the NetZero and Juno brands.

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

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

◦ Marconi Wireless is a mobile virtual network operator business that provides mobile phone voice, text, and data services and devices.

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

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

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

We are headquartered in Los Angeles with offices in major cities throughout the United States including New York, Chicago, Boston, Atlanta, Dallas, Memphis, Metro Washington D.C., West Palm Beach, and Boca Raton.

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

(i) Capital Markets, (ii) Wealth Management, (iii) Auction and Liquidation, (iv) Financial Consulting, (v) Principal Investments – Communications and Other and (vi) Brands.

Capital Markets Segment .

Our Capital Markets segment provides a full array of investment banking, corporate finance, financial advisory, research, securities lending and sales and trading services to corporate, institutional, and individual clients.

Our corporate finance and investment banking services include merger and acquisitions as well as restructuring advisory services to public and private companies, initial and secondary public offerings, and institutional private placements.

In addition, we trade equity securities as a principal for our account, including investments in funds managed by our subsidiaries.

Our Capital Markets segment also includes our asset management businesses that manage various private and public funds for institutional and individual investors.

Wealth Management Segment .

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

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

plans, lending & liquidity resources, and settlement solutions.

Our wealth management services for individual client services provide

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

legacy planning, and wealth transfer.

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

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

segment’s research.

and Liquidation Segment.

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

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

challenges, and distressed circumstances.

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

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

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

liquidations and wholesale and industrial assets dispositions.

Our wholesale and industrial assets dispositions division operates through

limited liability companies that are controlled by us.

Consulting Segment.

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

and private equity firms.

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

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

Our Financial Consulting segment operates through

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

Investments - United Online and magicJack Segment.

Our Principal Investments - United Online and magicJack segment consists

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

Currently, this segment includes UOL,

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

subscription services.

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

of trademarks and is held by BR Brands.

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

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

The total redemption payment included approximately

$2.1 million in accrued interest.

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

were delisted from NASDAQ .

On August 4, 2021, we issued

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

Interest on the 5.25% 2028 Notes is payable quarterly

The 5.25% 2028 Notes are unsecured and due and payable in full on August 31, 2028.

In connection with the issuance

of the 5.25% 2028 Notes, the Company received net proceeds of $308.7 million (after underwriting commissions, fees, and other issuance

costs of $7.6 million).

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

September 4, 2021, we redeemed, in full, $137.5 million aggregate principal amount of our 7.375% Senior Notes due 2023 (“7.375%

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

The redemption price was equal to 101.5% of

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

The total redemption payment

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

In connection with the full redemption, the 7.375%

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

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

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

dated September 11, 2018.

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

up to, but excluding, the redemption date.

The total redemption payment included approximately $1.8 million in accrued interest

and $1.2 million in premium.

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

were delisted from NASDAQ.

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

(the “COVID-19 outbreak”).

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

rapid increase in exposure globally.

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

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

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

toward vaccination.

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

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

in slowing or halting the pandemic.

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

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

If the financial markets and/or the overall economy continue

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

of Operations

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

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

Consolidated Statements of Operations

in thousands)

Three Months Ended

September 30,

We offer comprehensive wealth management services for corporate businesses that include investment strategies, executive services, retirement plans, lending & liquidity resources, and settlement solutions.

Our wealth management services for individual client services provide investment management, education planning, retirement planning, risk management, trust coordination, lending & liquidity solutions, legacy planning, and wealth transfer.

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

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

Riley Securities’ proprietary equity research.

Auction and Liquidation Segment.

Our Auction and Liquidation segment utilizes our significant industry experience, a scalable network of independent contractors and industry-specific advisors to tailor our services to the specific needs of a multitude of clients, logistical challenges, and distressed circumstances.

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

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

Our wholesale and industrial assets dispositions division operates through limited liability companies that are controlled by us.

Financial Consulting Segment.

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

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

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

Principal Investments - Communications and Other Segment.

Our Principal Investments - Communications and Other segment consists of businesses which have been acquired primarily for attractive investment return characteristics.

Currently, this segment includes, among other investments, UOL, through which we provide consumer Internet access, magicJack, through which we provide VoIP communication and related product and subscription services, and Marconi Wireless, through which we provide mobile phone services and devices.

Brands Segment.

Our Brands segment consists of our brand investment portfolio that is focused on generating revenue through the licensing of trademarks and is held by BR Brands.

Recent Developments

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

The purchase price consideration totaled $124.5 million, which consisted of $64.2 million in cash, $20.3 million in issuance of our common stock, and $39.9 million in deferred cash and contingent consideration payable over the next three years.

We used the acquisition method of accounting for this acquisition.

Goodwill of $110.6 million and other intangible assets of $10.7 million that was 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.

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

Results of Operations

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

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Condensed Consolidated Statements of Operations

(Dollars in thousands)

Three Months Ended March 31, Change

2022 2021 Amount %

Services and fees $ 210,675 $ 289,469 $ (78,794) (27.2) %

Trading income and fair value adjustments on loans

Trading (losses) income and fair value adjustments on loans (68,390) 266,942 (335,332) (125.6) %

Interest income - Loans and securities lending 61,426 36,920 24,506 66.4 %

5 unchanged sentences

Selling, general and administrative expenses 175,199 191,344 (16,145) (8.4) %

Restructuring charge

Interest expense - Securities lending and loan participations sold 11,766 19,189 (7,423) (38.7) %

3 unchanged sentences

Interest income 67 49 18 36.7 %

Gain on extinguishment of loans and other

Change in fair value of financial instruments and other 5,981 — 5,981 100.0 %

Income from equity investments 6,775 875 5,900 674.3 %

Interest expense (30,436) (19,786) (10,650) 53.8 %

Income before income taxes

Provision for income taxes

(Loss) income before income taxes (12,891) 354,116 (367,007) (103.6) %

Benefit (provision) for income taxes 3,695 (97,518) 101,213 (103.8) %

Net (loss) income (9,196) 256,598 (265,794) (103.6) %

Net income attributable to noncontrolling interests 866 1,942 (1,076) (55.4) %

Net income attributable to B.

Net (loss) income attributable to B.

Riley Financial, Inc.

(10,062) 254,656 (264,718) (104.0) %

Preferred stock dividends 2,002 1,749 253 14.5 %

Net income available to common shareholders

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

Three Months Ended

September 30,

Net (loss) income available to common shareholders $ (12,064) $ 252,907 $ (264,971) (104.8) %

n/m - Not applicable or not meaningful.

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

Three Months Ended March 31, Change

2022 2021 Amount %

Revenues - Services and fees:

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Financial Consulting segment 25,936 21,409 4,527 21.1 %

Principal Investments - United Online and magicJack segment

Principal Investments - Communications and Other segment 30,786 19,793 10,993 55.5 %

Brands segment 4,557 4,388 169 3.9 %

Subtotal 210,675 289,469 (78,794) (27.2) %

Revenues - Sale of goods:

Auction and Liquidation segment — 6,092 (6,092) (100.0) %

Principal Investments - United Online and magicJack segment

Trading income and fair value adjustments on loans

Principal Investments - Communications and Other segment 1,878 736 1,142 155.2 %

Subtotal 1,878 6,828 (4,950) (72.5) %

Trading (losses) income and fair value adjustments on loans

Capital Markets segment (68,912) 264,503 (333,415) (126.1) %

Wealth Management segment 522 2,356 (1,834) (77.8) %

Brands segment — 83 (83) (100.0) %

Subtotal (68,390) 266,942 (335,332) (125.6) %

Interest income - Loans and securities lending:

1 unchanged sentence

Total revenues $ 205,589 $ 600,159 $ (394,570) (65.7) %

_______________________________________________

n/m - Not applicable or not meaningful.

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

during the three months ended September 30, 2020.

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

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

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

on loans of $13.6 million.

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

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

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

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

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

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

The increase in revenues was primarily due

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

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

offset by a decrease of $8.8 million in dividends.

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

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

The increase in revenues was primarily due

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

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

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

The decrease in revenues was primarily

due to fewer large retail fee liquidation engagements.

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

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

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

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

operations management group during fiscal year 2021.

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

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

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

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

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

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

The primary source of revenue included in this segment

is the licensing of trademarks.

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

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

This decrease was primarily due to a decrease of $14.5

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

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

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

value of $1.2 million.

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

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

Interest income from securities lending was $13.0 million

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

Interest income from loans was $13.9 million

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

– Sale of Goods

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

during the three months ended September 30, 2020.

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

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

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

Cost of goods sold for the three months ended September

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

Cost of Services

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

during the three months ended September 30, 2020.

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

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

The decrease in direct costs

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

resale using the existing stores of the client.

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

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

The decrease in direct costs

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

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

General and Administrative Expenses

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

Three Months Ended

September 30, 2021

September 30, 2020

Capital Markets segment

Wealth Management segment

Auction and Liquidation segment

Financial Consulting segment

Principal Investments - United Online and magicJack segment

Brands segment

Corporate and Other segment

Total selling, general & administrative expenses

applicable or not meaningful.

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

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

The increase was primarily due to increases

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

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

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

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

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

The increase was primarily due to

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

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

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

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

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

The increase was primarily due to increases

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

and Liquidation

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

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

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

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

The increase was primarily due to

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

Investments — United Online and magicJack

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

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

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

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

30, 2021 and 2020.

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

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

The increase was primarily

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

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

expenses, and $0.2 million in foreign currency fluctuations.

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

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

The total redemption payments included

approximately $3.1 million in accrued interest.

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

senior notes.

Other Income (Expense).

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

Gain on extinguishment

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

fair value of warrant liabilities.

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

million during the three months ended September 30, 2020.

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

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

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

Other income in

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

Before Income Taxes .

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

million during the three months ended September 30, 2020.

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

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

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

for Income Taxes.

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

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

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

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

Income Attributable to Noncontrolling Interests .

Net income attributable to noncontrolling interests represents the proportionate

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

The net income attributable to noncontrolling

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

September 30, 2020.

Income Attributable to the Company .

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

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

The increase in net income attributable to the Company

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

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

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

Stock Dividends .

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

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

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

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

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

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

July, and October.

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

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

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

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

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

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

or $1.84375 per Depositary Share).

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

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

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

Income Available to Common Shareholders .

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

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

The increase in net income available to common

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

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

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

of $0.6 million.

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

Consolidated Statements of Operations

in thousands)

Nine Months Ended

September 30,

Services and fees

Trading income (losses) and fair value adjustments on loans

Interest income - Loans and securities lending

Sale of goods

Total revenues

Total revenues decreased approximately $394.6 million to $205.6 million during the three months ended March 31, 2022 from $600.2 million during the three months ended March 31, 2021.

The decrease in revenues during the three months ended March 31, 2022 was primarily due to a decrease in revenue from trading (losses) income and fair value adjustments on loans of $335.3 million, services and fees of $78.8 million and sale of goods of $5.0 million, offset by an increase in revenue interest income from loans and securities lending of $24.5 million.

The decrease in revenue from services and fees in the three months ended March 31, 2022 consisted of decreases in revenue of $101.9 million in the Capital Markets segment and $4.0 million in the Auction and Liquidation segment, partially offset by increases in revenues of $11.4 million in the Wealth Management segment, $11.0 million in the Principal Investments — Communications and Other segment, $4.5 million in the Financial Consulting segment, $4.0 million in the Auction and Liquidation segment and $0.2 million in the Brands segment.

Revenues from services and fees in the Capital Markets segment decreased $101.9 million to $69.1 million during the three months ended March 31, 2022 from $171.0 million during the three months ended March 31, 2021.

The decrease in revenues was primarily due to decreases in revenue of $105.4 million from corporate finance, consulting, and investment banking fees and $3.5 million of commission fees, partially offset by an increase of $6.9 million in dividends.

Revenues from services and fees in the Wealth Management segment increased $11.4 million to $77.0 million during the three months ended March 31, 2022 from $65.5 million during the three months ended March 31, 2021.

The increase in revenues was primarily due to an increase in revenue of $13.7 million from wealth and asset management fees, partially offset by a decrease of $1.7 million in other income.

Revenues from services and fees in the Auction and Liquidation segment decreased $4.0 million to $3.4 million during the three months ended March 31, 2022 from $7.4 million during the three months ended March 31, 2021.

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

Revenues from services and fees in the Financial Consulting segment increased $4.5 million to $25.9 million during the three months ended March 31, 2022 from $21.4 million during three months ended March 31, 2021.

The increase in revenues was primarily due to increases of $3.7 million within our Advisory Services divisions, $0.7 million for real estate engagement fees, and $0.1 million for B.

Riley Operations Management engagements.

Revenues from services and fees in the Principal Investments - Communications and Other segment increased $11.0 million to $30.8 million during the three months ended March 31, 2022 from $19.8 million during the three months ended March 31, 2021.

The increase in revenues was primarily due to an increase of $12.4 million in subscription services from the acquisition of Marconi Wireless in the fourth quarter of 2021, partially offset by decreases in subscription revenue of $1.8 million for UOL and magicJack.

We expect the subscription revenue to continue to decline year over year.

Revenues from services and fees in the Brands segment increased $0.2 million to $4.6 million during the three months ended March 31, 2022 from $4.4 million during the three months ended March 31, 2021.

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

Trading (losses) income and fair value adjustments on loans decreased $335.3 million to a loss of $68.4 million during the three months ended March 31, 2022 compared to income of $266.9 million during the three months ended March 31, 2021.

This decrease was primarily due to decreases of $333.4 million in the Capital Markets segment and $1.8 million in the Wealth Management segment.

The loss of $68.4 million during the three months ended March 31, 2022 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts of $79.3 million, partially offset by an unrealized gain on our loans receivable, at fair value of $10.9 million.

Interest income – loans and securities lending increased $24.5 million to $61.4 million during the three months ended March 31, 2022 from $36.9 million during the three months ended March 31, 2021.

Interest income from securities lending was $15.0 million and $22.9 million during the three months ended March 31, 2022 and 2021, respectively.

Interest income from loans was $46.4 million and $14.0 million during the three months ended March 31, 2022 and 2021, respectively.

Revenues – Sale of Goods

Revenues from the sale of goods decreased $5.0 million to $1.9 million during the three months ended March 31, 2022 from $6.8 million during three months ended March 31, 2021.

Revenues from sale of goods were attributable to a decrease of $6.1 million from sales of retail goods related to retail liquidation engagements in Europe that ended, partially offset by an increase of $1.1 million from sales of retail goods due to the acquisition of Marconi Wireless in the fourth quarter of 2021.

Cost of goods sold for three months ended March 31, 2022 was $2.3 million, resulting in a negative gross margin of 19.9%.

Operating Expenses

Direct Cost of Services

Cost of goods sold

Direct cost of services decreased $0.3 million to $11.7 million during the three months ended March 31, 2022 from $11.3 million during the three months ended March 31, 2021.

The activity is primarily driven by the Auction and Liquidation segment and Principal Investments — Communications and Other segment.

Selling, General and Administrative Expenses

Rectructuring charge

Impairment of tradenames

Interest expense - Securities lending and loan participations sold

Total operating expenses

Operating income

Other income (expense):

Interest income

Gain on extinguishment of loans and other

Income (loss) on equity investments

Interest expense

Income before income taxes

Provision for income taxes

Net income (loss) attributable to noncontrolling interests

Net income attributable to B.

Riley Financial, Inc.

Preferred stock dividends

Net income available to common shareholders

applicable or not meaningful.

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

Nine Months Ended

September 30,

Revenues - Services and fees:

Capital Markets segment

Wealth Management segment

Auction and Liquidation segment

Financial Consulting segment

Principal Investments - United Online and magicJack segment

Brands segment

Revenues - Sale of goods

Auction and Liquidation segment

Principal Investments - United Online and magicJack segment

Trading income (losses) and fair value adjustments on loans

Capital Markets segment

Wealth Management segment

Interest income - Loans and securities lending:

Capital Markets segment

Total revenues

applicable or not meaningful.

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

during the nine months ended September 30, 2020.

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

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

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

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

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

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

in the Brands segment;

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

in the Principal Investments — United Online and magicJack segment.

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

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

The increase in revenues was primarily due

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

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

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

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

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

The increase in revenues was primarily due

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

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

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

The decrease in revenues was primarily

due to fewer large retail fee liquidation engagements.

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

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

The increase in revenues was primarily

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

million in other income.

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

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

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

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

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

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

The primary source of revenue included in this segment

is the licensing of trademarks.

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

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

This was primarily due to increases

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

The gain of $317.8 million for the

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

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

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

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

Interest income from securities lending was $49.8 million

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

Interest income from loans was $39.5 million

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

– Sale of Goods

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

during the nine months ended September 30, 2020.

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

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

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

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

with VoIP services .

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

Cost of Services

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

during the nine months ended September 30, 2020.

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

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

The decrease in direct costs in the Auction

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

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

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

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

General and Administrative Expenses

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

Nine Months Ended

September 30, 2021

September 30, 2020

Selling, general and administrative expenses during the three months ended March 31, 2022 and 2021 were comprised of the following:

Three Months Ended March 31, 2022 Three Months Ended

March 31, 2021 Change

Amount % Amount % Amount %

Capital Markets segment $ 36,010 20.5 % $ 86,905 45.3 % $ (50,895) (58.6) %

2 unchanged sentences

Financial Consulting segment 21,024 12.0 % 18,087 9.5 % 2,937 16.2 %

Principal Investments - United Online and magicJack segment

Principal Investments -Communications and Other segment 12,253 7.0 % 7,404 3.9 % 4,849 65.5 %

Brands segment 1,339 0.8 % 1,390 0.7 % (51) (3.7) %

1 unchanged sentence

Total selling, general & administrative expenses $ 175,199 100.0 % $ 191,344 100.0 % $ (16,145) (8.4) %

applicable or not meaningful.

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

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

The increase of approximately $340.1 million

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

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

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

in the Principal Investments — United Online and magicJack segment.

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

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

The increase was primarily due to

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

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

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

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

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

The increase was primarily due to

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

decrease of $0.9 million in legal expenses.

and Liquidation

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

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

The increase was primarily due to

an increase of $3.6 million in business development expenses;

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

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

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

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

The increase was primarily due to

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

Investments — United Online and magicJack

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

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

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

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

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

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

The increase was primarily

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

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

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

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

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

The total redemption payments included

approximately $4.7 million in accrued interest.

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

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

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

Impairment of tradenames .

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

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

the Brands segment were impaired.

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

the indefinite-lived tradenames.

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

____________________________________

n/m - Not applicable or not meaningful.

Total selling, general and administrative expenses decreased approximately $16.1 million to $175.2 million during the three months ended March 31, 2022 from $191.3 million during the three months ended March 31, 2021.

The decrease was primarily due to a decrease of $50.9 million in the Capital Markets segment, partially offset by increases of $23.7 million in the Wealth Management segment, $4.8 million in the Principal Investments — Communications and Other segment, $3.0 million in the Corporate and Other segment, $2.9 million in the Financial Consulting segment, and $0.3 million in the Auction and Liquidation segment.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment decreased by $50.9 million to $36.0 million during the three months ended March 31, 2022 from $86.9 million during the three months ended March 31, 2021.

The decrease was primarily due to decreases of $28.6 million in consulting expenses, $19.2 million in payroll and related expenses, and $9.2 million from the reorganization of National, partially offset by an increases of $4.5 million from the acquisition of FocalPoint in the first quarter of 2022, $1.1 million in depreciation and amortization, and $0.4 million in other expenses.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment increased by $23.7 million to $87.6 million during the three months ended March 31, 2022 from $63.9 million during the three months ended March 31, 2021.

The increase was primarily due to increases of $23.3 million from a full quarter's activity of National, which was acquired in February 2021, and $0.5 million in legal expenses.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment increased $0.3 million to $1.8 million during the three months ended March 31, 2022 from $1.5 million during the three months ended March 31, 2021.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment increased by $2.9 million to $21.0 million during the three months ended March 31, 2022 from $18.1 million during the three months ended March 31, 2021.

The increase was primarily due to increases of $2.4 million in payroll and related expenses and $0.3 million in travel and entertainment.

Principal Investments — Communications and Other

Selling, general and administrative expenses in the Principal Investments — Communications and Other segment increased $4.8 million to $12.3 million for the three months ended March 31, 2022 from $7.4 million for the three months ended March 31, 2021.

The increase was primarily due to an increase of $1.8 million in payroll and related expenses, $0.9 million in communications expenses, $0.7 million in depreciation and amortization, $0.8 million from other expenses, and $0.4 million in marketing expenses.

Selling, general and administrative expenses in the Brands segment remained flat at $1.4 million during the three months ended March 31, 2022 and 2021.

Corporate and Other

Selling, general and administrative expenses for the Corporate and Other segment increased approximately $3.0 million to $15.2 million during the three months ended March 31, 2022 from $12.2 million for the three months ended March 31, 2021.

The increase was primarily due to increases of $4.4 million in payroll and related expenses, partially offset by a decrease of $0.9 million in loss from extinguishment of debt as further discussed below and increase of $0.3 million in gain from foreign currency exchange.

During the three months ended March 31, 2022, we did not repurchase any of our senior notes.

During the three months ended March 31, 2021, we repurchased bonds with an aggregate face value of $128.2 million at par, resulting in a loss net of expenses and original issue discount of $0.9 million.

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

Other Income (Expense).

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

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

Gain on extinguishment of loans

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

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

Interest expense was

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

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

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

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

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

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

Income Before Income Taxes .

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

months ended September 30, 2020.

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

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

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

Provision for Income Taxes.

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

nine months ended September 30, 2020.

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

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

Net Income (Loss) Attributable

to Noncontrolling Interests .

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

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

The net income attributable to noncontrolling interests

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

September 30, 2020.

Net Income Attributable

to the Company .

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

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

The increase was primarily due to increases in operating income of

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

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

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

Other income included interest income of $0.1 million during the three months ended March 31, 2022 and 2021.

Change in fair value of financial instruments and other in the amount of $6.0 million during the three months ended March 31, 2022 was primarily due to the change in fair value of warrant liabilities and the forgiveness of a Paycheck Protection Program loan related to FocalPoint, which was acquired in the first quarter of 2022.

Interest expense was $30.4 million during the three months ended March 31, 2022 compared to $19.8 million during the three months ended March 31, 2021.

The increase in interest expense was primarily due to increases in interest expense of $5.7 million from the issuance of senior notes, and $4.1 million and $1.1 million from the Nomura term loan and revolving credit facility, respectively, entered into in the second quarter of 2021.

During the three months ended March 31, 2022, income from equity investments was $6.8 million compared to $0.9 million during the three months ended March 31, 2021.

The increase was primarily due to $6.7 million in earnings related to the bebe equity method investment.

(Loss) Income Before Income Taxes .

Loss before income taxes was $12.9 million during the three months ended March 31, 2022 compared to income of $354.1 million during the three months ended March 31, 2021.

The change was primarily due to a decrease in revenue of $394.6 million and increase in interest expense of $10.7 million, partially offset by a decrease in operating expenses of approximately $26.3 million, increase in change in fair value of financial instruments and other of $6.0 million, and increase in income from equity investments of $5.9 million.

Benefit (Provision) for Income Taxes.

Benefit for income taxes was $3.7 million during the three months ended March 31, 2022 compared to a provision of $97.5 million during the three months ended March 31, 2021.

The effective income tax rate was 28.7% for the three months ended March 31, 2022 as compared to 27.5% for the three months ended March 31, 2021.

Net Income Attributable to Noncontrolling Interests .

Net income attributable to noncontrolling interests represents the proportionate share of net income generated by membership interests of partnerships that we do not own.

The net income attributable to noncontrolling interests was $0.9 million during the three months ended March 31, 2022 compared to $1.9 million during the three months ended March 31, 2021.

Net (Loss) Income Attributable to the Company .

Net loss attributable to the Company was $10.1 million during the three months ended March 31, 2022 compared to net income attributable to the Company of $254.7 million for the three months ended March 31, 2022.

The change was primarily due to a decrease in operating income of $368.3 million and an increase in interest expense of $10.7 million, partially offset by a change from provision to benefit for income taxes of

$101.2 million, increase in change in fair value of financial instruments and other of $6.0 million, increase in income from equity investments of $5.9 million, and a decrease in net income attributable to noncontrolling interests of $1.1 million.

Preferred Stock Dividends .

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

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

Holders of Series

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

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

per Depositary Share).

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

On January 11,

2021, the Company declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on January 29, 2021

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

On April 5, 2021, the Company declared a cash dividend

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

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

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

On September 4, 2020, the

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

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

Holders of Series B Preferred Stock,

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

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

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

On January 11, 2021, the Company

declared a cash dividend of $0.4609375 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of

business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend representing $0.4609375 per Depositary Share,

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

On July 8, 2021, the Company

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

business on July 21, 2021.

Net Income Available to

Common Shareholders .

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

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

The increase was primarily due to increases in operating

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

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

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

Liquidity and Capital

Our operations are funded

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

and credit facilities, and special purposes financing arrangements.

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

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

Our cash flows and profitability are impacted by capital market

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

As of September 30, 2021,

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

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

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

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

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

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

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

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

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

financial statements.

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

our business plan.

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

upon our financial condition and results of operations.

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

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

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

stockholders of record as of August 13, 2021.

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

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

On October 28, 2021, the Board of Directors

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

During the year ended December 31,

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

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

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

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

The declaration and

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

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

relevant by our Board of Directors.

A summary of dividend activity

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

July 29, 2021

August 26, 2021

August 13, 2021

February 25, 2021

March 24, 2021

March 10, 2021

October 28, 2020

November 24, 2020

November 10, 2020

July 30, 2020

August 28, 2020

August 14, 2020

June 10, 2020

March 3, 2020

March 31, 2020

March 17, 2020

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

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

or $1.71875 per Depositary Share).

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

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

On January 11,

2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 29, 2021 to holders

of record as of the close of business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend $0.4296875 per

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

8, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on August 2, 2021 to holders of

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

On October 6, 2021, the Company declared a cash dividend $0.4296875 per

Depositary Share, which will be paid on or about November 1, 2021 to holders of record as of the close of business on October

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

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

or $1.84375 per Depositary Share).

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

As of September 30, 2021, dividends in arrears in respect of the Depositary Shares were $0.5 million.

On January 11,

2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on January 29, 2021 to holders

of record as of the close of business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend $0.4609375 per

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

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

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

On October 6, 2021, the Company declared a cash dividend $0.4609375 per

Depositary Share, which will be paid on or about November 1, 2021 to holders of record as of the close of business on October

Our principal sources of

liquidity to finance our business is our existing cash on hand, cash flows generated from operating activities, funds available under

revolving credit facilities and special purpose financing arrangements.

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share).

Dividends are payable quarterly in arrears.

On January 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends are payable quarterly in arrears.

On January 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

Net (Loss) Income Available to Common Shareholders .

Net loss available to common shareholders was $12.1 million during the three months ended March 31, 2022 compared to net income available to common shareholders of $252.9 million during the three months ended March 31, 2021.

The change was primarily due to a decrease in operating income of $368.3 million, increase in interest expense of $10.7 million, and increase in preferred stock dividends of $0.3 million, partially offset by a change from provision to benefit for income taxes of $101.2 million, increase in change in fair value of financial instruments and other of $6.0 million, increase in income from equity investments of $5.9 million, and decrease in net income attributable to noncontrolling interests of $1.1 million.

Liquidity and Capital Resources

Our operations are funded through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes payable, term loans and credit facilities, and special purposes financing arrangements.

During the three months ended March 31, 2022 and 2021, we generated net loss of $9.2 million and net income of $256.6 million, respectively.

Our cash flows and profitability are impacted by capital market engagements performed on a quarterly and annual basis and amounts realized from the sale of our investments in marketable securities.

As of March 31, 2022, we had $213.6 million of unrestricted cash and cash equivalents, $0.9 million of restricted cash, $1,317.1 million of securities and other investments owned at fair value, $882.4 million of loans receivable, and $2,073.4 million of borrowings outstanding.

The borrowings outstanding of $2,073.4 million as of March 31, 2022 included $1,627.6 million of borrowings from the issuance of the series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $342.9 million in term loans borrowed pursuant to the BRPAC and Nomura Credit Agreements discussed below, $80.0 million of revolving credit under the Nomura Credit Agreement discussed below, and $22.9 million of notes payable.

We believe that our current cash and cash equivalents, securities and other investments owned, funds available under our asset based credit facility, funds available under the BRPAC and Nomura term loans, funds available under the Nomura revolving credit facility, and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying financial statements.

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

From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations.

On April 28, 2022, we declared a regular dividend of $1.00 per share that will be paid on or about May 20, 2022 to stockholders of record as of May 11, 2022.

On February 23, 2022, the Company declared a regular quarterly dividend of $1.00 per share, which was paid on March 23, 2022 to stockholders of record as of March 9, 2022.

During the year ended December 31, 2021, we paid cash dividends on our common stock of $347.1 million.

While it is the Board’s current intention to make regular dividend payments of $1.00 per share each quarter and special dividend payments dependent upon exceptional circumstances from time to time, our Board of Directors may reduce or discontinue the payment of dividends at any time for any reason it deems relevant.

The declaration and payment of any future dividends or repurchases of our common stock will be made at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, cash flows, capital expenditures, and other factors that may be deemed relevant by our Board of Directors.

A summary of dividend activity for the three months ended March 31, 2022 and the year ended December 31, 2021 was as follows:

Date Declared Date Paid Stockholder

February 23, 2022 March 23, 2022 March 9, 2022 $ 1.000 $ — $ 1.000

October 28, 2021 November 23, 2021 November 9, 2021 1.000 3.000 4.000

July 29, 2021 August 26, 2021 August 13, 2021 0.500 1.500 2.000

May 3, 2021 May 28, 2021 May 17, 2021 0.500 2.500 3.000

February 25, 2021 March 24, 2021 March 10, 2021 0.500 3.000 3.500

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share).

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

As of March 31, 2022, dividends in arrears in respect of the Depositary Shares were $0.8 million.

On January 11, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021.

On July 8, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on August 2, 2021 to holders of record as of the close of business on July 21, 2021.

On October 6, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.On January 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

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

As of March 31, 2022, dividends in arrears in respect of the Depositary Shares were $0.5 million.

On January 11, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021.

On July 8, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on August 2, 2021 to holders of record as of the close of business on July 21, 2021.

On October 6, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.

On January 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

Our principal sources of liquidity to finance our business is our existing cash on hand, cash flows generated from operating activities, funds available under revolving credit facilities and special purpose financing arrangements.

Cash Flow Summary

Nine Months Ended

September 30,

Three Months Ended

(Dollars in thousands)

5 unchanged sentences

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

used in operating activities was $166.7 million during the nine months ended September 30, 2021 compared to cash provided of $87.9 million

during the nine months ended September 30, 2020.

Cash used in operating activities for the nine months ended September 30, 2021 consisted

of the positive impact of net income of $383.4 million and noncash items of $40.0 million,

offset by the negative impact of changes in operating assets and liabilities of $590.0 million.

The positive cash flow impact from

noncash items of $40.0 million included deferred income taxes of $28.6 million, share-based compensation of $23.5 million, depreciation

and amortization of $19.1 million, loss on extinguishment of debt of $4.9 million, dividends from equity investments of $1.4 million,

provision for doubtful accounts of $1.2 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.5 million,

partially offset by other noncash interest and other of $15.7 million, fair value adjustments of $10.7 million, gain on extinguishment

of loans of $6.5 million, gain on equity investment of $3.5 million, effect of foreign currency on operations of $1.3 million, income

from equity investments of $1.2 million, and gain on disposal of fixed assets and other of $0.1 million.

Cash used in investing activities

was $416.7 million during the nine months ended September 30, 2021 compared to cash used in investing activities of $126.1 million

for the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, cash used in investing activities consisted

of cash used in investment of subsidiaries initial public offering proceeds into trust account of $345.0 million, purchases of loans receivable

of $186.3 million, repayments of loan participations sold of $15.2 million, cash used for acquisition of businesses of $2.1

million, and purchases of property and equipment of $0.6 million, partially offset by cash received from loans receivable repayment

of $132.5 million.

During the nine months ended September 30, 2020, cash used in investing activities consisted of cash used for

investment of subsidiaries initial public offering proceeds into trust account of $176.8 million, cash used for the purchase of loans

receivable of $169.1 million, purchases of property, equipment, and other of $1.5 million, cash used for acquisition of other business

of $1.5 million, and repayments of loan participations sold of $1.1 million, partially offset by funds received from trust account

of subsidiary of $143.8 million, cash received from loans receivable repayment of $76.0 million, loan participations sold of $2.4

million, and sale of a loan receivable to a related party of $1.8 million.

Cash provided by financing

activities was $859.4 million during the nine months ended September 30, 2021 compared to cash provided by financing activities of $104.1 million

during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, cash provided by financing activities

primarily consisted of $890.6 million in proceeds from issuance of senior notes, $345.0 million in proceeds from initial public offering

of subsidiaries, $200.0 million in proceeds from the Nomura term loan, $80.0 million in proceeds from Nomura revolving credit line, $64.7

million in net proceeds from offerings of common stock, $14.0 million in net proceeds from offerings of preferred stock, and $12.7 million

in contributions from noncontrolling interests, partially offset by $390.5 million used to repurchase our senior notes, $236.6 million

used to pay dividends on our common shares, $37.6 million used to repay our notes payable, $31.0 million used to pay debt issuance

costs, $16.1 million used for repayment on our BRPAC term loan, $15.7 million in distributions to noncontrolling interests,

$10.5 million used to pay employment taxes on vesting of restricted stock, $5.5 million used to pay dividends on our preferred shares,

$2.7 million used in the repurchase of common stock, and $1.6 million used to pay for contingent consideration.

During the nine months

ended September 30, 2020, cash provided by financing activities primarily consisted of $175.0 million proceeds from initial public offering

of subsidiaries, $171.4 million proceeds from issuance of senior notes, and $36.0 million proceeds from offerings of preferred stock,

partially offset by $143.8 million used in the redemption of subsidiary temporary equity and distributions, $38.3 million used to

repurchase our common stock, $37.1 million used to repay our asset based credit facility, $25.8 million used to pay dividends on

our common shares, $14.4 million used for repayment on our BRPAC term loan, $7.5 million used to pay debt issuance costs, $3.2

million used to pay dividends on our preferred shares, $3.0 million used for payment of employment taxes on vesting of restricted

stock, $3.0 million in distributions to noncontrolling interests, $1.8 million used to repurchase our senior notes, and $0.4 million

used to repay our other notes payable.

Cash used in operating activities was $14.9 million during the three months ended March 31, 2022 compared to cash used in operating activities of $42.9 million during the three months ended March 31, 2021.

Cash used in operating activities for the three months ended March 31, 2022 consisted of the negative impact of net loss of $9.2 million, noncash items of $42.7 million, and changes in operating assets and liabilities of $37.0 million.

The negative cash flow impact from noncash items of $42.7 million included deferred income taxes of $41.9 million, fair value adjustments of $15.8 million, income from equity investments of $6.8 million, noncash interest and other of $3.6 million, and gain on extinguishment of loan of $1.1 million, partially offset by share-based compensation of $17.0 million, depreciation and amortization of $7.8 million, dividends from equity investments of $0.8 million, provision for doubtful accounts of $0.4 million, gain on disposal of fixed assets and other of $0.3 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.2 million.

Cash used in operating activities for the three months ended March 31, 2021 consisted of the positive impact of net income of $256.6 million and noncash items of $56.5 million, partially offset by the negative impact of changes in operating assets and liabilities of $356.0 million.

The positive cash flow impact from noncash items of $56.5 million included deferred income taxes of $62.7 million, depreciation and amortization of $6.8 million, share-based compensation of $5.5 million, loss on extinguishment of debt of $0.9 million, provision for doubtful accounts of $0.4 million, dividends from equity investments of $0.3 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.1 million, partially offset by fair value adjustments of $10.7 million, noncash interest and other of $4.4 million, gain on equity investment of $3.5 million, income from equity investments of $0.9 million, and effect of foreign currency on operations of $0.7 million.

Cash used in investing activities was $35.5 million during the three months ended March 31, 2022 compared to cash used in investing activities of $171.8 million for the three months ended March 31, 2021.

During the three months ended March 31, 2022, cash used in investing activities consisted of cash used for purchases of loans receivable of $93.9 million acquisition of businesses of $40.0 million, purchases of equity and other investments of $2.4 million, and purchases of property and equipment of $0.2 million partially offset by cash received from loans receivable repayment of $101.0 million.

During the three months ended March 31, 2021, cash used in investing activities consisted of cash used to fund a trust account for the future redemption of one of our subsidiaries’ redeemable common stock of $172.5 million, purchases of loans receivable of $75.7 million, repayments of loan participations sold of $6.1 million, purchases of equity and other investments of $4.7 million, acquisition of business of $0.3 million, and purchases of property and equipment of $0.1 million, partially offset by cash received from loans receivable repayment of $87.5 million.

Cash used in financing activities was $14.4 million during the three months ended March 31, 2022 compared to cash provided by financing activities of $356.7 million during the three months ended March 31, 2021.

During the three months ended March 31, 2022, cash used in financing activities primarily consisted of $27.9 million used to pay dividends on our common shares, $4.1 million used in the repayment of term loan, $1.1 million in distributions to noncontrolling interests, $2.0 million used to pay dividends on our preferred shares, $1.3 million used in payment of employment taxes on vesting of restricted stock, and $0.4 million used to repay our notes payable, partially offset by cash provided by $20.0 million proceeds from issuance of senior notes, $1.8 million contributions from noncontrolling interests, and $0.6 million proceeds from issuance of preferred stock.

During the three months ended March 31, 2021, cash provided by financing activities primarily consisted of $402.4 million proceeds from issuance of senior notes, $172.5 million proceeds from initial public offering of subsidiaries, $64.7 million proceeds from issuance of common stock, and $3.7 million contributions from noncontrolling interests, partially offset by $128.2 million used to repurchase our senior notes, $95.2 million used to pay dividends on our common shares, $37.6 million used to repay our notes payable, $11.6 million distributions to noncontrolling interests, $7.5 million used to pay debt issuance costs, $4.8 million used for repayment on our term loan, and $1.7 million used to pay dividends on our preferred shares.

Credit Agreements

Credit Agreement

June 23, 2021, the Company, the Primary Guarantor, and the Borrower entered into the Credit Agreement with Nomura Corporate Funding

Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, providing for a four-year $200.0 million secured

Term Loan Facility and a four-year $80.0 million secured Revolving Credit Facility.

The Credit Facilities will mature on June 23, 2025,

subject to acceleration or prepayment.

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

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 Revolving Credit 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 Credit Facilities exceed the borrowing base, the Company is obligated to prepay the loans in an aggregate amount equal to such

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 $115.0 million and the Primary Guarantor to maintain

net asset value of at least $900.0 million.

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

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

Commencing on September 30,

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 $2.5 million per quarter.

of September 30, 2021, the outstanding balance on the Term Loan Facility was $194.6 million (net of unamortized debt issuance costs of

$5.4 million).

Interest on the term loan for the three and nine months ended September 30, 2021 was $2.7 million (including amortization

of deferred debt issuance costs of $0.4 million) and $2.9 million (including amortization of deferred debt issuance costs of $0.4 million),

respectively.

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

had an outstanding balance of $80.0 million under the Revolving Credit Facility as of September 30, 2021.

Interest on the revolving facility

for the three and nine months ended September 30, 2021 was $0.8 million (including unused commitment fees of $0.06 million and amortization

of deferred financing costs of $0.1 million) and $0.8 million (including unused commitment fees of $0.08 million and amortization of deferred

financing costs of $0.2 million), respectively.

The interest rate on the Revolving Credit Facility as of September 30, 2021 was 4.62%.

are in compliance with all financial covenants in the Nomura Credit Agreement as of September 30, 2021.

Nomura Credit Agreement

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

On December 17, 2021 (the “Amendment Date”), we, the Primary Guarantor, and the Borrower entered into a Second Incremental Amendment to Credit Agreement, pursuant to which the Borrower established an incremental facility in an aggregate principal amount of $100.0 million (the “Incremental Facility” and the incremental term loans made thereunder, the “Incremental Term Loans”) of secured term loans under the Credit Agreement on terms identical to those applicable to the Term Loan Facility.

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

The Term Loan Facility, Revolving Credit Facility, and Incremental Facility (together, 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, we are required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the Revolving Credit Facility for the immediately preceding fiscal quarter.

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

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

The Credit Agreement 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 our, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests.

In addition, the Credit Agreement contains a financial covenant that requires us to maintain operating earnings before interest, taxes, depreciation, and amortization (EBITDA) of at least $135.0 million and the Primary Guarantor to maintain net asset value of at least $1,100.0 million.

The Credit Agreement 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 $3.8 million per quarter.

As of March 31, 2022 and December 31, 2021, the outstanding balances on the Term Loan Facility and Incremental Facility were $293.2 million (net of unamortized debt issuance costs of $6.8 million) and $292.7 million (net of unamortized debt issuance costs of $7.4 million), respectively.

Interest on the term loan during the three months ended March 31, 2022 was $4.1 million (including amortization of deferred debt issuance costs of $0.5 million).

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

We had an outstanding balance of $80.0 million under the Revolving Credit Facility as of both March 31, 2022 and December 31, 2021.

Interest on the revolving facility during the three months ended March 31, 2022 was $1.1 million (including amortization of deferred financing costs of $0.1 million).

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

We are in compliance with all financial covenants in the Credit Agreement as of March 31, 2022.

Wells Fargo Credit Agreement

On April 21, 2017, we amended

the asset based credit facility agreement (as amended, the “Credit Agreement”) with Wells Fargo Bank to increase the maximum

borrowing limit from $100.0 million to $200.0 million.

Such amendment, among other things, also extended the expiration date of the credit

facility from July 15, 2018 to April 21, 2022.

The Credit Agreement continues to allow for borrowings under a separate credit agreement

(a “UK Credit Agreement”) dated March 19, 2015 with an affiliate of Wells Fargo Bank which provides for the financing of transactions

in the United Kingdom with borrowings up to 50.0 million British Pounds.

Any borrowing on the UK Credit Agreement reduces the availability

of the asset based $200.0 million credit facility.

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

with the Credit Agreement.

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

amendment to the Credit Agreement, to facilitate borrowings to fund retail liquidation transactions in Canada.

From time to time, we utilize

this credit facility to fund costs and expenses incurred in connection with liquidation engagements.

We also utilize this credit facility

in order to issue letters of credit in connection with liquidation engagements conducted on a guaranteed basis.

Subject to certain limitations

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

the UK Credit Agreement (if in effect).

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

required to be repaid within 180 days.

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

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

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

The credit facility is secured by the proceeds

received for services rendered in connection with the liquidation service contracts pursuant to which any outstanding loan or letters

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

The credit facility also provides for

success fees in the amount of 2.5% to 17.5% of the net profits, if any, earned on liquidation engagements that are financed under the

credit facility as set forth in the related credit agreement.

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

Agreement contains certain covenants, including covenants that limit or restrict our ability to incur liens, incur indebtedness, make

investments, dispose of assets, make certain restricted payments, merge, or consolidate and enter into certain transactions with affiliates.

was no outstanding balance on this credit facility as of September 30, 2021 and December 31, 2020.

As of September 30, 2021, there

were no open letters of credit outstanding.

We are in compliance with

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

We are party to a credit agreement (as amended, the “Credit Agreement”) governing our asset based credit facility with Wells Fargo Bank, National Association (“Wells Fargo Bank”) with a maximum borrowing limit of $200.0 million 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(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 related 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 liquidation engagements that are financed under the credit facility as set forth in the related Credit Agreement.

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.

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

As of March 31, 2022 and December 31, 2021, there were no open letters of credit outstanding.

We are in compliance with all financial covenants in the asset based credit facility as of March 31, 2022.

BRPAC Credit Agreement

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

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

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

in the capacity as agent and lender and with the other lenders party thereto

(the “BRPAC Credit Agreement”).

On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of ours, in the capacity of borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with Banc of California, N.A.

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

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

to the terms of the BRPAC Credit Agreement, we may request additional optional term loans in an aggregate principal amount of up to $10.0

million at any time prior to the first anniversary of the agreement date.

On February 1, 2019, the Borrowers entered into the First Amendment

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

December 31, 2020, the Borrowers, the Secured Guarantors, the Agent and the Lenders, entered into the Second Amendment to Credit Agreement

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

to the Borrowers, the proceeds of which the Borrowers’ will use to repay the outstanding principal amount of the existing Terms

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

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

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

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

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

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

Riley Principal Investments, LLC entered into

a reaffirmation of their guarantees of the Borrowers’ obligations under the Credit Agreement.

Additionally, the Borrowers paid a

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

Amendment, as further discussed in Note 9 to the accompanying financial statements.

The borrowings under the amended BRPAC Credit Agreement

bear interest equal to the LIBOR plus a margin of 2.75% to 3.25% depending on the Borrowers’ consolidated total funded debt ratio

as defined in the BRPAC Credit Agreement.

As of September 30, 2021, the interest rate on the BRPAC Credit Agreement was 3.09%.

Principal outstanding under

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

Quarterly installments on December

31, 2021 is in the amount of $4.6 million, from March 31, 2022 to December 31, 2022 are in the amount of $4.1 million per quarter,

from March 31, 2023 to December 31, 2023 are in the amount of $3.6 million per quarter, from March 31, 2024 to December 31, 2024

are in the amount of $3.1 million per quarter, from March 31, 2025 to September 30, 2025 are in the amount of $2.8 million per

quarter, and the remaining principal balance is due at final maturity on December 31, 2025.

of September 30, 2021 and December 31, 2020, the outstanding balance on the term loan was $58.4 million (net of unamortized

debt issuance costs of $0.6 million) and $74.2 million (net of unamortized debt issuance costs of $0.8 million), respectively.

expense on the term loan during the three months ended September 30, 2021 and 2020, was $0.5 million (including amortization of deferred

debt issuance costs of $0.07 million).

Interest expense on the term loan during the nine months ended September 30, 2021, was $1.9 million (including

amortization of deferred debt issuance costs of $0.2 million).

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

Pursuant to the terms of the BRPAC Credit Agreement, we may request additional optional term loans in an aggregate principal amount of up to $10.0 million at any time prior to the first anniversary of the agreement date.

On February 1, 2019, the Borrowers entered into the First Amendment to Credit Agreement and Joinder with City National Bank as a new lender in which the new lender extended to Borrowers the additional $10.0 million.

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

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

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

On December 16, 2021, the Borrowers, the Secured Guarantors, the Agent, and the Closing Date Lenders, entered into the Third Amendment to Credit Agreement (the “Third Amendment”), 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 $15.0 million on the date of the Third Amendment.

The borrowings under the amended BRPAC Credit Agreement bear interest equal to the SOFR rate plus a margin of 2.75% to 3.25% 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 amended BRPAC Credit Agreement was at 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 $4.1 million per quarter, from March 31, 2023

to December 31, 2023 are in the amount of $3.6 million per quarter, from March 31, 2024 to December 31, 2024 are in the amount of $3.1 million per quarter, from March 31, 2025 to December 31, 2025 are $2.7 million 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 $49.7 million (net of unamortized debt issuance costs of $0.5 million), and $53.7 million (net of unamortized debt issuance costs of $0.6 million), respectively.

Interest expense on the term loan during the three months ended March 31, 2022 and 2021, was $0.5 million (including amortization of deferred debt issuance costs of $0.1 million ) and $0.7 million (including amortization of deferred debt issuance costs of $0.08 million ), respectively.

We are in compliance with all financial covenants in the amended BRPAC Credit Agreement as of March 31, 2022.

Senior Note Offerings

During the nine months ended

September 30, 2021, the Company issued $183.0 million of senior notes due with maturities dates ranging from May 2023 to August 2028 pursuant

to At the Market Issuance Sales Agreements with B.

During the three months ended March 31, 2022 and 2021, we issued $20.1 million and $12.9 million, respectively, of senior notes due with maturities dates ranging from May 2024 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 which allowed the Company to sell these senior

On January 25, 2021, the

Company issued $230.0 million of senior notes due in January 2028 (“6.0% 2028 Notes”).

Interest on the 6.0% 2028 Notes

is payable quarterly at 6.0%.

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

In connection

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

and other issuance costs of $4.3 million).

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

On March 29, 2021, the Company

issued $159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”).

Interest on the 5.5% 2026 Notes is payable

quarterly at 5.5%.

The 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 $156.3 million (after underwriting commissions, fees, and other issuance

costs of $3.2 million).

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

On March 31, 2021, the Company

exercised its option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”)

pursuant to the second supplemental indenture dated May 31, 2017.

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

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

2027 Notes”) pursuant to the third supplemental indenture dated December 31, 2017.

The total redemption payment included approximately

$2.1 million in accrued interest.

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

were delisted from NASDAQ .

On August 4, 2021, the Company

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

Interest on the 5.25% 2028 Notes is payable

quarterly at 5.25%.

The 5.25% 2028 Notes are unsecured and due and payable in full on August 31, 2028.

In connection with the

issuance of the 5.25% 2028 Notes, the Company received net proceeds of $308.7 million (after underwriting commissions, fees, and

other issuance costs of $7.6 million).

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

On September 4, 2021, we

redeemed, in full, $137.5 million aggregate principal amount of our 7.375% Senior Notes due 2023 (“7.375% 2023 Notes”) pursuant

to the fifth supplemental indenture dated September 11, 2018.

The redemption price was equal to 101.5% of the aggregate principal amount,

plus accrued and unpaid interest up to, but excluding, the redemption date.

The total redemption payment included approximately $1.0 million

in accrued interest and $2.1 million in premium.

In connection with the full redemption, the 7.375% 2023 Notes under the ticker symbol

“RILYH,” were delisted from NASDAQ.

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

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

indenture dated September 11, 2018.

The redemption price was equal to 101% of the aggregate principal amount, plus accrued and unpaid

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

The total redemption payment included approximately $1.8 million in accrued

interest and $1.2 million in premium.

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

were delisted from NASDAQ.

As of September 30, 2021

and December 31, 2020, the total senior notes outstanding was $1,363 million (net of unamortized debt issue costs of $17.9 million) and

$870.8 million (net of unamortized debt issue costs of $9.6 million) with a weighted average interest rate of 5.96% and 6.95%, respectively.

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 which allowed the Company to sell these senior notes.

As of March 31, 2022 and December 31, 2021, the total senior notes outstanding was $1,627.6 million (net of unamortized debt issue costs of $20.5 million) and $1,606.6 million (net of unamortized debt issue costs of $21.5 million) with a weighted average interest rate of 5.69% and 5.69%, respectively.

Interest on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $21.5 million and $15.6 million for

the three months ended September 30, 2021 and 2020, respectively and $60.0 million and $45.5 million for the nine months ended September

30, 2021 and 2020, respectively.

The most recent sales agreement

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

prospectus filed on April 6, 2021 (the “April 2021 Sales Agreement Prospectus”), and the prospectus filed on January 28, 2021

(the “January 2021 Sales Agreement Prospectus”).

This program provides for the sale by the Company of up to $250.0 million of

certain of the Company’s senior notes.

As of September 30, 2021, the Company had $152.3 million remaining availability under

the August 2021 Sales Agreement.

Interest expense on senior notes totaled $24.4 million and $18.7 million during the three months ended March 31, 2022 and 2021, respectively.

The most recent sales agreement prospectus was filed by us with the SEC on January 5, 2022 (the “January 2022 Sales Agreement Prospectus”), supplementing the prospectus filed on August 11, 2021, the prospectus filed on April 6, 2021, and the prospectus filed on January 28, 2021.

This program provides for the sale by the Company of up to $250.0 million of certain of the Company’s senior notes.

As of March 31, 2022, and December 31, 2021 the Company had $91.8 million and $111.9 million, respectively, remaining availability under the January 2022 Sales Agreement.

Off Balance Sheet Arrangements

As part of our investment

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

transactions that may be considered off-balance sheet arrangements.

Babcock and Wilcox Commitments

On June 30, 2021, we agreed

to guaranty (the “B.

Riley Guaranty”) up to $110.0 million of obligations that Babcock & Wilcox Enterprises, Inc.

(“B&W”) may owe to providers of cash collateral pledged in connection with B&W’s debt financing.

Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of B&W’s

obligations under a reimbursement agreement with respect to such cash collateral.

B&W will pay us $0.9 million per annum in connection

Riley Guaranty.

B&W has agreed to reimburse us to the extent the B.

Riley Guaranty is called upon.

On August 10, 2020, we 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

Pursuant to the Indemnity Rider, we agreed to indemnify Berkley in connection with a default by B&W under the Indemnity

Agreement relating to a $30.0 million payment and performance bond issued by Berkley in connection with a construction project undertaken

In consideration for providing the Indemnity Rider, B&W paid us $0.6 million on August 26, 2020.

Other Commitments

On June 19, 2020, we participated

in a loan facility agreement to provide a total loan commitment up to 33.0 million EUROS to a retailer in Europe.

We made an initial

funding of 6.6 million EUROS in July 2020.

No additional borrowings have been made since the initial funding, leaving unused future commitments

available of up to 26.4 million EUROS as of September 30, 2021.

As of September 30, 2021,

we had an outstanding commitment to purchase a loan pursuant to an assignment agreement with a client in the amount of $77.5 million that

was funded on July 2, 2021.

Simultaneously with the funding of the loan on July 2, 2021, we received a principal payment on the loan for

$27.5 million reducing the loans receivable balance to $50.0 million.

In the normal course of business,

we enter into commitments to our clients in connection with capital raising transactions, such as firm commitment underwritings and equity

lines of credit.

These commitments require us to purchase securities at a specified price.

Securities underwriting exposes us to market

and credit risk, primarily in the event that, for any reason, securities purchased by us cannot be distributed at the anticipated price.

Except as disclosed above,

we have no material obligations, assets or liabilities which would be considered off-balance sheet arrangements and do not participate

in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest

entities, established for the purpose of facilitating off-balance sheet arrangements.

Contractual Obligations

On January 25, 2021, we issued

$230.0 million of senior notes due in January 2028 (“6.0% 2028 Notes”) pursuant to the prospectus supplement dated February

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, we received net proceeds of $225.7 million (after

underwriting commissions, fees, and other issuance costs of $4.3 million).

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

On March 31, 2021, we exercised

our option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to

the second supplemental indenture dated May 31, 2017.

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

On March 29, 2021, we issued

$159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to the 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, we received net proceeds of $156.3 million (after

underwriting commissions, fees, and other issuance costs of $3.2 million).

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

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

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

The total redemption payment included approximately $2.1 million

in accrued interest.

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

On August 4, 2021, we issued

$316.3 million of senior notes due in August 2028 (“5.25% 2028 Notes”) pursuant to a prospectus supplement dated January

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

The 5.25% 2028 Notes are unsecured and due and payable

in full on August 31, 2028.

In connection with the issuance of the 5.25% 2028 Notes, the Company received net proceeds of $308.7

million (after underwriting commissions, fees, and other issuance costs of $7.6 million).

The 5.25% 2028 Notes bear interest

at the rate of 5.25% per annum.

September 4, 2021, we redeemed, in full, $137.5 million aggregate principal amount of our 7.375% Senior Notes due 2023 (“7.375%

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

The redemption price was equal to 101.5% of

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

The total redemption payment

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

In connection with the full redemption, the 7.375%

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

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

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

dated September 11, 2018.

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

up to, but excluding, the redemption date.

The total redemption payment included approximately $1.8 million in accrued interest

and $1.2 million in premium.

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

were delisted from NASDAQ.

As a result of the above,

our total senior notes payable (including interest) increased to $1,713.0 million as of September 30, 2021, and comparing September

30, 2021 to December 31, 2020, our senior notes payable due in one year or less increased by $21.4 million, our senior notes payable due

in 1-3 years increased by $16.3 million, our senior notes due in 4-5 years increased by $332.3 million while our senior notes due in more

than 5 years increased by $251.2 million.

Additionally, our total contractual obligations increased to $2,056.8 million as of September

30, 2021 and comparing September 30, 2021 to December 31, 2020, our total payments due in one year or less decreased by $12.2 million,

our payments due in 1-3 years increased $37.0 million, our payments due in 4-5 years increased by $500.6 million, and our payments due

in more than 5 years increased by $252.6 million.

There were no other material

changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Information about our off-balance sheet arrangements is included in Note 15 of the Notes to the Condensed Consolidated Financial Statements.

Such information is hereby incorporated by reference.

Recent Accounting Standards

See Note 2(u) to the accompanying

financial statements for recent accounting standards we have not yet adopted and recently adopted.

See Note 2(t) to the accompanying financial statements for recent accounting standards we have recently adopted.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis