What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-07-29 · 372 added, 290 removed, 941 unchanged (41% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

(Dollars in thousands, except par value)

(Dollars in thousands, except share and per share data)

September 30,

2022 December 31,

6 unchanged sentences

Due from related parties 814 2,074

Loans receivable, at fair value (includes $ 88,893 and $ 167,744 from related parties as of June 30, 2022 and December 31, 2021, respectively)

Loans receivable, at fair value (includes $ 68,575 and $ 167,744 from related parties as of September 30, 2022 and December 31, 2021, respectively)

814,715 873,186

26 unchanged sentences

1,000,000 shares authorized;

4,535 and 4,512 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively;

and liquidation preference of $ 113,380 and $ 112,790 as of June 30, 2022 and December 31, 2021, respectively

4,535 and 4,512 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively;

and liquidation preference of $ 113,380 and $ 112,790 as of September 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.0001 par value;

100,000,000 shares authorized;

28,290,458 and 27,591,028 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

28,300,003 and 27,591,028 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 473,420 413,486

12 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Services and fees $ 266,485 $ 301,497 $ 678,065 $ 857,109

Trading (losses) income and fair value adjustments on loans ( 223,927 ) 32,679 ( 292,317 ) 299,621

Trading income (losses) and fair value adjustments on loans 12,154 18,197 ( 280,163 ) 317,818

Interest income - Loans and securities lending 57,594 26,869 182,855 89,280

5 unchanged sentences

Selling, general and administrative expenses 163,727 244,218 506,062 635,484

Restructuring charge 8,016 — 8,016 —

Interest expense - Securities lending and loan participations sold 17,447 10,097 43,757 40,269

Total operating expenses 236,802 284,776 639,128 738,582

Operating (loss) income ( 158,759 ) 110,145 ( 154,037 ) 483,123

Operating income (loss) 103,561 96,746 ( 50,476 ) 579,869

Other income (expense):

3 unchanged sentences

Interest expense ( 34,587 ) ( 25,372 ) ( 96,787 ) ( 66,014 )

(Loss) income before income taxes ( 189,101 ) 95,002 ( 201,992 ) 449,118

Benefit from (provision for) income taxes 52,513 ( 19,902 ) 56,208 ( 117,420 )

Net (loss) income ( 136,588 ) 75,100 ( 145,784 ) 331,698

Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 3,571 ( 576 ) 4,437 1,366

Net (loss) income attributable to B.

Income (loss) before income taxes 68,995 74,351 ( 132,997 ) 523,469

(Provision for) benefit from income taxes ( 16,350 ) ( 22,693 ) 39,858 ( 140,113 )

Net income (loss) 52,645 51,658 ( 93,139 ) 383,356

Net income attributable to noncontrolling interests and redeemable noncontrolling interests 4,808 1,108 9,245 2,474

Net income (loss) attributable to B.

Riley Financial, Inc.

1 unchanged sentence

Preferred stock dividends 2,002 1,929 6,006 5,467

Net (loss) income available to common shareholders $ ( 142,161 ) $ 73,887 $ ( 154,225 ) $ 326,794

Basic (loss) income per common share $ ( 5.07 ) $ 2.70 $ ( 5.52 ) $ 12.03

Diluted (loss) income per common share $ ( 5.07 ) $ 2.58 $ ( 5.52 ) $ 11.39

Net income (loss) available to common shareholders $ 45,835 $ 48,621 $ ( 108,390 ) $ 375,415

Basic income (loss) per common share $ 1.62 $ 1.76 $ ( 3.86 ) $ 13.75

Diluted income (loss) per common share $ 1.53 $ 1.69 $ ( 3.86 ) $ 13.07

Weighted average basic common shares outstanding 28,293,064 27,570,716 28,068,160 27,297,917

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net (loss) income $ ( 136,588 ) $ 75,100 $ ( 145,784 ) $ 331,698

Net income (loss) $ 52,645 $ 51,658 $ ( 93,139 ) $ 383,356

Other comprehensive income (loss):

Change in cumulative translation adjustment ( 2,842 ) ( 1,029 ) ( 5,646 ) ( 1,384 )

Other comprehensive (loss) income, net of tax ( 2,316 ) 281 ( 2,804 ) ( 355 )

Total comprehensive (loss) income ( 138,904 ) 75,381 ( 148,588 ) 331,343

Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 3,698 ( 576 ) 4,564 1,366

Comprehensive (loss) income attributable to B.

Other comprehensive loss, net of tax ( 2,842 ) ( 1,029 ) ( 5,646 ) ( 1,384 )

Total comprehensive income (loss) 49,803 50,629 ( 98,785 ) 381,972

Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interests 6,187 1,108 10,751 2,474

Comprehensive income (loss) attributable to B.

Riley Financial, Inc.

4 unchanged sentences

Condensed Consolidated Statements of Equity

(Dollars in thousands, except share data)

For the Three Months Ended June 30, 2022 and 2021

(Dollars in thousands, except share and per share data)

For the Three Months Ended September 30, 2022 and 2021

Preferred Stock Common Stock Additional

5 unchanged sentences

Shares Amount Shares Amount

Balance, April 1, 2022 4,535 $ — 27,928,234 $ 3 $ 450,164 $ 205,765 $ ( 1,568 ) $ 45,813 $ 700,177

ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 362,224 — ( 5,146 ) — — — ( 5,146 )

Balance, July 1, 2022 4,535 $ — 28,290,458 $ 3 $ 459,220 $ 32,570 $ ( 3,884 ) $ 55,467 $ 543,376

Vesting of restricted stock and other, net of shares withheld for employer taxes — — 10,116 — ( 293 ) — — — ( 293 )

Stock repurchased and retired — — ( 571 ) — ( 27 ) — — — ( 27 )

Share based payments — — — — 14,498 — — — 14,498

Share based payments in equity of subsidiary — — — — 57 — — — 57

Vesting of shares in equity of subsidiary — — — — ( 35 ) — — 35 —

Dividends on common stock ($ 1.00 per share)

1 unchanged sentence

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

Net loss — — — — — ( 140,159 ) — 3,698 ( 136,461 )

Net income — — — — — 47,837 — 6,187 54,024

Remeasurement of B.

Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity — — — — — ( 428 ) — — ( 428 )

Distributions to noncontrolling interests — — — — — — — ( 431 ) ( 431 )

1 unchanged sentence

Other comprehensive loss — — — — — — ( 2,842 ) — ( 2,842 )

Balance, June 30, 2022

Balance, September 30, 2022

4,535 $ — 28,300,003 $ 3 $ 473,420 $ 46,916 $ ( 6,726 ) $ 64,081 $ 577,694

Balance, April 1, 2021 3,971 $ — 27,194,909 $ 3 $ 380,543 $ 352,910 $ ( 1,459 ) $ 33,823 $ 765,820

Balance, July 1, 2021 4,275 $ — 27,580,300 $ 3 $ 387,084 $ 320,078 $ ( 1,178 ) $ 37,578 $ 743,565

Preferred stock issued 210 — — — 5,716 — — — 5,716

ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 385,391 — ( 10,348 ) — — — ( 10,348 )

Vesting of restricted stock and other, net of shares withheld for employer taxes — — 7,359 — ( 169 ) — — — ( 169 )

Common stock repurchased and retired — — ( 44,650 ) — ( 2,656 ) — — — ( 2,656 )

Warrants exercised — — 11,655 — — — — —

Share based payments — — — — 9,374 — — — 9,374

5 unchanged sentences

Contributions from noncontrolling interests — — — — — — — 2,084 2,084

Acquisition of noncontrolling interests — — — — — — — 583 583

Other comprehensive loss — — — — — — ( 1,029 ) — ( 1,029 )

Balance, June 30, 2021

Balance, September 30, 2021

4,485 $ — 27,554,664 $ 3 $ 399,349 $ 309,550 $ ( 2,207 ) $ 40,512 $ 747,207

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

For the Six Months Ended June 30, 2022 and 2021

For the Nine Months Ended September 30, 2022 and 2021

Preferred Stock Common Stock Additional

8 unchanged sentences

ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 404,668 — ( 6,733 ) — — — ( 6,733 )

Common stock repurchased and retired — — ( 571 ) — ( 27 ) — — — ( 27 )

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

Share based payments — — — — 45,713 — — — 45,713

Share based payments in equity of subsidiary — — — — 57 — — — 57

Vesting of shares in equity of subsidiary — — — — ( 35 ) — — 35 —

Dividends on common stock ($ 3.00 per share)

1 unchanged sentence

Dividends on preferred stock — — — — — ( 6,006 ) — — ( 6,006 )

Net loss — — — — — ( 150,221 ) — 4,564 ( 145,657 )

Net income — — — — — ( 102,384 ) — 10,751 ( 91,633 )

Remeasurement of B.

Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity — — — — — ( 428 ) — — ( 428 )

Distributions to noncontrolling interests — — — — — — — ( 2,167 ) ( 2,167 )

2 unchanged sentences

Other comprehensive loss — — — — — — ( 5,646 ) — ( 5,646 )

Balance, June 30, 2022

Balance, September 30, 2022

4,535 $ — 28,300,003 $ 3 $ 473,420 $ 46,916 $ ( 6,726 ) $ 64,081 $ 577,694

3 unchanged sentences

ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 396,818 — ( 10,539 ) — — — ( 10,539 )

Common stock repurchased and retired — — ( 44,650 ) — ( 2,656 ) — — — ( 2,656 )

Warrants exercised — — 11,655 — — — — — —

Share based payments — — — — 23,508 — — — 23,508

3 unchanged sentences

Net income — — — — — 380,882 — 2,474 383,356

Remeasurement of B.

Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity — — — — — ( 18,182 ) — — ( 18,182 )

Distributions to noncontrolling interests — — — — — — — ( 14,695 ) ( 14,695 )

2 unchanged sentences

Other comprehensive loss — — — — — — ( 1,384 ) — ( 1,384 )

Balance, June 30, 2021

Balance, September 30, 2021

4,485 $ — 27,554,664 $ 3 $ 399,349 $ 309,550 $ ( 2,207 ) $ 40,512 $ 747,207

4 unchanged sentences

(Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

(Revised - See Note 20)

Net (loss) income $ ( 93,139 ) $ 383,356

9 unchanged sentences

Deferred income taxes ( 81,832 ) 28,550

Loss on disposal of fixed assets 122 —

Impairment of intangibles and loss (gain) on disposal of fixed assets 5,537 ( 137 )

Gain on extinguishment of loan ( 1,102 ) ( 6,509 )

1 unchanged sentence

Gain on equity investment ( 6,790 ) ( 3,544 )

De-consolidation of BRPM 150 ( 8,294 ) —

Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests 792 548

20 unchanged sentences

Investment of subsidiaries initial public offering proceeds into trust account — ( 345,000 )

Funds received from trust account of subsidiary 172,584 —

Purchase of equity and other investments ( 2,786 ) —

1 unchanged sentence

Cash flows from financing activities:

Proceeds from revolving line of credit, net — 80,000

Repayment of revolving line of credit ( 5,300 ) —

Repayment of notes payable ( 409 ) ( 37,610 )

8 unchanged sentences

Preferred dividends paid ( 6,006 ) ( 5,467 )

Repurchase of common stock ( 27 ) ( 2,656 )

Distributions to noncontrolling interests ( 3,408 ) ( 15,742 )

Contributions from noncontrolling interests 11,350 12,732

Redemption of subsidiary temporary equity and distributions ( 172,584 ) —

Proceeds from initial public offering of subsidiaries — 345,000

26 unchanged sentences

(iv) Financial Consulting, through which the Company provides bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services;

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

(v) Principal Investments - Communications and Other, through which the Company provides consumer Internet access and related subscription services from United Online, cloud communication services primarily through the magicJack devices, global cloud/unified communications and managed services from Lingo, mobile phone voice, text, and data services and devices through a mobile virtual network operator, and single source communications and cloud technology services from BullsEye Telecom (“BullsEye”);

and (vi) Brands, which is focused on generating revenue through the licensing of trademarks.

On September 23, 2022, the Company's subsidiary, B.

Riley Receivables II, LLC, a Delaware limited liability company, entered into a credit agreement (the “Pathlight Credit Agreement”) by and among PLC Agent, LLC in the capacity as administrative agent and Pathlight Capital Fund I LP, Pathlight Capital Fund II LP, and Pathlight Capital Fund III LP as the lenders for a five-year $ 148,200 term loan.

The Pathlight Credit Agreement was entered in connection with the purchase of the 2022 Badcock Receivable discussed in Note 2.

On August 25, 2022, certain Company subsidiaries acquired the assets of Atlantic Coast Fibers, LLC (and related businesses), which provides residential and commercial recycling services in the New York City metropolitan area.

The purchase price consideration totaled $ 27,541 , which consisted of $ 14,482 in cash, $ 1,642 in assumed debt, and $ 11,416 in contingent consideration payable over approximately the next two years .

In accordance with Accounting Standards Codification (“ASC”) 805, the Company used the acquisition method of accounting for this acquisition.

Goodwill of $ 3,913 and other intangible assets of $ 13,080 were recorded as a result of the acquisition.

On August 16, 2022, the Company's majority-owned subsidiary, Lingo, acquired BullsEye, a single source communications and cloud technology provider.

The purchase price consideration totaled $ 64,907 , which Lingo partially funded using a $ 52,500 term loan that is discussed in Note 9.

In accordance with ASC 805, the Company used the acquisition method of accounting for this acquisition.

Goodwill of $ 29,284 and other intangible assets of $ 28,700 were recorded as a result of the acquisition.

The acquisition is expected to bring revenue from multi-location enterprise business customers to Lingo, improving scale and flexibility.

On August 16, 2022, Lingo entered into a credit agreement (the “Lingo Credit Agreement”) by and among Lingo, the Company as the secured guarantor, and Banc of California, N.A.

in its capacity as administrative agent and lender, for a five-year $ 45,000 term loan.

On September 9, 2022, Lingo entered into the First Amendment to the Lingo Credit Agreement with Grasshopper Bank for an incremental term loan of $ 7,500 , increasing the principal balance of the term loan to $ 52,500 .

On May 31, 2022, the Company's ownership interest in Lingo increased from 40 % to 80 % as a result of the conversion of $ 17,500 of debt owed by Lingo to equity.

As a result of the consolidation of Lingo, the pre-existing equity investment was remeasured at fair value resulting in the recognition of a gain of $ 6,790 , which is included in trading (losses) income and fair value adjustments on loans in the condensed consolidated statement of operations for the three and six months ended June 30, 2022.

In accordance with ASC 805, the company used the acquisition method of accounting.

In accordance with ASC 805,

the Company used the acquisition method of accounting.

The total fair value of the acquired assets of Lingo was $ 115,538 and the fair value of the 20 % noncontrolling interest was $ 8,021 at May 31, 2022.

7 unchanged sentences

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.

The continuing impact of the COVID-19 pandemic, higher inflation, the actions by the Federal Reserve to address inflation, Russia's invasion of Ukraine, and rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods.

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

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

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

14 unchanged sentences

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

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.

Revision of Prior Period Financial Statements

In connection with the preparation of the Company’s consolidated financial statements during prior year, the Company identified an error that was not material related to the consolidation of certain VIEs which primarily resulted in a gross up between investing activities and financing activities in the consolidated statements of cash flows.

In accordance with Staff Accounting Bulletin (“SAB”) No.

99, “Materiality,” and SAB No.

108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the error and determined that the related impact did not, either individually or in the aggregate, materially misstate previously issued consolidated financial statements.

A summary of revisions to certain previously reported financial information presented herein is included in Note 20.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.

(b) Use of Estimates

5 unchanged sentences

Interest expense from securities lending activities is included in operating expenses related to operations in the Capital Markets segment.

Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $ 14,544 and $ 10,725 during the three months ended June 30, 2022 and 2021,

respectively, and $ 26,310 and $ 29,446 during the six months ended June 30, 2022 and 2021, respectively.

Interest expense from loan participations sold totaled $ 258 and $ 726 during the three and six months ended June 30, 2021, respectively.

Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $ 17,447 and $ 9,945 during the three months ended September 30, 2022 and 2021, respectively, and $ 43,757 and $ 39,391 during the nine months ended September 30, 2022 and 2021, respectively.

Interest expense from loan participations sold totaled $ 152 and $ 878 during the three and nine months ended September 30, 2021, respectively.

(d) Concentration of Risk

7 unchanged sentences

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

Advertising costs totaled $ 2,594 and $ 578 during the three months ended June 30, 2022 and 2021, respectively, and $ 4,357 and $ 1,156 during the six months ended June 30, 2022 and 2021, respectively.

Advertising costs totaled $ 1,584 and $ 808 during the three months ended September 30, 2022 and 2021, respectively, and $ 5,941 and $ 1,964 during the nine months ended September 30, 2022 and 2021, respectively.

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

4 unchanged sentences

In June 2018, the Company adopted the 2018 Employee Stock Purchase Plan (“Purchase Plan”) which allows eligible employees to purchase common stock through payroll deductions at a price that is 85 % of the market value of the common stock on the last day of the offering period.

In accordance with the provisions of Accounting Standards Codification (“ASC”) 718 - Compensation — Stock Compensation (“ASC 718”), the Company is required to recognize compensation expense relating to shares offered under the Purchase Plan.

During the three months ended June 30, 2022 and 2021, the Company recognized compensation expense of $ 43 and $ 115 , respectively, related to the Purchase Plan.

During the six months ended June 30, 2022 and 2021, the Company recognized compensation expense of $ 196 and $ 342 , respectively, related to the Purchase Plan.

In accordance with the provisions of ASC 718 - Compensation — Stock Compensation (“ASC 718”), the Company is required to recognize compensation expense relating to shares offered under the Purchase Plan.

During the three months ended September 30, 2022 and 2021, the Company recognized compensation expense of $ 120 and $ 132 , respectively, related to the Purchase Plan.

During the nine months ended September 30, 2022 and 2021, the Company recognized compensation expense of $ 316 and $ 474 , respectively, related to the Purchase Plan.

(g) Income Taxes

7 unchanged sentences

Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements.

Company accrues interest on unrecognized tax benefits as a component of income tax expense.

The Company accrues interest on unrecognized tax benefits as a component of income tax expense.

Penalties, if incurred, would be recognized as a component of income tax expense.

2 unchanged sentences

(i) Restricted Cash

As of June 30, 2022 and December 31, 2021, restricted cash included $ 928 and $ 927 of cash collateral for leases, respectively.

As of September 30, 2022 and December 31, 2021, restricted cash included $ 1,578 and $ 927 of cash collateral for leases, respectively.

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

September 30,

2022 December 31,

14 unchanged sentences

Property and equipment held under finance leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset.

Depreciation expense on property and equipment was $ 1,021 and $ 1,031 during the three months ended June 30, 2022 and 2021, respectively, and $ 2,053 and $ 1,904 during the six months ended June 30, 2022 and 2021, respectively.

Depreciation expense on property and equipment was $ 1,327 and $ 986 during the three months ended September 30, 2022 and 2021, respectively, and $ 3,380 and $ 2,890 during the nine months ended September 30, 2022 and 2021, respectively.

(l) Loans Receivable

Under ASC 326 - Financial Instruments – Credit Losses , the Company elected the irrevocable fair value option for all outstanding loans receivable that were previously measured at amortized cost.

Under ASC 326 - Financial Instruments – Credit Losses , the Company elected the fair value option for all outstanding loans receivable.

Under the fair value option, loans receivables are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the consolidated statements of operations.

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

Loans receivable, at fair value totaled $ 770,840 and $ 873,186 as of June 30, 2022 and December 31, 2021, respectively.

Loans receivable, at fair value totaled $ 814,715 and $ 873,186 as of September 30, 2022 and December 31, 2021, respectively.

The loans have various maturities through March 2027 .

As of June 30, 2022 and December 31, 2021, the historical cost of loans receivable accounted for under the fair value option was $ 783,901 and $ 877,527 , respectively, which included principal balances of $ 788,972 and $ 886,831 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $ 5,071 and $ 9,304 , respectively.

During the three months ended June 30, 2022 and 2021,

the Company recorded net unrealized losses of $ 10,985 and $ 680 , respectively, and during the six months ended June 30, 2022 and 2021, the Company recorded a net unrealized loss of $ 129 and net unrealized gain of $ 10,046 , respectively, on the loans receivable at fair value, which was included in trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations.

As of September 30, 2022 and December 31, 2021, the historical cost of loans receivable accounted for under the fair value option was $ 846,933 and $ 877,527 , respectively, which included principal balances of $ 851,689 and $ 886,831 respectively, and unamortized costs, origination fees,

premiums and discounts, totaling $ 4,756 and $ 9,304 , respectively.

During the three months ended September 30, 2022 and 2021, the Company recorded net unrealized loss of $ 19,158 and $ 1,317 , respectively, and during the nine months ended September 30, 2022 and 2021, the Company recorded a net unrealized loss of $ 19,287 and net unrealized gain of $ 8,729 , respectively, on the loans receivable at fair value, which was included in trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations.

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

As of June 30, 2022, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc.

As of September 30, 2022, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc.

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

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

As of June 30, 2022, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure.

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

As of September 30, 2022, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure.

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

1 unchanged sentence

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

Badcock Loan Receivable

On December 20, 2021, the Company entered into a Master Receivables Purchase Agreement (“Receivables Purchase Agreement”) with W.S.

Badcock Loans Receivable

On September 23, 2022, the Company's subsidiary, B Riley Receivables II, LLC, a Delaware limited liability company, entered into a Master Receivables Purchase Agreement (“Receivables Purchase Agreement II”) with W.S.

Badcock Corporation, a Florida corporation (“WSBC”), an indirect wholly owned subsidiary of Franchise Group, Inc., a Delaware corporation (“FRG”).

The Company paid $ 400,000 in cash to WSBC for the purchase of certain consumer credit receivables of WSBC ("Badcock Receivables"), which was collateralized by the performance of the consumer credit receivables of WSBC.

This purchase of $ 168,363 consumer credit receivables of WSBC (“2022 Badcock Receivable”) was partially financed by a $ 148,200 term loan discussed in Note 9.

As of September 30, 2022, the principal outstanding for the 2022 Badcock Receivable was $ 168,363 and included in loans receivable, at fair value on the condensed consolidated balance sheets.

On December 20, 2021, the Company entered into a Master Receivables Purchase Agreement (“Receivables Purchase Agreement”) with WSBC.

The Company paid $ 400,000 in cash to WSBC for the purchase of certain consumer credit receivables of WSBC (“2021 Badcock Receivable”), which was collateralized by the performance of the consumer credit receivables of WSBC.

In connection with the Receivables Purchase Agreement, the Company entered into a Servicing Agreement (the “Servicing Agreement”) with WSBC pursuant to which WSBC will provide to the Company certain customary servicing and account management services in respect of the receivables purchased by the Company under the Receivables Purchase Agreement.

In addition, subject to certain terms and conditions, FRG has agreed to guarantee the performance by WSBC of its obligations under the Receivables Purchase Agreement and the Servicing Agreement.

As of June 30, 2022 and December 31, 2021, the principal outstanding for the Badcock Receivables was $ 309,355 and $ 400,000 , respectively, and included in loans receivable, at fair value on the condensed consolidated balance sheets.

As of September 30, 2022 and December 31, 2021, the principal outstanding for the 2021 Badcock Receivable was $ 212,551 and $ 400,000 , respectively, and included in loans receivable, at fair value on the condensed consolidated balance sheets.

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

2 unchanged sentences

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

As of June 30, 2022 and December 31, 2021, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities:

As of September 30, 2022 and December 31, 2021, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities:

September 30,

2022 December 31,

31 unchanged sentences

These partnership and investment fund interests are valued at net asset value (“NAV”) in accordance with ASC 820 - Fair Value Measurements.

As of June 30, 2022 and December 31, 2021, partnership and investment fund interests valued at NAV of $ 78,965 and $ 77,383 , respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.

As of September 30, 2022 and December 31, 2021, partnership and investment fund interests valued at NAV of $ 82,475 and $ 77,383 , respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.

Securities and other investments owned also include investments in nonpublic entities that do not have a readily determinable fair value and do not report NAV per share.

3 unchanged sentences

Any investments adjusted to their fair value by applying the measurement alternative are disclosed as nonrecurring fair value measurements, including the level in the fair value hierarchy that was used.

As of June 30, 2022 and December 31, 2021, investments in nonpublic entities valued using a measurement alternative of $ 84,280 and $ 59,745 , respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.

As of September 30, 2022 and December 31, 2021, investments in nonpublic entities valued using a measurement alternative of $ 84,280 and $ 59,745 , respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.

Funds held in trust represents U.S.

treasury bills that were purchased with funds raised through the initial public offerings of B.

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

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

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

treasury bills that were purchased with funds raised through the initial public offering of B.

Riley Principal 250 Merger Corporation (“BRPM 250”), a consolidated special purpose acquisition corporation (“SPAC”).

The funds raised are held in a trust account that is restricted for use and may only be used for purposes of completing an initial business combination or redemption of the class A public common shares of the SPAC as set forth in the trust agreement.

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

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

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

The warrants are accounted for as liabilities in accordance with ASC 815 - Derivatives and Hedging and are measured at fair value at inception and on a recurring basis using quoted prices in over-the-counter markets.

Warrant liabilities are included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets in the amount of $ 3,737 and $ 12,938 as of June 30, 2022 and December 31, 2021, respectively.

Warrant liabilities are included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets in the amount of $ 633 for BRPM 250 and $ 12,938 for B.

Riley Principal 150 Merger Corporation (“BRPM 150”) and BRPM 250 as of September 30, 2022 and December 31, 2021, respectively.

Changes in fair value of warrants are included within change in fair value of financial instruments and other as part of other income (expense) in the condensed consolidated statements of operations.

The fair value of mandatorily redeemable noncontrolling interests is determined based on the issuance of similar interests for cash, references to industry comparables, and relied, in part, on information obtained from appraisal reports and internal valuation models.

The following tables present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of June 30, 2022 and December 31, 2021.

The following tables present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of September 30, 2022 and December 31, 2021.

Financial Assets and Liabilities Measured at Fair Value on a

Recurring Basis as of June 30, 2022 Using

Fair value as of June 30, 2022

Recurring Basis as of September 30, 2022 Using

Fair value as of September 30, 2022

Quoted prices in active markets

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Warrant liabilities 633 633 — —

Contingent earnout 17,722 — — 17,722

Contingent consideration 29,578 — — 29,578

Total liabilities measured at fair value $ 52,284 $ 11,434 $ 6,950 $ 33,900

22 unchanged sentences

Total liabilities measured at fair value $ 46,067 $ 33,240 $ 8,321 $ 4,506

As of June 30, 2022 and December 31, 2021, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $ 1,104,756 and $ 1,250,735 , respectively, or 18.8 % and 21.4 %, respectively, of the Company’s total assets.

As of September 30, 2022 and December 31, 2021, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $ 1,154,071 and $ 1,250,735 , respectively, or 20.0 % and 21.4 %, respectively, of the Company’s total assets.

In determining the fair value for these Level 3 financial assets, the Company analyzes various financial, performance and market factors to estimate the value, including where applicable, over-the-counter market trading activity.

The following table summarizes the significant unobservable inputs in the fair value measurement of Level 3 financial assets and liabilities by category of investment and valuation technique as of June 30, 2022:

Fair value at

June 30, 2022

September 30, 2022

Technique Unobservable

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Equity securities $ 267,745 Market approach Multiple of EBITDA 1.80 x - 13.00 x

Multiple of PV-10 0.33 x

Multiple of Sales 1.00 x

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6,567 Option pricing model Annualized volatility 30.0 % - 200.0 %

Loans receivable at fair value 770,840 Discounted cash flow Market interest rate 6.0 % - 28.3 %

Loans receivable at fair value 814,715 Discounted cash flow/Market approach Market interest rate/Market price of related security 6.0 % - 33.5 %

Total level 3 assets measured at fair value $ 1,154,071

Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,322 Market approach Operating income multiple 6.0 x 6.0 x

Contingent earnout 17,722 Discounted cash flow EBITDA volatility 80.0 % 80.0 %

Contingent consideration 29,578 Discounted cash flow EBITDA volatility 65.0 % 65.0 %

Market interest rate 8.5 % 8.5 %

Total level 3 liabilities measured at fair value $ 33,900

The changes in Level 3 fair value hierarchy during the six months ended June 30, 2022 and 2021 were as follows:

The changes in Level 3 fair value hierarchy during the nine months ended September 30, 2022 and 2021 were as follows:

Year Level 3 Changes During the Period Level 3

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Settlements Transfer in

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Equity securities $ 377,549 $ ( 18,594 ) $ — $ 18,457 $ ( 38,056 ) $ 339,356

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Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,506 — 824 ( 1,008 ) — 4,322

Contingent earnout — ( 4,500 ) — 22,222 — 17,722

Six Months Ended June 30, 2021

Contingent consideration — ( 3,880 ) — 33,458 — 29,578

Nine Months Ended September 30, 2021

Equity securities $ 149,292 $ 52,102 $ — $ 125,794 $ 5,777 $ 332,965

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Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,700 — ( 504 ) — — 4,196

The amount reported in the table above during the six months ended June 30, 2022 and 2021 included the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis.

Warrant liabilities — — — 10,466 ( 10,466 ) —

The amount reported in the table above during the nine months ended September 30, 2022 and 2021 included the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis.

The carrying amounts reported in the condensed consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value based on the short-term maturity of these instruments.

As of June 30, 2022 and December 31, 2021, the senior notes payable had a carrying amount of $ 1,644,678 and $ 1,606,560 , respectively, and fair value of $ 1,544,036 and $ 1,661,189 , respectively.

As of September 30, 2022 and December 31, 2021, the senior notes payable had a carrying amount of $ 1,661,191 and $ 1,606,560 , respectively, and fair value of $ 1,539,876 and $ 1,661,189 , respectively.

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

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

The following table presents information on the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of June 30, 2022.

These investments were measured due to an observable price change or impairment during the six months ended June 30, 2022.

The following table presents information on the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of September 30, 2022.

These investments were measured due to an observable price change or impairment during the nine months ended September 30, 2022.

Fair Value Measurement Using

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(Level 2) Significant unobservable inputs

As of June 30, 2022

As of September 30, 2022

Investments in nonpublic entities that do not report NAV $ 16,387 $ — $ 15,737 $ 650

1 unchanged sentence

The Company periodically uses derivative instruments, which primarily consist of the purchase of forward exchange contracts, for certain loans receivable and Auction and Liquidation engagements with operations outside the United States.

As of June 30, 2022, there were no forward exchange contracts outstanding.

As of September 30, 2022, there were no forward exchange contracts outstanding.

As of December 31, 2021, € 6,000 forward exchange contracts were outstanding.

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

The net gain from forward exchange contracts was zero and $ 363 during the three months ended June 30, 2022 and 2021, respectively, and $ 68 and $ 673 during the six months ended June 30, 2022 and 2021, respectively.

The net gain from forward exchange contracts was zero and $ 248 during the three months ended September 30, 2022 and 2021, respectively, and $ 68 and $ 921 during the nine months ended September 30, 2022 and 2021, respectively.

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

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

Transaction gain was $ 834 and loss was $ 390 during the three months ended June 30, 2022 and 2021, respectively, and gains were $ 1,130 and $ 166 during the six

months ended June 30, 2022 and 2021, respectively.

Transaction gain was $ 783 and $ 689 during the three months ended September 30, 2022 and 2021, respectively, and gain was $ 1,913 and $ 855 during the nine months ended September 30, 2022 and 2021, respectively.

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

As disclosed in Note 2(s) below, the Company has consolidated two VIE’s, BRPM 150 and BRPM 250, which have outstanding warrants that were issued in their respective initial public offerings.

The warrants have been recorded as a liability since the warrants contain a provision to be settled in cash in the event of a qualifying cash tender offer, which is outside the control of the Company, for both BRPM 150 and BRPM 250.

The outstanding warrants are considered derivative instruments with the warrant liability measured at fair value at each reporting date until exercised, with changes in fair value reported in other income in the condensed consolidated statements of operations.

As of June 30, 2022 and December 31, 2021, the warrant liability totaled $ 3,737 and $ 12,938 , respectively, which was included in accrued expenses and other liabilities in the condensed consolidated balance sheet.

As disclosed in Note 2(s) below, the Company consolidated a VIE, BRPM 250, which has outstanding warrants that were issued in its initial public offering.

The warrants were recorded as a liability since the warrants contain a provision to be settled in cash in the event of a qualifying cash tender offer for BRPM 250, which is outside the control of the Company.

The outstanding warrants are considered derivative instruments with the warrant liability measured at fair value at each reporting date until exercised or upon expiration, with changes in fair value reported in other income in the condensed consolidated statements of operations.

As of September 30, 2022 and December 31, 2021, the warrant liability for BRPM 250 totaled $ 633 and BRPM 150 and BRPM 250 totaled $ 12,938 , respectively, which was included in accrued expenses and other liabilities in the condensed consolidated balance sheet.

(p) Redeemable Noncontrolling Interests in Equity of Subsidiaries

The Company records redeemable noncontrolling interests in equity of subsidiaries to reflect the economic interests of the class A ordinary shareholders in BRPM 150 and BRPM 250 sponsored SPACs and the 20 % noncontrolling interest of Lingo.

The Company records redeemable noncontrolling interests in equity of subsidiaries to reflect the economic interests of the class A ordinary shareholders in the BRPM 250 sponsored SPAC and the 20 % noncontrolling interest of Lingo.

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

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

The operating agreement with Lingo has provisions which result in the noncontrolling interest being accounted for as temporary equity.

The total redeemable noncontrolling interest of Lingo amounted to $ 7,284 at June 30, 2022 and includes $ 127 of net losses, which is reflected in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in the condensed consolidated statement of operations.

As of June 30, 2022 and December 31, 2021, the total carrying amount of the redeemable noncontrolling interests in equity of subsidiaries was $ 352,894 and $ 345,000 , respectively.

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

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

(q) Equity Investment

As of June 30, 2022 and December 31, 2021, equity investments of $ 43,235 and $ 39,190 , respectively, were included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.

The operating agreement with Lingo has provisions which result in the noncontrolling interest being accounted for as temporary equity.

Net income (losses) are reflected in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in the condensed consolidated statement of operations.

Changes to redeemable noncontrolling interest consist of the following:

Nine Months Ended September 30, 2022

Balance, January 1, 2022 $ 345,000

Net loss ( 1,078 )

De-consolidation of BRPM 150 ( 172,584 )

Contributions 8,021

Distributions ( 600 )

Balance, September 30, 2022 $ 178,759

(q) Equity Investments

As of September 30, 2022 and December 31, 2021, equity investments of $ 42,560 and $ 39,190 , respectively, were accounted for under the equity method of accounting and included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.

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

bebe stores, inc.

As of June 30, 2022 and December 31, 2021, the Company had a 40.1 % ownership interest in bebe stores, inc.

As of September 30, 2022 and December 31, 2021, the Company had a 40.1 % ownership interest in bebe stores, inc.

In December 2021, the Company purchased an additional 71,970 shares of newly issued common stock of bebe for $ 612 and increased its ownership interest from 39.5 % to 40.1 %.

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

Other Equity Investments

The Company had other equity investments over which the Company exercises significant influence but which did not meet the requirements for consolidation.

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

As of September 30, 2022, the carrying value of the Company’s equity investment in bebe exceeded the fair value based on the quoted market prices.

In consideration of these facts, the Company evaluated its investment for other than temporary impairment under ASC 323.

The Company did not utilize bright-line tests in the evaluation.

Based on the available facts and information regarding the operating results of bebe, the Company’s ability and intent to hold the investments until recovery, the relative amount of the declines, and the length of time that the fair values were less than the carrying values, the Company concluded that recognition of impairment losses in earnings was not required.

However, the Company will continue to monitor the investment and it is possible that impairment losses will be recorded in earnings in future periods based on changes in facts and circumstances or intentions.

(r) Supplemental Non-cash Disclosures

During the six months ended June 30, 2022, non-cash investing activities included $ 20,320 in issuance of the Company's common stock as part of the purchase price consideration from the FocalPoint acquisition and $ 22,661 in seller financing for deferred cash consideration, the conversion of $ 17,500 of debt owed by Lingo to equity, and the repayment of loans receivable in the amount of $ 850 with equity securities.

During the six months ended June 30, 2021, non-cash investing activities included the repayment of a loan receivable in full in the amount of $ 133,453 with equity securities.

In addition, $ 35,000 of loans receivable were exchanged for $ 35,000 of newly issued debt securities and a $ 36,000 note receivable was issued for the sale of equity securities to a third party.

During the nine months ended September 30, 2022, non-cash investing activities included $ 20,320 in issuance of the Company's common stock as part of the purchase price consideration from the FocalPoint acquisition and $ 22,661 in seller financing for deferred cash consideration, the conversion of $ 17,500 of debt owed by Lingo to equity, and the repayment of loans receivable in the amount of $ 850 with equity securities.

During the nine months ended September 30, 2021, non-cash investing activities included the repayment of a loan receivable in full in the amount of $ 133,453 with equity securities, a $ 51,000 note receivable issued for the sale of equity securities to a third party, $ 35,000 of loans receivable were exchanged for $ 35,000 of newly issued debt securities, the repayment of a loan receivable in full in the amount of $ 2,800 with equity securities, and a $ 200 note receivable was issued for the sale of equity securities to a third party.

(s) Variable Interest Entities

5 unchanged sentences

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

The Company, through its subsidiary, National Holdings Corporation (“National”), has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered VIEs under the accounting guidance.

The Company has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered VIEs under the accounting guidance.

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

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As the fee arrangements under such agreements are arm’s length and contain customary terms and conditions and represent compensation that is considered fair value for the services provided, the fee arrangements are not considered variable interests and accordingly, the Company does not consolidate such VIEs.

Placement agent fees attributable to such arrangements during the six months ended June 30, 2022 and 2021 were $ 12,088 and $ 25,382 , respectively, and are included in services and fees in the condensed consolidated statements of operations.

Placement agent fees attributable to such arrangements during the three months ended September 30, 2022 and 2021 were $ 349 and $ 26,732 , respectively, and for the nine months ended September 30, 2022 and 2021 were $ 12,437 and $ 52,114 , respectively, and are included in services and fees in the condensed consolidated statements of operations.

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

September 30,

2022 December 31,

4 unchanged sentences

Riley Principal 150 and 250 Merger Corporations

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

In 2021, the Company along with B.

Riley Principal 150 Merger Corporation (“BRPM 150”) and BRPM 250, both special purpose acquisition companies incorporated as Delaware corporations, consummated the initial public offerings of 17,250,000 units of BRPM 150 and 17,250,000 units of BRPM 250.

Each Unit of BRPM 150 and BRPM 250 consisted of one share of class A common stock and one-third of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of BRPM 150 or BRPM 250 class A common stock at an exercise price of $ 11.50 per share.

5 unchanged sentences

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

Both BRPM 150 and BRPM 250 are determined to be VIE’s because each of the entities do not have enough equity at risk to finance their activities without additional subordinated

financial support.

Both BRPM 150 and BRPM 250 are determined to be VIE’s because each of the entities do not have enough equity at risk to finance their activities without additional subordinated financial support.

The Company has determined that the class A shareholders of BRPM 150 and BRPM 250 do not have substantive rights as shareholders of BRPM 150 and BRPM 250 since these equity interests are determined to be temporary equity.

As such, the Company has determined that it is the primary beneficiary of BRPM 150 and BRPM 250 as it has the right to receive benefits or the obligation to absorb losses of each of the entities, as well as the power to direct a majority of the activities that significantly impact BRPM 150 and BRPM 250’s economic performance.

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

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

On July 19, 2022, BRPM 150 completed a business combination with FaZeClan Holdings, Inc.

(“Faze Holdings”) in a reverse merger transaction resulting in BRPM 150 no longer being a VIE of the Company and no longer be included in the consolidated group of the Company.

In connection with the de-consolidation of BRPM 150 subsequent to June 30, 2022, among other items, prepaid expenses and other assets decreased by $ 172,762 related to funds held in a trust account and redeemable noncontrolling interests in equity of subsidiaries decreased by $ 172,500 .

(“Faze Holdings”) in a reverse merger transaction resulting in BRPM 150 no longer being a VIE of the Company and no longer being included in the consolidated group of the Company.

In connection with the de-consolidation of BRPM 150, among other items, prepaid expenses and other assets decreased by $ 172,584 related to funds held in a trust account and redeemable noncontrolling interests in equity of subsidiaries decreased by $ 172,500 .

During the three and nine months ended September 30, 2022, the Company recognized incentive fees of $ 41,885 included in services and fees in the condensed consolidated statement of operations.

See Note 18 for further discussion.

(t) Recent Accounting Standards

Not yet adopted

In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820).

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations to enhance transparency about an entity’s use of supplier finance programs.

Under the ASU, the buyer in a supplier finance program is required to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented.

An entity should also consider whether the existence of a supplier finance program changes the appropriate presentation of the payables in the program from trade payables to borrowings.

The amendments in this update are effective for the Company for fiscal periods beginning after December 15, 2022, including interim periods within those fiscal years, except for the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023, with early adoption permitted.

The Company is currently evaluating the effect of this new standard, which is not expected to have a material impact on its financial position and results of operations.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820).

This update clarifies that a contractual restriction on the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security's unit of account.

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Recently adopted

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) , which provided optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”).

The amendments applied only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) , which refined the scope of Topic 848 through optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships.

The Company adopted the ASU effective January 1, 2022.

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

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

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

The amendments applied only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.

hedging relationships.

The Company adopted the ASU effective January 1, 2022.

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

NOTE 3 — RESTRUCTURING CHARGE

The Company had no restructuring charges during the three and six months ended June 30, 2022 and 2021.

The following tables summarize the changes in accrued restructuring charge during the three and six months ended June 30, 2022 and 2021:

The Company recorded $ 8,016 in restructuring charges during the three and nine months ended September 30, 2022.

The Company did no t record any restructuring charges for the three and nine months ended September 30, 2021.

The restructuring charges during the three and nine months ended September 30, 2022 were primarily related to the reorganization and consolidation activities in the Wealth Management segment and the Principal Investments - Communications and Other segment.

Reorganization and consolidation activities consisted of reductions in workforce, facility closures, and related intangible impairments and asset disposals.

The following tables summarize the changes in accrued restructuring charge during the three and nine months ended September 30, 2022 and 2021:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Balance, beginning of period $ 574 $ 676 $ 624 $ 727

Restructuring charge 8,016 — 8,016 —

Cash paid ( 1,448 ) ( 29 ) ( 1,503 ) ( 86 )

1 unchanged sentence

Balance, end of period $ 2,522 $ 650 $ 2,522 $ 650

The following tables summarize the restructuring activities by reportable segment during the three and nine months ended September 30, 2022.

Wealth Management Principal Investments - Communications and Other Total

Restructuring charge (recovery) for the three and nine months ended September 30, 2022

Employee termination $ 354 $ 906 $ 1,260

Impairment of intangibles 2,012 2,162 4,174

Facility closure and consolidation 1,741 841 2,582

Total restructuring charge $ 4,107 $ 3,909 $ 8,016

NOTE 4 — SECURITIES LENDING

The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of June 30, 2022 and December 31, 2021:

The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of September 30, 2022 and December 31, 2021:

Gross amounts recognized Gross amounts offset in the consolidated balance

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

As of June 30, 2022

As of September 30, 2022

Securities borrowed $ 2,243,306 $ — $ 2,243,306 $ 2,243,306 $ —

8 unchanged sentences

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

September 30,

2022 December 31,

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

6 unchanged sentences

Prepaid expenses and other assets consist of the following:

September 30,

2022 December 31,

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NOTE 7 — GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill was $ 394,331 and $ 250,568 as of June 30, 2022 and December 31, 2021, respectively.

The changes in the carrying amount of goodwill during the six months ended June 30, 2022, resulting primarily from the acquisition of FocalPoint in the Capital Markets segment and Lingo in the Principal Investments – Communications and Other segment (as previously discussed in Note 1), were as follows:

Goodwill was $ 429,187 and $ 250,568 as of September 30, 2022 and December 31, 2021, respectively.

The changes in the carrying amount of goodwill during the nine months ended September 30, 2022, resulting primarily from the acquisitions of FocalPoint in the Capital Markets segment and Lingo and BullsEye in the Principal Investments – Communications and Other segment (as previously discussed in Note 1), were as follows:

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

Balance as of December 31, 2021 $ 51,338 $ 51,195 $ 1,975 $ 23,680 $ 122,380 $ 250,568

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

Goodwill acquired during the period:

Acquisition of other businesses 110,512 — — — 68,107 178,619

Balance as of June 30, 2022

Balance as of September 30, 2022

$ 161,850 $ 51,195 $ 1,975 $ 23,680 $ 190,487 $ 429,187

Intangible assets consisted of the following:

As of June 30, 2022

As of September 30, 2022

As of December 31, 2021

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Total intangible assets $ 391,350 $ ( 95,004 ) $ 296,346 $ 278,006 $ ( 70,355 ) $ 207,651

Amortization expense was $ 6,940 and $ 5,134 during the three months ended June 30, 2022 and 2021, respectively, and $ 13,756 and $ 11,020 during the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, estimated future amortization expense was $ 14,825 , $ 23,934 , $ 19,814 , $ 15,346 , and $ 14,530 for the years ended December 31, 2022 (remaining six months), 2023, 2024, 2025 and 2026, respectively.

The estimated future amortization expense after December 31, 2026 was $ 56,597 .

Amortization expense was $ 9,390 and $ 5,156 during the three months ended September 30, 2022 and 2021, respectively, and $ 23,146 and $ 16,176 during the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, estimated future amortization expense was $ 9,466 , $ 32,249 , $ 28,169 , $ 23,685 , and $ 20,916 for the years ended December 31, 2022 (remaining three months), 2023, 2024, 2025 and 2026, respectively.

The estimated future amortization expense after December 31, 2026 is $ 56,585 .

NOTE 8 — NOTES PAYABLE

1 unchanged sentence

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

Cash advances and the issuance of letters of credit under the credit facility are made

at the lender’s discretion.

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.

4 unchanged sentences

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

Interest expense totaled $ 39 and $ 108 during the three months ended June 30, 2022 and 2021, respectively, and $ 147 and $ 216 during the six months ended June 30, 2022 and 2021, respectively.

There was no outstanding balance on this credit facility as of June 30, 2022 and December 31, 2021.

As of June 30, 2022, there were no open letters of credit outstanding.

The Company is in compliance with all financial covenants in the asset based credit facility as of June 30, 2022.

Interest expense totaled $ 18 and $ 109 during the three months ended September 30, 2022 and 2021, respectively, and $ 165 and $ 325 during the nine months ended September 30, 2022 and 2021, respectively.

There was no outstanding balance on this credit facility as of September 30, 2022 and December 31, 2021.

As of September 30, 2022, there were no open letters of credit outstanding.

The Company is in compliance with all financial covenants in the asset based credit facility as of September 30, 2022.

Other Notes Payable

As of June 30, 2022 and December 31, 2021, the outstanding balance for the other notes payable was $ 23,186 and $ 22,891 , respectively.

Interest expense was $ 295 and $ 5 during the three months ended June 30, 2022 and 2021, respectively, and $ 527 and $ 12 during the six months ended June 30, 2022 and 2021, respectively.

Notes payable consisted of additional deferred cash consideration owed to the sellers of FocalPoint as of June 30, 2022.

Notes payable to a clearing organization for one of the Company’s broker dealers, which accrued interest at the prime rate plus 2.0 %, matured on January 31, 2022 and was repaid during the six months ended June 30, 2022.

As of September 30, 2022 and December 31, 2021, the outstanding balance for the other notes payable was $ 25,075 and $ 357 , respectively.

Interest expense was $ 298 and $ 4 during the three months ended September 30, 2022 and 2021, respectively, and $ 825 and $ 16 during the nine months ended September 30, 2022 and 2021, respectively.

Notes payable consisted of additional deferred cash consideration owed to the sellers of FocalPoint as of September 30, 2022.

NOTE 9 — TERM LOANS AND REVOLVING CREDIT FACILITY

Pathlight Credit Agreement

On September 23, 2022, the Company's subsidiary, B.

Riley Receivables II, LLC, a Delaware limited liability company (the “Borrower”), entered into a credit agreement (the “Pathlight Credit Agreement”) by and among PLC Agent, LLC in the capacity as administrative agent and Pathlight Capital Fund I LP, Pathlight Capital Fund II LP, and Pathlight Capital Fund III LP as the lenders (collectively, “Pathlight”) for a five-year $ 148,200 term loan.

The Pathlight Credit Agreement was entered in connection with the purchase of the 2022 Badcock Receivable discussed in Note 2.

The term loan bears interest on the outstanding principal amount equal to the Term SOFR rate plus an applicable margin of 6.50 %.

As of September 30, 2022, the interest rate on the Pathlight Credit Agreement was 10.00 %.

The Pathlight Credit Agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends.

The Pathlight Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding Pathlight Credit Agreement.

Principal outstanding under the Pathlight Credit Agreement is repaid based on collections of the 2022 Badcock Receivable less other application of payments as defined in the Pathlight Credit Agreement and the remaining principal balance is due at final maturity on September 23, 2027.

As of September 30, 2022, the outstanding balance on the term loan was $ 144,584 (net of unamortized debt issuance costs of $ 3,616 ).

Interest expense on the term loan during the three and nine months ended September 30, 2022 was $ 418 (including amortization of deferred debt issuance costs of $ 89 ).

Lingo Credit Agreement

On August 16, 2022, the Company's subsidiary, Lingo, a Delaware limited liability company (the “Borrower”), entered into a credit agreement (the “Lingo Credit Agreement”) by and among the Borrower, the Company as the secured guarantor, and Banc of California, N.A.

in its capacity as administrative agent and lender, for a five-year $ 45,000 term loan.

On September 9, 2022, Lingo entered into the First Amendment to the Lingo Credit Agreement with Grasshopper Bank (the “New Lender”) for an incremental term loan of $ 7,500 , increasing the principal balance of the term loan to $ 52,500 .

The term loan bears interest on the outstanding principal amount equal to the Term SOFR rate plus a margin of 3.00 % to 3.75 % per annum, depending on the consolidated total funded debt ratio as defined in the Lingo Credit Agreement, plus applicable spread adjustment.

As of September 30, 2022, the interest rate on the Lingo Credit Agreement was 6.29 %.

The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends.

In addition, the agreement requires the Borrower to maintain certain financial ratios.

The agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

If an event of

default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding agreement.

Principal outstanding is due in quarterly installments starting on March 31, 2023.

Quarterly installments from March 31, 2023 to December 31, 2023 are in the amount of $ 1,641 per quarter, from March 31, 2024 to December 31, 2024 are in the amount of $ 1,969 per quarter, from March 31, 2025 to June 30, 2027 are in the amount of $ 2,625 , and the remaining principal balance is due at final maturity on August 16, 2027.

As of September 30, 2022, the outstanding balance on the term loan was $ 51,595 (net of unamortized debt issuance costs of $ 905 ).

Interest expense on the term loan during the three and nine months ended September 30, 2022 was $ 403 (including amortization of deferred debt issuance costs of $ 26 ).

Nomura Credit Agreement

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Quarterly installments from September 30, 2022 to March 31, 2025 are in the amount of $ 3,750 per quarter.

As of June 30, 2022 and December 31, 2021, the outstanding balances on the Term Loan Facility and Incremental Facility were $ 293,676 (net of unamortized debt issuance costs of $ 6,324 ) and $ 292,650 (net of unamortized debt issuance costs of $ 7,350 ), respectively.

Interest on the term loan during the three months ended June 30, 2022 and 2021 was $ 4,735 (including amortization of deferred debt issuance costs of $ 516 ) and $ 236 (including amortization of deferred debt issuance costs of $ 30 ), respectively.

Interest on the term loan during the six months ended June 30, 2022 and 2021 was $ 8,837 (including amortization of deferred debt issuance costs of $ 1,025 ) and $ 236 (including amortization of deferred debt issuance costs of $ 30 ), respectively.

The interest rate on the term loan as of June 30, 2022 and December 31, 2021 was 6.65 % and 4.72 %, respectively.

The Company had an outstanding balance of $ 80,000 under the Revolving Credit Facility as of June 30, 2022 and December 31, 2021.

Interest on the revolving facility during the three and six months ended June 30, 2022 was $ 1,227 (including amortization of deferred financing costs of $ 145 ) and $ 2,327 (including amortization of deferred financing costs of $ 288 ), respectively.

The unused commitment fee on the revolving facility for the three and six months ended June 30, 2021 was $ 30 (including amortization of deferred financing costs of $ 13 ).

The interest rate on the revolving facility as of June 30, 2022 and December 31, 2021 was 6.13 % and 4.67 %, respectively.

The Company is in compliance with all financial covenants in the Credit Agreement as of June 30, 2022.

As of September 30, 2022 and December 31, 2021, the outstanding balances on the Term Loan Facility and Incremental Facility were $ 290,448 (net of unamortized debt issuance costs of $ 5,802 ) and $ 292,650 (net of unamortized debt issuance costs of $ 7,350 ), respectively.

Interest on the term loan during the three months ended September 30, 2022 and 2021 was $ 5,720 (including amortization of deferred debt issuance costs of $ 523 ) and $ 2,720 (including amortization of deferred debt issuance costs of $ 350 ), respectively.

Interest on the term loan during the nine months ended September 30, 2022 and 2021 was $ 14,557 (including amortization of deferred debt issuance costs of $ 1,548 ) and $ 2,956 (including amortization of deferred debt issuance costs of $ 380 ), respectively.

The interest rate on the term loan as of September 30, 2022 and December 31, 2021 was 8.10 % and 4.72 %, respectively.

The Company had an outstanding balance of $ 74,700 and $ 80,000 under the Revolving Credit Facility as of September 30, 2022 and December 31, 2021, respectively.

Interest on the revolving facility during the three months ended September 30, 2022 and 2021 was $ 1,410 (including unused commitment fee of $ 6 and amortization of deferred financing costs of $ 146 ) and $ 790 (including unused commitment fee of $ 58 and amortization of deferred financing costs of $ 146 ), respectively.

Interest on the revolving facility during the nine months ended September 30, 2022 and 2021 was $ 3,737 (including unused commitment fee of $ 6 and amortization of deferred financing costs of $ 434 ) and $ 820 (including unused commitment fee of $ 76 and amortization of deferred financing costs of $ 159 ).

The interest rate on the revolving facility as of September 30, 2022 and December 31, 2021 was 7.64 % and 4.67 %, respectively.

BRPAC Credit Agreement

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In addition, the BRPAC Credit Agreement requires the Credit Parties to maintain certain financial ratios.

The BRPAC Credit Agreement also

contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

The BRPAC Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding BRPAC Credit Agreement.

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(i) the Lenders agreed to make a new $ 75,000 term loan to the Borrowers, the proceeds of which the Borrowers’ used to repay the outstanding principal amount of the existing terms loans and optional loans and will use for other general corporate purposes, (ii) a new applicable margin level of 3.50 % was established as set forth from the date of the Fourth Amendment, (iii) Marconi Wireless Holdings, LLC was added to the Borrowers, (iv) the maturity date of the term loan was set to June 30, 2027, and (v) the Borrowers were permitted to make certain distributions to the parent company of the Borrowers.

The borrowings under the amended BRPAC Credit Agreement bear interest equal to the SOFR rate plus a margin of 2.75 % to 3.50 % per annum, depending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement.

As of June 30, 2022 and December 31, 2021, the interest rate on the BRPAC Credit Agreement was 4.66 % and 3.17 %, respectively.

The borrowings under the amended BRPAC Credit Agreement bear interest equal to the Term SOFR rate plus a margin of 2.75 % to 3.50 % per annum, depending on the Borrowers’ consolidated total funded debt ratio as defined in the

BRPAC Credit Agreement.

As of September 30, 2022 and December 31, 2021, the interest rate on the BRPAC Credit Agreement was 6.04 % and 3.17 %, respectively.

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

Quarterly installments from September 30, 2022 to December 31, 2022 are in the amount of $ 2,813 per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $ 4,688 per quarter, from March 31, 2024 to December 31, 2026 are in the amount of $ 3,750 per quarter, on March 31, 2027 is in the amount of $ 2,813 , and the remaining principal balance is due at final maturity on June 30, 2027.

As of June 30, 2022 and December 31, 2021, the outstanding balance on the term loan was $ 74,140 (net of unamortized debt issuance costs of $ 860 ) and $ 53,735 (net of unamortized debt issuance costs of $ 582 ), respectively.

Interest expense on the term loan during the three months ended June 30, 2022 and 2021 was $ 578 (including amortization of deferred debt issuance costs of $ 99 ) and $ 663 (including amortization of deferred debt issuance costs of $ 77 ), respectively.

Interest expense on the term loan during the six months ended June 30, 2022 and 2021 was $ 1,080 (including amortization of deferred debt issuance costs of $ 171 ) and $ 1,377 (including amortization of deferred debt issuance costs of $ 157 ), respectively.

The Company is in compliance with all financial covenants in the BRPAC Credit Agreement as of June 30, 2022.

Quarterly installments on December 31, 2022 are in the amount of $ 2,813 , from March 31, 2023 to December 31, 2023 are in the amount of $ 4,688 per quarter, from March 31, 2024 to December 31, 2026 are in the amount of $ 3,750 per quarter, on March 31, 2027 is in the amount of $ 2,813 , and the remaining principal balance is due at final maturity on June 30, 2027.

As of September 30, 2022 and December 31, 2021, the outstanding balance on the term loan was $ 71,408 (net of unamortized debt issuance costs of $ 779 ) and $ 53,735 (net of unamortized debt issuance costs of $ 582 ), respectively.

Interest expense on the term loan during the three months ended September 30, 2022 and 2021 was $ 1,088 (including amortization of deferred debt issuance costs of $ 81 ) and $ 554 (including amortization of deferred debt issuance costs of $ 72 ), respectively.

Interest expense on the term loan during the nine months ended September 30, 2022 and 2021 was $ 2,168 (including amortization of deferred debt issuance costs of $ 252 ) and $ 1,931 (including amortization of deferred debt issuance costs of $ 229 ), respectively.

NOTE 10 — SENIOR NOTES PAYABLE

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

September 30,

2022 December 31,

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$ 1,661,191 $ 1,606,560

During the three months ended June 30, 2022 and 2021, the Company issued $ 15,800 and $ 72,469 , respectively, of senior notes, and during the six months ended June 30, 2022 and 2021, the Company issued $ 35,873 and $ 85,327 , respectively, of senior notes with maturity dates ranging from May 2024 to August 2028 pursuant to At the Market

Issuance Sales Agreements with B.

During the three months ended September 30, 2022 and 2021, the Company issued $ 15,448 and $ 97,715 , respectively, of senior notes, and during the nine months ended September 30, 2022 and 2021, the Company issued $ 51,321 and $ 183,042 , respectively, of senior notes with maturity dates ranging from May 2024 to August 2028 pursuant to At the Market Issuance Sales Agreements with B.

Riley Securities, Inc.

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

As of June 30, 2022 and December 31, 2021, the total senior notes outstanding was $ 1,644,778 (net of unamortized debt issue costs of $ 19,144 ) and $ 1,606,560 (net of unamortized debt issue costs of $ 21,489 ) with a weighted average interest rate of 5.70 % and 5.69 %, respectively.

As of September 30, 2022 and December 31, 2021, the total senior notes outstanding was $ 1,661,191 (net of unamortized debt issue costs of $ 18,180 ) and $ 1,606,560 (net of unamortized debt issue costs of $ 21,489 ) with a weighted average interest rate of 5.70 % and 5.69 %, respectively.

Interest on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $ 24,650 and $ 19,970 for the three months ended June 30, 2022 and 2021, respectively, and totaled $ 49,072 and $ 38,564 for the six months ended June 30, 2022 and 2021, respectively.

Interest expense on senior notes totaled $ 25,149 and $ 21,458 for the three months ended September 30, 2022 and 2021, respectively, and totaled $ 74,221 and $ 60,010 for the nine months ended September 30, 2022 and 2021, respectively.

Sales Agreement Prospectus to Issue Up to $ 250,000 of Senior Notes

The most recent sales agreement prospectus was filed by us with the SEC on January 5, 2022 (the “Sales Agreement Prospectus”) superseding the prospectus filed with the SEC on August 11, 2021, the prospectus filed with the SEC on April 6, 2021, and the prospectus filed with the SEC on January 28, 2021.

The most recent sales agreement prospectus was filed by the Company with the SEC on January 5, 2022 (the “Sales Agreement Prospectus”) superseding the prospectus filed with the SEC on August 11, 2021, the prospectus filed with the SEC on April 6, 2021, and the prospectus filed with the SEC on January 28, 2021.

This program provides for the sale by the Company of up to $ 250,000 of certain of the Company’s senior notes.

As of June 30, 2022 and December 31, 2021, the Company had $ 76,038 and $ 111,911 , respectively, remaining availability under the Sales Agreement Prospectus.

As of September 30, 2022 and December 31, 2021, the Company had $ 60,590 and $ 111,911 , respectively, remaining availability under the Sales Agreement Prospectus.

NOTE 11 — ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

September 30,

2022 December 31,

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NOTE 12 — REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue from contracts with customers by reportable segment for the three and six months ended June 30, 2022 and 2021 was as follows:

Revenue from contracts with customers by reportable segment for the three and nine months ended September 30, 2022 and 2021 was as follows:

Segment Wealth

5 unchanged sentences

Segment Total

Revenues for the three months ended June 30, 2022

Revenues for the three months ended September 30, 2022

Corporate finance, consulting and investment banking fees $ 41,302 $ — $ — $ 12,342 $ — $ — $ 53,644

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Interest income - Loans and securities lending 55,054 — 2,540 — — — 57,594

Trading (losses) gains on investments ( 214,493 ) 1,528 — — — ( 212,965 )

Trading gains on investments 15,171 1,027 — — — 16,198

Fair value adjustment on loans ( 4,044 ) — — — — — ( 4,044 )

1 unchanged sentence

Total revenues $ 179,398 $ 48,172 $ 7,039 $ 22,835 $ 77,896 $ 5,023 $ 340,363

(1) Includes sale of goods of $ 1,887 in Principal Investments - Communications and Other.

(1) Includes sale of goods of $ 2,550 in Auction and Liquidation and $ 1,580 in Principal Investments - Communications and Other.

Segment Wealth

5 unchanged sentences

Segment Total

Revenues for the three months ended June 30, 2021

Revenues for the three months ended September 30, 2021

Corporate finance, consulting and investment banking fees $ 116,044 $ — $ — $ 12,350 $ — $ — $ 128,394

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Segment Total

Revenues for the six months ended June 30, 2022

Revenues for the nine months ended September 30, 2022

Corporate finance, consulting and investment banking fees $ 118,448 $ — $ — $ 44,958 $ — $ — $ 163,406

10 unchanged sentences

Total revenues $ 145,366 $ 188,040 $ 14,318 $ 73,081 $ 153,093 $ 14,754 $ 588,652

(1) Includes sale of goods of $ 3,765 in Principal Investments - Communications and Other.

(1) Includes sale of goods of $ 2,550 in Auction and Liquidation and $ 5,345 in Principal Investments - Communications and Other.

Segment Wealth

5 unchanged sentences

Segment Total

Revenues for the six months ended June 30, 2021

Revenues for the nine months ended September 30, 2021

Corporate finance, consulting and investment banking fees $ 370,337 $ — $ — $ 40,290 $ — $ — $ 410,627

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Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligation(s) are satisfied.

Receivables related to revenues from contracts with customers totaled $ 52,935 and $ 49,673 as of June 30, 2022 and December 31, 2021, respectively.

The Company had no significant impairments related to these receivables during the three and six months ended June 30, 2022 and 2021.

The Company also had $ 16,491 and $ 12,315 of unbilled receivables included in prepaid expenses and other assets as of June 30, 2022 and December 31, 2021, respectively, and advances against customer contracts included in prepaid expenses and other assets of $ 200 as of June 30, 2022 and December 31, 2021.

The Company’s deferred revenue primarily relates to retainer and milestone fees received from corporate finance and investment banking advisory engagements, asset management agreements, financial consulting engagements, subscription services where the performance obligation has not yet been

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

Deferred revenue as of June 30, 2022 and December 31, 2021 was $ 79,226 and $ 69,507 , respectively.

The Company expects to recognize the deferred revenue of $ 79,226 as of June 30, 2022 as service and fee revenues when the performance obligation is met during the years December 31, 2022 (remaining six months), 2023, 2024, 2025 and 2026 in the amount of $ 48,031 , $ 12,620 , $ 8,421 , $ 4,792 , and $ 2,247 , respectively.

Receivables related to revenues from contracts with customers totaled $ 64,707 and $ 49,673 as of September 30, 2022 and December 31, 2021, respectively.

The Company had no significant impairments related to these receivables during the three and nine months ended September 30, 2022 and 2021.

The Company also had $ 12,483 and $ 12,315 of unbilled receivables included in prepaid expenses and other assets as of September 30, 2022 and December 31, 2021, respectively.

additional royalty revenue based on a percentage of defined sales.

Deferred revenue as of September 30, 2022 and December 31, 2021 was $ 89,157 and $ 69,507 , respectively.

The Company expects to recognize the deferred revenue of $ 89,157 as of September 30, 2022 as service and fee revenues when the performance obligation is met during the years December 31, 2022 (remaining three months), 2023, 2024, 2025 and 2026 in the amount of $ 57,058 , $ 13,519 , $ 8,637 , $ 4,496 , and $ 2,105 , respectively.

The Company expects to recognize the deferred revenue of $ 3,342 after December 31, 2026.

During the three months ended June 30, 2022 and 2021, the Company recognized revenue of $ 10,055 and $ 9,370 that was recorded as deferred revenue at the beginning of the respective year.

During the six months ended June 30, 2022 and 2021, the Company recognized revenue of $ 24,994 and $ 26,649 that was recorded as deferred revenue at the beginning of the respective year.

During the three months ended September 30, 2022 and 2021, the Company recognized revenue of $ 7,293 and $ 4,728 that was recorded as deferred revenue at the beginning of the respective year.

During the nine months ended September 30, 2022 and 2021, the Company recognized revenue of $ 32,287 and $ 31,377 that was recorded as deferred revenue at the beginning of the respective year.

Contract Costs

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and (3) commissions paid to obtain magicJack and Lingo contracts which are recognized ratably over the contract term and third party support costs for magicJack and related equipment purchased by customers which are recognized ratably over the service period.

The capitalized costs to fulfill a contract were $ 2,564 and $ 1,605 as of June 30, 2022 and December 31, 2021, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets.

During the three months ended June 30, 2022 and 2021, the Company recognized expenses of $ 175 and $ 51 related to capitalized costs to fulfill a contract, respectively.

During the six months ended June 30, 2022 and 2021, the Company recognized expenses of $ 1,090 and $ 109 related to capitalized costs to fulfill a contract, respectively.

There were no significant impairment charges recognized in relation to these capitalized costs during the three and six months ended June 30, 2022 and 2021.

The capitalized costs to fulfill a contract were $ 5,483 and $ 1,605 as of September 30, 2022 and December 31, 2021, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets.

During the three months ended September 30, 2022 and 2021, the Company recognized expenses of $ 723 and $ 324 related to capitalized costs to fulfill a contract, respectively.

During the nine months ended September 30, 2022 and 2021, the Company recognized expenses of $ 1,813 and $ 433 related to capitalized costs to fulfill a contract, respectively.

There were no significant impairment charges recognized in relation to these capitalized costs during the three and nine months ended September 30, 2022 and 2021.

Remaining Performance Obligations and Revenue Recognized from Past Performance

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

The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material as of June 30, 2022.

Corporate finance and investment banking fees and retail liquidation engagement fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded as the fees are considered variable and not included in the transaction price as of June 30, 2022.

The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material as of September 30, 2022.

NOTE 13 — INCOME TAXES

The Company’s effective income tax rate was a provision of 27.8 % and 26.1 % for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, the Company had federal net operating loss carryforwards of $ 48,869 and state net operating loss carryforwards of $ 52,548 .

The Company’s effective income tax rate was a benefit of 30.0 % and a provision of 26.8 % for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the Company had federal net operating loss carryforwards of $ 48,869 and state net operating loss carryforwards of $ 52,548 .

The Company’s federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2031 through December 31, 2038.

4 unchanged sentences

Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income.

As of June 30, 2022, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance.

As of September 30, 2022, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance.

The Company does not believe that

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According to ASC 480 - Distinguishing Liabilities from Equity , there is no impact on earnings per share in the computation of basic and diluted earnings per share to common shareholders for changes in the carrying value of the redeemable noncontrolling interests in equity, when such changes in carrying value which in substance approximates fair value.

Securities that could potentially dilute basic net income per share in the future that were not included in the computation of diluted net income per share were 1,757,081 and 936,727 for the three months ended June 30, 2022 and 2021, respectively, and 1,553,571 and 832,360 for the six months ended June 30, 2022 and 2021, respectively, because to do so would have been anti-dilutive.

Securities that could potentially dilute basic net income per share in the future that were not included in the computation of diluted net income per share were 1,721,132 and 1,069,184 for the three months ended September 30, 2022 and 2021, respectively, and 1,609,425 and 911,302 for the nine months ended September 30, 2022 and 2021, respectively, because to do so would have been anti-dilutive.

Basic and diluted earnings per share were calculated as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net (loss) income attributable to B.

Net income (loss) attributable to B.

Riley Financial, Inc.

1 unchanged sentence

Preferred stock dividends ( 2,002 ) ( 1,929 ) ( 6,006 ) ( 5,467 )

Net (loss) income applicable to common shareholders $ ( 142,161 ) $ 73,887 $ ( 154,225 ) $ 326,794

Net income (loss) applicable to common shareholders $ 45,835 $ 48,621 $ ( 108,390 ) $ 375,415

Weighted average common shares outstanding:

3 unchanged sentences

Diluted 29,968,417 28,794,066 28,068,160 28,726,492

Basic (loss) income per common share $ ( 5.07 ) $ 2.70 $ ( 5.52 ) $ 12.03

Diluted (loss) income per common share $ ( 5.07 ) $ 2.58 $ ( 5.52 ) $ 11.39

Basic income (loss) per common share $ 1.62 $ 1.76 $ ( 3.86 ) $ 13.75

Diluted income (loss) per common share $ 1.53 $ 1.69 $ ( 3.86 ) $ 13.07

NOTE 15 — COMMITMENTS AND CONTINGENCIES

27 unchanged sentences

The 2021 Stock Incentive Plan (the “2021 Plan”) replaced the Amended and Restated 2009 Stock Incentive Plan on May 27, 2021.

Share-based compensation expense for restricted stock units under the Company’s 2021 Plan was $ 14,159 and $ 8,493 for the three months ended June 30, 2022 and 2021, respectively, and $ 31,019 and $ 13,792 for the six months ended June 30, 2022 and 2021, respectively.

During the six months ended June 30, 2022, in connection with employee stock incentive plans, the Company granted 555,168 restricted stock units with a grant date fair value of $ 31,670 and 65,000 performance based restricted stock units with a grant date fair value of $ 2,329 .

During the six months ended June 30, 2021, in connection with employee stock incentive plans, the Company granted 365,050 restricted stock units with a grant date fair value of $ 25,534 and 1,100,000 performance based restricted stock units with a grant date fair value of $ 40,876 .

Share-based compensation expense for restricted stock units under the Company’s 2021 Plan was $ 14,378 and $ 9,243 for the three months ended September 30, 2022 and 2021, respectively, and $ 45,397 and $ 23,035 for the nine months ended September 30, 2022 and 2021, respectively.

During the nine months ended September 30, 2022, in connection with employee stock incentive plans, the Company granted 559,168 restricted stock units with a grant date fair value of $ 31,859 and 65,000 performance based restricted stock units with a grant date fair value of $ 2,329 .

During the nine months ended September 30, 2021, in connection with employee stock incentive plans, the Company granted 423,660 restricted stock units with a grant date fair value of $ 29,439 and 1,100,000 performance based restricted stock units with a grant date fair value of $ 40,876 .

The restricted stock units generally vest over a period of one to five years based on continued service.

3 unchanged sentences

(b) Employee Stock Purchase Plan

In connection with the Company’s Employee Stock Purchase Plan ("Purchase Plan"), share based compensation was $ 43 and $ 115 for the three months ended June 30, 2022 and 2021, respectively, and $ 196 and $ 342 for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022 and December 31, 2021, there were 398,442 and 450,717 shares reserved for issuance under the Purchase Plan, respectively.

In connection with the Company’s Employee Stock Purchase Plan ("Purchase Plan"), share based compensation was $ 120 and $ 132 during the three months ended September 30, 2022 and 2021, respectively, and $ 316 and $ 474 during the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, there were 398,442 and 450,717 shares reserved for issuance under the Purchase Plan, respectively.

1 unchanged sentence

All share repurchases were effected on the open market at prevailing market prices or in privately negotiated transactions.

During the six months ended June 30, 2022 and 2021, the Company did not repurchase shares of its common stock.

During the nine months ended September 30, 2022 and 2021, the Company repurchased 571 shares of its common stock for $ 27 and 44,650 shares of its common stock for $ 2,656 , respectively.

The shares repurchased under the program are retired.

1 unchanged sentence

(d) Preferred Stock

During the six months ended June 30, 2022 and 2021, the Company issued 19,659 and 76,417 depository shares of the Series A Preferred Stock, respectively.

There were 2,834,144 and 2,814,485 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.

Total liquidation preference for the Series A Preferred Stock as of June 30, 2022 and December 31, 2021, was $ 70,854 and $ 70,362 , respectively.

Dividends on the Series A preferred paid during the six months ended June 30, 2022 and 2021, were $ 0.4296875 per depository share.

During the six months ended June 30, 2022 and 2021, the Company issued 3,941 and 228,477 depository shares of the Series B Preferred Stock.

There were 1,701,075 and 1,697,134 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.

Total liquidation preference for the Series B Preferred Stock as of June 30, 2022 and December 31, 2021, was $ 42,527 and $ 42,428 , respectively.

Dividends on the Series B preferred paid during the six months ended June 30, 2022 and 2021, were $ 0.4609375 per depository share.

During the nine months ended September 30, 2022 and 2021, the Company issued 19,659 and 207,599 depository shares of the Series A Preferred Stock, respectively.

There were 2,834,144 and 2,814,485 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

Total liquidation preference for the Series A Preferred Stock as of September 30, 2022 and December 31, 2021, was $ 70,854 and $ 70,362 , respectively.

Dividends on the Series A preferred paid during the nine months ended September 30, 2022 and 2021, were $ 0.4296875 per depository share.

During the nine months ended September 30, 2022 and 2021, the Company issued 3,941 and 307,148 depository shares of the Series B Preferred Stock.

There were 1,701,075 and 1,697,134 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

Total liquidation preference for the Series B Preferred Stock as of September 30, 2022 and December 31, 2021, was $ 42,527 and $ 42,428 , respectively.

Dividends on the Series B preferred paid during the nine months ended September 30, 2022 and 2021, were $ 0.4609375 per depository share.

NOTE 17 — NET CAPITAL REQUIREMENTS

Riley Securities (“BRS”), B.

Riley Wealth Management (“BRWM”), National Securities Corporation (“NSC”) and FocalPoint Securities, LLC ("FocalPoint"), the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory Authority, Inc.

Riley Securities (“BRS”) and B.

Riley Wealth Management (“BRWM”), the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory Authority, Inc.

The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1.

As such, they are subject to the minimum net capital requirements promulgated by the SEC.

As of June 30, 2022, BRS had net capital of $ 150,415 , which was $ 146,305 in excess of required minimum net capital of $ 4,110 ;

BRWM had net capital of $ 10,699 , which was $ 10,029 in excess of required minimum net capital of $ 670 ;

NSC had net capital of $ 363 which was $ 113 in excess of required minimum net capital of $ 250 ;

and FocalPoint had net capital of $ 513 which was $ 271 in excess of the required minimum net capital of $ 242 .

As of December 31, 2021, BRS had net capital of $ 277,611 , which was $ 265,093 in excess of its required minimum net capital of $ 12,518 ;

BRWM had net capital of $ 13,833 , which was $ 12,819 in excess of its required minimum net capital of $ 1,014 ;

and NSC had net capital of $ 1,959 which was $ 959 in excess of required minimum net capital of $ 1,000 .

As of September 30, 2022, BRS had net capital of $ 153,244 , which was $ 146,718 in excess of required minimum net capital of $ 6,526 , and BRWM had net capital of $ 14,915 , which was $ 12,415 in excess of required minimum net capital of $ 2,500 .

As of December 31, 2021, BRS had net capital of $ 277,611 , which was $ 265,093 in excess of its required minimum net capital of $ 12,518 , and BRWM had net capital of $ 13,833 , which was $ 12,819 in excess of its required minimum net capital of $ 1,014 .

NOTE 18 — RELATED PARTY TRANSACTIONS

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In connection with these services, the Funds may bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the Funds.

As of June 30, 2022, amounts due from related parties of $ 645 included $ 625 from the Funds for management fees and other operating expenses.

As of September 30, 2022, amounts due from related parties of $ 814 were from the Funds for management fees and other operating expenses.

As of December 31, 2021, amounts due from related parties of $ 2,306 included $ 621 from the Funds for management fees and other operating expenses, and $ 1,635 due from CA Global Partners (“CA Global”) for operating expenses related to wholesale and industrial liquidation engagements managed by CA Global on behalf of GA Global Partners.

No interest expense was recorded related to loan participations sold to BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of the Company's subsidiaries, during the three and six months ended June 30, 2022.

During the three and six months ended June 30, 2021, the Company recorded interest expense of $ 133 and $ 479 related to loan participations sold to BRCPOF.

No commission income was recorded from introducing trades on behalf of BRCPOF during the three and six months ended June 30, 2022, respectively.

The Company recorded commission income of $ 92 and $ 422 from introducing trades on behalf of BRCPOF during the three and six months ended June 30, 2021.

Our executive officers and members of our board of directors have a 48.1 % financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 27.3 % in BRCPOF as of June 30, 2022.

During the three and nine months ended September 30, 2021, the Company recorded interest expense of $ 46 and $ 525 related to loan participations sold to BRCPOF, respectively.

No commission income was recorded from introducing trades on behalf of BRCPOF during the three and nine months ended September 30, 2022, respectively.

The Company recorded commission income of $ 131 and $ 553 from introducing trades on behalf of BRCPOF during the three and nine months ended September 30, 2021, respectively.

Our executive officers and members of our board of directors have a 46.8 % financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 27.8 % in BRCPOF as of September 30, 2022.

In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P.

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and GACP II, L.P.

During the three months ended June 30, 2022 and 2021, management fees paid for investment advisory services by Whitehawk was $ 94 and $ 236 , respectively, and during the six months ended June 30, 2022 and 2021 management fees paid was $ 1,173 and $ 1,446 , respectively.

During the three months ended September 30, 2022 and 2021, management fees paid for investment advisory services by Whitehawk was zero and $ 142 , respectively, and during the nine months ended September 30, 2022 and 2021 management fees paid was $ 1,173 and $ 1,588 , respectively.

The Company periodically participates in loans and financing arrangements for which the Company has an equity ownership and representation on the board of directors (or similar governing body).

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Babcock and Wilcox

During the three months ended June 30, 2022 and 2021, the Company earned $ 11 and $ 1,710 , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.

During the six months ended June 30, 2022 and 2021, the Company earned $ 64 and $ 12,348 , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.

During the three months ended September 30, 2022 and 2021, the Company earned $ 65 and $ 401 , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.

During the nine months ended September 30, 2022 and 2021, the Company earned $ 129 and $ 12,749 , respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.

One of the Company’s wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the Company to serve as the Chief Executive Officer of B&W until November 30, 2020 (the “Executive Consulting Agreement”), unless terminated by either party with thirty days written notice.

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The Company has loans receivable due from The Arena Group Holdings, Inc.

(fka the Maven, Inc.) ("Arena") included in loans receivable, at fair value with a fair value of $ 68,047 and $ 69,835 as of June 30, 2022 and December 31, 2021, respectively.

(fka the Maven, Inc.) ("Arena") included in loans receivable, at fair value with a fair value of $ 68,575 and $ 69,835 as of September 30, 2022 and December 31, 2021, respectively.

Interest on these loans is payable at 10 % per annum with maturity dates through December 2023.

During the three and six months ended June 30, 2022, the Company earned $ 2 and $ 2,023 , respectively, in underwriting and financial advisory and other fees from Arena in connection with Arena's capital raising activities.

During the three and nine months ended September 30, 2022, the Company earned zero and $ 2,023 , respectively, in underwriting and financial advisory and other fees from Arena in connection with Arena's capital raising activities.

California Natural Resources Group, LLC

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The Company has guaranteed CalNRG’s obligations, up to $ 10,375 , under the CalNRG Credit Facility.

On March 9, 2022, the Company lent $ 10,000 to Faze Clan, Inc.

On March 9, 2022, the Company loaned $ 10,000 to Faze Clan, Inc.

(“Faze”) pursuant to a bridge credit agreement (the “Bridge Agreement”).

On April 25, 2022, the Company lent an additional $ 10,000 pursuant to the Bridge Agreement.

All principal and accrued interest pursuant to the Bridge Agreement was repaid upon closing of Faze’s business combination (the “Business Combination”) with BRPM 150, which following the Business Combination changed its name to Faze

On April 25, 2022, the Company loaned an additional $ 10,000 pursuant to the Bridge Agreement.

As a result of the Business Combination, BRPM 150 is no longer a VIE of the Company.

On July 19, 2022, in connection with the Business Combination, the Company purchased 5,342,500 shares of Faze Holdings Class A common stock for $ 10.00 per share.

As of June 30, 2022 and December 31, 2021, the Company had loans receivable due from other related parties in the amount of $ 500 and $ 4,201 , respectively.

During the three months ended September 30, 2022, the Company earned $ 41,885 of incentive fees for the de-consolidation of BRPM 150 and $ 9,632 of underwriting and financial advisory fees from Faze and BRPM 150 in connection with the Business Combination and capital raising activities.

On October 18, 2022, a subsidiary of the Company acquired all of the issued and outstanding shares of Targus Cayman Holdco Limited (“Targus”) in a transaction with an enterprise value of approximately $ 250,000 , pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with Targus, the sellers identified therein, and the other parties thereto.

The purchase price consisted of a combination of cash, 6.75 % senior notes due 2024, shares of common stock of the Company, and seller financing (the “Targus Transaction”).

Mikel Williams, the chief executive officer of Targus and formerly a member of the Company’s board of directors, resigned from the Company’s board upon the closing of the Targus Transaction.

Williams continues to serve as the chief executive officer of Targus.

As of September 30, 2022 and December 31, 2021, the Company had loans receivable due from other related parties in the amount of zero and $ 4,201 , respectively.

The Company often provides consulting or investment banking services to raise capital for companies in which the Company has significant influence through equity ownership, representation on the board of directors (or similar governing body), or both.

Other than the fees described above, during the three months ended June 30, 2022 and 2021, the Company earned $ 2,156 and $ 1,234 , respectively, of fees related to these services and during the six months ended June 30, 2022 and 2021, the Company earned $ 4,036 and $ 2,957 , respectively, of fees related to these services.

Other than the fees described above, during the three months ended September 30, 2022 and 2021, the Company earned $ 35 and $ 20,868 , respectively, of fees related to these services and during the nine months ended September 30, 2022 and 2021, the Company earned $ 4,071 and $ 25,059 , respectively, of fees related to these services.

NOTE 19 — BUSINESS SEGMENTS

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These reportable segments are all distinct businesses, each with a different marketing strategy and management structure.

In 2022, the segment results in the Capital Markets segment include the operations of FocalPoint and the segment results in the Principal Investments – Communications and Other segment include the operations from Lingo (as previously discussed in Note 1) in each case from the date of acquisition

In 2022, the segment results in the Capital Markets segment include the operations of FocalPoint and the segment results in the Principal Investments – Communications and Other segment include the operations from Lingo and BullsEye (as previously discussed in Note 1) in each case from the date of acquisition.

The following is a summary of certain financial data for each of the Company’s reportable segments:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

1 unchanged sentence

Revenues - Services and fees $ 113,217 $ 134,849 $ 249,727 $ 431,825

Trading (loss) income and fair value adjustments on loans ( 225,455 ) 29,897 ( 294,367 ) 294,400

Trading income (loss) and fair value adjustments on loans 11,127 16,935 ( 283,240 ) 311,335

Interest income - Loans and securities lending 55,054 26,869 178,879 89,280

3 unchanged sentences

Depreciation and amortization ( 2,174 ) ( 514 ) ( 6,271 ) ( 1,526 )

Segment (loss) income ( 158,243 ) 104,682 ( 144,421 ) 470,990

Segment income (loss) 124,104 87,890 ( 20,317 ) 558,880

Wealth Management segment:

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Selling, general and administrative expenses ( 52,302 ) ( 110,157 ) ( 206,438 ) ( 260,331 )

Restructuring charge ( 4,106 ) — ( 4,106 ) —

Depreciation and amortization ( 1,261 ) ( 2,093 ) ( 4,402 ) ( 6,832 )

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Selling, general and administrative expenses ( 2,228 ) ( 5,153 ) ( 6,225 ) ( 9,719 )

Segment income (loss) 451 3,555 ( 349 ) 4,462

Segment income 577 6,298 228 10,760

Financial Consulting segment:

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Selling, general and administrative expenses ( 22,267 ) ( 5,458 ) ( 44,103 ) ( 15,096 )

Restructuring charge ( 3,910 ) — ( 3,910 ) —

Depreciation and amortization ( 6,435 ) ( 2,496 ) ( 13,255 ) ( 7,558 )

2 unchanged sentences

Revenues - Services and fees 5,023 6,372 14,754 15,261

Trading loss and fair value adjustments on loans — ( 83 ) — —

Total revenues 5,174 4,418 9,731 8,889

Selling, general and administrative expenses ( 845 ) ( 972 ) ( 2,419 ) ( 2,338 )

1 unchanged sentence

Segment income 3,599 4,686 10,590 10,780

Consolidated operating (loss) income from reportable segments ( 149,401 ) 121,967 ( 129,501 ) 507,143

Consolidated operating income (loss) from reportable segments 123,393 114,733 ( 6,108 ) 621,876

Corporate and other expenses ( 19,832 ) ( 17,987 ) ( 44,368 ) ( 42,007 )

3 unchanged sentences

Interest expense ( 34,587 ) ( 25,372 ) ( 96,787 ) ( 66,014 )

(Loss) income before income taxes ( 189,101 ) 95,002 ( 201,992 ) 449,118

Benefit from (provision for) income taxes 52,513 ( 19,902 ) 56,208 ( 117,420 )

Net (loss) income ( 136,588 ) 75,100 ( 145,784 ) 331,698

Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 3,571 ( 576 ) 4,437 1,366

Net (loss) income attributable to B.

Income (loss) before income taxes 68,995 74,351 ( 132,997 ) 523,469

(Provision for) benefit from income taxes ( 16,350 ) ( 22,693 ) 39,858 ( 140,113 )

Net income (loss) 52,645 51,658 ( 93,139 ) 383,356

Net income attributable to noncontrolling interests and redeemable noncontrolling interests 4,808 1,108 9,245 2,474

Net income (loss) attributable to B.

Riley Financial, Inc.

1 unchanged sentence

Preferred stock dividends 2,002 1,929 6,006 5,467

Net (loss) income available to common shareholders $ ( 142,161 ) $ 73,887 $ ( 154,225 ) $ 326,794

Net income (loss) available to common shareholders $ 45,835 $ 48,621 $ ( 108,390 ) $ 375,415

The following table presents revenues by geographical area:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

15 unchanged sentences

Total Revenues $ 340,363 $ 381,522 $ 588,652 $ 1,318,451

As of June 30, 2022 and December 31, 2021, long-lived assets, which consist of property and equipment and other assets, of $ 14,182 and $ 12,870 , respectively, were located in North America.

As of September 30, 2022 and December 31, 2021, long-lived assets, which consist of property and equipment and other assets, of $ 16,174 and $ 12,870 , respectively, were located in North America.

Segment assets are not reported to, or used by, the Company’s Chief Operating Decision Maker to allocate resources to, or assess performance of, the segments and therefore, total segment assets have not been disclosed.

NOTE 20 — REVISION OF PRIOR PERIOD FINANCIALS

As disclosed in Note 2(a) in the prior year, the Company identified misstatements related to the consolidation of certain VIE’s, which primarily resulted in a gross up of the balance sheet to reflect funds held in trust within prepaid expenses and other assets and the recording of temporary equity.

Although the Company concluded that these misstatements were not material, either individually or in aggregate, to its current or previously issued consolidated financial statements, the Company has elected to revise its previously issued consolidated financial statements to correct for these misstatements.

The revision to the accompanying unaudited condensed consolidated statements of cash flows are as follows:

Six Months Ended June 30, 2021

As Previously

Reported Adjustments As Revised

Statement of Cash Flows

Cash flows from investing activities:

Investment of subsidiaries initial public offering proceeds into trust account $ — $ ( 345,000 ) $ ( 345,000 )

Net cash used in investing activities $ ( 13,722 ) $ ( 345,000 ) $ ( 358,722 )

Cash flows from financing activities:

Proceeds from initial public offering of subsidiaries $ — $ 345,000 $ 345,000

Net cash provided by financing activities $ 356,051 $ 345,000 $ 701,051

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements