What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-16 compared with 2022-02-28 · 548 added, 644 removed, 242 unchanged (83% of the section changed)

7 unchanged sentences

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

Except as required by law we are under no obligation to update any of the forward-looking statements after the filing of this Annual Report to conform such statements to actual results or to changes in our expectations.

Except as required by law we

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

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

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

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

to risks related to:

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

volatility in our revenues and results of operations;

changing conditions in the financial markets;

to generate sufficient revenues to achieve and maintain profitability;

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

our exposure to credit risk;

1 unchanged sentence

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

competition in the

asset management business;

failure to successfully compete in any of our businesses;

potential losses related to our auction or liquidation engagements;

our dependence on communications, information

and other systems and third parties;

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

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

potential loss of financial institution clients;

the potential loss of financial institution clients;

potential losses from or illiquidity of our proprietary investments;

changing economic

and market conditions, including increasing inflation;

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

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

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

potential mark-downs in inventory in

connection with purchase transactions;

failure to successfully compete in any of our segments;

changing economic and market conditions, including increasing inflation and actions by the Federal Reserve to address inflation and the possibility of recession or an economic downturn;

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

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

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

loss of key personnel;

our ability to

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

failure to comply with the terms of our credit agreements

or senior notes;

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

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

our ability to meet future capital requirements;

our ability to realize the benefits of our completed acquisitions,

including our ability to achieve anticipated opportunities and cost savings, and accretion to reported earnings estimated to result from

completed and proposed acquisitions in the time frame expected by management or at all;

the diversion of management time on acquisition-related

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

the diversion of management time on acquisition-related issues;

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

and the intense competition to which our brand investment

portfolio is subject.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of

new information, future events or otherwise.

and the effect of geopolitical instability, including wars, conflicts and terrorist attacks, including the impacts of Russia’s invasion of Ukraine.

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

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

2 unchanged sentences

and all of its subsidiaries.

Restatement of Previously Issued Consolidated Financial Statements:

We identified a classification error of dividend income and realized and unrealized gains (losses) on certain investments within revenue in our consolidated statement of operations.

The classification error had no impact on our consolidated balance sheet, consolidated statements of equity, and cash flows.

We have restated our previously issued consolidated financial statements contained in this Annual Report on Form 10-K.

Refer to the “Explanatory Note” preceding Item 1, Business, for background on the restatement, the fiscal periods impacted, control considerations, and other information.

In addition, we have restated certain previously reported financial information for the years ended December 31, 2021 and 2020 in this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Results of Operations and Revenue sections.

The classification error had no impact on our consolidated balance sheet, consolidated statements of equity, and cash flows for the years ended December 31, 2021 and 2020.

Note 2 to our consolidated financial statements illustrates the impact of the classification error to our consolidated financial statements for the years ended December 31, 2021 and 2020.

Description of the Company

Riley Financial, Inc.

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

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

its affiliated subsidiaries, B.

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

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

The Company’s major business lines include:

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

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

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

Riley Securities was established from

the merger of B.

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

Riley Wealth Management, which provides comprehensive

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

retirement plans, trusts, foundations, and endowments.

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

acquired in July 2017.

● National Holdings Corporation (“National”), which

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

was acquired in February 2021.

Riley Capital Management, which is a Securities and Exchange

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

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

certain private funds.

Riley Advisory Services, which provides expert

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

financial institutions, and the legal community.

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

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

Riley Retail Solutions, which is a leading

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

Riley Real Estate, which advises companies,

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

A core focus of B.

Riley Real Estate,

LLC is the restructuring of lease obligations in both distressed and non-distressed situations, both inside and outside of the bankruptcy

process, on behalf of corporate tenants.

Riley Principal Investments, which identifies

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

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

The team concentrates

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

Representative transactions

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

● Communications consist of United Online, Inc.

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

(“magicJack”),

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

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

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

The following briefly

describes each such business:

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

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

technology and services and wireless mobile communications provider.

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

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

and data services and devices.

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

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

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

are headquartered in Los Angeles with over 44 offices throughout the United States including New York, Chicago, Boston, Atlanta, Dallas,

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

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

Under the new structure, the valuation and appraisal businesses are reported in the Financial Consulting segment and our bankruptcy, financial advisory, forensic accounting, and real estate consulting businesses that were previously reported in the Capital Markets segment are now reported as part of the Financial Consulting segment.

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

During the first quarter of 2021, in connection with the acquisition of National on February 25, 2021, the Company further realigned its segment reporting structure to reflect organizational management changes in the Company’s wealth management business and created a new Wealth Management segment that was previously reported as part of the Capital Markets segment in 2020.

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

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

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

RILY) (the “Company”) is a diversified financial services platform that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners.

We operate through several consolidated subsidiaries (collectively, “B.

Riley”) that provide investment banking, brokerage, wealth management, asset management, direct lending, business advisory, valuation, and asset disposition services to a broad client base spanning

public and private companies, financial sponsors, investors, financial institutions, legal and professional services firms, and individuals.

The Company opportunistically invests in and acquires companies or assets with attractive risk-adjusted return profiles to benefit our shareholders.

We own and operate several uncorrelated consumer businesses and invest in brands on a principal basis.

Our approach is focused on high quality companies and assets in industries in which we have extensive knowledge and can benefit from our experience to make operational improvements and maximize free cash flow.

Our principal investments often leverage the financial, restructuring, and operational expertise of our professionals who work collaboratively across disciplines.

We refer to B.

Riley as a “platform” because of the unique composition of our business.

Our platform has grown considerably and become more diversified over the past several years.

We have increased our market share and expanded the depth and breadth of our businesses both organically and through opportunistic acquisitions.

Our increasingly diversified platform enables us to invest opportunistically and to deliver strong long-term investment performance throughout a range of economic cycles.

We are headquartered in Los Angeles, California and maintain offices throughout the U.S.

including in New York, Chicago, Metro District of Columbia, Atlanta, Boston, Dallas, Metro Detroit, Houston, Memphis, Miami, San Francisco, Boca Raton, and West Palm Beach.

We report our activities in six reportable business segments:

Capital Markets, Wealth Management, Financial Consulting, Auction and Liquidation, Communications, and Consumer segment.

During the fourth quarter of 2022, we realigned our segment reporting structure to reflect organizational changes from recent acquisitions and the manner in which capital is allocated.

The Consumer segment includes the previously reported Brands segment and Targus, which we acquired in the fourth quarter of 2022.

We have also re-aligned our previously reported Principal Investments - Communications and Other segment into the Communications segment and the All Other category that is reported with Corporate and Other.

Recent Developments

On October 18, 2022, we acquired all of the issued and outstanding shares of Targus in a transaction pursuant to a Securities Purchase Agreement (the “Purchase Agreement”).

The purchase price consideration totaled $247.5 million, which consisted of $112.7 million in cash, $54.0 million in seller financing, $59.0 million in 6.75% senior notes due 2024, $15.3 million in the issuance of the Company's common stock and stock options, and $6.5 million in deferred payments.

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

Goodwill of $75.8 million and other intangible assets of $89.0 million were recorded as a result of the acquisition.

The acquisition offers the potential for accretive growth to our dividend capacity and complements our existing investments in our Consumer segment.

To finance part of the acquisition, on October 18, 2022, we entered into a credit agreement with PNC Bank, National Association (“PNC”), as agent and security trustee for a five-year $28.0 million term loan and a five-year $85.0 million revolver loan.

Our diversified financial platform is affected by a variety of factors including the continuing impact of the COVID-19 pandemic, higher inflation, the actions by the Federal Reserve to address inflation, the possibility of recession or an economic downturn, Russia's invasion of Ukraine, and rising energy prices.

These factors create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods.

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

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

Results of Operations

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

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Consolidated Statements of Operations

(Dollars in thousands)

December 31, 2022 Year Ended

December 31, 2021 Change

Amount % Amount % Amount %

(As restated)

Services and fees $ 895,623 82.9 % $ 1,153,225 74.2 % $ (257,602) (22.3) %

Trading (loss) income and fair value adjustments on loans (202,628) (18.8) % 220,545 14.2 % (423,173) (191.9) %

Interest income - Loans and securities lending 245,400 22.7 % 122,723 7.9 % 122,677 100.0 %

Sale of goods 142,275 13.2 % 58,205 3.7 % 84,070 144.4 %

Total revenues 1,080,670 100.0 % 1,554,698 100.0 % (474,028) (30.5) %

Operating expenses:

Direct cost of services 142,455 13.2 % 54,390 3.5 % 88,065 161.9 %

Cost of goods sold 78,647 7.3 % 26,953 1.8 % 51,694 191.8 %

Selling, general and administrative expenses 714,614 66.1 % 906,196 58.3 % (191,582) (21.1) %

Restructuring charge 9,011 0.8 % — — % 9,011 100.0 %

Interest expense - Securities lending and loan participations sold 66,495 6.2 % 52,631 3.4 % 13,864 26.3 %

Total operating expenses 1,011,222 93.6 % 1,040,170 66.9 % (28,948) (2.8) %

Operating income 69,448 6.4 % 514,528 33.1 % (445,080) (86.5) %

Other income (expense):

Interest income 2,735 0.3 % 229 — % 2,506 n/m

Dividend income 35,874 3.3 % 19,732 1.3 % 16,142 81.8 %

Realized and unrealized gains (losses) on investments (201,079) (18.6) % 166,131 10.7 % (367,210) n/m

Change in fair value of financial instruments and other 10,188 0.9 % 3,796 0.2 % 6,392 168.4 %

Income from equity method investments 3,570 0.3 % 2,801 0.2 % 769 27.5 %

Interest expense (141,186) (13.1) % (92,455) (5.9) % (48,731) 52.7 %

(Loss) income before income taxes (220,450) (20.4) % 614,762 39.5 % (835,212) (135.9) %

Benefit from (provision for) income taxes 63,856 5.9 % (163,960) (10.5) % 227,816 (138.9) %

Net (loss) income (156,594) (14.5) % 450,802 29.0 % (607,396) (134.7) %

Net income attributable to noncontrolling interests and redeemable noncontrolling interests 3,235 0.3 % 5,748 0.4 % (2,513) (43.7) %

Net (loss) income attributable to B.

Riley Financial, Inc.

(159,829) (14.8) % 445,054 28.6 % (604,883) (135.9) %

Preferred stock dividends 8,008 0.7 % 7,457 0.5 % 551 7.4 %

Net (loss) income available to common shareholders $ (167,837) (15.5) % $ 437,597 28.1 % $ (605,434) (138.4) %

n/m - Not applicable or not meaningful.

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

December 31, 2022 Year Ended

December 31, 2021 Change

Amount % Amount % Amount %

(As Restated)

Revenues - Services and fees

Capital Markets segment $ 292,933 27.1 % $ 555,585 35.7 % $ (262,652) (47.3) %

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

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

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

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

Management Segment .

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

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

plans, lending & liquidity resources, and settlement solutions.

Our wealth management services for individual client services provide

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

legacy planning, and wealth transfer.

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

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

Riley Securities’ proprietary

equity research.

Wealth Management segment 230,735 21.4 % 374,361 24.1 % (143,626) (38.4) %

Auction and Liquidation segment 12,581 1.2 % 20,169 1.3 % (7,588) (37.6) %

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

Our scale and pool of resources allow us to offer our services across

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

Our Auction and Liquidation segment operates through two main divisions,

retail store liquidations and wholesale and industrial assets dispositions.

Our wholesale and industrial assets dispositions division

operates through limited liability companies that are controlled by us.

Financial Consulting segment 98,508 9.1 % 94,312 6.1 % 4,196 4.4 %

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

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

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

Investments - Communications Segment .

Our Principal Investments - Communications segment consists of businesses which have

been acquired primarily for attractive investment return characteristics.

Currently, this segment includes, among other investments,

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

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

Brands Segment .

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

Recent Developments

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

investment bank based in Los Angeles.

The combination is expected to significantly expand B.

Riley Securities’ mergers and acquisitions

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

Founded in 2002,

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

The firm includes

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

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

Our acquisition of FocalPoint builds upon the momentum

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

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

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

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

(the “COVID-19 outbreak”).

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

rapid increase in exposure globally.

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

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

and worldwide.

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

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

The impact of the COVID-19

outbreak and these related matters on our results of operations, financial position and cash flows will depend on future developments,

including the duration and spread of the outbreak and related advisories and restrictions and the success of vaccines and natural immunity

in controlling the pandemic.

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

economy continue to be highly uncertain and cannot be predicted.

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

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

Results of Operations

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

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

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

be found in “Item 7.

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

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

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

Communications segment 228,129 21.1 % 88,490 5.7 % 139,639 157.8 %

Consumer segment 18,940 1.8 % 20,308 1.3 % (1,368) (6.7) %

All Other 13,797 1.3 % — — % 13,797 100.0 %

Subtotal 895,623 82.9 % 1,153,225 74.2 % (257,602) (22.3) %

Revenues - Sale of goods

Auction and Liquidation segment 56,928 5.3 % 53,348 3.4 % 3,580 6.7 %

Communications segment 7,526 0.7 % 4,857 0.3 % 2,669 55.0 %

Consumer segment 77,821 7.2 % — — % 77,821 100.0 %

Subtotal 142,275 13.2 % 58,205 3.7 % 84,070 144.4 %

Trading (loss) income and fair value adjustments on loans

Capital Markets segment (206,150) (19.1) % 212,922 13.7 % (419,072) (196.8) %

Wealth Management segment 3,522 0.3 % 7,623 0.5 % (4,101) (53.8) %

Subtotal (202,628) (18.8) % 220,545 14.2 % (423,173) (191.9) %

Interest income - Loans and securities lending

Capital Markets segment 240,813 22.3 % 122,723 7.9 % 118,090 96.2 %

Auction and Liquidation segment 4,587 0.4 % — — % 4,587 100.0 %

Subtotal 245,400 22.7 % 122,723 7.9 % 122,677 100.0 %

Total revenues $ 1,080,670 100.0 % $ 1,554,698 100.0 % $ (474,028) (30.5) %

n/m - Not applicable or not meaningful.

Total revenues decreased approximately $474.0 million to $1,080.7 million during the year ended December 31, 2022 from $1,554.7 million during the year ended December 31, 2021.

The decrease in revenues during the year ended December 31, 2022 was primarily due to decreases in the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $423.2 million and a decrease in revenue from services and fees of $257.6 million, partially offset by an increase in revenue from sale of goods of $84.1 million and an increase in revenue from interest income - loans and securities lending of $122.7 million.

The decrease in the fair value of the portfolio of securities

and other investments owned during the year ended December 31, 2022 was primarily due to the decrease in overall values in the stock market.

The decrease in revenue from services and fees of $257.6 million was primarily due to decreases in revenue of $262.7 million in the Capital Markets segment, $143.6 million in the Wealth Management segment, $7.6 million in the Auction and Liquidation segment, and $1.4 million in the Consumer segment, partially offset by increases of $139.6 million in the Communications segment, $13.8 million in All Other, and $4.2 million in the Financial Consulting segment.

Revenues from services and fees in the Capital Markets segment decreased approximately $262.7 million, to $292.9 million during the year ended December 31, 2022 from $555.6 million during the year ended December 31, 2021.

The decrease in revenues was primarily due to decreases in revenue of $314.3 million from corporate finance, consulting and investment banking fees, partially offset by increases of $43.3 million in asset management fees and $8.0 million which is primarily comprised of interest and other income earned on our investments.

Revenues from services and fees in the Wealth Management segment decreased $143.6 million, to $230.7 million during the year ended December 31, 2022 from $374.4 million during the year ended December 31, 2021.

The decrease in revenues was primarily due to decreases in revenue of $83.1 million from wealth and asset management fees, $48.5 million in commission fees, and $11.0 million in other asset management fees.

Revenues from services and fees in the Auction and Liquidation segment decreased $7.6 million, to $12.6 million during the year ended December 31, 2022 from $20.2 million during the year ended December 31, 2021.

The decrease in revenues was primarily due to fewer retail fee liquidation engagements during the year ended December 31, 2022 as compared to prior year.

Revenues from services and fees in the Financial Consulting segment increased $4.2 million, to $98.5 million during the year ended December 31, 2022 from $94.3 million during the year ended December 31, 2021.

The increase in revenues was primarily due to increases of $2.4 million within our Real Estate division and $1.8 million within our Advisory Services division.

Revenues from services and fees in the Communications segment increased $139.6 million to $228.1 million during the year ended December 31, 2022 from $88.5 million during the year ended December 31, 2021.

The increase in revenues was primarily due to $66.6 million from the consolidation of Lingo as a result of obtaining a majority interest in the second quarter of 2022, $44.6 million from the acquisition of BullsEye Telecom (“BullsEye”) in the third quarter of 2022, and $36.3 million from the inclusion of a full year of operating results from the acquisition of Marconi Wireless that occurred in the fourth quarter of 2021, partially offset by a decrease in revenues of $7.8 million from UOL and magicJack subscription services.

We expect the Marconi Wireless, UOL and magicJack subscription revenues to continue to decline year over year.

Revenues from services and fees in the Consumer segment decreased approximately $1.4 million, to $18.9 million during the year ended December 31, 2022 from $20.3 million during the year ended December 31, 2021.

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

Revenues from services and fees in All Other, which includes the operations of a regional environmental services business and a landscaping business that we acquired in 2022, was approximately $13.8 million during the year ended December 31, 2022.

Trading income and fair value adjustments on loans decreased $423.2 million to a loss of $202.6 million during the year ended December 31, 2022 compared to income of $220.5 million during the year ended December 31, 2021.

This was primarily due to decreases of $419.1 million in the Capital Markets segment and $4.1 million in the Wealth Management segment.

The loss of $202.6 million during the year ended December 31, 2022 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts of $148.3 million and unrealized losses on the fair value of our loans receivable of $54.3 million.

Interest income – loans and securities lending increased $122.7 million, to $245.4 million during the year ended December 31, 2022 from $122.7 million during the year ended December 31, 2021.

This was primarily due to increases of $118.1 million in the Capital Markets segment and $4.6 million in the Auction and Liquidation segment.

Interest income from securities lending was $83.1 million and $49.8 million during the year ended December 31, 2022 and 2021, respectively.

Interest income from loans was $162.3 million and $39.5 million during the year ended December 31, 2022

and 2021, respectively.

The increase in interest income on loans was primarily due to $93.1 million in interest from our loan receivable collateralized by the Badcock receivables portfolio, which was first made in December 2021.

Revenues – Sale of Goods

Revenues from the sale of goods increased $84.1 million, to $142.3 million during the year ended December 31, 2022 from $58.2 million during the year ended December 31, 2021.

The increase in revenues from sale of goods was primarily due to increases of $77.8 million from the acquisition of Targus in the fourth quarter of 2022, $3.6 million from the sales of retail goods related to retail liquidation engagements, and $3.2 million in sales of Marconi Wireless devices, partially offset by a decrease of $0.5 million in sales of magicJack devices.

Cost of goods sold during the year ended December 31, 2022 and 2021 was $78.6 million and $27.0 million, respectively, resulting in a gross margin of 44.7% and 53.7%, respectively.

Operating Expenses

Direct Cost of Services

Direct costs increased $88.1 million, to $142.5 million during the year ended December 31, 2022 from $54.4 million during the year ended December 31, 2021.

Direct costs of services increased $85.0 million in the Communications segment and $9.8 million in All Other, which is from the operations of a regional environmental services business and a landscaping business that we acquired in 2022, partially offset by a decrease of $6.8 million in the Auction and Liquidation segment.

The increase in the Communications segment was primarily due to increases of $45.5 million from the inclusion of Lingo from May 31, 2022 to December 31, 2022 as a result of our acquisition of a majority equity interest in the second quarter of 2022, $14.1 million from the acquisition Marconi Wireless in the fourth quarter of 2021, and $27.9 million from the acquisition of BullsEye in the third quarter of 2022, partially offset by decreases of $1.5 million and $1.2 million in magicJack and UOL, respectively.

The increase in the All Other category consists of other acquisitions made during 2022.

The decrease in the Auction and Liquidation segment was primarily due to a large retail liquidation engagement in Europe in 2021.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the years ended December 31, 2022 and 2021 were comprised of the following:

December 31, 2022 Year Ended

December 31, 2021 Change

Amount % Amount % Amount %

Capital Markets segment $ 179,499 25.1 % $ 347,591 38.4 % $ (168,092) (48.4) %

Wealth Management segment 263,622 36.9 % 366,050 40.3 % (102,428) (28.0) %

Auction and Liquidation segment 19,683 2.7 % 14,069 1.6 % 5,614 39.9 %

Financial Consulting segment 82,196 11.5 % 77,418 8.5 % 4,778 6.2 %

Communications segment 84,001 11.8 % 36,240 4.0 % 47,761 131.8 %

Consumer segment 22,737 3.2 % 5,923 0.7 % 16,814 n/m

Corporate and Other 62,876 8.8 % 58,905 6.5 % 3,971 6.7 %

Total selling, general & administrative expenses $ 714,614 100.0 % $ 906,196 100.0 % $ (191,582) (21.1) %

Total selling, general and administrative expenses decreased $191.6 million to $714.6 million during the year ended December 31, 2022 from $906.2 million during the year ended December 31, 2021.

The decrease of $191.6 million in selling, general and administrative expenses was due to decreases of $168.1 million in the Capital Markets segment, $102.4 million in the Wealth Management segment, partially offset by increases of $47.8 million in the Communications segment, $16.8 million in the Consumer segment, $5.6 million in the Auction and Liquidation segment, $4.8 million in the Financial Consulting segment, and $4.0 million in Corporate and Other.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment decreased by $168.1 million to $179.5 million during the year ended December 31, 2022 from $347.6 million during the year ended December 31, 2021.

The decrease was primarily due to decreases of $104.2 million in consulting expenses and $71.5 million in payroll and related expenses, partially offset by an increase in depreciation and amortization of $6.4 million.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment decreased by $102.4 million to $263.6 million during the year ended December 31, 2022 from $366.1 million during the year ended December 31, 2021.

The decrease was primarily due to decreases of $123.4 million in payroll and related expenses, partially offset by increases of $18.8 million in legal settlements and penalties and $1.0 million from the change in fair value change on contingent consideration.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment increased by $5.6 million to $19.7 million during the year ended December 31, 2022 from $14.1 million during the year ended December 31, 2021.

The increase was primarily due to an increase of $5.0 million in other business development activities and an increase of $1.4 million in payroll and related expenses, partially offset by a decrease of $0.5 million in foreign currency fluctuations.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment increased by $4.8 million to $82.2 million during the year ended December 31, 2022 from $77.4 million during the year ended December 31, 2021.

The increase was primarily due to increases of $3.9 million in payroll and related expenses, $1.3 million in travel and entertainment expenses, and $0.9 million in other expenses, partially offset by decreases of $1.6 million in legal expenses.

Communications

Selling, general and administrative expenses in the Communications segment increased by $47.8 million to $84.0 million during the year ended December 31, 2022 from $36.2 million during the year ended December 31, 2021.

The increase was primarily due to increases of $25.0 million from the consolidation of Lingo as a result of obtaining a majority interest in the second quarter of 2022, $14.4 million from the acquisition of BullsEye in the third quarter of 2022, and $9.0 million from the acquisition of Marconi Wireless in the fourth quarter of 2021.

Selling, general and administrative expenses in the Consumer segment increased by $16.8 million to $22.7 million during the year ended December 31, 2022 from $5.9 million during the year ended December 31, 2021.

The increase was primarily due to the acquisition of Targus in the fourth quarter of 2022.

Corporate and Other

Selling, general and administrative expenses for the Corporate and Other increased $4.0 million to $62.9 million during the year ended December 31, 2022 from $58.9 million during the year ended December 31, 2021.

The increase was primarily due to increases of $8.4 million in payroll and related expenses, $6.6 million of expenses from the operations of a regional environmental services business and a landscaping business that we acquired in 2022, $1.8 million in software and equipment expenses, and $1.1 million in accounting expenses, partially offset by the decrease of $6.5 million in gains on extinguishment of debt, $4.5 million in fair value change on contingent consideration, and $2.6 million in foreign currency fluctuations.

Other Income (Expense).

Other income included interest income of $2.7 million during the year ended December 31, 2022 compared to $0.2 million during the year ended December 31, 2021.

Dividend income was $35.9 million during the year ended December 31, 2022 compared to $19.7 million during the year ended December 31, 2021.

Realized and unrealized gains (losses) on investments was a loss of $201.1 million during the year ended December 31, 2022 compared to gains of $166.1 million during the year ended December 31, 2021.

The decrease was primarily due to a decrease in

overall values of our investments.

Change in fair value of financial instruments and other in the amount of $10.2 million during the year ended December 31, 2022 was primarily due to the change in fair value of warrant liabilities and the forgiveness of a Paycheck Protection Program loan issued to FocalPoint Securities, LLC prior to its acquisition by the Company.

Income on equity method investments was $3.6 million during the year ended December 31, 2022 compared to $2.8 million during the year ended December 31, 2021.

Interest expense was $141.2 million during the year ended December 31, 2022 compared to $92.5 million during the year ended December 31, 2021.

The increase in interest expense was due to additional debt incurred during the year ended December 31, 2022 and higher interest rates due to variable rates on certain of our outstanding debt.

The increases in interest expense primarily consisted of $18.6 million related to the senior notes, $15.4 million related to the Nomura term loan, $5.3 million related to the Pathlight term loan, $3.5 million related to the Nomura revolver, $1.6 million related to the Lingo term loan, $0.8 million related to the Targus revolver, and $0.5 million related to the Targus term loan.

(Loss) Income Before Income Taxes .

Income (loss) before income taxes decreased $835.2 million to a loss of $220.5 million during the year ended December 31, 2022 from income of $614.8 million during the year ended December 31, 2021.

The change was primarily due to a decrease in revenues of approximately $474.0 million, a change to realized and unrealized gains (losses) on investments of $367.2 million, and an increase in interest expense of $48.7 million, partially offset by a a decrease in operating expenses of $28.9 million, an increase in dividend income of $16.1 million, an increase in change in fair value of financial instruments and other of $6.4 million, an increase in interest income of $2.5 million, and an increase in income from equity method investments of $0.8 million.

Benefit from (Provision for) Income Taxes.

Benefit from income taxes was $63.9 million during the year ended December 31, 2022 compared to a provision for income taxes of $164.0 million during the year ended December 31, 2021.

The effective income tax rate was a provision of 29.0% during the year ended December 31, 2022 as compared to a provision of 26.7% during the year ended December 31, 2021.

Net Income Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interests .

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

The net income attributable to noncontrolling interests and redeemable noncontrolling interests was $3.2 million during the year ended December 31, 2022 compared to $5.7 million during the year ended December 31, 2021.

Net (Loss) Income Attributable to the Company .

Net loss attributable to the Company during the year ended December 31, 2022 was $159.8 million compared to net income attributable to the Company of $445.1 million during the year ended December 31, 2021.

The change was primarily due to a decrease in operating income of $445.1 million, a change to realized and unrealized gains (losses) on investments of $367.2 million, and an increase in interest expense of $48.7 million, partially offset by a change from provision for to benefit from income taxes of $227.8 million, an increase in dividend income of $16.1 million, an increase in change in fair value of financial instruments and other of $6.4 million, a decrease in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $2.5 million, an increase in interest income of $2.5 million, and an increase in income from equity method investments of $0.8 million.

Preferred Stock Dividends .

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

Dividends are payable quarterly in arrears.

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

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

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

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

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

Dividends are payable quarterly in arrears.

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

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

On July 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share,

which was paid on July 29, 2022 to holders of record as of the close of business on July 19, 2022.

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

Net (Loss) Income Available to Common Shareholders .

Net loss available to common shareholders during the year ended December 31, 2022 was $167.8 million compared to net income available to common shareholders of $437.6 million during the year ended December 31, 2021.

The change was primarily due to a decrease in operating income of $445.1 million, a change to realized and unrealized gains (losses) on investments of $367.2 million, an increase in interest expense of $48.7 million, and an increase in preferred stock dividends of $0.6 million, partially offset by a change from provision for to benefit from income taxes of $227.8 million, an increase in dividend income of $16.1 million, an increase in change in fair value of financial instruments and other of $6.4 million, a decrease in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $2.5 million, an increase in interest income of $2.5 million, and an increase in income from equity method investments of $0.8 million.

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

Consolidated Statements of Income

(Dollars in thousands)

December 31, 2021

December 31, 2020

(As Restated)

December 31, 2021 Year Ended

December 31, 2020 Change

Amount % Amount % Amount %

Services and fees $ 1,153,225 74.2 % $ 645,906 77.4 % $ 507,319 78.5 %

Trading income and fair value adjustments on loans

Trading income and fair value adjustments on loans 220,545 14.2 % 56,677 6.8 % 163,868 n/m

Interest income - Loans and securities lending 122,723 7.9 % 102,499 12.3 % 20,224 19.7 %

12 unchanged sentences

Interest income 229 — % 564 0.1 % (335) (59.4) %

Gain on extinguishment of loans and other

Income (loss) on equity investments

Dividend income 19,732 1.3 % 21,163 2.5 % (1,431) (6.8) %

Realized and unrealized gains (losses) on investments 166,131 10.7 % 47,341 5.7 % 118,790 n/m

Change in fair value of financial instruments and other 3,796 0.2 % — — % 3,796 100.0 %

Income (loss) on equity method investments 2,801 0.2 % (623) (0.1) % 3,424 n/m

Interest expense (92,455) (5.9) % (65,249) (7.8) % (27,206) 41.7 %

1 unchanged sentence

Provision for income taxes (163,960) (10.5) % (75,440) (9.0) % (88,520) 117.3 %

Net income (loss) attributable to noncontrolling interests

Net income 450,802 29.0 % 204,017 24.5 % 246,785 121.0 %

Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 5,748 0.4 % (1,131) (0.1) % 6,879 n/m

Net income attributable to B.

Riley Financial, Inc.

445,054 28.6 % 205,148 24.6 % 239,906 116.9 %

Preferred stock dividends 7,457 0.5 % 4,710 0.6 % 2,747 58.3 %

2 unchanged sentences

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

December 31, 2021

December 31, 2020

(As Restated)

December 31, 2021 Year Ended

December 31, 2020 Change

Amount % Amount % Amount %

Revenues - Services and fees

Capital Markets segment $ 555,585 35.7 % $ 318,714 38.2 % $ 236,871 74.3 %

Wealth Management segment

Wealth Management segment 374,361 24.1 % 72,345 8.7 % 302,016 n/m

Auction and Liquidation segment 20,169 1.3 % 63,101 7.6 % (42,932) (68.0) %

Financial Consulting segment 94,312 6.1 % 91,622 11.0 % 2,690 2.9 %

Principal Investments - Communications segment

Brands segment

Communications segment 88,490 5.7 % 83,666 10.0 % 4,824 5.8 %

Consumer segment 20,308 1.3 % 16,458 2.0 % 3,850 23.4 %

Subtotal 1,153,225 74.2 % 645,906 77.4 % 507,319 78.5 %

Revenues - Sale of goods

Auction and Liquidation segment 53,348 3.4 % 25,663 3.1 % 27,685 107.9 %

Principal Investments - Communications segment

Communications segment 4,857 0.3 % 3,472 0.4 % 1,385 39.9 %

Subtotal 58,205 3.7 % 29,135 3.5 % 29,070 99.8 %

Trading income and fair value adjustments on loans

Capital Markets segment

Wealth Management segment

Capital Markets segment 212,922 13.7 % 55,873 6.7 % 157,049 n/m

Wealth Management segment 7,623 0.5 % 804 0.1 % 6,819 n/m

Subtotal 220,545 14.2 % 56,677 6.8 % 163,868 n/m

Interest income - Loans and securities lending

2 unchanged sentences

n/m - Not applicable or not meaningful.

Total revenues increased

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

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

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

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

million, as further described below.

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

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

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

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

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

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

The increase in revenues was primarily due

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

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

$0.6 million from asset management fees.

Total revenues increased approximately $720.5 million to $1,554.7 million during the year ended December 31, 2021 from $834.2 million during the year ended December 31, 2020.

The increase in revenues during the year ended December 31, 2021 was primarily due to an increase in revenue from services and fees of $507.3 million, an increase in revenue from trading income and fair value adjustments on loans of $163.9 million, an increase in revenue from sale of goods of $29.1 million, and an increase in revenue from interest income - loans and securities lending of $20.2 million, as further described below.

The increase in revenue from services and fees of $507.3 million was primarily due to increases in revenue of $302.0 million in the Wealth Management segment, $236.9 million in the Capital Markets segment, $4.8 million in the Communications segment, $3.9 million in the Consumer segment, and $2.7 million in the Financial

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

Revenues from services and fees in the Capital Markets segment increased approximately $236.9 million, to $555.6 million during the year ended December 31, 2021 from $318.7 million during the year ended December 31, 2020.

The increase in revenues was primarily due to increases in revenue of $203.2 million from corporate finance, consulting and investment banking fees, $26.0 million from the acquisition of National, and $7.9 million primarily related to dividend income and other asset management fees.

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

4 unchanged sentences

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

Revenues from services and

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

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

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

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

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

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

Trading income and fair

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

million during the year ended December 31, 2020.

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

and $6.8 million in the Wealth Management segment.

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

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

loans receivable, at fair value of $10.5 million.

Revenues from services and fees in the Communications segment increased $4.8 million to $88.5 million during the year ended December 31, 2021 from $83.7 million during the year ended December 31, 2020.

The increase in revenues was primarily due to $12.4 million from the acquisition of a mobile phone services business during Q4 2021, partially offset by a decrease in revenues of $7.6 million from subscription services.

Revenues from services and fees in the Consumer segment increased approximately $3.9 million, to $20.3 million during the year ended December 31, 2021 from $16.5 million during the year ended December 31, 2020.

The primary sources of revenue included in this segment are the licensing of trademarks.

Trading income and fair value adjustments on loans increased $163.9 million to income of $220.5 million during the year ended December 31, 2021 compared to $56.7 million during the year ended December 31, 2020.

This was primarily due to increases of $157.0 million in the Capital Markets segment and $6.8 million in the Wealth Management segment.

The gain of $220.5 million during the year ended December 31, 2021 included realized and unrealized amounts earned on investments made in our proprietary trading accounts of $210.9 million and unrealized amounts on our loans receivable, at fair value of $9.6 million.

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

3 unchanged sentences

Revenues – Sale of Goods

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

the year ended December 31, 2020.

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

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

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

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

Cost of goods sold during the years

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

Revenues from the sale of goods increased $29.1 million, to $58.2 million during the year ended December 31, 2021 from $29.1 million during the year ended December 31, 2020.

Revenues from sale of goods were primarily attributable to $46.1 million of sales of retail goods related to retail liquidation engagements in Europe, $6.1 million of sales of retail goods related to a retail liquidation engagement in the U.S., and $2.7 million in sales of magicJack devices that were sold in connection with VoIP services, partially offset by a decrease of $25.7 million from sales of goods related to multiple liquidation engagements that ended in 2020.

Cost of goods sold during the years ended December 31, 2021 and 2020 was $27.0 million and $12.5 million, respectively, resulting in a gross margin of 53.7% and 57.2%, respectively.

Operating Expenses

1 unchanged sentence

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

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

Direct costs of services decreased by $10.0 million in the Auction and Liquidation segment, partially offset by an increase of $4.0 million in the Communications segment.

The decrease in direct costs in the Auction and Liquidation segment was primarily due to a decrease in the number of retail fee type engagements performed during the year ended December 31, 2021, partially offset by an increase of $11.7 million of direct costs incurred on a retail liquidation engagement in Europe, where we purchased inventory for resale and as part of the retail liquidation engagement we incurred costs related to the store operations which primarily related to expenses for occupancy, payroll and other store operating costs.

2 unchanged sentences

Selling, General and Administrative Expenses

December 31, 2021

December 31, 2020

December 31, 2021 Year Ended

December 31, 2020 Change

Amount % Amount % Amount %

Capital Markets segment $ 347,591 38.4 % $ 201,348 47.0 % $ 146,243 72.6 %

Wealth Management segment

Wealth Management segment 366,050 40.3 % 70,248 16.4 % 295,802 n/m

Auction and Liquidation segment 14,069 1.6 % 12,359 2.9 % 1,710 13.8 %

Financial Consulting segment 77,418 8.5 % 68,579 16.0 % 8,839 12.9 %

Principal Investments - Communications segment

Brands segment

Communications segment 36,240 4.0 % 31,363 7.3 % 4,877 15.6 %

Consumer segment 5,923 0.7 % 5,747 1.3 % 176 3.1 %

Corporate and Other segment 58,905 6.5 % 38,893 9.1 % 20,012 51.5 %

Total selling, general & administrative expenses $ 906,196 100.0 % $ 428,537 100.0 % $ 477,659 111.5 %

Total selling, general and administrative expenses increased $477.7 million

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

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

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

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

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

Total selling, general and administrative expenses increased $477.7 million to $906.2 million during the year ended December 31, 2021 from $428.5 million during the year ended December 31, 2020.

The increase of $477.7 million in selling, general and administrative expenses was due to increases of $146.2 million in the Capital Markets segment, $295.8 million in the Wealth Management segment, $1.7 million in the Auction and Liquidation segment, $8.8 million in the Financial Consulting segment, $4.9 million in the Communications segment, $0.2 million in the Consumer segment, and $20.0 million in the Corporate and Other segment, as described below.

Capital Markets

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

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

Wealth Management

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

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

and Liquidation

Auction and Liquidation

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

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

Financial Consulting

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

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

Investments - Communications

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

Communications

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

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

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

Selling, general and administrative expenses for the Corporate and

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

the year ended December 31, 2020.

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

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

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

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

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

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

Corporate and Other

Selling, general and administrative expenses for the Corporate and Other segment increased $20.0 million to $58.9 million during the year ended December 31, 2021 from $38.9 million during the year ended December 31, 2020.

The increase was primarily due to increases of $18.9 million in payroll and related expenses, $8.0 million in gains on extinguishment of debt, and $4.0 million from the consolidation of special purpose acquisition corporations (“SPACs”), partially offset by decreases of $8.7 million in legal settlement accrual, primarily due to recording a pre-acquisition litigation claim related to one of our acquired subsidiaries, $1.8 million in other expenses, and $0.8 million in legal expenses.

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

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Impairment of tradenames .

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

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

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

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

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

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

Dividend income was $19.7 million during the year ended December 31, 2021 compared to $21.2 million during the year ended December 31, 2020.

Realized and unrealized gains (losses) on investments was a gain of $166.1 million during the year ended December 31, 2021 compared

to a gain of $47.3 million during the year ended December 31, 2020.

The increase was primarily due to an increase in overall values of our investments.

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

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

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

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

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

The increase in income before income taxes was primarily due to increases in revenues of approximately $720.5 million, realized and unrealized gains (losses) on investments of $118.8 million, change in fair value of financial instruments and other of $3.8 million, and income from equity method investments of $3.4 million, partially offset by increases in operating expenses of $482.2 million, interest expense of $27.2 million, a decrease in dividend income of $1.4 million and a decrease in interest income of $0.3 million.

Provision for Income Taxes.

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

Net Income (Loss) Attributable to Noncontrolling Interest .

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

The net income attributable to noncontrolling interests was $5.7 million during the year ended December 31, 2021 compared to a net loss of $1.1 million during the year ended December 31, 2020.

Net Income (Loss) Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interests .

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

The net income attributable to noncontrolling interests and redeemable noncontrolling interests was $5.7 million during the year ended December 31, 2021 compared to a net loss of $1.1 million during the year ended December 31, 2020.

Net Income Attributable to the Company .

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

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

Stock Dividends .

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

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

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

The increase was primarily due to increases in operating income of $238.3 million, realized and unrealized gains (losses) on investments of $118.8 million, change in fair value of financial instruments and other of $3.8 million, and income from equity method investments of $3.4 million, partially offset by increases in provision for income taxes of $88.5 million, interest expense of $27.2 million, net income attributable to noncontrolling interests and redeemable noncontrolling interests of $6.9 million, a decrease in dividend income of $1.4 million, and a decrease in interest income of $0.3 million.

Preferred Stock Dividends .

Dividends are payable quarterly in arrears.

On January 11, 2021,

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

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

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

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

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

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

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

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

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

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

or $1.84375 per Depositary Share).

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

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

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

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

Dividends are payable quarterly in arrears.

On January 11, 2021, the Company declared a cash

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

on January 21, 2021.

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

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

On July 8, 2021, the Company declared

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

on July 21, 2021.

On October 6, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid

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

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

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

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

On October 6, 2021,

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

Net Income Available to Common Shareholders .

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

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

The increase was primarily due to increases in operating income of $238.3 million, realized and unrealized gains (losses) on investments of $118.8 million, change in fair value of financial instruments and other of $3.7 million, and income from equity method investments of $3.4 million, partially offset by increases in provision for income taxes of $88.5 million, interest expense of approximately $27.2 million, net income attributable to noncontrolling interests and redeemable noncontrolling interests of $6.9 million, preferred stock dividends of $2.7 million, a decrease in dividend income of $1.4 million, and a decrease in interest income of $0.3 million.

Liquidity and Capital Resources

Our operations are funded through a combination of existing cash on

hand, cash generated from operations, borrowings under our senior notes payable, term loans and credit facilities, and special purpose

financing arrangements.

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

and $205.2 million, respectively.

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

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

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

During the years ended December 31, 2022 and 2021, we generated net loss attributable to the Company of $159.8 million and net income attributable to the Company of $445.1 million, respectively.

Our net loss of $156.6 million included $202.6 million of losses that primarily related to a decrease in the fair value of our portfolio of securities and other investments owned during the year ended December 31, 2022.

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

As of December 31, 2022, we had $268.6 million of unrestricted cash and cash equivalents, $2.3 million of restricted cash, $1,129.3 million of securities and other investments, at fair value, $701.7 million of loans receivable, at fair value, and $2,446.8 million of borrowings outstanding.

The borrowings outstanding of $2,033.3 million as of December 31, 2021 included $1,606.6 million of borrowings from the issuance of the series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $346.4 million term loans borrowed pursuant to the BRPAC Credit Agreement and Nomura Credit Agreement discussed below, $80.0 million of revolving credit facility under the Nomura credit facility discussed below, and $0.4 million of notes payable.

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

The borrowings outstanding of $2,446.8 million as of December 31, 2022 included $1,721.8 million of borrowings from the issuance of the series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $572.1 million in term loans borrowed pursuant to the Targus, Pathlight, Lingo, BRPI Acquisition Co LLC (“BRPAC”), and Nomura credit agreements discussed below, $127.7 million of revolving credit facility under the Targus and Nomura credit facilities discussed below, and $25.3 million of notes payable.

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

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

Cash Flow Summary

Following is a summary of our

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

2021 and 2020.

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

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

Management’s Discussion and Analysis of Financial Condition and Results

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

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

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

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

Following is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities during the years ended December 31, 2022 and 2021.

A discussion of cash flows during the year ended December 31, 2020 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K during the year ended December 31, 2021, filed with the SEC on February 25, 2022, which is available free of charge on the SEC’s website at www.sec.gov.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Year Ended December 31,

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Effect of foreign currency on cash (933) (382)

Net increase in cash, cash equivalents and restricted cash

Cash provided by operating activities was $50.9 million during

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

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

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

Noncash items of $91.5 million

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

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

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

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

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

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

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

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

Noncash items of $123.4 million included deferred

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

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

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

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

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

Cash used in investing activities

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

the year ended December 31, 2020.

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

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

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

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

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

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

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

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

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

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

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

$2.0 million.

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

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

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

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

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

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

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

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

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

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

for payment of participating note payable and contingent consideration.

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

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

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

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

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

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

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

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

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

and $0.6 million contributions from noncontrolling interests.

Net (decrease) increase in cash, cash equivalents and restricted cash $ (8,934) $ 175,023

Cash provided by operating activities was $6.7 million during the year ended December 31, 2022 compared to cash provided by operating activities of $50.9 million during the year ended December 31, 2021.

Cash provided by operating activities during the year ended December 31, 2022 included net loss of $156.6 million adjusted for noncash items of $47.6 million and changes in operating assets and liabilities of $115.6 million.

Noncash items of $47.6 million included share-based compensation of $61.1 million, depreciation and amortization of $40.0 million, fair value adjustments of $34.9 million, impairment of leaseholds, intangibles and lease loss accrual, and gain (loss) on disposal of fixed assets of $4.9 million, provision for doubtful accounts of $4.2 million, dividends from equity method investments of $4.0 million, income allocated for mandatorily redeemable noncontrolling interests of $1.1 million, and effect of foreign currency on operations of $0.8 million, partially offset by deferred income taxes of $80.4 million, SPAC deconsolidation gain of $8.3 million, gain on equity method investments of $6.8 million, income from equity method investments of $3.6 million, non-cash interest and other of $3.2 million, and gain on extinguishment of debt of $1.1 million.

Cash provided by operating activities during the year ended December 31, 2021 included net income of $450.8 million adjusted for noncash items of $91.5 million and changes in operating assets and liabilities of $491.4 million.

Noncash items of $91.5 million included deferred income taxes of $61.8 million, share-based compensation of $36.0 million, depreciation and amortization of $25.9 million, loss on extinguishment of debt of $6.1 million, dividends from equity method investments of $2.1 million, provision for doubtful accounts of $1.5 million, effect of foreign currency on operations of $0.1 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.9 million, partially offset by interest and other of $22.3 million, fair value adjustments of $7.6 million, gain on extinguishment of loans of $6.5 million, gain on equity method investments of $3.5 million, income from equity method investments of $2.8 million, and impairment of leaseholds, intangibles and lease loss accrual and gain on disposal of fixed assets of $0.1 million.

Cash used in investing activities was $32.3 million during the year ended December 31, 2022 compared to used in investing activities of $956.5 million during the year ended December 31, 2021.

During the year ended December 31, 2022, cash used in investing activities consisted of cash used for purchases of loans receivable of $503.1 million, acquisition of businesses of $261.7 million, purchases of equity method investments of $11.0 million, and purchases of property and equipment and intangible assets of $3.9 million, partially offset by cash received from loans receivable repayment of $574.9 million and funds received from trust account of subsidiary of $172.6 million.

During the year ended December 31, 2021, cash used in investing activities consisted of cash used for purchases of loans receivable of $738.9 million, cash of $345.0 million used to fund two trust accounts for the future redemption of our subsidiaries’ redeemable common stock, cash used for acquisition of businesses of $28.3 million, cash used for repayments of loan participations sold of $15.2 million, cash used for purchases of property and equipment and intangible assets of $0.7 million, and purchases of equity method investments of $0.6 million, partially offset by cash received from loans receivable repayment of $172.1 million.

Cash provided by financing activities was $17.6 million during the year ended December 31, 2022 compared to cash provided by financing activities of $1,081.0 million during the year ended December 31, 2021.

During the year ended December 31, 2022, cash provided by financing activities primarily consisted of proceeds from term loans of $324.2 million, proceeds from revolving line of credit of $64.9 million, proceeds from issuance of senior notes of $51.6 million, contributions from noncontrolling interests of $21.1 million, proceeds from our offering of preferred stock of $0.9 million, partially offset by redemption of subsidiary temporary equity and distributions of $172.6 million, payment of dividends on our common shares of $119.5 million, repayment on our term loans of $96.2 million, repayment of our revolving line of credit of $17.2 million, payment of employment taxes on vesting of restricted stock of $10.3 million, payment of dividends on our preferred shares of $8.0 million, payment of debt issuance costs of $8.2 million, repurchase of our common stock of $6.5 million, distribution to noncontrolling interests of $4.2 million, payment for contingent consideration of $1.8 million,

and repayment of our notes payable of $0.5 million.

During the year ended December 31, 2021, cash provided by financing activities primarily consisted of $1,249.1 million proceeds from issuance of senior notes, $345.0 million proceeds from initial public offering of subsidiaries, $300.0 million proceeds from our term loan, $80.0 million proceeds from revolving line of credit, $64.7 million proceeds from our offering of common stock, $13.7 million contributions from noncontrolling interests, $14.7 million proceeds from our offering of preferred stock, partially offset by $507.3 million used to repurchase our senior notes, $347.1 million used to pay dividends on our common shares, $37.6 million used to repay our notes payable, $33.4 million used to pay debt issuance costs, $20.7 million used for repayment on our term loan, $16.5 million distribution to noncontrolling interests, $9.6 million used for payment of employment taxes on vesting of restricted stock, $7.5 million used to pay dividends on our preferred shares, $2.7 million used to repurchase our common stock, and $3.7 million used for payment of participating note payable and contingent consideration.

Credit Agreements

Targus Credit Agreement

On October 18, 2022, our subsidiary, Tiger US Holdings, Inc., a Delaware corporation, among others, entered into a credit agreement (“Targus Credit Agreement”) with PNC Bank, National Association (“PNC”), as agent and security trustee for a five-year $28.0 million term loan and a five-year $85.0 million revolver loan, which was used to finance part of the acquisition of Targus.

The Targus 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 Targus 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 outstanding under the Targus Credit Agreement.

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

The term loan bears interest on the outstanding principal amount equal to the Term Secured Overnight Financing Rate (“SOFR”) rate plus an applicable margin of 3.75%.

The revolver loan consists of base rate loans that bear interest on the outstanding principal amount equal to the base rate plus an applicable margin of 1.00% to 1.75% and term rate loans that bear interest on the outstanding principal amount equal to the revolver SOFR rate plus an applicable margin of 2.00% to 2.75%.

Principal outstanding is due in quarterly installments starting on December 31, 2022.

Quarterly installments from December 31, 2022 to September 30, 2027 are in the amount of $1.4 million per quarter and the remaining principal balance is due at final maturity on October 18, 2027.

As of December 31, 2022, the outstanding balance on the term loan was $26.0 million (net of unamortized debt issuance costs of $0.6 million) and the outstanding balance on the revolver loan was $53.0 million.

Interest expense on these loans during the year ended December 31, 2022 was $1.3 million (including amortization of deferred debt issuance costs and unused commitment fees of $0.2 million).

The interest rate on the term loan was 8.43% and the interest rate on the revolver loan ranged between 6.03% to 9.25% as of December 31, 2022.

Pathlight Credit Agreement

On September 23, 2022, our 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 $148.2 million term loan.

The Pathlight Credit Agreement was entered in connection with the purchase of the 2022 Badcock Receivable discussed in Note 3 to the consolidated

statements included elsewhere in this Annual Report.

On January 12, 2023, Amendment No.

2 to the Pathlight Credit Agreement increased the term loan by an additional $78.3 million.

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 December 31, 2022, the interest rate on the Pathlight Credit Agreement was 11.0%.

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.

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

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 December 31, 2022, the outstanding balance on the term loan was $118.4 million (net of unamortized debt issuance costs of $2.4 million).

Interest expense on the term loan during the year ended December 31, 2022 was $5.3 million (including amortization of deferred debt issuance costs of $1.3 million).

Lingo Credit Agreement

On August 16, 2022, our 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 $45.0 million term loan.

This loan was used to finance part of the purchase of BullsEye by Lingo.

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 $7.5 million, increasing the principal balance of the term loan to $52.5 million.

On November 10, 2022, Lingo entered into the Second Amendment to the Lingo Credit Agreement with KeyBank National Association for an incremental term loan of $20.5 million, increasing the principal balance of the term loan to $73.0 million.

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 December 31, 2022, the interest rate on the Lingo Credit Agreement was 7.89%.

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.

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

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 $2.3 million per quarter, from March 31, 2024 to December 31, 2024

are in the amount of $2.7 million per quarter, from March 31, 2025 to June 30, 2027 are in the amount of $3.7 million, and the remaining principal balance is due at final maturity on August 16, 2027.

As of December 31, 2022, the outstanding balance on the term loan was $72.0 million (net of unamortized debt issuance costs of $1.0 million).

Interest expense on the term loan during the year ended December 31, 2022 was $1.6 million (including amortization of deferred debt issuance costs of $0.1 million).

Nomura Credit Agreement

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

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

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

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

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

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

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

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

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

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

The Term Loan Facility, Revolving Credit Facility,

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

Eurodollar loans under the Credit Facilities accrue interest at the

Eurodollar Rate plus an applicable margin of 4.50%.

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

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

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

Facility for the immediately preceding fiscal quarter.

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

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

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

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

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

In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter.

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

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

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

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

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

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

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

debt issuance costs of $7.4 million).

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

of deferred debt issuance costs of $0.8 million).

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

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

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

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

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

Commencing on September 30, 2022, the Term Loan Facility and Incremental Facility is amortizing in equal quarterly installments of 1.25% of the aggregate principal amount of the term loan as of the closing date with the remaining balance due at final maturity on June 23, 2025.

Quarterly installments from March 31, 2023 to March 31, 2025 are in the amount of $3.8 million per quarter.

As of December 31, 2022 and 2021, the outstanding balance on the Term Loan Facility and Incremental Facility was $287.0 million (net of unamortized debt issuance costs of $5.5 million) and $292.7 million (net of unamortized debt issuance costs of $7.4 million), respectively.

Interest on the term loan during the years ended December 31, 2022 and 2021,

was $21.3 million (including amortization of deferred debt issuance costs of $2.1 million) and $5.9 million (including amortization of deferred debt issuance costs of $0.8 million), respectively.

The interest rate on the term loan as of December 31, 2022 and 2021 was 9.23% and 4.72%, respectively.

We had an outstanding balance of $74.7 million and $80.0 million under the Revolving Credit Facility as of December 31, 2022 and 2021, respectively.

Interest on the revolving facility during the years ended December 31, 2022 and 2021 was $5.4 million (including unused commitment fees of $0.01 million and amortization of deferred financing costs of $0.6 million) and $1.9 million (including unused commitment fees of $0.08 million and amortization of deferred financing costs of $0.3 million), respectively.

The interest rate on the revolving facility as of December 31, 2022 and 2021 was 9.23% and 4.67%, respectively.

Wells Fargo Credit Agreement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We are party to a credit agreement (as amended, the “Credit Agreement”) governing our asset based credit facility with Wells Fargo Bank, National Association (“Wells Fargo Bank”) with a maximum borrowing limit of $200.0 million and a maturity date of April 20, 2027.

Cash advances and the issuance of letters of credit under the credit facility are made at the lender’s discretion.

The letters of credit issued under this facility are furnished by the lender to third parties for the principal purpose of securing minimum guarantees under liquidation services contracts.

All outstanding loans, letters of credit, and interest are due on the expiration date which is generally within 180 days of funding.

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

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

The credit facility provides for success fees in the amount of 1.0% to 10.0% of the net profits, if any, earned on the liquidation engagements funded under the Credit Agreement as set forth therein.

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

Interest expense totaled $0.2 million, $0.4 million, and $0.6 million during the years ended December 31, 2022, 2021, and 2020, respectively.

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

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

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

BRPAC Credit Agreement

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

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

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

with Banc of California, N.A.

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

Date Lenders”).

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

Pursuant to the terms of the

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

prior to the first anniversary of the agreement date.

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

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

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

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

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

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

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

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

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

the Third Amendment.

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

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

Principal outstanding

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

Quarterly installments from March 31, 2022 to December 31,

2022 are in the amount of $4.1 million per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $3.6 million per quarter,

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

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

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

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

Certain of the Borrowers’ U.S.

subsidiaries are guarantors of all obligations under the BRPAC Credit Agreement and are parties to the BRPAC Credit Agreement in such capacity (collectively, the “Secured Guarantors”;

and together with the Borrowers, the “Credit Parties”).

In addition, we and B.

Riley Principal Investments, LLC, the parent corporation of BRPAC and a subsidiary of ours, are guarantors of the obligations under the BRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of BRPAC are pledged as collateral.

The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties, including a pledge of (a) 100.00% of the equity interests of the Credit Parties, (b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India;

and (c) 65% of the equity interests in magicJack VocalTec LTD., a limited company organized under the laws of Israel.

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

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

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

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

Credit Agreement.

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

Through a series of amendments, including the most recent Fourth Amendment to the BRPAC Credit Agreement (the “Fourth Amendment”) on June 21, 2022, the Borrowers, the Secured Guarantors, the Agent and the Closing Date Lenders agreed to the following, among other things:

(i) the Lenders agreed to make a new $75.0 million term loan to the Borrowers, the proceeds of which the Borrowers’ 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 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 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 December 31, 2022 and 2021, the interest rate on the BRPAC Credit Agreement was 7.65% and 3.17%, respectively.

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

Quarterly installments from March 31, 2023 to December 31, 2023 are in the amount of $4.7 million per quarter, from March 31, 2024 to December 31, 2026 are in the amount of $3.8 million per quarter, on March 31, 2027 is in the amount of $2.8 million, and the remaining principal balance is due at final maturity on June 30, 2027.

As of December 31, 2022, and 2021, the outstanding balance on the term loan was $68.7 million (net of unamortized debt issuance costs of $0.7 million) and $53.7 million (net of unamortized debt issuance costs of $0.6 million), respectively.

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

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

Preferred Stock Offering

On September 4, 2020, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 7.375% Series B Cumulative Perpetual Preferred Stock.

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

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

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

Interest expense on the term loan during the years ended December 31, 2022, 2021, and 2020, was $3.5 million (including amortization of deferred debt issuance costs of $0.3 million), $2.5 million (including amortization of deferred debt issuance costs of $0.3 million) and $2.4 million (including amortization of deferred debt issuance costs of $0.3 million), respectively.

Senior Note Offerings

During the year ended December 31, 2021, we issued $223.4 million of senior notes due with maturities dates ranging from May 2023 to August 2028 pursuant to At the Market Issuance Sales Agreements with B.

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

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

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

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

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

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

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

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

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

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

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

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

On March 31, 2021, we exercised our option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017.

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

On July 26, 2021, we redeemed, in full, $122.8 million aggregate principal amount of our 7.25% Senior Notes due 2027 (“7.25% 2027 Notes”) pursuant to the third supplemental indenture dated December 31, 2017.

The total redemption payment included approximately $2.1 million in accrued interest.

In connection with the full redemption, the 7.25% 2027 Notes under the ticker symbol “RILYG,” were delisted from NASDAQ.

On August 4, 2021, we issued $316.3 million of senior notes due in August 2028 (“5.25% 2028 Notes”).

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

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

In connection with the issuance of the 5.25% 2028 Notes, we received net proceeds of $308.7 million (after underwriting commissions, fees, and other issuance costs of $7.6 million).

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

On September 4, 2021, we redeemed, in full, $137.5 million aggregate principal amount of our 7.375% Senior Notes due 2023 (“7.375% 2023 Notes”) pursuant to the fifth supplemental indenture dated September 11, 2018.

The redemption price was equal to 101.5% of the aggregate principal amount, plus accrued and unpaid interest up to, but excluding, the redemption date.

The total redemption payment included approximately $1.0 million in accrued interest and $2.1 million in premium.

In connection with the full redemption, the 7.375% 2023 Notes under the ticker symbol “RILYH,” were delisted from NASDAQ.

On October 22, 2021, we redeemed, in full, $115.7 million aggregate principal amount of our 6.875% Senior Notes due 2023 (the “6.875% 2023 Notes”) pursuant to the fifth supplemental indenture dated September 11, 2018.

The redemption price was equal to 101% of the aggregate principal amount, plus accrued and unpaid interest, up to, but excluding, the redemption date.

The total redemption payment included approximately $1.8 million in accrued interest and $1.2 million in premium.

In connection with the full redemption, the 6.875% 2023 Notes under the ticker symbol “RILYI,” were delisted from NASDAQ.

On December 3, 2021, we issued $322.7 million of senior notes due in December 2026 (“5.00% 2026 Notes”).

During the years ended December 31, 2022 and 2021, the Company issued $111.8 million and $233.4 million, 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.

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

We filed a series of prospectus supplements with the SEC in respect of our offerings of these senior notes.

On November 15, 2022, we issued $60.0 million of senior notes due in May 2024 (“6.75% 2024 Notes”) pursuant to a prospectus supplement.

Interest on the 6.75% 2024 Notes is payable quarterly at 6.75%.

The 5.00% 2026 Notes are unsecured and due and payable in full on December 31, 2026.

The 6.75% 2024 Notes are unsecured and due and payable in full on May 30, 2024.

In connection with the issuance of the 6.75% 2024 Notes, we received net proceeds of $59.0 million (after underwriting commissions, fees and other issuance costs of $1.0 million)

The Notes bear interest at the rate of 5.00% per annum.

As of December 31, 2021 and December 31, 2020, the total senior notes outstanding was $1,606.6 million (net of unamortized debt issue costs of $21.5 million) and $870.8 million (net of unamortized debt issue costs of $9.6 million) with a weighted average interest rate of 5.69% and 6.95%, respectively.

As of December 31, 2022 and 2021, the total senior notes outstanding was $1,721.8 million (net of unamortized debt issue costs of $18.1 million) and $1,606.6 million (net of unamortized debt issue costs of $21.5 million) with a weighted average interest rate of 5.75% and 5.69%, respectively.

Interest on senior notes is payable on a quarterly basis.

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

This program provides for the sale by the Company of up to $250.0 million of certain of the Company’s senior notes.

As of December 31, 2021, the Company had $111.9 million remaining availability under the January 2022 Sales Agreement.

Off Balance Sheet

about our off-balance sheet arrangements is included in Note 17 of the Notes to Consolidated Financial Statements.

Such information is

hereby incorporated by reference.

From time to time, we

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

During the years ended

December 31, 2021 and 2020, we paid cash dividends on our common stock of $347.1 million and $38.8 million, respectively.

February 23, 2022, the Company declared a regular quarterly dividend of $1.00 per share, which will be paid on or about March 23,

2022 to stockholders of record as of March 9, 2022.

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

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

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

August 26, 2021 to stockholders of record as of August 13, 2021.

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

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

On October 28,

2021, the Board of Directors announced an increase to the regular quarterly dividend from $0.50 per share to $1.00 per share.

it is the Board’s current intention to make regular dividend payments of $1.00 per share each quarter and special dividend

payments dependent upon exceptional circumstances from time to time, our Board of Directors may reduce or discontinue the payment of

dividends at any time for any reason it deems relevant.

The declaration and payment of any future dividends or repurchases of our

common stock will be made at the discretion of our Board of Directors and will be dependent upon our financial condition, results of

operations, cash flows, capital expenditures, and other factors that may be deemed relevant by our Board of Directors.

This program provides for the sale by us of up to $250.0 million of certain of our senior notes.

As of December 31, 2022 and 2021, we had $69.5 million and $111.9 million, respectively, remaining availability under the January 2022 Sales Agreement.

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

During the years ended December 31, 2022, and 2021, we paid cash dividends on our common stock of

$119.5 million, and $347.1 million, respectively.

On February 22, 2023, the Company declared a regular quarterly dividend of $1.00 per share, which will be paid on or about March 23, 2023 to stockholders of record as of March 10, 2023.

On October 28, 2021, the Board of Directors announced an increase to the regular quarterly dividend from $0.50 per share to $1.00 per share.

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

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

A summary of our common stock dividend activity during the years ended December 31, 2022 and 2021 was as follows:

October 28, 2021

November 23, 2021

November 9, 2021

July 29, 2021

August 26, 2021

August 13, 2021

February 25, 2021

March 24, 2021

March 10, 2021

October 28, 2020

November 24, 2020

November 10, 2020

July 30, 2020

August 28, 2020

August 14, 2020

June 10, 2020

March 3, 2020

March 31, 2020

March 17, 2020

Holders of Series A Preferred Stock, when and as authorized by the

board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $0.03 million liquidation

preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share).

Dividends are payable quarterly

As of December 31, 2021, dividends in arrears in respect of the Depositary Shares were $0.8 million.

On January 11,

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

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

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

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

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

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

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

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

January 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 31, 2022 to

holders of record as of the close of business on January 21, 2022.

Holders of Series B Preferred Stock, when and as authorized by the

board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25 thousand liquidation

preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends are payable quarterly

As of December 31, 2021, dividends in arrears in respect of the Depositary Shares were $0.5 million.

On January 11,

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

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

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

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

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

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

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

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

January10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid January 31, 2022 to holders

of record as of the close of business on January 21, 2022.

Critical Accounting Policies

Date Declared Date Paid Stockholder Record Date Regular Dividend

Amount Special Dividend

Amount Total Dividend

November 3, 2022 November 29, 2022 November 15, 2022 $ 1.000 $ — $ 1.000

July 28, 2022 August 23, 2022 August 11, 2022 1.000 — 1.000

April 28, 2022 May 20, 2022 May 11, 2022 1.000 — 1.000

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

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

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

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

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

Holders of Series A Preferred Stock, when and as authorized by our board of directors, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share).

Dividends are payable quarterly in arrears.

As of December 31, 2022 and 2021, dividends in arrears in respect of the Depositary Shares were $0.8 million and $0.8 million, respectively.

On January 9, 2023, the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on January 31, 2023 to holders of record as of the close of business on January 20, 2023.

Holders of Series B Preferred Stock, when and as authorized by our board of directors, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $0.03 million liquidation preference $25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends are payable quarterly in arrears.

As of December 31, 2022 and 2021, dividends in arrears in respect of the Depositary Shares were $0.5 million and $0.5 million, respectively.

On January 9, 2023, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on January 31, 2023 to holders of record as of the close of business on January 20, 2023.

A summary of our preferred stock dividend activity during the years ended December 31, 2022 and 2021 was as follows:

Preferred Dividend per Depositary Share

Date Declared Date Paid Stockholder Record Date Series A Series B

October 10, 2022 October 31, 2022 October 21, 2022 $ 0.4296875 $ 0.4609375

July 7, 2022 July 29, 2022 July 19, 2022 0.4296875 0.4609375

April 7, 2022 April 29, 2022 April 19, 2022 0.4296875 0.4609375

January 10, 2022 January 31, 2022 January 21, 2022 0.4296875 0.4609375

October 6, 2021 November 1, 2021 October 21, 2021 0.4296875 0.4609375

July 8, 2021 August 2, 2021 July 21, 2021 0.4296875 0.4609375

April 5, 2021 April 30, 2021 April 20, 2021 0.4296875 0.4609375

January 11, 2021 January 29, 2021 January 21, 2021 0.4296875 0.4609375

Critical Accounting Policies and Estimates

Our financial statements and the notes thereto contain information that is pertinent to management’s discussion and analysis.

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• changes in the estimate, or the use of different estimating methods that could have been selected, could have a material impact on results of operations or financial condition.

of Estimates.

The preparation of financial statements in conformity with GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date

of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could

differ from those estimates.

Estimates are used when accounting for certain items such as valuation of securities, reserves for

accounts receivable, the fair value of loans receivable, intangible assets and goodwill, share based arrangements and accounting for income tax valuation allowances, recovery of contract assets and sales returns and

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

under the circumstances.

Use of Estimates.

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expense during the reporting period.

Estimates are used when accounting for certain items such as valuation of securities, allowance for doubtful accounts, the fair value of loans receivables, intangible assets and goodwill, share based arrangements, contingent consideration, accounting for income tax valuation allowances, recovery of contract assets, and sales returns and allowances.

Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances.

Due to the inherent uncertainty involved with estimates, actual results may differ.

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

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

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

fourth quarter of 2021, the full impact of the COVID-19 outbreak continued to evolve, with the emergence of variant strains and breakthrough

infections becoming prevalent both in the U.S.

and worldwide.

economy recovers, aided by stimulus packages and fiscal and

monetary policies, inflation has been rising at historically high rates, and the Federal Reserve has signaled that it will begin increasing

the target federal funds effective rate.

The impact of the COVID-19 outbreak and these related matters on our results of operations, financial

position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and

restrictions and the success of vaccines and natural immunity in controlling the pandemic.

These developments and the impact

of the COVID-19 outbreak on the financial markets and the overall economy continue to be highly uncertain and cannot be predicted.

the financial markets and/or the overall economy continue to be impacted, our results of operations, financial position and cash flows

may be materially adversely affected.

These factors create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods.

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

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

Our significant accounting policies are described in Note 3 to the consolidated financial statements included elsewhere in this Annual Report.

Management believes that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our financial statements.

Recognition .

We recognize revenues under Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts

with Customers

Revenue Recognition .

We recognize revenues under Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers.

Revenues are recognized when control of the promised goods or performance obligations for services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for the goods or services.

Revenues from contracts with customers in the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment, Principal Investments – Communications segment and Brands segment are primarily comprised of the following:

Revenues from contracts with customers in the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment, Communications segment, Consumer segment and the All Other category are primarily comprised of the following:

Capital Markets Segment - Fees earned from corporate finance and investment banking services are derived from debt, equity and convertible securities offerings in which the Company acted as an underwriter or placement agent.

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The performance obligation for financial advisory services is satisfied over time as work progresses on the engagement and services are delivered to the client.

The performance obligation for financial advisory services may also include success and performance based fees which are recognized as revenue when the performance obligation is no longer constrained and it is not probable that the revenue recognized would be subject to significant reversal in a future period.

The performance obligation for financial advisory services may also include success and performance-based fees which are recognized as

revenue when the performance obligation is no longer constrained and it is not probable that the revenue recognized would be subject to significant reversal in a future period.

Generally, it is probable that the revenue recognized is no longer subject to significant reversal upon the closing of the investment banking transaction.

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Revenues from sales and trading are recognized when the performance obligation is satisfied and include commissions resulting from equity securities transactions executed as agent or principal and are recorded on a trade date basis and fees paid for equity research.

Revenues from other sources in the Capital Markets segment is primarily comprised of (i) interest income from loans receivable and securities lending activities, (ii) related net trading gains and losses from market making activities, the commitment of capital to facilitate customer orders, (iii) trading activities from our Principal Investments in equity and other securities for the Company’s account, and (iv) other income.

Revenues from other sources in the Capital Markets segment is primarily comprised of (i) interest income from loans receivable and securities lending activities, (ii) related net trading gains and losses from market making activities, the commitment of capital to facilitate customer orders, (iii) trading activities of equity and other securities for the Company’s account, and (iv) other income.

Interest income from securities lending activities consists of interest income from equity and fixed income securities that are borrowed from one party and loaned to another.

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Other revenues include (i) net trading gains and losses from market making activities in our fixed income group, (ii) carried interest from our asset management recognized as earnings from financial assets within the scope of ASC 323 - Investments - Equity Method and Joint Ventures , and therefore will not be in the scope of ASC 606 - Revenue from Contracts with Customers .

In accordance with ASC 323 - Investments - Equity Method and Joint Ventures , the Company will record equity method income (losses) as a component of investment income based on the change in our proportionate claim on net assets of the investment fund, including performance-based capital allocations, assuming the investment fund was liquidated as of each reporting date pursuant to each fund’s governing agreements, and (iii) other miscellaneous income.

In accordance with ASC 323 - Investments - Equity Method and Joint Ventures , the Company records investment income based on the change in our proportionate claim on net assets of the investment fund, including performance-based capital allocations, assuming the investment fund was liquidated as of each reporting date pursuant to each fund’s governing agreements, and (iii) other miscellaneous income.

Wealth Management segment - Fees from wealth management asset advisory services consist primarily of investment advisory fees that are recognized over the period the performance obligation for the services provided.

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Auction and Liquidation segment - Commission and fees earned on the sale of goods at Auction and Liquidation sales are recognized when evidence of a contract or arrangement exists, the transaction price has been determined, and the performance obligation has been satisfied when control of the product and risks of ownership has been transferred to the buyer.

The commission and fees earned for these services are included in revenues in the accompanying consolidated statements of income.

The commission and fees earned for these services are included in revenues in the accompanying consolidated statements of operations.

Under these types of arrangements, revenues also include contractual reimbursable costs.

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Estimated amounts are included in the transaction price at the most likely amount it is probable that a significant reversal of revenue will not occur.

Our estimates of variable consideration and determination of whether or not to include estimated amounts in the transaction price are based on an assessment of our anticipated performance under the contract taking into consideration all historical, current and forecasted information that is reasonably available to us.

Our estimates of variable consideration and determination of whether or not to include estimated amounts in the transaction price are based on an assessment of our

anticipated performance under the contract taking into consideration all historical, current and forecasted information that is reasonably available to us.

Costs that directly relate to the contract and expected to be recoverable are capitalized as an asset and included in advances against customer contracts in the accompanying consolidated balance sheets.

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Revenues in the Financial Consulting segment also include contractual reimbursable costs.

Investments – Communications Segment – Revenues in the Principal Investments - Communications segment are primarily

comprised of subscription services revenues which consist of fees charged to United Online pay accounts;

revenues from the sale of the

magicJack access rights;

Communications Segment – Revenues in the Communications segment are primarily comprised of subscription services revenues which consist of fees charged to United Online pay accounts;

revenues from the sale of the magicJack access rights;

revenues from access rights renewals and mobile apps;

prepaid minutes revenues;

revenues from access and wholesale

service revenue from UCaaS hosting services;

revenues from access and wholesale charges;

service revenue from unified communication as a service (“UCaaS”) hosting services;

and revenues from mobile phone voice, text, and data services.

Products revenues

consist of revenues from the sale of magicJack, mobile phone, and mobile broadband service devices, including the related shipping and

handling and installation fees, if applicable.

This segment’s revenues also include advertising revenues which consist primarily

of amounts from the Company’s Internet search partner that are generated as a result of users utilizing the partner’s Internet

search services and amounts generated from display advertisements.

The Company recognizes such advertising revenues in the period in

which the advertisement is displayed or, for performance-based arrangements, when the related performance criteria are met.

Subscription service revenues are recognized over time in the service

period in which the transaction price has been determinable and the related performance obligations for services are provided to the customer.

Fees charged to customers in advance are initially recorded in the consolidated balance sheets as deferred revenue and then recognized

ratably over the service period as the performance obligations are provided.

revenues for hardware and shipping are recognized at the time of delivery.

Revenues from sales of devices and services

represent revenues recognized from sales of the magicJack devices to retailers, wholesalers, or direct to customers, net of returns,

and rights to access the Company’s servers over the period associated with the access right period, and from sales of mobile

phones and voice, text, and data services.

The transaction price for devices is allocated between equipment and service based on

stand-alone selling prices.

Revenues allocated to devices are recognized upon delivery (when control transfers to the customer), and

service revenue is recognized ratably over the service term.

The Company estimates the return of magicJack device direct sales as

part of the transaction price using a six month rolling average of historical returns.

Brands Segment – Licensing revenue results from various license agreements that provide revenue based on guaranteed minimum royalty amounts and advertising/marketing fees with additional royalty revenue based on a percentage of defined sales.

Guaranteed minimum royalty amounts are recognized as revenue on a straight-line basis over the full contract term.

Products revenues consist of revenues from the sale of magicJack, mobile phone, and mobile broadband service devices, including the related shipping and handling and installation fees, if applicable.

This segment’s revenues also include advertising revenues which consist primarily of amounts from the Company’s Internet search partner that are generated as a result of users utilizing the partner’s Internet search services and amounts generated from display advertisements.

The Company recognizes such advertising revenues in the period in which the advertisement is displayed or, for performance-based arrangements, when the related performance criteria are met.

Subscription service revenues are recognized over time in the service period in which the transaction price has been determinable and the related performance obligations for services are provided to the customer.

Fees charged to customers in advance are initially recorded in the consolidated balance sheets as deferred revenue and then recognized ratably over the service period as the performance obligations are provided.

Product revenues for hardware and shipping are recognized at the time of delivery.

Revenues from sales of devices and services represent revenues recognized from sales of the magicJack devices to retailers or direct to customers, net of returns, and rights to access the Company’s servers over the period associated with the access right period, and from sales of mobile phones and voice, text, and data services.

The transaction price for devices is allocated between equipment and service based on stand-alone selling prices.

Revenues allocated to devices are recognized upon delivery (when control transfers to the customer), and service revenue is recognized ratably over the service term.

The Company estimates the return of magicJack device direct sales as part of the transaction price using a six month rolling average of historical returns.

Consumer Segment – Revenues in the Consumer segment primarily consists of the global sales of notebook computer carrying cases and computer accessories;

licensing revenues from various licensing agreements that provide revenue based on guaranteed minimum royalty amounts and advertising/marketing fees with additional royalty revenue based on a percentage of defined sales.

Global sales of consumer goods to customers are subject to contracts that contain a single performance obligation and revenue is recognized at a point in time when control of the product transfers to the customer which is generally upon product shipment.

Customers consist primarily of equipment manufacturers, distributors (servicing resellers and corporate

end-customers), and retailers.

Generally, the terms of the contracts for the sale of global goods do not allow for a right of return except for matters related to products with defects or damages.

Licensing revenues include guaranteed minimum royalty amounts that are recognized as revenue on a straight-line basis over the contract term.

Royalty payments exceeding the guaranteed minimum amounts in a specific contract year are recognized only subsequent to when the guaranteed minimum amount has been achieved.

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Advanced royalty payments are recorded as deferred revenue at the time payment is received and recognized as revenue when earned.

Revenue is not recognized unless collectability is probable.

Royalty revenue is not recognized unless collectability is probable.

All Other - Revenue from the All Other category come from a regional environmental services business in the New York metropolitan area and a landscaping business in the southeast United States.

Revenue is recognized when the customer obtains control of the good or the service is provided.

Allowance for Doubtful Accounts.

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Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The bad debt expense is included as a component of selling, general and administrative expenses in the accompanying consolidated statements of income.

The bad debt expense is included as a component of selling, general and administrative expenses in the accompanying consolidated statements of operations.

Goodwill and Other Intangible Assets.

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Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value.

The Company operates five reporting units, which are the same as its reporting segments described in Note 22 to the consolidated financial statements.

The Company operates six reporting units, which are the same as its reporting segments described in Note 24 to the consolidated financial statements.

Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions.

Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.

When testing goodwill for impairment, in accordance with ASU 2017-04, Intangibles-Goodwill and Other (Topic 350):

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

Based on the Company’s qualitative assessments during 2020, the Company concluded that a positive assertion can be made from the qualitative assessment that it is more likely than not that the fair value of the reporting units exceeded their carrying values and no impairments were identified.

When testing goodwill for impairment, in accordance with ASC 350, the Company made an assessment of qualitative factors on goodwill and other intangible assets and concluded that a positive assertion could be made that it is more likely than not that the fair value of the reporting units exceeded their carrying values.

In performing the analysis, qualitative factors indicated that it could be more likely than not that the carrying value of goodwill in the Wealth Management segment could be impaired as a result of the segment loss incurred during the year ended December 31, 2022.

The Company performed a quantitative goodwill impairment test for its Wealth Management segment and determined the fair value of this reporting segment using the market approach and income approach exceeded the carrying value of goodwill.

The Company concluded there was no impairment of goodwill in the Wealth Management segment.

No impairments of goodwill were identified during the years ended December 31, 2022 and 2021.

The Company reviews the carrying value of its amortizable intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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If the undiscounted cash flows of such assets are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group, if any, exceeds its fair market value.

During the year ended December 31, 2020, the Company determined that the COVID-19 outbreak was a triggering event for testing the indefinite-lived tradenames in the Brands segment during the first quarter and again in the second quarter and determined that the indefinite-lived tradenames in the Brands segment were impaired.

As a result, the Company recognized impairment charges of $12,500, during the year ended December 31, 2020, which are included in restructuring charge in the Company’s consolidated statements of income.

During the year ended December 31, 2021, the Company recognized no impairment of intangibles.

Fair Value Measurements.

The Company records securities and other investments owned, securities sold not yet purchased, and mandatorily redeemable noncontrolling interests that were issued after November 5, 2003 at fair value with fair value determined in accordance with the Codification.

Our mandatorily redeemable noncontrolling interests are measured at fair value on a recurring basis and are categorized using the three levels of fair value hierarchy.

The Company records loans receivable, securities and other investments owned, securities sold not yet purchased, and mandatorily redeemable noncontrolling interests that were issued after November 5, 2003 at fair value with fair value determined in accordance with the Codification.

Our mandatorily redeemable noncontrolling

interests are measured at fair value on a recurring basis and are categorized using the three levels of fair value hierarchy.

In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) for identical instruments that are highly liquid, observable and actively traded in over-the-counter markets.

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The carrying amounts of the notes payable (including credit lines used to finance liquidation engagements), long-term debt and capital lease obligations approximate fair value because the contractual interest rates or effective yields of such instruments are consistent with current market rates of interest for instruments of comparable credit risk.

Share-Based Compensation.

The Company’s share based payment awards principally consist of grants of restricted stock and restricted stock units.

Share based payment awards also include grants of membership interests in the Company’s majority owned subsidiaries.

The grants of membership interests consist of percentage interests in the Company’s majority owned subsidiaries as determined at the date of grant.

In accordance with the accounting guidance share based payment awards are classified as either equity or a liability.

For equity-classified awards, the Company measures compensation cost for the grant of membership interests at fair value on the date of grant and recognizes compensation expense in the consolidated statements of income over the requisite service or performance period the award is expected to vest.

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

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

Income Taxes.

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns.

Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect during the year in which the differences are expected to reverse.

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

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.

Deferred tax liabilities and assets are determined based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect during the year in which the differences are expected to reverse.

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

A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods.

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If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.

The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax benefits of operating loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances.

As a result of the common stock offering that was completed on June 5, 2014, the Company had a more than 50% ownership shift in accordance with Internal Revenue Code Section 382.

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

As of December 31, 2019, the Company believes that the net operating loss that existed as of the more than 50% ownership shift will be utilized in future tax periods and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided an allowance.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

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

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

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

Recent Accounting Standards

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

What changed 10-K

Item 7. Management’s Discussion and Analysis