FORM 10-Q
(Mark One) For the quarterly period ended March 31, For the transition period from to Commission File Number 001-37503 B. RILEY FINANCIAL, INC. (Exact Name of Registrant as Specified in Its Charter) 90025 (310) 966-1444 Securities registered pursuant to Section 12(b) of the Act: Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes As of April B. Riley Financial, Inc. Quarterly Report on Form 10-Q For the Quarterly Period Ended March 31, Table of Contents Condensed Consolidated Balance Sheets (Dollars in thousands, except par value) The accompanying notes are an integral part of these condensed consolidated financial statements. Condensed Consolidated Statements of Operations (Dollars in thousands, except share data) The accompanying notes are an integral part of these condensed consolidated financial statements. Condensed Consolidated Statements of Comprehensive Income (Loss) (Dollars in thousands) The accompanying notes are an integral part of these condensed consolidated financial statements. Condensed Consolidated Statements of Equity (Dollars in thousands, except share data) Condensed Consolidated Statements of Cash Flows (Dollars in thousands) The accompanying notes are an integral part of these condensed consolidated financial statements. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data) NOTE B. Riley Financial, Inc. and its subsidiaries (collectively, the “Company”) provide investment banking and financial services to corporate, institutional and high net worth clients, and asset disposition, financial consulting, appraisal and capital advisory services to a wide range of retail, wholesale and industrial clients, as well as lenders, capital providers, private equity investors and professional services firms throughout the United States, Australia, Canada, and Europe and consumer Internet access and cloud communication services through its wholly-owned subsidiaries United Online, Inc. (“UOL” or “United Online”) and magicJack VocalTec Ltd. (“magicJack”). The Company The Company operates in NOTE (a) Principles of Consolidation and Basis of Presentation The condensed consolidated financial statements include the accounts of B. Riley Financial, Inc. and its wholly-owned and majority-owned subsidiaries. The condensed consolidated financial statements also include the accounts of The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as valuation of securities, (c) Interest Expense — Securities Lending Activities Interest expense from securities lending activities is included in operating expenses related to operations in the Capital Markets segment. Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $11,766 and $18,721 (d) Concentration of Risk Revenues in the Capital Markets, Financial Consulting, Wealth Management, Brands and Principal Investments — The Company’s activities in the Auction and Liquidation segment are executed frequently with, and on behalf of, distressed customers and secured creditors. Concentrations of credit risk can be affected by changes in economic, industry, or geographical factors. The Company seeks to control its credit risk and potential risk concentration through risk management activities that limit the Company’s exposure to losses on any one specific liquidation services contract or concentration within any one specific industry. To mitigate the exposure to losses on any one specific liquidations services contract, the Company sometimes conducts operations with third parties through collaborative arrangements. The Company maintains cash in various federally insured banking institutions. The account balances at each institution periodically exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts in excess of FDIC insurance coverage. The Company has not experienced any losses in such accounts. The Company also has substantial cash balances from proceeds received from auctions and liquidation engagements that are distributed to parties in accordance with the collaborative arrangements. (e) Advertising Expenses The Company expenses advertising costs, which consist primarily of costs for printed materials, as incurred. Advertising costs totaled $1,763 and $578 (f) Share-Based Compensation The Company’s share-based payment awards principally consist of grants of restricted stock, restricted stock units and costs associated with the Company’s employee stock purchase plan. In accordance with the applicable accounting guidance, share-based payment awards are classified as either equity or liabilities. For equity-classified awards, the Company measures compensation cost for the grant of membership interests at fair value on the date of grant and recognizes compensation expense in the condensed consolidated statements of operations over the requisite service or performance period the award is expected to vest. In June 2018, the Company adopted the 2018 Employee Stock Purchase Plan (“Purchase Plan”) which allows eligible employees to purchase common stock through payroll deductions at a price that is 85% of the market value of the common stock on the last day of the offering period. In accordance with the provisions of (g) Income Taxes The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the condensed consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods. Tax benefits of operating loss carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced. (h) Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. (i)Restricted Cash As of March 31, 2022 and December 31, 2021, restricted cash included (j) Securities Borrowed and Securities Loaned Securities borrowed and securities loaned are recorded based upon the amount of cash advanced or received. Securities borrowed transactions facilitate the settlement process and require the Company to deposit cash or other collateral with the lender. With respect to securities loaned, the Company receives collateral in the form of cash. The amount of collateral required to be deposited for securities borrowed, or received for securities loaned, is an amount generally in excess of the market value of the applicable securities borrowed or loaned. The Company monitors the market value of the securities borrowed and loaned on a daily basis, with additional collateral obtained, or excess collateral recalled, when deemed appropriate. The Company accounts for securities lending transactions in accordance with ASC (k) Property and Equipment Property and equipment are stated at cost. Depreciation (l) Loans Receivable Loans receivable, at fair value totaled The Company may periodically provide limited guarantees to third parties for loans that are made to investment banking and lending clients. Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans and securities lending on the condensed consolidated statements of operations. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Unearned income, discounts and premiums are amortized to interest income using a level yield methodology. Securities and other investments owned consist of marketable securities and investments in partnership interests and other securities recorded at fair value. Securities sold, but not yet purchased represents obligations of the Company to deliver the specified security at the contracted price and thereby create a liability to purchase the security in the market at prevailing prices. Changes in the value of these securities are reflected currently in the results of operations. As of March 31, (n) Fair Value Measurements The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) for identical instruments that are highly liquid, observable, and actively traded in over-the-counter markets. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable and can be corroborated by market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety The Company’s securities and other investments owned and securities sold and not yet purchased are comprised of common and preferred stocks and warrants, corporate bonds, and investments in partnerships. Investments in common stocks that are based on quoted prices in active markets are included in Level 1 of the fair value hierarchy. The Company also holds loans receivable valued at fair value, nonpublic common and preferred stocks and warrants for which there is little or no public market and fair value is determined by management on a consistent basis. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks. These investments are included in Level 3 of the fair value hierarchy. Investments in partnership interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending funds. The Company also invests in priority investment funds and the underlying securities held by these funds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company. The Company’s partnership and investment fund interests are valued based on the Company’s proportionate share of the net assets of the partnerships and funds; the value for these investments Securities and other investments owned also include investments in nonpublic entities that do not have a readily determinable fair value and do not report NAV per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold. Any investments adjusted to their fair value by applying the measurement alternative are disclosed as nonrecurring fair value measurements, including the level in the fair value hierarchy that was used. Derivatives and Hedging and are measured at fair value at inception and on a recurring basis using quoted prices in over-the-counter markets. Warrant liabilities are included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets with changes in fair value that amounted to $4,879 during the three months ended March 31, 2022 included within change in fair value of financial instruments and other as part of other income (expense) in the condensed consolidated statements of operations. The fair value of mandatorily redeemable noncontrolling interests is determined based on the issuance of similar interests for cash, references to industry comparables, and relied, in part, on information obtained from appraisal reports and internal valuation models. As of March 31, The following table summarizes the significant unobservable inputs in the fair value measurement of The amount reported in the table above As of March 31, The Company periodically uses derivative instruments, which primarily consist of the purchase of forward exchange contracts, for certain loans receivable and Auction and Liquidation engagements with operations outside the United States. As of March 31, The forward exchange contracts were entered into to improve the predictability of cash flows related to a retail store liquidation engagement and a loan receivable. The net gain from forward exchange contracts was $68 and $310 during the three months ended March 31, The Company transacts business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. Transaction gains were bebe stores, inc. (r) Supplemental Non-cash Disclosures During the three months ended March 31, 2022, non-cash investing activities included $20,320 in issuance of the Company's common stock as part of the purchase price consideration from the FocalPoint acquisition and $22,661 in seller financing for deferred cash consideration. During the three months ended March 31, 2021, non-cash investing activities included the repayment of a loan receivable in full in the amount of $64,754 with equity securities. In addition, $35,000 of loans receivable were exchanged for $35,000 of newly issued debt securities. (s) In November 2020, the Company invested in Lingo, The Company, through its Placement agent fees attributable to such arrangements The carrying value of the Company’s investments in the In March 2020, FASB issued ASU No. 2020-04, In 2021. The following tables summarize the changes in accrued restructuring charge during the three months ended March 31, NOTE The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of March 31, NOTE The components of accounts receivable, net, include the following: NOTE Goodwill was Intangible assets consisted of the following: Amortization expense was $6,816 and $5,886 $9,946. NOTE Asset Based Credit Facility 2022. The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties, including a pledge of (a) 100% of the equity interests of the Credit Parties, (b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India; and (c) 65% of the equity interests in magicJack VocalTec LTD., a limited company organized under the laws of Israel. Such security interests are evidenced by pledge, security, and other related agreements. The BRPAC Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’ ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the BRPAC Credit Agreement requires the Credit Parties to maintain certain financial ratios. The BRPAC Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment Under the BRPAC Credit Agreement, the Company borrowed $80,000 due December 19, 2023. Pursuant to the terms of the BRPAC Credit Agreement, the Company may request additional optional term loans in an aggregate principal amount of up to $10,000 at any time prior to the first anniversary of the agreement date (the “Option Loan”) with a final maturity date of December 19, 2023. On February 1, 2019, the Credit Parties, the Closing Date Lenders, the Agent and City National Bank, as a new lender (the “New Lender”), entered into the First Amendment to the Credit Agreement and Joinder (the “First Amendment”) pursuant to which, among other things, (i) New Lender became a party to the BRPAC Credit Agreement, (ii) the New Lender extended to Borrowers the Option Loan in the amount of $10,000, (iii) the aggregate outstanding principal amount of the term loans was increased from $80,000 to On December 31, 2020, the Borrowers, the Secured Guarantors, the Agent and the Lenders, entered into the Second Amendment to Credit Agreement (the “Second Amendment”) pursuant to which, among other things, (i) the Lenders agreed to make a new $75,000 term loan to the Borrowers, the proceeds of which the Borrowers’ used to repay the outstanding principal amount of the existing Terms Loans and Optional Loans and will use for other general corporate purposes, (ii) the Borrowers were permitted to make a one-time Permitted Distribution (as defined in the Second Amendment) in the amount of $30,000 on the date of the Second Amendment, (iii) the maturity date of the new Term Loans was set at five (5) years from the date of the Second Amendment, (iv) the interest rate margin was increased by 25 basis points as set forth in the Second Amendment, (v) the Borrowers agreed to make mandatory prepayments of the Term Loans from a portion of the Consolidated Excess Cash Flow (as defined in the Credit Agreement), (vi) the maximum Consolidated Total Funded Debt Ratio (as defined in the Credit Agreement) was increased as set forth in the Second Amendment and (vii) the Company and B. Riley Principal Investments, LLC entered into a reaffirmation of their guarantees of the Borrowers’ obligations under the Credit Agreement. Additionally, the Borrowers paid a commitment fee and an arrangement fee, each based on a percentage of the aggregate commitments, in each case upon the closing of the Second Amendment. As of March 31, NOTE Senior notes payable, net, are comprised of the following: During the three months ended March 31, 2022 and 2021, the Company issued $20,073 and $12,858, respectively, of senior notes Sales Agreement Prospectus to Issue Up to The most recent sales agreement prospectus was filed by us with the SEC on January 5, 2022 (the “Sales Agreement Prospectus”) superseding the prospectus filed with the SEC on August 11, 2021, the prospectus filed with the SEC on April 6, 2021, Revenue from contracts with customers by reportable segment for the three months ended March 31, 2022 and 2021 Contract Balances The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligation(s) are satisfied. Receivables related to revenues from contracts with customers totaled During the three months ended March 31, Contract Costs Contract costs include: (1) costs to fulfill contracts associated with corporate finance and investment banking engagements are capitalized where the revenue is recognized at a point in time and the costs are determined to be recoverable; (2) costs to fulfill Auction and Liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction or liquidation where the revenue is recognized over time when the performance obligation is satisfied; and (3) commissions paid to obtain magicJack contracts which are recognized ratably over the contract term and third party support costs for magicJack and related equipment purchased by customers which are recognized ratably over the service period. The capitalized costs to fulfill a contract were Remaining Performance Obligations and Revenue Recognized from Past Performance The Company does not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material NOTE The Company’s effective income tax rate was As of March 31, The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits of operating loss, capital loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382. Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income. As of March 31, The Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions. The Company is currently under audit by certain federal, state and local, and foreign tax authorities. The NOTE Basic earnings per share is calculated by dividing net income (loss) by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding, after giving effect to all dilutive potential common shares outstanding during the period. Basic and diluted earnings per share were calculated as follows: NOTE (a) Legal Matters The Company is subject to certain legal and other claims that arise in the ordinary course of its business. In particular, the Company and its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. In view of the number and diversity of claims against the Company, the number of jurisdictions in which litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state with certainty what the eventual outcome of pending litigation or other claims will be. Notwithstanding this (b) On On August 10, 2020, the Company entered into a project specific indemnity rider NOTE (a) Employee Stock Incentive Plans The 2021 Stock Incentive Plan (the “2021 Plan”) replaced the Amended and Restated 2009 Stock Incentive Plan on May 27, 2021. Share-based compensation expense for restricted stock units under the Company’s (b) Employee Stock Purchase Plan In connection with the Company’s Employee Stock Purchase Plan ("Purchase Plan"), share based compensation was (c) Common Stock During the three months ended March 31, 2022 and 2021, the Company NOTE B. Riley Securities (“BRS”), B. Riley Wealth Management (“BRWM”), NOTE The Company periodically participates in loans and financing arrangements for which the Company has an equity ownership and representation on the board of directors (or similar governing body). The Company may also provide consulting services or investment banking services to raise capital for these companies. These transactions can be summarized as follows: Babcock and Wilcox During the three months ended March 31, 2022 and 2021, the Company earned $53 and $10,638, respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities. One of the Company’s wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the Company to serve as the Chief Executive Officer of B&W until November 30, 2020 (the “Executive Consulting Agreement”), unless terminated by either party with thirty days written notice. The agreement was extended through December 31, 2023. Under this agreement, fees for services provided are $750 per annum, paid monthly. In addition, subject to the achievement of certain performance objectives as determined by B&W’s compensation committee of the board, a bonus or bonuses may also be earned and payable to the Company. The Company is also a party to The Arena Group Holdings, Inc. (fka the Maven, The Company has loans receivable due from the Arena Group Holdings, Inc. (fka the Maven, Inc. NOTE The Company’s business is classified into the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, Financial Consulting segment, Principal Investments — The following is a summary of certain financial data for each of the Company’s reportable segments: The following table presents revenues by geographical area: Segment assets are not reported to, or used by, the Company’s Chief Operating Decision Maker to allocate resources to, or assess performance of, the segments and therefore, total segment assets have not been disclosed. This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “seek,” “likely,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. We are under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report to conform such statements to actual results or to changes in our expectations. The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report. Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made in Item 1A of Part II of this Quarterly Report under the caption “Risk Factors.” Risk factors that could cause actual results to differ from those contained in the forward-looking statements include but are not limited to risks related to: volatility in our revenues and results of operations; Except as otherwise required by the context, references in this Quarterly Report to the “Company,” “B. Riley,” “B. Riley Financial,” “we,” “us” or “our” refer to the combined business of B. Riley Financial, Inc. and all of its subsidiaries. B. Riley Financial, Inc. (NASDAQ: RILY) We are headquartered in Los Angeles with offices in major cities throughout the United States including New York, Chicago, Boston, Atlanta, Dallas, Memphis, Metro Washington 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 – Capital Markets Segment. Our Capital Markets segment provides a full array of investment banking, corporate finance, Wealth Management Segment. Our Wealth Management segment provides wealth management and tax services to corporate and high net worth clients. We offer comprehensive wealth management services for corporate businesses that include investment strategies, executive services, retirement plans, lending & liquidity resources, and settlement solutions. Our wealth management services for individual client services provide investment management, education planning, retirement planning, risk management, trust coordination, lending & liquidity solutions, legacy planning, and wealth transfer. In addition, we supply market insights to provide unbiased guidance to make important financial decisions. Wealth management resources include market views from our Auction and Liquidation Financial Consulting Principal Investments - Brands Recent Developments On Results of Operations The following period to period comparisons of our financial results and our interim results are not necessarily indicative of future results. Three Months Ended March 31, Condensed Consolidated Statements of Operations (Dollars in thousands) The table below and the discussion that follows are based on how we analyze our business. Total revenues Revenues from services and fees in the Capital Markets segment Revenues from services and fees in the Wealth Management segment increased Revenues from services and fees in the Auction and Liquidation segment decreased Revenues from services and fees in the Financial Consulting segment increased Revenues from services and fees in the Brands segment increased Trading (losses) income and fair value adjustments on loans Interest income – loans and securities lending increased Selling, General and Administrative Expenses Selling, general and administrative expenses during the three months ended March 31, Total selling, general and administrative expenses Capital Markets Selling, general and administrative expenses in the Capital Markets segment Wealth Management Selling, general and administrative expenses in the Wealth Management segment increased by Auction and Liquidation Selling, general and administrative expenses in the Auction and Liquidation segment Financial Consulting Selling, general and administrative expenses in the Financial Consulting segment increased by Principal Investments — Selling, general and administrative expenses in the Principal Investments — Selling, general and administrative expenses in the Brands segment Corporate and Other Selling, general and administrative expenses for the Corporate and Other segment Other Income (Expense).Other income included interest income of Net Income Preferred Stock Dividends. 2022. On Net (Loss) Income 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 During the three months ended March 31, As of March 31, From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations. On A summary of dividend activity for the three months ended March 31, Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends will be payable quarterly in arrears, on or about the last day of January, April, July, and October. As of March 31, Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share). Dividends will be payable quarterly in arrears, on or about the last day of January, April, July, and October. As of March 31, Our principal sources of liquidity to finance our business is our existing cash on hand, cash flows generated from operating activities, funds available under revolving credit facilities and special purpose financing arrangements. Cash Flow Summary Cash used in operating activities was $14.9 million during the three months ended March 31, 2022 compared to cash used in operating activities of $42.9 million during the three months ended March 31, Cash Cash 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 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. Principal As of March 31, Interest expense on the term loan during the three months ended March 31, 2022 and 2021, was $0.5 million (including amortization of deferred debt issuance costs of Senior Note Offerings During the three months ended March 31, 2022 and 2021, The most recent sales agreement prospectus was filed by us with the SEC on Off Balance Sheet Arrangements Recent Accounting Standards See Note Interest Rate Risk Our primary exposure to market risk consists of risk related to changes in interest rates. We utilize borrowings under our senior notes payable and credit facilities to fund costs and expenses incurred in connection with our acquisitions and retail liquidation engagements. Borrowings under our senior notes payable are at fixed interest rates and borrowings under our credit facilities bear interest at a floating rate of interest. We invest in loans receivable that primarily bear interest at floating rates of interest. If floating rates of interest had increased by 1% during the The primary objective of our investment activities is to preserve capital for the purpose of funding operations while at the same time maximizing the income that we receive from investments without significantly increasing risk. To achieve these objectives, our investments allow us to maintain a portfolio of cash equivalents, short-term investments through a variety of securities owned that primarily includes common stocks, corporate bonds and investments in partnership interests, and loans receivable. Our cash and cash equivalents through March 31, Foreign Currency Risk The majority of our operating activities are conducted in U.S. dollars. Revenues generated from our foreign subsidiaries totaled Evaluation of Disclosure Controls and Procedures We maintain a system of disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that is designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Under the supervision and with the participation of our management, including our Co-Chief Executive Officers and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon the foregoing evaluation, our Co-Chief Executive Officers and our Chief Financial Officer concluded that as of March 31, Changes in Internal Control over Financial Reporting There have been no changes to our internal control over financial reporting during the fiscal quarter covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitation on Effectiveness of Controls Our management, including our Co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well- designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. The Company is subject to certain legal and other claims that arise in the ordinary course of its business. In particular, the Company and its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. In view of the number and diversity of claims against the Company, the number of jurisdictions in which litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state with certainty what the eventual outcome of pending litigation or other claims will be. Notwithstanding this uncertainty, the Company does not believe that the results of these claims are likely to have a material effect on its financial position or results of operations. There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. A detailed discussion of our risk factors was included in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, Not applicable. Item 5. Other The exhibits filed as part of this Quarterly Report are listed in the index to exhibits immediately preceding such exhibits, which index to exhibits is incorporated herein by reference. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. /☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 193420212022Or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Delaware 27-0223495 (I.R.S. Employer
Identification No.)(Address of Principal Executive Offices) (Zip Code) Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 per share RILY Nasdaq Global Market Depositary Shares, each representing a 1/1000th
fractional interest in a 6.875% share of Series A
Cumulative Perpetual Preferred StockRILYP Nasdaq Global Market Depositary Shares, each representing a 1/1000th
fractional interest in a 7.375% share of Series B
Cumulative Perpetual Preferred StockRILYL Nasdaq Global Market7.25% Senior Notes due 2027RILYGNasdaq Global Market 6.50% Senior Notes due 2026 RILYN Nasdaq Global Market 6.375% Senior Notes due 2025 RILYM Nasdaq Global Market 6.75% Senior Notes due 2024 RILYO Nasdaq Global Market7.375% Senior Notes due 2023RILYHNasdaq Global Market6.875% Senior Notes due 2023RILYINasdaq Global Market 6.00% Senior Notes due 2028 RILYT Nasdaq Global Market 5.50% Senior Notes due 2026 RILYK Nasdaq Global Market 5.25% Senior Notes due 2028 RILYZ Nasdaq Global Market 5.00% Senior Notes due 2026 RILYG Nasdaq Global Market ☒x No ☐☒x No ☐ (Check one)Large accelerated filer ☐xAccelerated filer ☒oNon-accelerated filer ☐oSmaller reporting company ☐oEmerging growth company ☐o☐☐o No ☒27, 2021,22, 2022, there were 27,194,90927,928,234 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.2021Page 11234563347 PART II. OTHER INFORMATION4950505050505052March 31,
2022December 31,
2021(Unaudited) ASSETS Assets: Cash and cash equivalents $ 213,584 $ 278,933 Restricted cash 928 927 Due from clearing brokers 40,350 29,657 Securities and other investments owned, at fair value 1,317,101 1,532,095 Securities borrowed 1,629,773 2,090,966 Accounts receivable, net 44,722 49,673 Due from related parties 1,480 2,074 Loans receivable, at fair value (includes $154,862 and $167,744 from related parties as of March 31, 2022 and December 31, 2021, respectively) 882,391 873,186 Prepaid expenses and other assets 470,525 463,502 Operating lease right-of-use assets 60,677 56,969 Property and equipment, net 12,980 12,870 Goodwill 362,466 250,568 Other intangible assets, net 211,915 207,651 Deferred tax assets, net 2,867 2,848 Total assets $ 5,251,759 $ 5,851,919 LIABILITIES AND EQUITY Liabilities: Accounts payable $ 8,634 $ 6,326 Accrued expenses and other liabilities 298,905 343,750 Deferred revenue 75,509 69,507 Deferred tax liabilities, net 51,174 93,055 Due to clearing brokers — 69,398 Securities sold not yet purchased 7,498 28,623 Securities loaned 1,619,132 2,088,685 Operating lease liabilities 72,339 69,072 Notes payable 22,891 357 Revolving credit facility 80,000 80,000 Term loans, net 342,851 346,385 Senior notes payable, net 1,627,649 1,606,560 Total liabilities 4,206,582 4,801,718 Commitments and contingencies (Note 15) 0 0 Redeemable noncontrolling interests in equity of subsidiaries 345,000 345,000 B. Riley Financial, Inc. equity: Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 4,535 and 4,512 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively; and liquidation preference of $113,380 and $112,790 as of March 31, 2022 and December 31, 2021, respectively — — Common stock, $0.0001 par value; 100,000,000 shares authorized; 27,928,234 and 27,591,028 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 3 3 Additional paid-in capital 450,164 413,486 Retained earnings 205,765 248,862 Accumulated other comprehensive loss (1,568) (1,080) Total B. Riley Financial, Inc. stockholders’ equity 654,364 661,271 Noncontrolling interests 45,813 43,930 Total equity 700,177 705,201 Total liabilities and equity $ 5,251,759 $ 5,851,919 March 31, December 31, 2021 2020 (Unaudited) Assets Assets: Cash and cash equivalents $ 237,590 $ 103,602 Restricted cash 8,532 1,235 Due from clearing brokers 416,925 7,089 Securities and other investments owned, at fair value 1,166,704 777,319 Securities borrowed 1,313,635 765,457 Accounts receivable, net 62,425 46,518 Due from related parties 1,079 986 Advances against customer contracts 200 200 Loans receivable, at fair value (includes $202,618 and $295,809 from related parties at March 31, 2021 and December 31, 2020, respectively) 294,085 390,689 Prepaid expenses and other assets 92,812 87,262 Operating lease right-of-use assets 60,518 48,799 Property and equipment, net 15,295 11,685 Goodwill 233,807 227,046 Other intangible assets, net 205,439 190,745 Deferred tax assets, net 2,765 4,098 Total assets $ 4,111,811 $ 2,662,730 Liabilities and Equity Liabilities: Accounts payable $ 7,487 $ 2,722 Accrued expenses and other liabilities 267,164 168,478 Deferred revenue 68,515 68,651 Deferred tax liabilities, net 101,270 34,248 Due to related parties and partners 1,503 327 Due to clearing brokers — 13,672 Securities sold not yet purchased 288,058 10,105 Securities loaned 1,307,069 759,810 Mandatorily redeemable noncontrolling interests 4,514 4,700 Operating lease liabilities 73,630 60,778 Notes payable 6,908 37,967 Loan participations sold 11,230 17,316 Term loan 69,543 74,213 Senior notes payable, net 1,139,100 870,783 Total liabilities 3,345,991 2,123,770 Commitments and contingencies (Note 13) B. Riley Financial, Inc. stockholders’ equity: Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 3,971 shares issued and outstanding as of March 31, 2021 and December 31, 2020; and liquidation preference of $99,260 as of March 31, 2021 and December 31,2020. — — Common stock, $0.0001 par value; 100,000,000 shares authorized; 27,194,909 and 25,777,796 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively. 3 3 Additional paid-in capital 380,543 310,326 Retained earnings 352,910 203,080 Accumulated other comprehensive loss (1,459 ) (823 ) Total B. Riley Financial, Inc. stockholders’ equity 731,997 512,586 Noncontrolling interests 33,823 26,374 Total equity 765,820 538,960 Total liabilities and equity $ 4,111,811 $ 2,662,730 (Unaudited)Three Months Ended
March 31,2022 2021 Revenues: Services and fees $ 210,675 $ 289,469 Trading (losses) income and fair value adjustments on loans (68,390) 266,942 Interest income - Loans and securities lending 61,426 36,920 Sale of goods 1,878 6,828 Total revenues 205,589 600,159 Operating expenses: Direct cost of services 11,651 11,322 Cost of goods sold 2,251 5,326 Selling, general and administrative expenses 175,199 191,344 Interest expense - Securities lending and loan participations sold 11,766 19,189 Total operating expenses 200,867 227,181 Operating income 4,722 372,978 Other income (expense): Interest income 67 49 Change in fair value of financial instruments and other 5,981 — Income from equity investments 6,775 875 Interest expense (30,436) (19,786) (Loss) income before income taxes (12,891) 354,116 Benefit (provision) for income taxes 3,695 (97,518) Net (loss) income (9,196) 256,598 Net income attributable to noncontrolling interests 866 1,942 Net (loss) income attributable to B. Riley Financial, Inc. $ (10,062) $ 254,656 Preferred stock dividends 2,002 1,749 Net (loss) income available to common shareholders $ (12,064) $ 252,907 Basic (loss) income per common share $ (0.43) $ 9.38 Diluted (loss) income per common share $ (0.43) $ 8.81 Weighted average basic common shares outstanding 27,855,033 26,972,275 Weighted average diluted common shares outstanding 27,855,033 28,710,368 Three Months Ended
March 31, 2021 2020 Revenues: Services and fees $ 289,469 $ 159,381 Trading income (losses) and fair value adjustments on loans 266,942 (182,442 ) Interest income - Loans and securities lending 36,920 21,851 Sale of goods 6,828 1,004 Total revenues 600,159 (206 ) Operating expenses: Direct cost of services 11,322 19,952 Cost of goods sold 5,326 769 Selling, general and administrative expenses 191,344 87,744 Impairment of tradenames — 4,000 Interest expense - Securities lending and loan participations sold 19,189 8,473 Total operating expenses 227,181 120,938 Operating income (loss) 372,978 (121,144 ) Other income (expense): Interest income 49 246 Gain (loss) from equity investments 875 (236 ) Interest expense (19,786 ) (15,654 ) Income (loss) before income taxes 354,116 (136,788 ) (Provision) benefit for income taxes (97,518 ) 37,539 Net income (loss) 256,598 (99,249 ) Net income (loss) attributable to noncontrolling interests 1,942 (584 ) Net income (loss) attributable to B. Riley Financial, Inc. $ 254,656 $ (98,665 ) Preferred stock dividends 1,749 1,055 Net income (loss) available to common shareholders $ 252,907 $ (99,720 ) Basic income (loss) per common share $ 9.38 $ (3.83 ) Diluted income (loss) per common share $ 8.81 $ (3.83 ) Weighted average basic common shares outstanding 26,972,275 26,028,613 Weighted average diluted common shares outstanding 28,710,368 26,028,613 (Unaudited)Three Months Ended
March 31,2022 2021 Net (loss) income $ (9,196) $ 256,598 Other comprehensive income (loss): Change in cumulative translation adjustment (488) (636) Other comprehensive loss, net of tax (488) (636) Total comprehensive (loss) income (9,684) 255,962 Comprehensive income (loss) attributable to noncontrolling interests 866 1,942 Comprehensive (loss) income attributable to B. Riley Financial, Inc. $ (10,550) $ 254,020 Three Months Ended
March 31, 2021 2020 Net income (loss) $ 256,598 $ (99,249 ) Other comprehensive income (loss): Change in cumulative translation adjustment (636 ) (1,220 ) Other comprehensive loss, net of tax (636 ) (1,220 ) Total comprehensive income (loss) 255,962 (100,469 ) Comprehensive income (loss) attributable to noncontrolling interests 1,942 (584 ) Comprehensive income (loss) attributable to B. Riley Financial, Inc. $ 254,020 $ (99,885 ) (Unaudited) Accumulated Additional Other Preferred Stock Common Stock Additional
Paid-in
CapitalRetained
EarningsAccumulated
Other
Comprehensive
LossNoncontrolling
InterestsTotal
Equity Preferred Stock Common Stock Paid-in Retained Comprehensive Noncontrolling Total Shares Amount Shares Amount Balance, January 1, 2022 Balance, January 1, 2022 4,512 $ — 27,591,028 $ 3 $ 413,486 $ 248,862 $ (1,080) $ 43,930 $ 705,201 Preferred stock issued Preferred stock issued 23 — — — 639 — — — 639 Vesting of restricted stock and other, net of shares withheld for employer taxes Vesting of restricted stock and other, net of shares withheld for employer taxes — — 32,328 — (1,294) — — — (1,294) Shares issued for the acquisition of FocalPoint Shares issued for the acquisition of FocalPoint — — 304,878 — 20,320 — — — 20,320 Share based payments Share based payments — — — — 17,013 — — — 17,013 Dividends on common stock ($1.00 per share) Dividends on common stock ($1.00 per share) — — — — — (31,033) — — (31,033) Dividends on preferred stock Dividends on preferred stock — — — — — (2,002) — — (2,002) Net loss Net loss — — — — — (10,062) — 866 (9,196) Distributions to noncontrolling interests Distributions to noncontrolling interests — — — — — — — (935) (935) Contributions from noncontrolling interests Contributions from noncontrolling interests — — — — — — — 1,770 1,770 Acquisition of noncontrolling interests Acquisition of noncontrolling interests — — — — — — — 182 182 Other comprehensive loss Other comprehensive loss — — — — — — (488) — (488) Balance, March 31, 2022 Balance, March 31, 2022 4,535 $ — 27,928,234 $ 3 $ 450,164 $ 205,765 $ (1,568) $ 45,813 $ 700,177 Shares Amount Shares Amount Capital Earnings Loss Interests Equity Balance, January 1, 2021 3,971 $ — 25,777,796 $ 3 $ 310,326 $ 203,080 $ (823 ) $ 26,374 $ 538,960 Balance, January 1, 2021 3,971 $ — 25,777,796 $ 3 $ 310,326 $ 203,080 $ (823) $ 26,374 $ 538,960 Common stock issued, net of offering costs — — 1,413,045 — 64,713 — — — 64,713 Common stock issued, net of offering costs — — 1,413,045 — 64,713 — — — 64,713 Vesting of restricted stock and other, net of shares withheld for employer taxes — — 4,068 — (22 ) — — — (22 ) Vesting of restricted stock and other, net of shares withheld for employer taxes — — 4,068 — (22) — — — (22) Share based payments — — — — 5,526 — — — 5,526 Share based payments — — — — 5,526 — — — 5,526 Dividends on common stock ($3.50 per share) — — — — — (103,077 ) — — (103,077 ) Dividends on common stock ($3.50 per share) — — — — — (103,077) — — (103,077) Dividends on preferred stock — — — — — (1,749 ) — — (1,749 ) Dividends on preferred stock — — — — — (1,749) — — (1,749) Net income — — — — — 254,656 — 1,942 256,598 Net income — — — — — 254,656 — 1,942 256,598 Distributions to noncontrolling interests — — — — — — — (11,257 ) (11,257 ) Distributions to noncontrolling interests — — — — — — — (11,257) (11,257) Contributions from noncontrolling interests — — — — — — — 3,722 3,722 Contributions from noncontrolling interests — — — — — — — 3,722 3,722 Acquisition of noncontrolling interests — — — — — — — 13,042 13,042 Acquisition of noncontrolling interests — — — — — — — 13,042 13,042 Other comprehensive loss — — — — — — (636 ) — (636 ) Other comprehensive loss — — — — — — (636) — (636) Balance, March 31, 2021 3,971 $ — 27,194,909 $ 3 $ 380,543 $ 352,910 $ (1,459 ) $ 33,823 $ 765,820 Balance, March 31, 2021 3,971 $ — 27,194,909 $ 3 $ 380,543 $ 352,910 $ (1,459) $ 33,823 $ 765,820 Balance, January 1, 2020 2,349 $ — 26,972,332 $ 3 $ 323,109 $ 39,536 $ (1,988 ) $ 29,591 $ 390,251 Preferred stock issued 182 — — — 4,630 — — — 4,630 Vesting of restricted stock, net of shares withheld for employer taxes — — 38,298 — (520 ) — — — (520 ) Common stock repurchased and retired — — (1,022,065 ) — (24,068 ) — — — (24,068 ) Share based payments — — — — 5,321 — — — 5,321 Dividends on common stock ($0.35 per share) — — — — — (10,048 ) — — (10,048 ) Dividends on preferred stock — — — — — (1,055 ) — — (1,055 ) Net loss — — — — — (98,665 ) — (584 ) (99,249 ) Distributions to noncontrolling interests — — — — — — — (1,021 ) (1,021 ) Other comprehensive loss — — — — — — (1,220 ) — (1,220 ) Balance, March 31, 2020 2,531 $ — 25,988,565 $ 3 $ 308,472 $ (70,232 ) $ (3,208 ) $ 27,986 $ 263,021 (Unaudited)Three Months Ended
March 31,2022 2021 Cash flows from operating activities: (Revised - See Note 20) Net (loss) income $ (9,196) $ 256,598 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 7,848 6,759 Provision for doubtful accounts 405 402 Share-based compensation 17,013 5,526 Fair value adjustments, non-cash (15,816) (10,726) Non-cash interest and other (3,596) (4,375) Effect of foreign currency on operations (34) (726) Income from equity investments (6,775) (875) Dividends from equity investments 774 305 Deferred income taxes (41,900) 62,696 Loss on loans receivable and disposal of fixed assets 257 — Gain on extinguishment of loan (1,102) — Loss on extinguishment of debt — 919 Gain on equity investment — (3,544) Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests 215 130 Change in operating assets and liabilities: Amounts due to/from clearing brokers (80,091) (416,038) Securities and other investments owned 215,973 (235,504) Securities borrowed 461,193 (548,178) Accounts receivable and advances against customer contracts 6,355 (3,885) Prepaid expenses and other assets 1,701 (5,629) Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities (82,962) 30,505 Amounts due to/from related parties and partners 594 1,083 Securities sold, not yet purchased (21,125) 277,446 Deferred revenue 4,924 (3,042) Securities loaned (469,553) 547,259 Net cash used in operating activities (14,898) (42,894) Cash flows from investing activities: Purchases of loans receivable (93,853) (75,669) Repayments of loans receivable 101,000 87,476 Repayment of loan participations sold — (6,086) Acquisition of businesses, net of $26,076 and $34,924 cash acquired for 2022 and 2021, respectively (40,047) (260) Purchases of property, equipment and intangible assets (176) (101) Proceeds from sale of property, equipment and intangible assets 2 — Investment of subsidiaries initial public offering proceeds into trust account — (172,500) Purchase of equity and other investments (2,439) (4,698) Net cash used in investing activities (35,513) (171,838) Cash flows from financing activities: Repayment of notes payable (357) (37,610) Repayment of term loan (4,116) (4,750) Proceeds from issuance of senior notes 20,037 402,404 Redemption of senior notes — (128,156) Payment of debt issuance and offering costs — (7,510) Payment of contingent consideration (181) (75) Payment of employment taxes on vesting of restricted stock (1,294) (22) Common dividends paid (27,886) (95,183) Preferred dividends paid (2,002) (1,749) Distribution to noncontrolling interests (1,051) (11,571) Contribution from noncontrolling interests 1,770 3,722 Proceeds from initial public offering of subsidiaries — 172,500 Proceeds from issuance of common stock — 64,713 Proceeds from issuance of preferred stock 639 — Net cash (used in) provided by financing activities (14,441) 356,713 (Decrease) increase in cash, cash equivalents and restricted cash (64,852) 141,981 Effect of foreign currency on cash, cash equivalents and restricted cash (496) (696) Net (decrease) increase in cash, cash equivalents and restricted cash (65,348) 141,285 Cash, cash equivalents and restricted cash, beginning of period 279,860 104,837 Cash, cash equivalents and restricted cash, end of period $ 214,512 $ 246,122 Supplemental disclosures: Interest paid $ 38,272 $ 36,725 Taxes paid $ 73 $ 53 Three Months Ended
March 31, 2021 2020 Cash flows from operating activities: Net income (loss) $ 256,598 $ (99,249 ) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Depreciation and amortization 6,759 4,956 Provision for doubtful accounts 402 724 Share-based compensation 5,526 5,322 Fair value adjustments, non-cash (10,726 ) 17,926 Non-cash interest and other (4,375 ) (2,827 ) Effect of foreign currency on operations (726 ) 179 (Income) loss from equity investments (875 ) 236 Dividends from equity investments 305 589 Deferred income taxes 62,696 (4,254 ) Impairment of intangibles and gain on disposal of fixed assets — 4,046 Loss (gain) on extinguishment of debt 919 (1,556 ) Gain on equity investment (3,544 ) — Income allocated for mandatorily redeemable noncontrolling interests 130 175 Change in operating assets and liabilities: Due from clearing brokers (416,038 ) 12,939 Securities and other investments owned (235,504 ) 125,061 Securities borrowed (548,178 ) 140,168 Accounts receivable and advances against customer contracts (3,885 ) 15,674 Prepaid expenses and other assets (5,629 ) (37,151 ) Accounts payable, accrued expenses and other liabilities 30,505 (22,097 ) Amounts due to/from related parties and partners 1,083 752 Securities sold, not yet purchased 277,446 (27,522 ) Deferred revenue (3,042 ) 6,589 Securities loaned 547,259 (139,636 ) Net cash (used in) provided by operating activities (42,894 ) 1,044 Cash flows from investing activities: Purchases of loans receivable (75,669 ) (115,328 ) Repayments of loans receivable 87,476 42,128 Sale of loan receivable to related party — 1,800 Repayment of loan participations sold (6,086 ) (244 ) Acquisition of business, net of $34,924 cash acquired (260 ) — Purchases of property, equipment and other (101 ) (438 ) Proceeds from sale of property, equipment and intangible assets — 1 Purchase of equity investments (4,698 ) — Net cash provided by (used in) investing activities 662 (72,081 ) Cash flows from financing activities: Repayment of asset based credit facility — (37,096 ) Repayment of notes payable (37,610 ) (357 ) Repayment of term loan (4,750 ) (4,810 ) Proceeds from issuance of senior notes 402,404 171,078 Redemption of senior notes (128,156 ) (1,829 ) Payment of debt issuance costs (7,510 ) (2,724 ) Payment for contingent consideration (75 ) — Payment of employment taxes on vesting of restricted stock (22 ) (505 ) Common dividends paid (95,183 ) (9,609 ) Preferred dividends paid (1,749 ) (1,055 ) Repurchase of common stock — (24,068 ) Distribution to noncontrolling interests (11,571 ) (1,323 ) Contribution from noncontrolling interests 3,722 — Proceeds from issuance of common stock 64,713 — Proceeds from issuance of preferred stock — 4,630 Net cash provided by financing activities 184,213 92,332 Increase in cash, cash equivalents and restricted cash 141,981 21,295 Effect of foreign currency on cash, cash equivalents and restricted cash (696 ) (1,332 ) Net increase in cash, cash equivalents and restricted cash 141,285 19,963 Cash, cash equivalents and restricted cash, beginning of period 104,837 104,739 Cash, cash equivalents and restricted cash, end of period $ 246,122 $ 124,702 Supplemental disclosures: Interest paid $ 36,725 $ 21,785 Taxes paid $ 53 $ 574 1—1 — ORGANIZATION AND NATURE OF BUSINESS OPERATIONSacquiredhas a majority ownership interest in BR Brands Holding, LLC (“BR Brands” or “Brands”), which provides licensing of trademarks.$35,184.$35,314. The Company used the acquisition method of accounting for this acquisition. The acquisition expandsexpanded the Company’s investment banking, wealth management and financial planning offerings by adding National’s brokerage, insurance, tax preparation and advisory services. As a result of the National acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational management changes for its wealth management business. Under the new structure, the wealth management business previously reported in the Capital Markets segment are now reported in the Wealth Management segment. In conjunction with the new reporting structure, the Company recast its segment presentation for all periods presented.six6 operating segments: (i) Capital Markets, through which the Company provides investment banking, corporate finance, securities lending, restructuring, research, sales and trading services to corporate and institutional clients; (ii) Wealth Management, through which the Company provides wealth management and tax services to corporate, institutional and high net worth clients; (iii) Auction and Liquidation, through which the Company provides auction and liquidation services to help clients dispose of assets that include multi-location retail inventory, wholesale inventory, trade fixtures, machinery and equipment, intellectual property and real property; (iv) Financial Consulting, through which the Company provides bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services; (v) Principal Investments - United OnlineCommunications and magicJack,Other, through which the Company provides consumer Internet access and related subscription services from United Online, and cloud communication services primarily through the magicJack devices;devices, and mobile phone voice, text, and data services and devices through a mobile virtual network operator; and (vi) Brands, which is focused on generating revenue through the licensing of trademarks.On January 30, 2020,There continues to be widespread impact from COVID-19, which 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 basedin March 2020. There has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on the rapid increase in exposure globally. During the first quarter 2021,social, business, travel, and government activities and functions; however, the full impact of the COVID-19 outbreak continues to evolve. Asevolve with the emergence of new variant strains and breakthrough infections. Although the U.S. economy recovers, aided by additional stimulus packages and positive momentum incontinued to grow during the domestic vaccine rollout, countries acrossfirst quarter of 2022, the world continue to manage repeated waves of the pandemic amid uneven progress toward vaccination. Thecontinuing impact of the COVID-19 outbreak onpandemic, higher inflation, the Company’s results of operations, financial positionactions by the Federal Reserve to address inflation, and cash flowsrising energy prices create uncertainty about the future economic environment which will depend oncontinue to evolve and may impact our business in future developments, including the duration and spread of the outbreak and related advisories and restrictions and the success of vaccines in slowing or halting the pandemic.periods. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy continue to be highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted, the Company’s results of operations, financial position, and cash flows may be materially adversely affected.2—2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Great American Global Partners, LLC, which is controlled by the Company as a result of its ownership of a 50% member interest, appointment of two of the three executive officers and significant influence over the funding of operations,operations. All intercompany accounts and (b) National Asset Management, Inc. (“NAM”),transactions have been eliminated upon consolidationfederally-registered investment adviser providing asset management advisory services to retail clients for a fee based upon a percentage of assets managed. NAM has a majority votingcontrolling financial interest in Innovation X Management, LLC (“Innovation X”), which together serve asa variable interest entity; to require ongoing reassessments of whether an enterprise is the investment managerprimary beneficiary of an investment fund (seea Variable Interest Entities below). Because NAM hasEntity (“VIE”); to eliminate the majoritysolely quantitative approach previously required for determining the primary beneficiary of a VIE; to add an additional reconsideration event for determining whether an entity is a VIE when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting interest in Innovation X,rights or similar rights of those investments to direct the resultsactivities of operationsthe entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures that will provide users of Innovation X are included in the Company’s consolidated financial statements and the amount attributable to the other investor is recorded aswith more transparent information about an enterprise’s involvement in a non-controlling interest. VIE.2020,2021, filed with the SEC on March 4, 2021.February 28, 2022. The results of operations for the three months ended March 31, 20212022 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.and loan receivables, allowance for doubtful accounts, the fair value of loans receivables, intangible assets and goodwill, the fair value of mandatorily redeemable noncontrolling interests, fair value of share based arrangements, contingent consideration, and accounting for income tax valuation allowances, recovery of contract assets and sales returns and allowances and contingencies.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. and Loan Participations Soldand $7,921 forduring the three months ended March 31, 20212022 and 2020, respectively. Loan participations sold as of March 31, 2021, and 2020 totaled $11,230 and $12,405, and $552 forduring the three months ended March 31, 2022 and 2021, and 2020, respectively.United OnlineCommunications and magicJackOther segments are currently primarily generated in the United States. Revenues in the Auction and Liquidation segment are primarily generated in the United States, Australia, Canada, and Europe.and $841 forduring the three months ended March 31, 20212022 and 2020,2021, respectively. Advertising expense iswas included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.ASC(ASC) 718 - Compensation — Stock Compensation(“ (“ASC 718”), the Company is required to recognize compensation expense relating to shares offered under the Purchase Plan. ForDuring the three months ended March 31, 20212022 and 2020,2021, the Company recognized compensation expense of $227$153 and $165,$227, respectively, related to the Purchase Plan.$1,508$928 and $927 of cash collateral for foreign exchange contractsleases, respectively.leases, $471 related to onerestricted cash consist of the Company’s telecommunication suppliers and $6,553 related to a loan taken out by National under the Paycheck Protection Program Loan (“PPP”). Upon completion of the acquisition of National, in accordance with the provisions of the Small Business Administration regarding changes of ownership of an entity that has received PPP funds, the Company was required to place $6,553 of cash in a restricted cash account with the PPP lender. As of December 31, 2020, restricted cash included $764 of cash collateral for foreign exchange contracts and $471 related to one of the Company’s telecommunication suppliers.March 31,
2022December 31,
2021Cash and cash equivalents $ 213,584 $ 278,933 Restricted cash 928 927 Total cash, cash equivalents and restricted cash $ 214,512 $ 279,860 “Topic 210: 210 - Balance Sheet”, which requires companies to report disclosures of offsetting assets and liabilities. The Company does not net securities borrowed and securities loaned and these items are presented on a gross basis in the condensed consolidated balance sheets.and amortization areis computed using the straight-line method over the estimated useful lives of the assets. Property and equipment held under finance leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Depreciation and amortization expense on property and equipment was $1,032 and $873 and $932 forduring the three months ended March 31, 2022 and 2021, and 2020, respectively.The Company adopted the new credit loss standard effective January 1, 2020. Pursuant to ASU 2016-13 and its amendment ASU 2019-05,Under ASC 326 - Financial Instruments – Credit Losses, the Company elected the irrevocable fair value option for all outstanding loans receivable that were previously measured at amortized cost. Under the fair value option, loans receivablereceivables are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the consolidated statements of operations. These loans are no longer subject to evaluation for impairment through an allowance for loan loss as such losses will be captured through fair value changes. The impact of adopting ASC 326 was immaterial to the consolidated financial statements.$294,085$882,391 and $390,689 at$873,186 as of March 31, 20212022 and December 31, 2020,2021, respectively. The loans have various maturities through March 2027.2027. As of March 31, 20212022 and December 31, 2020,2021, the historical cost of loans receivable accounted for under the fair value option was $297,786$875,794 and $405,064,$877,527, respectively,$306,967$883,965 and $416,401,$886,831 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $9,181$8,170 and $11,337,$9,304, respectively. During the three months ended March 31, 20212022 and 2020,2021, the Company recorded net unrealized gains (losses) of $10,726$10,937 and ($17,926),$10,726, respectively, on the loans receivable at fair value, which iswas included in trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations.AtAs of March 31, 2021,2022, the Company has outstanding limited guaranteesguarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc. (“B&W”) as further described in Note 13.15. In accordance with the new credit loss standard, the Company evaluates the need to record an allowance for credit losses for these loan guarantees since they have off-balance sheet credit exposures. AtAs of March 31, 2021,2022, the Company has not recorded any provision for credit losses on the B&W guarantees since the underlying guaranteed loans are senior to most of the outstanding debt of B&W and the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure. The maximum amount of credit exposure related to these limited guarantees is approximately $80,000.20212022 and December 31, 2020,2021, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities: March 31,
2021 December 31,
2020 Securities and other investments owned: Equity securities $ 1,006,019 $ 697,288 Corporate bonds 41,754 3,195 Other fixed income securities 5,165 1,913 Partnership interests and other 113,766 74,923 $ 1,166,704 $ 777,319 Securities sold not yet purchased: Equity securities $ 285,898 $ 4,575 Corporate bonds 1,236 4,288 Other fixed income securities 924 1,242 $ 288,058 $ 10,105 March 31,
2022December 31,
2021Securities and other investments owned: Equity securities $ 1,228,690 $ 1,444,474 Corporate bonds 10,508 7,632 Other fixed income securities 3,681 2,606 Partnership interests and other 74,222 77,383 $ 1,317,101 $ 1,532,095 Securities sold not yet purchased: Equity securities $ 1,118 $ 20,302 Corporate bonds 6,046 6,327 Other fixed income securities 334 1,994 $ 7,498 $ 28,623 falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.areis derived from the most recent statements received from the general partner or fund administrator. These partnership and investment fund interests are valued at net asset value (“NAV”) in accordance with ASC “Topic 820:820 - Fair Value Measurements.”We had no investments measured at fair value on a nonrecurring basis for the three months ended March 31, 2021 and 2020. As of March 31, 20212022 and December 31, 2020,2021, investments in nonpublic entities valued using a measurement alternative of $37,348$73,006 and $26,948,$59,745, respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.20212022 and December 31, 2020. Financial Assets and Liabilities Measured at Fair Value
on a Recurring Basis at March 31, 2021 Using Fair value at
March 31,
2021 Quoted prices in
active markets for
identical assets
(Level 1) Other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Assets: Securities and other investments owned: Equity securities $ 968,671 $ 796,701 $ — $ 171,970 Corporate bonds 41,754 — 41,754 — Other fixed income securities 5,165 — 5,165 — Total securities and other investments owned 1,015,590 796,701 46,919 171,970 Loans receivable, at fair value 294,085 — — 294,085 Total assets measured at fair value $ 1,309,675 $ 796,701 $ 46,919 $ 466,055 Liabilities: Securities sold not yet purchased: Equity securities $ 285,898 $ 285,898 $ — $ — Corporate bonds 1,236 — 1,236 — Other fixed income securities 924 — 924 — Total securities sold not yet purchased 288,058 285,898 2,160 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,514 — — 4,514 Total liabilities measured at fair value $ 292,572 $ 285,898 $ 2,160 $ 4,514 Fair value as of March 31, 2022 Quoted prices in active markets
for identical assets
(Level 1)Other observable inputs
(Level 2)Significant unobservable inputs
(Level 3)Assets: Funds held in trust account $ 345,057 $ 345,057 $ — $ — Securities and other investments owned: Equity securities 1,155,685 767,021 — 388,664 Corporate bonds 10,508 — 10,508 — Other fixed income securities 3,680 — 3,680 — Total securities and other investments owned 1,169,873 767,021 14,188 388,664 Loans receivable, at fair value 882,391 — — 882,391 Total assets measured at fair value $ 2,397,321 $ 1,112,078 $ 14,188 $ 1,271,055 Liabilities: Securities sold not yet purchased: Equity securities $ 1,118 $ 1,118 $ — $ — Corporate bonds 6,046 — 6,046 — Other fixed income securities 334 — 334 — Total securities sold not yet purchased 7,498 1,118 6,380 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,502 — — 4,502 Warrant liabilities 8,059 8,059 — — Contingent earnout 22,464 — — 22,464 Total liabilities measured at fair value $ 42,523 $ 9,177 $ 6,380 $ 26,966 Fair value at December 31, 2021 Quoted prices in active markets
for identical assets
(Level 1)Other observable inputs
(Level 2)Significant unobservable inputs
(Level 3)Assets: Funds held in trust account $ 345,024 $ 345,024 $ — $ — Securities and other investments owned: Equity securities 1,384,729 1,007,180 — 377,549 Corporate bonds 7,632 — 7,632 — Other fixed income securities 2,606 — 2,606 — Total securities and other investments owned 1,394,967 1,007,180 10,238 377,549 Loans receivable, at fair value 873,186 — — 873,186 Total assets measured at fair value $ 2,613,177 $ 1,352,204 $ 10,238 $ 1,250,735 Liabilities: Securities sold not yet purchased: Equity securities $ 20,302 $ 20,302 $ — $ — Corporate bonds 6,327 — 6,327 — Other fixed income securities 1,994 — 1,994 — Total securities sold not yet purchased 28,623 20,302 8,321 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,506 — — 4,506 Warrant liabilities 12,938 12,938 — — Total liabilities measured at fair value $ 46,067 $ 33,240 $ 8,321 $ 4,506 Financial Assets and Liabilities Measured at Fair Value
on a Recurring Basis at December 31, 2020 Using Fair value at
December 31
2020 Quoted prices in
active markets for
identical assets
(Level 1) Other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Assets: Securities and other investments owned: Equity securities $ 670,340 $ 521,048 $ — $ 149,292 Corporate bonds 3,195 — 3,195 — Other fixed income securities 1,913 — 1,913 — Total securities and other investments owned 675,448 521,048 5,108 149,292 Loans receivable, at fair value 390,689 — — 390,689 Total assets measured at fair value $ 1,066,137 $ 521,048 $ 5,108 $ 539,981 Liabilities: Securities sold not yet purchased: Equity securities $ 4,575 $ 4,575 $ — $ — Corporate bonds 4,288 — 4,288 — Other fixed income securities 1,242 — 1,242 — Total securities sold not yet purchased 10,105 4,575 5,530 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,700 — — 4,700 Total liabilities measured at fair value $ 14,805 $ 4,575 $ 5,530 $ 4,700 20212022 and December 31, 2020,2021, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $466,055$1,271,055 and $539,981,$1,250,735, respectively, or 11.3%24.2% and 20.3%21.4%, respectively, of the Company’s total assets. In determining the fair value for these Level 3 financial assets, the Company analyzes various financial, performance and market factors to estimate the value, including where applicable, over-the-counter market trading activity.levelLevel 3 financial assets and liabilities by category of investment and valuation technique as of March 31, 2021: Fair value at
March 31,
2021 Valuation Technique Unobservable Input Range Weighted
Average Assets: Equity securities $ 171,970 Market approach Multiple of EBITDA 5.75x - 15.00x 8.00x Multiple of PV-10 0.62x 0.62x Multiple of Sales 1.40x 1.40x Market price of related security $0.83 - $4.00 $ 3.72 Option pricing model Annualized volatility 0.05 - 1.23 0.83 Loans receivable at fair value 294,085 Discounted cash flow Market interest rate 4.9% - 37.5% 14.9% Total level 3 assets measured at fair value $ 466,055 Liabilities: Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,514 Market approach Operating income multiple 6.0x 6.0x Valuation
TechniqueUnobservable
InputRange Weighted
AverageAssets: Equity securities $ 311,960 Market approach Multiple of EBITDA 3.75x - 17.50x 6.85x Multiple of PV-10 0.32x - 0.70x 0.64x Multiple of Sales 1.22x - 1.25x 1.23x Market price of related security $9.91 - $64.51 $36.78 72,290 Discounted cash flow Market interest rate 15.8% 15.8% 4,414 Option pricing model Annualized volatility 30.0% - 484.0% 82.0% Loans receivable at fair value 849,558 Discounted cash flow Market interest rate 6.0% - 40.0% 26.2% 32,833 Market approach Multiple of EBITDA 5.00x 5.00x Total level 3 assets measured at fair value $ 1,271,055 Liabilities: Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,502 Market approach Operating income multiple 6.0x 6.0x Contingent earnout 22,464 Discounted cash flow EBITDA volatility 75% 75% and 2020 arewere as follows: Level 3 Level 3 Changes During the Period Level 3 Balance at
Beginning of
Year Fair Value Adjustments Relating to
Undistributed Earnings Purchases,
Sales and
Settlements Transfer in
and/or out
of Level 3 Balance at
End of
Period Three Months Ended March 31, 2021 Equity securities $ 149,292 $ 21,600 $ — $ 6,473 $ (5,395 ) $ 171,970 Loans receivable at fair value 390,689 10,726 2,082 (109,412 ) — 294,085 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,700 — (186 ) — — 4,514 Three Months Ended March 31, 2020 Equity securities $ 109,251 $ (15,135 ) $ — $ 1,000 $ — $ 95,116 Loans receivable at fair value 43,338 (17,926 ) 1,289 73,750 225,848 326,299 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,616 — (108 ) — — 4,508 Level 3
Balance at
Beginning of
YearLevel 3 Changes During the Period Level 3
Balance at
End of
PeriodFair
Value
AdjustmentsRelating to
Undistributed
EarningsPurchases,
Sales and
SettlementsTransfer in
and/or out
of Level 3Three Months Ended March 31, 2022 Equity securities $ 377,549 $ (4,543) $ — $ 19,912 $ (4,254) $ 388,664 Loans receivable at fair value 873,186 10,937 3,238 (4,970) — 882,391 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,506 — 247 (251) — 4,502 Contingent earnout — — — — 22,464 — 22,464 Three Months Ended March 31, 2021 Equity securities $ 149,292 $ 21,600 $ — $ 6,473 $ (5,395) $ 171,970 Loans receivable at fair value 390,689 10,726 2,082 (109,412) — 294,085 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,700 — (186) — — 4,514 The Company adopted ASU 2016-13 and its amendment ASU 2019-05 effective January 1, 2020. Pursuant to ASU 2016-13 and its amendment ASU 2019-05, the Company elected the irrevocable fair value option for all outstanding loans receivable that were measured at amortized cost as of December 31, 2019. The loans receivable, at fair value are included in transfers into level 3 fair value assets in the above table.forduring the three months ended March 31, 2021 and 2020 includesincluded the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis. The carrying amounts reported in the condensed consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value based on the short-term maturity of these instruments.20212022 and December 31, 2020,2021, the senior notes payable had a carrying amount of $1,139,100$1,627,649 and $870,783,$1,606,560, respectively, and fair value of $1,190,847$1,626,938 and $898,606,$1,661,189, respectively. The carrying amount of the term loanloans approximates fair value because the effective yield of such instrument isinstruments are consistent with current market rates of interest for instruments of comparable credit risk.During2021 and 2020, except for the impact of the intangible impairment charge in 2020 as described in Note 6 - Goodwill and Intangible Assets, there were no assets or liabilities measured at fair value on a non-recurring basis.Fair Value Measurement Using Total Quoted prices in active markets
for identical assets
(Level 1)Other observable inputs
(Level 2)Significant unobservable inputs
(Level 3)As of March 31, 2022 Investments in nonpublic entities that do not report NAV $ 16,011 $ — $ 15,511 $ 500 As of December 31, 2021 Investments in nonpublic entities that do not report NAV $ — $ — $ — $ — 2021 and December 31, 2020,2022, there were no forward exchange contracts in the amountoutstanding. As of 6,000 EurosDecember 31, 2021, 6,000€ forward exchange contracts were outstanding.2021. There was 0 forward exchange contract activity during the three months ended March 31, 2020.2022 and 2021, respectively. This amount iswas reported as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.$555$296 and $949$555 during the three months ended March 31, 20212022 and 2020,2021, respectively. These amounts arewere included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.(p) Equity InvestmentAtAs disclosed in Note 2(s) below, the Company has consolidated two VIE’s, BRPM 150 and BRPM 250, which have outstanding warrants that were issued in their respective initial public offerings. The warrants have been recorded as a liability since the warrants contain a provision to be settled in cash in the event of a qualifying cash tender offer, which is outside the control of the Company, for both BRPM 150 and BRPM 250. The outstanding warrants are considered derivative instruments with the warrant liability measured at fair value at each reporting date until exercised, with changes in fair value reported in other income in the condensed consolidated statements of operations. As of March 31, 20212022 and December 31, 2020,2021, the warrant liability totaled $8,059 and $12,938, respectively, which was included in accrued expenses and other liabilities in the condensed consolidated balance sheet.$44,221$45,978 and $54,953,$39,190, respectively, arewere included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.AtAs of March 31, 20212022 and December 31, 2020,2021, the Company had a 39.5%40.1% ownership interest in bebe stores, inc. (“bebe”). On November 10, 2020,In December 2021, the Company purchased an additional 1,500,00071,970 shares of newly issued common stock of bebe for $7,500$612 and increased its’its ownership interest increased from 31.5%39.5% to 39.5%40.1%. The equity ownership in bebe iswas accounted for under the equity method of accounting and iswas included in prepaid expenses and other assets in the condensed consolidated balance sheets.As of March 31, 2021, the carrying value of the Company’sinvestment in bebe exceeded the fair value based on the quoted market prices. In consideration of these facts,investments over which the Company evaluated its investment for impairment. The Companyexercises significant influence but which did not utilize bright-line testsmeet the requirements for consolidation, the largest ownership interest being a 40% ownership interest in Lingo Management, LLC (“Lingo”) which was acquired in November 2020. The equity ownership in these other investments was accounted for under the evaluation. Based on the available factsequity method of accounting and information regarding the operating results of bebe, the Company’s ability and intent to hold the investments until recovery, the relative amount of the declines, and the length of time that the fair values were less than the carrying values, the Company concluded that recognition of impairment losses in earnings was not required. However, the Company will continue to monitor the investment and it is possible that impairment losses will be recorded in earnings in future periods based on changes in facts and circumstances or intentions.National Holdings CorporationAs of December 31, 2020, the Company owned approximately 45% of the commons stock of National which is included in prepaid expenses and other assets in the condensed consolidated balance sheets. The equity ownership in National is accounted for under the equity method of accounting for periods prior to February 25, 2021.On February 25, 2021, the Company completed the acquisition of National by acquiring the 55% of common stock not previously owned by the Company pursuant to an agreement and plan of merger dated January 10, 2021, following the successful completion of a tender offer commenced by us on January 27, 2021. The cash consideration for the purchase of the 55% of common stock not previously owned by the Company and settlement of outstanding share based awards was $35,184. National’s operating results subsequent to February 25, 2021 are included in the Company’s condensed consolidated financial statements.Other Equity InvestmentsThe Company has other equity investments, the largest being a 40% ownership interest in Lingo Management, LLC (“Lingo”) which was purchased in November 2020. The equity ownership in these other investments is accounted for under the equity method of accounting and is included in prepaid expenses and other assets in the condensed consolidated balance sheets.(q) Loan Participations SoldAs of March 31, 2021, the Company has sold investments (“Loan Participations Sold”) to third parties (“Participants”) that are accounted for as secured borrowings under ASC Topic 860, Transfers and Servicing. Under ASC Topic 860, a partial loan transfer does not qualify for sale accounting in order for sale treatment to be allowed. A participation or other partial loan transfer that meets the definition of a participating interest is classified as loan receivable and the portion transferred is recorded as a secured borrowing under loan participations sold in the condensed consolidated balance sheet. The Participants are entitled to payments made by the borrower of the related loan equal to the current Loan Participations Sold outstanding at the interest rates for the respective investment. In the event that the borrower defaults, the Participants have rights to payments from such borrower, but do not have recourse to the Company. The terms of the Loan Participations Sold are commensurate with the terms of the related loan.As of March 31, 2021 and December 31, 2020, the Company had entered into participation agreements for a total of $11,230 and $17,316, respectively. In addition, the interest income and interest expense related to the Loan Participations Sold resulted in interest income and interest expense which is presented gross on the condensed consolidated statements of operations. During the three months ended March 31, 2020, non-cash investing activities included $4,633 non-cash conversion of an equity method investment. ReclassificationsCertain amounts reported in the Capital Markets segment for the period ended March 31, 2020 have been reclassified and reported in the Financial Consulting segment for the period ended March 31, 2020 as a result of the organizational changes that created the new Financial Consulting segment in the fourth quarter of 2020.For the three months ended March 31, 2020, $589 of dividends received from equity method investments that were previously included in cash flows from investing activities have been reclassified and included in cash flows from operating activities to conform to the 2021 presentation. (t) Variable Interest EntitiesIn 2018, the operations of GACP II, LP, a private debt investment limited partnership (the “Partnership”) commenced operations. The Partnership is a variable interest entity (“VIE”) since the unaffiliated limited partners do not have substantive kick- out or participating rights to remove the Company’s subsidiary that is the general partner managing the Partnership. The Company has determinedholds interests in various entities that itmeet the characteristics of a VIE but are not consolidated as the Company is not the primary beneficiary due to the fact that its fee arrangementsbeneficiary. Interests in these entities are considered at-market and thus not deemed to be variable interests, and it does not hold any other interestsgenerally in the Partnership that are considered to be more than insignificant. form of equity interests, loans receivable, or fee arrangements. Management, LLC (“Lingo”), a joint venture with an unaffiliated third party. On March 10, 2021, the Company also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo). Lingo is a VIE because the entity does not have enough equity at risk to finance its activities without additional subordinated financial support. The Company has determined that it is not the primary beneficiary because it does not have the power to direct the activities of the VIE that most significantly impact the entity’s financial performance. The Company’s variable interests in Lingo include loans receivable at fair value and an equity investment accounted for under the equity method of accounting. newly acquired subsidiary, National, has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered variable interest entities (“VIEs”)VIEs under the accounting guidance. These Funds are established primarily to make and manage investments in equity or convertible debt securities of privately held companies that the Company, as investment advisor to the Funds, believes possess innovative or disruptive technologies and present opportunities for an initial public offering (“IPO”) or other similar liquidity event within approximately one to five years from the date of investment. The Funds intend to hold the investments until an IPO or other similar liquidity event and then to make distributions to its investors when contractually permitted, estimated at approximately six months following such IPO or liquidity event.Once fund investors have received distributions in an amount equal to one hundred percent (100%) of their total capital contributions, the Company as the manager of the Funds will be entitled to share in any profits of the Funds to the extent of the carried interest. As the fee arrangements under such agreements are arm'sarm’s length and contain customary terms and conditions and represent compensation that is considered fair value for the services provided, the fee arrangements are not considered variable interests and accordingly, the Company does not consolidate such VIEs.from acquisition date throughduring the three months ended March 31, 2022 and 2021 were $12,051 and $11,360, respectively, and are included in services and fees in the condensed consolidated statements of operations.VIEVIEs that waswere not consolidated is shown below. March 31,
2021 Partnership investments $ 23,515 Due from related party 71,515 Maximum exposure to loss $ 95,030 March 31,
2022December 31,
2021Securities and other investments owned, at fair value $ 30,373 $ 27,445 Loans receivable, at fair value 163,780 205,265 Other assets 8,573 4,956 Maximum exposure to loss $ 202,726 $ 237,666 (u)Not yetRecently adopted“ReferenceReference Rate Reform (Topic 848)” (“ASU 2020-04”), which providesprovided optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”("LIBOR"). The amendments in ASU 2020-04 applyapplied only to contracts, hedging relationships, and other transactions that reference LIBOR or anotherThe amendments in ASU 2020-04 are effective through December 31, 2022. The Company is currently assessing the potential impacts the adoption of ASU 2020-04 may have on its consolidated results of operations, cash flows, financial position or disclosures.August 2020,January 2021, the FASB issued ASU 2020-06, Debt – Debt with Conversion2021-01, Reference Rate Reform (Topic 848), which refined the scope of Topic 848 through optional expedients and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This Update addresses issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. In addressing the complexity, the Board focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. In addition to eliminating certain accounting models, the ASU also provides guidance to enhance information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance. Additionally, the ASU amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions, and to amend the related EPS guidance. The amendments in this update are effective for public business entities for fiscal periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company has not yet adopted this update and is currently evaluating the effect, if any, this new standard will have on its financial condition and results of operations.Recently adoptedIn December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies theexceptions when accounting for income taxes by removingderivative contracts and certain exceptions for recognizing deferred taxes on investments, performing intra-period allocations, and calculating income taxes in interim periods. The ASU also adds guidance to reduce the complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The revised guidance will be applied prospectively and is effective for SEC filers for annual periods or interim periods with fiscal years beginning after December 15, 2020. Early adoption is permitted for interim or annual periods for which financial statements have not been issued.hedging relationships. The Company adopted the ASU effective January 1, 2021.2022. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures.2020,2021, the FASB issued ASU 2020-08, Codification Improvements2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs. The amendments in this Update clarify that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. The Update is intended to clarify the Codification and make the Codification easier to understand and easierrequire acquiring entities to apply Topic 606 when recognizing and measuring contract assets and contract liabilities instead of only recognizing such items at fair value on the acquisition date. The update addressed diversity in practice related to the acquired contract liability and payment terms and their effect on subsequent revenue recognized by eliminating inconsistencies and providing clarifications. The amendments in this update are effective for public business entities for fiscal periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is not permitted.the acquirer. The Company early adopted the ASU effectiveon January 1, 2021.2022. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position, and disclosures.In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The Update contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the Amendments arose because the Board provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option was only included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). These amendments are not expected to change current practice but are intended to improve the Codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is included in the Disclosure Section of the Codification, thus reducing the likelihood that the disclosure requirement would be missed. The Board does not anticipate that the amendments will result in any changes to current GAAP. The amendments in the Update are effective for annual periods beginning after December 15, 2020, for public business entities. Early application of the amendments is permitted for public business entities for any annual or interim period for which financial statements have not been issued. The amendments in the Update should be applied retrospectively. adopted the ASU effective January 1, 2021. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position and disclosures.NOTE 3— RESTRUCTURING CHARGEThe Company did not record anyhad no restructuring charges forduring the three months ended March 31, 20212022 and 2020.20212022 and 2020: Three Months Ended
March 31, 2021 2020 Balance, beginning of period $ 727 1,600 Restructuring charge — — Cash paid (28 ) (316 ) Non-cash items 3 — Balance, end of period $ 702 $ 1,284 Three Months Ended
March 31,2022 2021 Balance, beginning of period $ 624 $ 727 Restructuring charge — — Cash paid (27) (28) Non-cash items 2 3 Balance, end of period $ 599 $ 702 4—4 — SECURITIES LENDING20212022 and December 31, 2020: Gross amounts recognized Gross amounts offset in the consolidated balance sheets(1) Net amounts included in the consolidated balance sheets Amounts not offset in the consolidated balance sheets but eligible for offsetting upon counterparty default(2) Net amounts As of March 31, 2021 Securities borrowed $ 1,313,635 $ — $ 1,313,635 $ 1,313,635 $ — Securities loaned $ 1,307,069 $ — $ 1,307,069 $ 1,307,069 $ — As of December 31, 2020 Securities borrowed $ 765,457 $ — $ 765,457 $ 765,457 $ — Securities loaned $ 759,810 $ — $ 759,810 $ 759,810 $ — Gross amounts recognized Net amounts included in the consolidated balance sheets Net amounts As of March 31, 2022 Securities borrowed $ 1,629,773 $ — $ 1,629,773 $ 1,629,773 $ — Securities loaned $ 1,619,132 $ — $ 1,619,132 $ 1,619,132 $ — As of December 31, 2021 Securities borrowed $ 2,090,966 $ — $ 2,090,966 $ 2,090,966 $ — Securities loaned $ 2,088,685 $ — $ 2,088,685 $ 2,088,685 $ — (1)Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.(2)Includes the amount of cash collateral held/posted.5—5 — ACCOUNTS RECEIVABLEMarch 31,
2022December 31,
2021Accounts receivable $ 39,656 $ 39,045 Investment banking fees, commissions and other receivables 8,169 14,286 Total accounts receivable 47,825 53,331 Allowance for doubtful accounts (3,103) (3,658) Accounts receivable, net $ 44,722 $ 49,673 Three Months Ended
March 31,2022 2021 Balance, beginning of period $ 3,658 $ 3,599 Add: Additions to reserve 405 402 Less: Write-offs (960) (501) Less: Recovery — 26 Balance, end of period $ 3,103 $ 3,526 March 31,
2021 December 31,
2020 Accounts receivable $ 36,994 $ 33,604 Investment banking fees, commissions and other receivables 22,575 10,316 Unbilled receivables 6,382 5,712 Total accounts receivable 65,951 49,632 Allowance for doubtful accounts (3,526 ) (3,114 ) Accounts receivable, net $ 62,425 $ 46,518 March 31,
2022December 31,
2021Funds held in trust account $ 345,057 $ 345,024 Equity investments 45,978 39,190 Prepaid expenses 10,881 14,965 Unbilled receivables 14,100 12,315 Other receivables 39,685 40,483 Other assets 14,824 11,525 Prepaid expenses and other assets $ 470,525 $ 463,502 auctioncontracts in the Auction and liquidation contracts.AdditionsLiquidation segment, mobile handsets in the Principal Investments – Communications and changes toOther segment, and consulting related engagements in the allowance for doubtful accounts consist of the following: Three Months Ended
March 31, 2021 2020 Balance, beginning of period $ 3,599 1,514 Add: Additions to reserve 402 1,141 Less: Write-offs (501 ) (417 ) Less: Recovery 26 — Balance, end of period $ 3,526 $ 2,238 6—7 — GOODWILL AND OTHER INTANGIBLE ASSETS$233,807$362,466 and $227,046 at$250,568 as of March 31, 20212022 and December 31, 2020,2021, respectively.20212022 were as follows: Capital
Markets
Segment Wealth
Management
Segment Auction and
Liquidation
Segment Financial
Consulting
Segment Principal
Investments-
United Online
and magicJack
Segment Total Balance as of December 31, 2020 50,806 28,396 1,975 23,680 122,189 227,046 Goodwill acquired during the period: Acquisition of business — 6,761 — — — 6,761 Balance as of March 31, 2021 $ 50,806 $ 35,157 $ 1,975 $ 23,680 $ 122,189 $ 233,807 Capital Markets Segment Wealth Management Segment Auction and Liquidation Segment Financial Consulting Segment Principal Investments- Communications and Other Segment Total Balance as of December 31, 2021 $ 51,338 $ 51,195 $ 1,975 $ 23,680 $ 122,380 $ 250,568 Goodwill acquired during the period: Acquisition of other business 110,612 — — — 1,286 111,898 Balance as of March 31, 2022 $ 161,950 $ 51,195 $ 1,975 $ 23,680 $ 123,666 $ 362,466 As of March 31, 2021 As of December 31, 2020 Useful Life Gross
Carrying
Value Accumulated
Amortization Intangibles
Net Gross
Carrying
Value Accumulated
Amortization Intangibles
Net Amortizable assets: Customer relationships 0.1 to 13 Years $ 116,858 $ 45,622 $ 71,236 $ 98,898 $ 40,281 $ 58,617 Domain names 7 Years 235 157 78 235 148 87 Advertising relationships 8 Years 100 59 41 100 56 44 Internally developed software and other intangibles 0.5 to 5 Years 11,775 7,335 4,440 11,775 6,913 4,862 Trademarks 7 to 10 Years 5,469 1,100 4,369 2,850 991 1,859 Total 134,437 54,273 80,164 113,858 48,389 65,469 Non-amortizable assets: Tradenames 125,275 — 125,275 125,276 — 125,276 Total intangible assets $ 259,712 $ 54,273 $ 205,439 $ 239,134 $ 48,389 $ 190,745 As of March 31, 2022 As of December 31, 2021 Useful Life Gross Carrying Value Accumulated Amortization Intangibles Net Gross Carrying Value Accumulated Amortization Intangibles Net Amortizable assets: Customer relationships 0.1 to 13 Years $ 135,401 $ 65,235 $ 70,166 $ 130,801 $ 59,671 $ 71,130 Domain names 7 years 185 149 36 185 143 42 Advertising relationships 8 years 100 72 28 100 69 31 Internally developed software and other intangibles 0.5 to 5 Years 18,455 9,626 8,829 15,275 8,820 6,455 Trademarks 3 to 10 Years 9,669 2,089 7,580 6,369 1,652 4,717 Total 163,810 77,171 86,639 152,730 70,355 82,375 Non-amortizable assets: Tradenames 125,276 — 125,276 125,276 — 125,276 Total intangible assets $ 289,086 $ 77,171 $ 211,915 $ 278,006 $ 70,355 $ 207,651 and $4,024 forduring the three months ended March 31, 2022 and 2021, and 2020, respectively. AtAs of March 31, 2021,2022, estimated future amortization expense was $15,295, $17,193, $14,686, $10,745$19,268, $19,873, $15,757, $11,322, and $7,519$10,473 for the years ended December 31, 20212022 (remaining nine months), 2022, 2023, 2024, 2025 and 2025,2026, respectively. The estimated future amortization expense after December 31, 20252026 was $14,726.In the first quarter of 2020, in accordance with ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, the Company made a qualitative assessment of the impact of the COVID-19 outbreak on goodwill and other intangible assets. The Company determined that the COVID-19 outbreak was a triggering event for testing the indefinite-lived tradenames in the Brands segment and made a determination that the indefinite-lived tradenames in the Brands segment were impaired. In the three months ended March 31, 2020, the Company recognized an impairment charge of $4,000 for the indefinite-lived tradenames in the Brands segment. The Company also determined that there was a further triggering event for testing the indefinite-lived tradenames in the Brands segment in the second quarter of 2020 and made a determination that the indefinite-lived tradenames in the Brands segment were impaired and an additional impairment charge of $8,500 was recorded in the second quarter of 2020. There have been no triggering events subsequent to the second quarter of 2020 for testing indefinite-lived tradenames in the Brands segment. The Company will continue to monitor the impacts of the COVID-19 outbreak in future quarters. Changes in our forecasts could cause the book values of indefinite-lived tradenames to exceed fair values which may result in additional impairment charges in future periods.7—8 — NOTES PAYABLEOn April 21, 2017, theThe Company amended itsis party to a credit agreement (as amended, the “Credit Agreement”) governing its asset based credit facility with Wells Fargo Bank, National Association (“Wells Fargo Bank”) to increase thewith a maximum borrowing limit from $100,000 to $200,000. Such amendment, among other things, also extended the expirationof $200,000 and a maturity date of the credit facility from July 15, 2018 to April 21, 2022. The Credit Agreement continues to allow for borrowings under the separate credit agreement (a “UK Credit Agreement”) which was dated March 19, 2015 with an affiliate of Wells Fargo Bank which provides for the financing of transactions in the United Kingdom. Such facility allows the Company to borrow up to 50,000 British Pounds. Any borrowings on the UK Credit Agreement reduce the availability on the asset based $200,000 credit facility. The UK Credit Agreement is cross collateralized and integrated in certain respects with the Credit Agreement.20, 2027. Cash advances and the issuance of letters of credit under the credit facility are made at the lender’s discretion. The letters of credit issued under this facility are furnished by the lender to third parties for the principal purpose of securing minimum guarantees under liquidation services contracts more fully described in Note 2(c)2(d) in the Annual Report on Form 10-K. All outstanding loans, letters of credit, and interest are due on the expiration date which is generally within 180 days of funding. The credit facility is secured by the proceeds received for services rendered in connection with liquidation service contracts pursuant to which any outstanding loan or letters of credit are issued and the assets that are sold at liquidation related to such contract. The Company paid Wells Fargo Bank a closing fee in the amount of $500 in connection with the April 2017 amendment to the Credit Agreement. The interest rate for each revolving credit advance under the Credit Agreement is subject to certain terms and conditions, equal to the LIBORSecured Overnight Financing Rate (“SOFR”) plus a margin of 2.25% to 3.25% depending on the type of advance and the percentage such advance represents of the related transaction for which such advance is provided. The credit facility also provides for success fees in the amount of 2.5%1.0% to 17.5%10.0% of the net profits, if any, earned on the liquidation engagements funded under the Credit Agreement as set forth therein. The credit facility also provides for funding fees in the amount of 0.05% to 0.20% of the aggregate principal amount of all credit advances and letters of credit issued in connection with a liquidation sale. Interest expense totaled $108 and $277 forduring the three months ended March 31, 20212022 and 2020, respectively.2021. There was no outstanding balance on this credit facility atas of March 31, 2021 or2022 and December 31, 2020. At2021. As of March 31, 2021,2022, there were no open letters of credit outstanding.We areThe Company is in compliance with all financial covenants in the asset based credit facility atas of March 31, 2021.Paycheck Protection ProgramOn April 10, 2020, NSC (a subsidiaryAs of National) entered into a Promissory Note (the “NSC Note”) with Axos Bank asMarch 31, 2022 and December 31, 2021, the lender (the “Lender”), pursuant to whichoutstanding balance for the Lender agreed to make a loan to NSC underother notes payable was $22,891 and $357, respectively. Interest expense was $232 and $7 during the Paycheck Protection Program (the “NSC Loan”) offered by the U.S. Small Business Administration (the “SBA”) pursuantthree months ended March 31, 2022 and 2021, respectively. Notes payable consisted of additional deferred cash consideration owed to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to qualified small businesses (the “PPP”) in a principal amountsellers of $5,524. On April 15, 2020, WEC (another subsidiaryFocalPoint as of National) also entered into a Promissory Note (the “WEC Note” and together with the NSC Note, the “PPP Notes”) with the Lender, pursuant to which the Lender agreed to make a loan to WEC under the PPP (the “WEC Loan” and together with the NSC Loan, the “PPP Loans”) in a principal amount of $973.The interest rate on each PPP Note is a fixed rate of 1% per annum. Interest is calculated by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. The applicable borrower is required to make monthly payments commencing on the first day of the first full calendar month following the end of a statutorily defined deferral period (the “Deferral Period”), and such payments shall continue to be due and payable on the first day of each calendar month thereafter until the date that is two years following the funding date (the “Maturity Date”), or April 13, 2022 in the case of the NSC Note and April 16, 2022 in the case of the WEC Note. Monthly payment amounts are based on repayment of interest accrued during the Deferral Period, interest accruing until and including the Maturity Date, and full amortization of the outstanding principal balance. The PPP loans are included in notes payable in the condensed consolidated balance sheets.According to the terms of the PPP, all or a portion of loans under the PPP may be forgiven if certain conditions set forth in the CARES Act and the rules of the SBA are met. In order to be forgiven, the proceeds of each PPP Loan are to be used to pay for payroll costs, continuation of group health care benefits during periods of paid sick, medical, or family leave, or insurance premiums; salaries or commissions or similar compensation; rent; utilities; and interest on certain other outstanding debt; however, 60% of the proceeds of each PPP Loan must be used for payroll purposes.At its option, each of NSC and WEC may prepay all or a portion of its PPP Loan without penalty.Each PPP Note includes events of default, the occurrence and continuation of which would provide the Lender with the right to exercise remedies against NSC or WEC, as applicable, including the right to declare the entire unpaid principal balance under the applicable PPP Note and all accrued unpaid interest immediately due. Upon completion of the acquisition of National, in accordance with the provisions of the Small Business Administration regarding changes of ownership of an entity that has received PPP funds, the Company was required to place $6,553 of cash in a restricted cash account with the PPP lender.OtherMarch 31, 2022. Notes PayableNotes payable include notes payable to a clearing organization for one of the Company’s broker dealers. The notes payable accruedealers, which accrued interest at the prime rate plus 2.0% (5.25% at March 31, 2021) payable annually, maturing, matured on January 31, 2022. At March 31, 20212022 and December 31, 2020, the outstanding balance for the notes payable was $357 and $714, respectively. Interest expense was $7 and $15 forrepaid during the three months ended March 31, 2021 and 2020, respectively.Also includednotes payable at December 31, 2020, was a $37,253 note payablean aggregate principal amount of $100,000 (the “Incremental Facility” and the incremental term loans made thereunder, the “Incremental Term Loans”) of secured term loans under the Credit Agreement on terms identical to Garrison TNCI LLC which was assumed as partthose applicable to the Term Loan Facility. The Borrower borrowed the full amount of the Company’s investment in Lingo Management LLC.Incremental Term Loans on the Amendment Date. The note accruedTerm Loan Facility, Revolving Credit Facility, and Incremental Facility (together, the “Credit Facilities”), mature on June 23, 2025, subject to acceleration or prepayment.12.5%the Eurodollar Rate plus an applicable margin of 4.50%. Base rate loans accrue interest at the Base Rate plus an applicable margin of 3.50%. In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter.annum and had a maturity datequarter.2021. During2022 and December 31, 2021, the outstanding balances on the Term Loan Facility and Incremental Facility were $293,159 (net of unamortized debt issuance costs of $6,841) and $292,650 (net of unamortized debt issuance costs of $7,350), respectively. Interest on the term loan during the three months ended March 31, 2021,2022 was $4,102 (including amortization of deferred debt issuance costs of $509). The interest expenserate on the noteterm loan as of March 31, 2022 and December 31, 2021 was $238. 5.46% and 4.72%, respectively.noteCompany had an outstanding balance of $80,000 under the Revolving Credit Facility as of March 31, 2022 and December 31, 2021. Interest on the revolving facility during the three months ended March 31, 2022 was paid$1,100 (including amortization of deferred financing costs of $143). The interest rate on the revolving facility as of March 31, 2022 and December 31, 2021 was 5.01% and 4.67%, respectively.fullcompliance with all financial covenants in January 2021.NOTE 8 — TERM LOAN$90,000;$90,000, and (iv) the amortization schedule under the BRPAC was amended as set forth in the First Amendment. Additionally, in connection with the Option Loan, the Borrowers executed a term note in favor of New Lender dated February 1, 2019 in the amount of $10,000. Borrowingsat a rate equal to (a) the LIBORSOFR rate for Eurodollar loans, plus (b) the applicablea margin rate, which ranges fromof 2.75% to 3.25% per annum, based upondepending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement. As of consolidated funded indebtedness to adjusted earnings before interest, taxes, depreciation,March 31, 2022 and amortization (EBITDA) for the preceding four fiscal quarters or other applicable period. At MarchDecember 31, 2021, the interest rate on the BRPAC Credit Agreement was at 3.36%.AmountsPrincipal outstanding under the Amended BRPAC Credit Agreement areis due in quarterly installments commencing on March 31, 2021.installments. Quarterly installments from June 30, 2021 to December 31, 2021 are in the amount of $4,750 per quarter, from March 31, 2022 to December 31, 2022 are in the amount of $4,250$4,116 per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $3,750$3,631 per quarter, from March 31, 2024 to December 31, 2024 are in the amount of $3,250$3,147 per quarter, and from March 31, 2025 to December 31, 2025 are in the amount of $2,750$2,663 per quarter.20212022 and December 31, 2020,2021, the outstanding balance on the term loan was $69,543$49,691 (net of unamortized debt issuance costs of $707)$510) and $74,213$53,735 (net of unamortized debt issuance costs of $787)$582), respectively. Interest expense on the term loan during the three months ended March 31, 2022 and 2021, was $502 (including amortization of deferred debt issuance costs of $72) and 2020, was $714 (including amortization of deferred debt issuance costs of $80) and $829 (including amortization of deferred debt issuance costs of $76), respectively.We areThe Company is in compliance with all financial covenants in the BRPAC Credit Agreement atas of March 31, 2021.9—10 — SENIOR NOTES PAYABLE March 31,
2021 December 31,
2020 7.500% Senior notes due May 31, 2027 $ — $ 128,156 7.250% Senior notes due December 31, 2027 122,793 122,793 7.375% Senior notes due May 31, 2023 137,454 137,454 6.875% Senior notes due September 30, 2023 115,219 115,168 6.750% Senior notes due May 31, 2024 111,171 111,170 6.500% Senior notes due September 30, 2026 136,494 134,657 6.375% Senior notes due February 28, 2025 132,099 130,942 6.000% Senior notes due January 31, 2028 239,813 — 5.500% Senior notes due March 31, 2026 159,493 — 1,154,536 880,340 Less: Unamortized debt issuance costs (15,436 ) (9,557 ) $ 1,139,100 $ 870,783 March 31,
2022December 31,
20216.750% Senior notes due May 31, 2024 $ 111,287 $ 111,170 6.500% Senior notes due September 30, 2026 179,783 178,787 6.375% Senior notes due February 28, 2025 144,521 144,521 6.000% Senior notes due January 31, 2028 266,058 259,347 5.500% Senior notes due March 31, 2026 216,277 214,243 5.250% Senior notes due August 31, 2028 405,483 397,302 5.000% Senior notes due December 31, 2026 324,714 322,679 1,648,123 1,628,049 Less: Unamortized debt issuance costs (20,474) (21,489) $ 1,627,649 $ 1,606,560 due with maturity dates ranging from May 2023 to JanuaryAugust 2028 pursuant to At the Market Issuance Sales Agreements with B. Riley Securities, Inc. which governs the program of at-the-market sales of the Company’s senior notes. A series of prospectus supplements were filed by the Company with the SEC in respect of the Company’s offerings of these senior notes.On January 25, 2021, the Company issued $230,000As of senior notes due in January 2028 (“6.0% 2028 Notes”) pursuant to a prospectus supplement dated February 12, 2020. Interest on the 6.0% 2028 Notes is payable quarterly at 6.0%. The 6.0% 2028 Notes are unsecured and due and payable in full on January 31, 2028. In connection with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $225,723 (after underwriting commissions, fees and other issuance costs of $4,277). The Notes bear interest at the rate of 6.0% per annum.On March 29, 2021, the Company issued $159,493 of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to a prospectus supplement dated January 28, 2021. Interest on the 5.5% 2026 Notes is payable quarterly at 5.5%. The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026. In connection with the issuance of the 5.5% 2026 Notes, the Company received net proceeds of $156,260 (after underwriting commissions, fees and other issuance costs of $3,233). The Notes bear interest at the rate of 5.5% per annum.On March 31, 2021, the Company exercised its option for early redemption at par $128,156 of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017. The total redemption payment included $1,602 in accrued interest.At March 31, 20212022 and December 31, 2020,2021, the total senior notes outstanding was $1,139,100$1,627,649 (net of unamortized debt issue costs of $15,436)$20,474) and $870,783$1,606,560 (net of unamortized debt issue costs of $9,557)$21,489) with a weighted average interest rate of 6.49% and 6.95%, respectively.5.69%. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled $18,706$24,409 and $14,392$18,706 for the three months ended March 31, 2022 and 2021, and 2020, respectively.$150,000$250,000 of Senior Notes(the “April 2021 Sales Agreement Prospectus”) supplementingand the prospectus filed with the SEC on January 28, 2021 (the “January 2021 Sales Agreement Prospectus”).2021. This program provides for the sale by the Company of up to $150,000$250,000 of certain of the Company’s senior notes. As of March 31, 2022 and December 31, 2021, the Company had $137,142$91,838 and $111,911, respectively, remaining availability under the January 2021 Sales Agreement.
NOTE 11 — ACCRUED EXPENSES AND OTHER LIABILITIESMarch 31,
2022December 31,
2021Accrued payroll and related expenses $ 73,472 $ 107,904 Dividends payable 31,633 28,486 Income taxes payable 77,625 39,776 Other tax liabilities 18,761 20,106 Contingent consideration 22,464 — Accrued expenses 32,968 96,250 Other liabilities 41,982 51,228 Accrued expenses and other liabilities $ 298,905 $ 343,750 10—12 — REVENUE FROM CONTRACTS WITH CUSTOMERSand 2020 iswas as follows: Capital
Markets
Segment Wealth
Management
Segment Auction and
Liquidation
Segment Financial
Consulting
Segment Principal
Investments -
United Online
and magicJack
Segment Brands
Segment Total Revenues for the three months ended March 31, 2021 Corporate finance, consulting and investment banking fees $ 147,069 $ — $ — $ 13,427 $ — $ — $ 160,496 Wealth and asset management fees 2,883 50,511 — — — — 53,394 Commissions, fees and reimbursed expenses 15,544 13,468 7,057 7,982 — — 44,051 Subscription services — — — — 17,244 — 17,244 Service contract revenues — — 301 — — — 301 — — 6,092 — 3,285 4,388 13,765 Total revenues from contracts with customers 165,496 63,979 13,450 21,409 20,529 4,388 289,251 Interest income - Loans and securities lending 36,920 — — — — — 36,920 Trading gains on investments 253,777 2,356 — — — 83 256,216 Fair value adjustment on loans 10,726 — — — — — 10,726 Other 5,483 1,563 — — — — 7,046 Total revenues $ 472,402 $ 67,898 $ 13,450 $ 21,409 $ 20,529 $ 4,471 $ 600,159 (1) Includes sale of goods of $6,092 in Auction and Liquidation and $736 in Principal Investments - United Online and magicJack. Revenues for the three months ended March 31, 2020 Corporate finance, consulting and investment banking fees $ 55,889 $ — $ — $ 11,493 $ — $ — $ 67,382 Wealth and asset management fees 1,662 18,658 — — — — 20,320 Commissions, fees and reimbursed expenses 14,470 — 16,178 8,788 — — 39,436 Subscription services — — — — 18,833 — 18,833 Service contract revenues — — 4,483 — — — 4,483 Advertising, licensing and other (1) — — — — 3,889 3,801 7,690 Total revenues from contracts with customers 72,021 18,658 20,661 20,281 22,722 3,801 158,144 Interest income - Loans and securities lending 21,851 — — — — — 21,851 Trading losses on investments (164,089 ) (427 ) — — — — (164,516 ) Fair value adjustment on loans (17,926 ) — — — — — (17,926 ) Other 1,579 229 — 433 — — 2,241 Total revenues $ (86,564 ) $ 18,460 $ 20,661 $ 20,714 $ 22,722 $ 3,801 $ (206 ) Capital
Markets
SegmentWealth
Management
SegmentAuction and
Liquidation
SegmentFinancial
Consulting
SegmentPrincipal
Investments -
Communications and Other SegmentBrands
SegmentTotal Revenues for the three months ended March 31, 2022 Corporate finance, consulting and investment banking fees $ 41,673 $ — $ — $ 16,970 $ — $ — $ 58,643 Wealth and asset management fees 2,400 64,222 — — — — 66,622 Commissions, fees and reimbursed expenses 12,045 12,849 3,355 8,966 — — 37,215 Subscription services — — — — 27,813 — 27,813 Service contract revenues — — — — — — — — — — — 4,851 4,557 9,408 Total revenues from contracts with customers 56,118 77,071 3,355 25,936 32,664 4,557 199,701 Interest income - Loans and securities lending 61,426 — — — — — 61,426 Trading (losses) gains on investments (79,850) 522 — — — 0 (79,328) Fair value adjustment on loans 10,938 — — — — — 10,938 Other 12,966 (114) — — — — 12,852 Total revenues $ 61,598 $ 77,479 $ 3,355 $ 25,936 $ 32,664 $ 4,557 $ 205,589 (1)Includes sale of goods of $1,878 in Principal Investments - Communications and Other. Includes sale of goods of $1,004 in Principal Investments - United Online and magicJack.Capital
Markets
SegmentWealth
Management
SegmentAuction and
Liquidation
SegmentFinancial
Consulting
SegmentPrincipal
Investments -
Communications and Other SegmentBrands
SegmentTotal Revenues for the three months ended March 31, 2021 Corporate finance, consulting and investment banking fees $ 147,069 $ — $ — $ 13,427 $ — $ — $ 160,496 Wealth and asset management fees 2,883 50,511 — — — — 53,394 Commissions, fees and reimbursed expenses 15,544 13,468 7,057 7,982 — — 44,051 Subscription services — — — — 17,244 — 17,244 Service contract revenues — — 301 — — — 301 — — 6,092 — 3,285 4,388 13,765 Total revenues from contracts with customers 165,496 63,979 13,450 21,409 20,529 4,388 289,251 Interest income - Loans and securities lending 36,920 — — — — — 36,920 Trading gains on investments 253,777 2,356 — — — 83 256,216 Fair value adjustment on loans 10,726 — — — — — 10,726 Other 5,483 1,563 — 0 — — 7,046 Total revenues $ 472,402 $ 67,898 $ 13,450 $ 21,409 $ 20,529 $ 4,471 $ 600,159 $62,425$44,722 and $46,518 at$49,673 as of March 31, 20212022 and December 31, 2020,2021, respectively. The Company had no significant impairments related to these receivables during the three months ended March 31, 20212022 and 2020, respectively.2021. The Company also has $6,382$14,100 and $5,712$12,315 of unbilled receivables atincluded in prepaid expenses and other assets as of March 31, 20212022 and December 31, 2020,2021, respectively, and advances against customer contracts included in prepaid expenses and other assets of $200 atas of March 31, 20212022 and December 31, 2020.2021. The Company’s deferred revenue primarily relates to retainer and milestone fees received from corporate finance and investment banking advisory engagements, asset management agreements, financial consulting engagements, subscription services where the performance obligation has not yet been satisfied and license agreements with guaranteed minimum royalty payments and advertising/marketing fees with additional royalty revenue based on a percentage of defined sales. Deferred revenue atas of March 31, 20212022 and20202021 was $68,515$75,509 and $68,651,$69,507, respectively. The Company expects to recognize the deferred revenue of $68,515 at$75,509 as of March 31, 20212022 as service and fee revenues when the performance obligation is met during the years December 31, 20212022 (remaining nine months), 2022, 2023, 2024, 2025 and 20252026 in the amount of $39,000, $11,395, $7,104, $4,777,$43,386, $12,249, $8,594, $5,344, and $2,860,$2,724, respectively. The Company expects to recognize the deferred revenue of $3,379$3,212 after December 31, 2025.20212022 and 2020,2021, the Company recognized revenue of $17,279$14,939 and $13,987$17,279 that was recorded as deferred revenue at the beginning of the respective year.$257$868 and $279 at$1,605 as of March 31, 20212022 and December 31, 2020,2021, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets. For the three months ended March 31, 20212022 and 2020,2021, the Company recognized expenses of $57$915 and $72$57 related to capitalized costs to fulfill a contract, respectively. There were no significant impairment charges recognized in relation to these capitalized costs during the three months ended March 31, 20212022 and 2020.atas of March 31, 2021.2022. Corporate finance and investment banking fees and retail liquidation engagement fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded as the fees are considered variable and not included in the transaction price atas of March 31, 2021.11—13 — INCOME TAXES27.5%a provision of 28.7% and 27.4%27.5% for the three months ended March 31, 2022 and 2021, and 2020, respectively.2021,2022, the Company had federal net operating loss carryforwards of $60,422$48,869 and state net operating loss carryforwards of $72,058.$52,548. The Company’s federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2031 through December 31, 2038. The state net operating loss carryforwards will expire in the tax years commencing in December 31, 2025.2021,2022, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance. The Company does not believe that it is more likely than not that the Company will be able to utilize the benefits related to capital loss carryforwards and has provided a valuation allowance in the amount of $61,315$65,900 against these deferred tax assets.2020.2021.12—14 — EARNINGS PER SHAREBasicRemeasurements to the carrying value of the redeemable noncontrolling interests in equity of subsidiaries are not deemed to be a dividend (see Note 2(p)). According to ASC 480 - Distinguishing Liabilities from Equity, there is no impact on earnings per share in the computation of basic and diluted earnings per share to common shares outstanding exclude 387,365 common sharesshareholders for changes in 2020 that were heldthe carrying value of the redeemable noncontrolling interests in escrow and subject to forfeiture. The 387,365 common shares heldequity, when such changes in escrow were forfeited and cancelled on June 11, 2020 to indemnify the Company for certain representations and warranties and related claims pursuant to a related acquisition agreement. carrying value which in substance approximates fair value.727,9941,350,062 and 1,820,178727,994 for the three months ended March 31, 20212022 and 2020,2021, respectively, because to do so would have been anti-dilutive. Three Months Ended
March 31, 2021 2020 Net income (loss) attributable to B. Riley Financial, Inc. $ 254,656 $ (98,665 ) Preferred stock dividends (1,749 ) (1,055 ) Net income (loss) applicable to common shareholders $ 252,907 $ (99,720 ) Weighted average common shares outstanding: Basic 26,972,275 26,028,613 Effect of dilutive potential common shares: Restricted stock units and warrants 1,738,093 — Diluted 28,710,368 26,028,613 Basic income (loss) per common share $ 9.38 $ (3.83 ) Diluted income (loss) per common share $ 8.81 $ (3.83 ) Three Months Ended
March 31,2022 2021 Net (loss) income attributable to B. Riley Financial, Inc. $ (10,062) $ 254,656 Preferred stock dividends (2,002) (1,749) Net (loss) income applicable to common shareholders $ (12,064) $ 252,907 Weighted average common shares outstanding: Basic 27,855,033 26,972,275 Effect of dilutive potential common shares: Restricted stock units and warrants — 1,738,093 Diluted 27,855,033 28,710,368 Basic (loss) income per common share $ (0.43) $ 9.38 Diluted (loss) income per common share $ (0.43) $ 8.81 1315 — COMMITMENTS AND CONTINGENCIESOn January 5, 2017, complaints filed in November 2015 and May 2016 naming MLV & Co. (“MLV”) and National Securities Corporation, each an indirect broker-dealer subsidiary of the Company, as defendants in putative class action lawsuits alleging claims under the Securities Act, in connection with the offerings of Miller Energy Resources, Inc. (“Miller”), have been consolidated. The Consolidated Complaint, styled Gaynor v. Miller et al., is pending in the Circuit Court for Morgan County, Tennessee, and, like its predecessor complaints, continues to allege claims under Sections 11 and 12 of the Securities Act against nine underwriters for alleged material misrepresentations and omissions in the registration statement and prospectuses issued in connection with six offerings (February 13, 2013; May 8, 2013; June 28, 2013; September 26, 2013; October 17, 2013 (as to MLV only) and August 21, 2014) with an alleged aggregate offering price of approximately $151,000. A Court ordered mediation before a federal magistrate took place on August 6, 2019, with no resolution. In December 2019, the Court remanded the case to state court. In July 2020, the Company agreed to settle this matter, subject to court approval which is expected in 2021. An accrual for the settlement is included in the accompanying condensed consolidated financial statements.On July 3, 2019, a lawsuit was filed against National Securities Corporation, (“NSC”) National Asset Management, Inc., National, National’s current board members and certain former board members, certain officers of National, John Does 1–10, and the National as a nominal defendant, in the United States District Court for the Southern District of New York, captioned Kay Johnson v. National Securities Corporation, et al., Case No. 1:19-cv-06197-LTS. The complaint presents three purported derivative causes of action on behalf of the Company, and five causes of action by the plaintiff directly. As part of the derivative claims, the complaint generally alleges that certain of the individual defendants failed to establish and maintain adequate internal controls to ensure that the Board acted in accordance with its fiduciary duties to prevent and uncover alleged legal and regulatory misconduct and wrongdoing on the part of a National officer. As part of its claims brought directly by the plaintiff, the complaint generally alleges that certain individual and corporate defendants wrongfully terminated the employment of the plaintiff in violation of the Dodd-Frank Act and applicable common law, or conspired to do so. The complaint further alleges that certain corporate defendants violated the Equal Pay Act with regards to the plaintiff’s compensation. The complaint seeks monetary damages in favor of the Company, an order directing the Company’s board members to take actions to enhance the Company’s governance, compensatory and punitive damages in favor of the plaintiff, and attorneys’ fees and costs. On February 2, 2020, the plaintiff filed an amended complaint presenting additional causes of action. The Company has notified its insurer of the lawsuit and believes it has valid defenses to the asserted claims of the complaint. On March 18, 2020, the defendants filed a motion to dismiss the amended complaint. The plaintiff filed an opposition to the defendants’ motion to dismiss on April 15, 2020, and the defendants filed a reply in further support of the motion to dismiss on May 6, 2020. On August 20, 2020, the parties entered into mediation with a private mediator in an attempt to settle the action and, on January 15, 2021, as a result of the mediation, a settlement was reached. In March 2021, a settlement agreement and release was executed by the parties and all claims have been dismissed.The New York Department of Financial Services (the “Department”) conducted an investigation of NSC’s compliance with the Department’s Cybersecurity Requirements for Financial Services Companies (the “Regulations”). The Regulations establish standards for the cybersecurity programs of entities the Department licenses or otherwise regulates, including NSC. On April 14, 2021, NSC paid the Department a fine of $3,000 as a result of the Department’s finding that NSC violated certain of the Regulations.NSC is a respondent in several Financial Industry Regulatory Authority (“FINRA”) arbitration proceedings filed by investors alleging claims in connection with equity investments in GPB Capital Holdings, LLC (“GPB”) involving matters prior to the Company’s acquisition of National on February 25, 2021. Some of these arbitration claims, among other things, also allege that NSC failed to supervise certain registered representatives. NSC is evaluating each arbitration claim on its own merits. GPB and its affiliates have been the subject of various civil claims and fraud investigations over the past few years and, in February 2021, the U.S. Department of Justice indicted certain individuals affiliated with GPB for material misrepresentations and omissions under the federal securities laws with respect to funds managed by GPB. At the present time, the Company continues to vigorously defend these actions and is not able to determine the ultimate resolution of these matters. Adverse judgments in these matters in the aggregate could materially and adversely affect the Company and its financial condition. Franchise Group Commitment Letter, Loan Participant Guaranty and CIBC GuaranteePSP CommitmentOn January 23, 2021, the Company committed up to $400,000 aggregate principal amount of unsecured debt financing, consisting of $100,000 of secured debt financing, and $300,000 of unsecured debt financing, to affiliates of Franchise Group, Inc. (collectively, “FRG”) in connection with FRG’s acquisition of Pet Supplies Plus (“PSP”). FRG consummated the acquisition of PSP in March 2021 and the Company was not required, nor did it provide, any debt financing in connection therewith. At March 31, 2021, there were no further commitments outstanding to FRG.(c) Babcock & Wilcox Commitments and GuaranteeMay 14, 2020,June 30, 2021, the Company entered into an agreementagreed to provide Babcock & Wilcox Enterprises, Inc. (“B&W”guaranty (the “B. Riley Guaranty”) future commitments to loan B&W up to $40,000 at various dates starting$110,000 of obligations that B&W may owe to providers of cash collateral pledged in November 2020,connection with B&W’s debt financing. The B. Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of which, at March 31, 2021, no amounts remain available. The Company provided a limited guarantydefault and the acceleration of B&W’s obligations under a reimbursement agreement with respect to such cash collateral. B&W’s amended credit facility as more fully described&W will pay the Company $935 per annum in Note 16 - Related Party Transactions.(the “Indemnity Rider”) in favor of Berkley Insurance Company and/or Berkley Regional Insurance Company (collectively, “Berkley”) to a general agreement of indemnity made by B&W in favor of Berkley (the Indemnity Agreement”).one of its sureties. Pursuant to the Indemnity Rider,indemnity rider, the Company agreed to indemnify Berkleythe surety in connection with a default by B&W under the Indemnity Agreementunderlying indemnity agreement relating to a $29,970 payment and performance bond issued by Berkleythe surety in connection with a construction project undertaken by B&W. In consideration for providing the Indemnity Rider,indemnity rider, B&W paid the Company fees in the amount of $600 on August 26, 2020.On June 19, 2020,participatedenters into commitments to its clients in a loan facility agreementconnection with capital raising transactions, such as firm commitment underwritings, equity lines of credit, or other commitments to provide financing on specified terms and conditions. These commitments require the Company to purchase securities at a total loan commitment upspecified price or otherwise provide debt or equity financing on specified terms. Securities underwriting exposes the Company to 33,000 EUROSmarket and credit risk, primarily in the event that, for any reason, securities purchased by the Company cannot be distributed at the anticipated price and to a retailerbalance sheet risk in Europe. The Company made an initial funding of 6,600 EUROS in July 2020. No additional borrowings have been made since the initial funding, leaving unused futureevent that debt or equity financing commitments available of up to 26,400 EUROS as of March 31, 2021 and December 31, 2020.cannot be syndicated.14—16 — SHARE-BASED PAYMENTSAmended2021 Plan was $16,860 and Restated 2009 Stock Incentive Plan (the “Plan”) was $5,299 and $5,157 for the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, in connection with employee stock incentive plans, the Company granted 161,559 restricted stock units with a grant date fair value of $11,863 and 2020, respectively.65,000 performance based restricted stock units with a grant date fair value of $2,329. During the three months ended March 31, 2021, in connection with employee stock incentive plans, the Company granted 48,714 restricted stock units with a grant date fair value of $2,234 and 1,100,000 performance based restricted stock units with a grant date fair value of $40,876. The restricted stock units generally vest over a period of one to threefive years based on continued service. Performance based restricted stock units generally vest based on both the employee’s continued service and the achievement of a set threshold of the Company’s common stock price, as defined in the grant, during the two to three-year period following the grant. In determining the fair value of restricted stock units on the grant date, the fair value$227$153 and $165$227 for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022 and 2020, respectively. At MarchDecember 31, 2021, there were 502,326450,717 shares reserved for issuance under the Purchase Plan.OnSince October 30, 2018, the Company’s Board of Directors has authorized aannual share repurchase programprograms of up to $50,000 of its outstanding common shares. All share repurchases were effected on the open market at prevailing market prices or in privately negotiated transactions. During the three months ended March 31, 2022 and 2021, the Company did not repurchase shares of its common stock. The shares repurchased under the program are retired. On October 25, 2021, the share repurchase program expired on October 31, 2019. On both October 31, 2019 and 2020,was reauthorized by the Company’s Board of Directors authorizedfor share repurchase programs ofrepurchases up to $50,000 of its outstanding common shares. During the year ended December 31, 2020, the Company repurchased 2,165,383 shares of common stock for $48,248. The shares repurchased under the program were retired. and expires in October 2022.2021, the Company did not repurchase any shares of its common stock.On January 15,2022 and 2021, the Company issued 1,413,045 shares of common stock inclusive of 184,310 shares issued pursuant to the full exercise of the Underwriter’s option to purchase additional shares of common stock at a price of $46.00 per share for net proceeds of approximately $64,713 after underwriting fees20 and costs.(d) Preferred StockDuring the three months ended March 31, 2021, the Company did not issue anyno depository shares of the Series A Preferred Stock.Stock, respectively. There were 2,5812,834 and 2,814 shares issued and outstanding as of March 31, 20212022 and December 31, 2020.2021, respectively. Total liquidation preference for the Series A Preferred Stock atas of March 31, 20212022 and December 31, 2020,2021, was $64,519.$70,854 and $70,362, respectively. Dividends on the Series A preferred paid during the three months ended March 31, 2022 and 2021, were $0.4296875 per depository share.did not issue anyissued 4 and no depository shares of the Series B Preferred Stock. There were 1,3901,701 and 1,697 shares issued and outstanding as of March 31, 20212022 and December 31, 2020.2021, respectively. Total liquidation preference for the Series B Preferred Stock atas of March 31, 20212022 and December 31, 2020,2021, was $34,741.$42,527 and $42,428, respectively. Dividends on the Series B preferred paid during the three months ended March 31, 2022 and 2021, were $0.4609375 per depository share.15—17 — NET CAPITAL REQUIREMENTSand National Securities Corporation (“NSC”) and FocalPoint Securities, LLC ("FocalPoint"), the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and members of the Financial Industry Regulatory Authority, Inc. (“FINRA”). The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. As such, they are subject to the minimum net capital requirements promulgated by the SEC. As of March 31, 2021,2022, BRS had net capital of $243,991,$249,536, which was $237,055$245,970 in excess of required minimum net capital of $6,936;$3,566; BRWM had net capital of $8,363,$8,765, which was $7,627$7,846 in excess of required minimum net capital of $736;$919; NSC had net capital of $13,470$2,874 which was $12,470$1,874 in excess of required minimum net capital of $1,000; Winslow, Evans & Crocker, Inc (“WEC”), a subsidiary of National also subject to Rule 15c3-1,FocalPoint had net capital of $2,127$1,444 which was $1,982$672 in excess of the required minimum net capital of $772.$145.$1,000.16—18 — RELATED PARTY TRANSACTIONSAt March$1,079$2,306 included $22$621 from GACP I, L.P. (“GACP I”) and $1,057 from GACP II, L.P. (“GACP II”) for management fees and other operating expenses. At December 31, 2020, amounts due from related parties of $986 included $9 from GACP I, L.P. (“GACP I”) and $544 from GACP II, L.P. (“GACP II”)the Funds for management fees and other operating expenses, and $433$1,635 due from CA Global Partners (“CA Global”) for operating expenses related to wholesale and industrial liquidation engagements managed by CA Global on behalf of GA Global Partners.At March 31, 2021, the Company had soldNo interest expense was recorded related to loan participations sold to BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of its subsidiaries, in the amount of $6,630, and recorded interest expense of $346 during the three months ended March 31, 2022. During the three months ended March 31, 2021, the Company recorded interest expense of $346 related to BRCPOF’s loan participations.participations sold to BRCPOF. No commission income was recorded from introducing trades on behalf of BRCPOF during three months ended March 31, 2022. The Company also recorded commission income of $330 from introducing trades on behalf of BRCPOF during the three months ended March 31, 2021. Our executive officers and members of our board of directors have a 42.5%49.1% financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 32.9%29.1% in the BRCPOF atas of March 31, 2021. At March 31, 2021 and December 31,2022. the Company had outstanding loan to participations to BRCPOF in the amount of $6,630 and $14,816, respectively.On April 1, 2019, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P. (“Whitehawk”), a Transfer Agreement (the “Transfer Agreement”) with GACP II, a fund managedlimited partnership controlled by GACP, and JohnMr. J. Ahn, who is the brother of Phil Ahn, the Company’s Chief Financial Officer and Chief Operating Officer. The Transfer Agreement provides for among other things, the transfer to Mr. J. Ahn of 55.56% of the Company’s limited partnership interest in GACP II (the “Transferred Interest”), which represents a capital commitment in the aggregate amount of $5,000. In connection with the Transfer Agreement, the Company provided Mr. J. Ahn with a non-recourse, secured line of credit in an aggregate amount of up to $5,003 pursuant to the terms of a Secured Line of Credit Promissory Note (the “Note”) dated April 1, 2019, to fund the purchase price of the Transferred Interest. We also entered into a Security Agreement with Mr. J. Ahn on April 1, 2019, which granted to the Company a security interest in the Transferred Interest to secure Mr. J. Ahn’s obligations under the Note. The Note is subject to an interest rate per annum of 7.00%. As of December 31, 2019, the principal and accrued interest on the Note were $3,798 and $48, respectively. In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P., a limited partnership controlled by Mr. J. Ahn, (“Whitehawk”). Whitehawk has agreed to provide investment advisory services for two of the funds, GACP I, L.P. and GACP II. In accordance with the terms of the Note, Mr. J. Ahn surrendered the Transferred Interest to the Company in exchange for the cancellation of the Note.II, L.P. During the three months ended March 31, 2022 and 2021, management fees paid for investment advisory services by Whitehawk was $1,210.BRPM 150On February 23, 2021, the Company earned $3,366 of underwriting fees from the initial public offering of B. Riley Principal 150 Merger Corp, (“BRPM 150”), which was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “BRPM 150 IPO”). The Company has also agreed to loan BRPM 150 up to $300 for operating expenses. The loan is interest free and there were no amounts outstanding at December 31, 2020. Subsequent to December 31, 2020, the Company loaned BRPM 150 $40 which was repaid in full on March 1, 2021, using proceeds from the BRPM 150 initial public offering.In addition to the above, the Company from time to time participates in commitments, loans and financing arrangements in respect of companies in which the Company has an equity ownership and representation on the board of directors or equivalent body. The Company may also provide consulting services or investment banking services to raise capital for these companies. These transactions can be summarized as follows:The Company has a last-out term loan receivable due from B&W that is included in loans receivable, at fair value with a fair value of $73,330 and $176,191 at March 31, 2021 and December 31, 2020, respectively. Additionally, the Company holds senior notes from B&W with a fair value of $36,961 at March 31, 2021.On January 31, 2020, the Company provided B&W with an additional $30,000 of last-out term loans pursuant to new amendments to B&W’s credit agreement. On May 14, 2020, it provided B&W with another $30,000 of last-out term loans pursuant to a further amendment to B&W’s credit agreement which also included future commitments for the Company to loan B&W $40,000 at various dates starting in November 2020, of which, at March 31, 2021, no amounts remain available, and a limited guaranty of B&W’s obligations under the amended credit facility, (the “Amendment Transactions”). In November 2020, an additional $10,000 was funded under the Amendment Transactions. Interest is payable quarterly at the fixed rate of 12.0% per annum in common stock of B&W at $2.28 per common share through December 31, 2020 and in cash thereafter. All of these loans were made to B&W as part of various amendments to B&W’s existing credit agreement with other lenders not related to the Company. As part of the Amendment Transactions, the Company entered into the following agreements: (i) an Amendment and Restatement Agreement, dated as of May 14, 2020, among B&W, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto, including us; (ii) a Fee Letter, dated as of May 14, 2020, among B&W and us; (iii) a Fee and Interest Equitization Agreement, dated May 14, 2020, between B&W and us; (iv) a Termination Agreement, dated as of May 14, 2020, among us, B&W and acknowledged by Bank of America, N.A. with respect to the Backstop Commitment Letter described below (the “Termination Agreement”); and (v) a Limited Guaranty Agreement, dated as of May 14, 2020, among B&W, Bank of America, N.A and the Company.On January 31, 2020, the Company also entered into a letter agreement with B&W (the “Backstop Commitment Letter”) pursuant to which it agreed to fund any shortfall in the $200,000 of new debt or equity financing required as part of the terms of the Refinancing to the extent such amounts have not been raised from third parties on the same terms contemplated by the Refinancing. On May 14, 2020, the Company provided B&W with another $30,000 of last-out term loans pursuant to further amendments to B&W’s credit agreement, which also included future commitments from the Company to loan B&W $40,000 on various dates starting in November 2020 and a limited guaranty of B&W’s obligations under the amended credit facility. The Backstop Commitment Letter terminated pursuant to the Termination Agreement.In connection with making the loan to B&W, in April 2019 the Company received warrants to purchase 1,666,667 shares of common stock of B&W with an exercise price of $0.01 per share. The option to exercise the warrants expires on April 5, 2022.On February 12, 2021, B&W issued the Company an aggregate $35,000 in principal amount of 8.125% senior notes due 2026 in consideration for the cancellation or deemed prepayment of $35,000 principal amount of the existing Tranche A Term Loans made by the Company to B&W.an Indemnity Rider withindemnification agreements for the benefit of B&W, and the B. Riley Guaranty, each as disclosed above in Note 1315 – Commitments and Contingencies and other limited guarantees as disclosed above in Note 2(l) – Loans Receivable. (“Maven”) that are included in loans receivable, at fair value of $59,240 and $56,552 at March 31, 2021 and December 31, 2020, respectively. Interest on these loans is payable at 12.0% to 15.0% per annum with maturity dates through December 2022.On October 28, 2020, in connection with a capital raise by Maven, the Company converted $3,367 of Maven notes receivable into 3,367 shares of Maven Series K Preferred stock. In November 2020, the Company earned $441 of financial advisory fees from Maven in connection with providing services with their capital raising activities. On December 30, 2020, the Company converted loans receivable with a principal value of $9,991 and accrued but unpaid interest of $2,698 into 38,376,090 shares of Maven common stock at an average price of $0.33 per share.LingoThe Company has a loan receivable due from Lingo Management LLC (“Lingo”("Arena") included in loans receivable, at fair value with a fair value of $55,483$67,988 and $55,066 at$69,835 as of March 31, 20212022 and December 31, 2020,2021, respectively. Interest on these loans is payable at 10% per annum with maturity dates through December 2023. During the three months ended March 31, 2022, the Company earned $2,021 underwriting and financial advisory and other fees from Arena in connection with Arena's capital raising activities.hashad a conversion feature under which $17,500 will convert to additional equity ownership upon receipt of certain regulatory approval. If those regulatory approvals are received, the conversion would increase the Company’s ownership interest in Lingo from 40% to 80%. On August 1, 2021, the credit agreement was amended to allow the borrower to elect that a portion of interest payable be payable in kind. On(a wholly owned subsidiary of Lingo) in the amount of $1.1 million.$1,100. The note bears interest at 6% per annum with a maturity date of March 31,June 30, 2022.bebeloan receivablebridge credit agreement (the “Bridge Agreement”). The terms of the Bridge Agreement allow Faze to borrow an additional $10,000 with all principal and accrued interest due from bebe Stores, Inc.upon closing of Faze’s merger with B. Riley Principal 150 Merger Corp. In the event the merger agreement is terminated, without completion of the merger, Faze will issue convertible secured promissory notes in an aggregate principal amount equal to the outstanding principal balance and the unpaid accrued interest of the loans on such date. As of March 31, 2022, the note is included in loans receivable, at fair value with a fair valuein the amount of $8,000$9,540. Notes issued pursuant to the Bridge Agreement bear interest at 7.0% per annum.20212022 and December 31, 2020. The term loan bears interest at 16.0% per annum with a maturity date of November 10, 2021.OtherThe2021, the Company hashad loans receivable due from Dash Holdingother related parties in the amount of $4,417 and $4,201, respectively.Inc. with a fair value of $3,000 and Rumble On, Inc. with a fair value of $2,500 includedoften provides consulting or investment banking services to raise capital for companies in loans receivable at fair value at March 31, 2021. On March 2, 2021,which the Company purchased a $2,400 minorityhas significant influence through equity interest in Dash Medical Holdings, LLC (“Dash”). The Company also loaned Dash Holding Company, Inc. (together with Dash Medical Holdings, LLC, “Dash”), $3,000 pursuant to that certain Subordinated Working Capital Promissory Note (the “Note”) and Subordination Agreement that was entered into on March 2, 2021. The note bears interest at 12.0% per annum with a maturity date of March 1, 2027. Dash is controlled by a member of our Board of Directors. On March 12, 2021, the Company loaned Rumble On, Inc. $2,500, a Company in which two senior executives areownership, representation on the board which bears interest at 12% and is due on September 30, 2021.of directors (or similar governing body), or both. During the three months ended March 31, 2022, the Company earned $1,880 of fees related to these services.17—19 — BUSINESS SEGMENTSUnited OnlineCommunications and magicJackOther segment, and Brands segment. These reportable segments are all distinct businesses, each with a different marketing strategy and management structure.As a result of the National acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational management changes for its wealth management business. Under the new structure, the wealth management business previously reported in the Capital Markets segment are now reported in the Wealth Management segment. Under the new structure, there is a new segment for Wealth Management. In conjunction with the new reporting structure, the Company recast its segment presentation for all periods presented. Three Months Ended
March 31, 2021 2020 Capital Markets segment: Revenues - Services and fees $ 170,979 $ 73,600 Trading income (losses) and fair value adjustments on loans 264,503 (182,015 ) Interest income - Loans and securities lending 36,920 21,851 Total revenues 472,402 (86,564 ) Selling, general and administrative expenses (86,140 ) (28,301 ) Interest expense - Securities lending and loan participations sold (19,189 ) (8,473 ) Depreciation and amortization (765 ) (596 ) Segment income (loss) 366,308 (123,934 ) Wealth Management segment: Revenues - Services and fees 65,542 18,887 Trading income (losses) and fair value adjustments on loans 2,356 (427 ) Total revenues 67,898 18,460 Selling, general and administrative expenses (61,472 ) (17,548 ) Depreciation and amortization (2,399 ) (483 ) Segment income 4,027 429 Auction and Liquidation segment: Revenues - Services and fees 7,358 20,661 Revenues - Sale of goods 6,092 — Total revenues 13,450 20,661 Direct cost of services (6,580 ) (14,816 ) Cost of goods sold (4,474 ) (29 ) Selling, general and administrative expenses (1,489 ) (1,526 ) Depreciation and amortization — (1 ) Segment income 907 4,289 Financial Consulting segment: Revenues - Services and fees 21,409 20,714 Selling, general and administrative expenses (17,989 ) (15,729 ) Depreciation and amortization (98 ) (67 ) Segment income 3,322 4,918 Principal Investments - United Online and magicJack segment: Revenues - Services and fees 19,793 21,718 Revenues - Sale of goods 736 1,004 Total revenues 20,529 22,722 Direct cost of services (4,742 ) (5,136 ) Cost of goods sold (852 ) (740 ) Selling, general and administrative expenses (4,870 ) (5,463 ) Depreciation and amortization (2,534 ) (2,879 ) Segment income 7,531 8,504 Brands segment: Revenues - Services and fees 4,388 3,801 Trading income and fair value adjustments on loans 83 — Total revenues 4,471 3,801 Selling, general and administrative expenses (676 ) (904 ) Depreciation and amortization (714 ) (714 ) Impairment of tradenames — (4,000 ) Segment income (loss) 3,081 (1,817 ) Consolidated operating income (loss) from reportable segments 385,176 (107,611 ) Corporate and other expenses (including (loss) gain on extinguishment of debt of ($919) and $1,556 during the three months ended March 31, 2021 and 2020, respectively.) (12,198 ) (13,533 ) Interest income 49 246 Income (loss) on equity investments 875 (236 ) Interest expense (19,786 ) (15,654 ) Income (loss) before income taxes 354,116 (136,788 ) (Provision) benefit for income taxes (97,518 ) 37,539 Net income (loss) 256,598 (99,249 ) Net income (loss) attributable to noncontrolling interests 1,942 (584 ) Net income (loss) attributable to B. Riley Financial, Inc. 254,656 (98,665 ) Preferred stock dividends 1,749 1,055 Net income (loss) available to common shareholders $ 252,907 $ (99,720 ) 2022 2021 Capital Markets segment: Revenues - Services and fees $ 69,084 $ 170,979 Trading (loss) income and fair value adjustments on loans (68,912) 264,503 Interest income - Loans and securities lending 61,426 36,920 Total revenues 61,598 472,402 Selling, general and administrative expenses (34,117) (86,140) Interest expense - Securities lending and loan participations sold (11,766) (19,189) Depreciation and amortization (1,893) (765) Segment income 13,822 366,308 Wealth Management segment: Revenues - Services and fees 76,957 65,542 Trading income and fair value adjustments on loans 522 2,356 Total revenues 77,479 67,898 Selling, general and administrative expenses (85,742) (61,472) Depreciation and amortization (1,833) (2,399) Segment (loss) income (10,096) 4,027 Auction and Liquidation segment: Revenues - Services and fees 3,355 7,358 Revenues - Sale of goods — 6,092 Total revenues 3,355 13,450 Direct cost of services (2,335) (6,580) Cost of goods sold — (4,474) Selling, general and administrative expenses (1,820) (1,489) Segment (loss) income (800) 907 Financial Consulting segment: Revenues - Services and fees 25,936 21,409 Selling, general and administrative expenses (20,943) (17,989) Depreciation and amortization (81) (98) Segment income 4,912 3,322 Principal Investments - Communications and Other segment: Revenues - Services and fees 30,786 19,793 Revenues - Sale of goods 1,878 736 Total revenues 32,664 20,529 Direct cost of services (9,316) (4,742) Cost of goods sold (2,251) (852) Selling, general and administrative expenses (9,028) (4,870) Depreciation and amortization (3,225) (2,534) Segment income 8,844 7,531 Brands segment: Revenues - Services and fees 4,557 4,388 Trading income and fair value adjustments on loans — 83 Total revenues 4,557 4,471 Selling, general and administrative expenses (756) (676) Depreciation and amortization (583) (714) Segment income 3,218 3,081 Consolidated operating income from reportable segments 19,900 385,176 Corporate and other expenses (15,178) (12,198) Interest income 67 49 Change in fair value of financial instruments and other 5,981 — Income on equity investments 6,775 875 Interest expense (30,436) (19,786) (Loss) income before income taxes (12,891) 354,116 Benefit from (provision for) income taxes 3,695 (97,518) Net (loss) income (9,196) 256,598 Net income attributable to noncontrolling interests 866 1,942 Net (loss) income attributable to B. Riley Financial, Inc. (10,062) 254,656 Preferred stock dividends 2,002 1,749 Net (loss) income available to common shareholders $ (12,064) $ 252,907 Three Months Ended
March 31, 2021 2020 Revenues: Revenues - Services and fees: North America $ 288,984 $ 158,466 Australia — 664 Europe 485 251 Total Revenues - Services and fees $ 289,469 $ 159,381 Trading income (losses) and fair value adjustments on loans North America $ 266,942 $ (182,442 ) Revenues - Sale of goods North America $ 6,828 $ 1,004 Revenues - Interest income - Loans and securities lending: North America $ 36,920 $ 21,851 Total Revenues: North America $ 599,674 $ (1,121 ) Australia — 664 Europe 485 251 Total Revenues $ 600,159 $ (206 ) 2022 2021 Revenues: Revenues - Services and fees: North America $ 208,722 $ 288,984 Europe 1,953 485 Total Revenues - Services and fees 210,675 289,469 Trading income (losses) and fair value adjustments on loans North America (68,390) 266,942 Revenues - Sale of goods North America 1,878 6,828 Revenues - Interest income - Loans and securities lending: North America 61,426 36,920 Total Revenues: North America 203,636 599,674 Europe 1,953 485 Total Revenues $ 205,589 $ 600,159 During the three months endedAs of March 31, 20212022 and December 31, 20202021, long-lived assets, which consist of property and equipment and other assets, of $15,295$12,980 and $11,685,$12,870, respectively, were located in North America.Three Months Ended March 31, 2021 As Previously
ReportedAdjustments As Revised Statement of Cash Flows Cash flows from investing activities: Investment of subsidiaries initial public offering proceeds into trust account $ — $ (172,500) $ (172,500) Net cash provided by (used in) investing activities $ 662 $ (172,500) $ (171,838) Cash flows from financing activities: Proceeds from initial public offering of subsidiaries $ — $ 172,500 $ 172,500 Net cash provided by financing activities $ 184,213 $ 172,500 $ 356,713 the unpredictable and ongoing impact of the COVID-19 pandemic; changing conditions in the financial markets; our ability to generate sufficient revenues to achieve and maintain profitability; our exposure to credit risk; the short term nature of our engagements; the accuracy of our estimates and valuations of inventory or assets in “guarantee” based engagements; competition in the asset management business; potential losses related to our auction or liquidation engagements; our dependence on communications, information and other systems and third parties; potential losses related to purchase transactions in our auction and liquidations business; the potential loss of financial institution clients; potential losses from or illiquidity of our proprietary investments; changing economic and market conditions;conditions, including increasing inflation and actions by the Federal Reserve to address inflation; the continuing effects of the COVID-19 pandemic, or other pandemics or severe public health crises, and other related impacts including supply chain disruptions, labor shortages and increased labor costs; potential liability and harm to our reputation if we were to provide an inaccurate appraisal or valuation; potential mark-downs in inventory in connection with purchase transactions; failure to successfully compete in any of our segments; 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 meet future capital requirements; our ability to realize the benefits of our completed acquisitions, including our ability to achieve anticipated opportunities and operating cost savings, and accretion to reported earnings estimated to result from completed and proposed acquisitions in the time frame expected by management or at all; the diversion of management time on acquisition- relatedacquisition-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.OverviewGeneraland its subsidiaries provide collaborative(“B. Riley” or the “Company”) is a diversified financial services platform and opportunistically invests in companies or assets with attractive risk-adjusted return profiles to benefit its shareholders. Through its affiliated subsidiaries, B. Riley provides a full suite of investment banking, corporate finance research, sales, and trading, as well as advisory, valuation, and wealth management, services. The Company’s major business lines include:through several operating subsidiaries including:to a wide range of retail and industrial clients.●B. Riley Securities, Inc. (“B. Riley Securities”) is a leading, full service investment bank providing financial advisory, corporate finance, research, securities lending and sales and trading services to corporate, institutional and high net worth individual clients. B. Riley Securities, (fka B. Riley FBR) was formed in November 2017 through the merger of B. Riley & Co, LLC and FBR Capital Markets & Co., which the Company acquired in June 2017.●B. Riley Wealth Management, Inc. (“B. Riley Wealth Management”) provides comprehensive wealth management and brokerage services to individuals and families, corporations and non-profit organizations, including qualified retirement plans, trusts, foundations and endowments. B. Riley Wealth Management was formerly Wunderlich Securities, Inc., which the Company acquired on July 3, 2017 and whose name was changed in June 2018.●National Holdings Corporation (“National”) provides wealth management, brokerage, insurance, tax preparation and advisory services. On February 25, 2021, the Company completed a tender offer to acquire all of the outstanding shares of National not already owned by the Company. The merger expands the Company’s investment banking, wealth management and financial planning offerings.●B. Riley Capital Management, LLC, a Securities and Exchange Commission (“SEC”) registered investment advisor, which includes:○B. Riley Asset Management, an advisor to certain private funds and to institutional and high net worth investors;○Great American Capital Partners, LLC (“GACP”), the general partner of two private funds, GACP I, L.P. and GACP II, L.P., both direct lending funds managed by WhiteHawk Capital Partners, L.P. pursuant to an investment advisory services agreement, that provide senior secured loans and second lien secured loan facilities to middle market public and private U.S. companies.●B. Riley Advisory Services provides expert witness, bankruptcy, financial advisory, forensic accounting, valuation and appraisal, and operations management services.●B. Riley Retail Solutions, LLC (fka Great American Group, LLC), a leading provider of asset disposition and auction solutions to a wide range of retail and industrial clients.●B. Riley Real Estate works with real estate owners and tenants through all stages of the real estate life cycle. Our real estate advisors advise companies, financial institutions, investors, family offices and individuals on real estate projects worldwide. A core focus of B. Riley real estate is the restructuring of lease obligations in both distressed and non-distressed situations, both inside and outside of the bankruptcy process, on behalf of corporate tenants.●B. Riley Principal Investments identifies attractive investment opportunities and aims to deliver financial and operational improvement to its portfolio companies. Our team concentrates on opportunities presented by distressed companies or divisions that exhibit challenging market dynamics. Representative transactions include recapitalization, direct equity investment, debt investment, active minority investment and buyouts. B. Riley Principal Investments seeks to control or influence the operations of our investments to deliver financial and operational improvements that will maximize free cash flow, and therefore, shareholder returns. As part of our principal investment strategy, we acquired United Online, Inc. (“UOL” or “United Online”) on July 1, 2016, magicJack VocalTec Ltd. (“magicJack”) on November 14, 2018 and on November 30, 2020 we acquired a 40% equity interest in with Lingo Management, LLC (“Lingo”), with the ability to acquire an additional 40% equity interest therein.○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 primarily sold in the United States.○magicJack is a Voice over IP (“VoIP”) cloud-based technology and services communications provider.○Lingo is a global cloud/UC and managed service provider.●BR Brand Holding, LLC (“BR Brands”), in which the Company owns a majority interest, provides licensing of certain brand trademarks. BR Brand 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.D.C andD.C., West Palm Beach.During the fourth quarter of 2020, the Company realigned its segment reporting structure to reflect organizational management changes. Under the new structure, the valuationBeach, 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.United OnlineCommunications and magicJackOther and (vi) Brands. consulting, financial advisory, research, securities lending and sales and trading services to corporate, institutional, and individual clients. Our corporate finance and investment banking services include merger and acquisitions as well as restructuring advisory services to public and private companies, initial and secondary public offerings, and institutional private placements. In addition, we trade equity securities as a principal for our account, including investments in funds managed by our subsidiaries. Our Capital Markets segment also includes our asset management businesses that manage various private and public funds for institutional and individual investors.highly regarded Chief Investment Strategistinvestment strategists and Capital Markets segment’sB. Riley Securities’ proprietary equity research.SegmentSegment.. Our Auction and Liquidation segment utilizes our significant industry experience, a scalable network of independent contractors and industry-specific advisors to tailor our services to the specific needs of a multitude of clients, logistical challenges, and distressed circumstances. Furthermore, ourOur scale and pool of resources allow us to offer our services across North AmericanAmerica 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.SegmentSegment.. 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.United OnlineCommunications and magicJack SegmentOther Segment.. Our Principal Investments - United OnlineCommunications and magicJackOther 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, and magicJack, through which we provide VoIP communication and related product and subscription services.services, and Marconi Wireless, through which we provide mobile phone services and devices.SegmentSegment.. 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 Brand.Brands.March 31, 2021, the Company exercised its option for early redemption at par $128.2January 19, 2022, we acquired FocalPoint Securities, LLC ("FocalPoint"), an independent investment bank headquartered in Los Angeles, California. The purchase price consideration totaled $124.5 million, which consisted of 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$64.2 million in accrued interest.On February 25, 2021,cash, $20.3 million in issuance of our common stock, and $39.9 million in deferred cash and contingent consideration payable over the Company completednext three years. We used the acquisition method of National Holdings Corporation (“National), pursuant to an agreementaccounting for this acquisition. Goodwill of $110.6 million and planother intangible assets of merger dated January 10, 2021, following the successful completion of$10.7 million that was recorded as a tender offer commenced by us on January 27, 2021. National is a full-service investment banking and asset management firm that, through its affiliates, provides a range of services including financial advisory, investment banking, institutional sales and trading, equity research, financial planning, market making, tax preparation and insurance to corporations, institutions, high net-worth individuals and retail investors. We previously owned approximately 45%result of the common stock of National. National complements our Wealth Management segment, bringing approximately 900 registered representatives managing over $30.0 billion in assets.On January 25, 2021, the Company issued $230.0 million of senior notes due in January 2028acquisition will be deductible for tax purposes. The acquisition is expected to expand B. Riley Securities’ mergers and acquisitions (“6.0% 2028 Notes”M&A”) pursuantadvisory business and enhance its debt capital markets and financial restructuring capabilities.the prospectus supplement dated February 12, 2020. Interest on the 6.0% 2028 Notes is payable quarterly at 6.0%. The 6.0% 2028 Notes are unsecured and due and payable in full on January 31, 2028. In connection with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $225.7 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 January 23, 2021, we committed up to $400.0 million aggregate principal amount of debt financing, consisting of $100.0 million of secured debt financing, and $300.0 million of unsecured debt financing, to affiliates of Franchise Group, Inc. (collectively, “FRG”) in connection with FRG’s acquisition of Pet Supplies Plus.On January 15, 2021, the Company issued 1,413,045 shares of common stock inclusive of 184,310 shares issued pursuant to the full exercise of the Underwriter’s option to purchase additional shares of common stock at a price of $46.00 per share for net proceeds of approximately $64.7 million after underwriting fees and costs.On January 30, 2020,be widespread impact from COVID-19, which 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 basedin March 2020. There has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on the rapid increase in exposure globally. During the first quarter 2021,social, business, travel, and government activities and functions; however, the full impact of the COVID-19 outbreak continues to evolve. Asevolve with the emergence of new variant strains and breakthrough infections. Although the U.S. economy recovers, aided by additional stimulus packages and positive momentum incontinued to grow during the domestic vaccine rollout, countries acrossfirst quarter of 2022, the world continue to manage repeated waves of the pandemic amid uneven progress toward vaccination. Theoutbreak onpandemic, higher inflation, the actions by the Federal Reserve to address inflation, and rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our results of operations, financial position and cash flows will depend onbusiness in future developments, including the duration and spread of the outbreak and related advisories and restrictions and the success of vaccines in slowing or halting the pandemic.periods. 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.20212022 Compared to Three Months Ended March 31, 2020 Three Months Ended March 31,
2021 March 31,
2020 Change Revenues: Services and fees $ 289,469 $ 159,381 $ 129,209 Trading income (losses) and fair value adjustments on loans 266,942 (182,442 ) 450,263 Interest income - Loans and securities lending 36,920 21,851 15,069 Sale of goods 6,828 1,004 5,824 Total revenues 600,159 (206 ) 600,365 Operating expenses: Direct cost of services 11,322 19,952 (8,630 ) Cost of goods sold 5,326 769 4,557 Selling, general and administrative expenses 191,344 87,744 103,600 Impairment of tradenames — 4,000 (4,000 ) Interest expense - Securities lending and loan participations sold 19,189 8,473 10,716 Total operating expenses 227,181 120,938 106,243 Operating income (loss) 372,978 (121,144 ) 494,122 Other income (expense): Interest income 49 246 (197 ) Gain (loss) from equity investments 875 (236 ) 1,111 Interest expense (19,786 ) (15,654 ) (4,132 ) Income (loss) before income taxes 354,116 (136,788 ) 490,904 (Provision) benefit for income taxes (97,518 ) 37,539 (135,057 ) Net income (loss) 256,598 (99,249 ) 355,847 Net income (loss) attributable to noncontrolling interests 1,942 (584 ) 2,526 Net income (loss) attributable to B. Riley Financial, Inc. 254,656 (98,665 ) 353,321 Preferred stock dividends 1,749 1,055 694 Net income (loss) available to common shareholders $ 252,907 $ (99,720 ) $ 352,627 Three Months Ended March 31, Change 2022 2021 Amount % Revenues: Services and fees $ 210,675 $ 289,469 $ (78,794) (27.2) % Trading (losses) income and fair value adjustments on loans (68,390) 266,942 (335,332) (125.6) % Interest income - Loans and securities lending 61,426 36,920 24,506 66.4 % Sale of goods 1,878 6,828 (4,950) (72.5) % Total revenues 205,589 600,159 (394,570) (65.7) % Operating expenses: Direct cost of services 11,651 11,322 329 2.9 % Cost of goods sold 2,251 5,326 (3,075) (57.7) % Selling, general and administrative expenses 175,199 191,344 (16,145) (8.4) % Interest expense - Securities lending and loan participations sold 11,766 19,189 (7,423) (38.7) % Total operating expenses 200,867 227,181 (26,314) (11.6) % Operating income 4,722 372,978 (368,256) (98.7) % Other income (expense): Interest income 67 49 18 36.7 % Change in fair value of financial instruments and other 5,981 — 5,981 100.0 % Income from equity investments 6,775 875 5,900 674.3 % Interest expense (30,436) (19,786) (10,650) 53.8 % (Loss) income before income taxes (12,891) 354,116 (367,007) (103.6) % Benefit (provision) for income taxes 3,695 (97,518) 101,213 (103.8) % Net (loss) income (9,196) 256,598 (265,794) (103.6) % Net income attributable to noncontrolling interests 866 1,942 (1,076) (55.4) % Net (loss) income attributable to B. Riley Financial, Inc. (10,062) 254,656 (264,718) (104.0) % Preferred stock dividends 2,002 1,749 253 14.5 % Net (loss) income available to common shareholders $ (12,064) $ 252,907 $ (264,971) (104.8) % n/m - Not applicable or not meaningful. Three Months Ended March 31,
2021 March 31,
2020 Change Amount Amount Amount % Revenues - Services and fees: Capital Markets segment $ 170,979 $ 73,600 $ 97,379 132.3 % Wealth Management segment 65,542 18,887 46,655 n/m Auction and Liquidation segment 7,358 20,661 (13,303 ) -64.4 % Financial Consulting segment 21,409 20,714 695 3.4 % Principal Investments - United Online and magicJack segment 19,793 21,718 (1,925 ) -8.9 % Brands segment 4,388 3,801 587 15.4 % Subtotal 289,469 159,381 130,088 81.6 % Revenues - Sale of goods: Auction and Liquidation segment 6,092 — 6,092 100.0 % Principal Investments - United Online and magicJack segment 736 1,004 (268 ) -26.7 % Subtotal 6,828 1,004 5,824 n/m Trading income (losses) and fair value adjustments on loans Capital Markets segment 264,503 (182,015 ) 446,518 n/m Wealth Management segment 2,356 (427 ) 2,783 n/m Brands segment 83 — 83 100.0 % Subtotal 266,942 (182,442 ) 449,384 n/m Interest income - Loans and securities lending: Capital Markets segment 36,920 21,851 15,069 69.0 % Total revenues $ 600,159 $ (206 ) $ 600,365 n/m Three Months Ended March 31, Change 2022 2021 Amount % Revenues - Services and fees: Capital Markets segment $ 69,084 $ 170,979 $ (101,895) (59.6) % Wealth Management segment 76,957 65,542 11,415 17.4 % Auction and Liquidation segment 3,355 7,358 (4,003) (54.4) % Financial Consulting segment 25,936 21,409 4,527 21.1 % Principal Investments - Communications and Other segment 30,786 19,793 10,993 55.5 % Brands segment 4,557 4,388 169 3.9 % Subtotal 210,675 289,469 (78,794) (27.2) % Revenues - Sale of goods: Auction and Liquidation segment — 6,092 (6,092) (100.0) % Principal Investments - Communications and Other segment 1,878 736 1,142 155.2 % Subtotal 1,878 6,828 (4,950) (72.5) % Trading (losses) income and fair value adjustments on loans Capital Markets segment (68,912) 264,503 (333,415) (126.1) % Wealth Management segment 522 2,356 (1,834) (77.8) % Brands segment — 83 (83) (100.0) % Subtotal (68,390) 266,942 (335,332) (125.6) % Interest income - Loans and securities lending: Capital Markets segment 61,426 36,920 24,506 66.4 % Total revenues $ 205,589 $ 600,159 $ (394,570) (65.7) % n/m - Not applicable or not meaningful.increaseddecreased approximately $600.4$394.6 million to $205.6 million during the three months ended March 31, 2022 from $600.2 million during the three months ended March 31, 2021 from ($0.2 million) during the three months ended March 31, 2020.2021. The increasedecrease in revenues during the three months ended March 31, 20212022 was primarily due to a decrease in revenue from trading gains(losses) income and gains from fair value adjustment on loans that amounts to $266.9 million and in the prior year period ended March 31, 2020 trading losses and losses on fair value adjustments on loans amounted to $182.4of $335.3 million, services and fees of $78.8 million and was reported as a reductionsale of goods of $5.0 million, offset by an increase in revenue in 2020.interest income from loans and securities lending of $24.5 million. The increasedecrease in revenue from services and fees of $130.1 million in the three months ended March 31, 2021 was primarily due to increases2022 consisted of decreases in revenue of $97.4$101.9 million in the Capital Markets segment $46.7and $4.0 million in the Auction and Liquidation segment, partially offset by increases in revenues of $11.4 million in the Wealth Management segment, $0.7$11.0 million in the Principal Investments — Communications and Other segment, $4.5 million in the Financial Consulting segment, and $0.6 million in the Brands segment; partially offset by decreases in revenues of $13.3$4.0 million in the Auction and Liquidation segment and $1.9$0.2 million in the Principal Investments — United Online and magicJackBrands segment.increased $97.4decreased $101.9 million to $69.1 million during the three months ended March 31, 2022 from $171.0 million during the three months ended March 31, 2021 from $73.6 million during the three months ended March 31, 2020.2021. The increasedecrease in revenues was primarily due to increasesdecreases in revenue of $14.8 from the acquisition of National, $76.4$105.4 million from corporate finance, consulting, and investment banking fees; asset management fees and $3.5 million of $1.2 million; commissionscommission fees, partially offset by an increase of $1.1$6.9 million and other revenues of $3.9 million.in dividends.$46.7$11.4 million to $77.0 million during the three months ended March 31, 2022 from $65.5 million during the three months ended March 31, 2021 from $18.9 million during the three months ended March 31, 2020.2021. The increase in revenues was primarily due to increasesan increase in revenue of $42.9 from the acquisition of National and $3.6$13.7 million from wealth and asset management fees.$13.3$4.0 million to $3.4 million during the three months ended March 31, 2022 from $7.4 million during the three months ended March 31, 2021 from $20.7 million during the three months ended March 31, 2020.2021. The decrease in revenues was primarily due to fewer large retail fee liquidation engagements.$0.7$4.5 million to $21.4$25.9 million during the three months ended March 31, 20212022 from $20.7$21.4 million during three months ended March 31, 2021. The increase in revenues was primarily due to increases of $3.7 million within our Advisory Services divisions, $0.7 million for real estate engagement fees, and $0.1 million for B. Riley Operations Management engagements.2020.2022 from $19.8 million during the three months ended March 31, 2021. The increase in revenues was primarily due to an increase of $12.4 million in revenuesubscription services from the acquisition of $1.7 million for real estate engagement fees where we provide lease modification services for corporate tenants,Marconi Wireless in the fourth quarter of 2021, partially offset by a decrease of $0.8 million in revenues for appraisal engagements where we perform valuations for the monitoring of collateral for financial institutions, lenders, and private equity investors. Revenues from services and fees in the Principal Investments - United Online and magicJack segment decreased $1.9 million to $19.8 million during the three months ended March 31, 2021 from $21.7 million during the three months ended March 31, 2020. The decrease in revenues was primarily due to a decreasedecreases in subscription servicesrevenue of $1.6$1.8 million for UOL and a decrease in advertising licensing and other of $0.6 million. Management expects revenues frommagicJack. We expect the Principal Investments - United Online and magicJack segmentsubscription revenue to continue to decline year over year.$0.6$0.2 million to $4.6 million during the three months ended March 31, 2022 from $4.4 million during the three months ended March 31, 2021 from $3.8 million during the three months ended March 31, 2020.2021. The primary source of revenue included in this segment is the licensing of trademarks.consisteddecreased $335.3 million to a loss of gains in$68.4 million during the amountthree months ended March 31, 2022 compared to income of $266.9 million during the three months ended March 31, 2021 compared to trading losses and losses on fair value adjustments on loans in the amount of $182.4 million for the three months ended March 31, 2020. The $449.4 million increase in gain for the three months ended March 31, 20212021. This decrease was primarily due to increasesdecreases of $446.5$333.4 million in the Capital Markets segment and $2.8$1.8 million in the Wealth Management segment. The gainloss of $266.9$68.4 million forduring the three months ended March 31, 2021 included2022 was primarily due to realized and unrealized amounts earnedlosses on investments made in our proprietary trading accounts of $256.2$79.3 million, andpartially offset by an unrealized amountsgain on our loans receivable, at fair value of $10.7$10.9 million.$15.1$24.5 million to $61.4 million during the three months ended March 31, 2022 from $36.9 million during the three months ended March 31, 20212021. Interest income from $21.9securities lending was $15.0 million and $22.9 million during the three months ended March 31, 2020.2022 and 2021, respectively. Interest income from securities lendingloans was $22.9$46.4 million and $10.1$14.0 million during the three months ended March 31, 2022 and 2021, and 2020, respectively. Interest incomeloansthe sale of goods decreased $5.0 million to $1.9 million during the three months ended March 31, 2022 from $6.8 million during three months ended March 31, 2021. Revenues from sale of goods were attributable to a decrease of $6.1 million from sales of retail goods related to retail liquidation engagements in Europe that ended, partially offset by an increase of $1.1 million from sales of retail goods due to the acquisition of Marconi Wireless in the fourth quarter of 2021. Cost of goods sold for three months ended March 31, 2022 was $14.0$2.3 million, andresulting in a negative gross margin of 19.9%.2021 and 2020, respectively.Sale of Goods, Cost of Goods Sold and Gross Margin Three Months Ended March 31, 2021 Three Months Ended March 31, 2020 Principal Principal Investments - Investments - Auction and United Online Auction and United Online Liquidation and magicJack Liquidation and magicJack Segment Segment Total Segment Segment Total Revenues - Sale of Goods $ 6,092 $ 736 $ 6,828 $ — $ 1,004 $ 1,004 Cost of goods sold 4,474 852 5,326 29 740 769 Gross margin on sale of goods $ 1,618 $ (116 ) $ 1,502 $ (29 ) $ 264 $ 235 Gross margin percentage 26.6 % (15.8 %) 22.0 % (100.0 %) 26.3 % 23.4 % Revenues2022 from the sale of goods increased $5.8 million, to $6.8 million during the three months ended March 31, 2021 from $1.0 million during the three months ended March 31, 2020. Revenues from sale of goods were primarily attributable $6.1 million of sales of retail goods and $0.7 million of sales of magicJack devices that are sold in connection with VoIP services. Cost of goods sold for the three months ended March 31, 2021 was $5.3 million, resulting in a gross margin of 22.0%.Operating ExpensesDirect Cost of Services. Direct cost of services and direct cost of services measured as a percentage of revenues – services and fees by segment during the three months ended March 31, 2021 and 2020 are as follows: Three Months Ended March 31, 2021 Three Months Ended March 31, 2020 Principal Principal Investments - Investments - Auction and United Online Auction and United Online Liquidation and magicJack Liquidation and magicJack Segment Segment Total Segment Segment Total Revenues - Services and fees $ 7,358 19,793 $ 20,661 21,718 Direct cost of services 6,580 4,742 $ 11,322 14,816 5,136 $ 19,952 Gross margin on services and fees $ 778 $ 15,051 $ 5,845 $ 16,582 Gross margin percentage 10.6 % 76.0 % 28.3 % 76.4 % Total direct costs decreased $8.6 million, to $11.3 million during the three months ended March 31, 2021 from $20.0 million during the three months ended March 31, 2020. Direct costs of services decreased2021. The activity is primarily driven by $8.2 million in the Auction and Liquidation segment and $0.4 million in the Principal Investments — United OnlineCommunications and magicJackOther segment. The decrease in direct costs in the Auction and Liquidation segment was primarily due to a reduction in the number of retail fee type engagements performed during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. The decrease in direct costs in the Principal Investments — United Online and magicJack segment was primarily due to a corresponding decrease in revenues from subscription based customers for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.Auction and LiquidationGross margin in the Auction and Liquidation segment for services and fees decreased to 10.6% of revenues during the three months ended March 31, 2021, as compared to 28.3% of revenues during the three months ended March 31, 2020. The decrease in margin in the Auction and Liquidation segment is due to more services being provided under fee and commission type engagements during the three months ended March 31, 2021 as compared to the prior year period.Principal Investments — United Online and magicJackGross margins in the Principal Investments — United Online and magicJack segment remained relatively flat at 76.0% of revenues during the three months ended March 31, 2021, as compared to 76.4% of revenues during the three months ended March 31, 2020.20212022 and 20202021 were comprised of the following: Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Change Amount % Amount % Amount % Capital Markets segment $ 86,905 45.3 % $ 28,897 33.0 % $ 58,008 n/m Wealth Management segment 63,871 33.4 % 18,031 20.6 % 45,840 n/m Auction and Liquidation segment 1,489 0.8 % 1,527 1.7 % (38 ) (2.5 %) Financial Consulting segment 18,087 9.5 % 15,796 18.0 % 2,291 14.5 % Principal Investments - United Online and magicJack segment 7,404 3.9 % 8,342 9.5 % (938 ) (11.2 %) Brands segment 1,390 0.7 % 1,618 1.8 % (228 ) (14.1 %) Corporate and Other segment 12,198 6.4 % 13,533 15.4 % (1,335 ) (9.9 %) Total selling, general & administrative expenses $ 191,344 100.0 % $ 87,744 100.0 % $ 103,600 118.1 % Three Months Ended March 31, 2022 Three Months Ended
March 31, 2021Change Amount % Amount % Amount % Capital Markets segment $ 36,010 20.5 % $ 86,905 45.3 % $ (50,895) (58.6) % Wealth Management segment 87,575 50.0 % 63,871 33.4 % 23,704 37.1 % Auction and Liquidation segment 1,820 1.0 % 1,489 0.8 % 331 22.2 % Financial Consulting segment 21,024 12.0 % 18,087 9.5 % 2,937 16.2 % Principal Investments -Communications and Other segment 12,253 7.0 % 7,404 3.9 % 4,849 65.5 % Brands segment 1,339 0.8 % 1,390 0.7 % (51) (3.7) % Corporate and Other segment 15,178 8.7 % 12,198 6.4 % 2,980 24.4 % Total selling, general & administrative expenses $ 175,199 100.0 % $ 191,344 100.0 % $ (16,145) (8.4) % n/m - Not applicable or not meaningful. increaseddecreased approximately $103.6$16.1 million to $175.2 million during the three months ended March 31, 2022 from $191.3 million during the three months ended March 31, 2021 from $87.7 million for the three months ended March 31, 2020.2021. The increase of approximately $103.6 million in selling, general and administrative expensesdecrease was primarily due to increasesa decrease of $58.0$50.9 million in the Capital Markets segment, $45.8partially offset by increases of $23.7 million in the Wealth Management segment, $4.8 million in the Principal Investments — Communications and $2.3Other segment, $3.0 million in the Corporate and Other segment, $2.9 million in the Financial Consulting segment, partially offset by decreases of $1.0and $0.3 million in the Principal Investments — United OnlineAuction and magicJack segment, $0.2 million in the Brands segment and $1.3 million in the Corporate and OtherLiquidation segment.increaseddecreased by $58.0$50.9 million to $36.0 million during the three months ended March 31, 2022 from $86.9 million during the three months ended March 31, 2021 from $28.9 million during the three months ended March 31, 2020.2021. The increasedecrease was primarily due to increasesdecreases of $26.4$28.6 million in consulting expenses, $19.2 million in payroll and related expenses, $19.6and $9.2 million in consulting expenses, $11.7from the reorganization of National, partially offset by an increases of $4.5 million from the acquisition of National and $0.6FocalPoint in the first quarter of 2022, $1.1 million in investment banking deal expenses, partially offset by a decrease of $0.5depreciation and amortization, and $0.4 million in legalother expenses.$45.8$23.7 million to $87.6 million during the three months ended March 31, 2022 from $63.9 million during the three months ended March 31, 2021 from $18.0 million during the three months ended March 31, 2020.2021. The increase was primarily due to increases of $43.4$23.3 million from the acquisitiona full quarter's activity of National, and $3.2 millionwhich was acquired in payroll and related expenses, partially offset by decreases of $0.4 million in legal expensesFebruary 2021, and $0.5 million in clearing charges.remained atincreased $0.3 million to $1.8 million during the three months ended March 31, 2022 from $1.5 million during the three months ended March 31, 2021 and 2020.$2.3$2.9 million to $21.0 million during the three months ended March 31, 2022 from $18.1 million during the three months ended March 31, 2021 from $15.8 million during the three months ended March 31, 2020.2021. The increase was primarily due to an increaseincreases of $2.2$2.4 million in payroll and related expenses.expenses and $0.3 million in travel and entertainment.United OnlineCommunications and magicJackUnited OnlineCommunications and magicJackOther segment decreased $0.9increased $4.8 million to $12.3 million for the three months ended March 31, 2022 from $7.4 million for the three months ended March 31, 2021 from $8.3 million for the three months ended March 31, 2020.2021. The decreaseincrease was primarily due to decreasesan increase of $0.8$1.8 million in payroll and related expenses, $0.3$0.9 million in legalcommunications expenses, and $0.3$0.7 million in depreciation and amortization, $0.8 million from other expenses, partially offset by an increase of $0.5and $0.4 million in transaction costs.Brandsdecreased by $0.2 million toremained flat at $1.4 million during the three months ended March 31, 2021 from $1.6 million during the three months ended March 31, 2020. The decrease was primarily due to a decrease of $0.2 million in consulting expenses.decreasedincreased approximately $1.3$3.0 million to $12.2$15.2 million during the three months ended March 31, 20212022 from $13.5$12.2 million for the three months ended March 31, 2020.2021. The decreaseincrease was primarily due to decreases of $11.1 million in other expenses and $0.2 million in legal expenses, partially offset by increases of $6.3$4.4 million in payroll and related expenses, $2.5partially offset by a decrease of $0.9 million in loss from extinguishment of debt $0.9 million in transaction costsas further discussed below and $0.4increase of $0.3 million in gain from foreign currency exchange.(Loss) gain on extinguishmentDuring the three months ended March 31, 2022, we did not repurchase any of debt.our senior notes. During the three months ended March 31, 2021, we repurchased 5,126,228 bonds with an aggregate face value of $128.2 million at par, resulting in a loss net of expenses and original issue discount of $0.9 million. The total redemption payment included approximately $1.6 million in accrued interest. During the three months ended March 31, 2020, we repurchased 137,710 bonds with an aggregate face value of $3.4 million for $1.8 million resulting in a gain net of expenses and original issue discount of $1.6 million. As part of the repurchase, the Company paid $30 thousand in interest accrued through the date of each respective repurchase.Impairment of tradenames. Due to the impact of the COVID-19 outbreak on economic activity and market volatility, we tested our intangible assets as of March 31, 2020 and made the determination that the indefinite-lived tradenames in the Brands segment were impaired. In the three months ended March 31, 2020, the Company recognized impairment of $4.0 million on the indefinite-lived tradenames. There was no impairment in the three months ended March 31, 2021. less than $0.1 million during the three months ended March 31, 20212022 and $0.22021. Change in fair value of financial instruments and other in the amount of $6.0 million during the three months ended March 31, 2020.2022 was primarily due to the change in fair value of warrant liabilities and the forgiveness of a Paycheck Protection Program loan related to FocalPoint, which was acquired in the first quarter of 2022. Interest expense was $30.4 million during the three months ended March 31, 2022 compared to $19.8 million during the three months ended March 31, 20212021. The increase in interest expense was primarily due to increases in interest expense of $5.7 million from the issuance of senior notes, and $4.1 million and $1.1 million from the Nomura term loan and revolving credit facility, respectively, entered into in the second quarter of 2021. During the three months ended March 31, 2022, income from equity investments was $6.8 million compared to $15.7$0.9 million during the three months ended March 31, 2020.2021. The increase was primarily due to $6.7 million in interest expenseearnings related to the bebe equity method investment.2020 was primarily due to an increase in interest expense of $4.3 million from the issuance of senior notes due in - 2023, 2024, 2025, 2026, 2027 and 2028, partially offset by a decrease in interest expense of $0.2 million on our asset based credit facility. Other income in the three months ended March 31, 2021 included a gain on equity investments of $0.9 million2022 compared to a lossincome of $0.2 million in the prior year period.Income (Loss) Before Income Taxes. Income before income taxes was $354.1 million during the three months ended March 31, 2021 compared2021. The change was primarily due to loss beforea decrease in revenue of $394.6 million and increase in interest expense of $10.7 million, partially offset by a decrease in operating expenses of approximately $26.3 million, increase in change in fair value of financial instruments and other of $6.0 million, and increase in income from equity investments of $5.9 million.of $136.8was $3.7 million during the three months ended March 31, 2020. The increase in income before income taxes was primarily due2022 compared to an increases in revenuesa provision of approximately $600.4 million and in gain from equity investments of $1.1 million, partially offset by increases in operating expenses of $106.2 million, interest expense of $4.1 million and a decrease in interest income of $0.2 million, as discussed above.(Provision) Benefit for Income Taxes. Provision for income taxes was $97.5 million during the three months ended March 31, 2021 compared to benefit from2021. The effective income taxes of $37.5 million duringtax rate was 28.7% for the three months ended March 31, 2020. The effective income tax rate was a provision of2022 as compared to 27.5% for the three months ended March 31, 2021 as compared to a benefit of 27.4% for the three months ended March 31, 2020.2021. (Loss) Attributable to Noncontrolling InterestInterests2021 compared2021.netthe Company. Net loss of $0.6attributable to the Company was $10.1 million during the three months ended March 31, 2020.Net Income (Loss) Attributable2022 compared to the Company. Netnet income attributable to the Company for the three months ended March 31, 2021 wasof $254.7 million, from net loss attributable to the Company of $98.7 million for the three months ended March 31, 2020.2022. The increase in net income attributable to the Company during the three months ended March 31, 2021 as compared to the same period in 2020change was primarily due to an increasea decrease in operating income of $494.1 million, and an increase in gain from equity investments of $1.1 million, partially offset by an increase in provision for income taxes of $135.1$368.3 million and an increase in interest expense of $4.1$10.7 million, partially offset by a change from provision to benefit for income taxes ofinterestnet income attributable to noncontrolling interests of $0.2$1.1 million. On October 7, 2019, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 6.875% Series A Cumulative Perpetual Preferred Stock, (trading under NASDAQ symbol “RILYP”), par value $0.0001 per share. Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends will beare payable quarterly in arrears, on or about the last day of January, April, July and October.arrears. On January 11, 2021,10, 2022, the Company declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on January 29, 202131, 2022 to holders of record as of the close of business on January 21, 2021.September 4, 2020,April 7, 2022, the Company closed its public offeringdeclared a cash dividend $0.4296875 per Depositary Share, which was paid on April 29, 2022 to holders of Depositary Shares, each representing 1/1000threcord as of a sharethe close of 7.375% Series B Cumulative Perpetual Preferred Stock (trading under the NASDAQ symbol “RILYL”), par value $0.0001 per share. business on April 19, 2022.will beare payable quarterly in arrears, on or about the last day of January, April, July and October.arrears. On January 11, 2021,10, 2022, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on January 29, 202131, 2022 to holders of record as of the close of business on January 21, 2021. (Loss) Available to Common Shareholders. Net income available to common shareholders for the three months ended March 31, 2021 was $252.9 million, an increase from net loss available to common shareholders of $99.7was $12.1 million for the three months ended March 31, 2020. The increase in net income available to common shareholders during the three months ended March 31, 2021 as2022 compared to net income available to common shareholders of $252.9 million during the same period in 2020three months ended March 31, 2021. The change was primarily due to an increasea decrease in operating income of $494.1$368.3 million, and an increase in gain from equity investmentsinterest expense of $1.1$10.7 million, partially offset by an increase in provision for income taxes of $135.1 million, an increase in income attributable to noncontrolling interest of $2.5 million and an increase in preferred stock dividends of $0.7$0.3 million, anpartially offset by a change from provision to benefit for income taxes of $101.2 million, increase in interest expensechange in fair value of $4.1financial instruments and other of $6.0 million, increase in income from equity investments of $5.9 million, and a decrease in interestnet income attributable to noncontrolling interests of $0.2 millionloanloans and credit facility,facilities, and special purposes financing arrangements.20212022 and 2020,2021, we generated net incomeloss of $256.6$9.2 million and net lossincome of $99.2$256.6 million, respectively. Our cash flows and profitability are impacted by the number and size of retail liquidation and capital marketsmarket engagements performed on a quarterly and annual basis.2021,2022, we had $237.6$213.6 million of unrestricted cash and cash equivalents, $8.5$0.9 million of restricted cash, $1,166.7$1,317.1 million of securities and other investments heldowned at fair value, $294.1$882.4 million of loans receivable, and $1,226.8$2,073.4 million of borrowings outstanding. The borrowings outstanding of $1,226.8$2,073.4 million atas of March 31, 20212022 included (a) $122.8$1,627.6 million of borrowings from the issuance of the 7.25% 2027 Notes, (b) $137.5series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $342.9 million of borrowings from the issuance of the 7.375% 2023 Notes, (c) $115.2 million of borrowings from the issuance of the 6.875% 2023 Notes, (d) $111.2 million of borrowings from the issuance of the 6.75% 2024 Notes, (e) $136.5 million of borrowings from the issuance of the 6.50% 2026 Notes, (f) $132.1 million of borrowings from the issuance of the 6.375% 2025 Notes, (g) $239.8 million of borrowings from the issuance of the 6.00% 2028 Notes, (h) $159.5 million of borrowings from the issuance of the 5.50% 2026 Notes, (i) $69.5 millionin term loanloans borrowed pursuant to the BRPAC and Nomura Credit Agreements discussed below, $80.0 million of revolving credit under the Nomura Credit Agreement discussed below, (j) $6.9and $22.9 million of notes payable, and (k) $11.2 million of loan participations sold. payable.May 3, 2021,April 28, 2022, we declared a regular dividend of $0.50 per share and special dividend of $2.50$1.00 per share that will be paid on or about May 28, 202120, 2022 to stockholders of record as of May 17, 2021.11, 2022. On February 25, 2021,23, 2022, the Board of Directors announced an increase to theCompany declared a regular quarterly dividend from $0.375of $1.00 per share, which was paid on March 23, 2022 to $0.50 per share.stockholders of record as of March 9, 2022. During the year ended December 31, 2020,2021, we paid cash dividends on our common stock of $38.8$347.1 million. While it is the Board’s current intention to make regular dividend payments of $0.50$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.20212022 and the year ended December 31, 20202021 was as follows:Date Declared Date Paid Stockholder
Record Date Regular
Dividend
Amount Special
Dividend
Amount Total
Dividend
Amount February 25, 2021 March 24, 2021 March 10, 2021 $ 0.500 $ 3.000 $ 3.500 October 28, 2020 November 24, 2020 November 10, 2020 0.375 0.000 0.375 July 30, 2020 August 28, 2020 August 14, 2020 0.300 0.050 0.350 May 8, 2020 June 10, 2020 June 1, 2020 0.250 0.000 0.250 March 3, 2020 March 31, 2020 March 17, 2020 0.250 0.100 0.350 Date Declared Date Paid 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 2021,2022, dividends in arrears in respect of the Depositary Shares were $0.7$0.8 million. On January 11, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021. On April 5, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021. On July 8, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on August 2, 2021 to holders of record as of the close of business on July 21, 2021. On October 6, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.On January 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022. On April 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.2021,2022, dividends in arrears in respect of the Depositary Shares were $0.4$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.Three Months Ended
March 31,2022 2021 (Dollars in thousands) Net cash (used in) provided by: Operating activities $ (14,898) $ (42,894) Investing activities (35,513) (171,838) Financing activities (14,441) 356,713 Effect of foreign currency on cash (496) (696) Net increase in cash, cash equivalents and restricted cash $ (65,348) $ 141,285 Three Months Ended
March 31, 2021 2020 (Dollars in thousands) Net cash (used in) provided by: Operating activities $ (42,894 ) $ 1,044 Investing activities 662 (72,081 ) Financing activities 184,213 92,332 Effect of foreign currency on cash (696 ) (1,332 ) Net increase in cash, cash equivalents and restricted cash $ 141,285 $ 19,963 2021 compared to cash provided of $1.0 million during2021. Cash used in operating activities for the three months ended March 31, 2020.2022 consisted of the negative impact of net loss of $9.2 million, noncash items of $42.7 million, and changes in operating assets and liabilities of $37.0 million. The negative cash flow impact from noncash items of $42.7 million included deferred income taxes of $41.9 million, fair value adjustments of $15.8 million, income from equity investments of $6.8 million, noncash interest and other of $3.6 million, and gain on extinguishment of loan of $1.1 million, partially offset by share-based compensation of $17.0 million, depreciation and amortization of $7.8 million, dividends from equity investments of $0.8 million, provision for doubtful accounts of $0.4 million, gain on disposal of fixed assets and other of $0.3 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.2 million. Cash used in operating activities for the three months ended March 31, 2021 includedconsisted of the positive impact of net income of $256.6 million adjusted forand noncash items of $56.5 million, andpartially offset by the negative impact of changes in operating assets and liabilities of $356.0 million. NoncashThe positive cash flow impact from noncash items of $56.5 million include (a)included deferred income taxes of $62.7 million, depreciation and amortization of $6.8 million, (b) share-based compensation of $5.5 million, (c) income from equity investmentsloss on extinguishment of debt of $0.9 million, (d) fair value adjustments of $10.7 million, (e) provision for doubtful accounts of $0.4 million, (f)dividends from equity investments of $0.3 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.1 million, (g) otherpartially offset by fair value adjustments of $10.7 million, noncash interest and other of $4.4 million, (h) deferred income taxes of $62.7 million, (i) dividends from equity investments of $0.3 million, (j) loss on extinguishment of debt of $0.9 million, (k) gain on equity investment of $3.5 million, income from equity investments of $0.9 million, and (l) effect of foreign currency on operations of $0.7 million.provided byused in investing activities was $0.7$35.5 million during the three months ended March 31, 20212022 compared to cash used in investing activities of $72.1$171.8 million for the three months ended March 31, 2020.2021. During the three months ended March 31, 2022, cash used in investing activities consisted of cash used for purchases of loans receivable of $93.9 million acquisition of businesses of $40.0 million, purchases of equity and other investments of $2.4 million, and purchases of property and equipment of $0.2 million partially offset by cash received from loans receivable repayment of $101.0 million. During the three months ended March 31, 2021, cash provided byused in investing activities consisted of cash received from loans receivable repaymentused to fund a trust account for the future redemption of $87.5one of our subsidiaries’ redeemable common stock of $172.5 million, partially offset by cash used for purchases of loans receivable of $75.7 million, repayments of loan participations sold of $6.1 million, cash used for purchases of equity and other investments of $4.7 million, acquisition of business of $0.3 million, and purchases of property and equipment of $0.1 million. During the three months ended March 31, 2020, cash used in investing activities consisted of cash used for loans receivable of $115.3 million, repayments of loan participations sold of $0.2 million and cash used for purchases of property and equipment of $0.4 million,partially offset by cash received from loans receivable repayment of $42.1 million, sale of a loan receivable to a related party of $1.8$87.5 million.provided byused in financing activities was $184.2$14.4 million during the three months ended March 31, 20212022 compared to cash provided by financing activities of $92.3$356.7 million during the three months ended March 31, 2020.2021. During the three months ended March 31, 2022, cash used in financing activities primarily consisted of $27.9 million used to pay dividends on our common shares, $4.1 million used in the repayment of term loan, $1.1 million in distributions to noncontrolling interests, $2.0 million used to pay dividends on our preferred shares, $1.3 million used in payment of employment taxes on vesting of restricted stock, and $0.4 million used to repay our notes payable, partially offset by cash provided by $20.0 million proceeds from issuance of senior notes, $1.8 million contributions from noncontrolling interests, and $0.6 million proceeds from issuance of preferred stock. During the three months ended March 31, 2021, cash provided by financing activities primarily consisted of $402.4 million proceeds from issuance of senior notes, $172.5 million proceeds from initial public offering of subsidiaries, $64.7 million net proceeds from offeringsissuance of common stock, and $3.7 million contributions from noncontrolling interests, partially offset by (a) $37.6$128.2 million used to repayrepurchase our senior notes, payable, (b) $95.2 million used to pay dividends on our common shares, (c) $4.8 million use for repayment on our term loan, (d) $128.2$37.6 million used to repurchaserepay our senior notes (e)payable, $11.6 million distributions to noncontrolling interests, $7.5 million used to pay debt issuance costs, (f) $11.6$4.8 million distributions to noncontrolling interestsused for repayment on our term loan, and (g) $1.8$1.7 million used to pay dividends on our preferred shares. During2020, cash provided by financing activities primarily consisted2022 was $4.1 million (including amortization of $171.1 million proceeds from issuance of senior notes and $4.6 million proceeds from offerings of preferred stock, offset by (a) $37.1 million used to repay our asset based credit facility, (b) $24.1 million used to repurchase our common stock, (c) $9.6 million used to pay dividends on our common shares, (d) $4.8 million use for repayment on our term loan, (e) $1.8 million used to repurchase our senior notes, (f) $2.7 million used to paydeferred debt issuance costs (g) $1.3of $0.5 million). The interest rate on the term loan as of March 31, 2022 and December 31, 2021 was 5.46% and 4.72%, respectively.distribution to noncontrolling interests, (h)under the Revolving Credit Facility as of both March 31, 2022 and December 31, 2021. Interest on the revolving facility during the three months ended March 31, 2022 was $1.1 million used(including amortization of deferred financing costs of $0.1 million). The interest rate on the Revolving Credit Facility as of March 31, 2022 and December 31, 2021 was 5.01% and 4.67%, respectively.pay dividends on our preferred shares (i) $0.5 million used for payment of employment taxes on vesting of restricted stock and (j) $0.4 million used to repay our other notes payable.Credit AgreementsOn April 21, 2017, we amended the asset baseda credit facility agreement (as amended, the “Credit Agreement”) governing our asset based credit facility with Wells Fargo Bank, to increase theNational Association (“Wells Fargo Bank”) with a maximum borrowing limit from $100.0of $200.0 million to $200.0 million. Such amendment, among other things, also extended the expirationand a maturity date of April 20, 2027. Cash advances and 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 affiliateissuance 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 discretionlender’s discretion. The letters of credit issued under this facility are furnished by the lender to third parties for the principal purpose of securing minimum guarantees under liquidation services contracts more fully described in Note 2(d) in the Annual Report on Form 10-K. All outstanding loans, letters of credit, and interest are due on the expiration date which is generally required to be repaid within 180 days.days of funding. The credit facility is secured by the proceeds received for services rendered in connection with liquidation service contracts pursuant to which any outstanding loan or letters of credit are issued and the assets that are sold at liquidation related to such contract. The interest rate for each revolving credit advance under the related credit agreement is, subject to certain terms and conditions, equal to the LIBORSecured Overnight Financing Rate (“SOFR”) plus a margin of 2.25% to 3.25% depending on the type of advance and the percentage such advance represents of the related transaction for which such advance is provided. The credit facility 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%1.0% to 17.5%10.0% of the net profits, if any, earned on liquidation engagements that are financed under the credit facility as set forth in the related Credit Agreement. The credit agreement. We typically seek borrowings on an engagement-by-engagement basis. The Credit Agreement contains certain covenants, including covenants that limit or restrict our abilityfacility also provides for funding fees in the amount of 0.05% to incur liens, incur indebtedness, make investments, dispose0.20% of assets, make certain restricted payments, merge or consolidatethe aggregate principal amount of all credit advances and enter into certain transactionsletters of credit issued in connection with affiliates.a liquidation sale. There was no outstanding balance on this credit facility atas of March 31, 20212022 and December 31, 2020. At2021. As of March 31, 2022 and December 31, 2021, there were no open letters of credit outstanding.atas of March 31, 2021.2022.the Company,ours, in the capacity of borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with Banc of California, N.A. in theits capacity as agent (the “Agent”) and lender and with the other lenders party thereto (the “BRPAC Credit Agreement”“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.as further discussedto Credit Agreement (the “Third Amendment”), which, among other things, replaced LIBOR with the SOFR reference rate and pursuant to which the Borrowers were permitted to make a one-time Permitted Distribution (as defined in Note 10 to the accompanying financial statements. Third Amendment) in the amount of $15.0 million on the date of the Third Amendment.LIBORSOFR rate plus a margin of 2.75% to 3.25% per annum, depending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement. AtAs of March 31, 2022 and December 31, 2021, the interest rate on the amended BRPAC Credit Agreement was 3.36%.at 3.26% and 3.17%, respectively.Amounts outstanding under the Amendedamended BRPAC Credit Agreement areis due in quarterly installments commencing on March 31, 2021.installments. Quarterly installments from June 30, 2021 to December 31, 2021 are in the amount of $4.8 million per quarter, from March 31, 2022 to December 31, 2022 are in the amount of $4.3$4.1 million per quarter, from March 31, 2023$3.8$3.6 million per quarter, from March 31, 2024 to December 31, 2024 are in the amount of $3.3$3.1 million per quarter, and from March 31, 2025 to December 31, 2025 are $2.8$2.7 million per quarter.quarter, and the remaining principal balance is due at final maturity on December 31, 2025.20212022 and December 31, 2020,2021, the outstanding balance on the term loan was $69.5$49.7 million (net of unamortized debt issuance costs of $0.7$0.5 million), and $74.2$53.7 million (net of unamortized debt issuance costs of $0.8$0.6 million), respectively.atas of March 31, 2021.2022.the Companywe issued $20.1 million and $12.9 million, respectively, of senior notes due with maturities dates ranging from May 20232024 to JanuaryAugust 2028 pursuant to At the Market Issuance Sales Agreements with B. Riley Securities, Inc. which governs the program of at-the-market sales of the Company’s senior notes. A series of prospectus supplements were filed by the Company with the SEC which allowed the Company to sell these senior notes.On January 25, 2021, the Company issued $230.0 millionAs of senior notes due in January 2028 (“6.0% 2028 Notes”). Interest on the 6.0% 2028 Notes is payable quarterly at 6.0%. The 6.0% 2028 Notes are unsecured and due and payable in full on January 31, 2028. In connection with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $225.7 million (after underwriting commissions, fees and other issuance costs of $4.3 million). The Notes bear interest at the rate of 6.0% per annum.On March 29, 2021, the Company issued $159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”). Interest on the 5.5% 2026 Notes is payable quarterly at 5.5%. The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026. In connection with the issuance of the 5.5% 2026 Notes, the Company received net proceeds of $156.3 million (after underwriting commissions, fees and other issuance costs of $3.2 million). The Notes bear interest at the rate of 5.5% per annum.On March 31, 2021, the Company exercised its option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017. The total redemption payment included $1.6 million in accrued interest.At March 31, 20212022 and December 31, 2020,2021, the total senior notes outstanding was $1,139.1$1,627.6 million (net of unamortized debt issue costs of $15.4$20.5 million) and $870.8$1,606.6 million (net of unamortized debt issue costs of $9.6$21.5 million) with a weighted average interest rate of 6.49%5.69% and 6.95%5.69%, respectively. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled $24.4 million and $18.7 million and $14.4 million forduring the and 2020, respectively.April 6, 2021January 5, 2022 (the “April 2021“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 (the “January 2021 Sales Agreement Prospectus”).2021. This program provides for the sale by the Company of up to $150.0$250.0 million of certain of the Company’s senior notes. As of March 31, 2022, and December 31, 2021 the Company had $137.1$91.8 million and $111.9 million, respectively, remaining availability under the January 20212022 Sales Agreement.As part ofInformation about our investment banking and financial services activities, from time to time we enter into guaranties of debt, commitments of other entities, and similar transactions that may be considered off-balance sheet arrangements.B&W Credit Agreement and BackstopOn January 31, 2020, the Company provided Babcock & Wilcox Enterprises, Inc. (“B&W”) $30.0 million of additional Tranche A-4 last out term loans pursuant to Amendment No. 20 (“Amendment No. 20”) to the Credit Agreement, dated May 11, 2015 (as amended to date, the “B&W Credit Agreement”) with Bank of America, N.A., as administrative agent and lender, and the other lenders party thereto. The Company is a lender with respect to B&W’s existing last out term loans under the Credit Agreement. Kenneth Young, our President, is the Chief Executive Officer of B&W. Pursuant to Amendment No. 20, B&W and the lenders, including the Company, also agreed upon a term sheet pursuant to which B&W would undertake a refinancing transaction on or prior to May 11, 2020 (the “Refinancing”) and B&W and the lenders, including the Company, would amend and restate the Credit Agreement on the terms specified therein. On January 31, 2020, B&W also entered into a letter agreement with the Company (the “Backstop Commitment Letter”) pursuant to which the Company agreed to fund any shortfall in the $200.0 million of new debt or equity financing required as part of the terms of the Refinancing to the extent such amounts have not been raised from third parties on the same terms contemplated by the Refinancing. On May 14, 2020, the Company provided B&W with another $30.0 million of last-out term loans pursuant to a further amendments to B&W’s credit agreement, which also included future commitments for the Company to loan B&W $40.0 million on various dates starting in November 2020 and a limited guaranty by the Company of B&W’s obligations under the amended credit facility, of which, at March 31, 2021, no amounts remain available.On August 10, 2020, the Company entered into a project specific indemnity rider (the “Indemnity Rider”) in favor of Berkley Insurance Company and/or Berkley Regional Insurance Company (collectively, “Berkley”) to a general agreement of indemnity made by B&W in favor of Berkley (the Indemnity Agreement”). Pursuant to the Indemnity Rider, the Company agreed to indemnify Berkley in connection with a default by B&W under the Indemnity Agreement relating to a $30.0 million payment and performance bond issued by Berkley in connection with a construction project undertaken by B&W. In consideration for providing the Indemnity Rider, B&W paid the Company $0.6 million on August 26, 2020.Franchise Group Commitment Letter and Loan Participant GuarantyPSP CommitmentOn January 23, 2021, the Company committed up to $400.0 million aggregate principal amount of unsecured debt financing, consisting of $100.0 million of secured debt financing, and $300.0 million of unsecured debt financing, to affiliates of Franchise Group, Inc. (collectively, “FRG”) in connection with FRG’s acquisition of Pet Supplies Plus (“PSP”). FRG consummated the acquisition of PSP in March 2021 and the Company was not required nor did it provide any debt financing in connection therewith. At March 31, 2021, there were no further commitments outstanding to FRG.Other CommitmentOn June 19, 2020, the Company participated in a loan facility agreement to provide a total loan commitment up to 33.0 million EUROS to a retailer in Europe. The Company made an initial funding of 6.6 million EUROS in July 2020. No additional borrowings have been made since the initial funding, leaving unused future commitments available of up to 26.4 million EUROS as of March 31, 2021.Except as disclosed above, we have no material obligations, assets or liabilities which would be considered off-balance sheet arrangements and do not participateis included in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, established forNote 15 of the purpose of facilitating off-balance sheet arrangements.Contractual ObligationsOn January 25, 2021, the Company issued $230.0 million of senior notes due in January 2028 (“6.0% 2028 Notes”) pursuantNotes to the prospectus supplement dated February 12, 2020. Interest on the 6.0% 2028 NotesCondensed Consolidated Financial Statements. Such information is payable quarterly at 6.0%. The 6.0% 2028 Notes are unsecured and due and payable in full on January 31, 2028. In connection with the issuance of the 6.0% 2028 Notes, the Company received net proceeds of $225.7 million (after underwriting commissions, fees and other issuance costs of $4.3 million). The Notes bear interest at the rate of 6.0% per annum.On March 31, 2021, the Company exercised its option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017. The total redemption payment included $1.6 million in accrued interest.On March 29, 2021, the Company issued $159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to the prospectus supplement dated January 28, 2021. Interest on the 5.5% 2026 Notes is payable quarterly at 5.5%. The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026. In connection with the issuance of the 5.5% 2026 Notes, the Company received net proceeds of $156.3 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.As a result, our total senior notes payable increased to $1,154.5 million as of March 31, 2021 and our senior notes payable due in more than 5 years increased to $551.0 million. Additionally, our total contractual obligations increased to $1,639.7 million and our total payments due in more than 5 years increased to $577.4 million.There were no other material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.2(u)2(t) to the accompanying financial statements for recent accounting pronouncementsstandards we have not yet adopted and recently adopted.B. Riley’s primary exposureThe forward exchange contracts were entered into to market risk consistsimprove the predictability of riskcash flows related to changesa retail store liquidation engagement and a loan receivable. The net gain from forward exchange contracts was $0.1 million and $0.3 million during the three months ended March 31, 2022 and 2021, respectively. This amount is reported as a component of selling, general and administrative expenses in interestthe condensed consolidated statements of operations.B. Riley has not used derivative financial instruments for speculation or trading purposes.The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive20212022 included amounts in bank checking and liquid money market accounts. We may be exposed to interest rate risk through trading activities in convertible and fixed income securities as well as U.S. Treasury securities, however, based on our daily monitoring of this risk, we believe we currently have limited exposure to interest rate risk in these activities.less than $0.5$2.0 million forduring the three months ended March 31, 20212022 or 0.1%0.9% of our total revenues of $600.2$205.6 million during the three months ended March 31, 2021.2022. The financial statements of our foreign subsidiaries are translated into U.S. dollars at period-end rates, with the exception of revenues, costs, and expenses, which are translated at average rates during the reporting period. We include gains and losses resulting from foreign currency transactions in income, while we exclude those resulting from translation of financial statements from income and include them as a component of accumulated other comprehensive income (loss). Transaction gains (losses), which were included in our condensed consolidated statements of operations, amounted to a gain of $0.6$0.3 million and $0.9$0.6 million during the three months ended March 31, 20212022 and 2020,2021, respectively. We may be exposed to foreign currency risk; however, our operating results during the three months ended March 31, 20212022 included less than $0.5$2.0 million of revenues and $1.7 million of operating expenses from our foreign subsidiaries and a 10% appreciation or depreciation of the U.S. dollar relative to the local currency exchange rates would result in less than $0.1an approximately $0.2 million increasechange in our operating income and a 10% depreciation ofduring the U.S. dollar relative to the local currency exchange rates would have resulted in a net decrease in our operating income of less than $0.1 million for the three months ended March 31, 2021.202220212022 our disclosure controls and procedures were effective at the reasonable assurance level.On January 5, 2017, complaints filed in November 2015 and May 2016 naming MLV & Co. (“MLV”) and National Securities Corporation, each an indirect broker-dealer subsidiary of the Company, as defendants in putative class action lawsuits alleging claims under the Securities Act, in connection with the offerings of Miller Energy Resources, Inc. (“Miller”) have been consolidated. The consolidated Complaint, styled Gaynor v. Miller et al., is pending in the Circuit Court for Morgan County, Tennessee, and, like its predecessor complaints, continues to allege claims under Sections 11 and 12 of the Securities Act against nine underwriters for alleged material misrepresentations and omissions in the registration statement and prospectuses issued in connection with six offerings (February 13, 2013; May 8, 2013; June 28, 2013; September 26, 2013; October 17, 2013 (as to MLV only) and August 21, 2014) with an alleged aggregate offering price of approximately $151.0 million. Court ordered mediation before a federal magistrate took place on August 6, 2019, with no resolution. Settlement discussions are ongoing. An accrual for the settlement is included in the accompanying consolidated financial statements.On July 3, 2019, a lawsuit was filed against National Securities Corporation, National Asset Management, Inc., National, National’s current board members and certain former board members, certain officers of National, John Does 1–10, and the National as a nominal defendant, in the United States District Court for the Southern District of New York, captioned Kay Johnson v. National Securities Corporation, et al., Case No. 1:19-cv-06197-LTS. The complaint presents three purported derivative causes of action on behalf of the Company, and five causes of action by the plaintiff directly. As part of the derivative claims, the complaint generally alleges that certain of the individual defendants failed to establish and maintain adequate internal controls to ensure that the Board acted in accordance with its fiduciary duties to prevent and uncover alleged legal and regulatory misconduct and wrongdoing on the part of a National officer. As part of its claims brought directly by the plaintiff, the complaint generally alleges that certain individual and corporate defendants wrongfully terminated the employment of the plaintiff in violation of the Dodd-Frank Act and applicable common law, or conspired to do so. The complaint further alleges that certain corporate defendants violated the Equal Pay Act with regards to the plaintiff’s compensation. The complaint seeks monetary damages in favor of the Company, an order directing the Company’s board members to take actions to enhance the Company’s governance, compensatory and punitive damages in favor of the plaintiff, and attorneys’ fees and costs. On February 2, 2020, the plaintiff filed an amended complaint presenting additional causes of action. The Company has notified its insurer of the lawsuit and believes it has valid defenses to the asserted claims of the complaint. On March 18, 2020, the defendants filed a motion to dismiss the amended complaint. The plaintiff filed an opposition to the defendants’ motion to dismiss on April 15, 2020, and the defendants filed a reply in further support of the motion to dismiss on May 6, 2020. On August 20, 2020, the parties entered into mediation with a private mediator in an attempt to settle the action and, on January 15, 2021, as a result of the mediation, the parties reached a settlement agreement. In March 2021, a settlement agreement and release was executed by the parties and all claims have been dismissed.The New York Department of Financial Services (the “Department”) completed its investigation of NSC’s compliance with the Department’s Cybersecurity Requirements for Financial Services Companies (the “Regulations”). The Regulations establish standards for the cybersecurity programs of entities the Department licenses or otherwise regulates, including NSC. On April 14, 2021, NSC paid the Department a fine of $3.0 million as a result of the Department’s finding that NSC of violated certain of the Regulations.NSC is a respondent in several Financial Industry Regulatory Authority (“FINRA”) arbitration proceedings filed by investors alleging claims in connection with equity investments in GPB Capital Holdings, LLC (“GPB”) involving matters prior to the Company’s acquisition of National on February 25, 2021. Some of these arbitration claims, among other things, also allege that NSC failed to supervise certain registered representatives. NSC is evaluating each arbitration claim on its own merits. GPB and its affiliates have been the subject of various civil claims and fraud investigations over the past few years and, in February 2021, the U.S. Department of Justice indicted certain individuals affiliated with GPB for material misrepresentations and omissions under the federal securities laws with respect to funds managed by GPB. At the present time, the Company continues to vigorously defend these actions and is not able to determine the ultimate resolution of these matters. Adverse judgments in these matters in the aggregate could materially and adversely affect the Company and its financial condition.2020,2021, filed with the Securities and Exchange Commission on March 4, 2021.February 28, 2022. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report on Form 10-Q. Any of the risks described in the Annual Report on Form 10-K for the year ended December 31, 2020,2021, could materially affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. There have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2020.None.None.Information.InformationNone.Incorporated by Reference Exhibit No. Description Form Exhibit Filing Date 10.1 8-K 10.1 4/25/2022 31.1* 31.2* 31.3* 32.1** 32.2** 32.3** 101.INS* Inline XBRL Instance Document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document. 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
** Furnished herewith.Exhibit Index*Filed herewith.**Furnished herewith.#Management contract or compensatory plan or arrangement
SIGNATURESSIGNATURESB. Riley Financial, Inc. Date: May 7, 2021April 29, 2022By: s/s/ PHILLIP J. AHNName: Name:Phillip J. Ahn Title: Title:Chief Financial Officer and
Chief Operating Officer(Principal Financial OfficerOfficer))0001464790 rily:OtherMember rily:BrandsSegmentMember 2021-01-01 2021-03-3159